TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
FOR THE YEAR ENDED
DECEMBER 31, 1995
Principal Underwriter:
Franklin Templeton
Distributors, Inc.
700 Central Avenue
St. Petersburg
Florida 33701-3628
Account Services
1-800-354-9191
Sales Information
1-800-292-9293
This report must be
preceded or
accompanied by the
prospectus of the
Templeton
Institutional Funds,
Inc. Like any
investment in
securities, the value
of The Fund's
portfolio will be
subject to the risk of
loss from market,
currency, economic,
political and other
factors, as well as
investment decisions
by the investment
manager which will not
always be profitable
or wise. The Fund and
its investors are not
protected from such
losses by the
investment manager.
Therefore, investors
who cannot accept this
risk should not invest
in shares of the Fund.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
FOR THE YEAR ENDED
DECEMBER 31, 1995
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
This report must be preceded or accompanied by a prospectus of the Templeton
Institutional Funds, Inc. Like any investment in securities, the value of the
Fund's portfolio will be subject to the risk or loss from market, currency,
economic, political and other factors, as well as investment decisions by the
investment manager, which will not always be profitable or wise. The Fund and
its investors are not protected from such losses by the investment manager.
Therefore, investors who cannot accept this risk should not invest in shares of
the Fund.
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:
We are pleased to bring you the annual report for the Templeton
Institutional Funds, Inc. (TIFI) Global Fixed Income Series for the year ended
December 31, 1995. During the year, the Fund's share price increased from $7.93
to $7.94. The Fund's total return figures for the periods ended December 31,
1995, were as follows:
Since Inception
ONE-YEAR MAY 3, 1993
Average Annual 1 4.67% 1.09%
Cumulative 1 4.67% 2.92%
During the fourth quarter, two factors helped generate significant
rallies in bond prices, the drive toward a balanced budget in the United States
and the growing realization that European markets may experience an economic
slowdown. At the start of the fourth quarter, it appeared that the market
believed U.S. economic growth was declining and that inflation had peaked. The
market's realization that the European economies were also likely to experience
an economic slowdown in 1996 meant that the potentially higher-risk European
markets (such as Italy, Spain and Sweden) would have more room to lower interest
rates, and their currencies would be more likely to appreciate. We believe that
modest economic growth and improving fiscal conditions may exert their influence
on different countries in 1996.
We look forward to the future with confidence and appreciate your
continued support.
Sincerely,
/s/DONALD F. REED
Don Reed
President
Templeton Institutional Funds, Inc.
/s/TOM LATTA
Tom Latta
Portfolio Manager
Vice President
TIFI Global Fixed Income Series
1. Average annual total return figures represent the average annual increase in
value of an investment over the specified periods. Cumulative total return
figures show the change in value of an investment over the period indicated.
Both calculations assume the reinvestment of dividends and capital gains
distributions. Past expense reductions by the Fund's manager increased the
Fund's total returns. Investment return and principal value fluctuate so that
your shares, when redeemed may be worth more or less than their original cost.
The Fund's share price and returns will fluctuate with market conditions,
currencies, and the economic and political climates where investments are made.
These special risk considerations are discussed in the prospectus. Past
performance cannot guarantee future results.
<PAGE>
CUMULATIVE TOTAL RETURN SINCE INCEPTION
TIFI GLOBAL FIXED INCOME SERIES VS. SOLOMON BROTHERS WORLD GOVERNMENT
BOND INDEX AND CPI
(GRAPH APPEARS HERE)
May 3, 1993 to December 31, 1995
Cumulative Returns:
INCEPT
(%) 12/95
TIFI Global Fixed Income Series: 0 2.91%
Salomon Brothers Global Gov't Bond Index: 0 28.31%
CPI INDEX: 0 6.66%
Cumulative total returns since inception show the change in value of an
investment over the period indicated, assuming the reinvestment of dividends and
capital gains distributions. The Salmon Brothers Global Bond Index and the
Consumer Price Index are unmanaged and one cannot invest directly in and index.
Past expense reductions by the Fund's manager increased the Fund's total
returns. The fund's share price and returns will fluctuate with market
conditions, currencies, and the economic and political climates where
investments are made. These special risk considerations are discussed in the
prospectus. Past performance cannot guarantee future results.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- ---------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
<S>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period) PERIOD FROM
MAY 3, 1993
YEAR ENDED DECEMBER 31 COMMENCEMENT)
-------------------------- OF OPERATIONS) TO
1995 1994 DECEMBER 31, 1993
------------ --------- --------------------
<C> <C> <C>
Net asset value, beginning of period $7.93 $9.93 $10.00
--------- ------- ------------
Income from investment operations:
Net investment income .35 2.74 .25
Net realized and unrealized gain (loss) .02 (3.04) (.11)
------------- ---------- -----------
Total from investment operations .37 (.30) .14
------------- ---------- ----------
Distributions:
Dividends from net investment income (.35) (1.61) (.16)
Distributions from net realized gains (.01) - (.05)
Return of capital - (.09) -
------------- -------- ------------
Total distributions (.36) (1.70) (.21)
------------- -------- -------------
Change in net asset value .01 (2.00) (.07)
------------- -------- -------------
Net asset value, end of year $7.94 $7.93 $9.93
============== ========= ============
TOTAL RETURN * 4.67% (2.97)% 1.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $103 $98 $712
Ratio of expenses to average net assets 41.34% 12.15% 9.70%**
Ratio of expenses, net of reimbursement, to
average net assets 1.00% 1.00% 1.00%**
Ratio of net investment income to average
net assets 4.30% 5.61% 4.91%**
Portfolio turnover rate -0- 346.26% 252.80%
</TABLE>
* Not annualized for periods of less than one year.
**Annualized.
See Notes to Financial Statements.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- ------------------------------------------------------------------------------
INVESTMENT PORTFOLIO, DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY VALUE
<S> <C>
BONDS - GOVERNMENT & GOVERNMENT AGENCIES: (cost $30,717) 29.2%
30,000 U.S. U.S. Treasury Note, 7.50%, 1/31/96 $30,052
SHORT TERM OBLIGATIONS: (cost $65,760) 63.9%
66,000 U.S. U.S. Treasury Bills, 5.06% to 5.33% with maturities to 1/25/96 65,810
------------
TOTAL INVESTMENTS: (cost $96,477) 93.1% 95,862
OTHER ASSETS, LESS LIABILITIES: 6.9% 7,056
==============
TOTAL NET ASSETS: 100.0% $102,918
==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- -----------------------------------------------------------------------------
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
DECEMBER 31, 1995 FOR THE YEAR ENDED DECEMBER 31, 1995
<S> <C> <C> <C> <C>
Assets:
Investment in securities, at value Interest income $5,352
(identified cost $96,477) $95,862
Cash 5,482 Expenses:
Receivables: Management fees (Note 3 ) $555
Interest 942 Administrative fees (Note 3) 98
Administrative manager 10,208 Custodian fees 1,800
Unamortized organization costs 3,324 Reports to shareholders 3,250
--------------
Total assets 115,818 Audit fees 8,500
--------------
Legal fees 2,800
Liabilities: Registration and filing fees 19,450
Accrued expenses 12,900 Directors' fees and expenses 1,750
--------------
Total liabilities 12,900 Amortization of organization costs 1,432
--------------
Net assets, at value $102,918 Other 2,106
============== --------------
Total expenses 41,741
Less expenses reimbursed (Note 3) (40,731)
--------------
Net assets consist of: Total expenses less reimbursement 1,010
----------
Unrealized depreciation (615)
Accumulated net realized loss (54,023) Net investment income 4,342
Net capital paid in on shares of
capital stock 157,556
--------------
Net assets, at value $102,918 Realized and unrealized gain (loss):
==============
Net realized gain on foreign
currency transactions 198
-----------
Shares outstanding 12,961
==============
Net unrealized appreciation(depreciation) on:
Net asset value per share Investments 97
($102,918 / 12,961) $7.94 Foreign currency translation of
============== other assets and liabilities (66)
------------
31
------------
Net realized and unrealized gain 229
----------
Net increase in net assets resulting
from operations $4,571
==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- ----------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S>
Increase (decrease) in net assets: <C> <C>
Operations:
Net investment income $4,342 $25,007
Net realized gain (loss) from investment and foreign currency transactions 198 (52,414)
Net unrealized appreciation (depreciation) 31 (8,575)
----------- -----------
Net increase (decrease) in net assets resulting from operations 4,571 (35,982)
Distributions to shareholders:
From net investment income (4,342) (16,404)
Net realized gain (121) -
From return of capital - (949)
Capital share transactions (Note 2) 4,463 (560,361)
---------- -----------
Net increase (decrease) in net assets 4,571 (613,696)
Net assets:
Beginning of year 98,347 712,043
------------ -----------
End of year $102,918 $98,347
============== ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------
GLOBAL FIXED INCOME SERIES
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Global Fixed Income Series (the Fund), a non diversified fund, is a separate
series of Templeton Institutional 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 exchange
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 currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
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
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rate.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------
GLOBAL FIXED INCOME SERIES
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS CONT'D
D. UNAMORTIZED ORGANIZATIONS 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 ex-dividend date. Certain dividend income on foreign securities
are recorded as soon as information is available to the Fund. Interest income
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 10 million have been classified as Fund
shares. Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
-------------------- -----------------
<S> <C> <C> <C> <C>
SHARES AMOUNT SHARES AMOUNT
Shares Sold - - 8,465 $ 85,000
Shares issued on reinvestment of
distributions 563 $4,463 2,191 17,352
Shares redeemed - - (69,976) (662,713)
----- ------- ------- --------
Net increase (decrease) 563 $4,463 (59,320) $(560,361)
==== ====== ======= ==========
</TABLE>
Templeton Global Investors, Inc., the Fund's administrative manager, is the
record owner of 100% of the Fund's shares as of December 31, 1995.
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Company are also directors or officers of Templeton
Investment Counsel, Inc. (TICI), 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.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
- ------------------------------------------------------------------------------
GLOBAL FIXED INCOME SERIES
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS CONT'D
The Fund pays monthly an investment management fee to TICI equal, on an annual
basis, to 0.55% 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 December 31, 1995. The amount of reimbursement for
the year ended December 31, 1995 is set forth in the Statement of Operations.
For the 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 Funds, which firm received fees of $2,800 for the year ended December 31,
1995.
4. PURCHASES AND SALES OF SECURITIES
There were no purchases and sales of securities (excluding short-term
securities) for the year ended December 31, 1995. 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
depreciation of portfolio securities, based on cost for federal income tax
purposes, was as follows:
Unrealized appreciation $ 50
Unrealized depreciation (665)
------
Net unrealized depreciation $(615)
======
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
- -----------------------------------------------------------------------------
GLOBAL FIXED INCOME SERIES
- -----------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Templeton Institutional Funds, Inc. - Global Fixed Income Series
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of the Global Fixed Income 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
each of 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights 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
December 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates 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
Global Fixed Income 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 periods indicated, in conformity with generally
accepted accounting principles.
New York, New York
January 31, 1996
