<PAGE>
Templeton Institutional Funds, Inc.
TIFI Growth Series
--------------------------------------------------------
ANNUAL REPORT
December 31, 1995
<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.
- --------------------------------------------------------------------------------
<PAGE>
December 31, 1995
Dear Shareholder...
1994 was a difficult year for US and Non-US equities and bonds. Money
market instruments, however, generally offered good relative returns given an
uncertain investment environment. Interest rates were rising, many emerging
markets were being affected by adverse political and economic developments
including the Mexican monetary crisis and there were signs of a global economic
slowdown. It was a year that also witnessed the demise of several over-leveraged
US hedge funds.
At the beginning of 1995, given difficulties experienced in 1994, many
investors were maintaining conservative portfolios. Our view, however, was more
optimistic than the market consensus given our longer-term, five-year investment
horizon. In last year's annual report, we viewed the market's pessimism as a
buying opportunity for patient, fundamental investors. Our optimism had improved
because the number of names on our bargain (buy) list had grown since the
beginning of 1994 because many share prices had fallen significantly, yet their
underlying long-term fundamentals, based on our analysis, remained relatively
unchanged.
It is therefore not surprising, given reasonable fundamentals and a
reversal in the direction of interest rates, that performance for many financial
markets (including many global stock markets) improved in 1995. Furthermore,
performance results of many overseas stock markets, stated in US dollar terms,
were enhanced by stronger local currencies. The
continued...
- --------------------------------------------------------------------------------
Total Returns as of 12/31/95
<TABLE>
One-Year Cumulative
Average Annual/1, 2/ Since Inception/1, 3
/(05/03/93)
<S> <C> <C>
TIFI Growth Series 17.59 39.28
MSCI World Index 21.32 38.61
</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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[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................................................................
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Industry Diversification on 12/31/95
(% of Total Portfolio)
<S> <C>
Banking 16.6%
Utilities Electrical & Gas 7.3%
Telecommunications 6.6%
Insurance 6.4%
Financial Services 5.6%
Merchandising 5.1%
Business & Public Services 5.1%
Multi-industry 4.2%
Chemicals 3.8%
Electrical & Electronics 3.4%
</TABLE>
- --------------------------------------------------------------------------------
Geographic Distribution on 12/31/95
(% of Total Equity)
[PIE CHART APPEARS HERE]
Asia 15.3%
Australia/New Zealand 5.6%
Latin America/Caribbean 4.6%
Europe 45.7%
North America 28.8%
Templeton Institutional Funds, Inc. Growth Series (the "Fund") remains unhedged
and was also a beneficiary of this approach. Some markets, however, continued to
be disappointing, particularly the emerging markets. Additionally, within most
global stock markets, results varied amongst industry sectors and individual
stocks, given mixed earnings results.
The two most interesting developments in 1995 were the exceptional
performance gains of the US stock market and the recent weakening of the
Japanese Yen, which generally remains uncorrelated to movements of other major
currencies. Interestingly, despite strong US stock markets and foreign exchange
volatility concerns, US institutional and retail investor contributions into
global and international stock funds remained strong.
Within this environment, the Fund returned 1.4% and 17.6% for the
quarter and one-year periods ending December 31, 1995, compared to the unmanaged
Morgan Stanley Capital International ("MSCI") World index returns of 4.9% and
21.3% for the same time periods, respectively. Since its inception on May 3,
1993, the Fund has an average annual return of 13.3% compared to the MSCI World
index return of 13.1%.
The 1995 performance relative to the benchmark index is primarily
attributable to several key factors. Most importantly, the portfolio remained
underweighted in the Japanese market which underperformed the index despite a
strong fourth quarter. Performance was also enhanced by maintaining share
positions in the United Kingdom, Hong Kong, Sweden and Spain. Alternatively,
many of the Fund's emerging markets holdings continued to underperform the
index. The Fund was also negatively impacted by being underweighted in the
United States stock market (25% of the total portfolio versus 41% in the MSCI
World index).
Portfolio turnover in 1995 remained low, with geographic and industry
weightings fluctuating throughout the year due to share price appreciation,
depreciation and buying and selling of shares. Overall, on a geographic
perspective, the Fund's Continental European weighting has increased, while its
Far Eastern emerging markets and United Kingdom weightings have fallen. The
Fund's Japanese weighting has also increased, but is anticipated to remain
significantly underweighted relative to the MSCI World index. Valuations of most
Japanese shares remain expensive based on our valuation criteria. We have been
fortunate, however, to discover several new Japanese shares which are now held
in the Fund. These opportunities may benefit from recent regulatory changes. For
example, Japanese companies are now permitted to repurchase shares, a
shareholder value enhancing alternative which was previously prohibited.
The US weighting in the Fund has generally fallen over the year, as we
have taken profits during market strength. At this time, we anticipate that
these US weightings will remain more or less near current levels.
<PAGE>
................................................................................
Additionally, the Fund continued to grow, with total assets of $227
million at the end of 1995, compared to $194 million as of the end of 1994. The
Fund's share price, as measured by net asset value, was $11.86 at December 31,
1995, compared to $10.94 at December 31, 1994. Shareholders received $0.27 per
share in dividend income and $0.695 per share in capital gains in 1995.
We are now entering the second half of the 1990's and are probably
somewhere near or beyond the mid-point of the current global economic cycle.
Most financial markets have been good performers over the past five years and
are typically valued above historical averages. These results are often
attributed to low sustainable inflation, economic liberalization of emerging
nations and the spread of democracy and capitalism into former communist
countries. Are these assumptions reasonable and, more importantly, will 1996
offer good or poor investment returns, particularly in the international
markets? We do not really know, nor does anyone else.
We believe, however, that our overall level of optimism for long-term
prospects of international shares remains unchanged. For example, the number of
international investment opportunities on our bargain list are about equal to
those in January 1995. The stocks today, on an absolute basis, are typically
being priced in global markets at levels similar to last year's valuations. Many
of these stocks are also viewed as being more attractive than US peers, which
seems logical given the recent appreciation of the US stock market. The source
of funds (sell) list is also about the same size as last year. Throughout 1995,
the general composition of these lists did not change significantly except in
the emerging markets arena, where the number of shares on the bargain list
increased in the first half of the year and subsequently fell in the second half
due to long-term earnings revisions and/or share price changes.
The emerging markets have no doubt been volatile and will continue to
be so going forward. We will, however, continue to maintain investments in the
emerging markets arena despite poor performance in 1994 and 1995. We continue to
identify investment opportunities in Far Eastern markets and in Eastern European
markets like the Czech Republic. India also deserves further investigation.
In Europe, economic turmoil due to Maastricht compliance concerns may
also continue to provide us with investment opportunities in France and Italy.
Alternatively, many shares in Scandinavia and the United Kingdom are viewed as
being less attractive than last year.
Our best ideas generally remain focused on several themes. More
specifically, many of our potential bargains are shares of companies that are
considered special situations. These companies are typically focused on
restructuring, turnaround and/or consolidation activities. Other recommendations
include shares which offer strong cash flow and stable earnings.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10 Largest Positions on 12/31/95
(% of Total Portfolio)
<S> <C>
Svenska Handelsbanken 1.5%
Sony Corp 1.5%
Astra AB 1.4%
Hitachi Ltd. 1.3%
Iberdrola SA 1.2%
Societe Elf Aquitaine SA 1.2%
Asea AB 1.2%
Banque Nationale de Paris (BNP) 1.2%
Societe General de Surveillance
Holdings Ltd. 1.2%
Bayer AG 1.2%
</TABLE>
- --------------------------------------------------------------------------------
Fund Asset Allocation on 12/31/95
[PIE CHART APPEARS HERE]
Equity 96.0%
Short-term & Other 4.0%
*Equity includes convertible and preferred stocks
3
<PAGE>
Templeton Institutional Funds, Inc. Growth Series
letter continued................................................................
1996 should be much like every year, one filled with potential
opportunities. In searching for opportunities, we continue to vigorously
research each individual security purchased for the Fund. In addition, we try to
purchase securities that we believe are fundamentally inexpensive. There are, of
course, general risks involved with international investing related to market,
currency, economic, political and other factors. These risks are discussed in
the Fund's prospectus.
We realize your expectations are high. We respect the confidence you
have shown in our organization by placing your assets in our care, and we are
dedicated to the tasks at hand. We thank you for your continued relationship
with the Templeton organization.
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.
- --------------------------------------------------------------------------------
Total Return Index Comparison/1/
$5,000,000 Investment: 05/03/93 - 12/31/95
[Graph of Total Return Index Comparison between TIFI Growth Series, MSCI World
Index and CPI Index Appears Here]
<TABLE>
<CAPTION>
INCEPT
(Millions) 12/95
-------- -----
<S> <C> <C>
TIFI Growth Series $5 $6,964,000
MSCI $5 $6,930,716
CPI $5 $5,325,203
</TABLE>
Period ended December 31, 1995
<TABLE>
<CAPTION>
Since
Inception
One-Year (05/03/93)
<S> <C> <C>
Average Annual Total Return/1,2/ 17.59% 13.26%
Cumulative Total Return/1,3/ 17.59% 39.28%
</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.
- --------------------------------------------------------------------------------
4
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
YEAR ENDED MAY 3, 1993
DECEMBER 31 (COMMENCEMENT
------------------ OF OPERATIONS) TO
1995 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 .27 .20 .06
Net realized and unrealized gain (loss) 1.62 (.36) 1.94
-------- -------- --------
Total from investment operations 1.89 (.16) 2.00
-------- -------- --------
Distributions:
Dividends from net investment income (.27) (.20) (.05)
Distributions from net realized gains (.70) (.50) (.15)
-------- -------- --------
Total distributions (.97) (.70) (.20)
-------- -------- --------
Change in net asset value .92 (.86) 1.80
-------- -------- --------
Net asset value, end of year $ 11.86 $ 10.94 $ 11.80
======== ======== ========
TOTAL RETURN* 17.59% (1.32)% 20.04%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $226,963 $194,059 $184,013
Ratio of expenses to average net assets .88% .95% 1.00%**
Ratio of net investment income to
average net assets 2.28% 1.69% 1.19%**
Portfolio turnover rate 30.20% 17.23% 17.32%
</TABLE>
* NOT ANNUALIZED IN PERIODS OF LESS THAN ONE YEAR.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, December 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 89.9%
- -------------------------------------------------------------------------------------------------------------
Aerospace & Military Technical Systems: 0.3%
Boeing Co. U.S. 9,000 $ 705,375
- -------------------------------------------------------------------------------------------------------------
Appliances & Household Durables: 1.5%
Sony Corp. Jpn. 57,000 3,416,082
- -------------------------------------------------------------------------------------------------------------
Automobiles: 2.4%
Ford Motor Co. U.S. 46,000 1,334,000
Regie Nationale des Usines
Renault SA Fr. 57,000 1,641,209
Volvo AB, B Swe. 125,000 2,559,297
------------
5,534,506
- -------------------------------------------------------------------------------------------------------------
Banking: 16.0%
Argentaria Corporacion Bancaria de Espana SA, ADR Sp. 105,750 2,128,219
Australia & New Zealand Banking Group Ltd. Aus. 535,150 2,509,808
Banco Bilbao Vizcaya Sp. 64,000 2,305,688
Banco de Andalucia Sp. 12,150 1,772,918
*Banco di Sardegna SPA, di Risp Itl. 80,000 553,062
Banco Portugues de Investimento SA Port. 87,991 1,051,718
BankAmerica Corp. U.S. 24,000 1,554,000
Banque Nationale de Paris, ADR, 144A Fr. 59,000 2,661,446
Barclays PLC U.K. 91,533 1,050,486
Canadian Imperial Bank of Commerce Can. 76,000 2,261,656
Daegu Bank Co. Ltd. Kor. 40,820 626,599
Deutsche Bank AG Ger. 48,000 2,279,418
First Chicago NBD Corp. U.S. 39,820 1,572,890
*Glendale Federal Bank FSB U.S. 119,000 2,082,500
HSBC Holdings PLC H.K. 123,569 1,869,715
*Komercni Banka AS Csk. 10,000 538,138
*Komercni Banka AS, GDR, 144A Csk. 30,000 546,000
National Bank of Canada Can. 165,000 1,344,632
National Bank of Greece SA Gr. 9,250 471,493
National Westminster Bank PLC U.K. 107,277 1,081,233
PT Panin Bank, fgn. Indo. 1,084,200 972,058
Svenska Handelsbanken, A Swe. 165,000 3,427,952
TR Financial Corp. U.S. 63,000 1,606,500
------------
36,268,129
- -------------------------------------------------------------------------------------------------------------
Broadcasting & Publishing: 0.2%
News Corp. Ltd. Aus. 101,707 542,764
- -------------------------------------------------------------------------------------------------------------
Building Materials & Components: 1.8%
*Owens Corning Fiberglas Corp. U.S. 42,900 1,925,138
Pioneer International Ltd. Aus. 845,000 2,179,324
------------
4,104,462
- -------------------------------------------------------------------------------------------------------------
Business & Public Services: 5.0%
Esselte AB, A Swe. 117,000 1,761,398
*Mid American Waste System Inc. U.S. 260,000 910,000
*Novacare Inc. U.S. 82,500 422,813
Societe Generale de Surveillance Holdings Ltd., br. Swtz. 1,335 2,650,325
*Welsh Water PLC U.K. 125,833 1,514,487
Wheelabrator Technologies Inc. U.S. 131,000 2,194,250
WMX Technologies Inc. U.S. 61,000 1,822,375
------------
11,275,648
- -------------------------------------------------------------------------------------------------------------
Chemicals: 3.8%
Akzo Nobel NV Neth. 14,000 1,621,871
Bayer AG Ger. 9,850 2,615,585
European Vinyls Corp. EVC International NV Neth. 25,285 658,127
</TABLE>
6
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------
Chemicals (cont.)
Rhone-Poulenc SA, A Fr. 120,000 $ 2,570,553
Solvay SA Bel. 2,000 1,085,627
------------
8,551,763
- ------------------------------------------------------------------------------------------------------------
Construction & Housing: 1.0%
Daito Trust Construction Co. Ltd. Jpn. 115,000 1,358,377
Kyudenko Corp. Jpn. 65,000 855,884
------------
2,214,261
- ------------------------------------------------------------------------------------------------------------
Data Processing & Reproduction: 0.2%
International Business Machines Corp. U.S. 5,700 520,125
- ------------------------------------------------------------------------------------------------------------
Electrical & Electronics: 3.4%
Alcatel Alsthom SA Fr. 25,500 2,198,509
Asea AB, A Swe. 27,425 2,663,042
Hitachi Ltd. Jpn. 287,000 2,889,868
------------
7,751,419
- ------------------------------------------------------------------------------------------------------------
Electronic Components & Instruments: 0.8%
BICC U.K. 405,000 1,735,930
- ------------------------------------------------------------------------------------------------------------
Energy Equipment & Services: 0.8%
World Fuel Services Corp. U.S. 111,000 1,762,125
- ------------------------------------------------------------------------------------------------------------
Energy Sources: 2.7%
Repsol SA Sp. 56,500 1,851,505
Saga Petroleum AS, A Nor. 122,000 1,627,540
Societe Elf Aquitane SA Fr. 37,128 2,735,508
------------
6,214,553
- ------------------------------------------------------------------------------------------------------------
Financial Services: 4.8%
*Capital Portugal Fund Port. 6,500 550,443
*Chile Fund Inc. Chil. 18,000 468,000
*Creditanstalt Cesky Investicni Fond Csk. 14,028 324,055
Dean Witter Discover & Co. U.S. 35,842 1,684,574
Federal National Mortgage Assn. U.S. 16,400 2,035,650
*India Fund, B Ind. 679,964 1,087,655
Korea International Trust Kor. 20 1,040,000
*Korea International Trust, IDR Kor. 2 114,000
Thai Fund Inc. Thai. 30,000 671,250
Thailand International Fund Thai. 47 1,421,750
*Turkish Growth Fund Tur. 154,000 1,597,750
------------
10,995,127
- ------------------------------------------------------------------------------------------------------------
Food & Household Products: 1.8%
Albert Fisher Group PLC U.K. 2,179,447 1,624,634
Hillsdown Holdings PLC U.K. 677,010 1,776,846
Vitro SA Mex. 372,960 580,106
------------
3,981,586
- ------------------------------------------------------------------------------------------------------------
Forest Products & Paper: 3.0%
Carter Holt Harvey Ltd. N.Z. 465,000 1,003,177
Fletcher Challenge Ltd. Forestry Division N.Z. 700,000 997,620
Georgia-Pacific Corp. U.S. 20,000 1,372,500
International Paper Co. U.S. 36,000 1,363,500
Metsa Serla OY, B Fin. 25,000 769,567
PT Barito Pacific Timber, fgn. Indo. 515,000 377,269
Stora Kopparbergs Bergslags AB,
B Swe. 85,000 1,017,320
------------
6,900,953
- ------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ---------------------------------------------------------------------------------------------------------------
Health & Personal Care: 3.0%
Astra AB, A Swe. 78,500 $ 3,131,751
Bristol Myers Squibb Co. U.S. 17,500 1,502,813
Hafslund Nycomed SA, B Nor. 82,000 2,077,801
Recordati Industria Chimica e Farmaceutica SPA, di Risp Itl. 43,000 135,369
------------
6,847,734
- ---------------------------------------------------------------------------------------------------------------
Industrial Components: 0.9%
Goodyear Tire & Rubber Co. U.S. 43,000 1,951,125
- ---------------------------------------------------------------------------------------------------------------
Insurance: 6.4%
Aegon NV Neth. 48,570 2,152,469
American International Group Inc. U.S. 17,250 1,595,625
Capital RE Corp. U.S. 55,400 1,703,550
Cigna Corp. U.S. 15,000 1,548,750
Ing Groep NV Neth. 27,562 1,844,233
Kemper Corp. U.S. 26,000 1,290,250
London Insurance Group Inc. Can. 74,000 1,497,454
Presidential Life Corp. U.S. 180,000 1,777,500
*Zuerich Versicherung, new Swtz. 3,850 1,151,495
------------
14,561,326
- ---------------------------------------------------------------------------------------------------------------
Leisure & Tourism: 0.5%
Kuoni Reisen Holding AG, B Swtz. 700 1,122,670
- ---------------------------------------------------------------------------------------------------------------
Machinery & Engineering: 1.0%
Hitachi Koki Co. Ltd. Jpn. 71,000 643,424
VA Technologie AG, br., 144A Aust. 13,000 1,648,586
------------
2,292,010
- ---------------------------------------------------------------------------------------------------------------
Merchandising: 5.1%
Dairy Farm International
Holdings Ltd. H.K. 1,205,235 1,108,816
Dayton-Hudson Corp. U.S. 24,500 1,837,500
Home Depot Inc. U.S. 27,000 1,292,625
K Mart Corp. U.S. 150,000 1,087,500
Koninklijke Bijenkorf Beheer NV (KBB) Neth. 14,900 985,831
Kwik Save Group PLC U.K. 131,000 1,025,345
Limited Inc. U.S. 53,500 929,563
*Waban Inc. U.S. 76,000 1,425,000
Wessel & Vett AS, C Den. 39,000 1,824,791
------------
11,516,971
- ---------------------------------------------------------------------------------------------------------------
Metals & Mining: 1.9%
Elkem AS Nor. 97,000 1,102,603
Renison Goldfields Consolidated Ltd. Aus. 314,000 1,563,652
*Union Miniere NPV Bel. 23,500 1,569,062
------------
4,235,317
- ---------------------------------------------------------------------------------------------------------------
Multi-Industry: 4.2%
Amer Group Ltd., A Fin. 100,000 1,559,808
*BTR PLC, A U.K. 145,800 711,965
Hutchison Whampoa Ltd. H.K. 342,000 2,083,181
Jardine Matheson Holdings Ltd. H.K. 232,024 1,589,364
Jardine Strategic Holdings Ltd. H.K. 548,921 1,679,698
Swire Pacific Ltd., A H.K. 245,000 1,901,067
------------
9,525,083
- ---------------------------------------------------------------------------------------------------------------
Real Estate: 2.3%
American Health Properties Inc. U.S. 59,900 1,287,850
Beacon Properties Corp U.S. 57,500 1,322,500
</TABLE>
8
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------------------------------------
Real Estate: (cont.)
*Catellus Development Corp. U.S. 235,000 $ 1,410,000
Summit Properties Inc., REIT U.S. 58,800 1,168,650
------------
5,189,000
- ------------------------------------------------------------------------------------------------------------
Telecommunications: 3.4%
Compania de Telecomunicaciones de Chile SA, ADR Chil. 18,000 1,491,750
Philippine Long Distance
Telephone Co., GDR, 144A Phil. 49,000 1,525,125
*SPT Telecom AS Csk. 6,000 567,014
STET (Sta Finanziaria Telefonica Torino) SPA, di Risp Itl. 885,000 1,803,154
Telefonica de Espana SA Sp. 165,000 2,285,243
------------
7,672,286
- ------------------------------------------------------------------------------------------------------------
Textiles & Apparel: 1.0%
*Fruit of the Loom Inc., A U.S. 90,000 2,193,750
- ------------------------------------------------------------------------------------------------------------
Transportation: 2.7%
Anangel-American Shipholdings Ltd., ADR Gr. 52,000 578,500
Brambles Industries Ltd. Aus. 110,000 1,226,365
*OMI Corp. U.S. 190,300 1,236,950
Singapore Airlines Ltd., fgn. Sing. 103,000 961,188
Stolt Nielsen SA U.S. 46,500 1,342,688
*USAir Group Inc. U.S. 62,000 821,500
------------
6,167,191
- ------------------------------------------------------------------------------------------------------------
Utilities Electrical & Gas: 7.3%
American Electric Power Co.
Inc. U.S. 45,000 1,822,500
British Gas PLC U.K. 450,000 1,775,065
*CEZ Csk. 41,315 1,493,575
Electricidad de Caracas Venz. 1,936,781 1,323,515
Endesa-Empresa Nacional de Electricidad SA Sp. 21,000 1,189,365
Evn Energie-Versorgung Niederoesterreich AG Aust. 14,500 1,989,647
Hongkong Electric Holdings Ltd. H.K. 412,000 1,350,689
Iberdrola SA Sp. 299,000 2,736,109
*National Grid Holdings PLC U.K. 68,460 212,635
Niagara Mohawk Power Corp Com USD1 U.S. 85,000 818,125
South Wales Electricity U.K. 69,800 1,015,694
*Veba AG, wts. Ger. 5,600 886,441
------------
16,613,360
- ------------------------------------------------------------------------------------------------------------
Wholesale & International Trade: 0.7%
Brierley Investments Ltd. N.Z. 2,029,689 1,605,557
------------
TOTAL COMMON STOCKS (cost $179,403,535) 203,968,188
- ------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS: 2.4%
- ------------------------------------------------------------------------------------------------------------
Kaufman & Broad Home Corp., B, conv., pfd. U.S. 55,200 821,100
Nacional Financiera SA, 11.25%, conv., pfd., 5/15/98 U.S. 67,300 2,220,900
News Corp. Ltd. Aus. 105,853 494,868
Telebras-Telecomunicacoes Brasileiras SA, pfd., ADR U.S. 35,500 1,681,813
Welsh Water PLC, pfd. U.K. 135,900 230,046
------------
TOTAL PREFERRED STOCKS (cost $5,086,350) 5,448,727
- ------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Investment Portfolio, December 31, 1995 (cont.)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL IN
INDUSTRY ISSUE COUNTRY LOCAL CURRENCY** VALUE
<C> <S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
BONDS: 3.7%
- ---------------------------------------------------------------------------------------------------------------
C.S. Holding Finance BV, 4.875%, conv., 11/19/02 U.S. 830,000 $ 1,311,400
Cia de Inversiones en Telecomunicaciones SA, 7.00%, 3/3/98 U.S. 37,320 2,164,560
Jardine Strategic Holdings Ltd., 7.50%, conv., 5/7/49 U.S. 75,000 81,750
PIV Investment Finance (Cayman) Ltd., 4.50%, conv., 12/1/00 U.S. 2,040,000 1,703,400
Softe SA, 4.25%, conv., 7/30/98, 144A Itl 1,700,000,000 1,233,590
U.S. Treasury Note, 8.875%, 2/15/96 U.S. 1,950,000 1,958,229
------------
TOTAL BONDS (cost $7,704,522) 8,452,929
- ---------------------------------------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 3.3% (cost $47,443,767)
- ---------------------------------------------------------------------------------------------------------------
U.S. Treasury Bills, 4.83% to 5.40% with
maturities to 2/22/96 U.S. 7,478,000 7,447,027
- ---------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.3% ($199,638,174) 225,316,871
OTHER ASSETS, LESS LIABILITIES: 0.7% 1,646,138
------------
TOTAL NET ASSETS: 100.0% $226,963,009
============
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRIES INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
Assets:
Investments in securities, at value
(identified cost $199,638,174) $225,316,871
Cash 759,512
Receivables:
Investment securities sold 763,435
Capital shares sold 468,894
Dividends and interest 821,217
Unamortized organization costs 3,348
------------
Total assets 228,133,277
------------
Liabilities:
Payable for investment securities purchased 928,777
Accrued expenses 241,491
------------
Total liabilities 1,170,268
------------
Net assets, at value $226,963,009
============
Net assets consist of:
Net unrealized appreciation $ 25,617,276
Accumulated net realized gain 424,933
Net capital paid in on shares of capital stock 200,920,800
------------
Net assets, at value $226,963,009
============
Shares outstanding 19,141,240
============
Net asset value per share
($226,963,009 / 19,141,240) $ 11.86
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
for the year ended December 31, 1995
<TABLE>
<S> <C> <C>
Investment income:
(net of $595,195 foreign taxes withheld)
Dividends $ 5,621,694
Interest 1,019,620
-----------
Total income $ 6,641,314
Expenses:
Management fees (Note 3) 1,469,015
Administrative fees (Note 3) 208,881
Custodian fees 93,000
Reports to shareholders 20,500
Audit fees 30,500
Legal fees (Note 3) 4,000
Registration and filing fees 9,350
Directors' fees and expenses 8,750
Amortization of organization costs 1,482
Other 10,790
-----------
Total expenses 1,856,268
-----------
Net investment income 4,785,046
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 13,053,198
Foreign currency transactions (14,269)
-----------
13,038,929
-----------
Net unrealized appreciation (depreciation) on:
Investments 15,989,672
Foreign currency translations of other assets and
liabilities (61,421)
-----------
15,928,251
-----------
Net realized and unrealized gain 28,967,180
-----------
Net increase in net assets resulting from
operations $33,752,226
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
12
<PAGE>
Templeton Institutional Funds, Inc.
Growth 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 $ 4,785,046 $ 3,301,739
Net realized gain on investment and foreign
currency transactions 13,038,929 7,834,966
Net unrealized appreciation (depreciation) 15,928,251 (14,142,808)
------------ ------------
Net increase (decrease) in net assets result-
ing from operations 33,752,226 (3,006,103)
Distributions to shareholders:
From net investment income (4,785,045) (3,458,409)
From net realized gain (12,351,357) (8,353,991)
Capital share transactions (Note 2) 16,288,306 24,864,875
------------ ------------
Net increase in net assets 32,904,130 10,046,372
Net assets:
Beginning of year 194,058,879 184,012,507
------------ ------------
End of year $226,963,009 $194,058,879
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
13
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Notes to Financial Statements
- --------------------------------------------------------------------------------
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 investment com-
pany registered under the Investment Company Act of 1940. The following summa-
rizes 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 rate.
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
are determined in accordance with income tax regulations, which may differ from
generally accepted accounting principles. These differences are primarily due
to differing treatments for passive foreign investment companies held by the
Fund. Distributions 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 120 million shares have been classi-
fied as Fund shares. Transactions in the Fund's shares are 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 1,479,630 $ 17,359,602 1,772,408 $21,324,831
Shares issued on
reinvestment of
distributions 1,442,985 16,551,516 1,064,536 11,760,196
Shares redeemed (1,521,712) (17,622,812) (697,333) (8,220,152)
---------- ------------ --------- -----------
Net increase 1,400,903 $ 16,288,306 2,139,611 $24,864,875
========== ============ ========= ===========
</TABLE>
14
<PAGE>
Templeton Institutional Funds, Inc.
Growth 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 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 investment management fee to TICI equal, on an annual
basis, to 0.70% 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 1.00% of
the Fund's average net assets through year ended December 31, 1995. For the
year ended December 31, 1995, no reimbursement was necessary under the agree-
ment. For the year ended December 31, 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 $4,000 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 $63,187,504 and $59,562,089, respec-
tively. The cost of securities for federal tax purposes aggregated
$201,363,964. Realized gains and losses are reported on an identified cost ba-
sis.
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>
<CAPTION>
Unrealized appreciation $ 37,435,502
<S> <C>
Unrealized depreciation (13,482,595)
------------
Net unrealized appreciation $ 23,952,907
============
</TABLE>
15
<PAGE>
Templeton Institutional Funds, Inc.
Growth Series
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Institutional Funds, Inc.--Growth Series
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of the Growth Series of Templeton Institutional
Funds, Inc. as of December 31, 1995, and the related statement of operations
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 op-
erations) to December 31, 1993. These financial statements and financial high-
lights 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 audits.
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
Growth 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 accepted ac-
counting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
January 31, 1996
16
<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
Institutional Services: 1-800-321-8563
Fund Information: 1-800-362-6243
--------------------------------------------------------
ZT455 A 12/95
