<PAGE>
Semiannual Report
JAPAN
FUND
--------------
APRIL 30, 2000
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[LOGO OF T. ROWE PRICE]
<PAGE>
REPORT HIGHLIGHTS
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Japan Fund
. Despite continued economic challenges, corporate earnings were encouraging.
. Returns slowed from last year, yet your fund surpassed its benchmarks
handily.
. Holdings in technology, media, and telecommunications stocks dominated
performance.
. Outside of technology we found opportunities in nonbank financials, real
estate, food, and health care products.
. Volatility may persist, but we see attractive opportunities in Japan's
changing corporate environment.
UPDATES AVAILABLE
For updates on T. Rowe Price funds following the end of each calendar quarter,
please see our Web site at www.troweprice.com.
<PAGE>
FELLOW SHAREHOLDERS
Japan's economy showed signs of life during the six months ended April 30, 2000,
and its equity markets saw modest gains. Nonetheless, consumer sentiment and
household spending remained subdued, and stock price volatility was common. The
Japan Fund's returns slowed from previous periods, but were relatively good in a
challenging market environment.
Your fund posted a six-month gain of 6.90%, significantly outpacing both the TSE
First Section Index (which represents large Japanese stocks) and the TSE Second
Section Index (which tracks medium- and smaller-sized companies). It also
surpassed the Lipper Japanese Funds Average by a respectable margin. Owing to
strong gains during 1999, the fund's 12-month results were greater than 54%,
exceeding all benchmarks except the TSE Second Section, which benefited from a
strong small-cap rally in 1999.
----------------------
PERFORMANCE COMPARISON
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Periods Ended 4/30/00 6 Months 12 Months
------------------------------------------------------------------
Japan Fund 6.90% 54.24%
TSE First Section Index 1.81 36.20
TSE Second Section Index 2.03 65.90
Lipper Japanese Funds Average 5.46 52.96
In our last report to you, we noted the heightened potential for volatility in
the wake of the triple-digit gains made in the Japanese stock markets last year,
and our concerns proved well founded. The market's sedate rise overall masked
particularly volatile performance during the period and a huge range of sector
performances. The remarkable rally of new economy stocks, particularly in the
technology, media, and telecommunication stocks now known as "TMTs," continued
into early 2000 but left the markets extremely unbalanced. By early February,
the top five stocks in the TSE First Section represented 24% of its value. At
the same time, four market sectors were up over 10% year-to-date, while 14
sectors had fallen more than 10%.
However, the top technology-related sectors could not hold on to their gains for
long. Starting in about mid-February, investors grew uncomfortable with their
high valuations. In March, it became clear that one of the largest Japanese
Internet stocks, Softbank, and a leading mobile handset distributor, Hikari
Tsushin, would miss their earnings targets,
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and a correction in the overheated U.S. Nasdaq market dampened sentiment as
well. The euphoria peaked in February, and thereafter the most popular of these
stocks fell into a dramatic correction. Few other areas of the market took up
the slack: for example, the retail sector performed very poorly after the
February failure of Nagasakiya, a regional general merchandise chain store
operator.
MARKET REVIEW
The initial buoyancy of TMT stocks during the period contrasted with lackluster
performance by the economy. Fourth-quarter GDP was negative, and while that
outcome was anticipated, it was a disappointment. Unemployment rose to the
post-war high of 4.9%. Industrial production strengthened, but worries about
diminishing job security continued to depress consumer spending. Cutbacks in
government pensions for the retired also hurt consumption. At the same time, the
Bank of Japan had to intervene repeatedly in the economy to weaken a too-strong
currency. This was effective, and the yen ended the period down 3%.
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T. ROWE PRICE BECOMES SOLE OWNER OF INTERNATIONAL INVESTMENT MANAGER
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As an international investor, you may be aware that the T. Rowe Price
international and global stock and bond funds have always been managed by Rowe
Price-Fleming International, Inc., a joint venture formed in 1979 between T.
Rowe Price Associates and London-based Robert Fleming Holdings, Limited.
On April 11, 2000, T. Rowe Price announced an agreement to purchase the 50% of
the joint venture owned by Flemings, thus becoming the sole owner of the
management company. In due course, the name of Rowe Price-Fleming International
will be changed to reflect its new status.
The change in ownership structure will not affect the investment approach or
operations of our international funds. We expect Rowe Price-Fleming's leadership
and professional staff to remain in place, together with the substantial
resources and expertise built up over the past 20 years. Likewise, there will be
no change in the offices in London, Hong Kong, Tokyo, Singapore, Buenos Aires,
Paris, and Baltimore.
Under the U.S. securities laws, the assignment of the funds' investment
management contract to a new entity is subject to shareholder approval.
Accordingly, after the purchase is concluded later this year, we will set a date
for a shareholder meeting and send you a proxy with voting information.
The formation of Rowe Price-Fleming 20 years ago opened the way for T. Rowe
Price to expand the investment services offered to shareholders and clients. As
an integral part of T. Rowe Price, this very successful international investment
manager will provide significant opportunities to enhance those services.
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JAPAN'S FIRST-EVER HOSTILE ACQUISITION BID...SENT A WAKE-UP CALL TO JAPAN'S
POORLY MANAGED FIRMS [AND] WILL BE A POWERFUL INDUCEMENT TO MANAGERS TO RAISE
RETURNS TO SHAREHOLDERS.
However, some economic data were more encouraging. Fourth-quarter corporate
capital expenditures turned positive for the first time in two years, rising at
a 3.1% yearly rate. This was a significant indication that a modest
manufacturing recovery is underway. Corporate earnings also improved, with
aggregate profits climbing at a 42% annual rate in the fourth quarter. While
cost-cutting played a major role in this, sales also rose 2.2%--the first time
since the second quarter of 1997 that sales have grown.
The political environment proved a worry. The debilitating stroke suffered by
former Prime Minister Keizo Obuchi in early April resulted in Yoshio Mori
becoming the new head of the Liberal Democratic Party and Prime Minister. Yet
the process of selecting a new LDP leader remained as opaque as ever, and
expectations for Mori remain low. He has never filled a major government
position, occupying only party posts such as Secretary General. Of course,
expectations for Obuchi were also low when he first came to power, and he proved
a capable leader. Nonetheless, several political scandals have erupted around
former Prime Minister and current Finance Minister Kiichi Miyazawa, Chief
Cabinet Secretary Mikio Aoki, and Mori himself. These have further destabilized
the already fragile LDP in the run-up to the next general election in late June.
Further structural reform of the economy seems unlikely in the next few months
as electioneering takes priority. While this sounds discouraging, the impact on
the market is likely to be muted. The most attractive investments in Japan have
not been dependent on government policy. In fact, we believe that, in the near
future, true restructuring lies firmly at the company level, not the government
level. We were encouraged in January when M&A Consulting launched an unsolicited
bid for Shoei, a small real estate developer. This was perhaps Japan's first-
ever hostile acquisition bid, driven by an attempt to unlock the latent value in
Shoei's asset portfolio.
We viewed this as an important development for several reasons. For the first
time in our memory, the conditions for a successful hostile bid existed: 50% of
TSE First Section stocks are trading at discounts to
3
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their book value, making acquisition a feasible and inexpensive option; the
decline of equity cross-holdings among closely allied companies puts more shares
of individual companies on the market; and specialist merger and acquisition
funding and advice is much more readily available. The deal sent a wake-up call
to Japan's poorly managed firms. The threat of a hostile bid will be a powerful
inducement to managers to raise returns to shareholders.
PORTFOLIO STRATEGY
During the period under review, your fund benefited from the outperformance of
several new economy stock holdings. The most notable performers were Internet
investment company Softbank, electronic majors Fujitsu and Sony, and
semiconductor equipment manufacturer Tokyo Electron. Mobile telephony has been a
particularly strong theme over the past year, and your portfolio has benefited
from significant positions in the NTT group companies, including Nippon
Telegraph & Telephone and its mobile affiliate NTT DoCoMo. Holdings in handset
manufacturer Matsushita Communication Industrial and handset component suppliers
Kyocera, Rohm, and Murata Manufacturing were also valuable.
A merger agreement among three smaller telecom operators, DDI, IDO, and KDD,
marked the first consolidation step among Japanese telecoms. In part, Kyocera's
sharp rise owed to the fact it is the largest shareholder in the merged
DDI/IDO/KDD group. NTT DoCoMo's strong performance reflected the greater-than-
expected success of its Internet-compatible service, i-Mode, introduced in April
1999. Elsewhere in the TMT sectors, media company Fuji Television climbed. Its
highly watched programs, advertising growth, distribution programs, and plans to
provide TV viewers with Internet access via digital/interactive TV all proved
popular with investors.
------------------------
INDUSTRY DIVERSIFICATION
--------------------------------------------------------------------------------
[GRAPH]
Energy 1%
Materials 2%
Other and Reserves 8%
Financial 18%
Services 19%
Consumer Goods 24%
Capital Equipment 28%
Based on net assets as of 4/30/00.
4
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WE FREQUENTLY TOOK PROFITS IN TECHNOLOGY-RELATED STOCKS...
Outside the new economy, your fund's underweighting of the declining banking
sector helped performance. Diversified financials (largely brokers) made strong
gains due to the success of their stock fund launches. Nomura Securities surged
in this environment. In addition, the fund's substantial exposure to smaller
Japanese companies was also fruitful. We enjoyed remarkable rises in a range of
companies, many of which were not affected by the frenzy surrounding new economy
stocks.
Some of your fund's largest holdings, concentrated in the established,
fundamentally sound technology and consumer electronics companies, performed
well in an environment of rising demand for their products. Sony's plans to
provide Internet banking, its upcoming U.S. launch of the Internet-compatible
PlayStation 2, and its announcement of a stock split propelled its price higher.
Restructuring, robust demand, and announcements about Internet-related alliances
and services pushed NEC ahead. Canon's successful range of digital products and
its strengthening position in the semiconductor production equipment market
accounted for its buoyancy.
Because of the extreme differences in the performance of various sectors in the
market, it was necessary for us to regularly adjust our portfolio exposures. We
frequently took profits in technology-related stocks as their prices rose,
because we were increasingly uncomfortable with the risk presented by their
overstretched valuations. In particular, we trimmed our holdings in Sony,
Matsushita Communication Industrial, Misumi Electric, NEC, Fujitsu, Kyocera,
Murata, TDK, Tokyo Electron, Softbank, and the NTT companies. These moves
softened the damage when the TMT stocks corrected after mid-February.
We have reinvested in other types of new economy companies that have not been
swept up so far by investor enthusiasm. Examples include KDD, whose new merger
agreement could result in the creation of a realistic domestic telecom
competitor to NTT. Fanuc was added as a world-class play on the potential of
artificial intelligence, while Shimadzu was attractive as an overlooked
precision manufacturer with connections to the new economy. Smaller-cap
additions included Pacific Metals, a beneficiary of aggressive restructuring and
the strong
5
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DESPITE THEIR RECENT CORRECTION, WE REMAIN CONFIDENT ABOUT THE PROSPECTS FOR
SELECTED STOCKS IN THE BROADER JAPANESE TECHNOLOGY SECTOR.
rally in the nickel market, and Hitachi Cable, an electrical and
telecommunications component maker. Despite their recent correction, we remain
confident about the prospects for selected stocks in the broader Japanese
technology sector. In particular, the potential demand for Internet-enabled
cellular handsets and other portable devices could see explosive sales in the
next 12 to 18 months.
Numerous nonbank financials also looked attractive. We added to holdings in some
consumer finance and corporate loan companies that had been, in our view,
excessively cheapened in the wake of last year's shokoh loan scandal. Recent
weakness in the consumer finance sector saw declines in issues such as Takefuji
and Aiful. Yet we haven't lost interest. Aiful, for example, is inexpensively
valued and continues to enjoy good earnings growth. Meanwhile it has recently
announced plans to acquire two mid-size consumer finance companies to expand its
operations. Management also believes it can significantly reduce the operating
costs at these companies. We maintained our overweight position in brokerage
stocks despite taking partial profit in Nomura Securities by adding Daiwa
Securities. Holdings in Nomura, Daiwa, and Cosmo Securities enjoyed earnings
recoveries last fiscal year. We anticipate a return to sustainable earnings
growth for the securities industry in the next few years.
OUTLOOK
Japan's economy remains fragile: in our view, it will be another one to two
years before we see anything more than barely visible growth. But we believe
that Japan is changing and that it still offers great opportunity at the
individual stock level as corporations restructure and the older economy is
infused with ideas from the new economy. We have very recently seen Japan's
residents begin to redirect a small amount of their savings into stock mutual
funds and equities. If this trend continues, it will provide an important boost
to the demand for equities.
The Japanese stock markets are likely to remain volatile in the short term.
Technology, media, and telecom stocks have been particularly vulnerable, but now
that their share prices have significantly corrected, we believe the recent
indiscriminate selling will be replaced by an attempt to distinguish between the
longer-term winners and losers.
6
<PAGE>
When the dust settles over the next few months, we anticipate a return to a
greater emphasis on fundamentals and a renewed respect for sustainable earnings
and management prowess.
Respectfully submitted,
/s/ Martin G. Wade
Martin G. Wade
Chairman
/s/ John R. Ford
John R. Ford
President
May 25, 2000
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NEW PRESIDENT OF T. ROWE PRICE INTERNATIONAL FUNDS
After more than 20 years as president of T. Rowe Price International Funds,
Inc., Martin G. Wade has passed the baton to his colleague, John R. Ford. John
Ford has been associated with T. Rowe Price's international investment
management arm since 1984. He currently serves on the Investment Advisory
Committees of all the T. Rowe Price international equity funds.
Mr. Wade was instrumental in the launching of T. Rowe Price's first foreign
stock offering, the International Stock Fund, in 1980, and played a key role
thereafter in the company's increasing presence as an international asset
manager. He remains associated with the International Funds as chairman and is
also a member of the Board of Directors of T. Rowe Price Associates.
7
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T. ROWE PRICE JAPAN FUND
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--------------------
PORTFOLIO HIGHLIGHTS
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
4/30/00
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NTT DoCoMo 3.0%
Canon 2.7
Sony 2.6
Lux 2.5
Hitachi Cable 2.4
--------------------------------------------------------------------------------
Honda Motor 2.4
Nomura Securities 2.4
Rohm 2.3
Softbank 2.2
Matsushita Electric Industrial 2.1
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Matsushita Communication Industrial 1.9
Sanwa Bank 1.9
Fanuc 1.9
Murata Manufacturing 1.8
Tokyo Electron 1.8
--------------------------------------------------------------------------------
Fuji Television Network 1.8
Yakult Honsha 1.7
Daiwa Securities 1.7
Kyocera 1.6
Cosmo Securities 1.6
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Aiful 1.6
Nippon Telegraph & Telephone 1.6
Takefuji 1.5
NEC 1.5
Fujitsu 1.4
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Total 49.9%
Note: Table excludes reserves.
8
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T. ROWE PRICE JAPAN FUND
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------------------------
PERFORMANCE COMPARISON
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This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with benchmarks, which may include a
broad-based market index and a peer group average or index. Market indexes do
not include expenses, which are deducted from fund returns as well as mutual
fund averages and indexes.
JAPAN FUND
--------------------------------------------------------------------------------
As of 4/30/00
[GRAPH]
TSE First Lipper Japan
Section Index Funds Average Japan Fund Fund-Area
12/30/91 10,000 10,000 10,000 10,000
Apr-92 7,200 7,995 8,860 8,860
Apr-93 10,610 10,777 11,160 11,160
Apr-94 11,503 11,930 12,434 12,434
Apr-95 11,541 11,358 11,576 11,576
Apr-96 11,902 12,296 12,421 12,421
Apr-97 8,268 9,136 9,920 9,920
Apr-98 6,739 7,626 8,241 8,241
Apr-99 8,156 9,599 11,083 11,083
Apr-00 11,108 13,338 17,093 17,093
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AVERAGE ANNUAL COMPOUND TOTAL RETURN
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This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Since Inception
Periods Ended 4/30/00 1 Year 3 Years 5 Years Inception Date
--------------------------------------------------------------------------------
Japan Fund 54.24% 19.89% 8.11% 6.65% 12/30/91
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
9
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T. ROWE PRICE JAPAN FUND
--------------------------------------------------------------------------------
Unaudited
----------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year
Ended Ended
4/30/00 10/31/99 10/31/98 10/31/97 10/31/96 10/31/95
NET ASSET VALUE
<S> <C> <C> <C> <C> <C> <C>
Beginning of period $ 13.62 $ 6.72 $ 7.97 $ 9.02 $ 9.39 $ 11.64
Investment activities
Net investment
income (loss) (0.03) (0.02) (0.03) (0.03) (0.05) (0.04)
Net realized and
unrealized gain (loss) 0.97 6.92 (1.22) (1.02) (0.32) (1.40)
Total from
investment activities 0.94 6.90 (1.25) (1.05) (0.37) (1.44)
Distributions
Net realized gain (0.05) -- -- -- -- (0.81)
NET ASSET VALUE
End of period $ 14.51 $ 13.62 $ 6.72 $ 7.97 $ 9.02 $ 9.39
------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
Total return/u/ 6.90% 102.68% (15.68)% (11.64)% (3.94)% (12.87)%
Ratio of total expenses to
average net assets 1.07%+ 1.14% 1.32% 1.24% 1.32% 1.50%
Ratio of net investment
income (loss) to average
net assets (0.36)%+ (0.27)% (0.37)% (0.39)% (0.48)% (0.48)%
Portfolio turnover rate 75.5%+ 58.8% 66.9% 32.3% 29.8% 62.4%
Net assets, end of period
(in thousands) $ 455,052 $ 513,739 $ 150,949 $ 170,830 $ 167,118 $ 181,383
</TABLE>
/u/ Total return reflects the rate that an investor would have earned on an
investment in the fund during each period, assuming reinvestment of all
distributions.
+ Annualized
The accompanying notes are an integral part of these financial statements.
10
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T. ROWE PRICE JAPAN FUND
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Unaudited April 30, 2000
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PORTFOLIO OF INVESTMENTS Shares Value
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In thousands
JAPAN 92.0%
COMMON STOCKS 92.0%
Capital Equipment 27.9%
Canon 272,000 $ 12,440
Densei Lambda 31,200 592
Fanuc 80,600 8,447
Fujitsu 232,000 6,572
Hirose Electric 30,100 3,639
Hitachi 521,000 6,222
Hitachi Cable 1,263,000 10,769
Koyo Seiko 878,000 6,096
Kyocera 43,900 7,344
Matsushita Communication Industrial 56,000 8,783
Murata Manufacturing 43,000 8,360
NEC 246,000 6,696
Nidec (New shares) * 19,300 1,513
Nidec 17,700 1,229
Nissho Electronics 188,800 6,467
Rohm 30,600 10,255
Sanden 877,000 4,652
Shimadzu 1,074,000 5,419
TDK 22,000 2,947
Tokyo Electron 51,000 8,315
---------
Total Capital Equipment 126,757
---------
Consumer Goods 23.7%
Ajinomoto 317,000 3,624
Bridgestone 298,000 6,470
Honda Motor 240,000 10,732
Kao 118,000 3,594
Koha 24,000 911
Lux 1,250,000 11,445
Matsushita Electric Industrial 361,000 9,559
Mazda Motor 1,799,000 5,530
Sankyo 51,000 1,124
Santen Pharmaceutical 285,000 6,306
11
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T. ROWE PRICE JAPAN FUND
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Shares Value
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In thousands
Sharp 298,000 $ 5,752
Shiseido 317,000 4,009
Sony (New shares) * 53,600 6,203
Sony 49,600 5,698
Sumitomo Rubber Industries 583,000 3,050
Takeda Chemical Industries 73,000 4,805
Watami Food Service 15,800 1,316
Yakult Honsha 764,000 7,851
Yamaha Motor 584,000 4,985
Yamanouchi Pharmaceutical 94,000 4,969
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Total Consumer Goods 107,933
---------
Energy 1.3%
Hitachi Metals 130,000 1,043
Tokyo Electric Power 208,200 4,915
---------
Total Energy 5,958
---------
Financial 18.2%
Aiful 45,950 4,637
Aiful (New shares) * 22,975 2,531
Cosmo Securities 2,872,000 7,206
Daiwa Securities 506,000 7,730
Fuji Bank 681,000 5,674
Goldcrest 54,500 5,929
Mitsui Fudosan 557,000 5,662
Nomura Securities 425,000 10,702
Sakura Bank 373,000 2,617
Sanwa Bank 900,000 8,699
Shohkoh Fund 14,870 2,657
Sumitomo Bank 436,000 5,453
Suruga Bank 377,000 6,457
Takefuji 65,500 6,931
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Total Financial 82,885
---------
Materials 2.2%
Pacific Metals 2,975,000 6,335
Shin-Etsu Chemical 67,000 3,542
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Total Materials 9,877
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T. ROWE PRICE JAPAN FUND
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Shares Value
--------------------------------------------------------------------------------
In thousands
Miscellaneous 0.2%
Combi 72,000 $ 833
---------
Total Miscellaneous 833
---------
Services 18.5%
Benes * 21,300 1,948
Benesse 19,600 1,711
Crayfish ADR (USD) * 20,000 293
Fuji Soft ABC 12,100 717
Fuji Television Network 498 8,299
Internet Initiative Japan ADR (USD) * 92,804 5,533
Ito-Yokado 83,000 6,063
Japan Business 81,000 3,779
Megachips 29,000 1,775
Mitsubishi 366,000 3,185
Nippon Telegraph & Telephone 572 7,096
NTT DoCoMo 413 13,803
OBIC 5,600 3,137
Secom 73,000 6,123
Softbank * 40,800 10,085
Sumisho Electronic 113,000 2,092
Sumitomo 351,000 3,932
Sunkus & Associates 56,890 2,028
Toyo Information 56,000 2,826
---------
Total Services 84,425
---------
Total Common Stocks 418,668
---------
Total Japan (Cost $303,804) 418,668
---------
SHORT-TERM INVESTMENTS 6.1%
Money Market Funds 6.1%
Reserve Investment Fund, 6.18% # 27,703,483 27,703
---------
Total Short-Term Investments (Cost $27,703) 27,703
---------
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T. ROWE PRICE JAPAN FUND
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Value
--------------------------------------------------------------------------------
In thousands
Total Investments in Securities
98.1% of Net Assets (Cost $331,507) $ 446,371
Forward Currency Exchange Contracts
In thousands
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
------------ ---------- ------- ------- -----------
Chase Manhattan 5/31/00 USD 24,400 JPY 2,436,218 $ 1,713
-----------
Net unrealized gain (loss) on open forward
currency exchange contracts 1,713
-----------
Other Assets Less Liabilities 6,968
-----------
NET ASSETS $ 455,052
===========
# Seven-day yield
* Non-income producing
ADR American depository receipt
JPY Japanese yen
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
14
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T. ROWE PRICE JAPAN FUND
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Unaudited April 30, 2000
-------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $331,507) $ 446,371
Securities lending collateral 61,740
Other assets 15,388
---------
Total assets 523,499
---------
Liabilities
Obligation to return securities lending collateral 61,740
Other liabilities 6,707
---------
Total liabilities 68,447
---------
NET ASSETS $ 455,052
=========
Net Assets Consist of:
Accumulated net investment income - net of distributions $ (937)
Accumulated net realized gain/loss - net of distributions 55,450
Net unrealized gain (loss) 116,490
Paid-in-capital applicable to 31,364,634 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 284,049
---------
NET ASSETS $ 455,052
=========
NET ASSET VALUE PER SHARE $ 14.51
=========
The accompanying notes are an integral part of these financial statements.
15
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T. ROWE PRICE JAPAN FUND
--------------------------------------------------------------------------------
Unaudited
-------------------------
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
In thousands
6 Months
Ended
4/30/00
Investment Income (Loss)
Income
Dividend (net of foreign taxes of $186) $ 1,057
Interest 641
Securities lending 170
--------
Total income 1,868
--------
Expenses
Investment management 2,146
Shareholder servicing 436
Custody and accounting 158
Prospectus and shareholder reports 28
Registration 20
Legal and audit 10
Directors 3
Miscellaneous 4
--------
Total expenses 2,805
--------
Net investment income (loss) (937)
--------
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 62,803
Futures 4
Foreign currency transactions (607)
--------
Net realized gain (loss) 62,200
--------
Change in net unrealized gain or loss
Securities (25,559)
Other assets and liabilities
denominated in foreign currencies 1,621
--------
Change in net unrealized gain or loss (23,938)
--------
Net realized and unrealized gain (loss) 38,262
--------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 37,325
========
The accompanying notes are an integral part of these financial statements.
16
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T. ROWE PRICE JAPAN FUND
--------------------------------------------------------------------------------
Unaudited
-------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
4/30/00 10/31/99
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ (937) $ (762)
Net realized gain (loss) 62,200 43,843
Change in net unrealized gain or loss (23,938) 161,407
----------------------
Increase (decrease) in net assets from operations 37,325 204,488
----------------------
Distributions to shareholders
Net realized gain (1,884) --
----------------------
Capital share transactions*
Shares sold 248,755 439,514
Distributions reinvested 1,821 --
Shares redeemed (344,704) (281,212)
----------------------
Increase (decrease) in net assets from capital
share transactions (94,128) 158,302
----------------------
Net Assets
Increase (decrease) during period (58,687) 362,790
Beginning of period 513,739 150,949
----------------------
End of period $ 455,052 $ 513,739
======================
* Share information
Shares sold 16,930 42,892
Distributions reinvested 125 --
Shares redeemed (23,402) (27,654)
----------------------
Increase (decrease) in shares outstanding (6,347) 15,238
The accompanying notes are an integral part of these financial statements.
17
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T. ROWE PRICE JAPAN FUND
--------------------------------------------------------------------------------
Unaudited April 30, 2000
-------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price International Funds, Inc. (the corporation) is registered under
the Investment Company Act of 1940. The Japan Fund (the fund), a diversified,
open-end management investment company, is one of the portfolios established by
the corporation and commenced operations on December 30, 1991. The Japan Fund
seeks long-term growth of capital by investing in the common stocks of large and
small companies located, or with primary operations, in Japan.
The accompanying financial statements are prepared in accordance with generally
accepted accounting principles for the investment company industry; these
principles may require the use of estimates by fund management.
Valuation Equity securities are valued at the last quoted sales price at the
time the valuations are made. A security which is listed or traded on more than
one exchange is valued at the quotation on the exchange determined to be the
primary market for such security.
Investments in mutual funds are valued at the closing net asset value per share
of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars at
the prevailing exchange rate at the end of the reporting period. Purchases and
sales of securities and income and expenses are translated into U.S. dollars at
the prevailing exchange rate on the dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains and
losses is reflected as a component of such gains and losses.
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Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Dividend income and distributions to
shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations and may differ from those determined in accordance with generally
accepted accounting principles. Credits earned on daily uninvested cash balances
at the custodian and are used to reduce the fund's custody charges. Unrealized
gains and losses on foward currency exchange contracts are included in other
assets and other liabilities, respectively, and in change in unrealized gain or
loss in the accompanying financial statements.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Foward Currency Exchange Contracts At April 30, 2000, the fund was a party to
foward currency exchange contracts under which it is obligated to exchange
currencies at specified future dates and exchange rates. Risks arise from the
possible inability of counterparties to meet the terms of their agreements and
from movements in currency values.
Securities Lending The fund lends its securities to approved brokers to earn
additional income and receives cash and U.S. government securities as collateral
against the loans. Cash collateral received is invested in a money market pooled
account by the fund's lending agent. Collateral is maintained over the life of
the loan in an amount not less than 100% of the value of loaned securities.
Although risk is mitigated by the collateral, the fund could experience a delay
in recovering its securities and a possible loss of income or value if the
borrower fails to return them. At April 30, 2000, the value of loaned securities
was $57,666,000; aggregate collateral consisted of $61,740,000 in the securities
lending collateral pool.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $189,471,000 and $285,793,000, respectively, for the six
months ended April 30, 2000.
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T. ROWE PRICE JAPAN FUND
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NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income. As of October 31, 1999, the fund had capital loss carryforwards
for federal income tax purposes of $3,441,000, all of which expire in 2006. The
fund intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
At April 30, 2000, the cost of investments for federal income tax purposes was
substantially the same as for financial reporting and totaled $331,507,000. Net
unrealized gain aggregated $114,864,000 at period-end, of which $133,520,000
related to appreciated investments and $18,656,000 to depreciated investments.
NOTE 4 - FOREIGN TAXES
The fund is subject to foreign income taxes imposed by certain countries in
which it invests. Foreign income taxes are accrued by the fund and withheld from
dividend and interest income.
NOTE 5 - RELATED PARTY TRANSACTIONS
The fund is managed by Rowe Price-Fleming International, Inc. (the manager),
which is owned by subsidiaries of T. Rowe Price Associates, Inc. (Price
Associates) and Robert Fleming Holdings Limited (Fleming). Price Associates has
entered into an agreement with Fleming to purchase Fleming's interest in the
manager.
The investment management agreement between the fund and the manager provides
for an annual investment management fee, of which $312,000 was payable at April
30, 2000. The fee is computed daily and paid monthly, and consists of an
individual fund fee equal to 0.50% of average daily net assets and a group fee.
The group fee is based on the combined assets of certain mutual funds sponsored
by the manager or Price Associates (the group). The group fee rate ranges from
0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120
billion. At April 30, 2000 and for the six months then ended, the effective
annual group fee rate was 0.32%. The fund pays a pro-rata share of the group fee
based on the ratio of its net assets to those of the group.
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T. ROWE PRICE JAPAN FUND
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In addition, the fund has entered into agreements with Price Associates and two
wholly owned subsidiaries of Price Associates, pursuant to which the fund
receives certain other services. Price Associates computes the daily share price
and maintains the financial records of the fund. T. Rowe Price Services, Inc. is
the fund's transfer and dividend disbursing agent and provides shareholder and
administrative services to the fund. T. Rowe Price Retirement Plan Services,
Inc. provides subaccounting and recordkeeping services for certain retirement
accounts invested in the fund. The fund incurred expenses pursuant to these
related party agreements totaling approximately $383,000 for the six months
ended April 30, 2000, of which $82,000 was payable at period-end.
Additionally, the fund is one of several T. Rowe Price-sponsored mutual funds
(underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may
invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum International Fund
held approximately 1.4% of the outstanding shares of the fund at April 30, 2000.
For the six months then ended, the fund was allocated $8,000 of Spectrum
expenses, $3,000 of which was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve Funds
are offered as cash management options only to mutual funds and other accounts
managed by T. Rowe Price and its affiliates and are not available to the public.
The Reserve Funds pay no investment management fees. Distributions from the
Reserve Funds to the fund for the six months ended April 30, 2000, totaled
$639,000 and are reflected as interest income in the accompanying Statement of
Operations.
During the six months ended April 30, 2000, the fund, in the ordinary course of
business, placed security purchase and sale orders aggregating $50,861,000 with
certain affiliates of the manager and paid commissions of $75,000 related
thereto.
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For fund and account information or to conduct transactions, 24 hours, 7 days a
week By touch-tone telephone Tele*Access 1-800-638-2587 By Account Access on the
Internet www.troweprice.com/access
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132
To open a brokerage account or obtain information, call:
1-800-638-5660
Internet address:
www.troweprice.com
Plan Account Lines for retirement plan participants: The appropriate 800 number
appears on your retirement account statement.
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus appropriate to the fund or funds
covered in this report.
Walk-In Investor Centers:
For directions, call 1-800-225-5132
or visit our Web site
Baltimore Area
Downtown
101 East Lombard Street
Owings Mills
Three Financial Center
4515 Painters Mill Road
Boston Area
386 Washington Street
Wellesley
Colorado Springs
4410 ArrowsWest Drive
Los Angeles Area
Warner Center
21800 Oxnard Street, Suite 270
Woodland Hills
Tampa
4200 West Cypress Street
10th Floor
Washington, D.C.
900 17th Street N.W.
Farragut Square
Invest With Confidence R
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T. Rowe Price Investment Services, Inc., Distributor. F62-051 4/30/00
