<PAGE>
Templeton Institutional Funds, Inc.
TIFI Emerging Markets Series
--------------------------------------------------------
ANNUAL REPORT
December 31, 1995
[LOGO OF TEMPLETON 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
loss of the principal amount invested.
- --------------------------------------------------------------------------------
Investing in developing markets involves special considerations, which may
include risks related to market and currency volatility, adverse social and
political developments, and the relatively small size and lesser liquidity of
these markets. These special considerations are discussed in the Fund's
prospectus. The Fund is designed for the aggressive portion of a well
diversified portfolio.
<PAGE>
December 31, 1995
Dear Shareholder...
As we have stated in the past, investing in emerging markets is a
long-term proposition. Markets worldwide are affected more and more by rapid and
dramatic changes in other markets. The world's markets are increasingly viewed
on a global basis, so when volatility occurs in Mexico, investors react in other
parts of Latin America and, to a lesser extent, in Southern Europe, Africa and
Eastern Europe. Emerging markets were weak during 1995, with only 7 of the 24
countries in the IFC Investable Index showing positive returns for the year. The
Templeton Institutional Funds, Inc. Emerging Markets Series (the "Fund")
returned (3.0%), (1.2%), (6.5%) and 5.9% (annualized) for the quarter, one year,
two year and since inception (May 3, 1993 inception date) periods ending
December 31, 1995, compared to the unmanaged IFC Investable index returns of
(1.0%), (8.5%), (10.2%) and 11.2% for the same periods, respectively. The Morgan
Stanley Capital International World index returned 4.9%, 21.3%, 13.2% and 13.1%
for these comparable periods.
- --------------------------------------------------------------------------------
Total Returns as of 12/31/95
<TABLE>
<CAPTION>
One-Year Cumulative
Average Annual/1,2/ Since Inception/1,3/
(05/03/93)
<S> <C> <C>
TIFI Emerging Markets Series -1.23 16.36
IFC Investable Composite Index -8.46 32.75
</TABLE>
/1/ Past expense reductions by the Fund's manager increased the Fund's total
returns.
/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.
- --------------------------------------------------------------------------------
We believe that over the longer term, emerging markets investments
will provide good value for our clients. The current euphoria in the United
States has diverted investors' attention from the developing markets, and the
continued weakness of the Mexican Peso has also made some investors apprehensive
regarding these markets. Mexico is just one market out of more than 120 emerging
markets that allow foreign portfolio investment. Falling markets create the
specter of losses for short-term speculators, but for long-term investors,
volatility creates an opportunity to
continued...
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[PHOTO OF MARK MOBIUS APPEARS HERE]
MARK MOBIUS JOINED TEMPLETON IN 1987 AS MANAGING DIRECTOR OF ITS FAR EAST
DIVISION IN HONG KONG, WITH RESPONSIBILITY FOR THE TEMPLETON GROUP'S RESEARCH
EXPERTISE, PRINCIPALLY IN EMERGING MARKETS COUNTRIES. IN THIS CAPACITY, HE
DIRECTS THE ANALYSTS BASED IN HONG KONG, SINGAPORE AND MANAGES OUR EMERGING
MARKETS PORTFOLIOS. DR. MOBIUS HAS SPENT OVER TWENTY YEARS WORKING IN ASIA, AND
HAS EXTENSIVE EXPERIENCE IN ECONOMIC RESEARCH AND ANALYSIS.
PRIOR TO JOINING TEMPLETON, FROM 1983 TO 1986 HE WAS PRESIDENT OF INTERNATIONAL
INVESTMENT TRUST COMPANY LTD. IN TAIPEI, TAIWAN - THAT COUNTRY'S FIRST AND
LARGEST INVESTMENT MANAGEMENT FIRM. BEFORE THAT, HE SERVED AS A DIRECTOR AT
VICKERS DA COSTA, AN INTERNATIONAL SECURITIES FIRM. INITIALLY, HE STARTED IN
THAT FIRM'S HONG KONG OFFICE IN 1980, AND THEN MOVED TO TAIWAN IN 1983 TO OPEN
THAT FIRM'S OFFICE THERE AND TO DIRECT OPERATIONS IN INDIA, INDONESIA, THAILAND,
THE PHILIPPINES, AND KOREA. BEFORE JOINING VICKERS, DR. MOBIUS OPERATED HIS OWN
CONSULTING FIRM IN HONG KONG FOR TEN YEARS, AND WAS A RESEARCH SCIENTIST FOR
MONSANTO OVERSEAS ENTERPRISES COMPANY IN HONG KONG AND THE AMERICAN INSTITUTE
FOR RESEARCH IN KOREA AND THAILAND.
DR. MOBIUS HOLDS BACHELORS AND MASTERS DEGREES FROM BOSTON UNIVERSITY, AND
RECEIVED HIS PH.D. IN ECONOMICS AND POLITICAL SCIENCE IN 1964 FROM THE
MASSACHUSETTS INSTITUTE OF TECHNOLOGY. HE ALSO STUDIED AT THE UNIVERSITY OF
WISCONSIN, UNIVERSITY OF NEW MEXICO, AND KYOTO UNIVERSITY IN JAPAN.
- --------------------------------------------------------------------------------
<PAGE>
Templeton Institutional Funds, Inc. Emerging Markets Series
letter continued................................................................
Geographic Distribution on 12/31/95
(% of Total Equity)
[PIE CHART APPEARS HERE]
Europe 15.4%
Mid-East/Africa 3.3%
Latin America/Caribbean 37.1%
Asia 44.2%
Fund Asset Allocation on 12/31/95
[PIE CHART APPEARS HERE]
Equity* 82.1%
Short-term & Other 17.9%
*Equity includes convertible and preferred stocks
buy stocks at potentially cheaper prices. The recent correction in emerging
markets means many stocks are now selling at prices well below their historical
price/earnings ratios, and we feel they are good investment bargains for long-
term investors.
Emerging markets continue to be led by the resurgence of Latin America
and by the "tiger" economies of Asia. It is these two regions that have been
hardest hit by the withdrawal of foreign investors' support. Templeton has taken
the opportunity provided by temporarily weaker prices to increase our holdings
in Asia and Latin America.
The investment environment in many Latin American markets has improved
markedly over the past few months, and the long-term outlook for this region
remains promising. We have identified and bought many securities in Latin
America over the past few months. In Argentina, the macro-economic and corporate
fundamentals continue to strengthen, and long-term growth prospects have
improved. This is largely due to the recovery of the Argentine economy from the
liquidity crisis in its banking system earlier this year. The long-term macro-
economic and corporate fundamentals in Argentina continue to strengthen, and
long-term growth prospects have improved. The fiscal measures introduced in
August to help the banking sector recover from its liquidity crisis have helped
persuade foreign investors that Finance Minister Domingo Cavallo has the
determination and support to continue with fiscal reforms.
The Asian "growth story" that we have witnessed for the past two
decades remains the long-term driving force behind markets in the region.
China's youthful population of 1.2 billion and India's population of 900 million
are making these two countries economic giants in the world. The people of China
and India are living longer, improving their educational backgrounds, and
increasing their productivity.
Hong Kong currently offers the best investment bargains among the
Asian emerging markets. The Hong Kong economy has slowed from the incredible
growth rates seen in the past decade, but real GDP growth remains healthy at
more than 6%, and we see the current slowdown in Hong Kong as a consolidation
after years of strong growth. Worries about the 1997 change of sovereignty
surface occasionally, but most people in the colony realize that it is in
China's interest not to impair Hong Kong's strong performance.
Eastern Europe has some of the world's most exciting emerging markets,
which is why Templeton opened offices in Warsaw and Moscow during 1995. The
Eastern European markets are relatively new to most investors and they are at a
very early stage of development after many years of being locked behind the iron
curtain. Despite their proximity to the financial centers in Western Europe,
emerging markets in Eastern Europe are under-researched and appear undervalued.
Stocks in some companies can be bought at price-earning ratios as low as two
times, which makes them very attractive to long-term value investors such as
Templeton.
2
<PAGE>
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In Southern Europe, we believe Turkey offers the best potential
investment bargains. The Turkish market went from being an astounding performer
in 1994 to a state of chaos after the collapse of Prime Minister Tansu Ciller's
coalition government. Mrs. Ciller formed a tentative alliance with her old
coalition partners, but whether the old disagreements have been resolved isn't
yet certain. However, broad policies seem unlikely to change and the fundamental
factors underpinning the Turkish economy remain unshaken. Corporate earnings are
expected to improve as the country moves closer to a full customs union with
Europe, and the country is strategically located to export to the large European
market and take advantage of the fast growth expected in Central Asia.
We will continue with our proven "bottom-up" investment style and our
strategy of investing in companies with stocks that are selling at prices below
our appraisal of their true value. Although 1995 has been disappointing, the
prospects for the future are exciting. In the short-term, emerging markets will
continue to be volatile. There will be sizable short-term price movements in
individual markets and securities. Our organization hopes to take advantage of
this volatility to provide value to our clients.
Greece is an important emerging market and, due to the fundamental
economic changes it is experiencing, along with its growing integration in the
European Community, I believe it holds great potential promise as an area of
investment for our clients.
The Greek equity market was up 8% through November, according to the
IFC index. Members of our emerging markets team visited Greece in September and
the following are some of our thoughts on this strategically located country.
As always, we would like to thank you for your commitment and
confidence in the Templeton organization.
Sincerely,
/s/ J. Mark Mobius
J. Mark Mobius, Ph.D.
Managing Director
Templeton Asset Management Ltd.
For more complete portfolio information, call Templeton Fund Information,
toll-free, at 1-800-362-6243.
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Total Return Index Comparison/1/
$5,000,000 Investment: 05/03/93 - 12/31/95
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
INCEPT
(Millions) 12/95
-------- -----
<S> <C> <C>
TIFI Emerging Markets Series $5 $6,637,327
MSCI $5 $6,930,716
IFC $5 $5,818,000
</TABLE>
Period ended December 31, 1995
<TABLE>
<CAPTION>
Since
Inception
One-Year (05/03/93)
<S> <C> <C>
Average Annual Total Return/1,2/ -1.23% 5.86%
Cumulative Total Return/1,3/ -1.23% 16.36%
</TABLE>
/1/ Past expense reductions by the Fund's manager increased the Fund's total
returns.
/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.
- --------------------------------------------------------------------------------
3
<PAGE>
Templeton Institutional Funds, Inc. Emerging Markets Series
country focus...................................................................
A Closer Look at Greece
Country
FOCUS ----------------------------------------------------------------------
On a recent visit, I found Athens warm and welcoming after a two-hour
flight from cold, rainy Budapest. Upon arrival, I was told that agreement had
been reached concerning the construction of a new Athens airport, one of many
new infrastructure projects expected to boost the Greek economy. Certainly, the
old airport has always been severely overcrowded at the peak of the tourist
season, but tourism fell significantly in 1995, and some say it was due to the
congested airport. Others claim that European tour operators conspired to
boycott Greece because of rising prices. However, inflation no longer presents
the problem it did in the past. In two years, it has fallen more than 14% to
below 9%, and the government expects it to drop to 5%. My economic consultants
in Greece told me: "People are getting so used to declining inflation, soon it
will no longer be news." Of course, even the government's goal of 5% inflation
would be double the average for the European Union (EU). As a member of the EU,
however, Greece will most likely move closer to many European norms, including
the rate of inflation.
While I was in Athens, one topic of great interest to many people was
Prime Minister Papandreou's health and the possibility of another cabinet
reshuffle. Some Greeks told me that the country would be in deep trouble if
something happened to Papandreou, because there would be a dangerous political-
power vacuum, with no clear leader in sight. This, they said, could lead to
extended political upheavals. Although the ruling PASOK party was in some
disarray following the resignation of the Trade and Industry Minister just
before I arrived, my assessment was that the Greeks were being too sensitive to
local political events that would have little impact on the direction of the
Greek economy. In fact, as their economy becomes more integrated with the
European Union, it will be more difficult for local politicians to have much
impact on economic issues, and their power base will, therefore, shrink. As the
Greeks adhere increasingly to European Union rules and regulations, a number of
decisions which previously would have been based on populist pressures will be
made in Brussels.
Over the course of five days in Athens, I visited 14 companies,
including a telecommunications equipment manufacturer. Managers there
4
<PAGE>
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told me Greece has a 52% penetration rate for telephones, which is high for an
emerging market. However, you have to wait a year for a phone connection,
telephone lines are of poor quality, and there is plenty of room for expansion
of overall capacity and upgrading of existing technology. To me, this indicates
the potential for growth in the Greek telecommunications industry.
We also visited a shipping company, where we were told that the war in
Bosnia had appreciably increased the demand for ferries to carry trucks and
goods to Italy. Now, trucks and cars go by ferry to Italy and then north to the
rest of Europe. Although this new trade route has attracted a great deal of
competition, it is dominated by Greek firms.
As we left for the Athens airport, the driver told us we were lucky to
be leaving because there was going to be a demonstration near the hotel later
that day. During our visit, negotiations had been held in New York to end the
long and bitter dispute between Greece and the Former Yugoslav Republic of
Macedonia, which the Greeks insist on calling Skopje. According to a United
Nations plan, Greece would drop trade sanctions against its northern neighbor in
return for guarantees that Skopje would change its flag and renounce any
territorial ambitions. Apparently, the Greek and Macedonian foreign ministers
had agreed to the plan, and the Greeks had decided to stop the embargo against
Macedonia. However, die-hard opponents of the plan were arranging to hold a
protest march at the peak of rush-hour traffic.
Of course, there is more political trouble in the region than just the
Skopje dispute. But the day-to-day political situation in a country need not
have a major long-term impact on investors, and market declines caused by
political tensions are often a chance for us to increase our purchases of
attractive companies. I believe that Greece's increasing alignment with the
large European market will help drive long-term economic growth and that
investing there now, offers our clients a chance to benefit in the future.
- --------------------------------------------------------------------------------
Industry Diversification on 12/31/95
(% of Total Portfolio)
<TABLE>
<S> <C>
Banking 23.0%
Multi-industry 9.3%
Telecommunications 8.4%
Real Estate 6.7%
Energy Sources 4.5%
Food & Household Products 4.3%
Utilities Electrical & Gas 3.5%
Building Materials & Components 3.4%
Merchandising 2.0%
Metals & Mining 2.0%
</TABLE>
10 Largest Positions on 12/31/95
(% of Total Portfolio)
<TABLE>
<S> <C>
Telefonos de Mexico 4.5%
HSBC Holdings PLC 2.8%
Cheung Kong Holdings Ltd. 2.3%
Banco Comercial Portugues
SA (BCP) 2.2%
New World Development
Co. Ltd. 2.2%
Perez Companc SA, B 1.9%
Eletrobras -Centrais Electricas
Brasileiras SA, B 1.9%
Banco de Galicia y Buenos
Aires SA, B 1.8%
Alpha Credit Bank 1.7%
Sun Hung Kai Properties Ltd. 1.6%
</TABLE>
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5
<PAGE>
Templeton Institutional Funds, Inc. Emerging Markets Series
spotlight.......................................................................
The following are descriptions of several Greek securities held in the Fund.
Spotlight
----------------------------------------------------------------------
ON
CURRENT
HOLDINGS
Alpha Leasing A.E. - Alpha Leasing was established in Athens in 1981 by Alpha
Credit Bank, the largest private bank in Greece. The company originated as a
fully-owned subsidiary to lease computer equipment to the bank and other sister
companies. In 1987, 50% of the company was offered to the public in an initial
public offering and the company was listed on the Athens Stock Exchange. At this
time, it is the leading leasing company in Greece with a 30% share of the total
leasing market. It also has in excess of 2,000 existing customers comprising
small and large firms and freelance professionals. About 70% of the company's
customers are based in the Greater Athens area with the balance distributed
across Greece. Credit Bank's continuing success in expanding beyond the Greater
Athens district can be attributed to an expansion in leasing activities in
Greece in general, and the company's aggressive expansion drive more
specifically. A large part of Alpha Leasing's success can be attributed to
business referrals from parent company Credit Bank's clientele. Industrial
equipment comprises roughly 30% of total leases, including crafts production
machinery, construction companies' equipment, concrete production machines, etc.
Medical equipment leases are available for such items as CAT and magnetic
scanners, external lithotripsy units, radiological and ultrasound equipment and
chemical analyzers. Vehicle leases for car rental firms and for company cars are
also available. Only 3% of Alpha's total lease portfolio comes from Credit Bank
and other affiliated companies. With new regulations implemented at the end of
1991 now permitting the leasing of trucks and other professional vehicles, a new
market niche for Alpha Leasing expansion is set to emerge.
Delta Dairy S.A. - Opening its doors for business in 1952, Delta Dairy employed
20 employees and 10 vehicles, delivering milk and yogurt in the Athens area. By
1972, the present factory at Tavros near Athens had been constructed to enable
Delta Dairy to expand milk production. Over time, Delta Dairy expanded its
product range to include ice cream, fresh fruit juices, animal feed and frozen
vegetables. Today, Delta Dairy sells fresh milk and yogurt in different package
sizes, different percentages of fat and
6
<PAGE>
................................................................................
different flavors; numerous different kinds of ice cream; fresh apple, orange
and peach juices; different types of frozen vegetables and animal feed. Fresh
milk remains its most important field of business. The company purchases milk
directly from producers throughout the country and collects it at its
pasteurization centers. To build support among its producer-suppliers, Delta
Dairy provides dairy farmers with financing at favorable terms and animal feed
at competitive prices. From the pasteurization centers, the milk is transported
by Delta's fleet of refrigerated trucks to Tavros where processing takes place.
The milk is either processed and packaged or converted into ice cream and yogurt
daily. Delta Dairy was the first company in Greece to use homogenization and to
pack milk in cardboard cartons. Distribution extends across all of Greece and is
divided into four business groups: dairy products, ice creams, fruit juices and
frozen vegetables. There are four distribution centers (located in Athens,
Thessalonika, Patras and Larissa) to supply 2,500 sales outlets throughout
Greece.
Ergobank S.A. - Ergobank is one of the largest non-state banks in Greece with
total assets well in excess of US$3 billion. Founded in 1975 by a group of Greek
businessmen led by a former executive of an American bank, Ergobank commenced
operations with initial capital of only Drachma 800 million (equivalent to about
US$24 million at that time) raised from private investors. It has progressed
from its humble origins and flourished under the guidance of its founder and
late Chairman, Constantine Capsaskis. Ergobank has an enviable record of profit
growth and enjoys an excellent reputation in the Greek banking industry because
of its sound management. With over 90 branches throughout the country,
Ergobank's strategy is to offer outstanding services to its customers, who are
principally medium-sized Greek manufacturing and commercial companies. In
contrast to some state-controlled banks, Ergobank enjoys the freedom to direct
its operations towards commercial, profit-oriented activities, without the
obligation of allocating resources to less rewarding areas of business. The
bank's loan portfolio is therefore of good quality and geared towards privately-
run companies which broadly cover all areas of industry and commerce. Ergobank's
affiliates and subsidiaries are involved in investment management (Ergo Invest -
36%-owned), stockbrokering (Ergo Securities - 99%-owned), leasing (Ergo
Leasing - 62%-owned), mutual fund management (Ergo Mutual Fund Management - 50%-
owned), finance (Ergo Finance - 99%-owned) and data processing (Ergo Data - 13%-
owned).
7
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (for a share outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1993
YEAR ENDED DECEMBER 31 (COMMENCEMENT
------------------------ OF OPERATIONS) TO
1995 1994 DECEMBER 31, 1993
----------- ----------- -----------------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 11.21 $ 13.22 $ 10.00
----------- ----------- --------
Income from investment operations:
Net investment income .19 .17 .04
Net realized and unrealized gain
(loss) (.34) (1.65) 3.25
----------- ----------- --------
Total from investment operations (.15) (1.48) 3.29
----------- ----------- --------
Distributions:
Dividends from net investment
income (.17) (.17) (.04)
Distributions from net realized
gains (.14) (.36) (.03)
----------- ----------- --------
Total distributions (.31) (.53) (.07)
----------- ----------- --------
Change in net asset value (.46) (2.01) 3.22
----------- ----------- --------
Net asset value, end of year $ 10.75 $ 11.21 $ 13.22
=========== =========== ========
TOTAL RETURN* (1.23)% (11.39)% 32.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 798,515 $ 582,878 $422,433
Ratio of expenses to average net
assets 1.52% 1.66% 1.60%**
Ratio of expenses, net of
reimbursement, to average net
assets 1.52% 1.60% 1.60%**
Ratio of net investment income to
average net assets 2.00% 1.59% .91%**
Portfolio turnover rate 13.47% 12.51% 9.42%
</TABLE>
*NOT ANNUALIZED FOR PERIOD LESS THAN ONE YEAR.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES: 82.1%
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Argentina: 10.1%
Aluar Aluminio Argentino SA, B Miscellaneous Materials & Commodities 56,669 $ 509,944
**Astra Cia Argentina de Petroleo SA Energy Sources 1,080,030 1,997,756
**Atanor Cia Nacional Para la Industria Quimica SA, D Chemicals 339,303 810,813
**Banco Bansud SA, B Banking 372,328 2,773,428
Banco de Galicia y Buenos Aires SA, B Banking 2,785,449 14,482,162
Banco Frances del Rio de la Plata SA Banking 799,950 7,078,496
Capex SA, A Utilities--Electrical & Gas 35,650 260,206
Central Costanera SA, B Utilities--Electrical & Gas 506,468 1,559,687
**Central Termoelectricia de Buenos Aires Utilities--Electrical & Gas 20,470 24,151
**Ciadea SA Automobiles 443,332 2,304,981
Citicorp Equity Investment SA, A Financial Services 132,760 464,590
**Comercial de Plata SA Multi-Industry 4,059,120 10,755,055
Industrias Petroquimicas Koppers Chemicals 1,257,372 4,714,438
*Juan Minetti SA Building Materials & Components 183,913 606,822
Molinos Rio de Plata SA, B Food & Household Products 1,021,525 8,375,249
Nobleza Piccardo Sdad Industrial Comercial y Financial Beverages & Tobacco 47,543 180,636
Perez Companc SA, B Energy Sources 2,878,762 15,255,150
**Sevel Argentina SA, C Automobiles 835,574 1,495,453
Transportadora de Gas del Sur SA, B Energy Sources 1,367,404 3,294,949
YPF Sociedad Anonima, ADR Energy Sources 168,100 3,635,163
**Zanella Hermanos SA Automobiles 743,582 124,903
------------
80,704,032
- ---------------------------------------------------------------------------------------------------------------------------------
Bolivia: 0.1%
Compania Boliviana de Energia Electricas SA Utilities--Electrical & Gas 17,650 586,862
- ---------------------------------------------------------------------------------------------------------------------------------
Brazil: 9.0%
Banco Bradesco SA Banking 496,913,447 3,834,406
Banco Bradesco SA, pfd. Banking 72,851,843 637,112
**Banco Bradesco SA, rts. Banking 1,703,421 2,804
**Banco Bradesco SA, rts. Banking 11,618,830 7,172
**Banco do Brazil SA Banking 77,454,792 820,808
**Banco do Brazil SA, pfd. Banking 374,389,390 4,237,135
**Banespa-Banco do Estado de Sao Paulo SA, pfd. Banking 708,897,530 3,646,780
Brasmotor SA, pfd. Multi-Industry 4,580,000 909,450
**Cia Mesbla SA, pfd. Merchandising 33,734,000 416,491
Copene-Petroquimica do Nordeste SA, A, pfd. Chemicals 331,700 148,109
Duratex SA, pfd. Forest Products & Paper 41,005,900 1,425,999
Eletrobras-Centrais Eletricas Brasileiras SA, B, pfd. Utilities--Electrical & Gas 56,362,106 15,251,025
Itausa-Investimentos Itau SA, pfd. Multi-Industry 15,133,804 8,252,396
Mannesmann SA Machinery & Engineering 1,690,720 266,146
Mannesmann SA, pfd. Machinery & Engineering 1,670,650 283,595
Marcopolo SA, B, pfd. Automobiles 7,243,800 1,073,211
Petrobras-Petroleo Brasileiro SA, pfd. Energy Sources 79,458,666 6,784,582
Refripar-Refrigeracao Parana SA, pfd. Appliances & Household Durables 293,871,000 586,563
Telebras-Telecomunicacoes Brasileiras SA Telecommunications 238,952,583 9,243,909
Telebras-Telecomunicacoes Brasileiras SA, pfd. Telecommunications 68,205,968 3,284,160
**Telerj-Telecomunicacoes do Rio de Janeiro SA, pfd. Telecommunications 11,012,544 713,813
Unibanco-Uniao de Bancos Brasileiros SA, pfd. Banking 82,550,584 3,227,452
Vale de Rio Doce, pfd. Metals & Mining 39,401,650 6,486,202
------------
71,539,320
- ---------------------------------------------------------------------------------------------------------------------------------
Chile: 0.1%
Antofagasta Holdings PLC Metals & Mining 150,000 681,373
- ---------------------------------------------------------------------------------------------------------------------------------
China: 2.1%
China First Pencil Co. Ltd., B Recreation, Other Consumer Goods 597,400 199,532
China Merchants Shekou Port Service Co. Ltd., B Transportation 600,000 217,265
</TABLE>
9
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- --------------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
China: (cont.)
China Southern Glass Co. Ltd., B Building Materials & Components 1,504,800 $ 622,743
**China Textile Machinery Co. Ltd., B Machinery & Engineering 816,000 130,560
Chiwan Wharf Holdings Ltd., B Transportation 2,132,000 802,343
**Foshan Electrical and Lighting Co. Ltd., B Appliances & Household Durables 400,000 268,994
Guangzhou Shipyard International Co. Ltd., H Machinery & Engineering 2,438,000 617,973
Luoyang Glass Co. Ltd., H Misc Materials & Commodities 445,000 114,523
Shandong Huaneng Power Utilities--Electrical & Gas 195,000 1,316,250
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chemicals 4,831,000 1,227,074
**Shanghai Dazhong Taxi Shareholding Co. Ltd., B Transportation 700,000 534,800
**Shanghai Erfangji Textile Machinery Co. Ltd., B Machinery & Engineering 3,234,000 459,228
Shanghai Industrial Sewing Machine Corp. Machinery & Engineering 930,000 150,660
Shanghai Jin Jiang Tower Co. Ltd., B Leisure & Tourism 2,845,000 802,290
Shanghai Jinqiao Export Processing Zone Real Estate
Development, B 2,679,300 1,002,058
Shanghai Lian Hua Fibre Corp., B Textiles & Apparel 1,126,560 191,515
Shanghai Lujiaxui Finance & Trade Zone Real Estate
Development Stock Co. Ltd., B 4,201,000 2,386,168
Shanghai Narcissus Electric Appliances Co. Ltd., B Appliances & Household Durables 660,000 112,200
**Shanghai Refrigerator Compressor Co. Ltd., B Industrial Components 211,500 75,294
**Shanghai Rubber Belt Co. Ltd., B Industrial Components 41,000 6,683
Shanghai Steel Tube Co. Ltd., B Machinery & Engineering 2,257,640 316,070
Shanghai Tyre & Rubber Co. Ltd., B Industrial Components 1,214,000 250,084
**Shanghai Vacuum Electron Devices Co. Ltd., B Appliances & Household Durables 1,593,759 369,752
Shanghai Wingsung Stationery Co. Ltd., B Recreation, Other Consumer Goods 180,000 35,280
Shanghai Yaohua Pilkington Glass, B Building Materials & Components 2,273,000 2,000,240
Shenzhen China Bicycles Co. (Holdings) Ltd., B Recreation, Other Consumer Goods 1,875,000 307,953
Shenzhen Gintian Industrial Co. Ltd., B Multi-Industry 750,080 257,059
Shenzhen Huafa Electronics Co. Ltd., B Appliances & Household Durables 50,000 8,568
Shenzhen Properties & Resources Development (Group) Ltd., B Real Estate 2,100,560 421,063
Shenzhen Tellus Machinery & Electronics Co. Ltd., B Multi-Industry 41,800 6,054
Shenzhen Vanke Co. Ltd., B Real Estate 1,957,300 721,410
Tsann Kuen Enterprise Co. Ltd., B Appliances & Household Durables 1,520,000 294,859
Zhuhai Sez Lizhu Pharmaceutical, B Health & Personal Care 858,800 283,212
------------
16,509,757
- ---------------------------------------------------------------------------------------------------------------------------------
Colombia: 0.1%
Promigas SA Utilities--Electrical & Gas 29,705 77,954
- ---------------------------------------------------------------------------------------------------------------------------------
Czech Republic: 0.6%
**CEZ, GDR Utilities--Electrical & Gas 68,030 2,466,088
**CEZ, GDS, 144A Utilities--Electrical & Gas 26,000 942,500
**SPT Telecom AS Telecommunications 16,000 1,512,038
------------
4,920,626
- ---------------------------------------------------------------------------------------------------------------------------------
Greece: 4.7%
Alpha Credit Bank Banking 239,753 13,853,879
Alpha Leasing SA Financial Services 159,480 3,901,405
Delta Dairy SA, pfd. Food & Household Products 71,544 1,056,156
Elais Oleaginous Co. Food & Household Products 61,200 1,987,600
Ergo Bank SA Banking 119,220 4,749,390
Etba Leasing Financial Services 103,940 1,896,075
Fourlis Brothers Corp. SA Appliances & Household Durables 115,450 1,375,622
Hellas Can--Container Manufacturers Metals & Mining 102,580 2,055,148
Intracom SA Electrical & Electronics 50,000 1,077,650
National Bank of Greece SA Banking 46,150 2,352,367
Titan Cement Co., reg. Building Materials & Components 60,490 2,538,595
X. Benrubi & Son SA Food & Household Products 182,470 1,031,295
------------
37,875,182
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- -----------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hong Kong: 14.0%
Cheung Kong Holdings Ltd. Multi-Industry 3,036,000 $ 18,492,803
China Overseas Land & Investment Ltd. Real Estate 3,496,000 614,880
CNT Group Ltd. Multi-Industry 22,606,934 1,344,868
Cross Harbour Tunnel Co. Ltd. Transportation 799,010 1,513,805
Dairy Farm International Holdings Ltd. Merchandising 1,846,513 1,698,792
Dickson Concepts (International) Ltd. Merchandising 1,325,000 1,233,754
East Asiatic Co. (Hong Kong) Ltd. (The) Wholesale & International Trade 1,684,000 200,360
**Fu Hui Jewellery Co. (H.K.) Ltd. Recreation, Other Consumer Goods 3,000,000 116,392
Gold Peak Industries (Holdings) Ltd. Electrical & Electronics 155,000 76,673
Goldlion Holdings Ltd. Textiles & Apparel 3,066,000 2,240,272
Great Wall Electronic International Ltd. Electrical & Electronics 802,000 59,119
Hang Lung Development Co. Ltd. Real Estate 5,201,000 8,273,172
**Hang Lung Development Co. Ltd., wts. Real Estate 418,600 62,797
Hongkong Electric Holdings Ltd. Utilities--Electrical & Gas 246,000 806,479
HSBC Holdings PLC Banking 1,485,000 22,469,447
IMC Holdings Ltd. Transportation 145,000 85,322
Jardine International Motor Holdings Ltd. Automobiles 1,360,000 1,547,753
Jardine Matheson Holdings Ltd. Multi-Industry 192,352 1,317,611
Jardine Strategic Holdings Ltd. Multi-Industry 1,226,250 3,752,325
**Jardine Strategic Holdings Ltd., wts. Multi-Industry 136,250 43,600
JCG Holdings Ltd. Financial Services 433,000 316,385
Joyce Boutique Holdings Ltd. Merchandising 4,704,000 1,095,015
K Wah International Holdings Ltd. Building Materials & Components 11,246,804 1,687,202
**K Wah International Holdings Ltd., wts. Building Materials & Components 1,086,860 34,437
Lai Sun Development Co. Ltd. Real Estate 11,467,000 1,379,154
Lai Sun Garment International Ltd. Multi-Industry 1,122,000 1,088,264
**Laws International Holdings Ltd. Textiles & Apparel 3,128,000 279,123
Leefung-Asco Printers Holdings Ltd. Broadcasting & Publishing 470,000 66,861
Luks Industrial Co. Ltd. Appliances & Household Durables 700,000 71,516
New World Development Co. Ltd. Real Estate 3,966,491 17,286,873
S. Megga International Holdings Ltd. Electronic Components & Instruments 1,626,000 60,982
Semi-Tech (Global) Co. Ltd. Appliances & Household Durables 1,010,362 1,626,771
**South Sea Development Co. Ltd. Real Estate 1,845,000 57,503
Stelux International Holdings Ltd. Multi-Industry 5,477,881 1,402,678
Sun Hung Kai & Co. Ltd. Financial Services 5,952,000 1,270,068
Sun Hung Kai Properties Ltd. Real Estate 1,555,000 12,719,528
Swire Pacific Ltd., B Multi-Industry 230,000 287,035
Tian An China Investments Co. Ltd. Real Estate 2,451,000 304,295
Tungtex (Holdings) Co. Ltd. Textiles & Apparel 2,972,000 307,481
Vitasoy International Holdings Ltd. Food & Household Products 694,000 296,178
Wai Kee Holdings Ltd. Construction & Housing 394,126 49,441
Wheelock & Co. Ltd. Multi-Industry 1,228,000 2,104,235
Wing Shan International Ltd. Utilities--Electrical & Gas 544,000 56,282
Wo Kee Hong Holdings Ltd. Merchandising 4,054,000 634,380
Yaohan Hongkong Corp. Ltd. Merchandising 4,702,000 249,314
Yue Yuen Industrial (Holdings) Ltd. Recreation, Other Consumer Goods 4,885,000 1,295,086
------------
111,976,311
- -----------------------------------------------------------------------------------------------------------------------------
Hungary: 0.3%
Chinoin Pharmaceutical & Chemical Works Co. Ltd. Health & Personal Care 2,000 494,035
**Egis RT Multi-Industry 2,350 52,201
**Fotex First Hungarian-American Photo-Service Multi-Industry 1,784,000 1,033,972
**Gedeon Richter Ltd. Multi-Industry 15,000 288,750
**Ibusz Leisure & Tourism 38,280 204,797
**Ibusz, new Leisure & Tourism 12,760 63,083
**OTP Bank, GDR Banking 40,000 276,660
Pick Szeged RT, GDR Food & Household Products 3,500 131,250
------------
2,544,748
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- -----------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Indonesia: 4.8%
PT Anwar Sierad, fgn. Food & Household Products 1,191,000 $ 559,950
PT Aqua Golden Mississippi, fgn. Beverages & Tobacco 179,400 125,537
PT Astra International, fgn. Multi-Industry 4,500 9,348
PT Bank Dagang Nasional Indonesia, fgn. Banking 600,000 492,018
PT Bank PDFCI, fgn. Banking 243,000 154,100
PT Barito Pacific Timber, fgn. Forest Products & Paper 13,631,000 9,985,535
PT BBL Dharmala Finance, fgn. Financial Services 833,000 874,349
**PT Bimantara Citra, fgn. Multi-Industry 4,658,500 3,871,047
PT Branta Mulia, fgn. Automobiles 349,200 412,351
PT Charoen Pokphand Indonesia, fgn. Food & Household Products 889,000 1,807,938
PT Dharmala Intiland, fgn. Real Estate 314,000 171,660
PT Duta Anggada Realty, fgn. Real Estate 832,500 400,503
PT Duta Pertiwi Nusantura, fgn. Chemicals 59,813 18,311
PT Eratex Djaja, fgn. Textiles & Apparel 328,000 114,761
PT Ficorinvest Bank, fgn. Banking 140,000 122,458
PT Gadjah Tunggal, fgn. Automobiles 2,865,500 1,597,862
PT Gajah Surya Multi Finance, fgn. Financial Services 1,294,000 580,079
PT Ganda Wangsa Utama, fgn. Textiles & Apparel 463,600 126,722
PT Hadtex Indosyntec, fgn. Textiles & Apparel 1,417,500 666,439
PT Hotel Prapatan, fgn. Leisure & Tourism 32,500 28,428
PT Intan Wijaya Chemical Industry, fgn. Chemicals 141,000 32,375
PT Inter-Pacific Bank, fgn. Banking 589,500 476,963
PT Jakarta International Hotel & Development, fgn. Real Estate 502,000 614,739
PT Japfa Comfeed Indonesia, fgn. Food & Household Products 1,661,000 817,242
PT Metrodata Electronic, fgn. Electrical & Electronics 45,000 28,291
PT Multibreeder Adirama, fgn. Food & Household Products 221,250 77,411
PT Multipolar Corp., fgn. Electrical & Electronics 141,000 64,750
PT Polysindo Eka Perkasa, fgn. Textiles & Apparel 8,312,000 4,725,825
PT Pudjiadi Prestige Ltd., fgn. Real Estate 612,000 428,253
+PT Sarasa Nugraha, fgn. Textiles & Apparel 2,890,000 1,911,710
**PT Sinar Mas Multi Artha, fgn. Financial Services 4,319,000 3,730,604
PT Summarecon Agung, fgn. Real Estate 854,137 504,301
PT Ultra Jaya Milk, fgn. Food & Household Products 1,800 866
PT Unggul Indah Corp., fgn. Chemicals 2,937,000 2,697,442
------------
38,230,168
- ------------------------------------------------------------------------------------------------------------------------------
Israel: 0.7%
**Agis Industries Ltd. Health & Personal Care 2,800 19,851
Bank Hapoalim BM Banking 326,348 538,645
Clal Industries Ltd. Multi-Industry 173,978 933,530
Discount Investment Corp. Multi-Industry 47,433 3,141,242
Super Sol Ltd. Merchandising 9,800 205,530
The First International Bank of Israel Banking 3,977 481,196
------------
5,319,994
- ------------------------------------------------------------------------------------------------------------------------------
Korea (South): 1.9%
Boram Bank Co. Ltd. Banking 239,100 3,128,411
Central Investment & Finance Corp. Financial Services 46,251 861,524
**Dae Duck Electronics Co. Ltd. Electrical & Electronics 4,000 159,330
Daegu Bank Co. Ltd. Banking 147,000 2,256,495
**Daegu Bank Co. Ltd., new Banking 15,272 224,586
Daehan Synthetic Fiber Co. Ltd. Textiles & Apparel 5,790 712,788
Hae In Corp. Ltd. Merchandising 1,500 108,959
Hankook Cosmetics Co. Ltd. Health & Personal Care 14,940 418,878
Kyong Nam Bank Banking 65,000 666,549
**Kyung Dong Boiler Co Ltd Energy Equipment & Services 23,770 977,458
**Kyung Dong Boiler Co. Ltd., new Energy Equipment & Services 3,803 152,708
**Shinsung Industries Co. Ltd. Electrical & Electronics 14,000 458,395
</TABLE>
12
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ----------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Korea (South): (cont.)
**Ssangyong Oil Refining Co Ltd Energy Equipment & Services 99,000 $ 2,801,225
Tong Yang Investment and Finance Co. Ltd. Financial Services 91,000 1,618,820
Yuhwa Textiles & Apparel 5,440 278,750
------------
14,824,876
- ----------------------------------------------------------------------------------------------------------------------------
Malaysia: 2.1%
Aokam Perdana Bhd. Multi-Industry 191,000 308,344
Federal Flour Mills Bhd. Food & Household Products 957,500 2,243,227
Malayawata Steel Bhd., fgn. Metals & Mining 1,139,000 1,856,700
Malaysian International Shipping Corp. Bhd., fgn. Transportation 1,943,333 5,088,461
Oriental Holdings Bhd., fgn. Automobiles 657,000 3,337,126
Perlis Plantations Bhd. Multi-Industry 10,000 30,965
Perlis Plantations Bhd., fgn. Multi-Industry 837,400 2,621,306
Shangri-La Hotels (Malaysia) Bhd. Leisure & Tourism 1,832,000 1,781,722
------------
17,267,851
- ----------------------------------------------------------------------------------------------------------------------------
Mexico: 9.9%
Cemex SA, B Building Materials & Components 2,217,875 8,049,320
**Cifra SA, C Merchandising 10,406,602 10,494,279
**DESC SA, A Multi-Industry 104,000 342,735
**DESC SA, B Multi-Industry 548,544 2,012,158
**DESC SA, C Multi-Industry 113,000 402,787
Grupo Financiero Banamex Accival SA, B Banking 3,704,000 6,202,940
**Grupo Financiero Banamex Accival SA, L Banking 2,414,950 3,587,210
**Grupo Financiero Bancomer SA de CV, B Banking 15,276,934 4,257,344
Grupo Financiero Bancomer SA de CV, L Banking 4,046,553 1,049,009
**Grupo Financiero Serfin SA, B Banking 2,152,000 1,115,749
Grupo Industrial Alfa SA, A Multi-Industry 246,794 3,163,698
Grupo Industrial Maseca SA de CV, B Food & Household Products 185,093 113,239
Telmex-Telefonos de Mexico SA, L Telecommunications 181,000 289,975
Telmex-Telefonos de Mexico SA, L, ADR Telecommunications 1,113,500 35,492,812
**Tubos de Acero de Mexico SA Machinery & Engineering 896 6,539
Vitro SA Food & Household Products 1,788,693 2,782,154
------------
79,361,948
- ----------------------------------------------------------------------------------------------------------------------------
Pakistan: 0.9%
**Bank of Punjab Banking 530,800 395,589
**DG Khan Cement Co. Building Materials & Components 660,000 578,680
**DG Khan Cement Co., rts. Building Materials & Components 198,000 69,442
Engro Chemical Chemicals 160,000 661,683
Fauji Fertilizer Co. Ltd. Chemicals 228,000 341,509
Khadim Ali Sham Bukhari & Co. Ltd. Financial Services 219,120 163,303
National Development Leasing Corp. Financial Services 273,375 133,828
**Pakistan Electron Ltd. Appliances & Household Durables 110,000 105,214
**Pakistan Telecom Corp. PTC, ADR Telecommunications 5,000 435,000
**Pakistan Telecom Corp. PTC Telecommunications 4,871,000 4,334,896
**Union Bank Ltd. Banking 383,625 242,178
------------
7,461,322
- ----------------------------------------------------------------------------------------------------------------------------
Philippines: 3.0%
**Belle Corp. Real Estate 30,000,000 4,117,423
**Keppel Philippine Holdings Inc., B Machinery & Engineering 687,500 288,315
**Philex Minning Corp., B Metals & Mining 8,048,610 920,542
Philippine Long Distance Telephone Co., ADR Telecommunications 204,905 11,090,483
**Philippine National Bank Banking 236,309 2,612,642
RFM Corp. Food & Household Products 18,750,500 4,003,157
Sime Darby Pilipinas Inc. Industrial Components 956,400 729,241
------------
23,761,803
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Poland: 0.1%
Bank Przemyslowo-Handlowy SA Banking 21,991 $ 637,743
Elektrim Towarzystwo Handlowe SA Utilities--Electrical & Gas 50,000 169,337
Wielkopolski Bank Kredytowy SA Banking 150,000 310,282
------------
1,117,362
- ----------------------------------------------------------------------------------------------------------------------------------
Portugal: 6.8%
Banco Chemical (Portugal) Banking 92,370 1,024,448
Banco Comercial Portugues SA Banking 983,114 13,366,541
Banco Comercial Portugues, 8.75%, conv., 5/21/02 Corporate Bond 3,000,000* 4,062,428
Banco Espirito Santo e Comercial de Lisboa Banking 732,655 11,072,428
Banco Portugues do Investimento SA, new Banking 261,355 2,949,247
Banco Totta & Acores SA Banking 547,451 9,048,898
**Banco Totta & Acores SA, new Banking 49,768 756,121
BPI Socieda de Gestora de Participacoes Socias SA Banking 476,300 5,693,006
**Cel-Cat Fabrica Nacional de Conductores Electricos SA Electronic Components & Instruments 9,522 148,675
+Compta-Equipamentos e Servicos de Informatica SA Business & Public Services 75,240 766,601
Espirito Santo Financial Holding SA, ADR Banking 308,420 3,662,488
**Portucel Industrial Empresa Product de Celulose SA Forest Products & Paper 220,000 1,300,818
**Sociedade Portuguesa de Celulose SA Forest Products & Paper 43,510 900,868
------------
54,752,567
- ----------------------------------------------------------------------------------------------------------------------------------
Singapore: 1.5%
Acma Ltd. Electrical & Electronics 72,000 239,236
Acma Ltd., fgn. Electrical & Electronics 260,600 865,903
Chemical Industries (Far East) Ltd. Chemicals 883,500 1,961,251
First Capital Corp. Ltd., fgn. Real Estate 145,000 401,838
G.P. Batteries International Ltd. Electrical & Electronics 37,000 89,170
**GP Batteries International Ltd., wts. Electrical & Electronics 9,250 6,290
Hai Sun Hup Group Ltd. Transportation 552,000 370,732
Hinds Hotels International Ltd. Leisure & Tourism 268,000 318,303
Hinds Hotels International Ltd., fgn. Leisure & Tourism 188,000 223,287
Inchcape Bhd., fgn. Wholesale & International Trade 567,000 1,819,852
Isetan (Singapore) Ltd., fgn. Merchandising 61,000 119,024
Jaya Holdings Ltd. Transportation 843,000 935,673
Jaya Holdings Ltd., 3.00%, conv. ln. stk., 8/31/98 Corporate Bond 80,400* 130,732
**Jaya Holdings Ltd., wts. Transportation 75,240 53,458
Natsteel Ltd., fgn. Metals & Mining 803,000 1,646,306
**Osprey Maritime Ltd. Transportation 132,000 277,200
Prima Ltd. Food & Household Products 105,000 400,848
Singapore Bus Service (1978) Ltd., fgn. Transportation 249,600 1,782,227
TIBS Holdings Ltd. Transportation 78,000 190,795
**TIBS Holdings Ltd., wts. Transportation 30,000 25,027
------------
11,857,152
- ----------------------------------------------------------------------------------------------------------------------------------
South Africa: 2.0%
BTR Dunlop Ltd. Industrial Components 284,500 546,290
Del Monte Royal Foods Ltd Food & Household Products 813,650 1,127,125
Engen Ltd. Energy Sources 670,591 5,058,635
First National Bank Holdings Ltd. Banking 479,300 4,404,485
Nedcor Ltd. Banking 164,137 2,836,547
Palabora Mining Co. Ltd. Metals & Mining 700 10,753
Rembrandt Group Ltd. Multi-Industry 189,400 1,818,406
Sun International (South Africa) Ltd. Leisure & Tourism 170,000 279,797
------------
16,082,038
- ----------------------------------------------------------------------------------------------------------------------------------
Sri Lanka: 0.1%
Aitken Spence & Co. Ltd. Multi-Industry 50,000 172,988
Associated Motorways Ltd. Automobiles 100,512 81,823
</TABLE>
14
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ----------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sri Lanka: (cont.)
Ceylon Holiday Resorts Ltd. Leisure & Tourism 185,000 $ 126,642
Lanka Walltile Ltd. Building Materials & Components 34,000 28,936
**National Development Bank of Sri Lanka Banking 70,000 284,921
United Motor Lanka Ltd. Automobiles 112,000 54,912
------------
750,222
- ----------------------------------------------------------------------------------------------------------------------------
Thailand: 1.5%
American Standard Sanitaryware Public Co. Ltd., fgn. Building Materials & Components 95,600 1,635,713
Asia Fibre Public Co. Ltd., fgn. Textiles & Apparel 669,500 358,803
Ayudhya Insurance Public Co. Ltd., fgn. Insurance 150,900 982,437
Bangkok Land Public Co. Ltd., fgn. Real Estate 717,000 1,095,852
Chareon Pokphand Feedmill Public Co. Ltd., fgn. Food & Household Products 66,000 322,271
Charoen Pokphand Feedmill Public Co. Ltd. Food & Household Products 249,000 1,166,415
Hua Thai Manufacturing Public Co. Ltd. Textiles & Apparel 51,000 156,401
Karat Sanitaryware Public Co. Ltd., fgn. Building Materials & Components 161,600 654,355
Kian Gwan (Thailand) Public Co. Ltd., fgn. Real Estate 104,000 279,714
**Royal Ceramic Industry Public Co. Ltd., fgn. Building Materials & Components 206,700 324,123
Saha Pathanapibul Public Co Ltd., fgn. Food & Household Products 593,000 1,165,284
Saha Union Public Co. Ltd., fgn. Multi-Industry 1,249,300 1,413,460
Sanyo Universal Electric Public Co Ltd., fgn. Appliances & Household Durables 184,600 776,800
Thai Asahi Glass Public Co. Ltd. Building Materials & Components 94,910 194,040
Thai Asahi Glass Public Co. Ltd., fgn. Building Materials & Components 32,000 65,423
Thai Rayon Public Co. Ltd. Textiles & Apparel 35,000 305,677
Thai Rayon Public Co. Ltd., fgn. Textiles & Apparel 36,660 325,632
Thai Wacoal Public Co. Ltd., fgn. Textiles & Apparel 157,700 1,184,785
Thai Wah Public Co. Ltd., fgn. Multi-Industry 8,450 10,399
United Motor Works (Siam) Public Co. Ltd. Machinery & Engineering 2,100 10,254
------------
12,427,838
- ----------------------------------------------------------------------------------------------------------------------------
Turkey: 4.4%
Akbank Banking 37,242,670 7,032,688
Akcimento Building Materials & Components 2,082,000 786,305
Aksigorta AS Insurance 6,712,500 523,553
Alarko Sanayii ve Ticaret SA Appliances & Household Durables 852,000 237,833
**Alcatel Teletas Endustri Tic AS Telecommunications 1,687,000 463,994
Anadolu Anonim Turk Sigorta Sirketi Insurance 2,752,000 109,583
Arcelik AS Appliances & Household Durables 31,189,857 2,509,529
Bagfas Chemicals 3,162,000 973,522
Bekoteknik AS Appliances & Household Durables 15,428,758 1,038,718
Borusan AS Industrial Components 998,000 200,747
**Celik Halat ve Sanayii ve Ticaret AS Building Materials & Components 1,498,374 98,415
Cimentas Izmir Cimento Fabrikasi Turk AS Building Materials & Components 3,961,250 2,341,626
Cimsa Cimento Sanayi ve Ticaret AS Building Materials & Components 2,000,000 870,279
Compagnie Financiere Ottomane SA Banking 38,000 1,386,818
**Erciyas Biracilik Food & Household Products 5,000,000 2,339,901
Eregli Demir ve Celik Fabrikalari AS Metals & Mining 23,471,000 1,927,011
Finans Bank AS, br. Banking 15,070,331 600,091
Izocam Ticaret ve Sanayii AS, br. Building Materials & Components 1,563,796 143,797
Kartonsan Forest Products & Paper 5,042,000 1,324,663
Koc Holding AS Multi-Industry 3,296,000 470,857
**Koc Yatirim ve Sanayii Mamullesi Pazarlanca AS Multi-Industry 7,279,064 1,553,823
Marshall Boya ve Vernik Sanayii AS Industrial Components 7,106,568 688,485
Netas Northern Electric Telekomunic Asyon AS Electrical & Electronics 2,177,000 616,638
**Otosan Otomobil Sanayii AS Automobiles 6,721,500 1,103,695
**Tat Konserve Sanayii AS Food & Household Products 818,666 517,547
Tekstil Bankasi AS, br. Banking 757,160 24,555
Tofas Turk Otomobil Fabrikasi AS Automobiles 14,385,000 1,393,621
</TABLE>
15
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ------------------------------------------------------------------------------------------------------------------------------
LONG TERM SECURITIES (CONT.)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Turkey: (cont.)
Trakya Cam Sanayii AS Building Materials & Components 5,938,550 $ 604,581
Turk Demir Dokum, br. Appliances & Household Durables 6,785,331 668,506
Turkiye Garanti Bankasi AS Banking 26,360,650 2,207,542
Vakif Finansal Kiralama AS Financial Services 9,473,942 233,348
------------
34,992,271
- ------------------------------------------------------------------------------------------------------------------------------
Venezuela: 1.3%
Banco Venezolano de Credito Banking 11,584 238,837
Ceramica Carabobo CA, A Building Materials & Components 234,000 203,191
Ceramica Carabobo CA, A, ADR Building Materials & Components 130,000 135,980
Ceramica Carabobo CA, B Building Materials & Components 1,311,999 1,024,093
Consolidada Carabobo, A Building Materials & Components 2,488,000 111,758
Consolidada Carabobo, B Building Materials & Components 9,116,000 382,630
Electricidad de Caracas Utilities Electrical & Gas 5,800,942 3,964,119
Fabrica Nacional de Cementos CA Building Materials & Components 285,995 20,639
H.L. Boulton & Co. SA Multi-Industry 12,680,131 298,795
Industrias Ventane Utilities--Electrical & Gas 280,000 58,557
**Manufacturera de Aparatos Domesticos SA Appliances & Household Durables 180,613 140,966
Mavesa SA, ADR Food & Household Products 440,875 1,636,237
Siderurgica Venezolana Sivensa Saica Svs Metals & Mining 147,569 47,379
Siderurgica Venezolana Sivensa Saica Svs, ADR Metals & Mining 339,750 545,401
Vencemos de Cementos SA Building Materials & Components 816,222 1,002,547
Venezolana de Cementos-Vencemos, #2 Building Materials & Components 309,920 333,198
**Venezolana Prerreducidos Caroni Venprecar CA, Metals & Mining
GDS, 144A 118 493
------------
10,144,820
------------
TOTAL LONG TERM SECURITIES (cost $704,169,804) 655,768,397
- ------------------------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 19.1% (cost $152,256,757)
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.50% to 5.40% with maturities
to 3/14/96 U.S. 152,939,000* 152,370,167
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS:101.2% (cost $856,426,561) 808,138,564
OTHER ASSETS, LESS LIABILITIES: (1.2%) (9,623,500)
------------
TOTAL NET ASSETS: 100.0% $798,515,064
============
</TABLE>
*PRINCIPAL AMOUNT IN CURRENCY OF COUNTRY INDICATED
**NON-INCOME PRODUCING.
+SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $856,426,561) $808,138,564
Cash 345,459
Receivables:
Investment securities sold 224,613
Capital shares sold 11,118,768
Dividends and interest 1,354,935
Unamortized organization costs 8,401
------------
Total assets 821,190,740
------------
Liabilities:
Payables:
Investment securities purchased 20,993,980
Capital shares redeemed 147,338
Accrued expenses 1,534,358
------------
Total liabilities 22,675,676
------------
Net assets, at value $798,515,064
============
Net assets consist of:
Undistributed net investment income $ 1,138,292
Unrealized depreciation on investments (48,493,644)
Accumulated net realized gain 683,366
Net capital paid in on shares of capital stock 845,187,050
------------
Net assets, at value $798,515,064
============
Shares outstanding 74,261,758
============
Net asset value per share
($798,515,064 / 74,261,758) $ 10.75
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
17
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
(net of $982,685 foreign taxes withheld)
Dividends $ 15,649,496
Interest 8,285,108
------------
Total income $ 23,934,604
Expenses:
Management fees (Note 3 ) 8,488,442
Administrative fees (Note 3) 681,225
Transfer agent fees (Note 3) 9,000
Custodian fees 975,150
Reports to shareholders 41,000
Audit fees 39,000
Legal fees (Note 3) 7,600
Registration and filing fees 60,000
Directors' fees and expenses 24,000
Amortization of organization costs 1,447
Other 14,465
------------
Total expenses 10,341,329
------------
Net investment income 13,593,275
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 10,856,724
Foreign currency transactions (1,475,387)
------------
9,381,337
------------
Net unrealized depreciation on:
Investments (29,162,934)
Foreign currency translations of other assets
and liabilities (205,647)
------------
(29,368,581)
------------
Net realized and unrealized loss (19,987,244)
------------
Net decrease in net assets resulting from
operations $ (6,393,969)
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
18
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 13,593,275 $ 8,480,304
Net realized gain on investments and foreign
currency transactions 9,381,337 13,497,874
Net unrealized depreciation (29,368,581) (88,281,405)
------------ ------------
Net decrease in net assets resulting from op-
erations (6,393,969) (66,303,227)
Distributions to shareholders:
From net investment income (12,454,983) (8,480,304)
From net realized gain (9,647,645) (16,581,020)
Capital share transactions (Note 2) 244,133,379 251,809,430
------------ ------------
Net increase in net assets 215,636,782 160,444,879
Net assets:
Beginning of year 582,878,282 422,433,403
------------ ------------
End of year $798,515,064 $582,878,282
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
19
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Emerging Markets Series (the Fund) is a separate series of Templeton Institu-
tional Funds, Inc. (the Company) which is an open-end, diversified management
investment company registered under the Investment Company Act of 1940. The
following 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 Transactions:
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 investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement 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 rates.
The Brazilian government has exercised and may continue to exercise substantial
influence over exchange of Brazilian currency. Under Brazilian law, whenever
there occurs a serious imbalance, Brazil's National Monetary Council may, for a
limited period, impose restrictions on foreign capital remittances abroad. Ex-
change control regulations may restrict repatriation of investment income, cap-
ital, or the proceeds of securities sales by foreign investors.
c. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
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 securi-
ties is recorded as soon as information is available to the Fund. Interest in-
come and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
2. TRANSACTIONS IN SHARES OF CAPITAL STOCK
At December 31, 1995, there were 700 million shares of the Company's ($0.01 par
value) capital stock authorized of which 200 million shares have been classi-
fied as Fund shares. Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 25,584,150 $278,958,676 21,165,430 $266,579,142
Shares issued on
reinvestment of
distributions 2,003,414 21,146,824 1,798,076 21,032,117
Shares redeemed (5,323,688) (55,972,121) (2,916,467) (35,801,829)
---------- ------------ ---------- ------------
Net increase 22,263,876 $244,133,379 20,047,039 $251,809,430
========== ============ ========== ============
</TABLE>
20
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Company are also directors or officers of Templeton As-
set Management Ltd. (TAML), Templeton Global Investors, Inc. (TGII), Franklin
Templeton Distributors, Inc. (FTD), and Franklin Templeton Investor Services,
Inc. (FTIS), the Fund's investment manager, administrative manager, principal
underwriter and transfer agent, respectively.
The Fund pays monthly an investment management fee to TAML equal, on an annual
basis, to 1.25% of the average 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 million, 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 total expenses of the Fund to an annual rate of 1.60% of
the Fund's average net assets through December 31, 1995. For the year ended De-
cember 31, 1995 no reimbursement was necessary under the agreement. For the
year endedDecember 31, 1995, FTD did not receive any commissions from the sale
of the Fund's shares and FTIS received fees of $9,000.
An officer of the Company is a partner of Dechert Price & Rhoads, legal counsel
for the Company, which received fees of $7,600 for the year ended December 31,
1995.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 1995 aggregated $320,568,139 and $72,002,505, respec-
tively. The cost of securities for federal income tax purposes is the same as
that shown in the investment portfolio. Realized gains and losses are reported
on an identified cost basis.
At December 31, 1995, the aggregate gross unrealized appreciation and deprecia-
tion of portfolio securities based on cost for federal income tax purposes, was
as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 73,621,990
Unrealized depreciation (121,909,987)
-------------
Net unrealized depreciation $ (48,287,997)
=============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
The Investment Company Act of 1940 defines "affiliated companies" as invest-
ments in portfolio companies in which the Fund owns 5% or more of the outstand-
ing voting securities. Investments in "affiliated companies" at December 31,
1995 amounted to $2,678,311. For the year ended December 31, 1995, dividend in-
come from affiliated companies was $45,163.
21
<PAGE>
Templeton Institutional Funds, Inc.
Emerging Markets Series
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Institutional Funds, Inc.--Emerging Markets Series
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of the Emerging Markets Series of Templeton Institu-
tional Funds, Inc. as of December 31, 1995, and the related statement of opera-
tions for the year then ended, the statement of changes in net assets for each
of the two years in the period then ended, and the financial highlights for the
two years in the period then ended and the period May 3, 1993 (commencement of
operations) to December 31, 1993. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of De-
cember 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant esti-
mates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Emerging Markets Series of Templeton Institutional Funds, Inc. as of December
31, 1995, the results of its operations, the changes in its net assets and the
financial highlights for the period indicated, in conformity with generally ac-
cepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
January 31, 1996
22
<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. Investing in
developing markets involves special considerations,
which may include risks related to market and currency
volatility, adverse social and political developments,
and the relatively small size and lesser liquidity of
these markets. These special considerations are
discussed in the Fund's prospectus. The Fund is designed
for the aggressive portion of a well diversified
portfolio. 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
Institutional Services: 1-800-321-8563
Fund Information: 1-800-362-6243
ZT456 A 12/95 [RECYCLED PAPER LOGO]
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