PTAIF Pt Astra International TBK (PK)

Item 1. Report to Shareholders

The views and opinions in this report were current as of October 31, 2012. 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

Emerging European stock markets produced moderate gains over the last 12 months. Economic weakness and the eurozone’s sovereign debt crisis have contributed to a global slowdown in emerging economies, with particular repercussions in emerging Europe. In the last six months, markets in central Eastern Europe produced better returns, helped by the European Central Bank’s (ECB’s) conditional offer to purchase short-term debt of eurozone countries that seek financial assistance and agree to implement reforms. However, shares in energy-rich Russia, whose market dominates the region, declined amid oil price volatility and political uncertainty. Turkish shares soared as the central bank implemented an easier monetary policy in response to slower growth, while the country also benefited from improved liquidity in Europe, alleviating concerns about the current account deficit.

Your fund returned -1.80% and 3.87% for the 6- and 12-month periods ended October 31, 2012, respectively. As shown in the Performance Comparison table, the fund outperformed the MSCI Emerging Markets Europe Index over the last year—thanks to relative strength in the first half of our fiscal year—but lagged the index in the last six months.

For the full year, the fund’s performance was helped by stock selection in several countries, especially Ukraine, Russia, and Turkey. Overweighting the Turkish market was also advantageous, but other country allocations worked against us, such as our overweight to Russia and lack of exposure to the strong Hungarian market. In the second half of our fiscal year, the fund’s relative performance was hurt by our overweight allocation to Russia, where our holdings fared slightly worse than the broad market. The performance of the Russian market was disappointing. Despite attractive valuations, oil price volatility and concerns about global growth held the market back. On the plus side, our small overweight position in Turkey helped our relative results, as the Turkish market rallied strongly. Despite deep overall losses in the Ukrainian market, our key holding in the country bucked the trend and added value to the fund.

PORTFOLIO REVIEW

Russia
Russian stocks fell more than 6% in dollar terms in the last six months and slipped 4% over the last year, as shown in the Market Performance table on page 5. The Russian economy has slowed recently but still remains one of the strongest in our opportunity set, with full-year gross domestic product (GDP) growth likely to be around 3.5%. Russian companies generally have healthier balance sheets and are in better shape to withstand a possible downturn than they were prior to the global financial crisis in 2008, while greater exchange rate flexibility for the ruble has helped the economy as a whole in offsetting some of the strong oil price influence. As a testament to stronger corporate balance sheets, we are seeing an increasing number of companies paying dividends to shareholders and establishing meaningful share buyback programs.

However, the mood among business leaders and investors this year has been somewhat downbeat, which is not surprising given global uncertainty and volatility in the price of oil, on which the economy and Russian government revenues depend greatly. Also, with Vladimir Putin serving once again as president, there has been growing frustration and disappointment that his political rhetoric about much-needed reforms is not being followed by swift or meaningful action. We know that the state has great influence in the Russian economy and among businesses, so we monitor political developments closely and are judicious in our investment selection.

Russia remains our largest country weighting and our largest overweight versus the MSCI index. When searching our universe for the best combination of investment ideas at attractive valuations, we continue to find many in Russia. Russian equities remain inexpensive relative to their historical averages; in fact, emerging Europe as a whole is trading at a significant discount to the broad emerging markets universe, having underperformed since 2008.

The energy sector dominates the Russian stock market but overall has struggled from slowing production growth, tax reform uncertainty, and some corporate governance issues. We do have several investments in the sector, where we find companies that offer attractive long-term opportunities, but overall we have maintained an underweight position. Our investments in energy companies Gazprom , Novatek , and Kuzbasskaya Toplivnaya Kompaniya were among the fund’s largest absolute detractors in our 6- and 12-month reporting periods. On the plus side, our investment in Eurasia Drilling was one of the fund’s top contributors. The company, which benefits from increasing capital expenditures from major Russian oil companies, reported very strong financial results in the first half of 2012. (Please refer to the fund’s portfolio of investments for a complete list of holdings and the amount each represents in the portfolio.)

We favor Russian companies that should benefit from increasing domestic consumption over time, such as financials and consumer staples. Unfortunately, one of our largest detractors in the last six months was Sberbank of Russia , our largest holding at the end of October. Sberbank is the dominant bank in Russia, featuring strong loan growth, about 30% of the country’s total banking assets, and about 45% of Russia’s retail deposits, which gives the bank a strong funding advantage. Shares performed very well in the first half of our fiscal year, but their performance in the last six months was hurt by several factors, such as uncertainty over the company’s international expansion strategy; expectations that the Russian central bank would sell a 7.58% stake, which took place in September; rising costs stemming from the modernization of branches and information technology systems; and a recent increase in inflation that prompted the central bank to raise interest rates in September. Nevertheless, we believe Sberbank’s shares are attractively valued, particularly in a global context. The company continues to generate a high return on equity (ROE) and strong book value growth; it is currently able to reprice loans to offset deposit cost increases, and we are comfortable with its expansion plans being contained to Turkey at this stage.

In the consumer staples sector, we believe that the Russian food retailing industry is poised for significant growth in the years ahead. Two of the fund’s largest positions are Magnit and X5 Retail Group . Both of these stocks have attractive market positions and growth potential, but their share price performances have diverged widely over the last year. Magnit performed very well due to exceptional execution from the management team. Sales growth was brisk, while profit margins and earnings guidance continually increased. X5 shares, however, slumped amid relatively poor sales performance, ongoing restructuring, and the unexpected departure of chief executive officer Andrei Gusev in July. We are maintaining our position in X5 for the time being because we believe that management is now gradually taking the right steps to address the issues in its execution and to extract the proper value and results from an asset that is very cheaply valued.

Russia’s transportation infrastructure has suffered from significant underinvestment since the breakup of the Soviet Union. With the government planning to spend up to $120 billion on infrastructure upgrades over the next five years, we continue to pursue opportunities among trade-related transportation and infrastructure companies that should benefit from growth in trade and investment. Our holdings exposed to this trend are Mostotrest , the largest player in the Russian transport infrastructure construction market; rail freight transportation stock Globaltrans Investment ; and Global Ports Investments , which is the largest maritime container terminal operator in Russia. Globaltrans had the best performance of these three over the full year. The company benefited from its ability to charge customers a premium for use of its railcars, in comparison with the state railway operator, and continued to increase its market share through internal growth and external acquisitions. In contrast, Global Ports Investments declined over the last year with some concerns over the impact of the weaker currency on import demand. We are maintaining our investment in the company, as we believe that the longer-term containerization story has been overlooked with short-term concerns and that the company remains in a strong competitive position.

Materials stocks are among our significant investments in Russia, and we favor growing, low-cost commodity producers. One of our better-performing holdings over the last year, especially the last six months, was gold and silver mining company Polymetal International . The company, which has an excellent management team and good corporate governance practices, also has a strong growth profile and has been increasing its free cash flow, which could translate into higher dividends over time. Unfortunately, the economic slowdown in China, a major consumer of commodities, weighed on several of our investments, including Magnitogorsk Iron-& Steel Works and Novolipetsk Steel . We eliminated the latter from the portfolio a few months ago and reestablished a position in MMC Norilsk Nickel , a precious metals mining company whose main products—nickel, copper, palladium, and platinum—should benefit from new monetary stimulus efforts in the U.S. and Europe. Norilsk is the largest platinum group metals producer outside of South Africa, where the industry has been suffering from labor unrest and subsequent production cuts.

Other Former Soviet Republics
We have a few investments in peripheral countries such Ukraine, Kazakhstan, and Georgia. While these countries are not represented in our benchmark, we find that they occasionally offer attractive investment opportunities that help us diversify the portfolio.

Over the last year, Ukrainian shares fell sharply amid global economic weakness, which is translating into reduced demand for its steel and agricultural exports. Growing concerns that the central bank, which has been depleting its foreign currency reserves to stabilize the hryvnia, will be forced to devalue it in the months ahead also weighed on stocks. Despite this negative backdrop for Ukraine, we make investments where we are confident in the ability of a company to perform well amid these challenges. In the last six months, we eliminated our investment in iron ore producer Ferrexpo , a company that does benefit from a weaker hryvnia but whose outlook can change sharply with iron ore prices, which depend greatly on Chinese demand. We have maintained a relatively large position in poultry producer MHP , which was actually one of our top contributors to performance amid higher profit margins and revenues. While a currency devaluation may have a short-term negative impact, we believe it would be manageable for MHP, as the company’s revenues from grain sales are dollar based and can more than cover its foreign debt payments. Also, local poultry prices would likely adjust upward, and the company’s expansion plans and strong market position would not be derailed.

Three of our holdings hail from Russia’s southern neighbor Kazakhstan, where the economy continues to show strong growth: Halyk Savings Bank , paper and packaging products company Kazakhstan Kagazy , and copper producer Kazakhmys . Halyk produced reasonable gains over the last year, as loan growth started to return and asset quality improved after a few tough years for the banking sector. Our small position in Kazakhstan Kagazy also produced reasonable gains, but Kazakhmys sagged with global demand for copper.

One of our top contributors to performance in both the 6- and 12-month reporting periods was Bank of Georgia Holdings , our only investment in this former Soviet republic. This small-cap bank is benefiting from a rapidly growing economy and brisk loan growth while having very strong returns and a prudent approach to risk. We trimmed our position somewhat after the recent election results as we wait to see the new government’s economic policies.

Turkey
Turkish stocks surged about 33% over the last 12 months, with most of that gain coming in the second half of our fiscal year. Stocks have benefited from the apparent economic “soft landing” engineered by the central bank, which has managed to use unorthodox monetary policies to slow the economy without significantly hurting the value of the lira, and by the government’s commitment to fiscal discipline. Turkey’s current account deficit remains large, but it is being financed by strong cash flows into the country, and economic growth is expected to pick up starting next year thanks to easier monetary policy in the last few months. In addition, shortly after our reporting period ended, credit rating agency Fitch upgraded Turkey to investment grade, and more upgrades are possible in the months ahead.

Turkey has a young and growing population, and our investments are intended to benefit from the development of a consumer economy over time. Banks remain our core holdings in the country. They are well capitalized and well managed, and Turkey’s demographics augur well for future loan growth. The recent easing of monetary conditions boosted their stock price performance this year and is likely to lead to increased lending growth in 2013. Our large positions in Turkiye Halk Bankasi and Turkiye Garanti Bankasi were among the fund’s top performers over the last year. Our smaller position in Yapi ve Kredi Bankasi also did very well.

We own two consumer staples companies in Turkey: discount food retailer BIM Birlesik Magazalar and Bizim Toptan Satis Magazalari , a nationwide wholesale retailer. Our large position in BIM was the fund’s top contributor to performance over the last 12 months. Although revenue growth has been slowing this year, we believe the company will continue to enjoy strong earnings growth for the next several years. Our smaller position in Bizim was mostly lackluster throughout our fiscal year. The company’s financial performance in the first half of 2012 was somewhat disappointing, but we are encouraged that growth picked up in the third quarter, and we believe that the company will produce stronger earnings in 2013.

In other sectors, we have investments in car manufacturer Tofas Turk Otomobil Fabrikasi and airport operator TAV Havalimanlari Holding . Considering the Turkish economic slowdown and weak export markets in Europe, shares of Tofas performed very well over the last year. The company’s “take or pay” contracts with its European partners were activated, which protected their profit margins. We expect lower interest rates will boost growth and car sales in 2013. Despite favorable financial fundamentals, TAV underperformed the Turkish market for much of the year because of uncertainty about what could happen to its main concession at Ataturk airport, as a new airport for Istanbul is being considered. We believe that TAV will be well placed to participate in any new airport tender and will continue to provide low-risk exposure to the growth of Turkey’s aviation market in the years ahead.

Central Eastern Europe
The primary markets of central Eastern Europe produced good returns in the last six months but were mixed for the full year. Given their close proximity to and trade relationships with developed European economies, these markets benefited when eurozone markets were lifted by the ECB’s proposal to purchase sovereign short-term debt of fiscally troubled countries, as mentioned earlier.

Nevertheless, we continue to underweight this region because the ongoing eurozone uncertainties continue to weigh on economic growth, and deleveraging in the banking systems remains a headwind. We have no exposure to Hungary due to its high debt levels and poor growth outlook, necessitating the imposition of several extra taxes on the leading companies. In the Czech Republic, which is in a recession, we held only Komercni Banka but eliminated it from the portfolio near the end of our reporting period, as its valuation seemed full but the outlook for margins worsened. Poland’s economy has been resilient in a European context, although the macro environment is weakening, as evidenced by slowing GDP growth and falling retail sales. We continue to look for investment ideas in Poland but have found few that give us the desired combination of solid growth and attractive valuations. We maintained a position in Jeronimo Martins , a Portugal-listed food retailer with 70% exposure to the Polish market through the Biedronka chain. We also have a small position in PKO Bank Polski . Shares of both companies performed in line with the Polish market over the last 12 months.

OUTLOOK

Accommodative monetary policies in key global economies have provided a near-term tailwind for emerging markets. However, the repercussions of fiscal austerity in the eurozone, along with continued volatility in commodity prices, remain concerning and are likely to keep markets volatile. With the eurozone sovereign debt crisis unresolved, it will continue to act as an overhang on emerging Europe, especially central Eastern European markets. Nevertheless, we remain focused on companies with strong balance sheets, sustainable growth, and attractive valuations, and we are optimistic about the ability of these investments to perform well over the longer term.

In Russia, improved trade links through World Trade Organization membership, continued privatization, and increased dividend payouts from government-controlled companies are all positive developments. We would like to see further reforms to make Russia a more attractive place for investment, raise the country’s growth rate, and reduce its exposure to oil price volatility. Investors have been very cautious on the Russian market, which has led to valuations being mostly supportive.

In Turkey, macro headwinds appear to be receding, and the central bank has become more accommodative, which should help growth reaccelerate next year. The country depends greatly on external financing of its trade deficit, and the recent narrowing of the current account deficit is a welcome development. One potential headwind that we continue to monitor is that inflation is undesirably high, around 9%.

In closing, we would like to remind our investors that this fund has a high risk/return profile. Because of its narrow geographic focus and relatively small number of holdings, this fund can be extremely volatile and should represent only a small portion of a long-term investor’s well-diversified portfolio.

Thank you for your confidence in T. Rowe Price.

Respectfully submitted,

S. Leigh Innes
Portfolio Manager

November 20, 2012

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

R ISKS 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, limited geographic region, or emerging markets 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.

G LOSSARY

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

MSCI Emerging Markets Europe Index: An index that tracks the performance of stocks in several emerging European markets.

Return on equity (ROE): A valuation measure calculated by dividing the company’s current fiscal year net income by shareholders’ equity (i.e., the company’s book value). ROE measures how much a company earns on each dollar that common-stock investors have put into the company. It indicates how effectively and efficiently a company and its management are using stockholder investments.

Performance and Expenses

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.

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 on 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 on 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 account service fee of $20, generally for accounts with less than $10,000. The fee is waived for any investor whose T. Rowe Price mutual fund accounts total $50,000 or more; accounts electing to receive electronic delivery of account statements, transaction confirmations, prospectuses, and shareholder reports; or accounts of an investor who is a T. Rowe Price Preferred Services, Personal Services, or Enhanced Personal Services client (enrollment in these programs generally requires T. Rowe Price assets of at least $100,000). 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.

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

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

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

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

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

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 T. Rowe Price Emerging Europe Fund (the fund), formerly the T. Rowe Price Emerging Europe & Mediterranean Fund, is a diversified, open-end management investment company established by the corporation. The fund commenced operations on August 31, 2000. Pursuant to shareholder approval, effective March 1, 2012, the fund’s investment objective was modified to remove reference to the Mediterranean region; the fund seeks long-term growth of capital through investments primarily in the common stocks of companies located (or with primary operations) in the emerging market countries of Europe.

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 (GAAP), which require the use of estimates made by management. Management believes that estimates and valuations are appropriate; however, actual results may differ from those estimates, and the valuations reflected in the accompanying financial statements may differ from the value ultimately realized upon sale or maturity.

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 annually. Capital gain distributions, if any, are generally declared and paid by the fund annually.

Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses.

Redemption Fees A 2% fee is assessed on redemptions of fund shares held 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 In May 2011, the Financial Accounting Standards Board (FASB) issued amended guidance to align fair value measurement and disclosure requirements in U.S. GAAP with International Financial Reporting Standards. The guidance is effective for fiscal years and interim periods beginning on or after December 15, 2011. Adoption had no effect on net assets or results of operations.

In December 2011, the FASB issued amended guidance to enhance disclosure for offsetting assets and liabilities. The guidance is effective for fiscal years and interim periods beginning on or after January 1, 2013. Adoption will have no effect on the fund’s net assets or results of operations.

NOTE 2 - VALUATION

The fund’s financial instruments are reported at fair value as defined by GAAP. The fund determines the values of its assets and liabilities 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 private placements, and those financial instruments 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 (the Board). Subject to oversight by the Board, the Valuation Committee develops pricing-related policies and procedures and approves all fair-value determinations. The Valuation Committee regularly makes good faith judgments, using a wide variety of sources and information, to establish and adjust valuations of certain securities as events occur and circumstances warrant. For instance, in determining the fair value of private-equity instruments, the Valuation Committee considers a variety of factors, including the company’s business prospects, its financial performance, strategic events impacting the company, relevant valuations of similar companies, new rounds of financing, and any negotiated transactions of significant size between other investors in the company. Because any fair-value determination involves a significant amount of judgment, there is a degree of subjectivity inherent in such pricing decisions.

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. Additionally, trading in the underlying securities of the fund may take place in various foreign markets on certain days when the fund is not open for business and does not calculate a net asset value. As a result, net asset values may be significantly affected on days when shareholders cannot make transactions.

Valuation Inputs Various inputs are used to determine the value of the fund’s financial instruments. These inputs are summarized in the three broad levels listed below:

Level 1 – quoted prices in active markets for identical financial instruments

Level 2 – observable inputs other than Level 1 quoted prices (including, but not limited to, quoted prices for similar financial instruments, interest rates, prepayment speeds, and credit risk)

Level 3 – unobservable inputs

Observable inputs are those based on market data obtained from sources independent of the fund, and unobservable inputs reflect the fund’s own assumptions based on the best information available. The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level. For example, non-U.S. equity securities actively traded in foreign markets generally are reflected in Level 2 despite the availability of closing prices because the fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described above. The following table summarizes the fund’s financial instruments, based on the inputs used to determine their values on October 31, 2012:

NOTE 3 - OTHER INVESTMENT TRANSACTIONS

Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks and/or to enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund’s prospectus and Statement of Additional Information.

Emerging Markets At October 31, 2012, approximately 97% of the fund’s net assets were invested, either directly or through investments in T. Rowe Price institutional funds, in securities of companies located in emerging markets, securities issued by governments of emerging market countries, and/or securities denominated in or linked to the currencies of emerging market countries. Emerging market securities are often subject to greater price volatility, less liquidity, and higher rates of inflation than U.S. securities. In addition, emerging markets may be subject to greater political, economic, and social uncertainty, and differing regulatory environments that may potentially impact the fund’s ability to buy or sell certain securities or repatriate proceeds to U.S. dollars.

Restricted Securities The fund may invest in securities that are subject to legal or contractual restrictions on resale. Prompt sale of such securities at an acceptable price may be difficult and may involve substantial delays and additional costs.

Depository Receipts The fund may invest in American Depository Receipts (ADRs), Global Depository Receipts (GDRs), and other depository receipts, which are certificates issued by U.S. and international banks that represent ownership of foreign securities held by the issuing bank. Depository receipts are transferable, trade on established markets, and entitle the holder to all dividends paid by the underlying foreign security. Issuing banks generally charge a security administration fee.

Other Purchases and sales of portfolio securities other than short-term securities aggregated $47,325,000 and $130,138,000, respectively, for the year ended October 31, 2012.

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. Distributions determined in accordance with federal income 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 but are not adjusted for temporary differences.

The fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return but which can be extended to six years in certain circumstances. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.

Reclassifications between income and gain relate primarily to the character of net currency losses. For the year ended October 31, 2012, the following reclassifications were recorded to reflect tax character (there was no impact on results of operations or net assets):

There were no distributions in the years ended October 31, 2012 and October 31, 2011. At October 31, 2012, the tax-basis cost of investments and components of net assets were as follows:

The difference between book-basis and tax-basis net unrealized appreciation (depreciation) is attributable to the deferral of losses from wash sales for tax purposes. The fund intends to retain realized gains to the extent of available capital loss carryforwards. As a result of the Regulated Investment Company Modernization Act of 2010, net capital losses realized on or after November 1, 2011 (effective date) may be carried forward indefinitely to offset future realized capital gains; however, post-effective losses must be used before pre-effective capital loss carryforwards with expiration dates. Accordingly, it is possible that all or a portion of the fund’s pre-effective capital loss carryforwards could expire unused. The fund’s available capital loss carryforwards as of October 31, 2012, expire as follows: $207,631,000 in fiscal 2017, $7,949,000 in fiscal 2018; $8,068,000 have no expiration.

NOTE 5 - FOREIGN TAXES

The fund is subject to foreign income taxes imposed by certain countries in which it invests. Acquisition of certain foreign currencies related to security transactions are also subject to tax. 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. Taxes attributable to income are accrued by the fund as a reduction of income. Taxes incurred on the purchase of foreign currencies are recorded as realized loss on foreign currency transactions. 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 October 31, 2012, the fund had no deferred tax liability attributable to foreign securities and no foreign capital loss carryforwards.

NOTE 6 - RELATED PARTY TRANSACTIONS

The fund is managed by T. Rowe Price Associates, Inc. (Price Associates), a wholly owned subsidiary of T. Rowe Price Group, Inc. (Price Group). Price Associates has entered into a subadvisory agreement with T. Rowe Price International Ltd, a wholly owned subsidiary of Price Associates, to provide investment advisory services to the fund; the subadvisory agreement provides that Price Associates may pay the subadvisor up to 60% of the management fee that Price Associates receives from the fund. The investment management agreement between the fund and Price Associates provides for an annual investment management fee, which is computed daily and paid monthly. The fee consists of an individual fund fee, equal to 0.75% of the fund’s average daily net assets, and 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 0.28% for assets in excess of $300 billion. The fund’s group fee is determined by applying the group fee rate to the fund’s average daily net assets. At October 31, 2012, the effective annual group fee rate was 0.30%.

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 year ended October 31, 2012, expenses incurred pursuant to these service agreements were $122,000 for Price Associates; $570,000 for T. Rowe Price Services, Inc.; and $28,000 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.

The fund is also one of several mutual funds sponsored by Price Associates (underlying Price funds) in which the T. Rowe Price Spectrum Funds (Spectrum Funds) may invest. The Spectrum Funds do not invest in the underlying Price funds for the purpose of exercising management or control. Pursuant to a special servicing agreement, expenses associated with the operation of the Spectrum Funds are borne by each underlying Price fund to the extent of estimated savings to it and in proportion to the average daily value of its shares owned by the Spectrum Funds. Expenses allocated under this agreement are reflected as shareholder servicing expense in the accompanying financial statements. For the year ended October 31, 2012, the fund was allocated $10,000 of Spectrum Funds’ expenses, of which $6,000 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. Additionally, redemption fees received by the Spectrum Funds are allocated to each underlying Price fund in proportion to the average daily value of its shares owned by the Spectrum Funds. $1,000 of redemption fees reflected in the accompanying financial statements were received from the Spectrum Funds. At October 31, 2012, approximately 2% of the outstanding shares of the fund were held by the Spectrum Funds.

The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the 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.

Report of Independent Registered Public Accounting Firm

To the Board of Directors of T. Rowe Price International Funds, Inc. and
Shareholders of T. Rowe Price Emerging Europe Fund

In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price Emerging Europe Fund (one of the portfolios comprising T. Rowe Price International Funds, Inc., hereafter referred to as the “Fund”) (formerly known as T. Rowe Price Emerging Europe & Mediterranean Fund) at October 31, 2012, and the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated therein, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2012 by correspondence with the custodian, and confirmation of the underlying funds by correspondence with the transfer agent, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Baltimore, Maryland
December 14, 2012

Tax Information (Unaudited) for the Tax Year Ended 10/31/12

We are providing this information as required by the Internal Revenue Code. The amounts shown may differ from those elsewhere in this report because of differences between tax and financial reporting requirements.

For taxable non-corporate shareholders, $4,156,000 of the fund’s income represents qualified dividend income subject to the 15% rate category.

For corporate shareholders, $619,000 of the fund’s income qualifies for the dividends-received deduction.

The fund will pass through foreign source income of $4,156,000 and foreign taxes paid of $1,063,000.

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 website, sec.gov. The description of our proxy voting policies and procedures is also available on our website, troweprice.com. To access it, click on the words “Our Company” at the top of our corporate homepage. Then, when the next page appears, click on the words “Proxy Voting Policies” on the left side of the page.

Each fund’s most recent annual proxy voting record is available on our website and through the SEC’s website. To access it through our website, follow the directions above, then click on the words “Proxy Voting Records” on the right side of the Proxy Voting Policies 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 website (sec.gov); hard copies may be reviewed and copied at the SEC’s Public Reference Room, 100 F St. N.E., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330.