N-30D 1 sresf.txt T. ROWE PRICE EUROPEAN STOCK FUND 4/30/2002 Semiannual Report European Stock Fund April 30, 2002 T. Rowe Price Report Highlights -------------------------------------------------------------------------------- European Stock Fund o European stocks rebounded on signs of a modest economic recovery. o Your fund posted solid returns for the six-month period, outperforming its benchmark index but slightly lagging its average competitor. o Business services, consumer, and financial stocks aided results, while pharmaceuticals and technology disappointed. o We expect a steady economic recovery in the U.S. and Europe, and we believe our strategy will benefit long-term investors. REPORTS ON THE WEB Sign up for our E-mail Program, and you can begin to receive updated fund reports and prospectuses online rather than through the mail. Log on to your account at www.troweprice.com for more information. Fellow Shareholders It is now just over two years since global markets peaked at the height of the tech-nology bubble. This has been a difficult time for most international equity investors, but as economies around the world began to show signs of recovery during the six months ended April 30, international stocks finally gained some ground. Europe's modest economic rebound resulted in a solid stock rally, which generally favored value sectors. Growth stocks-especially technology and telecommunications-continued to suffer. Performance Comparison -------------------------------------------------------------------------------- Periods Ended 4/30/02 6 Months 12 Months -------------------------------------------------------------------------------- European Stock Fund 6.18% -12.35% MSCI Europe Index 5.89 -11.93 Lipper European Funds Average 6.53 -12.60 Your fund participated in the rebound, performing somewhat better than the unmanaged MSCI Europe Index but slightly behind its Lipper peer group average. The fund trailed the Lipper average because of strong performance by funds with a heavy value bias at a time when investors were rotating from growth into value stocks. Cyclical sectors had a strong run over the half-year. Materials (including metals, construction, and chemicals), autos, and capital goods stocks were among the best performers. MARKET AND PORTFOLIO REVIEW After the traumas of last September and the subsequent market rebound, investors have focused on the timing and shape of economic recovery. The fears of the fourth quarter were replaced with growing confidence during the first quarter, fueled by some robust economic figures around the world. The proponents of a stronger recovery could point to the sharp declines in interest rates around the world and the apparent rebuilding of inventories. First-quarter growth turned out to be stronger than many had anticipated, although much of this seems to have been inventory liquidation and rebuilding, backed by moderate growth in final sales. Market Performance -------------------------------------------------------------------------------- Six Months Local Local Currency U.S. Ended 4/30/02 Currency vs. U.S. Dollars Dollars -------------------------------------------------------------------------------- Belgium 8.97% 0.04% 9.02% France 4.04 0.04 4.09 Germany 10.76 0.04 10.81 Italy 6.36 0.04 6.41 Netherlands 11.77 0.04 11.82 Spain 4.90 0.04 4.94 Sweden -1.02 3.50 2.45 Switzerland 10.10 0.79 10.97 United Kingdom 4.44 0.21 4.66 Source: RIMES Online, using MSCI indices. By most indications, a modest recovery in Europe should continue throughout the remainder of 2002. Interest rates have been relatively low but may increase unless evidence of moderate inflation subsides. The big news was the successful introduction of euro notes and coins into general circulation. The switch from national currencies to the euro should foster the integration of the national economies into a single market. The euro was basically flat against the dollar over the six months but strengthened late in the period. Financials Banks were one of the better performing sectors over the last six months. Fears that bad loans would rise significantly have so far proved overblown, and, as investors have factored in steady bad-debt charges, valuations have looked increasingly attractive. Many European banks sell at 11 to 13 times earnings. Historically, these banks sell at low valuations because they are highly leveraged and have a cyclical earnings pattern, but the longer the sector avoids serious pain, the higher the stock prices investors are likely to give them. We still see some upside in the retail banks such as Royal Bank of Scotland (U.K.), the fund's largest holding and a significant six-month contributor. Italy's IntesaBci, which is benefiting from industry consolidation, was another solid contributor as the new CEO is expected to generate synergies from the merged operations. Banks with exposure to capital markets have fared worse during the bear market. We reduced our exposure to Nordea (Sweden), on concerns over the management and its strategic plan. We initiated a position in Banca Popolare di Verona (Italy), which looks attractive as a restructuring story under its new management. Although financials are our largest sector allocation, we remain underweight versus the MSCI Europe Index due principally to our large underweight position in insurers. We have selective exposure to some life insurers, such as Alleanza Assicurazioni in Italy, which we think will benefit from the rising savings trend and good margins. However, we are concerned about increasing pressure on margins across Europe. Consumer Traditionally defensive sectors such as consumer staples-the fund's second-largest sector contributor over the six months-held up well. We trimmed one of our larger holdings, beverage and restaurant giant Diageo (U.K.), following its very strong share price performance. Although we continue to like management and its strategy, the valuation was beginning to discount much of the future good news. Conversely, we added to supermarket group Tesco (U.K.) on a pullback. Even with its already strong position in the U.K., Tesco continued to eke out improvements in its domestic operation, and its heavy investment in overseas expansion is expected to start making a noticeable contribution to profits in the next few years. Telecoms and Technology The news is still very poor for telecommunications companies, which have been under intense pressure for the last two years. Previously steady revenues for wireline companies have reversed, partly because mobile phones are replacing fixed-line service and partly as a result of overly aggressive tariff policies. Many of the players in this arena are now in financial distress, but the competitive landscape should begin to improve once excess capacity is worked through. As for mobile phones, penetration levels are nearing the saturation point in a number of markets, which means revenue growth depends increasingly on each subscriber using the phone more. Hopes have been high for greater use of data services, but this keeps getting pushed further into the future. Major fund holding Vodafone (U.K.) has been in the eye of the storm as expectations have been scaled back, and the stock now trades at a discount to the U.K. market on many valuation measures. We have edged up our position because even a whiff of increased revenue per user could help the share price make a meaningful recovery. Industry Diversification -------------------------------------------------------------------------------- Percent of Net Assets 10/31/01 4/30/02 -------------------------------------------------------------------------------- Financials 22.3% 22.7% Consumer Discretionary 16.5 17.4 Health Care 14.1 13.5 Energy 10.2 10.4 Consumer Staples 8.2 9.1 Industrials and Business Services 7.3 8.3 Telecommunications Services 9.8 7.5 Information Technology 5.6 5.4 Materials 2.1 2.4 All Other 1.7 1.5 Reserves 2.2 1.8 -------------------------------------------------------------------------------- Total 100.0% 100.0% The telecom sector's woes hurt equipment makers LM Ericsson (Sweden) and Nokia (Finland) as well. Ericsson's problems stem from telecom operators postponing capital spending on mobile networks. Additionally, poor management has led to a worsening financial position that-together with a depressed outlook-has prompted the company to launch a rights issue to improve its long-term funding. However, the new chairman, Michael Treschow, has a successful track record in restructuring and is overseeing a significant cost-reduction program. Meanwhile, Nokia has been hurt by a perception that the mobile handset industry is no longer a growth business. Ericsson was down 42% and Nokia fell 21%. Media Your portfolio continued to have significant overweighting in media stocks, where the news was mixed. Pressure on fees from large corporate clients has kept advertising revenue growth in check. Profitability, however, remains robust. With some recovery in demand, there should be a return to above-average earnings growth. U.K. advertising agency WPP Group, one of our larger holdings, performed relatively well over the period as resilient earnings and the potential for upward revisions underpinned the stock. Publisher Reed Elsevier (U.K./Netherlands) was a solid contributor to fund results, as was Societe Television Francaise 1 (TF1), the leader in the French TV market, which benefited from better-than-expected customer demand and upgraded forecasts for 2002. The poor performance of France's Vivendi Universal was a drag on fund results. Investors were increasingly concerned about the company's debt load and its ability to form a single media giant out of the disparate parts it has acquired. Geographic Diversification -------------------------------------------------------------------------------- United Kingdom 36 France 18 Other & Reserves 11 Netherlands 9 Italy 8 Switzerland 7 Germany 6 Spain 5 Based on net assets as of 4/30/02. Pharmaceuticals This has been another difficult period for drug companies. Patent expirations, a lack of new products, and pricing issues have sapped confidence in what has historically been one of the more secure growth sectors. The key question for investors is whether large sums recently sunk into research and development will pay off. One of our largest investments, GlaxoSmithKline (U.K.), was a major detractor for the six months, despite posting some of the best earnings numbers in the sector. The focus instead was on potential patent litigation concerning a couple of the company's best-selling drugs and worries over the new-product pipeline after 2003. Sanofi-Synthelabo (France) also disappointed, again not because of earnings (which were better than expected) but because of concerns over patent challenges that we believe are without merit. We added to our small holding in UCB (Belgium) on fears of a threat by generics to its U.S. asthma franchise, which continues to grow well, thanks to the partnership with Pfizer. UCB trades at a large discount to the sector, yet has another potential blockbuster in its anti-epilepsy drug. Energy Oil prices have been rising largely due to heightened Middle East tensions. The underlying supply and demand balance has also become more positive for oil prices, with economies recovering and non-OPEC supply growing more slowly. Energy companies represent just over 10% of fund assets and were positive contributors for the period. TotalFinaElf (France) remains the pick of the bunch, with good management, the best growth in its production business, successful restructuring of its distribution and chemicals activities, and a reasonable valuation. Services Stocks in the services sector also did well. The fund's top contributor for the six months was Adecco, a Swiss temporary employment company. Adecco is the global leader with strong positions in the U.S. after recent acquisitions, most notably of Olsten. Temporary employment has been a growth area as companies seek greater flexibility in their cost base. In some countries, legal restrictions have constrained growth, but these are beginning to be relaxed. Italy and Spain are relatively untapped sources of growth for Adecco, which should also benefit from economic recovery in the more established U.S., U.K., and French markets. We added to international security group Securitas (Sweden), which continues to use its successful business model to leverage its global leadership in guarding. This has helped drive margins higher in Europe and the U.S. while also increasing the company's organic growth rate. We added a new holding, Essilor International (France), the worldwide leader in manufacturing lenses for glasses. Operating margins are good and improving, its growth is above GDP levels, and the valuation seemed very attractive to us. INVESTMENT OUTLOOK The broad economic background remains uncertain, but we expect a steady recovery in the U.S. and Europe after the rapid early phase. Growth is likely to be muted in the medium term, given the extended condition of the U.S. consumer, who remains an important driver of world growth. European multinational companies could find the going more difficult if the dollar weakens significantly in the months ahead. Stock valuations are generally reasonable but not at bargain basement levels, with some of the traditional growth sectors looking quite depressed while some of the more cyclical and defensive sectors look more stretched. Interest rates are low but could rise sometime this year. Over the longer term, Europe appears to be well situated to take the lead as international stocks rebound. Companies are increasingly focused on profitability, not just revenue growth, and there has been solid progress toward a single European market-the euro has been a real success in this regard. Europe has been the best region in the world in following the U.S. model of enhancing shareholder value. Progress has been made on restructuring corporations, and this trend is likely to continue as governments attempt to create a more efficient business environment. We are confident that, in a period of anticipated low returns, our focus on genuine growth companies with good management and strong cash flows will benefit investors who maintain their long-term strategy. Respectfully submitted, John R. Ford President, T. Rowe Price International Funds, Inc. May 20, 2002 T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Portfolio Highlights -------------------------------------------------------------------------------- TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 4/30/02 -------------------------------------------------------------------------------- Royal Bank of Scotland, United Kingdom 4.6% GlaxoSmithKline, United Kingdom 4.4 TotalFinaElf, France 3.9 Shell Transport &Trading/Royal Dutch Petroleum, United Kingdom/Netherlands 3.6 Reed Elsevier, United Kingdom/Netherlands 3.1 -------------------------------------------------------------------------------- Vodafone, United Kingdom 2.3 Philips Electronics, Netherlands 2.3 AstraZeneca, United Kingdom 2.2 ING Groep, Netherlands 2.1 Diageo, United Kingdom 2.1 -------------------------------------------------------------------------------- Nestle, Switzerland 2.1 Sanofi-Synthelabo, France 2.0 Adecco, Switzerland 1.9 Unilever, United Kingdom 1.5 Compass, United Kingdom 1.5 -------------------------------------------------------------------------------- ENI, Italy 1.4 Societe Television Francaise 1, France 1.4 Nokia, Finland 1.3 Telecom Italia Mobile, Italy 1.3 Roche, Switzerland 1.3 -------------------------------------------------------------------------------- Cadbury Schweppes, United Kingdom 1.3 Alleanza Assicurazioni, Italy 1.3 Aventis, France 1.2 Securitas, Sweden 1.2 UBS, Switzerland 1.2 -------------------------------------------------------------------------------- Total 52.5% Note: Table excludes investments in the T. Rowe Price Reserve Investment Fund. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Performance Comparison -------------------------------------------------------------------------------- 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. EUROPEAN STOCK FUND -------------------------------------------------------------------------------- MSCI Europe Lipper European European Index Funds Average Stock Fund 4/30/92 10.000 10.000 10.000 4/93 10.201 9.9390 9.7810 4/94 12.471 12.273 12.024 4/95 13.679 12.820 13.116 4/96 15.926 15.182 15.994 4/97 19.338 17.858 18.889 4/98 28.219 25.457 25.992 4/99 29.902 25.656 27.567 4/00 32.977 31.681 31.530 4/01 28.656 26.129 27.321 4/30/02 25.236 22.678 23.947 Average Annual Compound Total Return -------------------------------------------------------------------------------- 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. Periods Ended 4/30/02 1 Year 3 Years 5 Years 10 Years -------------------------------------------------------------------------------- European Stock Fund -12.35% -4.58% 4.86% 9.13% Investment return and principal value represent past performance and will vary. Shares may be worth more or less at redemption than at original purchase. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Unaudited Financial Highlights For a share outstanding throughout each period -------------------------------------------------------------------------------- 6 Months Year Ended Ended 4/30/02 10/31/01 10/31/00 10/31/99 10/31/98 10/31/97 NET ASSET VALUE Beginning of period $ 15.28 $ 21.69 $ 22.29 $ 22.38 $ 19.84 $ 16.93 Investment activities Net investment income (loss) 0.06 0.40 0.18 0.23 0.28 0.25 Net realized and unrealized gain (loss) 0.88 (5.23) 1.26 2.14 3.52 3.12 Total from investment activities 0.94 (4.83) 1.44 2.37 3.80 3.37 Distributions Net investment income (0.36) (0.16) (0.14) (0.28) (0.25) (0.26) Net realized gain -- (1.42) (1.90) (2.18) (1.01) (0.20) Total distributions (0.36) (1.58) (2.04) (2.46) (1.26) (0.46) NET ASSET VALUE End of period $ 15.86 $ 15.28 $ 21.69 $ 22.29 $ 22.38 $ 19.84 ----------------------------------------------------------------- Ratios/Supplemental Data Total return (diamond)) 6.18% (23.98)% 6.28% 11.44% 20.12% 20.30% Ratio of total expenses to average net assets 1.12%! 1.09% 1.02% 1.05% 1.05% 1.06% Ratio of net investment income (loss) to average net assets 0.66%! 2.03% 0.71% 0.97% 1.39% 1.41% Portfolio turnover rate 8.0%! 5.8% 24.5% 15.7% 26.8% 17.5% Net assets, end of period (in millions) $ 820 $ 814 $ 1,250 $ 1,382 $ 1,412 $ 984 (diamond) 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. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Unaudited April 30, 2002 Portfolio of Investments Shares Value -------------------------------------------------------------------------------- In thousands BELGIUM 1.9% Common Stocks 1.9% Dexia (miscelleaneous footnote symbol) 414,630 $ 6,832 Fortis (miscelleaneous footnote symbol) 156,969 3,601 UCB 142,717 5,205 Total Belgium (Cost $9,861) 15,638 DENMARK 0.5% Common Stocks 0.5% Novo Nordisk (miscelleaneous footnote symbol) 68,200 1,999 TDC A/S (miscelleaneous footnote symbol) 67,158 1,935 Total Denmark (Cost $4,980) 3,934 FINLAND 1.4% Common Stocks 1.4% Elcoteq Network *(miscelleaneous footnote symbol) 65,270 447 Nokia 669,254 10,823 Total Finland (Cost $1,895) 11,270 FRANCE 17.7% Common Stocks 17.7% Altran Technologies 61,480 3,211 Aventis 143,779 10,208 AXA (miscelleaneous footnote symbol) 324,956 6,891 BNP Paribas 178,292 9,312 Cap Gemini (miscelleaneous footnote symbol) 26,270 1,532 Compagnie de Saint-Gobain (miscelleaneous footnote symbol) 44,162 7,555 Dassault Systemes 24,900 1,117 Essilor International 56,886 2,313 Groupe Danone (miscelleaneous footnote symbol) 12,324 1,631 Hermes 17,530 2,704 L'Oreal 14,605 1,144 Lafarge 23,935 2,269 LVMH (miscelleaneous footnote symbol) 30,630 1,601 Orange *(miscelleaneous footnote symbol) 543,520 3,132 Sanofi-Synthelabo (miscelleaneous footnote symbol) 257,413 $ 16,469 Schneider Electric (miscelleaneous footnote symbol) 112,418 5,421 Societe Generale (miscelleaneous footnote symbol) 91,196 6,241 Societe Television Francaise 1 (miscelleaneous footnote symbol) 396,588 11,285 Sodexho Alliance (miscelleaneous footnote symbol) 130,695 5,060 STMicroelectronics (miscelleaneous footnote symbol) 224,196 6,965 Thomson Multimedia *(miscelleaneous footnote symbol) 25,100 686 TotalFinaElf (Class B) 208,475 31,575 Trader.com *(miscelleaneous footnote symbol) 58,240 430 Vivendi Universal (miscelleaneous footnote symbol) 205,511 6,549 Total France (Cost $103,258) 145,301 GERMANY 5.7% Common Stocks 5.7% Allianz (miscelleaneous footnote symbol) 26,100 6,145 Bayer (miscelleaneous footnote symbol) 158,452 5,189 Bayerische Hypo-und Vereinsbank (miscelleaneous footnote symbol) 75,847 2,660 Deutsche Bank (miscelleaneous footnote symbol) 124,694 8,264 Deutsche Telekom 48,042 638 E.On (miscelleaneous footnote symbol) 63,115 3,285 Gehe (miscelleaneous footnote symbol) 153,308 6,419 Gehe (New Shares) * (miscelleaneous footnote symbol) 25,669 1,048 Rhoen-Klinikum 51,939 3,040 SAP 48,720 6,344 Siemens 61,839 3,759 Total Germany (Cost $39,068) 46,791 GREECE 0.4% Common Stocks 0.4% Hellenic Telecommunications Organization 67,960 1,050 National Bank of Greece 132,250 2,408 Total Greece (Cost $5,246) 3,458 IRELAND 0.0% Common Stocks 0.0% SmartForce ADR (USD) * 39,228 251 Total Ireland (Cost $647) 251 ITALY 8.2% Common Stocks 8.2% Alleanza Assicurazioni (miscelleaneous footnote symbol) 1,069,370 $ 10,351 Banca Popolare di Verona (miscelleaneous footnote symbol) 138,000 1,713 Bipop-Carire (miscelleaneous footnote symbol) 602,000 1,076 ENI (miscelleaneous footnote symbol) 759,237 11,656 IntesaBci *(miscelleaneous footnote symbol) 2,735,167 8,842 Mediaset (miscelleaneous footnote symbol) 327,171 2,740 Mediolanum (miscelleaneous footnote symbol) 363,400 3,109 Olivetti (miscelleaneous footnote symbol) 1,427,406 1,639 San Paolo IMI (miscelleaneous footnote symbol) 83,284 928 Snam Rete Gas * 425,100 1,206 Telecom Italia (Ordinary shares) 829,950 6,599 Telecom Italia (Savings shares) (miscelleaneous footnote symbol) 150,200 805 Telecom Italia Mobile (miscelleaneous footnote symbol) 2,459,215 10,740 UniCredito Italiano (miscelleaneous footnote symbol) 1,182,461 5,483 Total Italy (Cost $67,822) 66,887 LUXEMBOURG 0.1% Common Stocks 0.1% Societe Europeenne des Satellites 75,370 760 Total Luxembourg (Cost $1,210) 760 NETHERLANDS 8.9% Common Stocks 8.9% Akzo Nobel 50,198 2,156 ASM Lithography * 361,630 8,206 Equant 75,156 680 Fortis (miscelleaneous footnote symbol) 237,480 5,451 ING Groep 663,678 17,510 Philips Electronics 604,004 18,638 Reed Elsevier 201,830 2,799 Royal Dutch Petroleum 184,986 9,794 Royal KPN 185,000 838 Wolters Kluwer 355,260 7,198 Total Netherlands (Cost $54,760) 73,270 NORWAY 0.6% Common Stocks 0.6% Norsk Hydro (miscelleaneous footnote symbol) 18,759 $ 923 Orkla (Class A) (miscelleaneous footnote symbol) 202,742 3,690 Total Norway (Cost $2,286) 4,613 PORTUGAL 0.6% Common Stocks 0.6% Jeronimo Martins * 147,694 1,230 Portugal Telecom * 516,221 3,765 Total Portugal (Cost $5,337) 4,995 SPAIN 5.0% Common Stocks 5.0% Banco Bilbao Vizcaya Argentaria 544,475 6,344 Banco Santander Central Hispano (miscelleaneous footnote symbol) 828,847 7,672 Endesa 285,729 4,374 Gamesa *(miscelleaneous footnote symbol) 204,924 3,545 Inditex * 356,300 7,344 Repsol 238,691 2,930 Telefonica 825,380 8,829 Total Spain (Cost $33,100) 41,038 SWEDEN 4.5% Common Stocks 4.5% Electrolux (Class B) (miscelleaneous footnote symbol) 442,840 7,359 Hennes & Mauritz (Class B) (miscelleaneous footnote symbol) 328,020 6,503 LM Ericsson (Class B) * 1,963,530 4,923 Nordea (miscelleaneous footnote symbol) 854,623 4,859 Sandvik (miscelleaneous footnote symbol) 126,500 2,926 Securitas (Class B) (miscelleaneous footnote symbol) 543,584 10,090 Total Sweden (Cost $49,671) 36,660 SWITZERLAND 7.1% Common Stocks 7.1% Adecco (miscelleaneous footnote symbol) 249,870 15,794 Credit Suisse 143,220 5,100 Nestle (miscelleaneous footnote symbol) 73,278 $ 17,307 Roche (Participation certificates) (miscelleaneous footnote symbol) 140,940 10,668 UBS 203,868 9,819 Total Switzerland (Cost $38,081) 58,688 UNITED KINGDOM 35.6% Common Stocks 35.6% Abbey National 139,117 2,211 AstraZeneca 378,883 17,743 Autonomy * 14,000 74 BG Group 402,933 1,799 BP 825,000 7,036 Brambles Industries 734,320 3,637 Cable & Wireless 588,598 1,552 Cadbury Schweppes 1,400,764 10,620 Centrica 526,640 1,620 Compass 1,954,600 12,157 David S. Smith 519,416 1,241 Diageo 1,305,702 17,326 Dimension Data * 166,987 148 Electrocomponents 789,980 5,005 Friends Provident 648,400 1,738 GKN 190,000 888 GlaxoSmithKline 1,474,706 35,658 Granada 1,958,848 3,674 Hays 591,281 1,483 Hilton 377,000 1,407 Kingfisher 1,626,858 9,088 Lattice 688,533 1,860 Reed Elsevier 2,278,720 22,305 Rio Tinto 404,428 7,511 Royal Bank of Scotland 1,329,431 38,109 Serco 563,432 2,187 Shell Transport & Trading 2,725,770 19,395 Standard Chartered 345,100 4,248 Tesco 2,496,270 9,563 Tomkins 1,694,086 6,514 Unilever 1,340,457 $ 12,262 United Business Media 408,411 3,117 Vodafone 11,855,522 19,125 Woolworths 1,844,325 1,410 WPP Group 660,460 7,004 Xstrata * 72,000 984 Total United Kingdom (Cost $293,244) 291,699 SHORT-TERM INVESTMENTS 0.5% Money Market Funds 0.5% T. Rowe Price Reserve Investment Fund, 2.07% # 4,078,129 4,078 Total Short-Term Investments (Cost $4,078) 4,078 Total Investments in Securities 98.7% of Net Assets (Cost $714,544) $ 809,331 Other Assets Less Liabilities 10,292 NET ASSETS $ 819,623 --------------- # Seven-day yield * Non-income producing (miscelleaneous footnote symbol) All or portion of this security is on loan @ April 30, 2002. See Note 2. ADR American Depository Receipts USD U.S. dollar The accompanying notes are an integral part of these financial statements. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Unaudited April 30, 2002 Statement of Assets and Liabilities -------------------------------------------------------------------------------- In thousands Assets Investments in securities, at value (cost $714,544) $ 809,331 Securities lending collateral 204,130 Other assets 13,672 Total assets 1,027,133 Liabilities Obligation to return securities lending collateral 204,130 Other liabilities 3,380 Total liabilities 207,510 NET ASSETS $ 819,623 ---------- Net Assets Consist of: Undistributed net investment income (loss) $ 2,376 Undistributed net realized gain (loss) (23,437) Net unrealized gain (loss) 94,793 Paid-in-capital applicable to 51,689,221 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized 745,891 NET ASSETS $ 819,623 ---------- NET ASSET VALUE PER SHARE $ 15.86 ---------- The accompanying notes are an integral part of these financial statements. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Unaudited Statement of Operations -------------------------------------------------------------------------------- In thousands 6 Months Ended 4/30/02 Investment Income (Loss) Income Dividend (net of foreign taxes of $941) $ 6,807 Securities lending 383 Interest 126 Total income 7,316 Expenses Investment management 3,383 Shareholder servicing 885 Custody and accounting 198 Prospectus and shareholder reports 61 Registration 38 Proxy and annual meeting 21 Legal and audit 9 Directors 5 Miscellaneous 2 Total expenses 4,602 Net investment income (loss) 2,714 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (5,474) Foreign currency transactions (107) Net realized gain (loss) (5,581) Change in net unrealized gain (loss) Securities 55,812 Other assets and liabilities denominated in foreign currencies 24 Change in net unrealized gain (loss) 55,836 Net realized and unrealized gain (loss) 50,255 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 52,969 ---------- The accompanying notes are an integral part of these financial statements. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Unaudited Statement of Changes in Net Assets -------------------------------------------------------------------------------- In thousands 6 Months Year Ended Ended 4/30/02 10/31/01 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ 2,714 $ 20,925 Net realized gain (loss) (5,581) (16,102) Change in net unrealized gain (loss) 55,836 (278,106) Increase (decrease) in net assets from operations 52,969 (273,283) Distributions to shareholders Net investment income (18,861) (9,001) Net realized gain -- (79,869) Decrease in net assets from distributions (18,861) (88,870) Capital share transactions * Shares sold 412,357 397,588 Distributions reinvested 17,698 84,295 Shares redeemed (458,514) (555,986) Increase (decrease)in net assets from capital share transactions (28,459) (74,103) Net Assets Increase (decrease) during period 5,649 (436,256) Beginning of period 813,974 1,250,230 End of period $ 819,623 $ 813,974 ------------------------------------- *Share information Shares sold 26,513 22,774 Distributions reinvested 1,129 4,217 Shares redeemed (29,232) (31,353) Increase (decrease) in shares outstanding (1,590) (4,362) The accompanying notes are an integral part of these financial statements. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Unaudited April 30, 2002 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 European Stock Fund (the fund), a diversified, open-end management investment company, is one of the portfolios established by the corporation and commenced operations on February 28, 1990. The fund seeks long-term growth of capital through investments primarily in the common stocks of European companies; current income is a secondary objective. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by fund management. Valuation Equity securities are valued at the last quoted sale price, or official closing price for certain markets, at the time the valuations are made. A security that 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. 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 denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and ask prices of such currencies against U.S. dollars quoted by a major bank. Purchases and sales of securities, 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. 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. Credits earned on daily uninvested cash balances at the custodian are used to reduce the fund's custody charges. 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. Securities Lending The fund lends its securities to approved brokers to earn additional income. It receives as collateral cash and U.S. government securities valued at 102% to 105% of the value of the securities on loan. Cash collateral 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 the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund the next business day. 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 the securities. At April 30, 2002, the value of loaned securities was $195,139,000; aggregate collateral consisted of $204,130,000 in the securities lending collateral pool. and U.S. government securities valued at $962,000. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $32,318,000 and $73,845,000, respectively, for the six months ended April 30, 2002. 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 to shareholders all of its taxable income and capital gains. Income and capital gain distributions determined in accordance with federal income tax regulations differ from net investment income and realized gains recognized for financial reporting purposes and, accordingly, the character of distributions and composition of net assets for tax purposes differ from those reflected in the accompanying financial statements. The fund intends to retain realized gains that may be offset by available capital loss carryforwards for tax purposes. As of October 31, 2001, the fund's most recent tax year-end, the fund had $17,588,000 of capital loss carryforwards available to offset future realized gains, all of which expire in 2009. At April 30, 2002, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $714,544,000. Net unrealized gain aggregated $94,787,000 at period-end, of which $221,634,000 related to appreciated investments and $126,847,000 related 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 as a reduction of income. NOTE 5 - RELATED PARTY TRANSACTIONS The fund is managed by T. Rowe Price International, Inc. (the manager), a wholly owned subsidiary of T. Rowe Price Associates, Inc. (Price Associates), which is wholly owned by T. Rowe Price Group. The investment management agreement between the fund and the manager provides for an annual investment management fee, of which $556,000 was payable at April 30, 2002. 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 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, 2002, 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. 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. Expenses incurred pursuant to these related party agreements totaled approximately $692,000 for the six months ended April 30, 2002, of which $153,000 was payable at period-end. Additionally, the fund is one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum) may invest. Spectrum does not invest in the underlying Price funds for the purpose of exercising management or control. Expenses associated with the operation of Spectrum are borne by each underlying Price 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 Price funds, Price Associates, and, in the case of T. Rowe Price Spectrum International, T. Rowe Price International. For the six months ended April 30, 2002, the fund was allocated $53,000 of Spectrum expenses, $11,000 of which was payable at period-end. At April 30, 2002, approximately 2.0% of the outstanding shares of the fund were held by Spectrum. The fund may invest in the T. Rowe Price Reserve Investment Fund and T. Rowe Price Government Reserve Investment Fund (collectively, the Reserve Funds), open-end management investment companies managed by Price Associates. The Reserve Funds are offered as cash management options only to mutual funds and other accounts managed by Price Associates and/or 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, 2002, totaled $78,000 and are reflected as interest income in the accompanying Statement of Operations. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- About the Fund's Directors and Officers -------------------------------------------------------------------------------- Your fund is governed by a Board of Directors that meets regularly to review investments, performance, expenses, and other business matters, and is responsible for protecting the interests of shareholders. The majority of the fund's directors are independent of T. Rowe Price Associates, Inc.; "inside" directors are officers of T. Rowe Price. The Board of Directors elects the fund's officers, who are listed in the final table. The business address of each director and officer is 100 East Pratt Street, Baltimore, MD 21202. Independent Directors Name (Date of Birth) Principal Occupation(s) During Past 5 Years and Year Elected* Other Directorships of Public Companies -------------------------------------------------------------------------------- Calvin W. Burnett, Ph.D. President, Coppin State College; Director, (3/16/32) Provident Bank of Maryland 2001 -------------------------------------------------------------------------------- Anthony W. Deering Director, Chairman of the Board, President, (1/28/45) and Chief Executive Officer, The Rouse Company, 1991 real estate developers -------------------------------------------------------------------------------- Donald W. Dick, Jr. Principal, EuroCapital Advisors, LLC, an (1/27/43) acquisition and management advisory firm 1988 -------------------------------------------------------------------------------- David K. Fagin Director, Dayton Mining Corp. (6/98 to (4/9/38) present), Golden Star Resources Ltd., and 2001 Canyon Resources Corp. (5/00 to present); Chairman and President, Nye Corp. -------------------------------------------------------------------------------- F. Pierce Linaweaver President, F. Pierce Linaweaver & Associates, (8/22/34) Inc., consulting environmental and civil 2001 engineers -------------------------------------------------------------------------------- Hanne M. Merriman Retail Business Consultant; Director, Ann (11/16/41) Taylor Stores Corp., Ameren Corp., Finlay 2001 Enterprises, Inc., The Rouse Company, and US Airways Group, Inc. -------------------------------------------------------------------------------- John G. Schreiber Owner/President, Centaur Capital Partners, Inc., (10/21/46) a real estate investment company; Senior 2001 Advisor and Partner, Blackstone Real Estate Advisors, L.P.; Director, AMLI Residential Properties Trust, Host Marriott Corp., and The Rouse Company -------------------------------------------------------------------------------- Hubert D. Vos Owner/President, Stonington Capital Corp., a (8/2/33) private investment company 2001 -------------------------------------------------------------------------------- Paul M. Wythes Founding Partner, Sutter Hill Ventures, a (6/23/33) venture capital limited partnership, providing 1996 equity capital to young high-technology companies throughout the United States; Director, Teltone Corp. *Each independent director oversees 98 T. Rowe Price portfolios and serves until the election of a successor. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Inside Directors Name (Date of Birth) Year Elected* [Number of T. Rowe Price Principal Occupation(s) During Past 5 Years and Portfolios Overseen] Other Directorships of Public Companies -------------------------------------------------------------------------------- James S. Riepe Director and Managing Director, T. Rowe Price; (6/25/43) Vice Chairman of the Board, Director, and 2002 [98] Managing Director, T. Rowe Price Group, Inc.; Chairman of the Board and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director, President, and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc., and T. Rowe Price Global Investment Services Limited; Vice President, International Funds -------------------------------------------------------------------------------- M. David Testa Chief Investment Officer, Director, and (4/22/44) Managing Director, T. Rowe Price; Vice Chairman 1979 [98] of the Board, Chief Investment Officer, Director, and Managing Director, T. Rowe Price Group, Inc.; Director and Chairman of the Board, T. Rowe Price Global Asset Management Limited; Vice President and Director, T. Rowe Price Trust Company; Director, T. Rowe Price Global Investment Services Limited and T. Rowe Price International, Inc.; Vice President, International Funds -------------------------------------------------------------------------------- Martin G. Wade Managing Director, T. Rowe Price; Director and (2/16/43) Managing Director, T. Rowe Price Group, Inc.; 1982 [15] Chairman of the Board and Director, T. Rowe Price Global Investment Services Limited and T. Rowe Price International, Inc.; Director, T. Rowe Price Global Asset Management Limited; Chairman of the Board, International Funds -------------------------------------------------------------------------------- *Each inside director serves until the election of a successor. Officers Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) -------------------------------------------------------------------------------- Christopher D. Alderson (3/29/62) Managing Director, T. Rowe Price and Vice President, International Funds T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Mark C.J. Bickford-Smith (4/30/62) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Joseph A. Carrier (12/30/60) Vice President, T. Rowe Price, T. Rowe Treasurer, International Funds Price Group, Inc., and T. Rowe Price Investment Services, Inc. -------------------------------------------------------------------------------- Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Officers (continued) Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) -------------------------------------------------------------------------------- Michael J. Conelius (6/16/64) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Ann B. Cranmer (3/23/47) Vice President, T. Rowe Price Group, Assistant Vice President, Inc., and T. Rowe Price International, International Funds Inc.; Vice President and Secretary, T. Rowe Price Global Asset Management Limited and T. Rowe Price Global Investment Services Limited -------------------------------------------------------------------------------- Frances Dydasco (5/8/66) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Mark J.T. Edwards (10/27/57) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Roger L. Fiery III (2/10/59) Vice President, T. Rowe Price, T. Rowe Assistant Vice President, Price Group, Inc., and T. Rowe Price International Funds International, Inc. -------------------------------------------------------------------------------- John R. Ford (11/25/57) Managing Director, T. Rowe Price and President, International Funds T. Rowe Price Group, Inc.; Director, Chief Investment Officer, and Vice President, T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Henry H. Hopkins (12/23/42) Managing Director, T. Rowe Price; Vice President, International Funds Director and Managing Director, T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc.; Vice President and Director, T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company -------------------------------------------------------------------------------- Ian D. Kelson (8/16/56) Managing Director, T. Rowe Price and Vice President, International Funds T. Rowe Price Group, Inc.; formerly Head of Fixed Income, Morgan Grenfell/ Deutsche Asset Management (to 2000) -------------------------------------------------------------------------------- Patricia B. Lippert (1/12/53) Assistant Vice President, T. Rowe Price Secretary, International Funds and T. Rowe Price Investment Services, Inc. -------------------------------------------------------------------------------- Ian J. Macdonald (1/7/62) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- David S. Middleton (1/18/56) Vice President, T. Rowe Price, T. Rowe Controller, International Funds Price Group, Inc., and T. Rowe Price Trust Company -------------------------------------------------------------------------------- Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. T. Rowe Price European Stock Fund -------------------------------------------------------------------------------- Officers (continued) Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) -------------------------------------------------------------------------------- George A. Murnaghan (5/1/56) Managing Director, T. Rowe Price and Vice President, International Funds T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Trust Company -------------------------------------------------------------------------------- Gonzalo Pangaro (11/27/68) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- D. James Prey III (11/26/59) Vice President, T. Rowe Price and T. Rowe Vice President, International Funds Price Group, Inc. -------------------------------------------------------------------------------- Robert Revel-Chion (3/9/65) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Christopher J. Rothery (5/26/63) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- James B.M. Seddon (6/17/64) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Robert W. Smith (4/11/61) Managing Director, T. Rowe Price and Vice President, International Funds T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Benedict R.F. Thomas (8/27/64) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Justin Thomson (1/14/68) Vice President, T. Rowe Price Group, Vice President, International Funds Inc., and T. Rowe Price International, Inc.; formerly Portfolio Manager, G.T. Capital/Invesco (to 1998) -------------------------------------------------------------------------------- David J.L. Warren (4/14/57) Managing Director, T. Rowe Price and Executive Vice President, T. Rowe Price Group, Inc.; Director, International Funds Chief Executive Officer, and President, T. Rowe Price International, Inc.; Director, T. Rowe Price Global Asset Management Limited -------------------------------------------------------------------------------- William F. Wendler II (3/14/62) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., and T. Rowe Price International, Inc. -------------------------------------------------------------------------------- Richard T. Whitney (5/7/58) Managing Director, T. Rowe Price and Vice President, International Funds T. Rowe Price Group, Inc.; Vice President, T. Rowe Price International, Inc., and T. Rowe Price Trust Company -------------------------------------------------------------------------------- Edward A. Wiese, CFA (4/12/59) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., and T. Rowe Price Trust Company; Director, Chief Investment Officer, and Vice President, T. Rowe Price Savings Bank -------------------------------------------------------------------------------- Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. T. Rowe Price Investment Services and Information -------------------------------------------------------------------------------- Investment Services and Information KNOWLEDGEABLE SERVICE REPRESENTATIVES By Phone 1-800-225-5132. Available Monday through Friday from 7 a.m. until midnight ET and weekends from 8:30 a.m. until 5 p.m. ET. In Person. Available in T. Rowe Price Investor Centers. Please call a service representative at 1-800-225-5132 or visit the Web at www.troweprice.com/investorcenter to locate a center near you. ACCOUNT SERVICES Automated 24-Hour Services Including Tele*Access(registered trademark) and Account Access through the T. Rowe Price Web site on the Internet. Address: www.troweprice.com. Automatic Investing. From your bank account or paycheck. Automatic Withdrawal. Scheduled, automatic redemptions. IRA Rebalancing. Ensuring that your accounts reflect your desired asset allocation. BROKERAGE SERVICES * Individual Investments. Stocks, bonds, options, precious metals, and other securities at a savings over full-service commission rates. INVESTMENT INFORMATION Consolidated Statement. Overview of all of your accounts. Shareholder Reports. Manager reviews of their strategies and results. T. Rowe Price Report. Quarterly investment newsletter. Performance Update. Quarterly review of all T. Rowe Price fund results. Insights. Educational reports on investment strategies and markets. Investment Guides. Asset Mix Worksheet, Diversifying Overseas: A Guide to International Investing, Retirement Planning Kit, Retirement Readiness Guide, and Tax Considerations Guide. * T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services, Inc., Member NASD/SIPC. T. Rowe Price Planning Tools and Services -------------------------------------------------------------------------------- T. Rowe Price Retirement Services T. Rowe Price offers unique retirement resources that can help you meet a broad variety of planning challenges. Our retirement tools are suitable for individuals, the self-employed, small businesses, corporations, and nonprofit organizations. We also provide recordkeeping, communications, and investment management services. For more information, call us at 1-800-IRA-5000, or visit our Web site at www.troweprice.com. PLANNING TOOLS AND SERVICES T. Rowe Price(registered trademark) Retirement Income Manager* helps retirees or those within two years of retirement determine how much income they can draw down in retirement. The program uses extensive statistical analysis and the input of a T. Rowe Price Advisory Counselor to suggest an income plan that best meets your objectives. Retirement Income Calculator. This free calculator, incorporating the analytic approach of the T. Rowe Price Retirement Income Manager program, simulates 500 potential market scenarios to estimate the probability of maintaining an income strategy throughout retirement. Rollover Investment Service* offers asset allocation and fund selection advice to those planning a 401(k) rollover from a previous employer after changing jobs or retiring. IRA Rebalancing Service. T. Rowe Price will rebalance your IRA at the end of every quarter by exchanging shares between mutual fund accounts. This ensures that your accounts retain your desired asset allocation. Quality Information. Thousands of investors have made their personal choices with the help of our Retirement Readiness Guide, Retirement Planning Kit, IRA Insights, and Retirement Planning Worksheet. INVESTMENT VEHICLES Individual Retirement Accounts (IRAs) No-Load Variable Annuities Small Business Retirement Plans * Services of T. Rowe Price Advisory Services, Inc., a federally registered investment adviser. There are costs associated with these services. T. Rowe Price Mutual Funds -------------------------------------------------------------------------------- STOCK FUNDS Domestic Blue Chip Growth* Capital Appreciation Capital Opportunity Developing Technologies Diversified Small-Cap Growth Dividend Growth Equity Income* Equity Index 500 Extended Equity Market Index Financial Services Growth & Income Growth Stock* Health Sciences Media & Telecommunications Mid-Cap Growth* Mid-Cap Value New America Growth New Era New Horizons Real Estate Science & Technology* Small-Cap Stock* Small-Cap Value*! Spectrum Growth Tax-Efficient Growth Tax-Efficient Multi-Cap Growth Total Equity Market Index Value* BLENDED ASSET FUNDS Balanced Personal Strategy Balanced Personal Strategy Growth Personal Strategy Income Tax-Efficient Balanced BOND FUNDS Domestic Taxable Corporate Income GNMA High Yield* New Income Short-Term Bond Spectrum Income Summit GNMA U.S. Bond Index U.S. Treasury Intermediate U.S. Treasury Long-Term Domestic Tax-Free California Tax-Free Bond Florida Intermediate Tax-Free Georgia Tax-Free Bond Maryland Short-Term Tax-Free Bond Maryland Tax-Free Bond New Jersey Tax-Free Bond New York Tax-Free Bond Summit Municipal Income Summit Municipal Intermediate Tax-Free High Yield Tax-Free Income Tax-Free Intermediate Bond Tax-Free Short-Intermediate Virginia Tax-Free Bond MONEY MARKET FUNDS!! Taxable Prime Reserve Summit Cash Reserves U.S. Treasury Money Tax-Free California Tax-Free Money Maryland Tax-Free Money New York Tax-Free Money Summit Municipal Money Market Tax-Exempt Money INTERNATIONAL/GLOBAL FUNDS Stock Emerging Europe & Mediterranean Emerging Markets Stock European Stock Global Stock Global Technology International Discovery! International Equity Index International Growth & Income International Stock* Japan Latin America New Asia Spectrum International Bond Emerging Markets Bond International Bond* For more information about T. Rowe Price funds or services, please contact us directly at 1-800-225-5132. * T. Rowe Price Advisor Class available for these funds. The T. Rowe Price Advisor Class is offered only through financial intermediaries. For more information about T. Rowe Price Advisor Class funds, contact your financial professional or T. Rowe Price at 1-877-804-2315. ! Closed to new investors. !! Investments in the funds are not insured or guaranteed by the FDIC or any other government agency. Although the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the funds. Please call for a prospectus, which contains complete information, including risks, fees, and expenses. Read it carefully before investing. T. Rowe Price Invest with Confidence (registered trademark) T. Rowe Price Investment Services, Inc. 100 East Pratt Street Baltimore, MD 21202 F79-051 4/30/02