T. Rowe Price Institutional Foreign Equity Fund - -------------------------------------------------------------------------------- Certified Annual Report This report is certified under the Sarbanes-Oxley Act of 2002, which requires that public companies, including mutual funds, affirm that the information provided in their annual and semiannual shareholder reports fully and fairly represents their financial position. T. Rowe Price Institutional Foreign Equity Fund - -------------------------------------------------------------------------------- Certified Annual Report 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. [Graphic Omitted] T. Rowe Price Institutional Foreign Equity Fund - -------------------------------------------------------------------------------- Institutional Lipper Foreign MSCI International Equity EAFE Funds Fund Index Average - -------------------------------------------------------------------------------- 10/93 10,000 10,000 10,000 10/94 11,196 11,038 11,037 10/95 11,268 11,031 11,164 10/96 12,899 12,222 12,524 10/97 13,970 12,823 13,977 10/98 15,038 14,099 14,654 10/99 18,164 17,394 18,281 10/00 18,610 16,931 18,692 10/01 13,394 12,753 14,143 10/02 11,595 11,104 12,492 10/03 14,185 14,165 15,554 - -------------------------------------------------------------------------------- Average Annual Compound Total Return - -------------------------------------------------------------------------------- Periods Ended 10/31/03 1 Year 5 Years 10 Years - -------------------------------------------------------------------------------- Institutional Foreign Equity Fund 22.33% -1.16% 3.56% MSCI EAFE Index 27.57 0.09 3.54 Lipper International Funds Average 24.51 0.91 4.19 Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. Past performance cannot guarantee future results. - -------------------------------------------------------------------------------- Dear Shareholder, We are pleased that international stocks soared and the fund posted a powerful return of 22.33% during the 12 months ended October 31, 2003, although performance lagged the MSCI EAFE Index and Lipper International Funds Average due to the fund's emphasis on growth stocks. International value stocks significantly outperformed growth stocks from the end of 2002 through the first six months of 2003. Recently, however, there have been indications that growth stocks are beginning to narrow the gap. As you know, the fund seeks to provide long-term growth of capital by investing primarily in established companies outside the U.S. The fund is diversified broadly among developed and some emerging markets. It focuses primarily on larger-cap and, to a lesser extent, on medium-cap growth stocks. Major International Index Returns - -------------------------------------------------------------------------------- 12-Month Period Ended 10/31/03 Return - -------------------------------------------------------------------------------- MSCI EMF Latin America Index 59.75% MSCI EAFE Index 27.57 MSCI Europe Index 24.71 MSCI Japan Index 33.18 MSCI Pacific Ex-Japan 37.19 S&P 500 Index 20.80 - -------------------------------------------------------------------------------- The Major International Index Returns table shows how various international markets performed over the fund's fiscal year. As you can see, Latin American and other emerging markets outpaced the developed markets of Europe and Japan over the 12-month period, and all international stocks surpassed U.S. shares measured by the S&P 500 Index. Top 5 Sectors - -------------------------------------------------------------------------------- Percent of Net Assets 10/31/02 10/31/03 - -------------------------------------------------------------------------------- Financials 20.2% 23.4% Consumer Discretionary 17.3 18.1 Telecommunication Services 8.7 10.3 Health Care 12.5 9.7 Consumer Staples 9.2 8.9 - -------------------------------------------------------------------------------- The Top 5 Sectors table reflects the portfolio's allocation to various sectors during the same period. We reduced our exposure to health care stocks and increased our allocation of financial and telecommunication services holdings where we see opportunities in the months ahead. [Graphic Omitted] Geographic Diversification - -------------------------------------------------------------------------------- Other Pacific Latin and Europe Japan Rim America Reserves - -------------------------------------------------------------------------------- 67% 20% 9% 2% 2% - -------------------------------------------------------------------------------- The Geographic Diversification table shows the fund's geographic profile as of October 31, 2003. In accordance with the fund's strategy of investing in established larger-cap companies, our highest regional exposure was to European markets and Japan, where most of these companies are located. The portfolio normally invests only a small portion of its assets in Latin America and Asian markets outside Japan. Please see the Financial Highlights section following this letter for a breakdown by individual country. Finally, I'm sure you are aware that mutual fund companies have recently come under scrutiny for their trading policies. The investigations have led to allegations that executives of several mutual fund companies permitted or engaged in improper mutual fund trading. In addition, certain intermediaries that process fund transactions are alleged to have assisted some investors in executing improper mutual fund trades. I want T. Rowe Price shareholders to know that we emphatically condemn the abuses that have been revealed or alleged against other firms in our industry. Our firm has not entered and will not enter into any agreements with any investors or intermediaries that authorize after-hours trading or excessive short-term trading in any of our funds. T. Rowe Price investors can be assured that our firm unequivocally opposes illegal or inappropriate trading of any nature and has policies and procedures in place designed to protect the best interests of our long-term shareholders. No T. Rowe Price executives or portfolio managers or investment personnel of the T. Rowe Price mutual funds have engaged in any inappropriate trading of T. Rowe Price mutual funds. You may find out more about our trading policies and the steps we take to protect your interests by visiting our Web site (troweprice.com). These policies are also spelled out in your fund's prospectus. We thank you for your continued support. Respectfully, James S. Riepe Chairman November 21, 2003 Financial Highlights T. Rowe Price Institutional Foreign Equity Fund - -------------------------------------------------------------------------------- Certified Annual Report For a share outstanding throughout each period - -------------------------------------------------------------------------------- Year Ended 10/31/03 10/31/02 10/31/01 10/31/00 10/31/99 - -------------------------------------------------------------------------------- NET ASSET VALUE Beginning of period $ 10.65 $ 12.70 $ 19.16 $ 20.08 $ 17.03 Investment activities Net investment income (loss) 0.23 0.18 0.39 0.13 0.21 Net realized and unrealized gain (loss) 2.11 (1.81) (5.35) 0.46 3.26 Total from investment activities 2.34 (1.63) (4.96) 0.59 3.47 Distributions Net investment income (0.15) (0.42) (0.11) (0.17) (0.29) Net realized gain (0.02) -- (1.39) (1.34) (0.13) Total distributions (0.17) (0.42) (1.50) (1.51) (0.42) NET ASSET VALUE End of period $ 12.82 $ 10.65 $ 12.70 $ 19.16 $ 20.08 ----------------------------------------------------------------- Ratios/Supplemental Data Total return^ 22.33% (13.43)% (28.02)% 2.45% 20.79% Ratio of total expenses to average net assets 0.76% 0.75% 0.74% 0.74% 0.74% Ratio of net investment income (loss) to average net assets 1.64% 1.06% 2.25% 0.57% 1.08% Portfolio turnover rate 27.8% 20.0% 21.4% 39.7% 18.2% Net assets, end of period (in millions) $ 1,061 $ 1,168 $ 1,903 $ 3,138 $ 3,361 ^ 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. The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- Statement of Net Assets (ss.) T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report October 31, 2003 Shares Value - -------------------------------------------------------------------------------- In thousands AUSTRALIA 1.2% Common Stocks 0.6% BHP Billiton 455,304 $ 3,779 Coles Myer 407,000 2,239 6,018 Preferred Stocks 0.6% News Corporation 911,779 6,696 6,696 Total Australia (Cost $9,457) 12,714 BELGIUM 0.8% Common Stocks 0.8% Dexia 273,710 4,306 Fortis 62,184 1,108 Fortis (Unified shares) 97,107 1,724 UCB 37,917 1,194 Total Belgium (Cost $4,390) 8,332 BRAZIL 0.6% Common Stocks 0.6% Grupo Pao de Acucar ADR (USD) 60,300 1,214 Petrobras ADR (USD) 259,360 5,644 Total Brazil (Cost $5,381) 6,858 CANADA 0.3% Common Stocks 0.3% Alcan Aluminum 38,560 1,538 Royal Bank of Canada 31,190 1,501 Total Canada (Cost $1,218) 3,039 DENMARK 0.5% Common Stocks 0.5% Novo Nordisk 164,851 5,922 Total Denmark (Cost $5,083) 5,922 FINLAND 1.4% Common Stocks 1.4% Nokia 857,117 14,539 Total Finland (Cost $1,707) 14,539 FRANCE 14.7% Common Stocks 14.7% Aventis 169,402 8,959 AXA 336,144 $ 6,362 BNP Paribas 337,136 17,693 Compagnie de Saint-Gobain 142,404 6,000 Credit Agricole 250,273 5,309 Credit Agricole, Rights, 11/7/03 * 250,273 58 France Telecom * 375,300 9,072 Groupe Danone 9,730 1,466 Hermes 43,534 7,486 L'Oreal 74,876 5,529 Lafarge 14,083 1,007 LVMH 116,272 8,026 Pinault Printemps Redoute 21,504 2,189 Renault 24,478 1,617 Sanofi-Synthelabo 211,540 13,079 Schneider Electric 113,349 6,626 Societe Generale 35,049 2,600 Societe Television Francaise 1 301,992 9,046 Sodexho Alliance 201,779 5,271 STMicroelectronics 150,678 4,006 Thomson 138,555 2,915 Total, Series B 190,664 29,597 Vivendi Universal * 89,197 1,871 Total France (Cost $104,402) 155,784 GERMANY 2.4% Common Stocks 2.4% Allianz 30,469 3,262 Bayer 61,434 1,474 Bayerische Hypo-und Vereinsbank 98,821 2,174 Celesio 85,862 3,589 Deutsche Bank 89,081 5,869 E.On 41,817 2,111 Hypo Real Estate (Spin Off Shares) * 24,704 430 Rhoen-Klinikum 44,049 2,225 SAP 19,420 2,822 Siemens 27,463 1,850 Total Germany (Cost $21,990) 25,806 HONG KONG 2.0% Common Stocks 2.0% BOC Hong Kong 1,711,500 2,964 Cheung Kong Holdings 388,000 3,234 China Mobile (Hong Kong) 1,802,500 5,117 Hong Kong & China Gas 1,568,000 $ 2,170 Hutchison Whampoa 423,000 3,267 Sun Hung Kai Properties 551,000 4,628 Total Hong Kong (Cost $17,344) 21,380 INDIA 1.2% Common Stocks 1.2% Hindustan Lever 1,646,060 6,343 Infosys Technologies 26,200 2,740 Zee Telefilms 1,229,700 3,715 Total India (Cost $13,294) 12,798 ISRAEL 0.1% Common Stocks 0.1% Check Point Software Technologies (USD) * 61,816 1,050 Total Israel (Cost $1,191) 1,050 ITALY 4.9% Common Stocks 4.9% Alleanza Assicurazioni 585,720 5,855 Banca Intesa 687,070 2,314 Banco Popolare di Verona e Novara 149,400 2,307 ENI 742,931 11,783 Mediaset 215,247 2,172 Mediolanum 300,235 2,095 Telecom Italia * 1,700,469 4,432 Telecom Italia Mobile 1,266,186 5,836 Telecom Italia-RNC * 2,051,664 3,554 UniCredito Italiano 2,373,473 11,684 Total Italy (Cost $33,564) 52,032 JAPAN 19.6% Common Stocks 19.6% Canon 129,000 6,233 Credit Saison 172,900 3,612 Dai Nippon Printing 190,000 2,930 Daito Trust Construction 126,600 3,909 Daiwa House Industry 408,000 4,395 Daiwa Securities 831,000 6,068 Denso 159,900 3,028 Fanuc 39,300 2,359 Fuji Television Network 527 2,800 Fujisawa Pharmaceutical 177,900 $ 3,667 Funai Electric 30,200 4,018 Honda 157,300 6,200 Hoya 25,000 2,259 Japan Telecom Holdings 2,736 8,175 Keyence 12,800 2,811 Kirin Brewery 309,000 2,467 Kyocera 32,000 1,924 Marui 267,800 3,395 Mitsubishi 393,000 4,072 Mitsubishi Estate 534,000 5,112 Mitsubishi Heavy Industries 610,000 1,673 Mitsui Fudosan 1,036,000 9,625 Mitsui Trust Holdings * 636,000 3,379 Nippon Telegraph & Telephone 777 3,465 Nissan Motor 227,600 2,547 Nomura Securities 770,000 13,203 NTT DoCoMo 4,051 8,756 Oji Paper 457,000 2,428 Oki Electric Industry * 455,000 2,012 Orix 20,200 1,697 Rohm 50,400 6,783 Secom 276,500 10,798 Sekisui House 363,000 3,557 Seven-Eleven Japan 278,000 8,786 Shin-Etsu Chemical 68,300 2,537 Shiseido 51,000 534 SMC 27,700 3,328 Sony 75,500 2,626 Sumitomo 192,000 1,330 Sumitomo Metal Industries 3,164,000 2,931 Sumitomo Mitsui Financial 1,427 7,167 Suzuki Motor 268,000 3,870 Takeda Chemical Industries 46,100 1,629 Teijin 803,000 2,377 Toyoda Gosei 28,700 847 Toyota Motor 183,200 5,208 UFJ Holdings * 1,691 7,218 Uniden 9,000 171 Yamanouchi Pharmaceutical 193,800 4,858 Yamato Transport 203,000 2,693 Total Japan (Cost $184,067) 207,467 LUXEMBOURG 0.1% Common Stocks 0.1% SES Global (1 FDR Represents 1 A share) 65,520 $ 583 Total Luxembourg (Cost $1,047) 583 MEXICO 1.5% Common Stocks 1.5% America Movil ADR Series L (USD) 173,200 4,122 Femsa UBD Units (Represents 1 Series B and 4 Series D shares) 1,067,190 3,792 Grupo Financiero BBVA Bancomer, Series B * 5,802,700 4,927 Wal-Mart de Mexico 1,281,573 3,575 Total Mexico (Cost $13,127) 16,416 NETHERLANDS 4.9% Common Stocks 4.9% Akzo Nobel 16,651 526 ASML Holding * 344,300 5,968 ING Groep 508,820 10,551 Koninklijke Numico * 204,136 4,600 Philips Electronics 373,274 10,050 Reed Elsevier 312,500 3,476 Royal Dutch Petroleum 72,799 3,226 Royal KPN * 724,800 5,504 Royal KPN, 144A * 219,800 1,669 VNU 121,366 3,692 Wolters Kluwer 179,220 2,516 Total Netherlands (Cost $40,316) 51,778 NORWAY 0.3% Common Stocks 0.3% Orkla, Series A 153,395 3,210 Total Norway (Cost $1,505) 3,210 RUSSIA 0.7% Common Stocks 0.7% Gazprom ADR (USD) 31,600 758 Lukoil ADR, 144A (USD) 34,990 2,852 YUKOS ADR (USD) 87,490 4,101 Total Russia (Cost $6,173) 7,711 SINGAPORE 1.0% Common Stocks 1.0% MobileOne Limited 2,660,000 $ 2,079 United Overseas Bank 1,069,060 8,357 Total Singapore (Cost $8,725) 10,436 SOUTH KOREA 1.9% Common Stocks 1.9% POSCO ADR (USD) 95,942 2,780 Samsung Electronics 30,043 11,931 South Korea Telecom 33,210 5,865 Total South Korea (Cost $10,239) 20,576 SPAIN 3.6% Common Stocks 3.6% Antena 3 Television * 1,429 47 Banco Bilbao Vizcaya Argentaria 706,273 8,094 Banco Santander Central Hispano 735,213 7,042 Endesa 235,926 3,739 Gas Natural 194,780 3,738 Inditex 237,000 4,890 Repsol 125,822 2,191 Telefonica 422,593 5,250 Telefonica ADR (USD) 74,707 2,794 Total Spain (Cost $29,963) 37,785 SWEDEN 2.8% Common Stocks 2.8% Electrolux, Series B 170,305 3,491 Hennes & Mauritz, Series B 338,550 7,178 LM Ericsson, Series B * 1,130,943 1,942 NORDEA 472,845 2,932 Sandvik 41,170 1,224 Securitas, Series B 1,017,135 12,510 Total Sweden (Cost $23,156) 29,277 SWITZERLAND 5.9% Common Stocks 5.9% Adecco 271,120 15,962 Credit Suisse Group 150,120 5,281 Nestle 99,484 21,867 Roche Holding (Participation certificates) 66,200 5,469 UBS 236,632 14,507 Total Switzerland (Cost $31,698) 63,086 TAIWAN 0.8% Common Stocks 0.8% China Trust Finance Holdings 1,605,000 $ 1,670 MediaTek 179,550 1,852 Taiwan Semiconductor Manufacturing 2,276,669 4,496 Total Taiwan (Cost $6,182) 8,018 THAILAND 0.5% Common Stocks 0.5% Bangkok Bank NVDR * 2,269,000 4,890 Total Thailand (Cost $2,827) 4,890 TURKEY 0.3% Common Stocks 0.3% Turkcell Iletisim Hizmet ADR (USD) * 172,286 3,273 Total Turkey (Cost $2,746) 3,273 UNITED KINGDOM 24.5% Common Stocks 24.5% Abbey National 222,684 2,125 AstraZeneca 257,425 12,084 Astro All Asia Networks (MYR) * 810,000 1,006 Autonomy * 150,896 642 BG Group 493,417 2,249 BP 774,199 5,370 Cadbury Schweppes 443,548 2,842 Capita 248,700 1,043 Carnival 49,867 1,721 Celltech * 345,015 2,686 Centrica 1,138,810 3,563 Compass 2,667,350 15,369 David S. Smith 373,325 1,038 Diageo 581,108 6,830 Electrocomponents 896,110 5,289 Friends Provident 424,690 989 GKN 94,050 440 GlaxoSmithKline 1,767,721 37,834 Granada 393,636 783 Hays 1,854,343 3,837 Hilton Group 396,940 1,306 HSBC (HKD) 200,400 3,018 Kesa Electricals * 377,115 $ 1,561 Kingfisher 2,690,203 12,889 Reckitt Benckiser 120,000 2,524 Reed Elsevier (Ordinary shares) 1,354,812 10,523 Rio Tinto 625,105 15,149 Royal Bank of Scotland 962,129 25,765 Shell Transport & Trading 1,827,310 11,404 Standard Chartered 206,800 3,306 Tesco 2,430,974 9,740 Tomkins 1,088,626 5,188 Unilever 861,246 7,340 United Business Media 180,089 1,417 Vodafone 14,259,937 29,928 Woolworths 977,477 763 WPP Group 1,150,680 10,958 Total United Kingdom (Cost $236,478) 260,519 SHORT-TERM INVESTMENTS 0.0% Money Market Funds 0.0% T. Rowe Price Reserve Investment Fund, 1.10% # 1,000 1 Total Short-Term Investments (Cost $1) 1 SECURITIES LENDING COLLATERAL 11.1% Money Market Pooled Account 11.1% Investment in money market pooled account managed by JP Morgan Chase Bank, London 117,812,496 117,813 Total Securities Lending Collateral (Cost $117,813) 117,813 Total Investments in Securities 109.6% of Net Assets (Cost $935,084) $ 1,163,093 Other Assets Less Liabilities Including $117,813 obligation to return securities lending collateral (101,973) NET ASSETS $ 1,061,120 --------------- Net Assets Consist of: Undistributed net investment income (loss) $ 18,451 Undistributed net realized gain (loss) (458,428) Net unrealized gain (loss) 228,033 Paid-in-capital applicable to 82,777,812 shares of $0.01 par value capital stock outstanding; 1,000,000,000 shares authorized 1,273,064 NET ASSETS $ 1,061,120 --------------- NET ASSET VALUE PER SHARE $ 12.82 --------------- # Seven-day yield * Non-income producing 144A Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration only to qualified institutional buyers -- total of such securities at period-end amounts to $4,521,000 and represents 0.4% of net assets (ss.) Denominated in currency of the country of incorporation unless otherwise noted ADR American Depository Receipts FDR Fiduciary Depository Receipts HKD Hong Kong dollar MYR Malaysian ringgit NVDR Non Voting Depository Receipt USD United States dollar The accompanying notes are an integral part of these financial statements. Statement of Operations T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report In thousands Year Ended 10/31/03 - -------------------------------------------------------------------------------- Investment Income (Loss) Income Dividend (net of foreign taxes of $3,779) $ 26,484 Securities lending 1,043 Interest 153 Total income 27,680 Expenses Investment management 8,097 Custody and accounting 526 Registration 45 Legal and audit 37 Miscellaneous 19 Shareholder servicing 17 Directors 8 Prospectus and shareholder reports 4 Total expenses 8,753 Net investment income (loss) 18,927 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (39,284) Foreign currency transactions 1,604 Net realized gain (loss) (37,680) Change in net unrealized gain (loss) Securities 253,250 Other assets and liabilities denominated in foreign currencies (71) Change in net unrealized gain (loss) 253,179 Net realized and unrealized gain (loss) 215,499 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 234,426 --------------- The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- Statement of Changes in Net Assets T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report In thousands Year Ended 10/31/03 10/31/02 - -------------------------------------------------------------------------------- Increase (Decrease) in Net Assets Operations Net investment income $ 18,927 $ 16,774 Net realized gain (loss) (37,680) (211,536) Change in net unrealized gain or loss 253,179 28,378 Increase (decrease) in net assets from operations 234,426 (166,384) Distributions to shareholders Net investment income (16,127) (58,733) Net realized gain (2,150) -- Decrease in net assets from distributions (18,277) (58,733) Capital share transactions * Shares sold 256,719 208,478 Distributions reinvested 14,775 43,452 Shares redeemed (594,653) (762,108) Increase (decrease) in net assets from capital share transactions (323,159) (510,178) Net Assets Increase (decrease) during period (107,010) (735,295) Beginning of period 1,168,130 1,903,425 End of period $ 1,061,120 $ 1,168,130 --------------- --------------- *Share information Shares sold 23,184 17,245 Distributions reinvested 1,413 3,342 Shares redeemed (51,540) (60,713) Increase (decrease) in shares outstanding (26,943) (40,126) The accompanying notes are an integral part of these financial statements. - -------------------------------------------------------------------------------- Notes to Financial Statements T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report October 31, 2003 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES T. Rowe Price Institutional International Funds, Inc. (the corporation) is registered under the Investment Company Act of 1940 (the 1940 Act). The Institutional Foreign Equity Fund (the fund), a diversified, open-end management investment company, is one portfolio established by the corporation and commenced operations on September 7, 1989. The fund seeks long-term growth of capital through investments primarily in the common stocks of established, non-U.S. companies. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates made by fund management. Valuation The fund values its investments and computes its net asset value per share at the close of the New York Stock Exchange (NYSE), normally 4 p.m. ET, each day that the NYSE is open for business. Equity securities listed or regularly traded on a securities exchange or in the over-the-counter market are valued at the last quoted sale price, or official closing price for certain markets, at the time the valuations are made. 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 ask prices for domestic securities and the last quoted sale price for international securities. Investments in mutual funds are valued at the mutual fund's closing net asset value per share on the day of valuation. Other investments and those for which the above valuation procedures are inappropriate or are deemed not to reflect fair value are stated at fair value as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. Most foreign markets close before the NYSE. Normally, developments that could affect the values of securities that occur between the close of a foreign market and the close of the NYSE will not be reflected in security valuations used by the fund to compute its share price. However, if developments are so significant that they will, in the judgment of the fund, clearly and materially affect security values, such valuations may be adjusted to reflect the estimated fair value of the securities as of the close of the NYSE, as determined in good faith by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors. 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 ask 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. 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. Dividends from mutual fund investments are reflected as dividend income; capital gain distributions from mutual fund investments are reflected as realized gain/loss. In the normal course of business, the fund enters into contracts that provide general indemnifications. The fund's maximum exposure under these arrangements is dependent on claims that may be made against the fund in the future and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote. NOTE 2 - INVESTMENT TRANSACTIONS Consistent with its investment objective, the fund engages in the following practices to manage exposure to certain risks or enhance performance. The investment objective, policies, program, and risk factors of the fund are described more fully in the fund's prospectus and Statement of Additional Information. Emerging Markets At October 31, 2003, approximately 11% of the fund's net assets were invested in securities of companies located in emerging markets. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities. Securities Lending The fund lends its securities to approved brokers to earn additional income. It receives as collateral cash and U.S. government securities valued at 102% to 105% of the value of the securities on loan. Cash collateral is invested in a money market pooled account managed by the fund's lending agent in accordance with investment guidelines approved by fund management. Collateral is maintained over the life of the loan in an amount not less than the value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund the next business day. Although risk is mitigated by the collateral, the fund could experience a delay in recovering its securities and a possible loss of income or value if the borrower fails to return the securities. Securities lending revenue recognized by the fund consists of earnings on invested collateral and borrowing fees, net of any rebates to the borrower and compensation to the lending agent. At October 31, 2003, the value of loaned securities was $111,121,000; aggregate collateral consisted of $117,813,000 in the money market pooled account. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $310,478,000 and $618,661,000, respectively, for the year ended October 31, 2003. NOTE 3 - FEDERAL INCOME TAXES No provision for federal income taxes is required since the fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and distribute to shareholders all of its taxable income and gains. Federal income tax regulations differ from generally accepted accounting principles; therefore, distributions determined in accordance with tax regulations may differ significantly in amount or character from net investment income and realized gains for financial reporting purposes. Financial reporting records are adjusted for permanent book/tax differences to reflect tax character. Financial records are not adjusted for temporary differences. Distributions during the year ended October 31, 2003 totaled $18,277,000 and were characterized as ordinary income. At October 31, 2003, the tax-basis components of net assets were as follows: - -------------------------------------------------------------------------------- Unrealized appreciation $ 296,050,000 Unrealized depreciation (68,017,000) Net unrealized appreciation (depreciation) 228,033,000 Undistributed ordinary income 19,895,000 Capital loss carryforwards (459,872,000) Paid-in capital 1,273,064,000 Net assets $ 1,061,120,000 -------------------- - -------------------------------------------------------------------------------- The fund intends to retain realized gains to the extent of available capital loss carryforwards for federal income tax purposes. As of October 31, 2003, the fund had $206,390,000 of capital loss carryforwards that expire in 2009, $214,055,000 that expire in 2010, and $39,427,000 that expire in 2011. At October 31, 2003, the cost of investments for federal income tax purposes was $935,084,000. NOTE 4 - FOREIGN TAXES The fund is subject to foreign income taxes imposed by certain countries in which it invests. Foreign income taxes are accrued by the fund as a reduction of income. Gains realized upon disposition of Indian securities held by the fund are subject to capital gains tax in India, payable prior to repatriation of sale proceeds. The tax is computed on net realized gains, and realized losses in excess of gains may be carried forward eight years to offset future gains. In addition, the fund accrues a deferred tax liability for net unrealized gains on Indian securities. NOTE 5 - RELATED PARTY TRANSACTIONS The fund is managed by T. Rowe Price International, Inc. (the manager), a wholly owned subsidiary of T. Rowe Price Associates, Inc. (Price Associates), which is wholly owned by T. Rowe Price Group, Inc. The investment management agreement between the fund and the manager provides for an annual investment management fee equal to 0.70% of the fund's average daily net assets. The fee is computed daily and paid monthly. At October 31, 2003, investment management fee payable totaled $642,000. In addition, the fund has entered into service agreements with Price Associates and two wholly owned subsidiaries of Price Associates (collectively, Price). Price Associates computes the daily share price and maintains the financial records of the fund. T. Rowe Price Services, Inc., provides shareholder and administrative services in its capacity as the fund's transfer and dividend disbursing agent. T. Rowe Price Retirement Plan Services, Inc., provides subaccounting and recordkeeping services for certain retirement accounts invested in the fund. Expenses incurred pursuant to these service agreements totaled $125,000 for the year ended October 31, 2003, of which $10,000 was payable at period-end. The fund may invest in the T. Rowe Price Reserve Investment Fund and the T. Rowe Price Government Reserve Investment Fund (collectively, the Reserve Funds), open-end management investment companies managed by Price Associates. The Reserve Funds are offered as cash management options only to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates, and are not available to the public. The Reserve Funds pay no investment management fees. During the year ended October 31, 2003, dividend income from the Reserve Funds totaled $183,000. NOTE 6 - INTERFUND BORROWING Pursuant to its prospectus, the fund may borrow up to 33 1/3% of its total assets. The fund is party to an interfund borrowing agreement between itself and other T. Rowe Price-sponsored mutual funds, which permits it to borrow or lend cash at rates beneficial to both the borrowing and lending funds. Loans totaling 10% or more of a borrowing fund's total assets are collateralized at 102% of the value of the loan; loans of less than 10% are unsecured. During the year ended October 31, 2003, the fund had outstanding borrowings on 14 days, in the average amount of $29,671,000, and at an average annual rate of 1.31%. There were no borrowings outstanding at October 31, 2003. T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report Report of Independent Accountants To the Board of Directors of T. Rowe Price Institutional International Funds, Inc. and Shareholders of T. Rowe Price Institutional Foreign Equity Fund In our opinion, the accompanying statement of net assets 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 Institutional Foreign Equity Fund (one of the portfolios comprising T. Rowe Price Institutional International Funds, Inc., hereafter referred to as the "Fund") at October 31, 2003, and the results of its operations, the changes in its net assets and the financial highlights for each of the fiscal periods presented, 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 auditing standards generally accepted in the United States of America which 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, 2003 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland November 24, 2003 T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report Tax Information (Unaudited) for the Tax Year Ended 10/31/03 - -------------------------------------------------------------------------------- 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. The fund's distributions to shareholders included $2,150,000 from short-term capital gains. For taxable non-corporate shareholders, $21,678,000 of the fund's income and short-term capital gains represents qualified dividend income subject to the 15% rate category. The fund will pass through foreign source income of $22,935,000 and foreign taxes paid of $3,084,000. T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report About the Fund's Directors and Officers - -------------------------------------------------------------------------------- Your fund is governed by a Board of Directors that meets regularly to review investments, performance, expenses, and other business matters, and is responsible for protecting the interests of shareholders. The majority of the fund's directors are independent of T. Rowe Price Associates, Inc. (T. Rowe Price); "inside" directors are officers of T. Rowe Price. The Board of Directors elects the fund's officers, who are listed in the final table. The business address of each director and officer is 100 East Pratt Street, Baltimore, MD 21202. The Statement of Additional Information includes additional information about the fund directors and is available without charge by calling a T. Rowe Price representative at 1-800-225-5132. Independent Directors Name (Date of Birth) Year Elected* Principal Occupation(s) During Past 5 Years and Directorships of Other Public Companies - -------------------------------------------------------------------------------- Anthony W. Deering (1/28/45) 1991 Director, Chairman of the Board, President, and Chief Executive Officer, The Rouse Company, real estate developers; Director, Mercantile Bank (4/03 to present) - -------------------------------------------------------------------------------- Donald W. Dick, Jr. (1/27/43) 1989 Principal, EuroCapital Advisors, LLC, an acquisition and management advisory firm - -------------------------------------------------------------------------------- David K. Fagin (4/9/38) 2001 Director, Golden Star Resources Ltd., Canyon Resources Corp. (5/00 to present), and Pacific Rim Mining Corp. (2/02 to present); Chairman and President, Nye Corp. - -------------------------------------------------------------------------------- F. Pierce Linaweaver (8/22/34) 2001 President, F. Pierce Linaweaver & Associates, Inc., consulting environmental and civil engineers - -------------------------------------------------------------------------------- John G. Schreiber (10/21/46) 2001 Owner/President, Centaur Capital Partners, Inc., a real estate investment company; Senior Advisor and Partner, Blackstone Real Estate Advisors, L.P.; Director, AMLI Residential Properties Trust, Host Marriott Corp., and The Rouse Company - -------------------------------------------------------------------------------- Hubert D. Vos (8/2/33) 2001 Owner/President, Stonington Capital Corp., a private investment company - -------------------------------------------------------------------------------- Paul M. Wythes (6/23/33) 1996 Founding Partner, Sutter Hill Ventures, a venture capital limited partnership, providing equity capital to young high-technology companies throughout the United States; Director, Teltone Corp. - -------------------------------------------------------------------------------- *Each independent director oversees 106 T. Rowe Price portfolios and serves until retirement, resignation, or election of a successor. T. Rowe Price Institutional Foreign Equity Fund Certified Annual Report Inside Directors Name (Date of Birth) Year Elected* [Number of T. Rowe Price Portfolios Overseen] Principal Occupation(s) During Past 5 Years and Directorships of Other Public Companies - -------------------------------------------------------------------------------- James S. Riepe (6/25/43) 2002 [106] Director and Vice President, T. Rowe Price; Vice Chairman of the Board, Director, and Vice President, T. Rowe Price Group, Inc.; Chairman of the Board and Director, T. Rowe Price Global Asset Management Limited, T. Rowe Price Global Investment Services Limited, T. Rowe Price Investment Services, Inc., T. Rowe Price Retirement Plan Services, Inc., and T. Rowe Price Services, Inc.; Chairman of the Board, Director, President, and Trust Officer, T. Rowe Price Trust Company; Director, T. Rowe Price International, Inc.; Chairman of the Board, Institutional International Funds - -------------------------------------------------------------------------------- M. David Testa (4/22/44) 1989 [106] Chief Investment Officer, Director, and Vice President, T. Rowe Price; Vice Chairman of the Board, Chief Investment Officer, Director, and Vice President, T. Rowe Price Group, Inc.; Director, T. Rowe Price Global Asset Management Limited and T. Rowe Price Global Investment Services Limited; Chairman of the Board and Director, T. Rowe Price International, Inc.; Director and Vice President, T. Rowe Price Trust Company; Vice President, Institutional International Funds - -------------------------------------------------------------------------------- *Each inside director serves until retirement, resignation, or election of a successor. Officers Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) - -------------------------------------------------------------------------------- Christopher D. Alderson (3/29/62) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. - -------------------------------------------------------------------------------- Mark C.J. Bickford-Smith (4/30/62) Vice President, Institutional International Funds Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. - -------------------------------------------------------------------------------- Stephen V. Booth (6/21/61) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company - -------------------------------------------------------------------------------- Joseph A. Carrier (12/30/60) Treasurer, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Investment Services, Inc. - -------------------------------------------------------------------------------- Roger L. Fiery III, CPA (2/10/59) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, Inc., and T. Rowe Price Trust Company - -------------------------------------------------------------------------------- John R. Ford, CFA (11/25/57) President, Institutional International Funds Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; Chief Investment Officer, Director, and Vice President, T. Rowe Price International, Inc. - -------------------------------------------------------------------------------- Henry H. Hopkins (12/23/42) Vice President, Institutional International Funds Director and Vice President, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., T. Rowe Price Services, Inc., and T. Rowe Price Trust Company; Vice President, T. Rowe Price, T. Rowe Price International, Inc., and T. Rowe Price Retirement Plan Services, Inc. - -------------------------------------------------------------------------------- Patricia B. Lippert (1/12/53) Secretary, Institutional International Funds Assistant Vice President, T. Rowe Price and T. Rowe Price Investment Services, Inc. - -------------------------------------------------------------------------------- George A. Murnaghan (5/1/56) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price International, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Trust Company - -------------------------------------------------------------------------------- Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. Name (Date of Birth) Title and Fund(s) Served Principal Occupation(s) - -------------------------------------------------------------------------------- R. Todd Ruppert (5/7/56) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Retirement Plan Services, and T. Rowe Price Trust Company; Chief Investment Officer, Director, and President, T. Rowe Price Global Asset Management Limited and T. Rowe Price Global Investment Services Limited - -------------------------------------------------------------------------------- James B.M. Seddon (6/17/64) Vice President, Institutional International Funds Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. - -------------------------------------------------------------------------------- Julie L. Waples (6/12/70) Vice President, Institutional International Funds Vice President, T. Rowe Price - -------------------------------------------------------------------------------- David J.L. Warren (4/14/57) Vice President, Institutional International Funds Vice President, T. Rowe Price and T. Rowe Price Group, Inc.; Chief Executive Officer, Director, and President, T. Rowe Price International, Inc.; Director, T. Rowe Price Global Asset Management Limited and T. Rowe Price Global Investment Services Limited - -------------------------------------------------------------------------------- William F. Wendler II, CFA (3/14/62) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. - -------------------------------------------------------------------------------- Edward A. Wiese, CFA (4/12/59) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company; Chief Investment Officer, Director, and Vice President, T. Rowe Price Savings Bank - -------------------------------------------------------------------------------- Unless otherwise noted, officers have been employees of T. Rowe Price or T. Rowe Price International for at least five years. Item 2. Code of Ethics. As of the end of the period covered by this report, the registrant had adopted a code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of this code of ethics is filed as an exhibit to this Form N-CSR. No substantive amendments were approved or waivers were granted to this code of ethics during the period covered by this report. Item 3. Audit Committee Financial Expert. The registrant's Board of Directors/Trustees has determined that Mr. David K. Fagin qualifies as an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Fagin is considered independent for purposes of Item 3 of Form N-CSR. Item 4. Principal Accountant Fees and Services. Not required at this time. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures (a) The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) The registrant's principal executive officer and principal financial officer are aware of no changes in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 10. Exhibits. (a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is attached. (a)(2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. T. Rowe Price International Funds, Inc. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date December 19, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/ James S. Riepe James S. Riepe Principal Executive Officer Date December 19, 2003 By /s/ Joseph A. Carrier Joseph A. Carrier Principal Financial Officer Date December 19, 2003