N-CSR 1 iem.txt T. ROWE PRICE INST EMERGING MARKETS EQUITY FUND Item 1. Report to Shareholders October 31, 2004 Annual Report Institutional Emerging Markets Equity Fund T. Rowe Price The views and opinions in this report were current as of October 31, 2004. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and the managers reserve the right to change their views about individual stocks, sectors, and the markets at any time. As a result, the views expressed should not be relied upon as a forecast of the fund's future investment intent. The report is certified under the Sarbanes-Oxley Act of 2002, which requires mutual funds and other public companies to affirm that, to the best of their knowledge, the information in their financial reports is fairly and accurately stated in all material respects. T. Rowe Price Institutional Emerging Markets Equity Fund Fellow Shareholders Emerging stock markets posted solid gains in the 6- and 12-month periods through October 31, 2004, that far surpassed the returns for developed stock markets. During the past year, world economies staged a broad-based recovery. Emerging markets generally benefited from ongoing price increases of oil and raw materials and stronger currencies. The energy sector was by far the best performer throughout the year, and materials and utilities stocks chipped in solid gains since April--explaining why value indexes outdistanced their growth counterparts. As in the developed markets, small-cap stocks outperformed large-caps across emerging markets. Performance Review Performance Comparison -------------------------------------------------------------------------------- Periods Ended 10/31/04 6 Months 12 Months -------------------------------------------------------------------------------- Institutional Emerging Markets Equity Fund 9.71% 19.58% MSCI Emerging Markets Index 9.16 19.40 Lipper Emerging Markets Funds Average 8.63 19.50 Please see the fund's quarter-end returns following this letter. The Institutional Emerging Markets Equity Fund returned 9.71% for six months and 19.58% for the year ended October 31, 2004. As shown in the table, the portfolio's performance was about the same in the first and second halves of our fiscal year. However, these results mask several sharp market swings. Nevertheless, we are pleased to report that your portfolio's results were better than the MSCI and Lipper benchmarks for both periods. From a regional perspective, Latin American stocks performed the best over the past six months, paced by rising oil and materials prices and stellar results in Brazil. Asian markets were basically flat due to weakness in South Korea and Taiwan--the technology sector was a significant drag on returns in both countries. Emerging Europe, the Mediterranean, and Africa performed well, but individual country performance was mixed. Eastern European countries, Turkey, and Egypt were strongest, while Israel (weak technology and pharmaceuticals) and Russia (primarily due to the problems at Yukos) were lower. Portfolio Review Far East Geographic Diversification -------------------------------------------------------------------------------- Periods Ended 4/30/04 10/31/04 -------------------------------------------------------------------------------- Far East 50.5% 44.0% Africa and Middle East 19.1 20.4 Latin America 17.0 19.2 Europe 8.3 9.0 Other and Reserves 5.1 7.4 -------------------------------------------------------------------------------- Total 100.0% 100.0% Asia's markets languished during the past six months. On a macro level, Asia appears strong, but from a micro view, the outlook is more difficult. Within North Asia, domestic-oriented companies in Taiwan and South Korea appear relatively attractive, although we think the sizable technology markets in both of these economies may be nearing a cyclical peak. Therefore, we reduced our exposure in the tech sector significantly over the past six months. South Asia looks less attractive on a valuation basis, despite strong growth in a number of previously red-hot markets, including India. We are similarly cautious about investing directly in China (see the special report on China on the following page). Although economic growth is strong, in our view, there is an absence of high-quality, industry-leading companies that can sustain profitability throughout a full business cycle. Hyundai Motor, the largest auto manufacturer in South Korea, was a leading Asian contributor for the last six months. The company's new product offerings have been well received, and it has been gaining market share in the U.S., Europe, and several emerging markets, including China and India. (Please refer to our portfolio of investments for a complete listing of the fund's holdings.) Asian information technology companies (specifically semiconductors and related equipment holdings) were among the worst performers for the six-month period. Samsung Electronics, Via Technologies, and Taiwan Semiconductor Manufacturing, for example, were significant detractors since April. However, Samsung was a solid contributor for the year. China: A Powerful Global Growth Engine China has increasingly become the growth engine for Asia, and T. Rowe Price investment managers believe that it will have an expanding impact on the global economy. Investing in China, however, presents unique challenges that warrant a cautious investment approach. China's economy has grown rapidly over the past year, fueled by massive fixed-asset investment by the government, high levels of foreign investment, and the rapid emergence of its urban middle class. In December 2003, money supply was growing at a 30% annual pace, and the supply of raw materials could not keep pace. China currently consumes 25% of the world's raw materials, and this will continue to rise. Over the past year, the Chinese government has attempted to cool this boom, and the continuing challenge will be achieving a manageable rate of growth. We believe the next stage of China's modernization must be to tackle its financial architecture. Due to the lack of a functioning bond market, interest rate inflexibility, and a rigid foreign exchange structure, the government has had to rely on administrative measures to slow the economy. The secular rise in inflation is another growing concern. The country is reaching the limit of its ability to supply domestic raw materials to its industries, meaning that growth will have to be met by imported raw materials and paid for with hard currency. These trends probably mean that China's low interest rates are likely to climb further, which could have major implications for its economy and potentially for inflation trends around the world. (The government edged rates higher in October for the first time in nearly a decade.) More importantly, it raises some question about the long-term sustainability of China's blistering growth. Accordingly, we have remained cautious about the quality of investment opportunities in China, almost exclusively focusing on industry leaders that we believe are capable of achieving sustained profitability through economic peaks and troughs. An alternative strategy has been to invest in non-Chinese companies that we believe will benefit from accelerating Chinese demand. While we are pleased that more high-growth, privately owned mainland companies are starting to be listed, we remain extremely selective and seek to avoid owning Chinese companies with opaque ownership structures and a lack of corporate transparency. [GRAPHIC OMITTED] Will China's GDP Growth Slow? -------------------------------------------------------------------------------- Real GDP Growth Rate '97 10.29% '98 6.39 '99 3.14 '00 8.96 '01 7.30 '02 6.74 '03 14.16 '04* 9.20 '05* 8.00 *Estimates Sources: FactSet Research Systems, OECD, Consensus Economics Inc. Market Performance -------------------------------------------------------------------------------- Six Months Local Local Currency U.S. Ended 10/31/04 Currency vs. U.S. Dollars Dollars -------------------------------------------------------------------------------- Brazil 28.59% 3.19% 32.68% India 3.99 -1.97 1.94 Israel -11.31 2.90 -9.27 Malaysia 2.12 0.00 2.12 Mexico 15.95 -1.12 14.66 Russia 7.39 0.93 7.39 South Africa 13.83 12.97 28.59 South Korea -7.61 4.81 -3.16 Taiwan -5.41 -0.55 -5.94 Thailand 1.96 -2.57 -0.66 Source: RIMES Online, using MSCI indices. As we reduced exposure to the Asian tech and telecom sectors, we added to positions in energy and financials. The portfolio's largest purchase in Asia over the last six months was S-Oil, one of South Korea's largest oil refiners, and in Taiwan, we bought Cathay Financial and Chinatrust Financial. We initiated a position in S-Oil because there is a shortage of Asian oil refining capacity, and, coupled with higher oil prices, we expect margins and profits to improve. We eliminated China Mobile, the leading provider of mobile telecommunications services in China, because in our view, the company's growth prospects have diminished and we see increasing competition that could pressure margins. Latin America Latin American stocks continued their strong performance over the past six months, posting the best results among emerging markets and contributing to the portfolio's solid returns. Markets in the region generally benefited from stronger currencies and ongoing increases in the price of oil and raw materials, which led energy and materials stocks higher for the period. Consumer and financial stocks also performed well in the region as economic growth fueled stronger consumer demand. As is often the case in Latin America, performance was extremely volatile over the course of the past year. Markets more exposed to rising rates, such as Brazil, declined the most but also bounced back higher. High commodity prices and still relatively low interest rates favored materials and companies with higher leverage, a detriment to our investment style, which focuses on high-quality, steady-growth companies in the region. Brazil was the region's top performer over the last six months. Brazilian energy and materials stocks, which make up about half of the market, surged on news of better-than-expected economic growth, industrial production, jobless rates, and trade surpluses. Petroleo Brasileiro (Petrobras) was a top contributor for both the six and 12 months, supported by record-high oil prices and expectations of rising oil production. We increased our position, and the stock remains the portfolio's largest Sector Diversification -------------------------------------------------------------------------------- Percent of Percent of Net Assets Net Assets 4/30/04 10/31/04 -------------------------------------------------------------------------------- Financials 18.0% 22.7% Telecommunications Services 15.0 14.6 Consumer Discretionary 12.3 13.7 Energy 8.3 11.7 Materials 11.3 8.9 Information Technology 16.4 8.0 Consumer Staples 5.9 7.7 Industrials and Business Services 5.6 3.9 Trusts 0.0 2.0 Utilities 0.6 1.4 Health Care 1.5 0.0 Reserves 5.1 5.4 Total 100.0% 100.0% -------------------------------------------------------------------------------- holding (3.5% of net assets). New purchases included Natura Cosmeticos, the largest Brazilian cosmetics company with a direct distribution model and over 400,000 sales representatives. We participated in the company's initial public offering in late May and have continued to add to the position. The company is benefiting from strong underlying growth in the cosmetics market. We also added low-cost airline GOL and toll road operator Cia Concessoes Rodoviarias on their initial public offerings. Although both are quality companies that we'd like to own, we eliminated them after they reached our target price. Wireless operator America Movil was our second-largest holding at the end of the reporting period, and a standout contributor for six and 12 months, benefiting from faster-than-expected penetration in many markets. Rebounding economies have spurred consumer spending, which in turn has led to rising growth. The company remains the dominant player in Mexico, well ahead of its closest competitors, and it is aggressively gaining market share in Brazil and other parts of Latin America. Wal-Mart de Mexico is now among the portfolio's 10-largest holdings, thanks to additional purchases over the past six months. This leading retailer has significant advantages over its competition, including a much more efficient distribution network. It continues to benefit from expansion opportunities and solid same-store sales growth. Margins are improving as well, and we believe that the valuation is still attractive. Africa, Emerging Europe, and the Middle East Stocks in European emerging markets, the Middle East, and African countries produced strong returns over the past year. However, for the past six months, gains were more moderate, and returns among countries were mixed. Stocks in Egypt, Turkey, and central European countries fared best, while the Russian market was hobbled by the government's ongoing political and tax disputes with oil company Yukos. Israeli stocks also fell sharply amid weakness among technology and pharmaceutical shares. This is the most expensive region among emerging markets. Within Central and Eastern Europe, the macroeconomic outlook is problematic, and many sustainable growth companies are expensive. However, we are finding good investment opportunities at the periphery of the region. Israel's economy has begun to recover from several years of recession, and we believe that our Israeli stock positions will benefit from this improvement over the long term. In the period, we initiated a position in Bank Leumi, a leading retail bank, after the company reported strong results. Turkey's economy is also strong, and its leaders are optimistic that the European Union will set a timetable in mid-December for Turkey to work toward full EU membership. However, rising global interest rates have had a negative impact on the country, due to very high debt levels. We have reduced our exposure in Turkey by trimming several strong performers. Turkcell, for example, was among the portfolio's top contributors over the last 12 months, and our largest sale in Turkey. We added several new companies in Egypt during the last six months because we are encouraged by the reform efforts of the new government that came into power in July. Our largest new Egyptian purchase is Commercial International Bank, which should benefit from new banking reform proposals. We also added telecommunication services companies Vodafone Egypt, Egyptian Company for Mobile Services, and Orascom Telecom to the portfolio. Subscriber growth in the wireless industry appears to be strong and could increase as the economy and consumer spending strengthen. The Russian economy, which is leveraged to energy and raw materials prices, remained strong in the last six months. Wireless companies have greatly benefited from this upturn, and consumers have been driving wireless penetration growth at an accelerating rate, particularly in the regions outside Moscow. Our large positions in Mobile TeleSystems and VimpleCom, Russia's two largest wireless providers, were solid performance contributors for the last six months. In contrast, Yukos was the portfolio's largest detractor in both the 6- and 12-month periods. Yukos was one of the most attractive Russian energy companies because of its strong production growth, lower relative costs, and a significant reserve base. The company has been a significant (and hugely profitable) portfolio holding for several years. However, the government's recent attempts to force the company to pay back taxes have jeopardized its ability to produce oil and pushed it to the verge of bankruptcy. We decided to eliminate the stock when the government prepared to circumvent Russian law by selling Yukos' assets at deep discounts to cover the tax liabilities. Naspers, a South African-based pay-TV, Internet, and print media company that we purchased earlier this year, was another top performer. The company continues to produce strong earnings gains, primarily driven by good subscriber growth and cost controls in South Africa and huge subscriber growth and solid margins in its Greek pay-TV business. OUTLOOK Although emerging markets are generally healthy, they face several areas of vulnerability. Economic growth and commodity prices are both strong, and currencies are attractive. Valuations remain appealing, as well, although the valuation gap with developed markets has narrowed over the last two years. However, in an environment of rising global inflation and higher interest rates, emerging markets would not be immune to a tightening of global liquidity and increased risk aversion. These factors impacted second-quarter results, but softer economic data from the U.S. and Japan supported a third-quarter rally. With the balance of these economic forces in mind, we remain somewhat cautious. Emerging market equities are a cyclical asset class. If global growth rises rapidly and interest rates increase sharply, we could see a repeat of the second quarter's sharp sell-off. If global growth stabilizes, liquidity expands, and the valuation and currency benefits remain in place, emerging markets could continue to provide solid returns. Respectfully submitted, David J.L. Warren President, T. Rowe Price International Funds, Inc. November 21, 2004 Risks of International Investing -------------------------------------------------------------------------------- Funds that invest overseas generally carry more risk than funds that invest strictly in U.S. assets. Funds investing in a single country or in a limited geographic region tend to be riskier than more diversified funds. Risks can result from varying stages of economic and political development, differing regulatory environments, trading days, and accounting standards, and higher transaction costs of non-U.S. markets. Non-U.S. investments are also subject to currency risk, or a decline in the value of a foreign currency versus the U.S. dollar, which reduces the dollar value of securities denominated in that currency. Glossary -------------------------------------------------------------------------------- MSCI Emerging Markets Index: A capitalization-weighted index of stocks from 26 emerging market countries that includes only securities that may be traded by foreign investors. T. Rowe Price Institutional Emerging Markets Equity Fund Portfolio Highlights Twenty-Five Largest Holdings -------------------------------------------------------------------------------- Percent of Net Assets Company Country 10/31/04 -------------------------------------------------------------------------------- Petrobras Brazil 3.5% America Movil Mexico 3.0 Samsung Electronics South Korea 2.5 iShares MSCI Emerging Markets Index Fund Europe/Far East 2.0 AO VimpelCom Russia 1.7 Naspers South Africa 1.6 Wal-Mart de Mexico Mexico 1.6 Lukoil Oil Russia 1.6 Cathay Financial Holding Taiwan 1.5 Impala Platinum Holdings South Africa 1.4 Hyundai Motor South Korea 1.4 Kookmin Bank South Korea 1.3 Mobile Telesystems Russia 1.3 Chinatrust Financial Taiwan 1.3 PetroKazakhstan Kazakhstan 1.2 Makhteshim-Agan Industries Israel 1.2 Sanlam South Africa 1.2 Tele Norte Leste Brazil 1.1 S-Oil South Korea 1.1 Zee Telefilms India 1.1 Grupo Televisa Mexico 1.1 Shinsegae South Korea 1.1 Bank Hapoalim Israel 1.0 South Korea Telecom South Korea 1.0 Taishin Financial Holdings Taiwan 1.0 -------------------------------------------------------------------------------- Total 37.8% -------------------------------------------------------------------------------- Note: Table excludes investments in the T. Rowe Price Reserve Investment Fund. Growth of $10,000 -------------------------------------------------------------------------------- This chart shows the value of a hypothetical $10,000 investment in the fund over the past 10 fiscal year periods or since inception (for funds lacking 10-year records). The result is compared with benchmarks, which may include a broad-based market index and a peer group average or index. Market indexes do not include expenses, which are deducted from fund returns as well as mutual fund averages and indexes. [GRAPHIC OMITTED] Institutional Emerging Markets Equity Fund -------------------------------------------------------------------------------- As of 10/31/04 Institutional Emerging Markets Equity Fund $16,973 MSCI Emerging Markets Index $17,760 MSCI Emerging Institutional Emerging Markets Index Markets Equity Fund 10/02 $10000 $10000 1/03 10288 9950 4/03 10593 10070 7/03 12752 12042 10/03 14874 14194 1/04 16722 15921 4/04 16270 15471 7/04 15739 15011 10/04 17760 16973 Average Annual Compound Total Return -------------------------------------------------------------------------------- Since Inception Periods Ended 10/31/04 1 Year 10/31/02 -------------------------------------------------------------------------------- Institutional Emerging Markets Equity Fund 19.58% 30.28% MSCI Emerging Markets Index 19.40 33.35 Lipper Emerging Markets Funds Average 19.50 32.58 Returns do not reflect taxes that the shareholder may pay on distributions or the redemption of fund shares. Past performance cannot guarantee future results. T. Rowe Price Institutional Emerging Markets Equity Fund Fund Expense Example As a mutual fund shareholder, you may incur two types of costs: (1) transaction costs such as redemption fees or sales loads and (2) ongoing costs, including management fees, distribution and service (12b-1) fees, and other fund expenses. The following example is intended to help you understand your ongoing costs (in dollars) of investing in the fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example is based on an investment of $1,000 invested at the beginning of the most recent six-month period and held for the entire period. Actual Expenses The first line of the following table ("Actual") provides information about actual account values and actual expenses. You may use the information in this line, together with your account balance, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. Hypothetical Example for Comparison Purposes The information on the second line of the table ("Hypothetical") is based on hypothetical account values and expenses derived from the fund's actual expense ratio and an assumed 5% per year rate of return before expenses (not the fund's actual return). You may compare the ongoing costs of investing in the fund with other funds by contrasting this 5% hypothetical example and the 5% hypothetical examples that appear in the shareholder reports of the other funds. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You should also be aware that the expenses shown in the table highlight only your ongoing costs and do not reflect any transaction costs, such as redemption fees or sales loads. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. To the extent a fund charges transaction costs, however, the total cost of owning that fund is higher. T. Rowe Price Institutional Emerging Markets Equity Fund -------------------------------------------------------------------------------- Expenses Beginning Ending Paid During Account Account Period* Value Value 5/1/04 to 5/1/04 10/31/04 10/31/04 -------------------------------------------------------------------------------- Actual $ 1,000 $ 1,097.10 $ 5.79 Hypothetical (assumes 5% return before expenses) 1,000 1,019.61 5.58 * Expenses are equal to the fund's annualized expense ratio for the six-month period (1.1%), multiplied by the average account value over the period, multiplied by the number derived by dividing the number of days in the most recent fiscal half year (184) by the days in the year (366) to reflect the half-year period. Quarter-End Returns -------------------------------------------------------------------------------- Since Inception Periods Ended 9/30/04 1 Year 10/31/02 -------------------------------------------------------------------------------- Institutional Emerging Markets Equity Fund 25.83% 29.73% MSCI Emerging Markets Index 26.53 33.31 Lipper Emerging Markets Funds Average 25.55 32.33 Current performance may be higher or lower than the quoted past performance, which cannot guarantee future results. Share price, principal value, and return will vary, and you may have a gain or loss when you sell your shares. For the most recent month-end performance information, please visit our Web site (troweprice.com) or contact a T. Rowe Price representative at 1-800-638-8790. Request a prospectus, which includes investment objectives, risks, fees, expenses, and other information you should read and consider carefully before investing. This table provides returns through the most recent calendar quarter-end rather than through the end of the fund's fiscal period. It shows how the fund would have performed each year if its actual (or cumulative) returns for the periods shown had been earned at a constant rate. Average annual total return figures include changes in principal value, reinvested dividends, and capital gain distributions. Returns do not reflect taxes that the shareholder may pay on fund distributions or the redemption of fund shares. When assessing performance, investors should consider both short- and long-term returns. T. Rowe Price Investment Services, Inc., Distributor. Financial Highlights T. Rowe Price Institutional Emerging Markets Equity Fund For a share outstanding throughout each period ------------------------------- Year 10/31/02 Ended Through 10/31/04 10/31/03 NET ASSET VALUE Beginning of period $ 14.18 $ 10.00 Investment activities Net investment income (loss) 0.15 0.09 Net realized and unrealized gain (loss) 2.58 4.10 Total from investment activities 2.73 4.19 Distributions Net investment income (0.09) (0.01) Net realized gain (0.21) -- Total distributions (0.30) (0.01) NET ASSET VALUE End of period $ 16.61 $ 14.18 ------------------------------------- Ratios/Supplemental Data Total return^ 19.58% 41.94% Ratio of total expenses to average net assets 1.10% 1.10% Ratio of net investment income (loss) to average net assets 1.28% 1.34% Portfolio turnover rate 69.1% 70.4% Net assets, end of period (in thousands) $ 34,182 $ 15,650 ^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming reinvestment of all distributions and payment of no redemption or account fees. The accompanying notes are an integral part of these financial statements. Portfolio of Investments (1) T. Rowe Price Institutional Emerging Markets Equity Fund October 31, 2004 Shares Value -------------------------------------------------------------------------------- (Cost and value in $ 000s) EUROPE/FAR EAST 2.0% Common Stocks 2.0% iShares MSCI Emerging Markets Index Fund (USD) 3,800 674 Total Europe/Far East (Cost $673) 674 ARGENTINA 0.7% Common Stocks 0.7% Quilmes Industrial ADR (USD) 1,181 19 Tenaris ADR (USD) 4,800 215 Total Argentina (Cost $163) 234 BRAZIL 9.7% Common Stocks 8.4% Cia Energetica Minas Gerais (Cemig) 8,457,000 196 Companhia Siderurgica Nacional 11,815 175 Companhia Vale do Rio Doce ADR (USD) 7,200 131 Companhia Vale do Rio Doce ADR (1 ADR represents 1 common share) (USD) 7,830 166 Embraer Aircraft ADR (USD) 1,800 48 Grendene * 1,900 23 Natura Cosmeticos 6,800 138 Petroleo Brasileiro (Petrobras) ADR (USD) 26,700 870 Petroleo Brasileiro (Petrobras)ADR (1 ADR represents 1 common share) (USD) 8,700 309 Tele Norte Leste ADR (USD) 14,800 194 Tele Norte Leste Participaco * 14,699 186 Telesp Celular Participacoes ADR (USD) * 33,300 199 Votorantim Celulose ADR (USD) 7,100 245 2,880 Preferred Stocks 1.3% Banco Itau Holdings Financiera * 2,631 319 Caemi Mineracao e Metalurgica * 126,200 76 Suzano Bahia Sul Papel 9,601 41 436 Total Brazil (Cost $2,577) 3,316 CHINA 4.7% Common Stocks 4.7% China Insurance (HKD) 252,000 115 China Resources Enterprise (HKD) 110,000 154 China Telecom, 144A (HKD) * 290,000 93 China Telecom (H shares)(HKD) 442,000 142 Cnooc (HKD) 615,500 318 Gome Electrical Appliances (HKD) * 57,000 46 Gome Electrical Appliances (Regulation S shares) (HKD) * 174,000 140 Luen Thai Holdings (HKD) * 229,000 118 Pacific Basin Shipping 144A (HKD) * 124,000 58 Pacific Basin Shipping (HKD) * 129,000 61 Panva Gas Holdings (HKD) * 311,000 132 Shanghai Forte Land Company (H shares) (HKD) 390,000 121 tom.com (HKD) * 584,000 113 Total China (Cost $1,472) 1,611 CZECH REPUBLIC 0.6% Common Stocks 0.6% Komercni Banka 1,529 193 Total Czech Republic (Cost $152) 193 EGYPT 2.8% Common Stocks 2.8% Commercial International Bank 47,235 269 Egyptian Company for Mobile Services 12,377 236 Orascom Construction Industries 15,400 177 Orascom Telecom GDR (USD) * 3,800 65 Orascom Telecommunications * 3,407 118 Vodafone Egypt * 11,550 87 Total Egypt (Cost $762) 952 ESTONIA 0.3% Common Stocks 0.3% Hansabank (EUR) 10,200 103 Total Estonia (Cost $96) 103 HONG KONG 0.3% Common Stocks 0.3% Kingboard Chemical Holdings, 144A * 58,000 121 Total Hong Kong (Cost $110) 121 HUNGARY 0.3% Common Stocks 0.3% OTP Bank 4,300 109 Total Hungary (Cost $92) 109 INDIA 6.4% Common Stocks 6.4% Arvind Mills * 107,336 187 Ballarpur Industries, 144A * 28,050 46 Ballarpur Industries (Regulation S shares) * 3,600 6 Bharti Tele-Ventures * 2,000 7 HDFC Bank 16,000 147 HDFC Bank ADR (USD) 900 32 Hindalco Industries 3,910 102 I-Flex Solutions 13,900 182 ITC 7,330 176 Kotak Mahindra Finance 33,000 131 LIC Housing Finance GDR (Regulation S shares) (USD) @ 15,452 96 National Thermal Power, 144A * 19,000 26 Oil & Natural Gas 6,000 104 Oil & Natural Gas (Regulation S shares) 4,000 70 Petronet LNG * 223,700 115 Power Trading 73,600 85 Tata Tea 16,000 145 UTI Bank 50,400 170 Zee Telefilms 111,500 368 Total India (Cost $1,861) 2,195 INDONESIA 0.9% Common Stocks 0.9% Indosat 360,300 187 Telekomunikasi, Series B 263,000 126 Total Indonesia (Cost $231) 313 ISRAEL 5.1% Common Stocks 5.1% Bank Hapoalim 129,100 355 Bank Leumi 93,900 198 Check Point Software Technologies (USD) * 10,495 237 Lipman Electronic Engineering (USD) 5,900 141 Makhteshim-Agan Industries 97,500 407 NICE Systems ADR (USD) * 3,100 66 Orbotech (USD) * 7,800 132 Partner Communications ADR (USD) * 31,040 203 Total Israel (Cost $1,672) 1,739 KAZAKHSTAN 1.2% Common Stocks 1.2% PetroKazakhstan (USD) 11,171 412 Total Kazakhstan (Cost $315) 412 MALAYSIA 4.7% Common Stocks 4.7% Astro All Asia (Ordinary shares) * 193,200 264 Astro All Asia (Regulation S shares) * 20,000 27 Berjaya Sports Toto 154,500 158 CIMB Berhad 106,000 137 Hong Leong Bank 111,300 154 IJM 102,500 127 Magnum 123,300 81 Malaysian Industrial Development Finance Berhad 255,300 81 MK Land Holdings 176,300 82 Multi-Purpose Holdings * 17,100 5 Multi-Purpose Holdings Warrants, 2/26/09 * 15,900 2 Public Bank BHD 19,150 35 Sime Darby 75,900 114 Symphony House 199,650 41 Symphony House Warrants, 4/28/09 * 32,250 2 Telekom Malaysia 42,000 127 Telekom Malaysia (Regulation S shares) 9,000 27 Tenaga Nasional * 55,000 161 Total Malaysia (Cost $1,623) 1,625 MEXICO 8.8% Common Stocks 8.8% America Movil ADR Series L (USD) 23,100 1,016 Cemex 28,916 167 Consorcio ARA * 45,100 121 Grupo Aeroportuario del Sureste ADR (USD) 3,800 87 Grupo Financiero Banorte 42,800 201 Grupo Modelo, Series C 55,000 141 Grupo Televisa ADR (USD) 6,624 364 Organizacion Soriana, Series B 26,700 86 Telmex ADR (USD) 4,339 149 Urbi Desarrollos Urbanos * 36,900 137 Wal-Mart de Mexico, Series V 166,234 544 Total Mexico (Cost $2,349) 3,013 RUSSIA 5.9% Common Stocks 5.9% AO VimpelCom ADR (USD) * 5,200 593 Gazprom ADR (USD) 3,900 146 Lukoil (USD) 4,770 148 Lukoil ADR (USD) 3,130 392 MMC Norilsk Nickel (USD) 4,400 274 Mobile Telesystems ADR (USD) 3,100 450 Total Russia (Cost $1,386) 2,003 SOUTH AFRICA 9.6% Common Stocks 9.6% ABSA Group 28,100 307 African Bank Investments 121,800 284 Anglo American 14,050 307 Impala Platinum Holdings 6,150 494 Investec 6,300 144 Naspers (N shares) 59,900 548 Pick 'N Pay Stores 42,400 154 SABMiller 16,300 234 Sanlam 224,340 394 Sappi 8,600 123 Standard Bank Investment 32,796 287 Total South Africa (Cost $2,431) 3,276 SOUTH KOREA 16.1% Common Stocks 15.1% Amorepacific 1,445 282 Cheil Communications 970 128 Daewoo Shipbuilding & Marine Engineering 8,690 128 Hanaro Telecom * 43,164 123 Hyundai Department Store * 2,740 79 Hyundai Motor * 860 42 Hyundai Motor GDR, 144A (USD) 3,900 93 Kookmin Bank * 12,570 420 Kookmin Bank ADR (USD) * 1,100 37 Korean Air Lines * 4,000 61 Kumgang Korea Chemical 2,240 238 LG Chemical 8,100 303 LG Electronics * 1,990 112 Lotte Chilsung Beverage 280 192 Ncsoft * 2,200 210 Plenus 7,670 78 S-Oil 7,330 370 Samsung Electronics 2,180 855 Shinhan Financial 13,500 266 Shinsegae 1,280 360 SK Corporation * 5,130 268 South Korea Telecom 2,140 335 Woori Finance Holdings 13,960 100 Woori Finance Holdings (Regulation S shares) * 8,890 64 5,144 Preferred Stocks 1.0% Hyundai Motor 12,890 356 356 Total South Korea (Cost $4,671) 5,500 SWITZERLAND 0.7% Common Stocks 0.7% Compagnie Financiere Richemont GDR (ZAR) 86,500 242 Compagnie Financiere Richemont Equity Units, Class A 100 3 Total Switzerland (Cost $200) 245 TAIWAN 9.4% Common Stocks 9.4% Acer 76,183 111 Advantech 75,795 162 Basso Industry 70,000 145 Cathay Financial Holding 265,000 508 Cheng Shin Rubber Industry 101,488 121 Chinatrust Financial 392,733 448 E.Sun Financial 261,000 178 E.Sun Financial GDR 144A (USD) * 1,800 31 Evergreen Marine * 26 0 Far Eastern Department Stores 197,000 93 Far Eastern Textile 301,505 201 Formosa Petrochemical * 79,000 132 Polaris Securities 177,000 91 Quanta Computer 133,226 215 Taishin Financial Holdings 409,887 335 Taiwan Cellular 116,000 116 Taiwan Semiconductor Manufacturing 99,693 131 Via Technologies * 158,000 91 Yuanta Core Pacific * 126,000 89 Total Taiwan (Cost $3,067) 3,198 THAILAND 1.5% Common Stocks 1.5% Bangkok Bank NVDR * 62,300 142 C.P. 7-Eleven 54,300 71 Kasikornbank Public NVDR * 74,000 82 Land & Houses NVDR 481,300 106 Siam Commercial Bank 92,100 99 Total Thailand (Cost $440) 500 TURKEY 2.9% Common Stocks 2.9% Akbank 28,254,298 127 Anadolu Efes Biracilik ve Malt Sanayii 6,432,750 102 Arcelik * 15,415,300 94 Dogus Otomotiv * 6,116,200 20 Hurriyet Gazete 92,176,350 183 Turkcell Iletisim Hizmetleri 28,563,174 175 Turkcell Iletisim Hizmetleri ADR (USD) 1,769 27 Turkiye Garanti Bankasi * 62,558,852 167 Turkiye Is Bankasi (Isbank) 26,815,100 111 Total Turkey (Cost $630) 1,006 SHORT-TERM INVESTMENTS 6.1% Money Market Funds 6.1% T. Rowe Price Reserve Investment Fund, 1.81% #+ 2,093,342 2,093 Total Short-Term Investments (Cost $2,093) 2,093 Total Investments in Securities 100.7% of Net Assets (Cost $29,066) $ 34,431 The accompanying notes are an integral part of these financial statements. (1) Denominated in currency of country of incorporation unless otherwise noted # Seven-day yield * Non-income producing + Affiliated company--See Note 5 @ Valued by the T. Rowe Price Valuation Committee, established by the fund's Board of Directors 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 value of such securities at period-end amounts to $468 and represents 1.4% of net assets ADR American Depository Receipts EUR Euro GDR Global Depository Receipts HKD Hong Kong dollar NVDR Non Voting Depository Receipt USD United States dollar ZAR South African rand Statement of Assets and Liabilities T. Rowe Price Institutional Emerging Markets Equity Fund October 31, 2004 (In thousands except shares and per share amounts) Assets Investments in securities, at value Affiliated companies (cost $2,093) $ 2,093 Other companies (cost $26,973) 32,338 Total investments in securities 34,431 Other assets 581 Total assets 35,012 Liabilities Total liabilities 830 NET ASSETS $ 34,182 -------------------- Net Assets Consist of: Undistributed net investment income (loss) $ 155 Undistributed net realized gain (loss) 1,010 Net unrealized gain (loss) 5,368 Paid-in-capital applicable to 2,057,278 shares of $0.01 par value capital stock outstanding; 1,000,000,000 shares of the Corporation authorized 27,649 NET ASSETS $ 34,182 -------------------- NET ASSET VALUE PER SHARE $ 16.61 -------------------- The accompanying notes are an integral part of these financial statements. Statement of Operations T. Rowe Price Institutional Emerging Markets Equity Fund ($ 000s) Year Ended 10/31/04 Investment Income (Loss) Dividend income (net of foreign taxes of $83) $ 600 Investment management and administrative expense 277 Net investment income (loss) 323 Realized and Unrealized Gain (Loss) Net realized gain (loss) Securities (net of foreign taxes of $141) 904 Foreign currency transactions (30) Net realized gain (loss) 874 Change in net unrealized gain (loss) Securities (net of decrease in deferred foreign taxes of $5) 2,831 Other assets and liabilities denominated in foreign currencies 3 Change in net unrealized gain (loss) 2,834 Net realized and unrealized gain (loss) 3,708 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS $ 4,031 -------------------- The accompanying notes are an integral part of these financial statements. Statement of Changes in Net Assets T. Rowe Price Institutional Emerging Markets Equity Fund ($ 000s) Year 10/31/02 Ended Through 10/31/04 10/31/03 Increase (Decrease) in Net Assets Operations Net investment income (loss) $ 323 $ 95 Net realized gain (loss) 874 256 Change in net unrealized gain (loss) 2,834 2,534 Increase (decrease) in net assets from operations 4,031 2,885 Distributions to shareholders Net investment income (115) (2) Net realized gain (268) -- Decrease in net assets from distributions (383) (2) Capital share transactions * Shares sold 19,092 12,921 Distributions reinvested 280 2 Shares redeemed (4,488) (156) Increase (decrease) in net assets from capital share transactions 14,884 12,767 Net Assets Increase (decrease) during period 18,532 15,650 Beginning of period 15,650 -- End of period $ 34,182 $ 15,650 --------------- --------------- (Including undistributed net investment income of $155 at 10/31/04 and $88 at 10/31/03) *Share information Shares sold 1,228 1,116 Distributions reinvested 19 -- Shares redeemed (293) (13) Increase (decrease) in shares outstanding 954 1,103 The accompanying notes are an integral part of these financial statements. Notes to Financial Statements T. Rowe Price Institutional Emerging Markets Equity Fund October 31, 2004 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 Emerging Markets Equity Fund (the fund), a diversified, open-end management investment company, is one portfolio established by the corporation. The fund commenced operations on October 31, 2002. The fund seeks long-term growth of capital through investments primarily in the common stocks of companies located (or with primary operations) in emerging markets. 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, for certain markets, the official closing price at the time the valuations are made, except for OTC Bulletin Board securities, which are valued at the mean of the latest bid and asked prices. A security that is listed or traded on more than one exchange is valued at the quotation on the exchange determined to be the primary market for such security. Listed securities not traded on a particular day are valued at the mean of the latest bid and asked prices for domestic securities and the last quoted sale price for international securities. Investments in mutual funds are valued at the mutual fund's closing net asset value per share on the day of valuation. Other investments 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. In the course of making a good faith determination of a security's fair value, the fund reviews a variety of factors, including market and trading trends and the value of comparable securities, such as unrestricted securities of the same issuer. Most foreign markets close before the close of trading on the NYSE. If the fund determines that developments between the close of a foreign market and the close of the NYSE will, in its judgment, materially affect the value of some or all of its portfolio securities, which in turn will affect the fund's share price, the fund will adjust the previous closing prices to reflect the 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. A fund may also fair value securities in other situations, such as when a particular foreign market is closed but the fund is open. In deciding whether to make fair value adjustments, the fund reviews a variety of factors, including developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. The fund uses outside pricing services to provide it with closing market prices and information used for adjusting those prices. The fund cannot predict how often it will use closing prices and how often it will adjust those prices. As a means of evaluating its fair value process, the fund routinely compares closing market prices, the next day's opening prices in the same markets, and adjusted prices. Currency Translation Assets, including investments, and liabilities denominated in foreign currencies are translated into U.S. dollar values each day at the prevailing exchange rate, using the mean of the bid and asked prices of such currencies against U.S. dollars as quoted by a major bank. Purchases and sales of securities, income, and expenses are translated into U.S. dollars at the prevailing exchange rate on the date of the transaction. The effect of changes in foreign currency exchange rates on realized and unrealized security gains and losses is reflected as a component of security gains and losses. Redemption Fees A 2% fee is assessed on redemptions of fund shares held less than 1 year to deter short-term trading and protect the interests of long-term shareholders. Redemption fees are withheld from proceeds that shareholders receive from the sale or exchange of fund shares. The fees are paid to the fund, and have the primary effect of increasing paid-in capital. The fees may cause the redemption price per share to differ from the net asset value per share. Investment Transactions, Investment Income, and Distributions Income and expenses are recorded on the accrual basis. Dividends received from mutual fund investments are reflected as dividend income; capital gain distributions are reflected as realized gain/loss. Dividend income and capital gain distributions are recorded on the ex-dividend date. Investment transactions are accounted for on the trade date. Realized gains and losses are reported on the identified cost basis. Distributions to shareholders are recorded on the ex-dividend date. Income distributions are declared and paid on an annual basis. Capital gain distributions, if any, are declared and paid by the fund, typically on an annual basis. Other 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, 2004, approximately 91% of the fund's net assets were invested in securities of companies located in emerging markets or denominated in or linked to the currencies of emerging market countries. Future economic or political developments could adversely affect the liquidity or value, or both, of such securities. Restricted Securities The fund may invest in securities that are subject to legal or contractual restrictions on resale. Although certain of these securities may be readily sold, for example, under Rule 144A, others may be illiquid, and their sale may involve substantial delays and additional costs, and prompt sale at an acceptable price may be difficult. Other Purchases and sales of portfolio securities, other than short-term securities, aggregated $30,858,000 and $16,465,000, respectively, for the year ended October 31, 2004. 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, 2004 totaled $383,000 and were characterized as ordinary income for tax purposes. At October 31, 2004, the tax-basis components of net assets were as follows: -------------------------------------------------------------------------------- Unrealized appreciation $ 5,931,000 Unrealized depreciation (563,000) Net unrealized appreciation (depreciation) 5,368,000 Undistributed ordinary income 623,000 Undistributed long-term capital gain 542,000 Paid-in capital 27,649,000 Net assets $ 34,182,000 -------------------- For the year ended October 31, 2004, the fund recorded the following permanent reclassifications to reflect tax character. Reclassifications between income and gain relate primarily to the character of foreign capital gain taxes. Results of operations and net assets were not affected by these reclassifications. -------------------------------------------------------------------------------- Undistributed net investment income $ (141,000) Undistributed net realized gain 141,000 At October 31, 2004, the cost of investments for federal income tax purposes was $29,066,000. 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 certain 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 when applicable. At October 31, 2004, the fund had no deferred tax liability. 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 and administrative agreement between the fund and the manager provides for an all- inclusive annual fee equal to 1.10% of the fund's average daily net assets. The fee is computed daily and paid monthly. The agreement provides that investment management, shareholder servicing, transfer agency, accounting, and custody services are provided to the fund, and interest, taxes, brokerage commissions, directors' fees and expenses, and extraordinary expenses are paid directly by the fund. At October 31, 2004, $33,000 was payable under the agreement. 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 and affiliates of the fund. The Reserve Funds are offered as cash management options to mutual funds, trusts, and other accounts managed by Price Associates and/or its affiliates, and are not available for direct purchase by members of the pub- lic. The Reserve Funds pay no investment management fees. During the year ended October 31, 2004, dividend income from the Reserve Funds totaled $10,000, and the value of shares of the Reserve Funds held at October 31, 2004, and October 31, 2003, was $2,093,000 and $488,000, respectively. T. Rowe Price Institutional Emerging Markets Equity Fund Report of Independent Registered Public Accounting Firm To the Board of Directors of T. Rowe Price Institutional International Funds, Inc. and Shareholders of T. Rowe Price Institutional Emerging Markets Equity Fund In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of T. Rowe Price Institutional Emerging Markets Equity Fund (one of the portfolios comprising T. Rowe Price Institutional International Funds, Inc., hereafter referred to as the "Fund") at October 31, 2004, 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 the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2004, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Baltimore, Maryland November 22, 2004 T. Rowe Price Institutional Emerging Markets Equity Fund Tax Information (Unaudited) for the Tax Year Ended 10/31/04 -------------------------------------------------------------------------------- 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 $268,000 from short-term capital gains. For taxable non-corporate shareholders, $482,000 of the fund's income represents qualified dividend income subject to the 15% rate category. The fund will pass through foreign source income of $605,000 and foreign taxes paid of $223,000. Information on Proxy Voting Policies, Procedures, and Records -------------------------------------------------------------------------------- A description of the policies and procedures used by T. Rowe Price funds and portfolios to determine how to vote proxies relating to portfolio securities is available in each fund's Statement of Additional Information, which you may request by calling 1-800-225-5132 or by accessing the SEC's Web site, www.sec.gov. The description of our proxy voting policies and procedures is also available on our Web site, www.troweprice.com. To access it, click on the words "Company Info" at the top of our homepage for individual investors. Then, in the window that appears, click on the "Proxy Voting Policy" navigation button in the top left corner. Each fund's most recent annual proxy voting record is available on our Web site and through the SEC's Web site. To access it through our Web site, follow the directions above, then click on the words "Proxy Voting Record" at the bottom of the Proxy Voting Policy page. How to Obtain Quarterly Portfolio Holdings -------------------------------------------------------------------------------- The fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The fund's Form N-Q is available electronically on the SEC's Web site (www.sec.gov); hard copies may be reviewed and copied at the SEC's Public Reference Room, 450 Fifth St. N.W., Washington, DC 20549. For more information on the Public Reference Room, call 1-800-SEC-0330. T. Rowe Price Institutional Emerging Markets Equity Fund About the Fund's Directors and Officers -------------------------------------------------------------------------------- Your fund is governed by a Board of Directors that meets regularly to review investments, performance, compliance matters, advisory fees and expenses, and other business affairs, 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 (Year of Birth) Year Elected* Principal Occupation(s) During Past 5 Years and Directorships of Other Public Companies Anthony W. Deering (1945) 1991 Director, Chairman of the Board, and Chief Executive Officer, The Rouse Company, real estate developers; Director, Mercantile Bank (4/03 to present) Donald W. Dick, Jr. (1943) 1989 Principal, EuroCapital Advisors, LLC, an acquisition and management advisory firm David K. Fagin (1938) 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 Corporation Karen N. Horn (1943) 2004 Managing Director and President, Global Private Client Services, Marsh, Inc. (1999-2003); Managing Director and Head of International Private Banking, Bankers Trust (1996-1999) F. Pierce Linaweaver (1934) 2001 President, F. Pierce Linaweaver & Associates, Inc., consulting environmental and civil engineers John G. Schreiber (1946) 2001 Owner/President, Centaur Capital Partners, Inc., a real estate investment company; Partner, Blackstone Real Estate Advisors, L.P. * Each independent director oversees 111 T. Rowe Price portfolios and serves until retirement, resignation, or election of a successor. Inside Director Name (Year 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 (1943) 2002 [111] 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 ** Inside directors serve until retirement, resignation, or election of a successor. T. Rowe Price Institutional Emerging Markets Equity Fund Officers Name (Year of Birth) Title and Fund(s) Served Principal Occupation(s) Christopher D. Alderson (1962) 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 (1962) Vice President, Institutional International Funds Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. Stephen V. Booth, CPA (1961) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., and T. Rowe Price Trust Company Joseph A. Carrier (1960) Treasurer, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Investment Services, Inc., and T. Rowe Price Trust Company Roger L. Fiery III, CPA (1959) 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 Gregory S. Golczewski (1966) Vice President, Institutional International Funds Vice President, T. Rowe Price and T. Rowe Price Trust Company Henry H. Hopkins (1942) 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 (1953) Secretary, Institutional International Funds Assistant Vice President, T. Rowe Price and T. Rowe Price Investment Services, Inc. George A. Murnaghan (1956) 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 R. Todd Ruppert (1956) Vice President, Institutional International Funds Vice President, T. Rowe Price, T. Rowe Price Group, Inc., T. Rowe Price Retirement Plan Services, Inc., 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 (1964) Vice President, Institutional International Funds Vice President, T. Rowe Price Group, Inc., and T. Rowe Price International, Inc. Julie L. Waples (1970) Vice President, Institutional International Funds Vice President, T. Rowe Price David J.L. Warren (1957) President, Institutional International Funds Director and Vice President, T. Rowe Price; Vice President, 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 (1962) 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 (1959) 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. The registrant has 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. (a) - (d) Aggregate fees billed to the registrant for the last two fiscal years for professional services rendered by the registrant's principal accountant were as follows: 2004 2003 Audit Fees $9,490 $11,266 Audit-Related Fees 912 670 Tax Fees 4,863 3,550 All Other Fees 124 -- Audit fees include amounts related to the audit of the registrant's annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. Audit-related fees include amounts reasonably related to the performance of the audit of the registrant's financial statements, specifically the issuance of a report on internal controls. Tax fees include amounts related to tax compliance, tax planning, and tax advice. Other fees include the registrant's pro-rata share of amounts for agreed-upon procedures in conjunction with service contract approvals by the registrant's Board of Directors/Trustees. (e)(1) The registrant's audit committee has adopted a policy whereby audit and non-audit services performed by the registrant's principal accountant for the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant require pre-approval in advance at regularly scheduled audit committee meetings. If such a service is required between regularly scheduled audit committee meetings, pre-approval may be authorized by one audit committee member with ratification at the next scheduled audit committee meeting. Waiver of pre-approval for audit or non-audit services requiring fees of a de minimis amount is not permitted. (2) No services included in (b) - (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) Less than 50 percent of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by the registrant's principal accountant for non-audit services rendered to the registrant, its investment adviser, and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant were $849,000 and $819,000, respectively, and were less than the aggregate fees billed for those same periods by the registrant's principal accountant for audit services rendered to the T. Rowe Price Funds. (h) All non-audit services rendered in (g) above were pre-approved by the registrant's audit committee. Accordingly, these services were considered by the registrant's audit committee in maintaining the principal accountant's independence. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. Not applicable. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of Matters to a Vote of Security Holders. Not applicable. Item 11. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer have evaluated the registrant's disclosure controls and procedures within 90 days of this filing and have concluded that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized, and reported timely. (b) The registrant's principal executive officer and principal financial officer are aware of no change in the registrant's internal control over financial reporting that occurred during the registrant's second fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is attached. (2) Separate certifications by the registrant's principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of 1940, are attached. (3) Written solicitation to repurchase securities issued by closed-end companies: not applicable. (b) A certification by the registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. T. Rowe Price Institutional International Funds, Inc. By /s/ James S. Riepe ----------------------------------- James S. Riepe Principal Executive Officer Date December 17, 2004 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 17, 2004 By /s/ Joseph A. Carrier ----------------------------------- Joseph A. Carrier Principal Financial Officer Date December 17, 2004