Item 1. Report to Shareholders
T. Rowe Price Institutional Foreign Equity Fund
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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
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Certified Annual Report
Performance Comparison
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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
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Institutional Lipper
Foreign MSCI International
Equity EAFE Funds
Fund Index Average
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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
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Average Annual Compound Total Return
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Periods Ended 10/31/03 1 Year 5 Years 10 Years
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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.
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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
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12-Month
Period Ended 10/31/03 Return
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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
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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
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Percent of
Net Assets
10/31/02 10/31/03
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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
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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
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Other
Pacific Latin and
Europe Japan Rim America Reserves
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67% 20% 9% 2% 2%
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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
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Certified Annual Report
For a share outstanding throughout each period
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Year
Ended
10/31/03 10/31/02 10/31/01 10/31/00 10/31/99
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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
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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.
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Statement of Net Assets (ss.)
T. Rowe Price Institutional Foreign Equity Fund
Certified Annual Report
October 31, 2003
Shares Value
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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
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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.
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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 Institutional 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