The 1986 contributions of the Institute of International Education (IIE) through development assistance and educational and cultural exchange are described along with the history of the 40-year-old Fulbright Program which IIE helps to administer. Attention is directied to: IIE in the arts, in efforts to build developing-country institutions, in human rights, and in agriculture and natural resources; IIE and U.S. colleges and universities, IIE's activities in research and communications, and IIE's administrative support services and overseas offices. Fulbright graduate fellowships for foreign nationals and U.S. nationals are discussed. Profiles of individual IIE beneficiaries and participants and Fulbright fellows are included. IIE-administered projects for 1986 are listed. Additional listings include: IIE educational associates (colleges and universities arranged alphabetically by state); members of the Fulbright 1986-1987 national screening committee, listed by country and school; members of regional IIE advisory boards; business and foundation donors to IIE; and individual donors. Financial information about IIE for 1985 and 1986 is also appended. Statements by IIE Board of Trustees Chairman Charles H. Percy and IIE President and Chief Executive Officer Richard M. Krasno are included. The report is illustrated throughout with black and white and color photographs. (SW)