-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bh7OlS8Z13/S0fda7qyYgrMpkhIawFGxrhJns1KAi3QKfQq6AQ1BGKgWFMci4tDf KrIfOiElFlPg0n9RFj36zA== 0000313212-02-000049.txt : 20021210 0000313212-02-000049.hdr.sgml : 20021210 20021210081903 ACCESSION NUMBER: 0000313212-02-000049 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021031 FILED AS OF DATE: 20021210 EFFECTIVENESS DATE: 20021210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUNDS INC CENTRAL INDEX KEY: 0000313212 IRS NUMBER: 521175211 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-02958 FILM NUMBER: 02852895 BUSINESS ADDRESS: STREET 1: 100 E PRATT ST CITY: BALTIMORE STATE: MD ZIP: 21202 BUSINESS PHONE: 3015472000 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL TRUST DATE OF NAME CHANGE: 19900301 FORMER COMPANY: FORMER CONFORMED NAME: PRICE T ROWE INTERNATIONAL FUND INC DATE OF NAME CHANGE: 19890914 N-30D 1 arisf.txt T. ROWE PRICE INTERNATIONAL STOCK FUND 10/31/02 Annual Report International Stock Fund October 31, 2002 T. Rowe Price(registered trademark) logo icon (registered trademark) REPORT HIGHLIGHTS - -------------------------------------------------------------------------------- International Stock Fund o International stocks weakened during the past six months but ended the fund's fiscal year with a strong gain in October. o Fund performance lagged the MSCI EAFE Index and the Lipper average because of our emphasis on growth in an environment that favored defensive stocks in general. o The fund remains heavily weighted in services stocks because we see above-average long-term growth and strong cash flow for several businesses in this sector. o Stock valuations in most markets are at levels last seen in the early 1990s, interest rates are much lower, and economic growth should be moderate, leading us to believe that equity returns going forward should at least be reasonable. 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 After losing ground for most of the past six months, international stocks rallied strongly in October to end the fund's fiscal year on a high note. However, strength in October failed to overcome earlier losses. For the six and 12 months ended October 31, 2002, results were sharply negative as all major international markets posted severe double-digit losses. Your portfolio suffered along with other international equity funds during the past six months, performing somewhat worse than the unmanaged EAFE index and the Lipper International Funds Average, which shows the average performances for similarly managed funds. Within our peer group, funds with a value bias fared best while funds with a growth bias, including yours, tended to lag. The results for the Advisor Class shares trailed slightly behind the fund shares, reflecting the former's higher expense ratio in return for additional services. The primary reasons for the International Stock Fund's lagging results relative to the benchmarks' were the portfolio's emphasis on growth during a period when the market generally favored defensive stocks, and to stock selection in several sectors. Performance Comparison - -------------------------------------------------------------------------------- Periods Ended 10/31/02 6 Months 12 Months - -------------------------------------------------------------------------------- International Stock Fund -19.73% -14.19% International Stock Fund - Advisor Class -19.82 -14.37 MSCI EAFE Index -17.60 -12.93 Lipper International Funds Average -18.67 -12.72 Pie Graph: Geographic Diversification - -------------------------------------------------------------------------------- Europe 72 Japan 14 Far East 9 Other and Reserves 3 Latin America 2 Based on net assets as of 10/31/02. MARKET REVIEW International stock markets were buffeted on several fronts over the past six months as expectations for economic recovery continued to be revised downward. At the beginning of the period, there was still some optimism that lower interest rates would help revive growth. However, by the end of October, many commentators had decided that lower consumer confidence, high debt levels, and falling equity markets would probably keep growth subdued, at best, and could possibly be a harbinger of a double-dip recession in the U.S. European growth expectations broadly followed the U.S., with Germany doing significantly worse while the U.K. and Spain seem to be more robust. In Japan, the long period of slow growth appeared to be ending, but more recent signs make that scenario seem less likely-putting the spotlight back on the parlous state of the banking system. While confidence in economic growth has waned, fears of war with Iraq have mounted. The Bush administration has made no secret of its desire to overthrow Saddam Hussein. As we write, this issue appears to be nearing the beginning of some form of resolution, with the UN now united behind the U.S. In addition, the issue of corporate accounting integrity has been plaguing the equities markets during the period. New regulations have been put in place, indicating that the worst of these scandals are now behind us and the issue will continue to recede as a major concern overhanging the markets. PORTFOLIO REVIEW Media The bulk of your portfolio's significant exposure to the media sector remains in the professional publishing area, and a recent visit to one of our largest holdings, U.K./Netherlands' Reed Elsevier, confirmed that the company has established a strong position in its industry. CEO Crispin Davis has reinforced the scientific publishing business with the intelligent use of electronic delivery while keeping a tight rein on costs in the more difficult business publishing unit. This development, coupled with steady growth in legal and educational publishing, should underpin 12% earnings growth for a valuation of around 17 times earnings next year. The more cyclical broadcasting area endured a difficult six-month period but rallied strongly recently as fast-moving consumer goods companies increased their advertising in an attempt to bolster market share. This broad trend has helped holdings such as Australia's News Corporation. We trimmed back exposure in this area during the rally as valuations have become a little stretched. Market Performance - -------------------------------------------------------------------------------- Six Months Local Local Currency U.S. Ended 10/31/02 Currency vs. U.S. Dollars Dollars - -------------------------------------------------------------------------------- France -27.47% 9.90% -20.29% Germany -36.68 9.90 -30.41 Hong Kong -20.95 0.00 -20.95 Italy -23.26 9.90 -15.66 Japan -21.31 4.81 -17.53 Mexico -18.96 -7.64 -25.15 Netherlands -30.63 9.90 -23.76 Singapore -14.85 2.61 -12.65 Sweden -29.76 12.15 -21.22 Switzerland -22.82 9.75 -15.29 United Kingdom -21.70 7.35 -15.94 Source: RIMES Online, using MSCI indices. Services The fund remains heavily weighted in this broad area because we see above-average long-term growth and strong cash flow for several businesses. One stock that has had a difficult time recently is Securitas, the Swedish protection and security services company. We project top-line growth for the overall business in the mid to high single digits, helped by growing security consciousness as well as implementation of the tried-and-tested Securitas model in new regions. The stock has been under pressure for a variety of reasons and now sells at about 14 times earnings for growth that we think will average 14% over the next few years-a reasonable valuation in our estimation. Industry Diversification - -------------------------------------------------------------------------------- Percent of Net Assets 4/30/02 10/31/02 - -------------------------------------------------------------------------------- Financials 21.8% 20.3% Consumer Discretionary 17.3 17.5 Health Care 12.1 12.4 Energy 8.8 9.4 Consumer Staples 8.6 9.0 Telecommunication Services 7.8 8.8 Information Technology 9.1 8.2 Industrials and Business Services 8.0 7.9 Materials 2.7 2.9 Utilities 0.9 1.2 Reserves 2.9 2.4 - -------------------------------------------------------------------------------- Total 100.0% 100.0% Financials The insurance sector has been through a tumultuous period, particularly in Europe. As equity markets have fallen, balance sheets that previously looked relatively secure have begun to look somewhat thin. At the same time, poor returns have meant that new business has been difficult to achieve, and many life insurance business models have had to be revisited in the current environment. Your fund remains underweighted in this sector, having reduced its position early in the period and again more recently as the sector has recovered. Within banking, there has been contrasting performance with capital markets-exposed stocks lagging steadier retail-focused stocks. Over the past few months, the market has become increasingly vulnerable to concerns about bad debts. Bad debts have picked up significantly in the weak German economy, although they have been benign so far in other countries. We anticipate some worsening of this situation during the coming months. However, many European banks have taken a much more cautious approach to credit exposure than in the early 1990s when they encountered major problems. With this in mind, we revisited all our stocks and scaled back our position in IntesaBCI in Italy, where the restructuring program will be more difficult to implement in an uncertain economic environment. We maintained our position in Royal Bank of Scotland where the environment seems more encouraging and the bank's profitability and market position, coupled with a low stock valuation, give us more comfort. In Japan, on the other hand, we remain leery of banks and believe they have a long way to go before the nonperforming loan issue is finally addressed. Recent moves toward reform have once again proved rather disappointing. Telecommunications After an extremely difficult couple of years, the telecommunications sector seemed to reach something of an inflection point in the summer as both investors and management came to terms with lower longer-term growth potential, leading to a sharper focus on returns and capital discipline. With lower levels of capital spending all around, cash generation has improved significantly and it is possible to see returns beginning to pick up. The mobile sector has also seen average revenue per user increasing after a long period of attrition. With valuations reaching low levels, share prices have begun to perform better. Your fund is overweight in the mobile area as well as in emerging markets. We retained our large position in the U.K.'s Vodafone, which has been a beneficiary of both improved capital discipline and an improvement in revenues. Pharmaceuticals This sector also seems to have passed its low point. Earlier in the year, it seemed that the drug industry was in freefall with a succession of patent attacks and new product disappointments. More recently, with valuations having hit very depressed levels, snippets of good news have been enough to push prices back up. With a new FDA director in place in the U.S. and some patent attacks repelled, the strong long-term dynamics of the pharmaceutical business model-good cash generation, supportive demographics, favorable returns-are reasserting themselves. We added to Novo Nordisk of Denmark, which is benefiting from a diabetes resurgence and is well positioned with its NovoSeven blood-clotting agent. Technology The last six months have seen yet another cluster of companies struggling within the inhospitable technology sector. As the recession in tech persists, the winners and losers are becoming more polarized. Stocks such as Finland's Nokia have such a commanding lead over the competition that many of the second- and third-line mobile companies have withdrawn from the field. In semiconductors, Samsung Electronics of South Korea, another large holding for the fund, has shown a clean pair of heels to the chasing pack. Samsung has extended its lead in memory by continuing to invest while its competitors have struggled to conserve cash. It has also been very successful in the mobile handset business, rivaling Nokia in the margins it earns. On the other hand, the losers in many of these areas have been the Japanese electronics conglomerates that have spread themselves too thin and have been slow to adapt. It is difficult to see a strong rebound in technology spending, but it is possible to identify companies with reasonable valuations and sustainable business models that will be around for the upturn when it occurs. INVESTMENT OUTLOOK Interest rates have fallen a long way and there are some signs of companies and consumers rebuilding their balance sheets, but debt remains high, particularly for the U.S. consumer. We envision a period of subdued growth in the medium term with continuing low inflation. Some observers have expressed concern that the U.S. is on the brink of a Japan-style deflation. While this scenario is possible, we assign it a relatively low level of probability. Stock valuations in most markets are at levels last seen in the early 1990s while interest rates are much lower than 10 years ago. In this environment, if the global economy can manage a measure of muted growth, equity returns going forward should at least be reasonable. Companies with above-average growth potential, strong balance sheets, good market positions, and solid management should do well. The last two years have been difficult for growth stocks in particular, but we are optimistic that the worst is behind us for our investment approach. Respectfully submitted, John R. Ford President, T. Rowe Price International Funds, Inc. November 15, 2002 T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- Portfolio Highlights TWENTY-FIVE LARGEST HOLDINGS Percent of Net Assets 10/31/02 GlaxoSmithKline, United Kingdom 4.2% Reed Elsevier, United Kingdom/Netherlands 3.3 TotalFinaElf, France 3.1 Royal Bank of Scotland, United Kingdom 2.7 Shell Transport & Trading/Royal Dutch Petroleum, United Kingdom/Netherlands 2.6 - -------------------------------------------------------------------------------- Nestle, Switzerland 2.5 Vodafone, United Kingdom 2.3 Aventis, France 1.8 BNP Paribas, France 1.7 Sanofi-Synthelabo, France 1.7 - -------------------------------------------------------------------------------- Nokia, Finland 1.6 Securitas, Sweden 1.6 Samsung Electronics, South Korea 1.4 Canon, Japan 1.4 UBS, Switzerland 1.4 - -------------------------------------------------------------------------------- Rio Tinto, United Kingdom 1.3 ENI, Italy 1.3 AstraZeneca, United Kingdom 1.3 Compass, United Kingdom 1.2 Adecco, Switzerland 1.2 - -------------------------------------------------------------------------------- ING Groep, Netherlands 1.2 WPP Group, United Kingdom 1.1 Sony, Japan 1.1 Philips Electronics, Netherlands 1.0 Tesco, United Kingdom 1.0 - -------------------------------------------------------------------------------- Total 45.0% Note: Table excludes investments in the T. Rowe Price Reserve Investment Fund. T. Rowe Price International 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. SECGraph: INTERNATIONAL STOCK FUND - -------------------------------------------------------------------------------- Lipper MSCI EAFE International International Index Funds Average Stock Fund 10/31/92 10000 10000 10000 10/31/93 13788 13210 13393 10/31/94 15219 14673 15004 10/31/95 15209 14775 15061 10/31/96 16851 16609 17302 10/31/97 17680 18607 18669 10/31/98 19440 19575 20065 10/31/99 23983 24345 24212 10/31/00 23344 24969 24764 10/31/01 17583 18768 17788 10/31/02 15310 16566 15264 Note: Performance for Advisor and "R Class shares will vary due to the different fee structures. See returns table below. 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 Since Inception 10/31/02 1 Year 5 Years 10 Years Inception Date - -------------------------------------------------------------------------------- International Stock shares -14.19% -3.95% 4.32% -- -- International Stock - Advisor Class shares -14.37 -- -- -22.37% 3/31/00 International Stock - R Class shares -- -- -- 7.12 9/30/02 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 redemptions. T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- International Stock shares Year Ended 10/31/02 10/31/01 10/31/00 10/31/99 10/31/98 NET ASSET VALUE Beginning of period $ 10.65 $ 16.11 $ 16.70 $ 14.39 $ 14.14 Investment activities Net investment income (loss) 0.11 0.29 0.10 0.17 0.23 Net realized and unrealized gain (loss) (1.56) (4.48) 0.35 2.71 0.77 Total from investment activities (1.45) (4.19) 0.45 2.88 1.00 Distributions Net investment income (0.30) (0.09) (0.13) (0.22) (0.20) Net realized gain (0.03) (1.18) (0.91) (0.35) (0.55) Total distributions (0.33) (1.27) (1.04) (0.57) (0.75) NET ASSET VALUE End of period $ 8.87 $ 10.65 $ 16.11 $ 16.70 $ 14.39 ----------------------------------------------------------------- Ratios/Supplemental Data Total return^ (14.19)% (28.17)% 2.28% 20.67% 7.48% Ratio of total expenses to average net assets 0.92% 0.90% 0.84% 0.85% 0.85% Ratio of net investment income (loss) to average net assets 0.96% 2.14% 0.55% 1.05% 1.50% Portfolio turnover rate 21.6% 17.4% 38.2% 17.6% 12.2% Net assets, end of period (in millions) $ 4,773 $ 6,370 $ 10,458 $ 10,615 $ 9,537 ^ 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. The accompanying notes are an integral part of these financial statements. T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- International Stock - Advisor Class shares Year 3/31/00 Ended Through 10/31/02 10/31/01 10/31/00 NET ASSET VALUE Beginning of period $ 10.66 $ 16.12 $ 19.12 Investment activities Net investment income (loss) 0.10 0.29 0.02 Net realized and unrealized gain (loss) (1.57) (4.46) (3.02) Total from investment activities (1.47) (4.17) (3.00) Distributions Net investment income (0.30) (0.11) -- Net realized gain (0.03) (1.18) -- Total distributions (0.33) (1.29) -- NET ASSET VALUE End of period $ 8.86 $ 10.66 $ 16.12 ---------------------------------------------- Ratios/Supplemental Data Total return^ (14.37)% (28.06)% (15.69)% Ratio of total expenses to average net assets 1.15% 1.05% 0.83%! Ratio of net investment income (loss) to average net assets 0.82% 2.26% 0.63%! Portfolio turnover rate 21.6% 17.4% 38.2%! Net assets, end of period (in thousands) $ 10,207 $ 6,938 $ 1,500 ^ 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 International Stock Fund - -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period - -------------------------------------------------------------------------------- International Stock - R Class shares 9/30/02 Through 10/31/02 NET ASSET VALUE Beginning of period $ 8.29 Investment activities Net realized and unrealized gain (loss) 0.59 Total from investment activities 0.59 NET ASSET VALUE End of period $ 8.88 ---------- Ratios/Supplemental Data Total return^ 7.12% Ratio of total expenses to average net assets 1.22%! Ratio of net investment income (loss) to average net assets (0.21)%! Portfolio turnover rate 21.6%! Net assets, end of period (in thousands) $ 107 ^ 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 International Stock Fund - -------------------------------------------------------------------------------- October 31, 2002 Portfolio of Investments Shares Value - -------------------------------------------------------------------------------- In thousands AUSTRALIA 1.5% Common Stocks 1.0% BHP Billiton (misc. symbol) 4,855,000 $ 26,107 Brambles Industries (misc. symbol) 2,981,881 11,335 National Australia Bank 471,000 8,984 46,426 Preferred Stocks 0.5% News Corporation 5,315,923 26,256 26,256 Total Australia (Cost $85,006) 72,682 BELGIUM 0.6% Common Stocks 0.6% Dexia 1,463,020 14,069 Fortis 574,215 10,487 UCB 197,655 4,813 Total Belgium (Cost $24,583) 29,369 BRAZIL 0.5% Common Stocks 0.5% Grupo Pao de Acucar ADR (USD) 407,700 6,327 Petroleo Brasileiro (Petrobras) ADR (USD) 1,294,931 15,617 Total Brazil (Cost $32,916) 21,944 CANADA 0.6% Common Stocks 0.6% Alcan Aluminum 226,260 6,360 Celestica (USD) * 768,863 10,610 Royal Bank of Canada (misc. symbol) 289,840 10,108 Total Canada (Cost $31,480) 27,078 DENMARK 0.4% Common Stocks 0.4% Novo Nordisk 651,600 17,924 TDC A/S 100,506 2,164 Total Denmark (Cost $23,851) 20,088 FINLAND 1.7% Common Stocks 1.7% Nokia 4,643,185 $ 78,699 Total Finland (Cost $9,400) 78,699 FRANCE 14.0% Common Stocks 14.0% Aventis 1,433,025 85,613 AXA (misc. symbol) 1,930,676 28,755 BNP Paribas 2,092,116 83,243 Cap Gemini (misc. symbol) 66,664 1,636 Carrefour 154,960 7,180 Compagnie de Saint-Gobain 798,108 17,298 Groupe Danone 58,790 7,611 Hermes (misc. symbol) 151,011 22,536 L'Oreal (misc. symbol) 55,766 4,145 Lafarge 56,246 4,472 LVMH (misc. symbol) 356,948 15,991 Orange *(misc. symbol) 1,418,040 7,946 Pinault Printemps Redoute (misc. symbol) 101,355 8,094 Sanofi-Synthelabo 1,298,345 79,235 Schneider Electric *(misc. symbol) 666,601 30,832 Societe Generale 259,228 13,104 Societe Television Francaise 1 (misc. symbol) 1,344,634 34,551 Sodexho Alliance 1,394,299 34,174 STMicroelectronics (misc. symbol) 808,169 16,014 Thomson *(misc. symbol) 718,600 13,217 TotalFinaElf, Series B 1,076,057 147,928 Vivendi Universal 475,676 5,829 Total France (Cost $555,364) 669,404 GERMANY 2.4% Common Stocks 2.4% Allianz 175,427 18,392 Bayer 292,342 5,536 Deutsche Bank 521,848 22,744 Deutsche Telekom 268,372 $ 3,058 E.On 372,895 16,694 Gehe (misc. symbol) 493,380 18,846 HVB Group (Ordinary shares) 222,759 2,948 Rhoen-Klinikum 193,854 7,280 SAP 145,630 11,197 Siemens 147,291 6,957 Total Germany (Cost $130,350) 113,652 GREECE 0.1% Common Stocks 0.1% Hellenic Telecommunications Organization 511,460 5,692 Total Greece (Cost $7,221) 5,692 HONG KONG 0.6% Common Stocks 0.6% Cheung Kong Holdings 2,777,000 18,426 Hutchison Whampoa 1,840,300 11,326 Total Hong Kong (Cost $28,300) 29,752 INDIA 1.2% Common Stocks 1.2% Hindustan Lever 8,865,862 29,446 ICICI Bank (Ordinary shares) 3,119,081 8,711 ICICI Bank ADR (USD) 1,131,345 6,958 Reliance Industries 2,606,459 14,342 Total India (Cost $81,739) 59,457 IRELAND 0.0% Common Stocks 0.0% SmartForce ADR (USD) *(misc. symbol) 465,541 1,867 Total Ireland (Cost $8,205) 1,867 ISRAEL 0.1% Common Stocks 0.1% Check Point Software Technologies (USD) *(misc. symbol) 309,424 4,267 Total Israel (Cost $6,028) 4,267 ITALY 5.4% Common Stocks 5.4% Alleanza Assicurazioni (misc. symbol) 3,344,680 $ 23,998 Assicurazioni Generali 472,516 8,406 Capitalia (misc. symbol) 886,376 1,021 ENI 4,341,938 60,162 Fineco *(misc. symbol) 2,569,210 1,178 IntesaBCI (misc. symbol) 8,353,145 14,158 Mediaset (misc. symbol) 445,867 3,107 Mediolanum (misc. symbol) 1,496,725 8,269 Olivetti *(misc. symbol) 6,804,912 7,055 San Paolo IMI 366,334 2,281 Telecom Italia (Ordinary shares) (misc. symbol) 3,013,203 23,883 Telecom Italia (Savings shares) (misc. symbol) 3,132,300 16,500 Telecom Italia Mobile (misc. symbol) 9,432,302 43,720 UniCredito Italiano (misc. symbol) 11,937,096 44,830 Total Italy (Cost $249,029) 258,568 JAPAN 14.4% Common Stocks 14.4% Canon 1,797,000 66,163 Credit Saison 909,900 17,936 Daiichi Pharmaceutical 451,200 6,579 Fanuc (misc. symbol) 211,700 8,364 Fuji Television Network 2,628 12,309 Fujisawa Pharmaceutical 1,553,000 30,107 Hitachi Chemical 1,093,000 7,977 Honda Motor 735,300 26,294 Ito-Yokado 557,000 17,332 KDDI (misc. symbol) 6,180 18,122 Keyence 66,000 10,903 Kyocera 254,600 14,973 Marui (misc. symbol) 1,645,000 15,249 Mitsubishi Estate (misc. symbol) 2,920,000 21,787 Mitsui Fudosan 4,737,000 36,232 Murata Manufacturing 315,300 14,871 Nomura Securities (misc. symbol) 1,960,000 22,511 NTT DoCoMo (misc. symbol) 22,002 $ 40,504 Rohm 83,500 10,495 Secom 883,500 31,162 Seven-Eleven Japan (misc. symbol) 1,195,000 33,680 Shin-Etsu Chemical 398,900 12,282 Shiseido (misc. symbol) 1,784,000 19,792 SMC 160,800 12,705 Sony 1,184,620 50,853 Sumitomo (misc. symbol) 2,695,000 11,657 Suzuki Motor 777,000 8,298 Takeda Chemical Industries 491,000 20,358 Takefuji 209,140 8,756 Toppan Printing 1,099,000 8,155 Toshiba * 2,802,000 7,007 Toyota Motor 1,605,800 38,979 Yamanouchi Pharmaceutical (misc. symbol) 1,090,500 26,648 Total Japan (Cost $789,375) 689,040 LUXEMBOURG 0.0% Common Stocks 0.0% SES Global (misc. symbol) 289,500 1,459 Total Luxembourg (Cost $4,649) 1,459 MALAYSIA 0.3% Common Stocks 0.3% Malayan Banking Berhad 4,292,800 9,320 Sime Darby 4,681,000 6,110 Total Malaysia (Cost $16,420) 15,430 MEXICO 1.4% Common Stocks 1.4% America Movil ADR, Series L (USD) 1,221,700 16,420 Femsa UBD Units (Represents 1 Series B and 4 Series D shares) 5,564,360 20,170 Grupo Financiero BBVA Bancomer, Series B *(misc. symbol) 18,600,500 14,658 Telmex ADR, Series L (USD) (misc. symbol) 185,114 5,646 Wal-Mart de Mexico (misc. symbol) 3,605,300 9,002 Total Mexico (Cost $60,754) 65,896 NETHERLANDS 5.8% Common Stocks 5.8% Akzo Nobel 86,178 $ 2,572 ASML Holding *(misc. symbol) 1,979,280 17,312 Equant *(misc. symbol) 165,911 802 Fortis 1,170,234 21,350 ING Groep 3,335,990 55,686 Philips Electronics 2,704,201 48,373 Reed Elsevier 1,692,890 21,064 Royal Ahold 650,400 8,163 Royal Dutch Petroleum 636,132 27,461 Royal KPN * 4,042,100 25,567 VNU 1,069,549 28,656 Wolters Kluwer 1,114,324 19,504 Total Netherlands (Cost $280,205) 276,510 NORWAY 0.4% Common Stocks 0.4% Orkla, Series A (misc. symbol) 978,994 15,494 Statoil 405,420 2,937 Total Norway (Cost $10,348) 18,431 PORTUGAL 0.1% Common Stocks 0.1% Jeronimo Martins * 690,616 4,129 Total Portugal (Cost $4,550) 4,129 RUSSIA 0.5% Common Stocks 0.5% YUKOS ADR (USD) (misc. symbol) 186,460 25,825 Total Russia (Cost $18,776) 25,825 SINGAPORE 1.1% Common Stocks 1.1% Flextronics (USD) * 1,240,706 10,372 United Overseas Bank 5,830,592 44,220 Total Singapore (Cost $67,575) 54,592 SOUTH KOREA 3.1% Common Stocks 3.1% Kookmin Bank ADR (USD) (misc. symbol) 256,700 $ 8,304 KT Corporation ADR (USD) (misc. symbol) 1,007,061 20,685 POSCO ADR (USD) 646,454 14,952 Samsung Electronics (misc. symbol) 238,517 67,257 Shinhan Financial (misc. symbol) 1,369,700 14,386 South Korea Telecom 132,900 24,440 Total South Korea (Cost $112,272) 150,024 SPAIN 3.5% Common Stocks 3.5% Banco Bilbao Vizcaya Argentaria 3,924,927 37,316 Banco Santander Central Hispano (misc. symbol) 4,315,649 26,402 Endesa 1,376,148 14,185 Gas Natural 1,087,460 18,217 Inditex 956,300 21,454 Repsol 839,242 9,472 Telefonica * 3,012,598 28,523 Telefonica ADR (USD) 384,323 10,857 Total Spain (Cost $172,281) 166,426 SWEDEN 3.1% Common Stocks 3.1% Electrolux, Series B (misc. symbol) 955,475 14,459 Hennes & Mauritz, Series B 1,619,170 31,377 LM Ericsson, Series B * 8,564,031 6,899 Nordea 2,744,477 11,204 Sandvik (misc. symbol) 186,870 4,435 Securitas, Series B (misc. symbol) 5,568,936 77,300 Total Sweden (Cost $145,082) 145,674 SWITZERLAND 5.8% Common Stocks 5.8% Adecco (misc. symbol) 1,454,037 56,986 Credit Suisse Group * 329,540 6,279 Nestle (misc. symbol) 565,918 121,031 Roche (Participation certificates) 386,190 $ 27,270 UBS * 1,378,190 65,515 Total Switzerland (Cost $167,479) 277,081 TAIWAN 0.7% Common Stocks 0.7% Taiwan Semiconductor Manufacturing 25,253,193 33,841 Total Taiwan (Cost $53,326) 33,841 THAILAND 0.3% Common Stocks 0.3% Bangkok Bank (Local shares) * 11,962,000 14,222 Total Thailand (Cost $15,206) 14,222 UNITED KINGDOM 28.0% Common Stocks 28.0% Abbey National 1,114,779 11,502 AstraZeneca 1,611,889 60,101 Autonomy * 615,263 1,385 BG Group 2,573,698 10,260 BP 6,244,000 40,022 Brambles Industries 10,159,620 33,354 Cable & Wireless 2,733,095 6,324 Cadbury Schweppes 3,594,402 23,376 Celltech * 1,738,632 9,513 Centrica 3,627,468 10,321 Compass 13,451,380 59,565 David S. Smith 1,692,560 4,207 Diageo 3,431,324 38,650 Electrocomponents 3,504,070 14,873 Friends Provident 1,828,240 3,730 GKN 388,000 1,344 GlaxoSmithKline (misc. symbol) 10,453,575 199,380 Granada 6,203,218 7,128 Hays 9,708,832 13,623 Hilton 1,892,470 5,148 HSBC (HKD) (misc. symbol) 2,274,400 24,860 Kingfisher 9,970,804 $ 34,839 Reed Elsevier 15,548,568 137,218 Rio Tinto 3,540,148 63,923 Royal Bank of Scotland 5,452,118 128,195 Shell Transport & Trading 14,866,367 95,464 Standard Chartered 1,103,700 12,838 Tesco 15,119,132 46,859 Tomkins 7,233,744 22,392 Unilever 4,718,657 46,585 United Business Media 1,090,209 4,363 Vodafone 69,468,056 111,590 Woolworths 3,956,033 2,211 WPP Group 7,644,711 51,809 Total United Kingdom (Cost $1,499,813) 1,336,952 SHORT-TERM INVESTMENTS 0.6% Money Market Funds 0.6% T. Rowe Price Reserve Investment Fund, 1.85% # 29,538,063 29,538 Total Short-Term Investments (Cost $29,538) 29,538 Total Investments in Securities 98.2% of Net Assets (Cost $4,721,121) $ 4,697,589 Other Assets Less Liabilities 86,148 NET ASSETS $ 4,783,737 --------------- # Seven-day yield * Non-income producing (misc. symbol) All or a portion of this security is on loan at October 31, 2002 - See Note 2 ADR American Depository Receipts HKD Hong Kong dollar USD United States dollar The accompanying notes are an integral part of these financial statements. T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- October 31, 2002 Statement of Assets and Liabilities - -------------------------------------------------------------------------------- In thousands Assets Investments in securities, at value (cost $4,721,121) $4,697,589 Securities lending collateral 601,902 Other assets 125,845 Total assets 5,425,336 Liabilities Obligation to return securities lending collateral 601,902 Other liabilities 39,697 Total liabilities 641,599 NET ASSETS $4,783,737 ---------- Net Assets Consist of: Undistributed net investment income (loss) $ 50,687 Undistributed net realized gain (loss) (1,279,846) Net unrealized gain (loss) (22,720) Paid-in-capital applicable to 539,021,125 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized 6,035,616 NET ASSETS $4,783,737 ---------- NET ASSET VALUE PER SHARE International Stock shares ($4,773,422,898/537,856,704 shares outstanding) $ 8.87 ---------- International Stock - Advisor Class shares ($10,207,297/1,152,358 shares outstanding) $ 8.86 ---------- International Stock - R Class shares ($107,083/12,063 shares outstanding) $ 8.88 ---------- The accompanying notes are an integral part of these financial statements. T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- Statement of Operations - -------------------------------------------------------------------------------- In thousands Year Ended 10/31/02 Investment Income (Loss) Income Dividend (net of foreign taxes of $14,713) $ 101,182 Securities lending 5,997 Interest (net of foreign taxes of $60) 3,337 Total income 110,516 Expenses Investment management 39,511 Shareholder servicing International Stock shares 11,542 International Stock - Advisor Class shares 7 Custody and accounting 2,127 Prospectus and shareholder reports International Stock shares 492 International Stock - Advisor Class shares 10 Proxy and annual meeting 161 Registration 62 Directors 41 Legal and audit 36 Distribution - International Stock - Advisor Class shares 22 Miscellaneous 56 Total expenses 54,067 Net investment income (loss) 56,449 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (642,359) Futures 17,087 Foreign currency transactions (52) Net realized gain (loss) (625,324) Change in net unrealized gain (loss) Securities $ (178,073) Futures (11,356) Other assets and liabilities denominated in foreign currencies 3,758 Change in net unrealized gain (loss) (185,671) Net realized and unrealized gain (loss) (810,995) INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ (754,546) ---------- The accompanying notes are an integral part of these financial statements. T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- Statement of Changes in Net Assets - -------------------------------------------------------------------------------- In thousands xxx Year xxx Ended 10/31/02 10/31/01 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ 56,449 $ 178,393 Net realized gain (loss) (625,324) (632,690) Change in net unrealized gain (loss) (185,671) (2,245,442) Increase (decrease) in net assets from operations (754,546) (2,699,739) Distributions to shareholders Net investment income International Stock shares (176,885) (57,780) International Stock - Advisor Class shares (202) (20) Net realized gain International Stock shares (17,688) (757,242) International Stock - Advisor Class shares (20) (218) Decrease in net assets from distributions (194,795) (815,260) Capital share transactions * Shares sold International Stock shares 3,380,310 3,082,779 International Stock - Advisor Class shares 29,467 17,549 International Stock - R Class shares 100 -- Distributions reinvested International Stock shares 182,037 777,395 International Stock - Advisor Class shares 219 -- Shares redeemed International Stock shares (4,211,706) (4,435,161) International Stock - Advisor Class shares (24,786) (9,589) Increase (decrease) in net assets from capital share transactions (644,359) (567,027) -------- -------- Net Assets Increase (decrease) during period (1,593,700) (4,082,026) Beginning of period 6,377,437 10,459,463 End of period $ 4,783,737 $ 6,377,437 --------------- --------------- *Share information Shares sold International Stock shares 334,337 235,789 International Stock - Advisor Class shares 2,835 1,336 International Stock - R Class 12 -- Distributions reinvested International Stock shares 16,716 52,992 International Stock - Advisor Class shares 20 -- Shares redeemed International Stock shares (411,478) (339,752) International Stock - Advisor Class shares (2,354) (778) Increase (decrease) in shares outstanding (59,912) (50,413) The accompanying notes are an integral part of these financial statements. T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- October 31, 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 1940 Act). The International Stock Fund (the fund), a diversified, open-end management investment company, is one of the portfolios established by the corporation. The fund seeks long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies. The fund has three classes of shares: International Stock, offered since May 9, 1980, International Stock - Advisor Class (Advisor Class), offered since March 31, 2000, and International Stock - R Class (R Class), which was first offered on September 30, 2002. Advisor Class shares are offered only through brokers and other financial intermediaries and R Class shares are only available to small retirement plans serviced by intermediaries. The Advisor Class and R Class each operate under separate Board-approved Rule 12b-1 plans, pursuant to which each class compensates financial intermediaries for distribution and certain administrative services. Each class has exclusive voting rights on matters related solely to that class, separate voting rights on matters that relate to all classes, and, in all other respects, the same rights and obligations as the other classes. 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 listed or regularly traded on a securities exchange or in the over-the-counter market 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. Listed securities not traded on a particular day are valued at the mean of the latest bid and ask prices for domestic securities and the last quoted sale price for international securities. Other equity securities are valued at a price within the limits of the latest bid and ask prices deemed by the Board of Directors, or by persons delegated by the Board, best to reflect fair value. Investments in mutual funds are valued at the closing net asset value per share of the mutual fund on the day of valuation. Financial futures contracts are valued at closing settlement prices. 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. Class Accounting The Advisor Class and R Class each pay distribution and administrative expenses in the form of Rule 12b-1 fees, in an amount not exceeding 0.25% and 0.50%, respectively, of the class's average net assets during the period ended October 31, 2002. Shareholder servicing, prospectus, and shareholder report expenses incurred by each class are charged directly to the class to which they relate. Expenses common to all classes, investment income, and realized and unrealized gains and losses are allocated to the classes based upon the relative daily net assets of each class. Income distributions are declared and paid by each class on an annual basis. Capital gain distributions, if any, are declared and paid by the fund, typically on an annual basis. Expenses Paid Indirectly Credits earned on temporarily uninvested cash balances at the custodian are used to reduce the fund's custody charges. 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. 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. Emerging Markets At October 31, 2002, approximately 10% of the fund's net assets were invested in securities of companies located in emerging markets. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities. Futures Contracts During the year ended October 31, 2002, the fund was a party to futures contracts, which provide for the future sale by one party and purchase by another of a specified amount of a specific financial instrument at an agreed upon price, date, time, and place. Risks arise from possible illiquidity of the futures market and from movements in security values. Securities Lending The fund lends its securities to approved brokers to earn additional income. It receives as collateral cash and 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 October 31, 2002, the value of loaned securities was $594,735,000; aggregate collateral consisted of $601,902,000 in the securities lending collateral pool and government securities valued at $31,353,000. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $1,229,695,000 and $1,719,792,000, respectively, for the year ended October 31, 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 gains. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ significantly in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Temporary differences are not adjusted. Distributions during the year ended October 31, 2002 totaled $194,795,000 and were characterized as ordinary income for tax purposes. At October 31, 2002, the tax-basis components of net assets were as follows: - -------------------------------------------------------------------------------- Unrealized appreciation $1,011,959,000 Unrealized depreciation (1,034,679,000) Net unrealized appreciation (depreciation) (22,720,000) Undistributed ordinary income 50,687,000 Capital loss carryforwards (1,279,846,000) Paid-in capital 6,035,616,000 Net assets $4,783,737,000 The fund intends to retain realized gains to the extent of available capital loss carryforwards for federal income tax purposes. As of October 31, 2002, the fund had $649,972,000 of capital loss carryforwards that expire in 2009, and $629,874,000 that expire in 2010. For the year ended October 31, 2002, the fund recorded the following permanent reclassifications. Results of operations and net assets were not affected by these reclassifications. - -------------------------------------------------------------------------------- Undistributed net investment income $(5,786,000) Undistributed net realized gain 5,786,000 At October 31, 2002, the cost of investments for federal income tax purposes was substantially the same as for financial reporting and totaled $4,721,121,000. 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. Gains realized upon disposition of Indian securities held by the fund are subject to capital gains tax in India, payable prior to repatriation of sale proceeds. The tax is computed on net realized gains, and realized losses in excess of gains may be carried forward eight years to offset future gains. In addition, the fund accrues a deferred tax for net unrealized gains on Indian securities. 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, Inc. The investment management agreement between the fund and the manager provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.35 % of the fund's average daily net assets, and the fund's pro-rata share of a group fee. The group fee is calculated based on the combined net assets of certain mutual funds sponsored by Price Associates (the group) applied to a graduated fee schedule, with rates ranging from 0.48% for the first $1 billion of assets to 0.295% for assets in excess of $120 billion. The fund's portion of the group fee is determined by the ratio of its net assets to those of the group. At October 31, 2002, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $2,669,000. Through October 31, 2003, for the Advisor Class and through February 28, 2004, for the R Class, the manager is required to bear any expenses, excluding interest, taxes, brokerage commissions, and extraordinary expenses that would cause the class's ratio of total expenses to average net assets (expense ratio) to exceed 1.15% and 1.40%, respectively. Thereafter, through October 31, 2005, for the Advisor Class and through February 28, 2006, for the R class, each class is required to reimburse the manager for these expenses, provided that its average net assets have grown or expenses have declined sufficiently to allow reimbursement without causing its expense ratio to exceed 1.15% and 1.40%, respectively. Pursuant to these agreements, no fees or expenses were borne by the manager during the year ended October 31, 2002; no amounts are subject to future reimbursement. In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates (collectively, Price). Price Associates computes the daily share prices and maintains the financial records of the fund. T. Rowe Price Services, Inc. provides shareholder and administrative services in its capacity as the fund's transfer and dividend disbursing agent. T. Rowe Price Retirement Plan Services, Inc. provides subaccounting and recordkeeping services for certain retirement accounts invested in the International Stock class. Expenses incurred pursuant to these service agreements totaled $7,389,000 for the year ended October 31, 2002, of which $490,000 was payable at period-end. Additionally, the fund is one of several mutual funds in which certain college savings plans managed by Price Associates may invest. As approved by the fund's Board of Directors, shareholder servicing costs associated with each college savings plan are borne by the fund in proportion to the average daily value of its shares owned by the college savings plan. For the year ended October 31, 2002, the International Stock class was charged $92,000 for shareholder servicing costs related to the college savings plans, of which $78,000 was for services provided by Price and $9,000 was payable at period-end. At October 31, 2002, approximately 0.5% of the outstanding shares of the International Stock share class were held by college savings plans. The fund is also one of several mutual funds sponsored by Price Associates, (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum Funds) and T. Rowe Price Retirement Funds (Retirement Funds) may invest. Neither the Spectrum Funds nor the Retirement Funds invest in the underlying Price funds for the purpose of exercising management or control. Pursuant to separate, special servicing agreements, expenses associated with the operation of the Spectrum and Retirement Funds 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 the Spectrum and Retirement funds, respectively. Expenses allocated under these agreements are reflected as shareholder servicing expense in the accompanying financial statements. For the year ended October 31, 2002, the International Stock class was allocated $1,292,000 of Spectrum Funds' expenses and $21,000 of Retirement Funds' expenses under these agreements. Of these amounts, $568,000 related to services provided by Price and $83,000 was payable at period-end. At October 31, 2002, approximately 9.0% of the outstanding shares of the International Stock class were held by the Spectrum Funds and 0.1% were held by the Retirement Funds. 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 year ended October 31, 2002, totaled $1,086,000 and are reflected as interest income in the accompanying Statement of Operations. T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- Report of Independent Accountants - -------------------------------------------------------------------------------- To the Board of Directors of T. Rowe Price International Funds, Inc. and Shareholders of T. Rowe Price International Stock Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price International Stock Fund (one of the portfolios comprising T. Rowe Price International Funds, Inc., hereafter referred to as the "Fund") at October 31, 2002, and the results of its operations, the changes in its net assets and the financial highlights for each of the fiscal periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2002 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland November 19, 2002 T. Rowe Price International Stock Fund - -------------------------------------------------------------------------------- Tax Information (Unaudited) for the Tax Year Ended 10/31/02 We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements. The fund's distributions to shareholders included: o $17,709 for short-term capital gains. The fund will pass through foreign source income of $65,677,000 and foreign taxes paid of $10,318,000. T. Rowe Price International 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. (T. Rowe Price); "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* Directorships of Other 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, and (1/28/45) Chief Executive Officer, The Rouse Company, real 1991 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 present), (4/9/38) Golden Star Resources Ltd., and Canyon Resources 2001 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 Taylor (11/16/41) Stores Corp., Ameren Corp., Finlay Enterprises, 2001 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 Advisor 2001 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 105 T. Rowe Price portfolios and serves until the election of a successor. T. Rowe Price International 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] Directorships of Other Public Companies - -------------------------------------------------------------------------------- James S. Riepe Director and Vice President, T. Rowe Price; Vice (6/25/43) Chairman of the Board, Director, and Vice 2002 President, T. Rowe Price Group, Inc.; Chairman [105] of the Board and Director, T. Rowe Price Global Asset Management Limited, 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; Chairman of the Board, International Funds M. David Testa Chief Investment Officer, Director, and Vice (4/22/44) 1979 President, T. Rowe Price; Vice Chairman of the [105] Board, Chief Investment Officer, Director, and Vice President, T. Rowe Price Group, Inc.; Director, T. Rowe Price Global Asset Management Limited; Director and Vice President, 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 Director and Vice President, T. Rowe Price (2/16/43) Group, Inc.; Chairman of the Board and Director, 1982 T. Rowe Price Global Investment Services [16] Limited and T. Rowe Price International, Inc.; Director, T. Rowe Price Global Asset Management Limited; Vice President, T. Rowe Price *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) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., and 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. 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) Vice President, 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) Director and Vice President, T. Rowe Vice President, International Funds Price Group, Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Vice President, T. Rowe Price, T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc. Ian D. Kelson (8/16/56) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., and T. Rowe Price International, 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 George A. Murnaghan (5/1/56) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., 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 Vice President, International Funds T. Rowe 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) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., and 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) Vice President, 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) Vice President, T. Rowe Price, T. Rowe Vice President, International Funds Price Group, Inc., 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 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 Retirement 2010 Retirement 2020 Retirement 2030 Retirement 2040 Retirement Income Tax-Efficient Balanced BOND FUNDS Domestic Taxable Corporate Income GNMA High Yield* Inflation Protected Bond 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 F37-050 10/31/02 -----END PRIVACY-ENHANCED MESSAGE-----