<DOCUMENT>
<TYPE>N-CSRS
<SEQUENCE>1
<FILENAME>ibf.txt
<DESCRIPTION>T. ROWE PRICE INTERNATIONAL BOND FUND
<TEXT>
Item 1. Report to Shareholders
T. Rowe Price International Bond Fund
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June 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.
<PAGE>
T. Rowe Price International Bond Fund
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Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
--------------------------------------------------------------------------------
Investor Class
6 Months Year
Ended Ended
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00 12/31/99
NET ASSET VALUE
Beginning
of period $ 10.25 $ 9.29 $ 7.86 $ 8.47 $ 9.16 $ 10.46
Investment activities
Net investment
income (loss) 0.12 0.25 0.25 0.32 0.40 0.37
Net realized
and unrealized
gain (loss) (0.31) 1.46 1.43 (0.61) (0.70) (1.18)
Total from
investment
activities (0.19) 1.71 1.68 (0.29) (0.30) (0.81)
Distributions
Net investment
income (0.12) (0.25) (0.25) -- -- (0.33)
Net realized
gain (0.06) (0.50) -- -- -- (0.11)
Tax return
of capital -- -- -- (0.32) (0.39) (0.05)
Total
distributions (0.18) (0.75) (0.25) (0.32) (0.39) (0.49)
NET ASSET VALUE
End of period $ 9.88 $ 10.25 $ 9.29 $ 7.86 $ 8.47 $ 9.16
-----------------------------------------------------------------
Ratios/Supplemental Data
Total return^ (1.86)% 18.77% 21.80% (3.41)% (3.13)% (7.86)%
Ratio of total
expenses to
average
net assets 0.89%! 0.91% 0.93% 0.95% 0.91% 0.90%
Ratio of net
investment
income (loss)
to average
net assets 2.46%! 2.58% 3.01% 3.98% 4.76% 3.93%
Portfolio
turnover rate 49.8%! 38.5% 113.9% 107.6% 160.5%+ 94.9%
Net assets,
end of period
(in millions) $ 1,351 $ 1,306 $ 1,058 $ 762 $ 753 $ 779
^ 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.
+ Excludes the effect of the acquisition of the T. Rowe Price Global Bond
Fund's assets.
! Annualized
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price International Bond Fund
--------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited)
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
--------------------------------------------------------------------------------
Advisor Class
6 Months Year 3/31/00
Ended Ended Through
6/30/04 12/31/03 12/31/02 12/31/01 12/31/00
NET ASSET VALUE
Beginning
of period $ 10.24 $ 9.28 $ 7.85 $ 8.47 $ 8.88
Investment
activities
Net investment
income (loss) 0.12 0.24 0.24 0.31* 0.30*
Net realized
and unrealized
gain (loss) (0.31) 1.46 1.43 (0.62) (0.42)
Total from
investment
activities (0.19) 1.70 1.67 (0.31) (0.12)
Distributions
Net investment
income (0.12) (0.24) (0.24) -- --
Net realized gain (0.06) (0.50) -- --
Tax return
of capital -- -- -- (0.31) (0.29)
Total distributions (0.18) (0.74) (0.24) (0.31) (0.29)
NET ASSET VALUE
End of period $ 9.87 $ 10.24 $ 9.28 $ 7.85 $ 8.47
-----------------------------------------------------------
Ratios/Supplemental Data
Total return^ (1.93)% 18.62% 21.65% (3.73)%* (1.29%)*
Ratio of total
expenses to average
net assets 1.03%! 1.06% 1.08% 1.15%* 1.15%*!
Ratio of net
investment
income (loss)
to average
net assets 2.31%! 2.43% 2.82% 3.28%* 4.60%*!
Portfolio
turnover rate 49.8%! 38.5% 113.9% 107.6% 160.5%+
Net assets,
end of period
(in thousands) $ 57,560 $ 50,217 $ 14,760 $ 5,026 $ 120
^ 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.
* Excludes expenses in excess of a 1.15% voluntary expense limitation in
effect through 4/30/06.
+ Excludes the effect of the acquisition of the T. Rowe Price Global Bond
Fund's assets.
! Annualized
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price International Bond Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
PORTFOLIO OF INVESTMENTS (1) $ Par/Shares Value
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(Cost and value in $ 000s)
AUSTRALIA 0.2%
Government Bonds 0.2%
New South Wales Treasury, 6.00%, 5/1/12 5,070,000 3,517
Total Australia (Cost $3,162) 3,517
AUSTRIA 4.5%
Government Bonds 4.5%
Republic of Austria, 3.40%, 10/20/04 12,000,000 14,668
Republic of Austria, 144A, 3.80%, 10/20/13 2,700,000 3,164
Republic of Austria, 4.00%, 7/15/09 16,400,000 20,285
Republic of Austria, 5.50%, 1/15/10 18,750,000 24,781
Total Austria (Cost $54,841) 62,898
BELGIUM 2.8%
Government Bonds 2.8%
Kingdom of Belgium, 4.25%, 9/28/13 7,500,000 9,097
Kingdom of Belgium, 6.25%, 3/28/07 8,100,000 10,683
Kingdom of Belgium, 6.50%, 3/31/05 15,600,000 19,591
Total Belgium (Cost $34,646) 39,371
CANADA 1.1%
Government Bonds 1.1%
Government of Canada, 5.25%, 6/1/12 11,600,000 8,909
Government of Canada, 5.75%, 6/1/29 8,200,000 6,444
Total Canada (Cost $12,711) 15,353
DENMARK 1.4%
Government Bonds 1.4%
Kingdom of Denmark, 6.00%, 11/15/11 19,400,000 3,529
Kingdom of Denmark, 7.00%, 11/10/24 12,000,000 2,473
Kingdom of Denmark, 8.00%, 3/15/06 76,850,000 13,670
Total Denmark (Cost $14,295) 19,672
<PAGE>
FINLAND 1.7%
Government Bonds 1.7%
Republic of Finland, 5.00%, 7/4/07 4,500,000 5,773
Republic of Finland, 5.00%, 4/25/09 14,000,000 18,091
Total Finland (Cost $19,077) 23,864
FRANCE 9.6%
Government Bonds 9.6%
Government of France, 4.00%, 4/25/09 21,470,000 26,645
Government of France, 5.00%, 7/12/05 3,130,000 3,914
Government of France, 5.00%, 1/12/06 26,100,000 32,941
Government of France, 5.00%, 4/25/12 19,800,000 25,562
Government of France, 5.25%, 4/25/08 2,200,000 2,856
Government of France, 5.50%, 4/25/10 10,270,000 13,603
Government of France, 5.50%, 4/25/29 5,000,000 6,574
Government of France, 5.75%, 10/25/32 16,672,000 22,771
Total France (Cost $116,947) 134,866
GERMANY 15.8%
Government Bonds 15.8%
Bundesobligation, 5.00%, 8/19/05 43,470,000 54,452
Bundesrepublic, 4.50%, 7/4/09 37,000,000 46,870
Bundesrepublic, 4.75%, 7/4/08 14,240,000 18,180
Bundesrepublic, 4.75%, 7/4/28 5,685,000 6,780
Bundesrepublic, 5.00%, 1/4/12 21,650,000 27,973
Bundesrepublic, 5.50%, 1/4/31 19,250,000 25,485
Bundesrepublic, 6.00%, 1/5/06 19,350,000 24,742
Bundesrepublic, 6.00%, 7/4/07 14,000,000 18,447
Total Germany (Cost $191,923) 222,929
GREECE 4.2%
Government Bonds 4.2%
Hellenic Republic, 2.84%, 8/25/04 16,100,000 19,700
Hellenic Republic, 4.60%, 5/20/13 13,030,000 16,139
<PAGE>
Hellenic Republic, 6.00%, 2/19/06 6,000,000 7,685
Hellenic Republic, 6.50%, 1/11/14 11,063,940 15,597
Total Greece (Cost $51,816) 59,121
HUNGARY 0.1%
Government Bonds 0.1%
Government of Hungary, 6.25%, 6/12/07 236,150,000 1,027
Total Hungary (Cost $1,036) 1,027
IRELAND 0.8%
Government Bonds 0.8%
Republic of Ireland, 4.00%, 4/18/10 3,150,000 3,870
Republic of Ireland, 5.00%, 4/18/13 6,100,000 7,843
Total Ireland (Cost $9,141) 11,713
ITALY 9.1%
Government Bonds 9.1%
Republic of Italy, 5.00%, 10/15/07 10,940,000 14,034
Republic of Italy, 5.25%, 8/1/11 5,400,000 7,045
Republic of Italy, 5.50%, 11/1/10 13,800,000 18,247
Republic of Italy, 6.00%, 11/1/07 33,800,000 44,667
Republic of Italy, 6.00%, 5/1/31 29,400,000 40,739
Republic of Italy, 7.25%, 11/1/26 2,483,653 3,957
Total Italy (Cost $100,524) 128,689
JAPAN 11.9%
Government Bonds 11.9%
Government of Japan, 1.00%, 12/20/12 2,432,200,000 21,193
Government of Japan, 1.30%, 6/20/11 4,923,000,000 45,050
Government of Japan, 1.30%, 12/20/13 800,600,000 7,049
Government of Japan, 1.40%, 3/20/12 3,050,000,000 27,779
Government of Japan, 1.70%, 9/20/10 2,431,800,000 23,031
Government of Japan, 1.80%, 9/21/09 2,307,100,000 22,107
<PAGE>
Government of Japan, 2.00%, 6/20/22 732,000,000 6,491
Government of Japan, 2.20%, 6/22/20 1,663,000,000 15,433
Total Japan (Cost $163,441) 168,133
MEXICO 0.8%
Common Stocks 0.0%
United Mexican States, Series C,
Warrants, 6/1/05 (USD) 1,334,506 30
30
Government Bonds 0.8%
United Mexican States, 8.00%, 12/7/23 128,000,000 8,245
United Mexican States, 10.50%, 8/24/06 35,450,000 3,197
11,442
Total Mexico (Cost $11,786) 11,472
NETHERLANDS 3.0%
Government Bonds 3.0%
Government of Netherlands, 5.00%, 7/15/11 6,200,000 7,995
Government of Netherlands, 5.25%, 7/15/08 11,000,000 14,312
Government of Netherlands, 5.50%, 1/15/28 235,000 310
Government of Netherlands, 7.25%, 10/1/04 15,500,000 19,107
Total Netherlands (Cost $39,653) 41,724
POLAND 0.4%
Government Bonds 0.4%
Government of Poland, 8.50%, 11/12/06 21,900,000 6,042
Total Poland (Cost $6,098) 6,042
PORTUGAL 3.7%
Government Bonds 3.7%
Republic of Portugal, 3.00%, 7/17/06 28,000,000 34,247
Republic of Portugal, 3.625%, 8/19/04 5,400,000 6,589
Republic of Portugal, 5.15%, 6/15/11 8,275,000 10,743
Total Portugal (Cost $50,287) 51,579
<PAGE>
SOUTH AFRICA 0.6%
Government Bonds 0.6%
Republic of South Africa,
13.00%, 8/31/10 ss. 44,900,000 8,223
Total South Africa (Cost $6,857) 8,223
SPAIN 4.7%
Government Bonds 4.7%
Kingdom of Spain, 4.95%, 7/30/05 12,350,000 15,448
Kingdom of Spain, 5.75%, 7/30/32 4,200,000 5,737
Kingdom of Spain, 6.00%, 1/31/08 34,200,000 45,492
Total Spain (Cost $54,868) 66,677
SWEDEN 1.0%
Government Bonds 1.0%
Kingdom of Sweden, 5.00%, 1/28/09 100,000,000 13,827
Total Sweden (Cost $11,856) 13,827
UNITED KINGDOM 4.7%
Government Bonds 4.7%
United Kingdom Treasury, 4.25%, 6/7/32 18,000,000 29,819
United Kingdom Treasury, 5.00%, 3/7/08 8,540,000 15,465
United Kingdom Treasury, 5.00%, 3/7/12 5,000,000 9,001
United Kingdom Treasury, 5.75%, 12/7/09 5,100,000 9,545
United Kingdom Treasury, 8.50%, 12/7/05 1,250,000 2,382
Total United Kingdom (Cost $59,851) 66,212
UNITED STATES 15.6%
Money Market Funds 15.6%
T. Rowe Price Reserve
Investment Fund, 1.16% # 219,435,406 219,435
Total United States (Cost $219,435) 219,435
<PAGE>
SECURITIES LENDING COLLATERAL 0.6%
Money Market Pooled Account 0.6%
Investment in money market
pooled account managed by
JP Morgan Chase Bank, London, 1.15% # 8,012,000 8,012
Total Securities Lending
Collateral (Cost $8,012) 8,012
Total Investments in Securities
98.3% of Net Assets (Cost $1,242,263) $ 1,384,356
---------------
<PAGE>
T. Rowe Price International Bond Fund
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Certified Semiannual Report
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FORWARD CURRENCY EXCHANGE CONTRACTS
Amounts in (000s)
Unrealized
Counterparty Settlement Receive Deliver Gain (Loss)
------------ ---------- ----------------- --------------- -----------
Chase 7/21/04 BRL 20,448 USD 6,800 $ (214)
ABN AMRO 7/21/04 USD 6,751 BRL 20,448 165
CSFB 8/17/04 TWD 466,336 USD 14,155 (267)
Chase 8/17/04 USD 14,013 TWD 466,336 125
UBS 8/18/04 AUD 6,958 USD 4,843 (33)
Morgan Stanley 8/18/04 CAD 9,409 USD 6,850 163
Chase 8/18/04 CAD 4,035 USD 2,958 49
State Street 8/18/04 CAD 15,740 USD 11,517 215
Morgan Stanley 8/18/04 CZK 58,664 USD 2,230 5
Chase 8/18/04 DKK 11,157 USD 1,831 (4)
ABN AMRO 8/18/04 GBP 9,661 USD 17,321 119
Chase 8/18/04 GBP 851 USD 1,549 (14)
State Street 8/18/04 HUF 583,946 USD 2,737 59
ABN AMRO 8/18/04 JPY 23,424 EUR 173,017 4,089
UBS 8/18/04 JPY 11,255,781 USD 100,140 3,005
Chase 8/18/04 JPY 1,742,450 USD 15,831 136
Chase 8/18/04 KRW 14,711,347 USD 12,433 252
State Street 8/18/04 MXN 24,971 USD 2,153 (5)
ABN AMRO 8/18/04 PLN 26,401 USD 5,658 203
Citibank 8/18/04 PLN 107,266 USD 27,644 1,155
UBS 8/18/04 SEK 333,498 USD 44,014 257
CSFB 8/18/04 SGD 6,540 USD 3,813 (11)
State Street 8/18/04 USD 2,497 CAD 3,425 (56)
State Street 8/18/04 USD 2,973 DKK 18,350 (32)
Chase 8/18/04 USD 24,027 EUR 19,855 (137)
State Street 8/18/04 USD 5,954 EUR 4,840 63
State Street 8/18/04 USD 8,639 MXN 99,337 96
Chase 8/18/04 ZAR 2,113 SEK 15,817 13
State Street 8/18/04 ZAR 14,352 USD 2,130 156
Net unrealized gain (loss) on open
forward currency exchange contracts $ 9,552
--------
<PAGE>
(1) Denominated in currency of country of incorporation unless otherwise
noted
# Seven-day yield
ss. All or a portion of this security is on loan at June 30, 2004 - See
Note 2
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 $3,164 and represents 0.2% of net assets
AUD Australian dollar
BRL Brazilian real
CAD Canadian dollar
CZK Czech koruna
DKK Danish krone
EUR Euro
GBP British pound
HUF Hungarian forint
JPY Japanese yen
KRW South Korean won
MXN Mexican peso
PLN Polish zloty
SEK Swedish krona
SGD Singapore dollar
TWD Taiwan dollar
USD U.S. dollar
ZAR South African rand
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price International Bond Fund
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Certified Semiannual Report (Unaudited) June 30, 2004
STATEMENT OF ASSETS AND LIABILITIES
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(In thousands except shares and per share amounts)
Assets
Investments in securities, at value (cost $1,242,263) $ 1,384,356
Other assets 40,237
Total assets 1,424,593
Liabilities
Total liabilities 16,183
NET ASSETS $ 1,408,410
--------------------
Net Assets Consist of:
Undistributed net realized gain (loss) $ (7,359)
Net unrealized gain (loss) 151,762
Paid-in-capital applicable to 142,590,586 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 1,264,007
NET ASSETS $ 1,408,410
--------------------
NET ASSET VALUE PER SHARE
Investor Class
($1,350,850,962/136,756,551 shares outstanding) $ 9.88
--------------------
Advisor Class
($57,559,506/5,834,035 shares outstanding) $ 9.87
--------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price International Bond Fund
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Certified Semiannual Report (Unaudited)
STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
($ 000s)
6 Months
Ended
6/30/04
Investment Income (Loss)
Income
Interest $ 22,294
Dividend 956
Securities lending 19
Total income 23,269
Expenses
Investment management 4,625
Shareholder servicing
Investor Class 1,119
Advisor Class 11
Custody and accounting 272
Rule 12b-1 fees - Advisor Class 65
Registration 60
Prospectus and shareholder reports
Investor Class 52
Advisor Class 4
Legal and audit 15
Directors 3
Miscellaneous 4
Total expenses 6,230
Net investment income (loss) 17,039
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 32,384
Futures 18
Foreign currency transactions (11,233)
Net realized gain (loss) 21,169
Change in net unrealized gain (loss)
Securities (77,682)
Futures 7
Other assets and liabilities
denominated in foreign currencies 11,319
Change in net unrealized gain (loss) (66,356)
Net realized and unrealized gain (loss) (45,187)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (28,148)
--------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price International Bond Fund
--------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
Increase (Decrease) in Net Assets
Operations
Net investment income (loss) $ 17,039 $ 30,980
Net realized gain (loss) 21,169 55,048
Change in net unrealized gain (loss) (66,356) 123,718
Increase (decrease) in net
assets from operations (28,148) 209,746
Distributions to shareholders
Net investment income
Investor Class (16,442) (30,305)
Advisor Class (604) (668)
Net realized gain
Investor Class (7,796) (61,184)
Advisor Class (299) (2,235)
Decrease in net assets from distributions (25,141) (94,392)
Capital share transactions *
Shares sold
Investor Class 234,046 412,857
Advisor Class 19,818 42,114
Distributions reinvested
Investor Class 22,553 86,713
Advisor Class 837 2,656
Shares redeemed
Investor Class (160,638) (364,191)
Advisor Class (11,451) (11,647)
Increase (decrease) in net assets from
capital share transactions 105,165 168,502
Net Assets
Increase (decrease) during period 51,876 283,856
Beginning of period 1,356,534 1,072,678
End of period $ 1,408,410 $ 1,356,534
--------------- ---------------
(Including undistributed net investment
income of $0 at 6/30/04 and $7 at 12/31/03)
<PAGE>
T. Rowe Price International Bond Fund
--------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited)
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
($ 000s)
6 Months Year
Ended Ended
6/30/04 12/31/03
*Share information
Shares sold
Investor Class 23,159 42,028
Advisor Class 1,974 4,214
Distributions reinvested
Investor Class 2,229 8,617
Advisor Class 83 263
Shares redeemed
Investor Class (16,038) (37,148)
Advisor Class (1,127) (1,164)
Increase (decrease) in shares outstanding 10,280 16,810
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price International Bond Fund
--------------------------------------------------------------------------------
Certified Semiannual Report (Unaudited) June 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 Bond Fund
(the fund), a nondiversified, open-end management investment company, is one
portfolio established by the corporation. The fund seeks to provide high current
income and capital appreciation by investing primarily in high-quality,
nondollar-denominated bonds outside the U.S. The fund has two classes of shares:
the International Bond Fund original share class, referred to in this report as
the Investor Class, offered since September 10, 1986, and International Bond
Fund--Advisor Class (Advisor Class), offered since March 31, 2000. Advisor Class
shares are sold only through brokers and other financial intermediaries that are
compensated by the class for distribution, shareholder servicing, and/or certain
administrative services under a Board-approved Rule 12b-1 plan. Each class has
exclusive voting rights on matters related solely to that class, separate voting
rights on matters that relate to both classes, and, in all other respects, the
same rights and obligations as the other class.
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. Debt securities are generally traded in the
over-the-counter market. Securities with original maturities of one year or more
are valued at prices furnished by dealers who make markets in such securities or
by an independent pricing service, which considers yield or price of bonds of
comparable quality, coupon, maturity, and type, as well as prices quoted by
dealers who make markets in such securities. Securities with original maturities
of less than one year are stated at fair value, which is determined by using a
matrix system that establishes a value for each security based on bid-side money
market yields.
Investments in mutual funds are valued at the mutual fund's closing net asset
value per share on the day of valuation. Financial futures contracts are valued
at closing settlement prices.
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
<PAGE>
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.
Class Accounting
The Advisor Class pays distribution, shareholder servicing, and/or certain
administrative expenses in the form of Rule 12b-1 fees, in an amount not
exceeding 0.25% of the class's average daily net assets. Shareholder servicing,
prospectus, and shareholder report expenses incurred by each class are charged
directly to the class to which they relate. Expenses common to both classes and
investment income are allocated to the classes based upon the rela-tive daily
net assets of each class's settled shares; realized and unrealized gains and
losses are allocated based upon the relative daily net assets of each class's
outstanding shares.
<PAGE>
Credits
The fund earns credits on temporarily uninvested cash balances at the custodian
that reduce the fund's custody charges. Custody expense in the accompanying
financial statements is presented before reduction for credits.
Redemption Fees
A 2% fee is assessed on redemptions of Investor Class and Advisor Class fund
shares held less than 90 days 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. Premiums and discounts on
debt securities are amortized for financial reporting purposes. 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. Payments ("variation margin") made or
received to settle the daily fluctuations in the value of futures contracts are
recorded as unrealized gains or losses until the contracts are closed.
Unrealized gains and losses on forward currency exchange contracts are included
in other assets and other liabilities, respectively, and in the change in net
realized gains or losses in the accompanying financial statements. Distributions
to shareholders are recorded on the ex-dividend date. Income distributions are
declared by each class on a daily basis and paid monthly. 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.
<PAGE>
Forward Currency Exchange Contracts
During the six months ended June 30, 2004, the fund was a party to forward
currency exchange contracts under which it is obligated to exchange currencies
at specified future dates and exchange rates. Risks arise from the possible
inability of counterparties to meet the terms of their agreements and from
movements in currency values.
Futures Contracts
During the six months ended June 30, 2004, 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 instru-ment at an agreed
upon price, date, time, and place. Risks arise from possible illiquidity of the
futures market and from movements in security values and/or interest rates.
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 June 30, 2004, the value of loaned
securities was $7,326,000; aggregate collateral consisted of $8,012,000 in the
money market pooled account.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $260,984,000 and $255,063,000, respectively, for the six months ended
June 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
<PAGE>
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 June
30, 2004.
At June 30, 2004, the cost of investments for federal income tax purposes was
$1,242,263,000. Net unrealized gain aggregated $151,762,000 at period-end, of
which $157,610,000 related to appreciated investments and $5,848,000 related to
depreciated investments.
NOTE 4 - 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 average daily net
assets to those of the group. At June 30, 2004, the effective annual group fee
rate was 0.31%, and investment management fee payable totaled $764,000.
The Advisor Class is also subject to a contractual expense limitation through
April 30, 2006. During the limitation period, the manager is required to waive
its management fee and reimburse the class for any expenses, excluding interest,
taxes, brokerage commissions, and extraordinary expenses, that would otherwise
cause the class's ratio of total expenses to average net assets (expense ratio)
to exceed its expense limitation of 1.15%. Through April 30, 2008, the class is
required to repay the manager for expenses previously reimbursed and management
fees waived to the extent its net assets have grown or expenses
<PAGE>
have declined sufficiently to allow repayment without causing the class's
expense ratio to exceed its expense limitation. For the six months ended
June 30, 2004, the Advisor Class operated below its expense limitation.
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 Investor Class. Expenses incurred pursuant to these service
agreements totaled $359,000 for the six months ended June 30, 2004, of which
$140,000 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 June 30, 2004, the fund was allocated $610,000 of Spectrum
Funds' expenses, of which $397,000 related to services provided by Price and
$194,000 was payable at period-end. At June 30, 2004, approximately 43.1% of the
outstanding shares of the Investor Class 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 June 30, 2004,
dividend income from the Reserve Funds totaled $956,000.
<PAGE>
T. Rowe Price International Bond Fund
--------------------------------------------------------------------------------
Certified Semiannual Report
INFORMATION ON PROXY VOTING
--------------------------------------------------------------------------------
A description of the policies and procedures that the T. Rowe Price
International Bond fund 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: August 16, 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: August 16, 2004
By: /s/ Joseph A. Carrier
Joseph A. Carrier
Principal Financial Officer
Date: August 16, 2004
</TEXT>
</DOCUMENT>