<PAGE>
Semiannual Report
INTERNATIONAL
DISCOVERY
FUND
APRIL 30, 1999
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
- --------------------------------------------------------------------------------
International Discovery Fund
. International small-cap stocks benefited from lower interest rates, IPO
activity in Europe, and a turnaround in investor sentiment during the past
six months.
. The fund's return was more than double that of the MSCI EAFE Index for the
six months ended April 30 and in line with it during the past 12 months.
. Our strategy included increased exposure to the rebounding Japanese market
and an emphasis on key markets within Europe and Southeast Asia.
. The U.K., which was the fund's largest country allocation after Japan,
posted solid gains, while investments in Australia, New Zealand, Hong Kong,
and India also helped performance.
. We recently took profits in Japan and feel comfortable with our positions
in Europe and select areas of Southeast Asia; stock selection and country
allocation should help the fund achieve its goal of long-term capital
growth.
<PAGE>
FELLOW SHAREHOLDERS
The past six months were especially beneficial for international small-cap
stocks and your fund despite the strong dollar. Rising confidence in overseas
markets, coupled with a renewed appetite for the stocks of smaller companies,
fueled the advance. A move toward lower rates by the U.S. Federal Reserve served
as a catalyst for the small-cap rally, which started in Japan and quickly spread
to other Asian markets. An economic "soft landing" in the U.K, along with an
unprecedented level of initial public offerings (IPOs) in Europe, added to the
turnaround in investor sentiment.
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
Periods Ended 4/30/99 6 Months 12 Months
- --------------------------------------------------------------------------------
International Discovery Fund 32.48% 9.84%
................................................................................
MSCI EAFE Index 15.44 9.81
................................................................................
Fund performance for the six months ended April 30 was more than double that of
the Morgan Stanley Capital International Europe, Australasia, and Far East (MSCI
EAFE) Index and was in line with it during the past 12 months. Large-cap foreign
stocks, like those in the U.S., had led the way earlier.
As the advance in the share prices of Japanese small companies got under way in
late October and early November, we increased our exposure in Japan to 25% of
net assets from 16% at the end of the fiscal year. This substantial reallocation
of funds was a major contributor to fund performance as the rally accelerated
through early 1999. From its low of 611 on October 13, 1998, the OTC index of
small companies nearly doubled to a high of 1205 on April 28, 1999.
We continued to sell positions in emerging markets, first in Southeast Asia and
then in Latin America, following strong rallies there. One exception to this
strategy was in India, where we added to positions. Our primary focus is on
individual stocks, and within emerging markets India was the only area where we
still found stocks that met our growth criteria.
In Europe we maintained a broadly neutral stance versus the benchmark and tended
to overweight the northern European markets of the
1
<PAGE>
U.K. and the Netherlands, while underweighting the southern European markets of
Spain and Italy. Again, stock valuations were behind these decisions.
MARKET REVIEW
Europe
The fund's largest exposure at 54% of assets was in Europe, and within that
region the U.K. remained our most significant market at 18% of assets. From
their low levels in the late fall of last year, U.K. small-company stocks staged
a remarkable recovery driven by improved expectations about economic growth and
increased activism by institutional shareholders. In some cases, this activism
has led to management changes as well as mergers and acquisitions. Many stock
valuations had been so low that some companies chose to go private and delist
their shares. Our strategy in the U.K. was to reorient the portfolio toward
growth companies. Toward that end, we sold retailer Harvey Nichols Group,
engineering firms Mayflower and Bodycote International, and reduced our position
in construction services company Ashtead Group. Our technology holdings
accounted for the lion's share of strong performance as this sector rallied
strongly following the sharp correction last year. Examples include Eidos, a
publisher of software games; Pace Micro Technology, a manufacturer of set top
boxes for pay TV; Psion, a producer of palm-held computers whose operating
system forms the basis of a joint venture with Nokia, Ericsson, and Motorola;
and Acorn, a holding company for shares in ARM Technology, a revolutionary
microchip technology.
Despite economic sluggishness in Continental
MARKET PERFORMANCE
- --------------------------------------------------------------------------------
Six Months Local Local Currency U.S.
Ended 4/30/99 Currency vs. U.S. Dollars Dollars
- --------------------------------------------------------------------------------
Australia 17.95% 6.51% 25.62%
................................................................................
Brazil (Free) 59.71 -28.37 14.40
................................................................................
France 24.33 -10.37 11.43
................................................................................
Germany 16.48 -10.41 4.35
................................................................................
Hong Kong 28.01 -0.06 27.94
................................................................................
India 18.93 -0.98 17.76
................................................................................
Japan 30.14 -2.38 27.05
................................................................................
Mexico 33.09 8.22 44.03
................................................................................
Netherlands 26.16 -10.34 13.12
................................................................................
Sweden 29.52 -7.06 20.38
................................................................................
United Kingdom 21.46 -3.86 16.77
................................................................................
Source: FAME Information Services, Inc.; using MSCI indices.
2
<PAGE>
GEOGRAPHIC DIVERSIFICATION
- --------------------------------------------------------------------------------
[PIE CHART APPEARS HERE]
Japan 19%
Far East 25%
Other and Reserves 2%
Europe 54%
Europe, particularly in Germany, there were pockets of vitality. German stocks
were robust in local currency terms, but the strength of the dollar dampened
returns for U.S. investors--as it did in many foreign markets. The phenomenal
success of Germany's Neue Markt (a new exchange for fledgling growth stocks),
which has outperformed virtually all other stock indices around the world,
encouraged many companies to undertake IPOs. This development has major benefits
for our segment of the market over the longer term. First, it broadens the
small-cap universe and gives us access to sectors of the economy that we have
not been able to invest in before. Second, it encourages entrepreneurship and
attracts private investors to smaller growth companies. Your fund participated
in many new issues, some of which performed strongly.
The birth of the single currency in Europe (the euro) turned out to be a
negative for small companies because institutions in some countries, such as the
Netherlands and Ireland, sold small-company stocks to buy large-cap shares
indexed to the euro. However, we believe this was a short-term phenomenon that
has largely run its course.
Notable returns were posted by Teles, a supplier of advanced telecom switches
for large corporations, a market we believe is worth more than $50 billion
within Europe; Avenir Telecom, a French retailer of mobile handsets; and Sifo, a
Swedish supplier of media services. Our stock selection process emphasizes high-
growth industries and has recently steered us toward telecom, media, life
sciences, support services, and technology companies, and away from investment
technology services and software since we anticipate a slowdown in these
sectors before 2000.
3
<PAGE>
INDUSTRY DIVERSIFICATION
- --------------------------------------------------------------------------------
Percent of Net Assets
10/31/98 4/30/99
- --------------------------------------------------------------------------------
Services 35.5% 50.2%
................................................................................
Capital Equipment 23.6 15.7
................................................................................
Consumer Goods 16.0 14.7
................................................................................
Finance 7.2 11.2
................................................................................
Multi-industry 2.2 3.1
................................................................................
Materials 1.0 2.0
................................................................................
Energy 0.8 --
................................................................................
All Other 1.4 1.5
................................................................................
Reserves 12.3 1.6
- --------------------------------------------------------------------------------
Total 100.0% 100.0%
Japan
We increased the fund's weighting in Japanese small-cap stocks as a technical
rally commenced from what we considered to be oversold levels. The rally was
more intense and prolonged than we had anticipated, and it became especially
powerful in March 1999. It is worth noting that, while domestic institutions and
retail investors were the driving forces in the early stages, foreign
institutions joined the party as they scrambled to eliminate underweighted
positions in Japan.
For the most part, the broad economic picture in Japan remains bleak and the
early signs of recovery are few and far between. A March survey indicated that
the earnings of 1,759 listed firms would fall about 25% in fiscal 1998, which
ended March 31, 1999. More significant are the subtle changes at the company
level, with some managers at small-cap companies showing greater inclination to
do some necessary restructuring. The big question now is whether the signs of
change at Sony have relevance for the overall market.
As ever, our Japanese investments were eclectic, but our focus was on areas
where we detected signs of positive change. For example, we took positions in
Nemic Lambda, a manufacturer of electrical equipment where we saw value, and in
retailer Seiyu, which implemented comprehensive restructuring from the ground
up. Our research led us to back companies with winning management teams that are
able to grow their businesses in a difficult environment, such as real estate
developer Goldcrest and child seat manufacturer Combi.
Other Regions
Outside Europe and Japan we identified major growth opportunities in Hong Kong
(3.4% of assets), Australia (6.9%), New Zealand (3.4%), and India (3.8%), which
contributed positively to performance. Our
4
<PAGE>
presence in these select Asian markets skewed the portfolio toward an
overweighted position in Southeast Asia at the end of April.
In India, our holdings included Zee Telefilms, which produces content for
television and has also been acquiring its own distribution network, and
Pentafour Software, a developer of animation software for the multimedia sector
that has been able to announce several distribution agreements in the U.S. Both
companies have the characteristics we are looking for: strong intellectual
property that generates high operating returns for shareholders. Generally in
India we seek to invest in domestic consumption plays or globally competitive
companies. In Australia we participated successfully in the consolidation taking
place in the financial services sector through Tyndall and Perpetual Trustees.
Our stock selection in both Australia and New Zealand has focused on growth
areas in common with the rest of the portfolio, such as in the technology,
health care, and media sectors.
INVESTMENT OUTLOOK
We have recently begun to take some profits in Japan and to substantially
reduce our exposure there. This will leave the portfolio broadly neutral in
Europe and underweighted in Japan versus the EAFE benchmark. For the foreseeable
future, we will maintain our relatively heavy allotments in Australia, New
Zealand, and India. At the end of April, apart from these markets, the fund had
a minor exposure to Southeast Asia. We feel comfortable with this allocation,
since interest rates in Asian markets have fallen a long way already and the
recovery in these economies may not be as smooth as equity markets have been
indicating.
The pace of change in the world is accelerating, as is the paradigm of what
constitutes a successful small-to mid-cap investment. In our annual report, we
discussed the trend toward globalization, the need for pricing power in a
disinflationary world, and the importance of growth and technology. A smaller
manufacturing company without pricing power will find life increasingly
difficult as the need increases for economies of scale. However, the increasing
penetration of the Internet--both as a means of
IN OUR ANNUAL REPORT, WE DISCUSSED THE TREND TOWARD GLOBALIZATION, THE NEED FOR
PRICING POWER IN A DISINFLATIONARY WORLD, AND THE IMPORTANCE OF GROWTH AND
TECHNOLOGY.
5
<PAGE>
communication and a mode of doing business--has to an extent obviated the need
for physical scale economies. The Internet is, therefore, an important
development for small-company investing. The portfolio has already benefited
from Internet investments, and we will continue to pay close attention to
developments in this sector.
We will continue to seek investments in the $100 million to $1.5 billion market
capitalization range. Within this universe, our aim is to identify growth
companies with leading technologies, market positions, and business models that
can generate above-average, sustainable profit margins. We believe this strategy
will help the fund achieve its goal of long-term capital appreciation.
Respectfully submitted,
/s/ Martin G. Wade
Martin G. Wade
President
May 21, 1999
6
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
4/30/99
- --------------------------------------------------------------------------------
Detron Group, Netherlands 3.0%
................................................................................
Eidos, United Kingdom 2.0
................................................................................
Serco Group, United Kingdom 1.7
................................................................................
Neopost, France 1.5
................................................................................
Atlantic Telecom, United Kingdom 1.5
- --------------------------------------------------------------------------------
Freepages Group, United Kingdom 1.5
................................................................................
Filtronic, United Kingdom 1.4
................................................................................
PubliGroupe, Switzerland 1.3
................................................................................
Express, United Kingdom 1.3
................................................................................
Nemic Lambda, Japan 1.2
- --------------------------------------------------------------------------------
Consors Discount, Germany 1.2
................................................................................
Irish Permanent, Ireland 1.2
................................................................................
Zapf Creation, Germany 1.2
................................................................................
Lang, Australia 1.2
................................................................................
Intershop Communications, Germany 1.2
- --------------------------------------------------------------------------------
Greggs, United Kingdom 1.1
................................................................................
Ashtead Group, United Kingdom 1.1
................................................................................
Goldcrest, Japan 1.1
................................................................................
Nidec, Japan 1.1
................................................................................
Acorn Computer Group, United Kingdom 1.1
- --------------------------------------------------------------------------------
Electron Boutique, United Kingdom 1.1
................................................................................
Avenir Telecom, France 1.0
................................................................................
Mirae, South Korea 1.0
................................................................................
Swisslog Holding, Switzerland 0.9
................................................................................
Fancl, Japan 0.9
- --------------------------------------------------------------------------------
Total 32.8%
Note: Table excludes reserves
7
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON
- --------------------------------------------------------------------------------
This chart shows the value of a hypothetical $10,000 investment in the fund over
the past 10 fiscal year periods or since inception (for funds lacking 10-year
records). The result is compared with a broad-based average or index. The index
return does not reflect expenses, which have been deducted from the fund's
return.
INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
[PLOT POINTS APPEARS HERE]
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
This table shows how the fund would have performed each year if its actual (or
cumulative) returns for the periods shown had been earned at a constant rate.
Periods Ended 4/30/99 1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
International Discovery Fund 9.84% 7.84% 4.81% 8.09%
................................................................................
Investment return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
8
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- ---------------------------------------------------------------------------------------------------
6 Months Year
Ended Ended
4/30/99 10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 14.99 $ 16.11 $ 15.97 $ 14.43 $ 17.63 $ 16.16
.....................................................................
Investment activities
Net investment income (0.02) 0.05 0.02 0.07 0.10 0.04
Net realized and
unrealized gain (loss) 4.80 (0.92) 0.25 1.59 (2.38) 1.52
.....................................................................
Total from
investment activities 4.78 (0.87) 0.27 1.66 (2.28) 1.56
.....................................................................
Distributions
Net investment income (0.01) -- (0.07) (0.10) (0.06) (0.07)
Net realized gain (0.30) (0.25) (0.06) (0.02) (0.87) (0.02)
.....................................................................
Total distributions (0.31) (0.25) (0.13) (0.12) (0.93) (0.09)
.....................................................................
Redemption fees added
to paid-in-capital -- -- -- -- 0.01 --
.....................................................................
NET ASSET VALUE
End of period $ 19.46 $ 14.99 $ 16.11 $ 15.97 $ 14.43 $ 17.63
---------------------------------------------------------------------
Ratios/Supplemental Data
Total return* 32.48% (5.40)% 1.69% 11.60% (13.06)% 9.67%
...................................................................................................
Ratio of total expenses to
average net assets 1.47%+ 1.47% 1.41% 1.45% 1.50% 1.50%
...................................................................................................
Ratio of net investment
income to average
net assets (0.27)%+ 0.25% 0.13% 0.40% 0.55% 0.38%
...................................................................................................
Portfolio turnover rate 123.7%+ 34.2% 72.7% 52.0% 43.5% 57.4%
...................................................................................................
Net assets, end of period
(in thousands) $ 235,924 $ 189,001 $ 254,430 $ 325,639 $ 325,374 $ 503,442
...................................................................................................
</TABLE>
* 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.
9
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Unaudited April 30, 1999
PORTFOLIO OF INVESTMENTS Shares Value
- --------------------------------------------------------------------------------
In thousands
AUSTRALIA 6.9%
Common Stocks and Rights 6.9%
AAPT Limited 474,594 $ 1,696
................................................................................
Austrim 279,290 593
................................................................................
Computershare 180,547 1,864
................................................................................
Energy Development 267,440 699
................................................................................
Lang 850,590 2,792
................................................................................
LibertyOne* 1,313,000 904
................................................................................
Perpetual Trustees 157,490 2,178
................................................................................
Seven Network 376,000 1,265
................................................................................
Solution 6 Holdings 430,000 945
................................................................................
Sonic Healthcare 357,309 1,040
................................................................................
Spotless Group 222,000 639
................................................................................
Spotless Group, Rights, 6/4/99* 11,100 3
................................................................................
Tyndall Australia 963,281 1,772
................................................................................
Total Australia (Cost $11,510) 16,390
...........
BELGIUM 0.5%
Common Stocks 0.5%
Roularta Media Group (EUR) 18,466 1,117
................................................................................
Total Belgium (Cost $1,311) 1,117
...........
CHINA 0.4%
Common Stocks 0.4%
Guangshen Railway (HKD) 4,680,000 616
................................................................................
Shenzhen Expressway (Class H) (HKD) 1,684,000 345
................................................................................
Total China (Cost $1,049) 961
...........
DENMARK 2.3%
Common Stocks 2.3%
GN Store 50,000 1,706
................................................................................
Navision Software 100,000 2,018
................................................................................
Sondagsavisen 27,000 1,689
................................................................................
Total Denmark (Cost $5,641) 5,413
...........
10
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
FINLAND 1.6%
Common Stocks 1.6%
Tampere Telephone (EUR) 218,000 $ 1,566
.............................................................................
Teleste (EUR) 250,076 2,179
.............................................................................
Total Finland (Cost $4,242) 3,745
...........
FRANCE 6.0%
Common Stocks 6.0%
A Novo (EUR) * 15,456 456
.............................................................................
Alten (EUR) 5,000 306
.............................................................................
Avenir Telecom (EUR) * 51,449 2,446
.............................................................................
Boiron (EUR) 33,000 2,196
.............................................................................
Cegedim (EUR) 54,000 2,219
.............................................................................
CPR (EUR) 38,636 1,992
.............................................................................
Neopost (EUR) * 199,333 3,597
.............................................................................
Prosodie (EUR) 12,000 950
.............................................................................
Total France (Cost $13,315) 14,162
...........
GERMANY 8.3%
Common Stocks 7.5%
Boewe Systec (EUR) 67,390 1,783
.............................................................................
Consors Discount (EUR) * 30,759 2,925
.............................................................................
Eurobike (EUR) 125,390 1,457
.............................................................................
FortuneCity.com (EUR) * 17,220 482
.............................................................................
Hawesko Holding (EUR) 24,471 1,008
.............................................................................
Intershop Communications Ag (EUR) * 11,400 2,740
.............................................................................
Kamps (EUR) 32,760 1,125
.............................................................................
Sixt (EUR) 26,645 1,928
.............................................................................
Teles (EUR) 6,000 1,298
.............................................................................
Utimaco Safeware (EUR) * 1,100 215
.............................................................................
Zapf Creation AG (EUR) * 131,232 2,800
.............................................................................
17,761
...........
Preferred Stocks 0.8%
Rhon Klinikum (EUR) 19,670 1,787
.............................................................................
1,787
...........
Total Germany (Cost $16,934) 19,548
...........
11
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
HONG KONG 3.4%
Common Stocks and Warrants 3.4%
Esprit Holdings 1,938,000 $ 1,163
.............................................................................
HKR International 789,600 586
.............................................................................
HKR International, Warrants, 6/23/00 * 725,200 92
.............................................................................
Li & Fung 550,000 1,348
.............................................................................
Moulin International Holdings 10,819,119 1,256
.............................................................................
Sa Sa International Holdings 3,868,000 404
.............................................................................
Shun Tak Holdings 5,032,000 1,704
.............................................................................
South China Morning Post 1,126,000 679
.............................................................................
Varitronix International 390,000 669
.............................................................................
Total Hong Kong (Cost $7,247) 7,901
........
INDIA 3.8%
Common Stocks 3.8%
Britannia Industries 53,000 1,854
.............................................................................
Cipla 41,000 1,313
.............................................................................
HCL Infosystems * 80,200 795
.............................................................................
HDF 6,500 310
.............................................................................
Hindustan Lever 200 10
.............................................................................
Industrial Credit & Investment 596,450 652
.............................................................................
Mahanagar Telephone 2,200 8
.............................................................................
Mcdowell 201,400 376
.............................................................................
Pentafour Software 66,000 1,581
.............................................................................
Ranbaxy Laboratories 59,300 790
.............................................................................
Zee Telefilms 44,500 1,277
.............................................................................
Total India (Cost $8,416) 8,966
.........
IRELAND 1.9%
Common Stocks 1.9%
Arnotts (EUR) 215,830 1,687
.............................................................................
Irish Permanent (EUR) 194,560 2,820
.............................................................................
Total Ireland (Cost $4,569) 4,507
........
12
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
ITALY 1.5%
Common Stocks 1.5%
Ericsson (EUR) 44,000 $ 1,487
.............................................................................
Trenno Societa SPA (EUR) 683,700 2,015
.............................................................................
Total Italy (Cost $3,607) 3,502
...........
JAPAN 25.0%
Common Stocks 25.0%
Aeon Credit Service 18,500 1,596
.............................................................................
Aiful 26,100 2,135
.............................................................................
Bellsystem24 1,900 749
.............................................................................
Combi 143,000 1,509
.............................................................................
FCC 89,000 917
.............................................................................
Fancl 15,600 2,221
.............................................................................
Fuji Machine 43,000 1,534
.............................................................................
Fuji Soft ABC 14,820 901
.............................................................................
Fujimi 23,500 1,220
.............................................................................
Fujitsu Support and Service 15,000 1,834
.............................................................................
Goldcrest 52,000 2,652
.............................................................................
Hirose Electric 17,500 1,627
.............................................................................
Hitachi Electrncs 36,000 181
.............................................................................
Hokuto 34,800 1,078
.............................................................................
Homac 48,600 952
.............................................................................
Hoya 10,000 523
.............................................................................
Japan Business Components 50,000 787
.............................................................................
Koha * 51,000 1,717
.............................................................................
Lasertec 21,000 587
.............................................................................
Mabuchi Motor 21,400 1,661
.............................................................................
Marukyo 70,000 463
.............................................................................
Megachips 22,000 1,304
.............................................................................
Nemic Lambda 44,600 2,936
.............................................................................
New Japan Radio 106,000 728
.............................................................................
Nichiei 8,000 693
.............................................................................
Nidec 19,900 2,583
.............................................................................
13
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Nissho Electronics 88,000 $ 2,063
.............................................................................
Otsuka Kagu 10,000 1,256
.............................................................................
People 31,240 1,256
.............................................................................
Roland 27,900 787
.............................................................................
Round One 263 978
.............................................................................
Ryohin Keikaku 3,900 710
.............................................................................
Sanix 19,800 630
.............................................................................
Santen Pharmaceutical 68,000 1,236
.............................................................................
Seiyu 335,000 2,006
.............................................................................
Shohkoh Fund 3,500 2,052
.............................................................................
Sony 34,900 1,768
.............................................................................
Toa Medical Electronics 54,200 976
.............................................................................
TOC 133,000 1,100
.............................................................................
Tokyo Seimitsu 13,300 736
.............................................................................
Toyo Information 64,000 1,849
.............................................................................
Trend Micro 6,500 860
.............................................................................
Union Tool 14,700 1,083
.............................................................................
Watami Food Service 45,000 1,620
.............................................................................
Yamada Denki 26,000 969
.............................................................................
Total Japan (Cost $39,142) 59,023
.............
NETHERLANDS 5.7%
Common Stocks 5.7%
Accell Group (EUR) 32,829 480
.............................................................................
Ahrend (EUR) 95,421 1,855
.............................................................................
Detron Group (EUR) * 443,111 6,975
.............................................................................
Draka Holdings (EUR) 28,905 992
.............................................................................
Endemol Entertainment (EUR) 60,000 2,060
.............................................................................
United Pan-Europe Communications (EUR) 20,245 1,047
.............................................................................
Total Netherlands (Cost $14,638) 13,409
.............
NEW ZEALAND 3.4%
Common Stocks 3.4%
Baycorp Holdings 172,000 1,050
.............................................................................
Corporate Investments 2,003,000 909
.............................................................................
Fernz 367,000 1,233
.............................................................................
Fisher & Paykel 543,000 1,992
.............................................................................
14
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
Sky City 259,000 $ 647
.............................................................................
Warehouse Group 517,900 2,068
.............................................................................
Total New Zealand (Cost $6,963) 7,899
........
NORWAY 0.5%
Common Stocks 0.5%
Tandberg Televisjo 134,000 1,270
.............................................................................
Total Norway (Cost $1,110) 1,270
........
SINGAPORE 0.5%
Common Stocks 0.5%
Avimo Group 768,000 1,177
.............................................................................
Sembawang Maritime 26,000 63
.............................................................................
Total Singapore (Cost $1,063) 1,240
........
SOUTH KOREA 1.0%
Common Stocks 1.0%
Mirae 506,900 2,410
.............................................................................
Total South Korea (Cost $1,684) 2,410
........
SPAIN 1.2%
Common Stocks 1.2%
Azkoyen SA (EUR) 51,625 1,433
.............................................................................
Prosegur Seguridad (EUR) 115,177 1,333
.............................................................................
Total Spain (Cost $2,529) 2,766
........
SWEDEN 1.7%
Common Stocks 1.7%
Assa-Abloy (Class B) 42,868 1,870
.............................................................................
Sifo Group (Class B) * 330,204 2,191
.............................................................................
Total Sweden (Cost $2,434) 4,061
........
SWITZERLAND 4.3%
Common Stocks 4.3%
Bachem (Class B) * 1,360 2,131
.............................................................................
Disetronic Holdings 433 1,107
.............................................................................
15
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
In thousands
PubliGroupe S.A. 5,000 $ 3,064
.............................................................................
Swisslog Holding 18,860 2,231
.............................................................................
Valora Holdings 7,350 1,715
.............................................................................
Total Switzerland (Cost $7,561) 10,248
........
UNITED KINGDOM 18.4%
Common Stocks 18.2%
Ashtead Group 724,996 2,653
.............................................................................
Atlantic Telecom 808,000 3,484
.............................................................................
Bell Group 851,500 1,644
.............................................................................
Eidos * 122,100 4,665
.............................................................................
Electron Boutique 1,500,000 2,498
.............................................................................
Filtronic 234,000 3,230
.............................................................................
Freepages Group 4,839,912 3,465
.............................................................................
Greggs 63,000 2,660
.............................................................................
Icon Public Limited ADR (USD) 139,100 2,191
.............................................................................
N Brown Group 126,340 583
.............................................................................
Ncorn Computer Group * 629,000 2,580
.............................................................................
Pace Micro Technology 708,500 1,670
.............................................................................
Pizza Express 208,000 3,035
.............................................................................
Psion 100,000 1,464
.............................................................................
Quality Software 254,000 2,206
.............................................................................
Regal Hotel Group 2,120,906 887
.............................................................................
Serco Group 180,000 3,996
.............................................................................
42,911
........
Preferred Stocks 0.2%
Regal Hotel Group, Cv. Loan Stock, 8.00%, 6/30/01 335,039 490
.............................................................................
490
........
Total United Kingdom (Cost $30,472) 43,401
........
VIETNAM 0.0%
Common Stocks 0.0%
Lazard Vietnam Fund Limited (USD) * 106,600 107
.............................................................................
Total Vietnam (Cost $320) 107
........
16
<PAGE>
T. ROWE PRICE INTERNATIONAL DISCOVERY FUND
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
In thousands
SHORT-TERM INVESTMENTS 4.1%
Money Market Funds 4.1%
Reserve Investment Fund, 5.01% # 9,563,773 $ 9,564
............................................................................
Total Short-Term Investments (Cost $9,564) 9,564
...........
Total Investments in Securities
102.4% of Net Assets (Cost $195,321) $ 241,610
Other Assets Less Liabilities (5,686)
...........
NET ASSETS $ 235,924
===========
* Non-income producing
# Seven day yield
ADR American depository receipt
EUR European currency unit
HKD Hong Kong dollar
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
T. Rowe Price International Discovery Fund
- --------------------------------------------------------------------------------
Unaudited April 30, 1999
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $195,321) $ 241,610
Securities lending collateral 15,655
Other assets 6,135
...........
Total assets 263,400
Liabilities
Obligation to return securities lending collateral 15,655
Other liabilities 11,821
...........
Total liabilities 27,476
NET ASSETS $ 235,924
-----------
Net Assets Consist of:
Accumulated net investment income - net of distributions $ (266)
Accumulated net realized gain/loss - net of distributions 11,208
Net unrealized gain (loss) 46,191
Paid-in-capital applicable to 12,124,418 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 178,791
...........
NET ASSETS $ 235,924
-----------
NET ASSET VALUE PER SHARE $ 19.46
-----------
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
T. Rowe Price International Discovery Fund
- --------------------------------------------------------------------------------
Unaudited
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
4/30/99
Investment Income
Income
Dividend (net of foreign taxes of $108) $ 886
Interest 314
............
Total income 1,200
............
Expenses
Investment management 1,066
Shareholder servicing 236
Custody and accounting 99
Prospectus and shareholder reports 39
Legal and audit 9
Registration 8
Directors 3
Miscellaneous 7
............
Total expenses 1,467
............
Net investment income (267)
............
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities 11,497
Foreign currency transactions (47)
............
Net realized gain (loss) 11,450
............
Change in net unrealized gain or loss
Securities 46,616
Other assets and liabilities
denominated in foreign currencies (137)
............
Change in net unrealized gain or loss 46,479
............
Net realized and unrealized gain (loss) 57,929
............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $57,662
------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
T. Rowe Price International Discovery Fund
- --------------------------------------------------------------------------------
Unaudited
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
In thousands 6 Months Year
Ended Ended
4/30/99 10/31/98
Increase (Decrease) in Net Assets
Operations
Net investment income $ (267) $ 579
Net realized gain (loss) 11,450 3,019
Change in net unrealized gain or loss 46,479 (14,115)
........................
Increase (decrease) in net assets from operations 57,662 (10,517)
........................
Distributions to shareholders
Net investment income (123) --
Net realized gain (3,675) (3,754)
........................
Decrease in net assets from distributions (3,798) (3,754)
........................
Capital share transactions*
Shares sold 26,213 28,150
Distributions reinvested 3,583 3,562
Shares redeemed (36,757) (82,937)
Redemption fees received 20 67
........................
Increase (decrease) in net assets from capital
share transactions (6,941) (51,158)
........................
Net Assets
Increase (decrease) during period 46,923 (65,429)
Beginning of period 189,001 254,430
........................
End of period $ 235,924 $ 189,001
------------------------
*Share information
Shares sold 1,516 1,701
Distributions reinvested 237 237
Shares redeemed (2,234) (5,128)
........................
Increase (decrease) in shares outstanding (481) (3,190)
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
T. Rowe Price International Discovery Fund
- --------------------------------------------------------------------------------
Unaudited April 30, 1999
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 International Discovery Fund (the
fund), a diversified, open-end management investment company, is one of the
portfolios established by the corporation and commenced operations on
December 30, 1988.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Equity securities are valued at the last quoted sales price at
the time the valuations are made. A security which is listed or traded on
more than one exchange is valued at the quotation on the exchange determined
to be the primary market for such security.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining the fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of
such currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair
value as determined in good faith by or under the supervision of the officers
of the fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S. dollars
at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such
transactions. The effect of changes in foreign exchange rates on realized
and unrealized security gains and losses is reflected as a component of such
gains and losses.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses
are reported on the identified cost basis. Dividend income and distributions
to shareholders are recorded by the fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income
tax regulations and may differ from those determined in accordance with
generally
21
<PAGE>
T. Rowe Price International Discovery Fund
- --------------------------------------------------------------------------------
accepted accounting principles. Credits earned on daily, uninvested cash
balances at the custodian are used to reduce the fund's custody charges.
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
Securities Lending The fund lends its securities to approved brokers to earn
additional income and receives cash and U.S. government securities as
collateral against the loans. Cash collateral received is invested in a
money market pooled account by the fund's lending agent. Collateral is
maintained over the life of the loan in an amount not less than 100% of the
value of loaned securities. 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 them. At April 30,
1999, the value of loaned securities was $15,913,000; aggregate collateral
consisted of $15,655,000 in the securities lending collateral pool and U.S.
government securities valued at $952,000.
Other Purchases and sales of portfolio securities, other than short-term
securities, aggregated $128,013,000 and $119,873,000, respectively, for the
six months ended April 30, 1999.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the fund intends to
continue to qualify as regulated investment company and distribute all of its
taxable income.
At April 30, 1999, the cost of investments for federal income tax purposes
was substantially the same as for financial reporting and totaled
$195,321,000. Net unrealized gain aggregated $46,289,000 at period-end, of
which $57,641,000 related to appreciated investments and $11,352,000 to
depreciated investments.
NOTE 4 - RELATED PARTY TRANSACTIONS
The fund is managed by Rowe Price-Fleming International, Inc. (the man-
ager), which is owned by T. Rowe Price Associates, Inc. (Price Associates),
22
<PAGE>
T. Rowe Price International Discovery Fund
- --------------------------------------------------------------------------------
Robert Fleming Holdings Limited, and Jardine Fleming Holdings Limited under
a joint venture agreement.
The investment management agreement between the fund and the manager provides
for an annual investment management fee, of which $197,000 was payable at
April 30, 1999. The fee is computed daily and paid monthly, and consists of
an individual fund fee equal to 0.75% of average daily net assets and a group
fee. The group fee is based on the combined assets of certain mutual funds
sponsored by the manager or Price Associates (the group). The group fee rate
ranges from 0.48% for the first $1 billion of assets to 0.30% for assets in
excess of $80 billion. At April 30, 1999, and for the six months then ended,
the effective annual group fee rate was 0.32%. The fund pays a pro-rata
share of the group fee based on the ratio of its net assets to those of the
group.
In addition, the fund has entered into agreements with Price Associates and
two wholly owned subsidiaries of Price Associates, pursuant to which the fund
receives certain other services. Price Associates computes the daily share
price and maintains the financial records of the fund. T. Rowe Price
Services, Inc. is the fund's transfer and dividend disbursing agent and
provides shareholder and administrative services to the fund. T. Rowe Price
Retirement Plan Services, Inc. provides subaccounting and recordkeeping
services for certain retirement accounts invested in the fund. The fund
incurred expenses pursuant to these related party agreements totaling
approximately $265,000 for the six months ended April 30, 1999, of which
$61,000 was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve
Funds are offered as cash management options only to mutual funds and other
accounts managed by T. Rowe Price and its affiliates and are not available to
the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the six months ended
April 30, 1999, totaled $254,000 and are reflected as interest income in the
accompanying Statement of Operations.
During the six months ended April 30, 1999, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $12,576,000
with certain affiliates of the manager and paid commissions of $39,000
related thereto.
23
<PAGE>
T. ROWE PRICE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
INVESTMENT SERVICES AND INFORMATION
KNOWLEDGEABLE SERVICE REPRESENTATIVES
By Phone 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10 p.m.
ET and weekends from 8:30 a.m. to 5 p.m. ET.
In Person Available in T. Rowe Price Investor Centers.
ACCOUNT SERVICES
Checking Available on most fixed income funds ($500 minimum).
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(R) and the T. Rowe Price Web
site on the Internet. Address: www.troweprice.com
BROKERAGE SERVICES*
Individual Investments Stocks, bonds, options, precious metals, and other
securities at a savings over full-service commission rates.**
INVESTMENT INFORMATION
Combined Statement Overview of all your accounts with T. Rowe Price.
Shareholder Reports Fund manager's reviews of their strategies and results.
T. Rowe Price Report Quarterly investment newsletter discussing markets and
financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Diversifying
Overseas: A Guide to International Investing, Personal Strategy Planner,
Retirees Financial Guide, and Retirement Planning Kit.
* T. Rowe Price Brokerage is a division of T. Rowe Price Investment Services,
Inc., Member NASD/SIPC.
** Based on a January 1999 survey for representative-assisted stock trades.
Services vary by firm, and commissions may vary depending on size of order.
24
<PAGE>
T. Rowe Price Mutual Funds
- --------------------------------------------------------------------------------
Stock Funds
................................................................................
Domestic
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Diversified Small-Cap Growth
Dividend Growth
Equity Income
Equity Index 500
Extended Equity Market Index
Financial Services
Growth & Income
Growth Stock
Health Sciences
Media & Telecommunications
Mid-Cap Growth
Mid-Cap Value
New America Growth
New Era
New Horizons*
Real Estate
Science & Technology
Small-Cap Stock
Small-Cap Value
Spectrum Growth
Total Equity Market Index
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Growth & Income
International Stock
Japan
Latin America
New Asia
Spectrum International
Bond Funds
................................................................................
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Intermediate Tax-Free**
Georgia Tax-Free Bond
Maryland Short-Term
Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Intermediate Bond***
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
................................................................................
International/Global
Emerging Markets Bond
Global Bond
International Bond
Money Market FUNDS ++
................................................................................
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal
Money Market
Tax-Exempt Money
Blended Asset FUNDS
................................................................................
Balanced
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
Tax-Efficient Balanced
T. Rowe Price No-Load Variable Annuity
................................................................................
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
Mid-Cap Growth Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
Prime Reserve Portfolio
* Closed to new investors. ** Formerly named Florida Insured Intermediate
Tax-Free. *** Formerly named Tax-Free Insured Intermediate Bond.
+ Formerly named Global Government Bond. ++ Investments in the funds are not
insured or guaranteed by the FDIC or any other government agency. Although the
funds seek to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the funds.
Please call for a prospectus. Read it carefully before investing.
The T. Rowe Price No-Load Variable Annuity [#V6021] is issued by Security
Benefit Life Insurance Company. In New York, it [#FSB201(11-96)] is issued by
First Security Benefit Life Insurance Company of New York, White Plains, NY. T.
Rowe Price refers to the underlying portfolio's investment managers and the
distributors, T. Rowe Price Investment Services, Inc.; T. Rowe Price Insurance
Agency, Inc.; and T. Rowe Price Insurance Agency of Texas, Inc. The Security
Benefit Group of Companies and the T. Rowe Price companies are not affiliated.
The variable annuity may not be available in all states. The contract has
limitations. Call a representative for costs and complete details of the
coverage.
25
<PAGE>
For yield, price, last transaction,
current balance, or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access:
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
410-625-6500 Baltimore area
To open a brokerage account
or obtain information, call:
1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus appropriate
to the fund or funds covered in this report.
Investor Centers:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
4200 West Cypress St.
10th Floor
Tampa, FL 33607
4410 ArrowsWest Drive
Colorado Springs, CO 80907
Warner Center Plaza 5
Mezzanine Level
21800 Oxnard Street, Suite 270
Woodland Hills, CA 91367
(opens mid-June)
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor. F38-051 4/30/99
