UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

FORM N-CSR 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED 

MANAGEMENT INVESTMENT COMPANIES 

Investment Company Act File Number: 811-2958 

T. Rowe Price International Funds, Inc. 

(Exact name of registrant as specified in charter) 

100 East Pratt Street, Baltimore, MD 21202 

(Address of principal executive offices) 

David Oestreicher 

 100 East Pratt Street, Baltimore, MD 21202 

 (Name and address of agent for service) 

Registrant’s telephone number, including area code: (410) 345-2000 

Date of fiscal year end: October 31 

Date of reporting period: April 30, 2008 

Item 1: Report to Shareholders

Overseas Stock Fund April 30, 2008 

The views and opinions in this report were current as of April 30, 2008. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund’s future investment intent. The report is certified under the Sarbanes-Oxley Act, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects.

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Manager’s Letter

Fellow Shareholders

The global financial crisis and fears about the world’s economic health combined to push most developed international markets lower during the six-month period ended April 30, 2008. Risk-averse investors, fearing the worst from the U.S. subprime mortgage meltdown, moved to safer havens for most of the period. In April, after investors became confident the worst of the crisis was over and companies—with the exception of financials—reported stronger-than-expected earnings gains, international markets rallied. The U.S. Federal Reserve aggressively cut its target interest rate to 2% and, along with the Bank of England and the European Central Bank, instituted several extraordinary measures in an effort to add liquidity to the financial system. The declining levels of consumer and business confidence affected all regions, including a number of formerly buoyant emerging markets, such as China and India. Your fund was not immune to these difficult market conditions.

The Overseas Stock Fund generated disappointing returns for the six-month period ended April 30, 2008. On a relative basis, the portfolio performed in line with the Lipper International Multi-Cap Value Funds Average but lagged the MSCI EAFE (Europe, Australasia, and Far East) Index and the Lipper International Multi-Cap Core Funds Average for the period.

HIGHLIGHTS

• Concerns about the deterioration in global financial markets and slowing global growth took their toll on most international stock markets during the past six months.

• The Overseas Stock Fund lagged its Lipper peer group and the MSCI EAFE Index for the six-month period ended April 30, 2008.

• With global equity markets falling across the board, there were few safe havens. Energy and materials were the only sectors that held fast.

• The correction generated attractive investment opportunities, creating valuations that are more appealing than they have been in the past several years.

Europe had the worst absolute and relative impact on the fund’s performance. Despite our relatively lower exposure to Japan, our Japanese holdings struggled. We reduced our exposure to emerging markets, particularly China, and were able to avoid some of their sharp declines. Most sectors fared poorly, but we were surprised that historically good defensive categories—telecommunications and health care—declined. Only energy, which benefited from record oil prices, gained.

When we experience disappointing short-term returns, it is important to keep in mind that your fund’s investment strategy is oriented toward achieving long-term appreciation. Since this is a relatively new fund, we think it is appropriate to outline our investment strategy. We are looking for the best combinations of growth and valuation among non-U.S. stocks, and we have the flexibility to search a broad spectrum for particularly promising investment opportunities. Although the majority of the investments will be in established, large-capitalization companies with favorable prospects for capital appreciation and, secondarily, for growing dividend payments, we will also purchase mid-cap stocks that meet our investment criteria. We also expect to find select opportunities in emerging markets. We will focus on stocks in which we believe the market’s valuation underestimates the company’s potential for earnings growth. Such stocks may or may not appear inexpensive on an absolute basis or relative to the rest of the market.

MARKET REVIEW

A year ago, the global economy was experiencing a healthy noninflationary expansion, but conditions changed dramatically late last summer when it became evident that the problems of the U.S. subprime mortgage market had spread throughout the global financial system. Financial institutions encountered difficulty trading complicated structured products containing these mortgages, creating a global liquidity crisis. Consumer and business confidence declined, particularly in the U.S., where housing prices weakened and overextended consumers could not continue their high levels of spending. As we feared, the weakening U.S. economy took its toll on the global economy and international equity markets.

Economic growth in Europe continues, albeit at a slower rate. The rates of economic growth vary within the region. Economic conditions in the U.K. mirror those in the U.S. The U.K. housing bubble burst, and British consumers—the world’s most heavily indebted, surpassing even those in the U.S.—found they could not sustain their levels of spending. U.K. unemployment rose. Elsewhere, there were signs of slowing, particularly in Spain and Ireland, which had their own housing bubbles, and in Italy and France, where domestic consumption slowed. Germany was the exception. Business and consumer confidence remained relatively buoyant, unemployment declined, and the nation’s exports to growth markets in Asia rose. The European Central Bank remained more concerned about rising inflationary pressures and consequently resisted calls to reignite the economy with interest rate cuts. Even though the European economy expanded, its stock markets experienced significant declines during the six-month period, as risk-averse investors looked for safe havens. The steepest losses were in Finland, the U.K., Ireland, Portugal, and Greece.

A similar story played out in the Pacific region. Japan’s multiyear export-fueled expansion began to slow in response to the yen’s strength, which curtailed exports to the U.S. Data indicated that the country had yet to rid itself of the persistent deflation that has bedeviled it for more than a decade. As a result, domestic demand remained weak, although subsequently a healthy level of inflation began to appear. Australia’s business conditions deteriorated and market sentiment soured, despite reaping the benefits of China’s seemingly insatiable demand for energy and raw materials. Hong Kong, Singapore, and New Zealand markets also experienced significant declines.

Emerging markets in Latin America showed more resilience. Brazil’s stock market had a marked advance. In emerging Asian markets—most notably China and India—the speculative bubble that had developed over the past several years deflated, and many emerging Asian markets experienced double-digit declines.

Although corporate earnings did not grow as rapidly, most companies—with the exception of financials—reported respectable gains. With the decline in stock prices, valuations look more attractive in many cases. However, with a more subdued macroeconomic backdrop, the prospects for revenue and earnings growth are less positive.

PORTFOLIO REVIEW

During the six-month reporting period, consumer discretionary and financials were the portfolio’s worst-performing sectors. Losses stemming from the credit crisis reached just about every corner of the global financial system. We lightened the fund’s exposure to financials throughout this period and were able to avoid some of the downside. However, financial stocks make up the largest sector of the non-U.S. opportunity set, and the sector was responsible for the largest detraction from the fund’s performance over the six months.

Our holdings in telecommunication services and health care stocks did not hold up as well as the inherent defensiveness of these sectors would suggest. We continue to believe these sectors, especially telecoms, represent a favorable combination of stable growth at attractive valuations.

Strong global demand for petroleum, iron, steel, and other metals helped our energy and materials holdings. We were heavily exposed in energy, which helped boost the portfolio’s results, but we reduced our exposure to materials due to concerns over rising valuations, a decision that detracted.

Regionally, our European stocks—especially those in the U.K.—were our largest detractors due to the heavy concentration of financial stocks in Europe. Our holdings in Japan also suffered, although our relatively lower exposure to that market was a mitigating factor. One brighter area was Asia, where we had lightened up in China and India before those markets experienced sharp declines, and our holdings tended to perform better than the market.

Europe
Europe was the largest detractor from the fund over the reporting period. The flurry of merger and acquisition activity that supported the market for several years dried up. European financial institutions, which had appreciated handsomely in the past few years, declined after reporting losses generated from structured securities containing subprime mortgages. Investors soured on Royal Bank of Scotland (U.K.), the fund’s worst performer, after it overpaid for the least desirable assets in a multi-bank takeover of Dutch bank ABN Amro. We sold our holdings of Hypo Real Estate (Germany), which specializes in real estate financing and had a large writedown. Risk-averse investors sold off shares of financial giant AXA (France). The company has a solid insurance franchise in Europe with growing operations in the U.S. and Asia. (Please refer to the fund’s portfolio of investments for a detailed list of holdings and the amount each represents in the portfolio.)

Not all our European financials performed poorly. New purchase Topdanmark (Denmark), a property and casualty insurer, rose smartly on steady premium growth. Banco Santander(Spain), another participant in the ABN Amro deal, gained. It was seen as acquiring ABN Amro’s most attractive assets, and it experienced strong growth from its Latin American subsidiaries.

A large number of our consumer-oriented companies struggled. Automaker BMW (Germany) declined primarily because of the impact of the strong euro, which reduced the translated value of the substantial portion of its earnings that are dollar denominated. Its revenue generation was strong, and its valuations were near all-time lows. Clothing company Benetton Group (Italy) has had strong sales, but fears of Italy’s economic retrenchment drove its shares lower. The company is currently restructuring, and we believe the Benetton family’s return to active management bodes well for the company’s long-term prospects. British retailer Tesco declined, and we used the drop as an opportunity to buy more of this well-managed company that is now expanding into the U.S. Food giant Nestlé (Switzerland) bucked consumer stocks’ downward momentum and performed strongly. We believe the market underestimates the extent to which the company’s global operations and newly integrated information technology system will allow it to realize efficiencies and improve its margins.

Our European telecommunications holdings, which had been stalwart performers, weakened significantly during the period. Vodafone, the British wireless giant with mobile operations around the world (including a 45% interest in Verizon Wireless) sold off for no apparent reason other than it was caught in the negative sentiment directed toward the sector. Mobile operator and construction company Bouygues (France) fell on concerns that heavy-handed regulation might hurt its expanding telecommunications business. Telenor (Norway) and France Telecom (France) also fell on fears of increased regulation and slowing customer growth in their mobile operations. Telefonica (Spain) dropped, despite the steady revenue stream from its stable landline business in Spain and the strong growth from its wireless expansion in Latin America and Europe. We believe the stock is attractively valued.

Despite increasing its share of the global mobile handset market and offering attractive new products, Nokia (Finland) declined. We consider this a very good company selling at an attractive valuation, and we added to our holdings.

European energy and utility stocks were the region’s bright spots this period. The fund’s large producers—including StatoilHydro (Norway) and Total (France)—benefited from the rising crude oil prices. Geophysical services company Fugro (Netherlands), whose shares we purchased over the period, rose on expanded demand for its services from the oil and gas exploration and mining industries. TGS-NOPEC Geophysical (Norway) also gained and has seen increased sales from its large data library of geophysical information. German utility E.ON held up due to higher rates and its healthy share of low-carbon, low-cost methods of electricity generation. To build up some of our defensive positions, we initiated a position in utility company Enel (Italy), which had very reasonable valuations.

Other strong performers this period included defense contractor Finmeccanica (Italy), chemicals company BASF (Germany), and shopping center investor Deutsche EuroShop (Germany). Auto safety system maker Autoliv (Sweden), also a new purchase, gained. German pharmaceutical and chemical company Merck KGA (not related to the U.S. Merck) did well following our purchase of the shares. The demand for the crystals that it makes for LCD display panels is rising, and it received promising results from trials testing a drug to treat colorectal cancer.

Japan
Japan’s economic performance has been uneven. With a weak domestic economy, we have focused our attention on Japanese companies with export-oriented businesses or large offshore operations. Despite strong earnings and attractive values, a number of these companies struggled. Automakers Toyota Motor and Honda had solid sales in most of their markets, but they dropped because the strong yen took a toll on their U.S. earnings. Their weak shares have resulted in extremely low valuations. We believe Toyota and Honda are excellent companies with great long-term potential, and we continue to own both.

A number of other solid Japanese companies performed poorly this period. Sumco, a supplier of silicon wafers for semiconductors, saw its shares decline over concerns about current excess global production capacity. We believe the valuation of this stock is compelling given the company’s solid growth prospects, and we added to our holdings.

Sumitomo Trust and Banking Company, a well-managed bank with rising fee income, held up well relative to the fund’s other financial companies as did the The Bank of Yokohama and new purchase Sumitomo Mitsui Financial Group.

Although subprime mortgage holdings dragged down the results for most insurance companies, Sony Financial Holdings was an exception. Its life, auto, and property and casualty insurance business continues to grab market share.

Nissha Printing, which specializes in molding decorative designs onto products such as cell phones, personal computers, and home appliances, saw orders for its products rise and was a strong contributor this period. Benesse, an education and language instruction company, has seen its enrollments grow at a healthy rate and continues to generate strong earnings growth. Hosiden rose due to its strong sales of components used in Nintendo’s Wii gaming device.

Over the period, we sold our holdings of Seven & I, which operates convenience stores. We eliminated Tokyo Electron, a semiconductor production equipment manufacturer, and Star Micronics, a precision machinery maker, from the portfolio. Both suffered from declining orders. Trading company Sumitomo was hurt by its exposure to the weak domestic Japanese market, and we eliminated it, but we added Mitsubishi, a trader with solid coking coal and energy businesses.

Pacific ex-Japan
We have liked the Pacific markets outside of Japan for several years due to the region’s economic and demographic growth as well as improving corporate governance. Rio Tinto, the Australian mining and minerals producer, saw its share price appreciate smartly on continuing strong Chinese demand and after rival BHP Billiton made an unsolicited buyout offer. Pharmaceutical company CSL (Australia) continued to perform well due to strong sales of the active ingredient used in the new cervical cancer vaccine. Wireless communications company Starhub (Singapore) was one of the few telecommunications companies whose shares appreciated during the period.

New purchase Samsung Electronics (Korea) posted gains with strong demand for its televisions, mobile phones, and chips. We also purchased China Citic Bank, which caters primarily to businesses. We sold off some of our shares of Hong Kong & China Gas, a natural gas utility that markets in Hong Kong and has joint ventures in 30 Chinese cities, after the stock appreciated substantially since our initial purchase.

Emerging Markets
For some time we have been concerned about valuations in emerging markets and have been reducing our exposure to only the most resilient companies. Nevertheless, some of our holdings struggled. Former stalwart America Movil (Mexico) declined as investors feared the company’s subscriber growth rate might slow.

INVESTMENT OUTLOOK

We are less sanguine about global markets than we were a year ago, but we can begin to see improvement compared with the conditions in late 2007. It appears that the global financial crisis has stabilized for now. Interest rate spreads for riskier debt instruments have fallen, banks are not clamoring as much for liquidity, and deep-value investors are poking around the rubble and picking up what have become attractive assets. The Federal Reserve’s interest rate cuts and creation of lending facilities to dealers have helped to restore confidence in the system short term, even if creating potential for inflation and moral hazard longer term.

We believe the Fed is now in a wait-and-see mode and is not likely to cut interest rates further. The European Central Bank, chartered solely to maintain price stability, is likely to hold off cutting rates until inflation moderates, while the Bank of England has struck a middle ground. Banks around the world have tightened their lending standards, which will curb the amount of credit available for businesses and consumers and dampen near-term investment and spending.

The U.S. has experienced an economic slowdown, but so far it seems to be less severe than previous contractions. The European economy shows signs of weakening, but the prior recovery was subdued and did not create the large imbalances that accompany a more exuberant expansion. As a result, if the region experiences a contraction, it may be shorter and less painful. The housing bubbles in Spain and Ireland are deflating, and the downturn in housing construction should result in more muted growth in those countries. With consumers burdened with high debt levels and facing rising unemployment, the U.K. economy is likely to remain weak. Europe, however, is to likely to benefit from the dynamic growth occurring in Eastern Europe, the Middle East, and Asia. Companies that are export oriented or have large operations in these high-growth areas should continue to prosper.

Japan’s economy remains in a slow-growth mode. The domestic economy shows few signs of life, while the country’s export sectors, which were responsible for what growth there had been, present a more balanced view. They are suffering from the strong yen that is making Japanese goods less competitive and reducing the value of offshore earnings, particularly those from the U.S. At the same time, exports to China, which has surpassed the U.S. as Japan’s largest export market, continue to grow. We don’t see any immediate catalysts that can revive Japan’s languid economy. Healthy growth in the rest of Asia is likely to continue. China’s overall growth has moderated slightly, but it will continue to be a massive consumer of raw materials, energy, and technology as it industrializes.

Corporate profits have been stronger than expected in many cases, and after the correction earlier this year, many stocks currently carry attractive valuations. In some cases, we are seeing valuations similar to those earlier in this decade before the non-U.S. markets rallied. However, shorter-term earnings prospects have also weakened in many cases. Another factor to consider is that a lot of money moved to the sidelines during the past several months of risk aversion. Much of this cash may begin to migrate back into equities in hopes of getting better returns. In addition, sovereign wealth funds have accumulated billions of dollars of reserves that inevitably will be invested, which should also prop up international stocks.

We believe the fundamentals should support the equity markets for the remainder of the year. Although non-U.S. markets have rallied in April and in early May as we write this letter, we expect volatility to continue. We may have a better understanding of the dimensions of the credit crisis than we did six months ago, but the market is still vulnerable to any hint of bad news.

We want to reiterate that regardless of day-to-day market conditions, our investment philosophy remains unchanged. We look for stocks of companies with a favorable combination of earnings growth and valuation. We remain mindful of the risks of investing in international markets while we strive to generate continued rewards for our shareholders.

Respectfully submitted,

Raymond Mills
Chairman of the fund’s Investment Advisory Committee

May 20, 2008

The committee chairman has day-to-day responsibility for managing the portfolio and works with committee members in developing and executing the fund’s investment program.

RISKS OF INTERNATIONAL INVESTING

Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets. Funds investing in a single country or in a limited geographic region tend to be riskier than more diversified funds. Risks can result from varying stages of economic and political development; differing regulatory environments, trading days, and accounting standards; and higher transaction costs of non-U.S. markets. Non-U.S. investments are also subject to currency risk, or a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency.

GLOSSARY

Gross domestic product (GDP): GDP is the total market value of all goods and services produced in a country in a given year.

Lipper averages: The averages of available mutual fund performance returns for specified periods in defined categories as tracked by Lipper Inc.

MSCI EAFE Index: Widely accepted as the benchmark for international stock performance (EAFE refers to Europe, Australasia, and the Far East). The index represents the major markets of the world.

Price/earnings ratio: The price-to-earnings ratio shows the “multiple” of earnings at which a stock is selling. The P/E ratio is calculated by dividing a stock’s current price by its current earnings per share. A high multiple means that investors are optimistic about future growth and have bid up the stock’s price.

Performance and Expenses

GROWTH OF $10,000 

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.

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.

FUND EXPENSE EXAMPLE 

As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs, such as redemption fees or sales loads, and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period.

Actual Expenses
The first line of the following table (“Actual”) provides information about actual account values and expenses based on the fund’s actual returns. You may use the information in this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes
The information on the second line of the table (“Hypothetical”) is based on hypothetical account values and expenses derived from the fund’s actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund’s actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.

Note: T. Rowe Price charges an annual small-account maintenance fee of $10, generally for accounts with less than $2,000 ($500 for UGMA/UTMA). The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $25,000 or more, accounts employing automatic investing, and IRAs and other retirement plan accounts that utilize a prototype plan sponsored by T. Rowe Price (although a separate custodial or administrative fee may apply to such accounts). This fee is not included in the accompanying table. If you are subject to the fee, keep it in mind when you are estimating the ongoing expenses of investing in the fund and when comparing the expenses of this fund with other funds.

You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher.

Unaudited

The accompanying notes are an integral part of these financial statements.

Unaudited

The accompanying notes are an integral part of these financial statements.

Unaudited

The accompanying notes are an integral part of these financial statements.

Unaudited

The accompanying notes are an integral part of these financial statements.

Unaudited

The accompanying notes are an integral part of these financial statements.

Unaudited

NOTES TO FINANCIAL STATEMENTS 

T. Rowe Price International Funds, Inc. (the corporation), is registered under the Investment Company Act of 1940 (the 1940 Act). The Overseas Stock Fund (the fund), a diversified, open-end management investment company, is one portfolio established by the corporation. The fund commenced operations on December 29, 2006. The fund seeks long-term growth of capital through investments in the common stocks of non-U.S. companies.

NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation 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. Fund management believes that estimates and security valuations are appropriate; however, actual results may differ from those estimates, and the security valuations reflected in the financial statements may differ from the value the fund ultimately realizes upon sale of the securities.

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. Income tax-related interest and penalties, if incurred, would be recorded as income tax expense. 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 on an annual basis. Capital gain distributions, if any, are declared and paid by the fund, typically on an annual basis.

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.

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, which are reflected as expenses paid indirectly.

Redemption Fees A 2% fee is assessed on redemptions of fund shares held for 90 days or less to deter short-term trading and to 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 are recorded as an increase to paid-in capital. The fees may cause the redemption price per share to differ from the net asset value per share.

New Accounting Pronouncements Effective November 1, 2007, the fund adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, a clarification of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 establishes financial accounting and disclosure requirements for recognition and measurement of tax positions taken or expected to be taken on an income tax return. The adoption of FIN 48 had no impact on the fund’s net assets or results of operations.

In September 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 (FAS 157), Fair Value Measurements. FAS 157 defines fair value, establishes the framework for measuring fair value, and expands the disclosure of fair value measurements in the financial statements. It is effective for the fund’s fiscal year beginning November 1, 2008. Management expects adoption of FAS 157 will have no material impact on the fund’s net assets or results of operations.

NOTE 2 - 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.

Valuation Methods Equity securities listed or regularly traded on a securities exchange or in the over-the-counter (OTC) 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, including restricted securities, 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.

For valuation purposes, the last quoted prices of non-U.S. equity securities may be adjusted under the circumstances described below. 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, the fund will adjust the previous closing prices to reflect what it believes to be the fair value of the securities as of the close of the NYSE. In deciding whether it is necessary to adjust closing prices to reflect fair value, 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. A fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. The fund uses outside pricing services to provide it with closing prices and information to evaluate and/or adjust those prices. The fund cannot predict how often it will use closing prices and how often it will determine it necessary to adjust those prices to reflect fair value. As a means of evaluating its security valuation process, the fund routinely compares closing prices, the next day’s opening prices in the same markets, and adjusted prices.

NOTE 3 - INVESTMENT TRANSACTIONS

Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $642,126,000 and $228,706,000, respectively, for the six months ended April 30, 2008.

NOTE 4 - 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, 2008.

The fund intends to retain realized gains to the extent of available capital loss carryforwards. As of October 31, 2007, the fund had $9,477,000 of unused capital loss carryforwards that expire in fiscal 2015.

At April 30, 2008, the cost of investments for federal income tax purposes was $1,676,835,000. Net unrealized loss aggregated $26,247,000 at period-end, of which $98,172,000 related to appreciated investments and $124,419,000 related to depreciated investments.

NOTE 5 - FOREIGN TAXES

The fund is subject to foreign income taxes imposed by certain countries in which it invests. Additionally, capital gains realized by the fund upon disposition of securities issued in or by certain foreign countries are subject to capital gains tax imposed by those countries. All taxes are computed in accordance with the applicable foreign tax law, and, to the extent permitted, capital losses are used to offset capital gains. Tax expense attributable to income is accrued by the fund as a reduction of income. Current and deferred tax expense attributable to net capital gains is reflected as a component of realized and/or change in unrealized gain/loss on securities in the accompanying financial statements. At April 30, 2008, the fund had no deferred tax liability attributable to foreign securities and $219,000 of foreign capital loss carryforwards that expire in 2016.

NOTE 6 - 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 a group fee. The group fee rate 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 0.285% for assets in excess of $220 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At April 30, 2008, the effective annual group fee rate was 0.30%.

The fund is also subject to a contractual expense limitation through February 28, 2009. During the limitation period, the manager is required to waive its management fee and reimburse the fund for any expenses, excluding interest, taxes, brokerage commissions, and extraordinary expenses, that would otherwise cause the fund’s ratio of annualized total expenses to average net assets (expense ratio) to exceed its expense limitation of 1.15%. For a period of three years after the date of any reimbursement or waiver, the fund is required to repay the manager for expenses previously reimbursed and management fees waived to the extent its net assets have grown or expenses have declined sufficiently to allow repayment without causing the fund’s expense ratio to exceed its expense limitation. For the period ended April 30, 2008, the fund 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 price and provides certain other administrative services to 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. For the six months ended April 30, 2008, expenses incurred pursuant to these service agreements were $85,000 for Price Associates, $57,000 for T. Rowe Price Services, Inc., and $5,000 for T. Rowe Price Retirement Plan Services, Inc. The total amount payable at period-end pursuant to these service agreements is reflected as Due to Affiliates in the accompanying financial statements.

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 six months ended April 30, 2008, the fund was charged $56,000 for shareholder servicing costs related to the college savings plans, of which $48,000 was for services provided by Price. The amount payable at period-end pursuant to this agreement is reflected as Due to Affiliates in the accompanying financial statements. At April 30, 2008, approximately 5% of the outstanding shares of the fund 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 Retirement Funds (Retirement Funds) may invest. The Retirement 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 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 Retirement Funds. Expenses allocated under this agreement are reflected as shareholder servicing expense in the accompanying financial statements. For the six months ended April 30, 2008, the fund was allocated $1,389,000 of Retirement Funds’ expenses, of which $1,062,000 related to services provided by Price. The amount payable at period-end pursuant to this agreement is reflected as Due to Affiliates in the accompanying financial statements. At April 30, 2008, approximately 90% of the outstanding shares of the fund were held by the Retirement Funds.

The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the T. Rowe Price Reserve Investment Funds), open-end management investment companies managed by Price Associates and considered affiliates of the fund. The T. Rowe Price Reserve Investment 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 T. Rowe Price Reserve Investment Funds pay no investment management fees.

As of April 30, 2008, T. Rowe Price Group, Inc., and/or its wholly owned subsidiaries owned 1,012,334 shares of the fund, representing less than 1% of the fund’s net assets.

INFORMATION ON PROXY VOTING POLICIES, PROCEDURES, AND RECORDS 

A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund’s Statement of Additional Information, which you may request by calling 1-800-225-5132 or by accessing the SEC’s Web site, www.sec.gov. The description of our proxy voting policies and procedures is also available on our Web site, www.troweprice.com. To access it, click on the words “Company Info” at the top of our homepage for individual investors. Then, in the window that appears, click on the “Proxy Voting Policy” navigation button in the top left corner.

Each fund’s most recent annual proxy voting record is available on our Web site and through the SEC’s Web site. To access it through our Web site, follow the directions above, then click on the words “Proxy Voting Record” at the bottom of the Proxy Voting Policy page.

HOW TO OBTAIN QUARTERLY PORTFOLIO HOLDINGS 

The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund’s Form N-Q is available electronically on the SEC’s Web site (www.sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.

APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT 

On March 4, 2008, the fund’s Board of Directors (Board) unanimously approved the investment advisory contract (Contract) between the fund and its investment manager, T. Rowe Price International, Inc. (Manager). The Board considered a variety of factors in connection with its review of the Contract, also taking into account information provided by the Manager during the course of the year, as discussed below:

Services Provided by the Manager
The Board considered the nature, quality, and extent of the services provided to the fund by the Manager. These services included, but were not limited to, management of the fund’s portfolio and a variety of related activities as well as financial and administrative services, reporting, and communications. The Board also reviewed the background and experience of the Manager’s senior management team and investment personnel involved in the management of the fund. The Board concluded that it was satisfied with the nature, quality, and extent of the services provided by the Manager.

Investment Performance of the Fund
The Board reviewed the fund’s total returns over the one-year and since-inception periods and compared these returns with a wide variety of previously agreed upon comparable performance measures and market data, including those supplied by Lipper and Morningstar, which are independent providers of mutual fund data. On the basis of this evaluation and the Board’s ongoing review of investment results, the Board concluded that the fund’s performance was satisfactory.

Costs, Benefits, Profits, and Economies of Scale
The Board reviewed detailed information regarding the revenues received by the Manager under the Contract and other benefits that the Manager (and its affiliates) may have realized from its relationship with the fund, including research received under “soft dollar” agreements. The Board noted that soft dollars were not used to pay for third-party, non-broker research. The Board also received information on the estimated costs incurred and profits realized by the Manager and its affiliates from advising T. Rowe Price mutual funds, as well as estimates of the gross profits realized from managing the fund in particular. The Board concluded that the Manager’s profits were reasonable in light of the services provided to the fund. The Board also considered whether the fund or other funds benefit under the fee levels set forth in the Contract from any economies of scale realized by the Manager. Under the Contract, the fund pays a fee to the Manager composed of two components—a group fee rate based on the aggregate assets of certain T. Rowe Price mutual funds (including the fund) that declines at certain asset levels and an individual fund fee rate that is assessed on the assets of the fund. The Board concluded that the advisory fee structure for the fund continued to provide for a reasonable sharing of benefits from economies of scale with the fund’s investors.

Fees
The Board reviewed the fund’s management fee rate, operating expenses, and total expense ratio and compared them with fees and expenses of other comparable funds based on information and data supplied by Lipper. The information provided to the Board showed that the fund’s management fee was at or below the median for comparable funds. The information also showed the fund’s expense ratio was above the median for certain groups of comparable funds but below the median for other groups of comparable funds. The Board also reviewed the fee schedules for comparable privately managed accounts of the Manager and its affiliates. Management informed the Board that the Manager’s responsibilities for privately managed accounts are more limited than its responsibilities for the fund and other T. Rowe Price mutual funds that it or its affiliates advise. On the basis of the information provided, the Board concluded that the fees paid by the fund under the Contract were reasonable.

Approval of the Contract
As noted, the Board approved the continuation of the Contract. No single factor was considered in isolation or to be determinative to the decision. Rather, the Board concluded, in light of a weighting and balancing of all factors considered, that it was in the best interests of the fund to approve the continuation of the Contract, including the fees to be charged for services thereunder.

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. Investments.

(a) Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR.

(b) Not applicable.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 11. 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 change in the registrant’s internal control over financial reporting that occurred during the registrant’s second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 12. 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/ Edward C. Bernard
	Edward C. Bernard
	Principal Executive Officer
Date	June 17, 2008
	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/ Edward C. Bernard
	Edward C. Bernard
	Principal Executive Officer
Date	June 17, 2008
By	/s/ Gregory K. Hinkle
	Gregory K. Hinkle
	Principal Financial Officer
Date	June 17, 2008