TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
SEMI-ANNUAL REPORT
FOR THE PERIOD ENDED
JUNE 30, 1996
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. 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.
June 30, 1996
Dear Shareholder:
We are pleased to bring you the semi-annual report for the Templeton
Institutional Funds, Inc. (TIFI) Global Fixed Income Series for the period ended
June 30, 1996. During the period, the Fund's share price increased from $7.94 to
$8.03. The Fund's total return figures for the periods ended June 30, 1996, were
as follows:
<TABLE>
<CAPTION>
Since Inception
One-Year Three-Year May 3, 1993
<S> <C> <C> <C>
Average Annual 1 3.13% 1.55% 1.31%
Cumulative 1 3.13% 4.73% 4.21%
</TABLE>
During the first half of 1996, global fixed income markets were again
influenced by expectations for increasing economic growth. This trend was best
reflected in the United States, where an unexpected surge in first quarter
employment growth presaged an increase in industrial production and consumer
spending. Ten year U.S. Treasury bond yields rose during the period from 6.33%
at the beginning of the year to 6.71% by June 30, 1996. Interest rates also rose
in foreign economies, as growth expectations spread from the United States to
other countries. Interest rate increases were generally less in other markets,
as growth was somewhat lower. Looking forward, we do not perceive the rise in
interest rates to be completely over, and we believe that further increases will
represent an opportunity to capture potentially attractive yields, which will
likely decline if economic growth softens in the second half of 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.
CUMULATIVE TOTAL RETURN SINCE INCEPTION
TIFI Global Fixed Income Series vs. J.P. Morgan Global
Government Bond Index and CPI
May 3, 1993 to June 30, 1996
[GRAPHIC APPEARS HERE]
TIFI GLOBAL FIXED INCOME SERIES 4.22%
JP MORGAN GLOBAL GOVERNMENT BOND INDEX 25.88%
CPI INDEX 9.04%
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 J.P. Morgan Global Government 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.
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
Six Months MAY 3, 1993
ended YEAR ENDED DECEMBER 31 COMMENCEMENT)
June 30, 1996 -------------------------- OF OPERATIONS) TO
(unaudited) 1995 1994 DECEMBER 31, 1993
------------ ------------ --------- --------------------
<C> <C> <C> <C>
Net asset value, beginning of period $7.94 $7.93 $9.93 $10.00
---------- --------- ------- ------------
Income from investment operations:
Net investment income .17 .35 2.74 .25
Net realized and unrealized gain (loss) (.07) .02 (3.04) (.11)
---------- ------------- ---------- -----------
Total from investment operations .10 .37 (.30) .14
---------- ------------- ---------- ----------
Distributions:
Dividends from net investment income (.01) (.35) (1.61) (.16)
Distributions from net realized gains - (.01) - (.05)
Return of capital - - (.09) -
----------- ------------- -------- ------------
Total distributions (.01) (.36) (1.70) (.21)
----------- ------------- -------- -------------
Change in net asset value .09 .01 (2.00) (.07)
----------- ------------- -------- -------------
Net asset value, end of year $8.03 $7.94 $7.93 $9.93
=========== ============== ========= ============
TOTAL RETURN * 1.26% 4.67% (2.97)% 1.36%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000) $104 $103 $98 $712
Ratio of expenses to average net assets 51.17%** 41.34% 12.15% 9.70%**
Ratio of expenses, net of reimbursement, to
average net assets 1.00%** 1.00% 1.00% 1.00%**
Ratio of net investment income to average
net assets 4.18% ** 4.30% 5.61% 4.91%**
Portfolio turnover rate 272.12% -0- 346.26% 252.80%
</TABLE>
* Not annualized for periods of less than one year.
**Annualized.
See Notes to Financial Statements.
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- ------------------------------------------------------------------------------
INVESTMENT PORTFOLIO, JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY VALUE
<S> <C>
BONDS - GOVERNMENT & GOVERNMENT AGENCIES: 27.1%(cost $28,873)
27,000 U.S. U.S. Treasury Note, 7.50%, 5/15/02 $28,265
SHORT TERM OBLIGATIONS: 62.3% (cost $64,972)
65,000 U.S. Federal National Mortgage Association, 5.25% 7/03/96 64,981
------------
TOTAL INVESTMENTS: 89.4% (cost $93,845) 93,246
OTHER ASSETS, LESS LIABILITIES: 10.6% 11,004
==============
TOTAL NET ASSETS: 100.0% $104,250
==============
</TABLE>
See Notes to Financial Statements.
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- -----------------------------------------------------------------------------
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
JUNE 30, 1996 (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<S> <C> <C> <C> <C>
Assets:
Investment in securities, at value Interest income $2,671
(identified cost $93,845) $93,246
Cash 14,754 Expenses:
Receivables: Management fees (Note 3 ) $51
Administrative manager 5,9518 Administrative fees (Note 3) 283
Interest 261 Custodian fees 1,326
Unamortized organization costs 2,615 Reports to shareholders 1,900
--------------
Total assets 116,827 Audit fees 1,750
--------------
Legal fees 2,150
Liabilities: Registration and filing fees 17,950
Accrued expenses 12,577 Amortization of organization costs 709
Total liabilities 12,577 Other 293
-------------- ----------
Net assets, at value 104,250 Total expenses 26,412
==============
Less expenses reimbursed (Note 3) (25,897)
-----------
Net assets consist of: Total expenses less reimbursement 515
Undistributed net investment income 2,026 --------
Unrealized depreciation (599)
Accumulated net realized loss (54,863) Net investment income $2,156
Net capital paid in on shares of
capital stock 157,686
--------------
Net assets, at value 104,250 Realized and unrealized gain (loss):
============== Net realized gain on
Investments (687)
Foreign currency transactions (153)
Shares outstanding 12,977 -------
============= (840)
Net unrealized appreciation on:
Net asset value per share Investments 16
($104,250/12,977) $8.03 Net realized and unrealized loss ----- (824)
--------
Net increase in net assets resulting
============== from operations $1,332
==========
</TABLE>
See Notes to Financial Statements.
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- ----------------------------------------------------------------------------
FINANCIAL STATEMENTS (CONT.)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1996
(UNAUDITED) 1995
------------ ------------
<S>
Increase (decrease) in net assets: <C> <C>
Operations:
Net investment income $2,156 $4,342
Net realized gain (loss) from investment and foreign currency transactions (840) 198
Net unrealized appreciation 16 31
----------- --------
Net increase in net assets resulting from operations 1,332 4,571
Distributions to shareholders:
From net investment income (130) (4,342)
Net realized gain - (121)
Capital share transactions (Note 2) 130 4,463
---------- ---------
Net increase in net assets 1,332 4,571
Net assets:
Beginning of year 102,918 98,347
------------ ---------
End of year $104,250 $102,918
============== ==========
</TABLE>
See Notes to Financial Statements.
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- ----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 Fund seeks to achieve high total return by
investing primarily in a portfolio of fixed-income securities of U.S. and
foreign issuers.
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.
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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 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 June 30, 1996, 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>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
------------------- -----------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares Sold - - - -
Shares issued on reinvestment of
distributions 16 $130 563 $4,463
Shares redeemed - - - -
----- ------- ------ -------
Net increase 16 $130 563 $4,463
===== ======= ===== =======
</TABLE>
Templeton Global Investors, Inc., the Fund's administrative manager, is the
record owner of 100% of the Fund's shares as of June 30, 1996.
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.
TEMPLETON INSTITUTIONAL FUNDS, INC.
GLOBAL FIXED INCOME SERIES
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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 June 30, 1996. The amount of reimbursement for the
six ended June 30, 1996 is set forth in the Statement of Operations. For the six
months ended June 30, 1996, 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 $2,150 for the six months ended June 30,
1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the six
months ended June 30, 1996, aggregated $55,786 and $56,948, respectively. 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 June 30, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
Unrealized appreciation $ 9
Unrealized depreciation (608)
-------
Net unrealized depreciation $(599)
======
