<PAGE>
Templeton Institutional Funds, Inc.
TIFI Growth Series
- ------------------------------------------------------------------
SEMI-ANNUAL REPORT
[LOGO OF TEMPLETON June 30, 1995
APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
Mutual funds, annuities, and other investment products:
. are not FDIC insured;
. are not deposits or obligations of, or guaranteed by, any financial
institution;
. are subject to investment risks, including possible 1oss of the
principal amount invested.
- --------------------------------------------------------------------------------
<PAGE>
June 30, 1995
Dear Shareholder...
While problems in Latin America cast a bearish pall over the
world's equity markets in early 1995, second quarter results had a much more
bullish feel to them. The combination of falling interest rates, better than
anticipated earnings performance and improving flows of assets into mutual funds
proved potent for most of the world's stock markets, but most notably for US
stocks. Of the various categories of mutual funds tracked by Lipper, only
emerging market and Japanese oriented funds turned in a negative performance in
1995's first half while many other categories were able to attain double digit
advances. Within this environment, the Templeton Institutional Funds, Inc.
Growth Series (the "Fund") returned 8.7%, 11.1% and 11.9% for the quarter, six
month and one year periods ending June 30, 1995, compared to the MSCI World
Index returns of 4.4%, 9.4% and 11.2%, respectively. The Fund has returned 13.6%
annualized since its inception on May 3, 1993, compared to the MSCI World Index
annualized return of 10.9%.
European stocks generally moved higher with returns to dollar
based investors being even better due to the positive impact of the rather sharp
decline in the US currency's value. Asian stock markets outside of Japan also
mostly improved with Hong Kong leading the rebound from last year's dismal
returns. Overall, however, US stocks have been the equity of choice so far in
1995 as the US market achieved the best returns when measured in local currency
terms and the third best, after Finland and Switzerland, when measured in
dollars. The MSCI EAFE Index, however, rose just 2.8% due largely to Japan's
negative influence on the index while the MSCI World Index rose 9.4% due to the
large positive impact of the US weighting in that index.
- --------------------------------------------------------------------------------
Total Returns as of 6/30/95
<TABLE>
<CAPTION>
One-Year Cumulative
Average Annual/1/ Since Inception/2/
<S> <C> <C>
TIFI Growth Series 11.85 31.59
MSCI World Index 11.22 25.02
</TABLE>
/1/ Average annual total return figures represent the average annual increase
in value of an investment over the specified periods. The calculations
assume reinvestment of dividends and capital gains distributions.
/2/ The cumulative return shows the change in value of an investment over the
period(s) indicated. The calculations assume reinvestment of dividends and
capital gains distributions.
Investment return and principal value fluctuate, so that your shares, when
redeemed, may be worth more or less than their original cost. Past
performance cannot guarantee future results.
- --------------------------------------------------------------------------------
continued...
[PHOTO OF JAMES CHANEY APPEARS HERE]
James Chaney is a portfolio manager and research analyst. He currently manages
the Templeton Institutional Growth and Foreign Equity Mutual Funds, two variable
annuity products and several corporate and public fund separate accounts. Mr.
Chaney's global research responsibilities include merchandising, regional banks
and environmental companies.
Prior to joining the Templeton organization in 1991, Mr. Chaney spent six years
with GE Investments, where he was vice president of international equities. In
that capacity, he had numerous research responsibilities and also managed
several separate accounts and a start-up mutual fund which was a Lipper-listed
top quartile performer. He also has another seven years experience as an
international consulting engineer and project manager for Camp, Dresser & McKee,
Inc. and American British Consultants.
Mr. Chaney received a M.B.A. with Honors from Columbia University, where he was
a member of the Beta Gamma Sigma Honor Society. He received his M.S. in
Engineering from Northeastern University and his B.S. in Engineering from the
University of Massachusetts-Amherst. Mr. Chaney is a licensed and registered
engineer.
<PAGE>
Templeton Institutional Funds, Inc. Growth Series
letter continued................................................................
One of the most intriguing aspects of the markets' behavior lately
has been the extreme divergence in the performance of the world's two largest
stock markets and their associated currencies. During the first half of 1995,
the US market, as measured by the S&P 500, rose 20.1% while Japan's Nikkei 500
Index declined 26.4% in local currency. Conversely, the two nation's currencies
have moved in the opposite direction with the yen rising 17.3% versus the dollar
for the six months ended June 30th. The major European markets seem to be taking
the middle ground with token appreciation in the equity markets and slightly
more subdued currency strength versus the dollar. These short-term trends in
equity prices and exchange rate values at least partly, and perhaps largely,
reflect the consequences of the fundamental economic policy differences that
have been in place for many years in these nations.
These policies can be briefly summarized as follows: The US's
primary goal has been maintaining economic growth and employment as close to
potential as possible without igniting serious bouts of inflation and with an
unhealthy emphasis on domestic consumption versus savings. Japan has tried to
successfully achieve economic growth and employment via encouraging savings,
investment and unusually rapid export growth while discouraging imports and
domestic demand. Germany's (and therefore much of central Europe's) most
prominent goal has long been to limit inflation at the expense of optimal
economic growth and employment as well as to encourage savings, investment and
growth in the export sector. The incompatibility of the policies of the three
most influential economic regions in the world has thus far worked itself out in
each nation's respective current account and ultimately in their exchange rates
as we have seen so clearly again recently. Japan and Germany, as of the end of
1993, had built their net foreign asset positions to 14% and 12% of their
respective GNP's and the US, after thirteen years of current account deficits,
is a net debtor to the rest of the world to the tune of over 10% of its GNP.
These different models of capitalism have been clashing for over
twenty years and given the increasingly integrated world economy, the emergence
of the world's developing economies as an economic force and the current state
of each nation's economy, it is unlikely that the current policies can remain
unaltered over the next twenty years. The changes that ultimately occur will
undoubtedly have a material impact on the magnitude, and perhaps direction, of
equity price movements both inside and outside the nation's involved. The US
will have the least impetus for change given the small share of international
trade in its economy. The high value of the deutschemark will crimp Germany's
export ability, thereby reducing its economic growth somewhat and leading to
greater investment overseas, but major changes in the German model of capitalism
do not appear imminent.
Japan, on the other hand, will remain a victim of its own enormous
export success as its major customer, the US, continues to badger them to change
their economic model to incorporate greater imports and
- --------------------------------------------------------------------------------
Industry Diversification on 6/30/95
(% of Total Portfolio)
Banking 15.4%
Utilities Electrical & Gas 6.9%
Telecommunications 6.8%
Insurance 6.6%
Merchandising 6.4%
Financial Services 5.5%
Multi-Industry 4.8%
Forest Products & Paper 3.9%
Chemicals 3.8%
Business & Public Service 3.8%
- --------------------------------------------------------------------------------
Geographic Distribution on 6/30/95
(% of Total Equity)
[PIE CHART APPEARS HERE]
Europe 46.3%
North America 30.2%
Asia 14.0%
Australia/New Zealand 5.6%
Latin America/Caribbean 3.9%
2
<PAGE>
................................................................................
fewer exports. While Japan has largely resisted such changes in the past, Adam
Smith's proverbial "invisible hand" has become somewhat more visible in the
strength of the yen which has begun to bring about some alterations in the
Japanese model of capitalism, primarily low economic growth, reduced
productivity, increased offshore investments, reductions in cross holdings and
less stable employment prospects. The value of the yen versus the dollar will
greatly influence the future pace of change in the Japanese economy. In the
absence of additional significant yen strength, the transition of the Japanese
economy to one that is at least somewhat more complementary with its major
trading partners will likely be slow due to the potentially heavy costs of
changes such as unemployment, greater fiscal deficits and lower corporate
earnings. Entering this period with an over built manufacturing base, a weakened
financial sector and an equity market that is unable to attract or allocate
capital in an efficient manner will not ease this transition. Japan's strong
national balance sheet, however, should help the country weather whatever
difficult times may arise.
It is also worth noting that we have often found that, as the
difficulties that Japanese companies are facing multiply, this often translates
into greater opportunities for US, European and emerging market firms. While we
at Templeton are often attracted to markets like Japan's that have declined
greatly in value, in this case we still find it very difficult to identify many
stocks that are selling at extremely low multiples of what we believe could be
earned five years from now. Given the changes that could occur and the market's
expected negative reaction to such changes, Templeton's team of 34 analysts
located in 7 offices worldwide will be diligently and continuously reviewing the
long-term earnings potential of Japanese companies in their assigned industries
in relation to share prices so as to identify bargains as they arise.
Weaker share prices in the emerging markets is also attracting our
analysts' attention. Many of these nations embraced capitalism with such an
initial vigor that substantial flows of portfolio investment were attracted from
developed world investors leading to stunning advances in equity prices. Lately,
these nations and investors alike have found that the transition to capitalism
was more complicated than initially anticipated and this reality has been
reflected in sharply declining share prices in places like Mexico, Argentina,
Brazil, Eastern Europe, Russia, India and China. The recent volatility of these
markets is, in large measure, a reflection of the increased reliance on fast
moving foreign portfolio investments to finance growth versus the historic use
of more stable bank loans and a likely increased future focus on foreign direct
investments. Nevertheless, portfolio investment will remain a very important
source of capital for the emerging markets and, in most of these nations, the
needed economic adaptations to return economic growth to a more balanced and
sustainable level will be forthcoming with greater rapidity then we expect in
Japan. As a result of this and much lower current valuation levels, we have been
able to increasingly
- --------------------------------------------------------------------------------
10 Largest Positions on 6/30/95
(% of Total Portfolio)
Svenska Handelsbanken, A 1.5%
Astra AB, A 1.3%
Hitachi Ltd. 1.3%
Bayer AG 1.2%
Volvo AB, B 1.1%
Asea AB, A 1.1%
Societe Generale de Surveillance 1.1%
VEBA AG 1.0%
Alcatel Alsthom Cie Generale 1.0%
Sony Corp. 1.0%
- --------------------------------------------------------------------------------
Fund Asset Allocation on 6/30/95
Equity* 94.4%
[PIE CHART APPEARS HERE] Short Term & Other 5.6%
*Equity includes convertible and preferred stocks
3
<PAGE>
Templeton Institutional Funds, Inc. Growth Series
letter continued................................................................
identify shares selling at inordinately low multiples of long-term earnings
power. While the road to western levels of prosperity will, in all probability,
remain long and quite bumpy for these developing markets, the course seems to
have been set firmly in the direction towards greater corporate and individual
earnings power. Only the speed at which these nations proceed down the path to
the benefits of capitalism seems in doubt at this time and this will vary from
nation to nation with spectacular accidents occurring from time to time. Our
analysts will strive to apply our time-tested investment disciplines in order to
identify those emerging market equities that may provide the most worthwhile
returns for your portfolio.
Turning briefly to those markets that have performed better in
1995, we are finding fewer bargains - particularly in the US. While we at
Templeton have never claimed any expertise in the area of short-term economic
prognostication, it is readily apparent to us that we are not at the bottom of a
recession with only upside surprises awaiting us. Economic activity has clearly
begun to slow but, with no obvious imbalances in the economy, a long period of
decline does not seem likely. Because of the good performance of both the US
bond and equity markets, however, risk has clearly increased. Still, valuations
are not yet so extended as to cause a dramatic increase in the number of stocks
qualifying for our Source of Funds List. With the financial system in good
health, corporate balance sheets improving, stock prices relatively high,
interest rates low and the dollar weak, investment bankers have begun to stir.
New issuance activity is strong and mergers and acquisition activity is
prevalent with US companies potentially the target of European based firms. This
coupled with continued healthy inflows into mutual funds could support the US
market for some time.
It is also becoming more difficult to identify bargains in Europe,
particularly in the hard currency countries (i.e. Germany, France, Switzerland
and the Netherlands). Again, however, valuations have not become so extended
that our Source of Funds List has become cluttered with European names.
Moreover, consensus expectations appear to be less optimistic in Europe
suggesting that there is still the possibility of favorable developments
surprising these markets.
Partly because many Asian currencies are indirectly tied to the
value of the depressed dollar, we are still able to find many bargain-priced
stocks in this region. Earnings continue to expand and valuations generally
remain reasonable. Due to Japan's and China's economic problems, interest in the
area remains somewhat subdued and expectations relatively low. Economic growth
remains at very high levels and could continue unabated in most countries for
the foreseeable future. The long term outlook for share prices in this region
remains favorable.
The long-term outlook for global equity investment
remains positive in our view. The acceptance of capitalism by almost all
nations, increasingly free trade, technological advancements and the reduced
probability of warfare on a large scale all point towards better economic
growth
- --------------------------------------------------------------------------------
Total Return Index Comparison/1/
$5,000,000 Investment: 05/03/93 - 06/30/95
[GRAPH APPEARS HERE SHOWING COMPARISON
BETWEEN TIFI GROWTH SERIES, MSCI WORLD
INDEX AND THE CPI INDEX]
Period ended June 30, 1995
<TABLE>
<CAPTION>
Since
Inception
One-Year (05/03/93)
<S> <C> <C>
Average Annual Total Return/2/ 11.85% 13.57%
Cumulative Total Return/3/ 11.85% 31.59%
</TABLE>
/1/ The Fund's manager is waiving a portion of its managment fees, which
reduces operating expenses. Without these reductions, the Fund's total
return would have been lower. The fee waiver may be discontinued at any
time.
/2/ Average annual total return figures represent the average annual increase
in value of an investment over the specified periods. The calculations
assume reinvestment of dividends and capital gains distributions.
/3/ The cumulative return shows the change in value of an investment over the
period(s) indicated. The calculations assume reinvestment of dividends and
capital gains distributions.
Investment return and principal value fluctuate, so that your shares, when
redeemed, may be worth more or less than their original cost. Past
performance cannot guarantee future results.
- --------------------------------------------------------------------------------
4
<PAGE>
................................................................................
and thus corporate earnings. While the supply of equities is growing, due partly
to privatizations in both developed and developing countries, savings should
also rise dramatically over the longer term due to demographic changes and the
pressing need for governments and individuals to address the issue of pensions
and health care. A study using 1993 data by the Investment Company Institute
indicates that mutual fund assets outside the US already equal those in the US
and that the total is over $4 trillion. This number should grow rapidly,
particularly outside the US where demand for mutual funds and pension management
has only just begun to catch on. As
<TABLE>
<CAPTION>
==============================================================================================================
Regional Fund Management (US$b)
Total Total Funds
Pension Mutual Funds as % of per
Country Funds Funds Insurance Per Capita Capita GDP
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Hong Kong 13 27 4 7,251 30%
India 40 13 17 75 27%
Indonesia 7 0.67 1 42 5%
Korea 26* 173** 75 6,073 62%
Malaysia 35 N/A 7 2,086 50%
Philippines 3 0.19 0.32 51 4%
Singapore 35 20 10 22,772 85%
Taiwan 6 9 27 1,998 21%
Thailand 4 10 2 321 12%
US 5,000 1,600 2,000 28,667 106%
*End-1993
**Investments Trust Cos and Bank Trust Accounts
Source: Peregrine regional estimates
==============================================================================================================
</TABLE>
we noted this time last year, if the top five most populous emerging market
nations (China, India, Indonesia, Brazil and Pakistan) can accumulate an
additional $400 per capita in mutual fund and pension assets over the next ten
years, this alone will create a new pool of $1 trillion in savings. Also, most
observers believe that the developed countries will increase the level of
foreign assets held over the next five to ten years. The Regional Fund
Management table above, produced by Peregrine, compares the size of pension,
mutual fund and insurance assets in various Asian countries with that of the US
and highlights the potential for growth in this area alone.
5
<PAGE>
Templeton Institutional Funds, Inc. Growth Series
letter continued................................................................
With long-term earnings growth at least as good as that experienced in the past
and the potential for rapid growth in savings, global equities should remain the
asset class of choice for long-term investors.
Current market conditions present a challenge to our analytical
team to uncover unusually inexpensive shares. Nevertheless, you can be confident
that we will continue to implement, in a disciplined fashion, the investment
methodologies that have served our clients so well for so long. Finding
outstanding values by carefully studying the fundamental position of individual
companies, translating our observations into long term earnings projections,
determining which shares are valued most attractively based on these projections
and patiently waiting until other investors come to admire the positive traits
we have already identified will remain the hallmark of the Templeton research
team. Our investment style requires fortitude and resolve to remain focused on
long-term opportunities in the face of short-term problems that depress share
prices to the level that qualify them as true Templeton bargains. Our staff of
investment professionals continues to grow and the resources dedicated to
helping them produce the highest quality investment research have also expanded.
While we are generally pleased with our results thus far in 1995, we intend to
intensify our bargain-hunting efforts with the goal of producing even better
long-term investment returns for our clients. It has been our pleasure to serve
as your investment counselor and we highly value your continued relationship
with the Templeton organization. Please feel free to contact us with any
questions or comments you might have.
Sincerely,
/s/ Donald F. Reed
Donald F. Reed, C.F.A., C.I.C.
President
Templeton Institutional Funds, Inc.
/s/ James E. Chaney
James E. Chaney, P.E.
Senior Vice President
Templeton Investment Counsel, Inc.
For more complete portfolio information, call Templeton Fund Information,
toll-free, at 1-800-362-6243.
6
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<TABLE>
<CAPTION>
SIX MONTHS MAY 3, 1993
ENDED (COMMENCEMENT OF
JUNE 30, 1995 YEAR ENDED OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1994 DECEMBER 31, 1993
------------- ----------------- -----------------
<S> <C> <C> <C>
Net asset value, beginning
of period $ 10.94 $ 11.80 $ 10.00
-------- -------- --------
Income from investment
operations:
Net investment income .17 .20 .06
Net realized and unrealized
gain (loss) 1.04 (.36) 1.94
-------- -------- --------
Total from investment
operations 1.21 (.16) 2.00
-------- -------- --------
Distributions:
Dividends from net
investment income -- (.20) (.05)
Distributions from net
realized gains (.08) (.50) (.15)
-------- -------- --------
Total distributions (.08) (.70) (.20)
-------- -------- --------
Change in net asset value 1.13 (.86) 1.80
-------- -------- --------
Net asset value, end of
period $ 12.07 $ 10.94 $ 11.80
======== ======== ========
TOTAL RETURN * 11.09% (1.32)% 20.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000) $210,408 $194,059 $184,013
Ratio of expenses to average
net assets 0.86%** 0.95% 1.00%**
Ratio of net investment
income to average net
assets 2.92%** 1.69% 1.19%**
Portfolio turnover rate 15.80% 17.23% 17.32%
</TABLE>
*NOT ANNUALIZED IN PERIODS OF LESS THAN ONE YEAR.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, June 30, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS: 87.4%
- -------------------------------------------------------------------------------
Aerospace & Military Technical Systems:
1.1%
Boeing Co. U.S. 15,500 $ 970,687
British Aerospace PLC U.K. 162,753 1,456,918
------------
2,427,605
- -------------------------------------------------------------------------------
Appliances & Household Durables: 1.0%
Sony Corp. Jpn. 45,000 2,160,170
- -------------------------------------------------------------------------------
Automobiles: 2.4%
Ford Motor Co. U.S. 46,000 1,368,500
*Regie Nationale des Usines
Renault SA Fr. 42,000 1,315,949
Volvo AB, B Swe. 125,000 2,379,856
------------
5,064,305
- -------------------------------------------------------------------------------
Banking: 14.9%
Argentaria Corporacion Bancaria
de Espana SA, ADR Sp. 99,750 1,832,906
Australia & New Zealand Banking
Group Ltd. Aus. 535,150 1,901,795
Banco Bilbao Vizcaya Sp. 64,000 1,846,687
Banco de Andalucia Sp. 11,750 1,523,983
Banco di Sardegna SPA, di Risp Itl. 69,300 448,941
Banco Portugues de Investimento
SA Port. 87,991 1,536,685
BankAmerica Corp. U.S. 24,000 1,263,000
Banque Nationale de Paris, ADR Fr. 40,600 1,958,341
Barclays PLC U.K. 102,533 1,101,252
Canadian Imperial Bank of
Commerce Can. 59,500 1,429,299
Deutsche Bank AG Ger. 43,500 2,116,811
First Chicago Corp. U.S. 22,000 1,317,250
Glendale Federal Bank FSB U.S. 119,000 1,487,500
HSBC Holdings PLC H.K. 122,294 1,568,622
Michigan National Corp. U.S. 11,000 1,170,125
National Bank of Canada Can. 165,000 1,351,228
National Bank of Greece SA Gr. 9,250 505,204
National Westminster Bank PLC U.K. 120,277 1,044,174
*PT Panin Bank ord., rts. Indo. 271,050 91,283
PT Panin Bank, fgn. Indo. 1,084,200 1,290,135
Svenska Handelsbanken, A Swe. 205,500 3,065,014
TR Financial Corp. U.S. 80,500 1,438,938
------------
31,289,173
- -------------------------------------------------------------------------------
Broadcasting & Publishing: 0.6%
News Corp. Ltd. Aus. 211,707 1,182,704
- -------------------------------------------------------------------------------
Building Materials & Components: 1.9%
*Owens Corning Fiberglas Corp. U.S. 47,900 1,766,313
Pioneer International Ltd. Aus. 860,000 2,139,364
------------
3,905,677
- -------------------------------------------------------------------------------
Business & Public Services: 3.8%
Esselte AB, A Swe. 87,000 1,088,307
*Novacare Inc. U.S. 82,500 670,313
Societe Generale de Surveillance
Holdings Ltd., br. Swtz. 1,275 2,214,503
Welsh Water PLC U.K. 151,000 1,596,601
Wheelbrator Technologies U.S. 52,700 810,263
WMX Technologies Inc. U.S. 58,000 1,645,750
------------
8,025,737
- -------------------------------------------------------------------------------
Chemicals: 3.8%
Akzo Nobel NV Neth. 12,000 1,434,269
Bayer AG Ger. 9,850 2,447,899
*European Vinyls Corp. EVC
International NV Neth. 25,285 1,178,172
</TABLE>
8
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Chemicals (cont.)
Rhone-Poulenc SA, A Fr. 84,800 $ 1,910,567
Solvay SA Bel. 2,000 1,096,815
------------
8,067,722
- -------------------------------------------------------------------------------
Data Processing & Reproduction: 0.3%
International Business Machines
Corp. (IBM) U.S. 5,700 547,200
- -------------------------------------------------------------------------------
Electrical & Electronics: 2.4%
Asea AB, A Swe. 27,425 2,363,769
Hitachi Ltd. Jpn. 267,000 2,661,025
------------
5,024,794
- -------------------------------------------------------------------------------
Energy Equipment & Services: 0.8%
International Recovery Corp. U.S. 111,000 1,637,250
- -------------------------------------------------------------------------------
Energy Sources: 3.0%
Repsol SA Sp. 56,500 1,777,214
Saga Petroleum AS, A Nor. 122,000 1,732,392
Societe Elf Aquitane SA Fr. 26,778 1,978,853
USX-Marathon Group Inc. U.S. 44,000 869,000
------------
6,357,459
- -------------------------------------------------------------------------------
Financial Services: 4.7%
*Capital Portugal Fund Port. 6,500 634,450
*Creditanstalt Investment
Privatisation Fund PLC Csk. 8,941 242,116
Dean Witter Discover & Co. U.S. 35,842 1,684,574
Federal National Mortgage Assn. U.S. 16,400 1,547,750
India Fund, B Ind. 679,964 1,281,156
Korea International Trust Kor. 28 1,414,000
Korea International Trust, IDR Kor. 2 113,000
Thailand International Fund Thai. 47 1,562,750
*Turkish Growth Fund Tur. 110,000 1,443,750
------------
9,923,546
- -------------------------------------------------------------------------------
Food & Household Products: 2.0%
Albert Fisher Group PLC U.K. 2,179,447 1,576,723
Hillsdown Holdings PLC U.K. 587,010 1,680,025
Vitro SA Mex. 372,960 1,060,997
------------
4,317,745
- -------------------------------------------------------------------------------
Forest Products & Paper: 3.9%
Carter Holt Harvey Ltd. N.Z. 465,000 1,137,809
Fletcher Challenge Ltd. Forestry
Division N.Z. 700,000 921,933
Georgia-Pacific Corp. U.S. 20,000 1,735,000
International Paper Co. U.S. 18,000 1,543,500
Metsa Serla OY, B Fin. 25,000 1,112,022
PT Barito Pacific Timber, fgn. Indo. 420,000 603,502
Stora Kopparbergs Bergslags AB,
B Swe. 85,000 1,150,922
------------
8,204,688
- -------------------------------------------------------------------------------
Health & Personal Care: 2.7%
Astra AB, A Swe. 91,000 2,808,333
Bristol Myers Squibb Co. U.S. 17,500 1,192,187
Hafslund Nycomed SA, B Nor. 50,000 1,156,280
Recordati Industria Chimica e
Farmaceutica SPA, di Risp Itl. 160,000 506,035
------------
5,662,835
- -------------------------------------------------------------------------------
Industrial Components: 0.8%
Goodyear Tire & Rubber Co. U.S. 40,000 1,650,000
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Insurance: 6.5%
Aegon NV Neth. 48,570 $ 1,680,124
Aetna Life & Casualty Co. U.S. 8,500 534,438
American International Group
Inc. U.S. 11,500 1,311,000
Capital RE Corp. U.S. 55,400 1,440,400
Cigna Corp. U.S. 15,000 1,164,375
International Nederlanden Group Neth. 27,562 1,524,404
Kemper Corp. U.S. 26,000 1,212,250
London Insurance Group Inc. Can. 74,000 1,380,346
Presidential Life Corp. U.S. 206,400 1,702,800
Zuerich Versicherung-
Gesellschaft Swtz. 1,460 1,834,668
------------
13,784,805
- -------------------------------------------------------------------------------
Machinery & Engineering: 0.8%
*VA Technologie AG, br. Aust. 13,000 1,627,002
- -------------------------------------------------------------------------------
Merchandising: 6.4%
Burton Group PLC U.K. 655,000 861,801
Dayton-Hudson Corp. U.S. 24,500 1,757,875
Home Depot Inc. U.S. 27,000 1,096,875
K Mart Corp. U.S. 96,000 1,404,000
Koninklijke Bijenkorf Beheer NV
(KBB) Neth. 15,215 1,091,906
Kwik Save Group PLC U.K. 173,000 1,785,207
Limited Inc. U.S. 59,500 1,309,000
Sears Roebuck & Co. U.S. 22,500 1,347,188
*Waban Inc. U.S. 70,000 1,041,250
Wessel & Vett AS, C Den. 34,000 1,700,472
------------
13,395,574
- -------------------------------------------------------------------------------
Metals & Mining: 3.4%
Alcan Aluminum Ltd. Can. 41,000 1,238,580
Aluminum Co. of America U.S. 34,600 1,734,325
*Elkem AS Nor. 97,000 1,353,781
Reynolds Metals Co. U.S. 25,500 1,319,625
*Union Miniere NPV Bel. 23,500 1,532,465
------------
7,178,776
- -------------------------------------------------------------------------------
Multi-Industry: 4.1%
Amer Group Ltd., A Fin. 100,000 1,819,033
BTR Nylex Ltd. Aus. 540,000 1,032,439
Dairy Farm International
Holdings Ltd. H.K. 932,929 802,319
Hutchison Whampoa Ltd. H.K. 342,000 1,653,028
Jardine Matheson Holdings Ltd. H.K. 199,440 1,465,884
Swire Pacific Ltd., A H.K. 245,000 1,868,102
------------
8,640,805
- -------------------------------------------------------------------------------
Real Estate: 1.2%
American Health Properties Inc. U.S. 49,900 1,066,612
*Catellus Development Corp. U.S. 235,000 1,498,125
------------
2,564,737
- -------------------------------------------------------------------------------
Telecommunications: 3.5%
Alcatel Alsthom SA Fr. 24,000 2,160,928
Compania de Telecomunicaciones
de Chile SA, ADR Chil. 18,000 1,464,750
STET (Sta Finanziaria Telefonica
Torino) SPA, di Risp Itl. 840,000 1,861,476
Telefonica de Espana SA Sp. 141,500 1,822,415
------------
7,309,569
- -------------------------------------------------------------------------------
Textiles & Apparel: 0.6%
*Fruit of the Loom Inc., A U.S. 63,000 1,330,875
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, June 30, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Transportation: 3.4%
Anangel-American Shipholdings
Ltd., ADR Gr. 35,000 $ 485,625
Brambles Industries Ltd. Aus. 110,000 1,042,958
*OMI Corp. U.S. 190,300 1,260,738
Singapore Airlines Ltd., fgn. Sing. 103,000 950,769
*Stolt Nielsen SA U.S. 53,500 1,538,125
*USAir Group Inc. U.S. 156,000 1,813,500
------------
7,091,715
- -------------------------------------------------------------------------------
Utilities Electrical & Gas: 6.9%
British Gas PLC U.K. 342,000 1,574,245
*CEZ Csk. 26,475 962,727
Electricidad de Caracas Venz. 1,551,908 1,379,603
Endesa-Empresa Nacional de
Electricidad SA Sp. 28,000 1,382,374
Evn Energie-Versorgung
Niederoesterreich AG Aust. 14,500 2,026,129
Hongkong Electric Holdings
Ltd. H.K. 412,000 1,400,346
Iberdrola SA Sp. 284,000 2,138,353
South Wales Electricity U.K. 134,000 1,485,030
VEBA AG Ger. 5,600 2,198,698
------------
14,547,505
- -------------------------------------------------------------------------------
Wholesale & International Trade: 0.5%
Brierley Investments Ltd. N.Z. 1,444,689 1,091,410
------------
TOTAL COMMON STOCKS (cost $162,048,675) 184,011,383
- -------------------------------------------------------------------------------
PREFERRED STOCKS: 4.2%
- -------------------------------------------------------------------------------
Cia de Inversiones en
Telecomunicaciones SA, pfd. Arg. 27,220 1,374,610
Jardine Strategic Holdings
Ltd., conv., pfd. H.K. 1,384,000 1,529,320
Kaufman & Broad Home Corp.,
B, conv., pfd. U.S. 55,200 855,600
Nacional Financiera SA, reg.
S conv., pfd. Mex. 3,000 94,125
Nacional Financiera SA, reg.
42 conv., pfd. Mex. 30,900 969,488
News Corp. Ltd., conv. pfd. Aus. 105,853 523,637
Philippine Long Distance
Telephone Co., conv., pfd. Phil. 49,000 2,021,250
Telebras-Telecomunicacoes
Brasileiras SA, pfd., ADR Braz. 42,000 1,383,375
------------
TOTAL PREFERRED STOCKS (cost
$8,433,179) 8,751,405
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY**
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BONDS: 2.8%
- -------------------------------------------------------------------------------
C.S. Holding Finance BV,
4.875%, conv., 11/19/02 U.S. 830,000 1,174,450
PIV Investment Finance
(Cayman) Ltd.,
4.50%, conv., 12/1/00 U.S. 2,040,000 1,642,200
Softe SA, 4.25%, conv.,
7/30/98 Itl. 1,700,000,000 1,171,429
U.S. Treasury Note, 8.875%,
2/15/96 U.S. 1,950,000 1,985,958
------------
TOTAL BONDS (cost $5,681,646) 5,974,037
- -------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 4.8% (cost $10,052,801)
- -------------------------------------------------------------------------------
U S Treasury Bills, 5.26% to
5.62% with
maturities to 8/24/95 U.S. 10,109,000 10,058,636
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.2% (cost
$186,216,301) 208,795,461
OTHER ASSETS, LESS LIABILITIES: 0.8% 1,612,455
------------
TOTAL NET ASSETS: 100.0% $210,407,916
============
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRY INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (unaudited)
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (identified cost $186,216,301) $208,795,461
Cash 237,103
Receivables:
Capital shares sold 22,450
Investment securities sold 1,239,851
Dividends and interest 1,035,224
Unamortized organization costs 4,065
------------
Total assets 211,334,154
------------
Liabilities:
Payables for investment securities purchased 688,718
Accrued expenses 237,520
------------
Total liabilities 926,238
------------
Net assets, at value $210,407,916
============
Net assets consist of:
Undistributed net investment income $ 2,896,789
Unrealized appreciation on investments 22,579,160
Accumulated net realized gain 4,016,728
Net capital paid in on shares of capital stock 180,915,239
------------
Net assets, at value $210,407,916
============
Shares outstanding 17,436,290
============
Net asset value per share ($210,407,916 / 17,436,290) $ 12.07
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
for the six months ended June 30, 1995 (unaudited)
<TABLE>
<S> <C> <C>
Investment income: (net of $373,142 foreign taxes
withheld)
Dividends $ 3,254,729
Interest 499,533
-----------
Total income $ 3,754,262
Expenses:
Management fees (Note 3 ) 695,451
Administrative fees (Note 3) 103,084
Custodian fees 32,000
Reports to shareholders 5,500
Audit fees 10,000
Legal fees 1,500
Registration and filing fees 1,500
Directors' fees and expenses 6,226
Amortization of organization costs 765
Other 1,447
-----------
Total expenses 857,473
-----------
Net investment income 2,896,789
Realized and unrealized gain:
Net realized gain (loss) on:
Investments 5,587,132
Foreign currency transactions (11,935)
-----------
5,575,197
Net unrealized appreciation on investments 12,890,135
-----------
Net realized and unrealized gain 18,465,332
-----------
Net increase in net assets resulting from operations $21,362,121
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
-------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 2,896,789 $ 3,301,739
Net realized gain from security and foreign
currency transactions 5,575,197 7,834,966
Net unrealized appreciation (depreciation) 12,890,135 (14,142,808)
------------ ------------
Net increase (decrease) in net assets re-
sulting from operations 21,362,121 (3,006,103)
Distributions to shareholders:
From net investment income -- (3,458,409)
From net realized capital gain (1,295,829) (8,353,991)
Capital share transactions (Note 2) (3,717,255) 24,864,875
------------ ------------
Net increase in net assets 16,349,037 10,046,372
Net assets:
Beginning of period 194,058,879 184,012,507
------------ ------------
End of period $210,407,916 $914,058,879
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
14
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Notes to Financial Statements (unaudited)
- -------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Growth Series (the Fund) is a separate series of Templeton Institutional
Funds, Inc. (the Company) which is an open-end, diversified management invest-
ment company registered under the Investment Company Act of 1940. The follow-
ing summarizes the Fund's significant accounting policies.
a. Securities Valuations:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal ex-
change on which the securities are traded. Over-the-counter securities and
listed securities for which no sale is reported are valued at the mean between
the last current bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
and approved in good faith by the Board of Directors.
b. Foreign Currency Translations:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into foreign exchange contracts to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from invest-
ments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the amounts actually received
or paid. Net unrealized foreign exchange gains and losses arise from changes
in the value of assets and liabilities other than investments in securities at
the end of the fiscal period, resulting from changes in the exchange rate.
c. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Reve-
nue Code applicable to regulated investment companies and to distribute all
its taxable income to its shareholders. Therefore, no provision has been made
for federal income taxes.
d. Unamortized Organization Costs:
Organization costs are being amortized on a straight line basis over a five
year period.
e. Security Transactions, Investment Income, Distributions, and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign secu-
rities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to sharehold-
ers, which are determined in accordance with income tax regulations, are re-
corded on the ex-dividend date.
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
At June 30, 1995, there were 520 million shares of capital stock authorized
($0.01 par value) of which 120 million shares have been classified as Fund
shares. Transactions in the Fund's shares are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Shares sold 797,580 $ 8,879,572 1,772,408 $21,324,831
Shares issued on
reinvestment of
distributions 117,875 1,288,373 1,064,536 11,760,196
Shares redeemed (1,219,502) (13,885,200) (697,333) (8,220,152)
---------- ----------- --------- -----------
Net increase (decrease) (304,047) $(3,717,255) 2,139,611 $24,864,875
========== =========== ========= ===========
</TABLE>
15
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Company are also directors or officers of Templeton In-
vestment Counsel, Inc. (TICI), Templeton Global Investors, Inc. (TGII), Frank-
lin Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor Servic-
es, Inc. (FTIS), the Fund's investment manager, administrative manager, princi-
pal underwriter and transfer agent, respectively. The Fund pays monthly an in-
vestment management fee to TICI equal, on an annual basis, to 0.70% of the av-
erage daily net assets of the Fund. The Fund pays TGII monthly its allocated
share of an administrative fee of 0.15% per annum on the first $200 million of
the Company's aggregate average daily net assets, 0.135% of the next $500 mil-
lion, 0.10% of the next $500 million and 0.075% per annum of such average net
assets in excess of $1.2 billion. TGII has voluntarily agreed to limit the to-
tal expenses of the Fund to an annual rate of 1.00% of the Fund's average net
assets through period ended December 31, 1995. For the six months ended June
30, 1995, no such reimbursement was necessary. For the six months ended June
30, 1995, FTD and FTIS received no amounts with respect to the Fund.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Company, which received fees of $1,500 for the six months ended June
30, 1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the six
months ended June 30, 1995, aggregated $29,585,830 and $33,664,791, respective-
ly. The cost of securities for federal tax purposes aggregated $188,022,887.
Realized gains and losses are reported on an identified cost basis.
At June 30, 1995, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $29,230,445
Unrealized depreciation (8,457,871)
-----------
Net unrealized appreciation $20,772,574
===========
</TABLE>
16
<PAGE>
Templeton Institutional Funds, Inc.
Special Meeting of Shareholders, May 4, 1995
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of the Fund was held at the Fund's offices,
700 Central Avenue, St. Petersburg, Florida, on May 4, 1995. The purpose of the
meeting was to elect twelve directors of the Fund. At the meeting, the follow-
ing persons were elected by the shareholders to serve as directors of the Fund:
John Wm. Galbraith, Charles B. Johnson, Nicholas F. Brady, Betty P. Krahmer,
Constantine D. Tseretopoulos, Frank J. Crothers, Fred R. Millsaps, S. Joseph
Fortunato, Harris J. Ashton, Andrew H. Hines, Jr., John G. Bennett, Jr., and
Gordon S. Macklin.
The results of the voting at the Special Meeting are as follows:
1. Election of twelve (12) Directors:
<TABLE>
<CAPTION>
% OF % OF % OF
OUTSTANDING SHARES OUTSTANDING
FOR SHARES VOTED AGAINST % ABSTAIN SHARES
---------- ----------- ------ ------- --- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
John Wm. Galbraith* 92,515,630 53.41% 99.98% 0 0 15,858 0.01%
Charles B. Johnson 92,515,630 53.41 99.98 0 0 15,858 0.01
Nicholas F. Brady 92,515,630 53.41 99.98 0 0 15,858 0.01
Betty P. Krahmer 92,515,630 53.41 99.98 0 0 15,858 0.01
Constantine D.
Tseretopoulos 92,515,630 53.41 99.98 0 0 15,858 0.01
Frank J. Crothers 92,515,630 53.41 99.98 0 0 15,858 0.01
Fred R. Millsaps 92,515,630 53.41 99.98 0 0 15,858 0.01
S. Joseph Fortunato 92,515,630 53.41 99.98 0 0 15,858 0.01
Harris J. Ashton 92,515,630 53.41 99.98 0 0 15,858 0.01
Andrew H. Hines Jr. 92,515,630 53.41 99.98 0 0 15,858 0.01
John G. Bennett Jr.** 92,515,630 53.41 99.98 0 0 15,858 0.01
Gordon S. Macklin 92,515,630 53.41 99.98 0 0 15,858 0.01
</TABLE>
* AFTER HIS NOMINATION AND THE MAILING OF THE PROXY FOR THE SPECIAL MEETING,
SIR JOHN TEMPLETON STEPPED DOWN AS CHAIRMAN AND DIRECTOR OF THE U.S.
REGISTERED TEMPLETON FUNDS, EFFECTIVE APRIL 16, 1995, AND DECLINED TO STAND
FOR RE-ELECTION. CONSEQUENTLY, PURSUANT TO DISCRETIONARY AUTHORITY GRANTED
IN THE PROXIES, THE PROXY HOLDERS CAST THE PROXIES FOR JOHN WM. GALBRAITH,
FORMER VICE CHAIRMAN OF TEMPLETON, GALBRAITH & HANSBERGER LTD.
** SUBSEQUENT TO THE SPECIAL MEETING, MR. JOHN G. BENNETT, JR., RESIGNED FROM
ALL OF THE TEMPLETON FUNDS, EFFECTIVE MAY 19, 1995.
17
<PAGE>
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by the prospectus of the Templeton
Institutional Funds, Inc.
Investors should be aware that the value of investments made for the Fund may go
up as well as down and that the Investment Manager may make errors in selecting
the securities for the Fund's portfolio. Like any investment in securities, the
Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political, and other factors. The Fund and Fund investors are not
protected from such losses by the Investment Manager. Therefore, investors who
cannot accept the risk of such losses should not invest in shares of the Fund.
Principal Underwriter:
FRANKLIN TEMPLETON
DISTRIBUTORS, INC.
700 Central Avenue
St. Petersburg, Florida 33701-3628
[RECYCLING LOGO Account Service: 1-800-684-4001
ZT455 S 08/95 APPEARS HERE] Fund Information: 1-800-362-6243
- --------------------------------------------------------------------------------
