N-CSRS 1 idf.txt T. ROWE PRICE INTERNATIONAL DISCOVERY FUND Item 1. Report to Shareholders T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- April 30, 2004 Certified Semiannual Report This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position. T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Financial Highlights For a share outstanding throughout each period -------------------------------------------------------------------------------- 6 Months Year Ended Ended 4/30/04 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99 NET ASSET VALUE Beginning of period $ 25.21 $ 15.34 $ 19.28 $ 34.52 $ 26.75 $ 14.99 Investment activities Net investment income (loss) (0.03) 0.08 0.01 0.06 0.06 (0.03) Net realized and unrealized gain (loss) 3.28 9.79 (3.95) (9.49) 10.39 12.09 Total from investment activities 3.25 9.87 (3.94) (9.43) 10.45 12.06 Distributions Net investment income (0.08) - - - - (0.01) Net realized gain (0.06) - - (5.83) (2.81) (0.30) Total distributions (0.14) - - (5.83) (2.81) (0.31) Redemption fees added to paid-in-capital - - - 0.02 0.13 0.01 NET ASSET VALUE End of period $ 28.32 $ 25.21 $ 15.34 $ 19.28 $ 34.52 $ 26.75 ---------------------------------------------------------- Ratios/Supplemental Data Total return^ 12.96% 64.34% (20.44)% (31.90)% 40.07% 82.11% Ratio of total expenses to average net assets 1.32%! 1.41% 1.44% 1.38% 1.27% 1.42% Ratio of net investment income (loss) to average net assets (0.20)%! 0.46% 0.06% 0.25% 0.15% (0.17)% Portfolio turnover rate 121.20%! 115.90% 93.90% 59.10% 81.00% 98.20% Net assets, end of period (in thousands) $820,080 $652,046 $359,514 $500,403 $905,387 $381,462 ^ 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 and payment of no redemption or account fees. ! Annualized The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) April 30, 2004 Portfolio of Investments (ss.) ++ Shares Value -------------------------------------------------------------------------------- (Cost and value in $ 000s) AUSTRALIA 4.4% Common Stocks 4.4% Aristocrat Leisure 4,903,800 14,246 Challenger Financial Services Group* 5,565,600 1,967 Excel Coal Limited (Regulation S shares)* 393,500 568 GRD NL 1,540,157 2,050 Independent Practitioner* 36,682,400 1,032 Oceana Gold (Ordinary shares)* 2,543,144 1,468 Oceana Gold (Regulation S shares)* 2,950,100 1,702 Perilya* 2,603,541 1,586 Tap Oil* 3,329,100 3,305 United Group 985,000 3,228 Unwired Australia* 5,076,793 2,444 Worley Group, 144A 1,217,400 2,663 Total Australia (Cost $30,262) 36,259 BELGIUM 1.8% Common Stocks 1.8% Melexis 362,587 3,970 Telindus Group* 359,200 3,595 UCB 178,270 7,105 Total Belgium (Cost $10,713) 14,670 CHINA 2.3% Common Stocks 2.3% China Insurance (HKD) 6,888,000 3,296 Golden Meditech (HKD) 7,888,000 3,287 GZI Transport (HKD) 9,166,000 2,684 Harbin Brewery Group (HKD) 4,438,000 1,830 Panva Gas Holdings, 144A (HKD)* 5,847,000 2,602 Shanghai Forte Land Company (H shares) (HKD)* 7,498,000 1,652 tom.com (HKD)* 15,404,000 3,382 Total China (Cost $20,544) 18,733 FINLAND 3.0% Common Stocks 3.0% CapMan 1,622,900 3,591 Elisa, Series A* 375,546 5,114 Pohjola Group 195,900 1,947 Rapala VMC 1,334,918 9,593 Vacon 336,700 4,359 Total Finland (Cost $19,257) 24,604 FRANCE 5.1% Common Stocks 5.1% Boiron 132,000 3,004 Camaieu 38,010 3,264 Cegedim 48,935 3,339 Clarins 3,616 224 Faiveley 33,200 2,077 ILOG* 99,806 1,142 Ipsos 41,965 4,308 Lectra* 565,429 4,653 Neopost 164,015 9,008 Oeneo* 369,428 1,641 Oeneo, Warrants 8/26/06* 169,728 112 Spir Communication 62,017 9,024 Total France (Cost $31,232) 41,796 GERMANY 8.0% Common Stocks 7.0% AWD Holding 143,000 4,806 Boewe Systec 88,377 4,287 Dis Deutscher, 144A* 325,000 8,563 Evotec OAI* 283,942 1,706 GFK 276,793 9,355 IDS Scheer 370,700 7,947 K&S* 259,200 8,642 Medion 193,995 8,231 Singulus Technology* 190,200 3,801 57,338 Preferred Stocks 1.0% Draegerwerk* 60,200 3,731 Rheinmetall* 117,800 4,790 8,521 Total Germany (Cost $50,837) 65,859 GREECE 0.5% Common Stocks 0.5% Folli-Follie 142,700 4,257 Total Greece (Cost $3,103) 4,257 HONG KONG 3.9% Common Stocks 3.9% Asia Aluminum Holdings 9,630,000 1,111 Dickson Concepts 4,119,000 4,449 Giordano 7,846,000 4,511 Grande Holdings 2,960,000 3,359 Lee & Man Paper Manufacturing* 912,000 832 Lee & Man Paper Manufacturing, 144A* 958,000 873 Linmark Group 10,067,000 4,052 Moulin International Holdings, 144A* 2,782,000 1,935 Next Media* 6,442,000 2,445 Ngai Lik Industrial 4,970,000 2,229 Oriental Press Group 7,944,000 2,638 Titan Holdings* 12,860,000 832 Varitronix 2,728,000 2,557 Total Hong Kong (Cost $27,419) 31,823 INDIA 3.8% Common Stocks 3.8% Arvind Mills* 1,871,700 2,094 Balaji Telefilms 1,471,100 2,819 Bombay Dyeing* 748,000 2,506 Colgate-Palmolive (India) 757,600 2,181 HDFC Bank* 272,000 2,324 Hindalco Industries 45,648 1,133 I-Flex Solutions (Restricted shares), 144A* 133,056 1,582 Indian Hotels 309,200 2,726 Kotak Mahindra Finance 314,000 2,789 State Trading Corp of India 332,245 866 Tata Tea 160,900 1,375 Uti Bank 618,000 2,168 Welspun Gujarat Stahl* 2,213,900 1,842 Welspun India* 948,850 1,835 Zee Telefilms 868,300 2,470 Total India (Cost $24,564) 30,710 IRELAND 0.7% Common Stocks 0.7% Icon ADR (USD)* 151,720 6,054 Total Ireland (Cost $2,277) 6,054 ISRAEL 0.7% Common Stocks 0.7% Partner Communications ADR (USD)* 720,296 5,453 Total Israel (Cost $13,851) 5,453 ITALY 1.6% Common Stocks 1.6% Immsi 2,902,000 4,626 Sorin* 2,893,460 8,100 Total Italy (Cost $9,615) 12,726 JAPAN 23.7% Common Stocks 23.7% Aica Kogyo 296,000 3,212 Air Water 908,000 5,718 Arisawa Manufacturing* 104,440 4,813 Arnest One* 91,200 2,859 C. Uyemura 76,000 2,634 Central Glass 617,000 4,546 Century Leasing System 302,700 4,136 D&M Holdings* 893,000 3,261 Daiichikosho* 98,300 2,921 Daiken 82,000 369 Daimaru 588,000 5,110 Doshisha 117,900 4,760 First Juken* 64,400 1,716 Hisamitsu Pharmaceutical 294,000 4,915 Honeys* 42,000 3,311 Kanto Denka Kogyo 977,000 5,449 Kuroda Electric 75,500 3,326 Leopalace21 516,000 8,645 Lintec 265,000 3,953 Mars Engineering 90,300 5,554 Nichi-iko Pharmaceutuical 138,000 1,228 Nippon Kanzai 264,700 4,665 Nissan Shatai 591,000 3,936 Nissen 178,000 3,838 Nitori 96,000 6,178 Okinawa Cellular Telephone 605 6,115 OSG 494,000 6,211 PAL 47,000 2,466 Paltac 172,600 3,832 Point 60,900 2,030 Privee Zurich Turnaround* 936,000 2,883 Round One 3,007 5,857 Ryobi 1,207,000 4,822 Sanei-International 25,900 1,306 Sumisho Auto Leasing 57,800 2,010 Takamatsu 109,800 3,253 Tamron 97,000 4,904 THK 246,800 4,748 Toho Gas 1,460,000 4,822 Tohokushinsha Film 100,400 3,150 Tokyo Steel Manufacturing 457,100 7,704 Tomen Electronics 52,500 2,841 Toyota Tsusho 498,000 4,862 U's BMB Entertainment 653,000 3,062 USS 103,190 8,690 Valor 105,600 3,071 Yamaha Motor 328,000 4,663 Total Japan (Cost $165,434) 194,355 LIECHTENSTEIN 0.4% Common Stocks 0.4% Verwaltungs-und Privat-Bank (CHF)* 19,850 3,007 Total Liechtenstein (Cost $2,127) 3,007 MALAYSIA 1.7% Common Stocks 1.7% Berjaya Sports Toto 1,330,250 1,531 CIMB Berhad 803,600 1,171 Hong Leong Bank 1,915,000 2,567 IJM 1,381,900 1,696 Magnum 2,389,300 1,819 Pos Malaysia & Services Holdings 1,356,300 758 Symphony House* 3,429,500 1,463 Symphony House, Class A*!! 465,800 196 Symphony House, Warrants 3/11/08* 685,900 0 Transmile Group 1,696,700 3,041 Total Malaysia (Cost $12,136) 14,242 NETHERLANDS 1.3% Common Stocks 1.3% New Skies Satellites* 512,041 3,919 Van der Moolen Holding* 862,500 6,912 Total Netherlands (Cost $11,521) 10,831 NEW ZEALAND 0.9% Common Stocks 0.9% Fisher & Paykel Healthcare 560,604 4,544 Sky Network Television* 717,000 2,462 Total New Zealand (Cost $4,654) 7,006 NORWAY 0.8% Common Stocks 0.8% Norwegian Air Shuttle* 884,500 1,992 Visma ASA 347,300 3,782 Yara International (Regulation S shares)* 147,600 1,042 Total Norway (Cost $9,087) 6,816 SINGAPORE 1.1% Common Stocks 1.1% Creative Technology 205,600 2,141 Elec & Eltek (USD) 252,100 742 GES International 4,114,000 1,600 Goodpack* 4,271,000 2,553 Keppel 479,000 2,003 Total Singapore (Cost $7,936) 9,039 SOUTH KOREA 2.8% Common Stocks 2.8% Amorepacific 16,130 2,578 CJ Home Shopping 40,570 1,486 Handsome 211,960 1,757 LG Ad 154,900 2,605 LG Home Shopping 30,400 1,263 LG International 335,430 2,560 Lotte Chilsung Beverage 3,810 2,247 NCsoft 31,740 2,255 Plenus 278,450 3,723 Pusan Bank 405,980 2,348 Total South Korea (Cost $22,310) 22,822 SPAIN 1.0% Common Stocks 1.0% Baron de Ley* 99,455 4,298 Cortefiel 361,392 3,908 Total Spain (Cost $6,670) 8,206 SWEDEN 3.0% Common Stocks 3.0% Bergman & Beving 658,415 4,469 D. Carnegie 426,000 4,523 Observer* 771,725 3,063 Proffice, Series B* 1,179,600 3,153 Teleca 1,650,400 9,303 Total Sweden (Cost $21,925) 24,511 SWITZERLAND 2.5% Common Stocks 2.5% Bachem Holding (Class B shares) 44,463 2,512 Baloise 95,800 3,856 Julius Baer* 27,394 7,351 Micronas Semiconductor Holding* 72,800 3,367 Micronas Semiconductor Holding, 144A* 12,133 561 TEMENOS Group* 353,559 2,951 Total Switzerland (Cost $22,782) 20,598 TAIWAN 2.7% Common Stocks 2.7% Acer 1,598,681 2,247 Advantech 1,402,714 2,940 Basso Industry 2,101,000 4,151 Merry Electronics 1,669,000 4,075 Min Aik Technology 891,000 1,932 Taiflex Scientific* 768,000 1,985 Test Rite* 4,548,000 2,561 Waffer Technology 857,000 2,298 Total Taiwan (Cost $20,748) 22,189 THAILAND 0.2% Common Stocks 0.2% C.P. 7-Eleven 1,165,900 1,646 Total Thailand (Cost $1,954) 1,646 UNITED KINGDOM 15.0% Common Stocks 15.0% 3i Group 813,500 8,688 Arena Leisure* 4,918,756 3,862 Benfield Group 1,225,600 5,719 BRIT Insurance Holdings* 2,676,800 3,918 Cairn Energy* 472,300 9,000 Carphone Warehouse 1,873,800 4,738 Close Brothers Group 335,400 4,874 Collins Stewart Tullett 591,600 4,377 CSR * 250,000 1,158 Dignity Caring Funeral Service (Regulation S shares)* 1,377,200 6,048 Eidos* 2,230,453 6,707 Galen Holdings 249,743 3,524 Hiscox 357,034 1,007 Incepta Group 3,344,700 6,631 Investec 298,100 5,570 ITE Group 3,476,800 3,420 Marlborough Stirling 6,572,673 6,965 Merchant Retail Group 1,466,400 4,579 MFI Furniture Group* 3,099,900 8,588 Moneybox* 4,590,700 4,072 N Brown 1,597,022 3,485 PHS Group 4,126,600 6,150 Psion* 2,366,000 2,351 Taylor Nelson 832,486 2,924 Wolfson Microelectronics* 400,000 1,881 Wolfson Microelectronics, 144A* 600,000 2,829 Total United Kingdom (Cost $110,477) 123,065 UNITED STATES 0.8% Common Stocks 0.8% deCODE GENETICS* 753,200 6,523 Total United States (Cost $3,634) 6,523 SHORT-TERM INVESTMENTS 4.9% Money Market Funds 4.9% T. Rowe Price Reserve Investment Fund, 1.09% # 40,143,463 40,143 Total Short-Term Investments (Cost $40,143) 40,143 SECURITIES LENDING COLLATERAL 10.2% Money Market Pooled Account 10.2% Investment in money market pooled account managed by JP Morgan Chase Bank, London, 1.06% # 83,985,368 83,985 Total Securities Lending Collateral (Cost $83,985) 83,985 Total Investments in Securities 108.8% of Net Assets (Cost $791,197) $891,928 -------- (ss.) Denominated in currency of country of incorporation unless otherwise noted ++ At April 30, 2004, a substantial number of the fund's international securities were valued by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. See Note 1. # Seven-day yield * Non-income producing !! Security contains restrictions as to public resale pursuant to the Securities Act of 1933 and related rules - total value of such securities at period-end amounts to $196 and represents 0.02% of net assets 144A Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration only to qualified institutional buyers - total value of such securities at period-end amounts to $21,608 and represents 2.6% of net assets ADR American Depository Receipts CHF Swiss franc HKD Hong Kong dollar USD U.S. dollar The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) April 30, 2004 Statement of Assets and Liabilities -------------------------------------------------------------------------------- (Amounts in $ 000s except shares and per share amounts) Assets Investments in securities, at value (cost $791,197) $ 891,928 Other assets 30,396 Total assets 922,324 Liabilities Obligation to return securities lending collateral 83,985 Other liabilities 18,259 Total liabilities 102,244 NET ASSETS $ 820,080 ------------ Net Assets Consist of: Undistributed net investment income (loss) $ (871) Undistributed net realized gain (loss) (169,447) Net unrealized gain (loss) 100,425 Paid-in-capital applicable to 28,958,569 shares of $0.01 par value capital stock outstanding; 2,000,000,000 shares of the Corporation authorized 889,973 NET ASSETS $ 820,080 ------------ NET ASSET VALUE PER SHARE $ 28.32 ------------ The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Statement of Operations -------------------------------------------------------------------------------- ($ 000s) 6 Months Ended 4/30/04 Investment Income (Loss) Income Dividend (net of foreign taxes of $413) $ 3,820 Securities lending 316 Interest 16 Total income 4,152 Expenses Investment management 3,939 Shareholder servicing 685 Custody and accounting 189 Legal and audit 29 Prospectus and shareholder reports 28 Registration 19 Directors 3 Miscellaneous 3 Total expenses 4,895 Net investment income (loss) (743) Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (net of foreign taxes of $1,884) 108,964 Foreign currency transactions (759) Net realized gain (loss) 108,205 Change in net unrealized gain (loss) Securities (net of decrease in deferred foreign taxes of $138) (20,242) Other assets and liabilities denominated in foreign currencies (36) Change in net unrealized gain (loss) (20,278) Net realized and unrealized gain (loss) 87,927 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 87,184 ---------- The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) Statement of Changes in Net Assets -------------------------------------------------------------------------------- ($ 000s) 6 Months Year Ended Ended 4/30/04 10/31/03 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ (743) $ 1,988 Net realized gain (loss) 108,205 18,615 Change in net unrealized gain (loss) (20,278) 214,212 Increase (decrease) in net assets from operations 87,184 234,815 Distributions to shareholders Net investment income (2,116) - Net realized gain (1,588) - Decrease in net assets from distributions (3,704) - Capital share transactions * Shares sold 152,559 133,313 Distributions reinvested 3,574 - Shares redeemed (71,718) (75,638) Redemption fees received 139 42 Increase (decrease) in net assets from capital share transactions 84,554 57,717 Net Assets Increase (decrease) during period 168,034 292,532 Beginning of period 652,046 359,514 End of period $ 820,080 $ 652,046 ---------- ---------- (Including undistributed net investment income (loss) of $(871) at 4/30/04 and $1,988 at 10/31/03) *Share information Shares sold 5,627 6,627 Distributions reinvested 141 - Shares redeemed (2,674) (4,191) Increase (decrease) in shares outstanding 3,094 2,436 The accompanying notes are an integral part of these financial statements. T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- Certified Semiannual Report (Unaudited) April 30, 2004 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 Discovery Fund (the fund), a diversified, open-end management investment company, is one portfolio established by the corporation and commenced operations on December 30, 1988. The fund seeks long-term growth of capital through investments primarily in the common stocks of rapidly growing, small to medium-sized companies outside the U.S. 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 The fund values its investments and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business. 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, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin Board securities, which are valued at the mean of the latest bid and asked prices. 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 asked prices for domestic securities and the last quoted sale price for international securities. Investments in mutual funds are valued at the mutual fund's closing net asset value per share on the day of valuation. Other investments and those 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 the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. Most foreign markets close before the close of trading on the NYSE. If the fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its portfolio securities, which in turn will affect the fund's share price, the fund will adjust the previous closing prices to reflect the fair value of the securities as of the close of the NYSE, as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. A fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. In deciding whether to make fair value adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U. S. markets that represent foreign securities and baskets of foreign securities. The fund uses outside pricing services to provide it with closing market prices and information used for adjusting those prices. The fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next day's opening prices in the same markets, and adjusted prices. Currency Translation Assets, including investments, 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 asked prices of such currencies against U.S. dollars as 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 date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses. Redemption Fees A 2% fee is assessed on redemptions of fund shares held less than 1 year to deter short-term trading and protect the interests of long-term shareholders. Redemption fees are withheld from proceeds that shareholders receive from the sale or exchange of fund shares. The fees are paid to the fund, and have the primary effect of increasing paid-in capital. Investment Transactions, Investment Income, and Distributions Income and expenses are recorded on the accrual basis. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid an annual basis. Capital gain distributions, if any, are declared and paid by the fund, typically on an annual basis. Other In the normal course of business, the fund enters into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is dependent on claims that may be made against the fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote. 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 April 30, 2004, approximately 20% of the fund's net assets were invested in securities of companies located in emerging markets or linked to the currencies of emerging market countries. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities. 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 managed by the fund's lending agent in accordance with investment guidelines approved by fund management. 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. Securities lending revenue recognized by the fund consists of earnings on invested collateral and borrowing fees, net of any rebates to the borrower and compensation to the lending agent. At April 30, 2004, the value of loaned securities was $78,971,000; aggregate collateral consisted of $83,985,000 in the money market pooled account. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $482,216,000 and $423,057,000, respectively, for the six months ended April 30, 2004. 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 under Subchapter M of the Internal Revenue Code 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 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. Financial records are not adjusted for temporary differences. The amount and character of tax-basis distributions and composition of net assets are finalized at fiscal year-end; accordingly, tax-basis balances have not been determined as of April 30, 2004. The fund intends to retain realized gains to the extent of available capital loss carryforwards. As of October 31, 2003, the fund had $277,614,000 of unused capital loss carryforwards, of which $155,920,000 expire in fiscal 2009, and $121,694,000 expire in fiscal 2010. At April 30, 2004, the cost of investments for federal income tax purposes was $791,197,000. Net unrealized gain aggregated $100,425,000 at period-end, of which $143,507,000 related to appreciated investments and $43,082,000 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. 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 liability for net unrealized gains on Indian securities. At April 30, 2004, the fund had a deferred tax liability of $173,000. 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 0.75% 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 average daily net assets to those of the group. At April 30, 2004, the effective annual group fee rate was 0.32%, and investment management fee payable totaled $724,000. 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 price 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 fund. Expenses incurred pursuant to these service agreements totaled $499,000 for the six months ended April 30, 2004, of which $109,000 was payable at period-end. 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) may invest. The Spectrum Funds do not invest in the underlying Price funds for the purpose of exercising management or control. Pursuant to a special servicing agreement, expenses associated with the operation of the Spectrum 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 Funds. Expenses allocated under this agreement are reflected as shareholder servicing expense in the accompanying financial statements. For the six months ended April 30, 2004, the fund was allocated $7,000 of Spectrum Funds' expenses, of which $4,000 related to services provided by Price and $3,000 was payable at period-end. At April 30, 2004, approximately 0.5% of the outstanding shares of the fund were held by the Spectrum Funds. The fund may invest in the T. Rowe Price Reserve Investment Fund and the 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 to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates, and are not available for direct purchase by members of the public. The Reserve Funds pay no investment management fees. During the six months ended April 30, 2004, dividend income from the Reserve Funds totaled $175,000. T. Rowe Price International Discovery Fund -------------------------------------------------------------------------------- Certified Semiannual Report Information on Proxy Voting -------------------------------------------------------------------------------- A description of the policies and procedures that the T. Rowe Price International Discovery Fund uses to determine how to vote proxies relating to portfolio securities is available, without charge, upon request by calling 1-800-225-5132. It also appears in the fund's Statement of Additional Information (Form 485B), which can be found on the SEC's Web site, www.sec.gov. Item 2. Code of Ethics. A code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions is filed as an exhibit to the registrant's annual Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the registrant's most recent fiscal half-year. Item 3. Audit Committee Financial Expert. Disclosure required in registrant's annual Form N-CSR. Item 4. Principal Accountant Fees and Services. Disclosure required in registrant's annual Form N-CSR. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable. Item 10. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) The registrant's principal executive officer and principal financial officer are aware of no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 11. Exhibits. (a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is filed with the registrant's annual Form N-CSR. (2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (3) Written solicitation to repurchase securities issued by closed-end companies: not applicable. (b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. T. Rowe Price International Funds, Inc. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date June 15, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date June 15, 2004 By /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer Date June 15, 2004