TEMPLETON INSTITUTIONAL FUNDS, INC.
TIFI
Emerging Markets Series
SEMI-ANNUAL REPORT
[TEMPLETON LOGO GRAPHIC]
JUNE 30, 1997
[FRANKLIN TEMPLETON LOGO]
<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 risk considerations are discussed in the Fund's
prospectus. The Fund is designed for the aggressive portion of a
well-diversified portfolio.
<PAGE>
June 30, 1997
Dear Shareholder...
Following a rebound in returns for several emerging markets in 1996,
the unmanaged International Finance Corporation Investable Composite Index ("IFC
Index") increased 6.0% for the second quarter of 1997 compared to a 9.6% return
during the same period for the Templeton Institutional Funds, Inc., Emerging
Markets Series (the "Fund"). For the one- and three-year periods ending June 30,
1997, the Fund returned 24.7% and 12.7%, respectively, versus an IFC Index
return of 13.2% and 6.2%, respectively. At Templeton, we continue to be
optimistic on emerging markets for the long term. Over the last six months, we
have seen strong gains in emerging market equity prices, underpinned by strong
economic fundamentals and high capital inflows from developed market countries.
As in 1996, the Latin America region has been the star
performer in 1997. A combination of improved macroeconomic management, cyclical
economic recovery and an improved export position
TOTAL RETURNS AS OF 6/30/97
<TABLE>
<CAPTION>
CUMULATIVE
ONE-YEAR THREE-YEAR SINCE
AVERAGE AVERAGE INCEPTION(1),(3)
ANNUAL(1),(2) ANNUAL(1),(2) (05/03/93)
<S> <C> <C> <C>
TIFI Emerging Markets Series 24.7% 12.7% 65.5%
IFC Investable Composite Index(4) 13.2% 6.2% 68.6%
</TABLE>
(1) The Investment Manager and Fund Administrator have agreed in advance to
waive a portion of their respective fees in order to limit the total
expenses of the Fund to 1.6% of average net assets through April 30,
1998. If these fee waivers are insufficient to so limit the Fund's
expenses, the Fund Administrator has agreed to make certain payments to
reduce the Fund's expenses. After April 30, 1998, these agreements may
end at any time upon notice to the Board. These voluntary agreements
did not result in any fee waivers for the Fund for the fiscal year
ended December 31, 1996.
(2) Average annual total return figures represent the average annual change
in value of an investment over the specified periods.
(3) The cumulative total return represents the change in value of an
investment over the period(s) indicated.
(4) The index is unmanaged, does not contain cash and does not include
sales charges or management expenses. The index includes reinvested
dividends. One cannot invest directly in an index.
All calculations assume that dividends and capital gains were reinvested when
paid. Investment return and principal value will fluctuate with market
conditions, volatility and the economic, social, and political climates of the
countries where investments are made. Emerging markets involve heightened risks
related to the same factors, in addition to those associated with the relatively
small size and lesser liquidity of these markets. You may have a gain or loss
when you sell your shares. Past performance is not predictive of future results.
continued...
[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 AND 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 6/30/97
(% of Long Term Securities)
[PIE CHART APPEARS HERE]
Middle-East/Africa 4.7%
Europe 17.8%
Latin America/Caribbean 36.2%
Asia 41.3%
FUND ASSET ALLOCATION ON 6/30/97
[PIE CHART]
Short-term & Other 12.3%
Equity* 87.7%
*Equity includes convertibles and preferred stocks.
has driven strong growth in equity prices in the region, particularly in Brazil,
which saw unrelenting gains during the reporting period. A markedly different
economic landscape emerged in Brazil and foreign investors appeared comfortable
with Brazil's long-term economic prospects. Obviously, much was achieved when
President Cardoso embarked on an innovative anti-inflation strategy, which
brought inflation down to single digits. However, we believe that much still
needs to be done structurally in Brazil in order to justify the new-found
optimism in this country. The general outlook for the Latin American economies
is the best that we have seen in many years, and this may help boost stock
markets in the region further.
Asia was much more mixed over the latest quarter, with many countries
suffering from oversupply in key sectors and a cyclical decline in exports over
the period. Stock prices in Malaysia, the Philippines, Singapore and Thailand
have fallen substantially since the beginning of the year, but recently, the
market in Thailand has picked up. Looking forward, we believe that Asia's
exports have the potential to recover over the rest of the year and into 1998,
if driven by stronger demand from the U.S. and Europe. Should a significant
rebound in exports occur, it could help to drive faster economic growth and help
to bolster some of the more moribund stock markets in the region, particularly
South Korea and Thailand. The outlook for world demand is the strongest it has
been since the 1960's, and inventory levels in the U.S. and other countries are
generally very low. In our view, this may benefit exporters in Latin America and
Eastern Europe as well as in Asia. There are already signs that a cyclical
recovery in Asia's exports may take hold and, if so, Asian stock markets may be
positioned for a stronger 1997/98 performance.
As China assumed sovereignty over Hong Kong, many people believed that
this would ultimately mean an end to economic and personal freedoms in the
territory. We believe that this is unlikely, although developments following any
major transfer of political power cannot be predicted. Under Chinese rule, Hong
Kong has the chance to become much more than just an important island state.
Hong Kong has the chance to become an even more important economic center for
the most populous nation in the world (which will soon become one of the largest
economies in the world). In our opinion, the citizens of Hong Kong are likely to
prosper immeasurably from the reunification with China. Together, Hong Kong and
China have the potential to become the largest economic superpower the world has
ever known.
Most commentators in Hong Kong have focused on the likelihood of
continuity and prosperity after the handover. It is a mistake to take an
inflexible position on the negative or positive side of the argument, but we
believe that there is a better than 70% chance that Hong Kong will prosper as
part of China. The overriding goal among China's leaders appears to be more
pragmatic than perhaps at any time in China's modern history. The objective
seems clear: enhance the livelihood and living standards of China's population.
China needs the vibrant, modern, service-oriented Hong Kong as a blueprint for a
market economy. Where Shenzhen and other special administrative regions of China
are the drawing boards of Chinese capitalism, Hong Kong is a
2
<PAGE>
working model. As such, Hong Kong will be an indispensable tool in China's
future economic development.
Rather than being a negative factor for the Hong Kong economy and stock
market, this momentous occasion could be a major positive. The territory could
attract large capital inflows from the mainland in search of well-run companies,
possibly driving the Hong Kong market to new highs. There will again be problems
and crises for Hong Kong, but we are optimistic that Hong Kong will be able to
surmount those problems because the people of Hong Kong see problems as simply
opportunities in work clothes. Hong Kong is likely to change immeasurably in the
next thirty years -- as it has done in the last thirty years -- but what makes
Hong Kong special will remain the same.
Elsewhere, we continue to seek bargain opportunities in Eastern Europe.
The liquidity and depth of the capital markets in several Eastern European
countries have improved, and we expect that will continue if more privatizations
come to fruition. Hungary's capitalization has increased by more than twenty-six
times since 1992, and it experienced a significant jump in equity turnover over
the last few months that caught many local brokers by surprise. The Russian
government recently launched a big sell-off in six state-owned oil companies.
These share sales could give renewed impetus to the government's privatization
and may also help to raise the much needed revenue to pay off the massive
government debts. Boris Yeltsin has put together a team of pro-reform
professionals under the leadership of the "father of Russia's privatization,"
Anatoly Chubais (Russia's first Deputy Prime Minister), to aggressively execute
privatization schemes that will hopefully be conducted to the highest standards.
Although investing in Russia involves political, economic, market and other
significant risks, ultimately, we believe that if the government is proactive
towards issues of corporate governance, that will build confidence among the
foreign investor community and could subsequently lead to increased foreign
capital inflows.
This discussion reflects the strategies we employed for the Fund during
the six months under review, and includes our opinions as of the close of the
period. Since economic and market conditions are constantly changing, our
strategies, and our evaluations, conclusions and decisions regarding portfolio
holdings, may change as new circumstances arise. Although past performance of a
specific investment or sector cannot guarantee future performance, such
information can be useful in analyzing securities we purchase or sell for the
Fund.
Of course, it should be remembered that investing in foreign securities
involves special risks related to market and currency volatility, and economic,
social, political and other factors in the countries where the Fund is invested.
Emerging markets involve heightened risks related to the same factors, in
addition to those associated with the
10 LARGEST INDUSTRIES ON 6/30/97*
(% of Total Portfolio)
<TABLE>
<S> <C>
Banking 21.7%
Multi-Industry 8.6%
Telecommunications 7.9%
Utilities Electrical & Gas 5.8%
Energy Sources 5.5%
Real Estate 5.3%
Building Materials and Components 4.6%
Food and Household Products 4.6%
Metals and Mining 3.6%
Chemicals 2.8%
</TABLE>
10 LARGEST POSITIONS ON 6/30/97*
(% of Total Portfolio)
<TABLE>
<S> <C>
Eletrobras-Centrais Eletricas
Brasileiras SA 2.6%
Telmex-Telefonos De Mexico SA 2.5%
Telebras-Telecomunicacoes
Brasileiras SA 2.1%
HSBC Holdings PLC 2.0%
Banco Comercial Portugues SA 1.8%
Cementos Mexicanos SA De CV 1.7%
Petrobras-Petroleo Brasileiro
SA, pfd. 1.6%
New World Development
Co. Ltd. 1.5%
Perez Companc SA 1.5%
Alpha Credit Bank 1.5%
</TABLE>
*Allocations may change subject to market conditions
3
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
letter continued
Total Return Index Comparison
$5,000,000 Investment: 05/03/93-06/30/97
[LINE GRAPH]
Periods ended June 30, 1997
SINCE
INCEPTION
ONE-YEAR (05/03/93)
Average Annual Total Return(1),(2) 24.7% 12.9%
Cumulative Total Return(1),(3) 24.7% 65.5%
(1) The Investment Manager and Fund Adminstrator have agreed in advance to
waive a portion of their respective fees in order to limit the total
expenses of the Fund to 1.6% of average net assets through April 30,
1998. If these fee waivers are insufficient to so limit the Fund's
expenses, the Fund Administrator has agreed to make certain payments to
reduce the Fund's expenses. After April 30, 1998, these agreements may
end at any time upon notice to the Board of Directors. These voluntary
agreements did not result in any fee waivers for the Fund for the
fiscal year ended December 31, 1996.
(2) Average annual total return figures represent the average annual change
in value of an investment over the specified periods.
(3) The cumulative total return represents the change in value of an
investment over the period(s) indicated.
All calculations assume that dividends and capital gains were
reinvested when paid.
Investment return and principal value will fluctuate with market
conditions, volatility and the economic, social, and political climates
of the countries where investments are made. Emerging markets involve
heightened risks related to the same factors, in addition to those
associated with the relatively small size and lesser liquidity of these
markets. You may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.
relatively small size and lesser liquidity of these markets. These special risks
and other considerations are discussed in the Fund's prospectus.
Despite strong growth in the first half of 1997, in our opinion the
emerging markets as a whole still represent good value. The key to investing in
the emerging markets is to take a long term view. Our fundamental investment
philosophy, including a long term outlook, patience, and bottom-up value
investing remains unchanged. We thank you and appreciate your continued
confidence in us.
Best regards,
/S/Donald F. Reed
- -----------------
Donald F. Reed, C.F.A., C.I.C.
President
Templeton Institutional Funds, Inc.
/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.
4
<PAGE>
The following are Dr. Mobius's thoughts regarding a recent visit to Argentina
with the emerging markets research team.
Country FOCUS
BUENOS AIRES, Argentina -- The economic successes of the 1990's have brought
about a major overhaul of the Buenos Aires landscape. In particular, the
prosperous, thriving center of the city has enveloped run-down areas close to
the river (Rio de la Plata). It was very encouraging to see that the previously
run-down, old shipping dockyards of the port have now been converted into modern
lofts and offices -- evidence of Argentina's new-found prosperity. Such is the
attraction of this redevelopment that many corporations are clamoring to
establish their headquarters there. We have also purchased office space in this
area, which will eventually become our Argentina emerging markets office.
The successful implementation of such a large redevelopment project
would have been impossible only a few years ago when hyperinflation was the norm
and budgets for projects could be rendered worthless in only a few months. It is
testament to the dramatic overhaul that has been accomplished by the government
and the strength of the real estate and construction sectors. The project was
carried out by most of the large real estate and construction companies in
Argentina, among them a company in which George Soros has an investment. These
developments illustrate the transformation process which has been taking place
in Argentina since 1991, when the economy started to open up and the government
started to overcome years of hyperinflation.
The new area is replete with trendy restaurants, usually packed with
businessmen at lunch. Many of the restaurants are Italian because of the strong
influence of Italian migration to Argentina at the beginning of the century. In
Argentina, many people believe that Argentine pizza and ice-cream are better
than those in Italy. It is also common to see enormous barbecue restaurants,
serving Argentine steaks which are justifiably world famous. You can see
Argentines enjoying steaks the size of a dinner plate, as if they were just
having a light midday snack.
One of the companies we visited on this trip was Argentina's largest
oil and gas company. Our meeting with some of the company officials revealed
some of the massive productivity and efficiency improvements that had been made
by this former state-owned company since it was privatized. On our way to our
next meeting, we drove by one of the gas stations operated
5
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
country focus continued...
by the company. It was very impressive to see that the complete refurbishment of
their gas stations had been achieved. The gas station we saw had been modernized
and came complete with a new attractive brand logo. Only a couple of years ago,
gas stations had been pictures of neglect and inefficiency.
There has also been tremendous improvement in the telecommunications
sector in Argentina. Only recently, customers had to wait five years to get a
telephone line installed. This now can take less than a week. There has also
been significant investment in new technology. A couple of years ago, one could
walk along one of the narrow streets of the business district, and sunlight
would be completely blocked out by the thousands of telephones lines that were
hanging from one office building to
[INSET GRAPHIC OF SOUTH AMERICA ON GLOBE WITH ARGENTINA HIGHLIGHTED]
[ENLARGED GRAPHIC OF SOUTHERN SOUTH AMERICA HIGHLIGHTING ARGENTINA]
6
<PAGE>
the next. Today, many of these cables have disappeared since the two listed
national telephone companies have made significant investment in an underground
network and fiber optic cables.
In our meeting with one of these companies we learned that the
international business of the national telephone companies had been
significantly affected by the operation of so-called "callback" companies, which
have undercut the national companies on international calls. Overall, there are
27 callback companies, which now account for approximately 20% of the
international calls business. Of course, the national companies have been
outraged by what they consider to be unlawful competition, although they still
receive a settlement fee for the incoming call made through callback. However,
the government is in the process of rebalancing the tariff structure on domestic
and international calls. At the moment, the cost of the local calls are some of
the cheapest in the world, whereas the cost of the long distance and
international calls are some of the most expensive in the world. Under the new
structure, international tariffs are expected to be lowered and domestic tariffs
raised. The new plan has met with considerable hostility, and the government has
agreed to ensure the changes do not have any impact on the bottom-line of the
national companies. The changes should make the national companies more
competitive against callback companies, and this will also help them prepare for
the time when telecommunications is fully opened to international and domestic
competition in the year 2000.
We have seen many changes in Argentina in the ten years that Templeton
has been investing there, and we are optimistic that Argentina has the potential
to continue to develop and prosper in the next ten years. We have visited many
companies on numerous occasions, and it is encouraging to hear them ask us for
advice on how they can improve their operations, given our knowledge of similar
operations in other countries. We are always pleased to oblige.*
*This letter reflects the strategies employed for the Fund during the past six
months and includes our opinions as of the close of the period. Since economic
and market conditions are constantly changing, our strategies, and our
evaluations, conclusions and decisions regarding portfolio holdings may change
as new circumstances arise.
7
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
spotlight...
The following are short descriptions of some companies held in the portfolio on
June 30, 1997. This information is based on research, reports and other
information provided to Templeton and has not been independently verified.*
Spotlight ON CURRENT HOLDINGS
Banco Frances del Rio de la Plata S.A. (0.34%) -- Founded in 1886, Banco Frances
is one of Argentina's largest private banks in terms of total deposits. It
provides a full range of financial services including commercial and consumer
lending, mortgage financing, credit and debit cards, securities underwriting and
distribution, trading and brokerage services, asset management, investment
advisory services and other non-credit-related services such as cash management
and payroll processing. While it serves a large variety of customers including
large corporations, small and medium-sized businesses and individuals, its
target market segment is the middle and upper income class individuals, mostly
residents of Argentina, from whom lucrative fee income can be derived. Banco
Frances takes deposits and extends loans in both Pesos and U.S. dollars. The
bank's key strategy for its large corporate customers is to capitalize on its
long experience in the local market by diversifying into more fee-generating
services that these corporations require as they begin to access global capital
markets. Banco Frances is currently one of the largest issuers of credit cards
in the country with over 170,000 card holders. Banco Frances currently operates
a total of over 70 branches with more than 90 automatic teller machines. It has
about 2,500 full-time employees.
YPF S.A. (1.00%) -- YPF is one of Argentina's largest integrated oil and gas
companies engaged in the exploration, development and production of oil and
natural gas; and in the refining, marketing, transportation and distribution of
oil and a wide range of petroleum products, petroleum derivatives,
petrochemicals and liquid petroleum gas. Its proven reserves consist of
approximately one billion barrels of oil and condensate and nine trillion cubic
feet of gas, with the highest graded reserves located in the prolific Neuquen
and Golfo San Jorge basins. YPF's three refineries have a combined annual
refining capacity of approximately 126 million barrels, representing
approximately half of Argentina's total refining capacity. YPF's retail
distribution network for automotive petroleum products comprises
*These positions are subject to change as the Fund's portfolio is managed.
8
<PAGE>
approximately 2,800 YPF-branded service stations, representing approximately
half of all service stations in Argentina. To compete in the deregulated
environment, YPF's new management, appointed in 1990, initiated a restructuring
plan that included significant additional asset disposals, the creation of two
strategic business units -- Upstream for exploration and development and
Downstream for refining and marketing -- and a cost reduction program that
included a substantial reduction in the number of domestic employees: from over
51,000 in 1990 to less than 6,000 at present. In addition to the facilities that
transport 24,000 barrels of oil out of the Neuquen basin by rail and truck, YPF
has recently completed an oil pipeline to Chile that can transport approximately
60,000 barrels a day.
Atanor S.A (0.14%) -- Founded in 1938, the company is engaged in the production
and commercialization of a wide variety of agrochemical, chemical and
petrochemical products. Its first factory was established in Munro (Greater
Buenos Aires), for the production and sale of hydrogen peroxide. In 1949 it
built its second plant, in the province of Cordoba, for the purpose of producing
methanol. In 1974, together with YPF and Fabricaciones Militares it formed the
company Petroquimica Rio Tercero, for the production of TDI, a petrochemical
used for the production of mattresses. In 1981 it acquired a chemical complex in
Baradero (Buenos Aires province) from the firm Rhodia, where it produces, among
other products, aldehyde, acetic acid, acetic anhydride and ethyl acetate. At
the end of 1985, through the acquisition of the firm Dericel, it incorporated
the production of new chemical specialities. Atanor was completely privatized in
1988. The finished goods produced by the Company can be grouped into 3
categories (agrochemicals, chemicals and plastics) which reach a very wide
spectrum of clients due to the enormous diversity of products. Its principal
sales are currently directed at three sectors: agriculture, forestry and, to a
lesser extent, textiles. The main products are acid 2.4D, trifluralyn,
glifosato, and atrazyn (in agrochemicals); sodium hypochloride, acetic acid,
caustic soda and hydrogen peroxide (in chemicals); and resins, phthalates and
ureic glues (in plastics). The current capacity is approximately 160,000 tons.
Juan Minetti S.A. (0.05%) -- Founded in 1929, Juan Minetti is the second largest
cement producer in Argentina covering 17% of total cement sales in the country
with a total capacity of 2.1 Metric Tons. It operates 3 plants in the provinces
of Cordoba, Mendoza and Jujuy, the most important of which is the plant at
Malagueno outside the city of Cordoba with a nominal capacity of 900,000 tons
and current production levels of 790,000 tons. A second plant is Puesto Viejo
(province of Jujuy) with a nominal capacity of 950,000 tons and production of
720,000 tons. The third plant called Panquequa is located outside the city of
Mendoza and has a nominal capacity of 260,000 tons and production of 230,000
tons. The Company produces five different types of cement under nine brands.
Each of
9
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
spotlight continued...
the plants produces normal portland cement used in medium and low volume
concrete, reinforced concrete structures, foundations and general applications;
they also produce a variety of other more specialized cements for use in high
volume applications. The Argentine cement market remains oligopolistic in
structure, with market shares of major players holding steady over time. Cement
manufacturers have historically avoided competition for market share, with
relative profitability depending more upon relative costs of production. Juan
Minetti has recently obtained the ISO 9002 certification.
10
<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
SIX MONTHS MAY 3, 1993
ENDED YEAR ENDED DECEMBER 31 (COMMENCEMENT
JUNE 30, 1997 ------------------------------ OF OPERATIONS) TO
(UNAUDITED) 1996 1995 1994 DECEMBER 31, 1993
------------- ---------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 12.45 $ 10.75 $ 11.21 $ 13.22 $ 10.00
---------- ---------- -------- -------- --------
Income from investment operations:
Net investment income .14 .15 .19 .17 .04
Net realized and unrealized gain (loss) 2.31 1.86 (.34) (1.65) 3.25
---------- ---------- -------- -------- --------
Total from investment operations 2.45 2.01 (.15) (1.48) 3.29
---------- ---------- -------- -------- --------
Distributions:
Dividends from net investment income (.02) (.15) (.17) (.17) (.04)
Distributions from net realized gains (.02) (.16) (.14) (.36) (.03)
---------- ---------- -------- -------- --------
Total distributions (.04) (.31) (.31) (.53) (.07)
---------- ---------- -------- -------- --------
Change in net asset value for the period 2.41 1.70 (.46) (2.01) 3.22
---------- ---------- -------- -------- --------
Net asset value, end of period $ 14.86 $ 12.45 $ 10.75 $ 11.21 $ 13.22
========== ========== ======== ======== ========
TOTAL RETURN* 19.70% 18.86% (1.23)% (11.39)% 32.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 2,219,793 $1,565,537 $798,515 $582,878 $ 422,433
Ratio of expenses to average net assets 1.58%** 1.56% 1.52% 1.66% 1.60%**
Ratio of expenses, net of fee waiver, to average
net assets 1.58%** 1.56% 1.52% 1.60% 1.60%**
Ratio of net investment income to average net
assets 2.12%** 1.56% 2.00% 1.59% .91%**
Portfolio turnover rate 6.59% 7.92% 13.47% 12.51% 9.42%
Average commission rate paid (per share) $ .0024 $ .0019
</TABLE>
* NOT ANNUALIZED FOR PERIOD LESS THAN ONE YEAR.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
11
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES: 87.7%
---------------------------------------------------------------------------------------------------------------------
ARGENTINA: 6.6%
Aluar Aluminio Argentino SA, B Misc Materials & Commodities 77,678 $ 279,683
Astra Cia Argentina de Petroleo SA Energy Sources 1,771,730 3,756,631
Atanor Cia Nacional Para la Industria Quimica
SA, D Chemicals 1,894,877 3,051,210
* Banco Bansud SA, B Banking 140,066 2,128,438
Banco de Galicia y Buenos Aires SA, B Banking 3,309,686 22,012,714
Banco Frances del Rio de la Plata SA Banking 693,363 7,510,248
* Buenos Aires Embotelladora SA, ADR Beverages & Tobacco 375,300 3,753
Capex SA, A Utilities Electrical & Gas 51,205 481,399
Central Costanera SA, B Utilities Electrical & Gas 297,468 1,026,419
Ciadea SA Automobiles 424,725 1,826,593
+* Garovaglio Y Zorraquin SA Chemicals 1,257,372 4,527,218
Juan Minetti SA Building Materials & Components 219,914 1,055,746
Juan Minetti SA, conv. Building Materials & Components 50,000 50,008
Molinos Rio de Plata SA, B Food & Household Products 3,679,320 14,388,299
Nobleza Piccardo Sdad Industrial
Comercial y Financial Beverages & Tobacco 182,597 1,205,321
Perez Companc SA, B Energy Sources 4,190,994 33,658,733
Quilmes Industrial SA Beverages & Tobacco 741,000 8,614,125
Quilmes Industrial SA, reg Beverages & Tobacco 44,000 451,000
* Sevel Argentina SA, C Automobiles 474,240 967,594
Siderar, A Metals & Mining 225,447 926,726
* Sociedad Comercial del Plata Cadelplata Come Multi-Industry 4,431,890 14,450,129
Transportadora de Gas del Sur SA, B Energy Sources 352,647 853,534
YPF Sociedad Anonima, ADR Energy Sources 722,810 22,226,408
* Zanella Hermanos SA Automobiles 743,582 159,894
-------------
145,611,823
---------------------------------------------------------------------------------------------------------------------
BRAZIL: 11.3%
Aracruz Celulose SA, ADR Forest Products & Paper 194,100 3,954,788
Banco Bradesco SA Banking 762,798,423 7,298,150
Banco Bradesco SA, pfd. Banking 111,832,897 1,127,107
* Banco do Brasil SA Banking 922,450,792 9,682,499
* Banco do Brasil SA, wts., A Banking 190,208,236 618,391
* Banco do Brasil SA, wts., B Banking 285,312,354 797,724
* Banco do Brasil SA, wts., C Banking 475,520,591 1,325,123
* Banco do Brazil SA, pfd. Banking 493,410,390 5,912,400
* Banespa-Banco do Estado de Sao Paulo SA, pfd. Banking 620,867,530 15,288,838
Brasmotor SA, pfd. Multi-Industry 20,198,000 4,502,828
Cia Vale do Rio Doce, pfd. Metals & Mining 332,941 7,363,639
Companhia Siderurgica Nacional Metals & Mining 214,676,000 7,079,093
Copene-Petroquimica do Nordeste SA, A, pfd. Chemicals 15,725,700 5,828,391
Duratex SA, pfd. Forest Products & Paper 191,931,900 10,160,419
Electrolux Do Brasil SA, pfd. Appliances & Household Durables 26,477,000 42,056
Eletrobras-Centrais Eletricas Brasileiras SA Utilities Electrical & Gas 41,006,000 22,930,298
Eletrobras-Centrais Eletricas Brasileiras
SA, B, pfd. Utilities Electrical & Gas 56,362,106 33,611,511
Itausa-Investimentos Itau SA, pfd. Multi-Industry 25,743,704 23,674,021
* Mannesmann SA Machinery & Engineering 10,662,720 1,228,162
* Mannesmann SA, pfd. Machinery & Engineering 1,670,650 215,708
Marcopolo SA, pfd. Automobiles 6,123,800 1,095,009
Petrobras-Petroleo Brasileiro SA, pfd. Energy Sources 125,490,666 34,854,827
Telebras-Telecomunicacoes Brasileiras SA Telecommunications 303,867,531 41,210,032
Telebras-Telecomunicacoes Brasileiras SA, pfd. Telecommunications 41,865,968 6,350,576
Unibanco-Uniao de Bancos Brasileiros SA, pfd. Banking 148,251,168 5,438,148
-------------
251,589,738
---------------------------------------------------------------------------------------------------------------------
CHILE: 0.1%
Antofagasta Holdings PLC Metals & Mining 197,000 1,504,180
---------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
CHINA: 1.8%
China First Pencil Co. Ltd., B Recreation & Other Consumer
Goods 835,882 $ 334,353
China Southern Glass Co. Ltd., B Building Materials & Components 3,321,240 1,736,221
* Chiwan Wharf Holdings Ltd., B Transportation 4,715,700 2,885,188
Guangdong Electric Power Development Co
Ltd, B, 144A Utilities Electrical & Gas 788,400 646,204
Guangshen Railway Co. Ltd., ADR Transportation 140,000 3,062,500
Guangzhou Shipyard International Co. Ltd., H Machinery & Engineering 2,253,000 421,676
* Luoyang Glass Co. Ltd., H Misc Materials & Commodities 4,029,000 702,070
Maanshan Iron & Steel Co. Ltd., H Metals & Mining 2,357,000 492,861
Shandong Huaneng Power Utilities Electrical & Gas 195,000 2,096,250
* Shanghai Chlor-Alkali Chemical Co. Ltd., B Chemicals 4,831,000 1,381,666
* Shanghai Dazhong Taxi Shareholding Co. Ltd., B Transportation 2,940,600 2,611,253
* Shanghai Erfangji Textile Machinery Co. Ltd.,
B Machinery & Engineering 3,913,140 508,708
* Shanghai Industrial Sewing Machine Corp. Machinery & Engineering 1,209,000 147,498
* Shanghai Jin Jiang Tower Co. Ltd., B Leisure & Tourism 3,564,700 1,126,445
Shanghai Jinqiao Export Processing Zone
Development, B Real Estate 1,678,900 1,369,982
Shanghai Lujiaxui Finance & Trade Zone Dev.
Stock Co Ltd, B Real Estate 6,046,220 8,646,095
* Shanghai Narcissus Electric Appliances Co.
Ltd., B Appliances & Household Durables 529,000 75,118
Shanghai New Asia Group Co. Ltd., B Food & Household Products 1,900,000 1,037,400
Shanghai Petrochemical Co. Ltd., H Chemicals 5,254,000 1,261,399
* Shanghai Refrigerator Compressor Co. Ltd., B Industrial Components 1,109,940 532,771
* Shanghai Rubber Belt Co. Ltd., B Industrial Components 41,000 8,118
* Shanghai Shangling Electric Appliance, B Appliances & Household Durables 2,135,870 439,989
* Shanghai Steel Tube Co. Ltd., B Machinery & Engineering 2,257,640 298,008
Shanghai Tyre & Rubber Co. Ltd., B Industrial Components 3,340,000 1,636,600
* Shanghai Vacuum Electron Devices Co. Ltd., B Appliances & Household Durables 2,903,434 580,687
* Shanghai Wingsung Co. Ltd., B Recreation & Other Consumer
Goods 207,000 48,852
* Shanghai Yaohua Pilkington Glass, B Building Materials & Components 5,064,500 1,833,349
* Shenzhen China Bicycles Co. (Holdings) Ltd., B Recreation & Other Consumer
Goods 1,875,000 738,160
Shenzhen Properties & Resources Develop.
(Group) Ltd., B Real Estate 1,874,616 648,480
Shenzhen Vanke Co. Ltd., B Real Estate 2,665,735 2,590,965
* Tsingtao Brewey Co., H Beverages & Tobacco 1,068,000 413,563
-------------
40,312,429
---------------------------------------------------------------------------------------------------------------------
COLOMBIA: 3.1%
Banco Ganadero SA, ADR C Banking 131,000 3,422,375
Banco Industrial Colombiano SA Banking 390,705 1,302,111
Bavaria SA Beverages & Tobacco 180,656 1,296,550
Cementos Argos SA Building Materials & Components 1,795,346 14,398,971
Cia Colombiana de Tabacos SA Coltabaco Beverages & Tobacco 1,992,521 6,941,863
Compania Nacional de Chocolates SA Food & Household Products 2,339,988 20,804,660
Compania Suramericana de Seguros Insurance 729,470 18,855,228
Promigas SA Utilities Electrical & Gas 132,438 564,470
-------------
67,586,228
---------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC: 1.2%
* CEZ Utilities Electrical & Gas 353,280 9,750,389
Chemopetrol Group AS Chemicals 115,976 4,094,996
Elektrarny Opatovice AS Energy Sources 8,001 1,048,608
* Komercni Banka AS Banking 7,822 405,235
</TABLE>
13
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC (cont.)
Komercni Banka AS, GDR Banking 27,000 $ 562,275
SPT Telecom AS Telecommunications 63,330 6,640,002
* Tabak AS Beverages & Tobacco 17,104 4,008,585
-------------
26,510,090
---------------------------------------------------------------------------------------------------------------------
ECUADOR: 0.1%
La Cemento Nacional CA, GDR Multi-Industry 8,946 1,860,768
La Cemento Nacional CA, GDR, 144A Multi-Industry 3,946 820,768
-------------
2,681,536
---------------------------------------------------------------------------------------------------------------------
EGYPT: 0.2%
Commercial International Bank Ltd. Banking 197,350 4,128,455
---------------------------------------------------------------------------------------------------------------------
GHANA: 0.3%
Ashanti Goldfields Co. Ltd., GDR Metals & Mining 483,870 5,655,231
---------------------------------------------------------------------------------------------------------------------
GREECE: 4.4%
Alpha Credit Bank Banking 479,505 32,623,272
Alpha Leasing SA Financial Services 158,480 4,205,596
Delta Dairy SA Food & Household Products 394,470 4,882,232
Delta Dairy SA, pfd. Food & Household Products 57,884 503,596
Elais Oleaginous Co. Food & Household Products 80,560 2,343,105
Ergo Bank SA Banking 202,653 12,172,016
Etba Leasing Financial Services 131,092 1,331,392
Fourlis Brothers Corp. SA Appliances & Household Durables 100,020 1,019,461
Hellas Can--Container Manufacturers Metals & Mining 146,980 2,715,313
Hellenic Telecommunications Organizations
OTE Telecommunications 210,320 4,938,168
Hellenic Telecommunications Organizations
OTE, 144A Telecommunications 678,000 15,918,969
* Hellenic Telecommunications Organizations,
rts. Telecommunications 888,320 109,136
* Intracom SA, reg. Electrical & Electronics 50,000 2,276,947
* National Bank of Greece SA Banking 53,152 6,501,064
Titan Cement Co., reg. Building Materials & Components 122,980 6,065,957
X. Benrubi & Son SA Food & Household Products 125,280 346,594
-------------
97,952,818
---------------------------------------------------------------------------------------------------------------------
HONG KONG: 9.0%
Cheung Kong Holdings Ltd. Multi-Industry 3,009,000 29,712,093
Cross Harbour Tunnel Co. Ltd. Transportation 906,010 1,935,444
Dairy Farm International Holdings Ltd. Merchandising 5,842,971 4,382,228
* East Asiatic Co. (Hong Kong) Ltd. (The) Wholesale & International Trade 1,684,000 281,489
Great Wall Electronic International Ltd. Electrical & Electronics 751,132 80,472
Hang Lung Development Co. Ltd. Real Estate 8,491,000 15,563,125
Hong Kong Electric Holdings Ltd. Utilities Electrical & Gas 2,617,000 10,539,207
Hopewell Holdings Ltd. Construction & Housing 5,994,000 3,791,076
HSBC Holdings PLC Banking 1,443,667 43,418,276
Jardine International Motor Holdings Ltd. Automobiles 536,000 678,017
Jardine Matheson Holdings Ltd. Multi-Industry 543,362 3,857,870
Jardine Strategic Holdings Ltd. Multi-Industry 1,024,250 3,871,665
Joyce Boutique Holdings Ltd. Merchandising 862,000 134,630
K Wah International Holdings Ltd. Building Materials & Components 10,138,684 1,910,663
Lai Sun Development Co. Ltd. Real Estate 2,647,000 2,972,507
Lai Sun Garment International Ltd. Multi-Industry 1,629,000 1,997,535
* Lai Sun Hotels International Ltd., wts. Leisure & Tourism 531,262 46,630
Laws International Holdings Ltd. Textiles & Apparel 2,478,000 633,310
New World Development Co. Ltd. Real Estate 5,702,133 34,003,917
Orient Overseas International Ltd. Transportation 35,000 24,847
</TABLE>
14
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
HONG KONG (cont.)
* S. Megga International Holdings Ltd. Electronic Components &
Instruments 2,102,400 $ 149,255
Semi-Tech (Global) Co. Ltd. Appliances & Household Durables 1,946,365 3,178,077
Sun Hung Kai & Co. Ltd. Financial Services 2,030,800 609,452
* Sun Hung Kai & Co. Ltd, wts. Financial Services 786,960 74,152
Sun Hung Kai Properties Ltd. Real Estate 2,222,000 26,744,995
Swire Pacific Ltd., B Multi-Industry 190,000 288,165
Tian An China Investments Co. Ltd. Real Estate 789,000 106,934
Tungtex (Holdings) Co. Ltd. Textiles & Apparel 1,934,000 199,708
Wheelock & Co. Ltd. Multi-Industry 1,817,000 4,467,860
* Wo Kee Hong Holdings Ltd. Merchandising 3,970,400 281,869
* Yaohan Hongkong Corp. Ltd. Merchandising 4,702,000 242,768
Yue Yuen Industrial (Holdings) Ltd. Recreation & Other Consumer
Goods 1,485,400 3,077,288
-------------
199,255,524
---------------------------------------------------------------------------------------------------------------------
HUNGARY: 0.8%
* Danubius Hotel and Spa RT Leisure & Tourism 17,000 502,470
Egis RT Multi-Industry 29,000 1,850,586
* Egis RT, certificates Multi-Industry 2,350 149,961
Fotex First Hungarian-Amer. Photo Co., 12.00%,
5/11/00 Multi-Industry 16,000 16,000
* Fotex First Hungarian-American Photo-Service Multi-Industry 1,784,000 1,818,404
Gedeon Richter Ltd. Health & Personal Care 11,000 1,012,976
* Ibusz RT Leisure & Tourism 51,040 185,337
Inter-Europa Bank RT Banking 1,408 349,622
Mol Magyar Olay--Es Gazipari RT Energy Sources 6,830 151,360
OTP Bank, GDR Banking 75,000 1,987,500
Pick Szeged RT Food & Household Products 10,000 768,964
Pick Szeged RT, GDR Food & Household Products 10,910 838,939
Tiszai Vegyi Kombinat RT Chemicals 86,176 1,504,795
Tiszai Vegyi Kombinat RT, GDR, 144A Chemicals 272,000 4,712,400
Tiszai Vagyi Kombinat RT, GDR, S Chemicals 157,000 2,720,025
-------------
18,569,339
---------------------------------------------------------------------------------------------------------------------
INDIA: 2.4%
* Arvind Mills Ltd. Textiles & Apparel 583,500 2,118,855
* Bank of Baroda Banking 297,900 769,714
Bharat Petroleum Corp., Ltd. Energy Sources 28,400 356,587
* Bombay Dyeing & Manufacturing Co. Ltd. Chemicals 55,550 149,737
Bses Ltd. Utilities Electrical & Gas 55,250 367,690
Cochin Refineries Ltd. Energy Sources 100,750 430,580
Grasim Industries Ltd Ord INR10 Multi-Industry 192,600 2,009,388
Great Eastern Shipping Co. Ltd. Transportation 1,363,900 1,866,791
Gujarat Ambuja Cements Ltd. Building Materials & Components 95,300 922,387
* Gujarat Industries Power Ltd. Energy Equipment & Services 89,000 70,852
Gujarat Narmada Valley Fertilizers Co. Ltd. Chemicals 17,000 10,803
Gujarat Narmanda Valley Fertilizers Co. Ltd.,
ADR Chemicals 29,000 72,500
Hindalco Industries Metals & Mining 142,725 3,887,063
Hindustan Organic Chemicals Ltd. Chemicals 38,100 26,606
Hindustan Petroleum Corp. Ltd. Energy Sources 298,900 3,782,170
* India Cements Ltd. Building Materials & Components 226,900 684,503
India Cements Ltd., GDR Building Materials & Components 265,658 796,974
Indian Aluminium Co. Ltd. Metals & Mining 84,900 316,003
Indian Petrochemicals Corp. Ltd. Chemicals 1,233,100 4,994,399
Indian Rayon & Industries Ltd., GDR Multi-Industry 55,666 697,217
Indian Rayon and Industries Ltd. Multi-Industry 113,300 1,170,978
Indo Gulf Fertilisers & Chemicals Corp. Ltd. Chemicals 1,262,700 1,216,848
</TABLE>
15
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
INDIA (cont.)
Indo Gulf Fertilisers & Chemicals, GDR Chemicals 28,700 $ 30,853
Industrial Credit & Inv. Corp. of India
(ICICI) Financial Services 1,522,000 3,326,718
* Industrial Development Bank of India Banking 695,600 1,986,735
ITC Bhadrachalam Paperboards Ltd. Forest Products & Paper 96,700 124,251
Larsen and Toubro Ltd. Multi-Industry 822,600 5,606,547
Madras Cements Building Materials & Components 100 22,556
Mahanagar Telephone Nigam Ltd. Telecommunications 8,800 74,358
* National Aluminium Co. Ltd. Metals & Mining 830,400 1,055,397
* Oriental Bank of Commerce Banking 533,200 1,038,102
Reliance Industries Ltd. Chemicals 190,800 1,981,282
Shipping Corporation of India Ltd. Transportation 632,400 861,159
State Bank of India Banking 74,400 707,112
Steel Authority of India Ltd. Metals & Mining 2,791,300 1,598,370
Steel Authority of India Ltd, GDR, reg S Metals & Mining 45,000 402,750
Steel Authority of India Ltd., GDR, 144A Metals & Mining 62,000 554,900
Sterlite Industries (India) Ltd. Metals & Mining 34,700 259,281
* Tata Chemicals Ltd. Chemicals 273,650 1,383,538
Tata Engineering & Locomotive Co. Telco Machinery & Engineering 239,750 3,027,011
* Tata Iron & Steel Co. Ltd. Metals & Mining 526,400 2,812,123
Thermax Ltd. Energy Equipment & Services 7,100 69,413
Wockhardt Health & Personal Care 7,400 40,721
-------------
53,681,822
---------------------------------------------------------------------------------------------------------------------
INDONESIA: 5.2%
* Asia Pulp & Paper Co. Ltd., ADR Forest Products & Paper 295,500 4,469,437
PT Indah Kiat Pulp & Paper Corp. TBK, rts. Forest Products & Paper 2,920,500 510,367
PT Tempo Scan Pacific, fgn. Health & Personal Care 48,000 107,566
PT Bank Dagang Nasional Indonesia, fgn. Banking 4,035,500 2,862,351
PT Bank Danamon, fgn. Banking 1,434,000 751,789
PT Bank PDFCI, fgn. Banking 360,500 337,228
PT Barito Pacific Timber, fgn. Forest Products & Paper 20,657,000 17,624,702
PT BBL Dharmala Finance, fgn. Financial Services 1,433,000 2,003,372
PT BDNI Capital Corporation, fgn. Financial Services 731,000 578,608
* PT Charoen Pokphand Indonesia, fgn. Food & Household Products 13,710,000 6,201,069
PT Ciputra Dev. Real Estate 3,888,000 3,876,809
* PT Dharmala Intiland, fgn. Real Estate 1,262,000 1,816,201
PT Gadjah Tunggal TBK, fgn. Automobiles 12,795,500 6,313,569
* PT Indah Kiat Pulp & Paper Corp. TBK, fgn. Forest Products & Paper 3,245,000 1,901,367
PT Indocement Tunggal Prakarsa, fgn. Building Materials & Components 3,120,000 4,842,928
PT Indosat, fgn Telecommunications 784,000 2,345,230
* PT Inter-Pacific Bank, fgn. Banking 589,500 539,325
* PT Jakarta International Hotel & Development
TBK, fgn. Real Estate 3,095,000 3,531,507
PT Japfa Comfeed Indonesia TBK Food & Household Products 1,661,000 1,109,838
PT Kalbe Farma, fgn. Health & Personal Care 1,474,000 1,969,778
PT Metrodata Electronic, fgn. Electrical & Electronic 45,000 68,462
PT Multibreeder Adirama TBK, fgn. Food & Household Products 221,250 79,603
PT Pabrik Kertas Tjiwi Kimia, fgn. Forest Products & Paper 2,487,790 2,889,805
PT Polysindo Eka Perkasa, fgn. Textiles & Apparel 8,720,500 4,840,738
PT Semen Cibinong TBK, fgn. Building Materials & Components 660,500 1,731,368
PT Semen Gresik, fgn. Building Materials & Components 537,000 1,203,392
PT Sinar Mas Agro Resources & Technology
Corp., fgn. Food & Household Products 4,428,600 4,006,135
PT Sinar Mas Multi Artha, fgn. Financial Services 11,520,600 10,540,023
PT Sinar Mas Multi Artha, wts., fgn. Financial Services 864,045 435,220
* PT Sumalindo Lestari Jaya, fgn. Forest Products & Paper 2,472,000 2,236,184
PT Summarecon Agung, fgn. Real Estate 1,776,604 1,059,242
</TABLE>
16
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
INDONESIA (cont.)
PT Tambang Timah (Persero), fgn. Metals & Mining 2,978,000 $ 4,622,512
PT Ultra Jaya Milk, fgn. Food & Household Products 3,254,300 1,773,005
* PT Unggul Indah Corp., fgn. Chemicals 2,937,000 4,709,827
PT United Tractors, fgn. Machinery & Engineering 3,371,000 12,474,918
-------------
116,363,475
---------------------------------------------------------------------------------------------------------------------
ISRAEL: 0.7%
Agis Industries Ltd. Health & Personal Care 66,190 694,051
Bank Hapoalim BM Banking 2,469,334 5,141,326
Clal Industries Ltd. Multi-Industry 917,878 4,588,752
Discount Investment Corp. Multi-Industry 26,033 2,075,977
First International Bank of Israel Banking 3,286 2,537,451
Koor Industries Ltd. Multi-Industry 15,000 1,324,615
-------------
16,362,172
---------------------------------------------------------------------------------------------------------------------
JORDAN: 0.0%
* Jordan Cement Factories Ltd. Building Materials & Components 23,000 132,355
---------------------------------------------------------------------------------------------------------------------
KOREA (SOUTH): 2.2%
Asia Cement Co. Ltd. Building Materials & Components 40,190 1,312,511
Boram Bank Co. Ltd. Banking 649,149 4,276,488
BYC Co. Ltd. Textiles & Apparel 6,200 638,851
Central Banking Corp. Financial Services 213,784 3,226,020
Cho Hung Bank Co. Ltd., GDR Banking 70,800 507,990
Cho Hung Bank Co. Ltd., GDR, 144A Banking 700,000 5,022,500
Dae Duck Electronics Co. Ltd. Electrical & Electronics 16,926 1,067,405
* Daegu Bank Co. Ltd. Banking 344,305 2,951,291
* Daegu Bank Co. Ltd., rts. Banking 95,237 151,403
Dongkuk Steel Mill Co. Ltd. Metals & Mining 121,880 2,786,221
Hae In Corp. Ltd. Merchandising 5,500 303,491
Hana Bank, GDR Banking 289,907 4,189,156
Hankook Cosmetics Co. Ltd. Health & Personal Care 14,940 402,101
Korea First Bank Banking 960,960 4,004,000
Korea Kumho Petrochemical Chemicals 413,900 2,871,198
Kyong Nam Bank Banking 295,750 3,183,442
Kyung Dong Boiler Co Ltd Energy Equipment & Services 27,573 912,890
Moon Bae Steel Co. Ltd. Metals & Mining 9,000 287,838
* Samsung Display Devices (L) Ltd Electrical & Electronics 17,420 960,871
Samsung Electronics Co. Ltd. Multi-Industry 508 56,363
Samsung Heavy Industries Co. Ltd. Machinery & Engineering 67,000 706,216
* Shinsung Industrial Co. Ltd., rts. Electrical & Electronics 2,820 13,655
Shinsung Industries Co. Ltd. Electrical & Electronics 14,000 386,261
Ssangyong Oil Refining Co Ltd Energy Equipment & Services 364,740 7,393,378
Tong Yang Merchant Bank Financial Services 150,221 1,556,341
-------------
49,167,881
---------------------------------------------------------------------------------------------------------------------
MALAYSIA: 2.6%
* Aokam Perdana Bhd. Multi-Industry 1,086,000 1,209,057
Berjaya Singer Bhd. Appliances & Household Durables 2,189,000 4,232,298
Berjaya Singer Bhd., fgn. Appliances & Household Durables 540,000 1,044,057
Boustead Holdings Bhd., fgn. Food & Household Products 510,000 1,111,331
Federal Flour Mills Bhd. Food & Household Products 957,500 2,370,989
* Hong Leong Industries Bhd, wts., fgn. Multi-Industry 221,250 182,330
Hong Leong Industries Bhd. Multi-Industry 1,630,000 5,166,403
Island & Peninsula Bhd, fgn. Real Estate 451,000 1,447,345
Leader Universal Holdings Bhd. Industrial Components 3,217,000 5,786,521
Malayawata Steel Bhd., fgn. Metals & Mining 1,137,000 1,756,854
Malaysian International Shipping Corp. Bhd.,
fgn. Transportation 1,857,333 4,819,941
MBF Capital Bhd. Financial Services 4,363,000 8,020,729
</TABLE>
17
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
MALAYSIA (cont.)
Oriental Holdings Bhd., fgn. Automobiles 505,600 $ 3,806,022
Perlis Plantations Bhd., fgn. Multi-Industry 1,969,250 5,773,554
Renong Bhd. Multi-Industry 7,207,000 9,422,781
* Renong Bhd., wts. Multi-Industry 32,750 17,257
Renong, 4.00%, conv., 9/9/01 Multi-Industry 52,400** 16,609
Shangri-La Hotels (Malaysia) Bhd. Leisure & Tourism 1,821,000 1,738,752
-------------
57,922,830
---------------------------------------------------------------------------------------------------------------------
MEXICO: 9.2%
Alfa SA de CV, A Multi-Industry 94,774 646,783
Cementos Mexicanos SA de CV (Cemex), B Building Materials & Components 7,530,875 36,696,659
Cifra SA de CV, A Merchandising 1,529,284 2,826,730
Cifra SA, C Merchandising 12,503,602 19,994,428
Coca Cola Femsa SA de CV, ADR Beverages & Tobacco 170,700 8,812,388
Cydea SA de CV Chemicals 910,231 2,429,728
DESC SA, A Multi-Industry 104,000 733,317
DESC SA, B Multi-Industry 548,544 4,005,987
DESC SA, C Multi-Industry 409,462 2,954,193
Fomento Economico Mexicano SA de CV, B Beverages & Tobacco 1,198,000 7,127,361
Grupo Carso SA de CV Multi-Industry 74,285 517,245
* Grupo Financiero Banamex Accival SA, B Banking 3,704,000 9,514,178
* Grupo Financiero Banamex Accival SA, L Banking 7,853,518 18,590,549
* Grupo Financiero Bancomer SA de CV, B Banking 15,276,934 7,348,009
* Grupo Financiero Bancomer SA de CV, L Banking 24,544,553 8,807,854
+* Grupo Financiero Serfin SA, B Banking 15,331,114 4,903,177
Telmex-Telefonos de Mexico SA, L Telecommunications 181,000 433,014
Telmex-Telefonos de Mexico SA, L, ADR Telecommunications 1,138,500 54,363,375
Transportacion Maritima Mexicana SA de CV, L,
ADR Transportation 2,000 12,375
* Vitro SA Food & Household Products 3,392,692 12,537,838
-------------
203,255,188
---------------------------------------------------------------------------------------------------------------------
PAKISTAN: 0.8%
* Bank of Punjab Banking 718,546 401,765
DG Khan Cement Co. Building Materials & Components 1,096,400 330,931
Engro Chemical Chemicals 338,815 1,198,692
Fauji Fertilizer Co. Ltd. Chemicals 265,000 521,221
Khadim Ali Sham Bukhari & Co. Ltd. Financial Services 219,120 89,449
National Development Leasing Corp. Financial Services 259,875 57,865
* Pakistan Electron Ltd. Appliances & Household Durables 110,000 28,031
* Pakistan International Airlines Corp. Transportation 1,056,300 199,921
Pakistan Telecom Corp. PTC Telecommunications 6,993,100 5,320,151
Pakistan Telecom Corp. PTC, GDR Telecommunications 10,000 755,000
Pakistan Telecommunications Corp., PTC, A Telecommunications 9,977,000 7,590,216
* Union Bank Ltd. Banking 530,878 131,342
-------------
16,624,584
---------------------------------------------------------------------------------------------------------------------
PERU: 0.0%
Cpt-Telefonica Del Peru SA, ADR B Telecommunications 28,000 733,250
---------------------------------------------------------------------------------------------------------------------
PHILIPPINES: 0.7%
* A Soriano Corp. Multi-Industry 3,983,000 415,273
* Filinvest Development Corp. Real Estate 454,000 108,439
* Keppel Philippine Holdings Inc., B Machinery & Engineering 825,000 100,091
* Philex Mining Corp., B Metals & Mining 19,380,915 1,616,546
Philippine Commercial International Bank Inc. Banking 19,000 183,690
Philippine Long Distance Telephone Co., ADR Telecommunications 53,905 3,463,396
* Philippine National Bank Banking 246,014 1,669,566
RFM Corp. Food & Household Products 21,092,100 5,117,889
</TABLE>
18
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
PHILIPPINES (cont.)
* RFM Corporation, conv., pfd. Food & Household Products 3,834,927 $ 680,447
Sime Darby Pilipinas Inc. Industrial Components 956,400 1,196,588
-------------
14,551,925
---------------------------------------------------------------------------------------------------------------------
POLAND: 1.2%
* Bank Gdanski SA Banking 184,470 2,132,926
* Bank Gdanski SA, GDR Banking 110,000 1,292,500
Bank Inicjatyw Gospodarczch SA, G Banking 4,857,262 5,837,878
Bank Przemyslowo-Handlowy SA Banking 53,751 2,641,347
* Farm Food S.A., new Food & Household Products 11,285 153,317
* Farm Food SA Food & Household Products 42,167 577,366
* Huta Olawa SA Metals & Mining 20,221 77,525
* Impexmetal, A Metals & Mining 74,221 767,842
* Impexmetal, B Metals & Mining 56,116 580,540
* Mostostal Export SA Construction & Housing 731,238 2,313,974
* Polifarb Ceiszyu SA Chemicals 304,989 1,549,769
* Raciborska Fabryka Kotlow SA Energy Equipment & Services 97,732 434,166
+ Rolimpex SA Wholesale & International Trade 1,187,587 4,697,590
Warta SA Insurance 99,000 1,430,853
Wielkopolski Bank Kredytowy SA Banking 221,653 1,267,937
Zaklady Cementowo Wapiennicze
Gorazdze Chorula Building Materials & Components 49,877 1,707,337
-------------
27,462,867
---------------------------------------------------------------------------------------------------------------------
PORTUGAL: 4.5%
Banco Comercial Portugues SA Banking 2,076,372 39,217,345
Banco Espirito Santo e Comercial de Lisboa Banking 943,955 21,395,741
Banco Totta & Acores SA Banking 595,219 9,946,810
BPI Socieda de Gestora de Participacoes Socias
SA Banking 885,483 17,232,680
Cel-Cat Fabrica Nacional de Conductores
Electricos SA Electronic Components &
Instruments 8,672 154,972
+* Compta-Equipamentos e Servicos de Informatica
SA Business & Public Services 75,240 778,094
Espirito Santo Financial Holding SA, ADR Banking 363,920 7,232,910
Portucel Industrial Empresa Product de
Celulose SA Forest Products & Paper 278,000 2,061,424
Portugal Telecom SA Telecommunications 12,000 484,118
* Sociedade Portuguesa de Celulose SA Forest Products & Paper 47,510 1,419,982
-------------
99,924,076
---------------------------------------------------------------------------------------------------------------------
RUSSIA: 3.1%
* Aeroflot Transportation 17,600 2,464,000
* Chernogorneft Energy Sources 3,000 31,725
GUM Trade House Merchandising 55,000 2,227,500
Irkutskenergo Utilities Electrical & Gas 23,928,000 8,135,520
* Kamaz Automobiles 1,047,980 2,253,157
Krasnoyarsk Aluminum Plant Metals & Mining 24,086 240,860
* Lukoil-Holdings Energy Sources 222,000 4,357,860
* Lukoil Holdings., pfd. Energy Sources 151,000 1,902,600
* Megionneftegaz Multi-Industry 156,000 1,118,520
* Mosenergo Utilities Electrical & Gas 2,990,000 4,188,990
* Norilsk Nickel Metals & Mining 215,000 2,031,750
* Novolipetsk Mettallurgy Multi-Industry 4,000 300,000
* Novorosissk Sea Shipping Transportation 1,010,000 272,700
* Noyabrskneftegaz Multi-Industry 84,959 936,673
* Primorsk Shipping Transportation 67,800 277,980
</TABLE>
19
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
RUSSIA (cont.)
* Purneftegaz Energy Sources 746,000 $ 4,214,900
Rao Gazprom, ADR, 144A Energy Sources 76,000 1,297,700
* Red October Food & Household Products 2,000 47,100
* Rostelekom Telecommunications 2,511,000 9,742,680
Rostelekom, pfd. Telecommunications 2,165,200 5,369,696
* Saint Petersburg City Telephone Net, pfd. Telecommunications 302,000 266,364
* St. Petersburg Intercity International
Telephone Telecommunications 103,040 298,816
* St. Petersburg MMT, prf. Telecommunications 133,000 242,060
* Unified Energy System Utilities Electrical & Gas 47,860,000 17,320,534
* Unified Energy System, pfd. Utilities Electrical & Gas 300,000 66,900
* Uralmash Zavody Machinery & Engineering 20,250 166,556
-------------
69,773,141
---------------------------------------------------------------------------------------------------------------------
SINGAPORE: 2.5%
* Acer Computer International Ltd. Electrical & Electronics 1,210,000 2,226,400
* Acer Computer International Ltd., wts. Electrical & Electronics 114,800 66,010
Acma Ltd., fgn. Electrical & Electronics 332,600 572,285
* Acma Ltd., fgn., wts. Electrical & Electronics 83,150 41,874
British American Tobacco Ltd. Beverages & Tobacco 44,000 178,499
* Chemical Industries (Far East) Ltd. Chemicals 646,500 1,424,407
First Capital Corp. Ltd. Real Estate 916,000 2,383,381
First Capital Corp. Ltd., fgn. Real Estate 1,771,000 4,608,044
GP Batteries International Ltd. Electrical & Electronics 37,000 110,247
* GP Batteries International Ltd., wts. Electrical & Electronics 9,250 14,106
* Hai Sun Hup Group Ltd. Transportation 3,986,000 2,871,637
* Hai Sun Hup Group Ltd., wts Transportation 872,400 231,875
Hinds Hotels International Ltd. Leisure & Tourism 244,000 436,903
Hinds Hotels International Ltd., fgn. Leisure & Tourism 170,000 304,400
Hour Glass Ltd. Merchandising 320,000 250,682
Inchcape Bhd., fgn. Wholesale & International Trade 1,290,000 4,646,779
Isetan (Singapore) Ltd., fgn. Merchandising 68,000 154,102
* Jaya Holdings Ltd. Transportation 748,000 504,875
Jaya Holdings Ltd., 3.00%, conv. ln. stk.,
8/31/98 Transportation 80,400 58,766
Jaya Holdings Ltd., wts. Transportation 75,240 28,024
Jurong Shipyard, fgn Machinery & Engineering 2,290,000 9,930,755
MCL Land Ltd. Real Estate 1,522,000 2,310,093
Natsteel Ltd., fgn. Metals & Mining 1,489,000 3,790,977
Natsteel Ltd., loc. Metals & Mining 954,000 2,428,873
Osprey Maritime Ltd. Transportation 332,000 434,245
* Osprey Maritime Ltd., rts. Transportation 511,280 97,543
Overseas Union Enterprise Ltd. Leisure & Tourism 1,000 4,616
Prima Ltd. Food & Household Products 100,000 339,931
Robinson & Co. Ltd. Merchandising 51,000 265,755
Sembawang Corp. Ltd. Multi-Industry 1,722,000 7,828,915
Singapore Bus Service (1978) Ltd., fgn. Transportation 206,600 989,865
* TIBS Holdings Ltd. Transportation 78,000 105,840
United Industrial Corp. Real Estate 817,000 617,164
United Industrial Corporation Ltd., fgn. Real Estate 3,836,000 2,897,727
WBL Corp. Ltd. Multi-Industry 604,000 1,825,054
-------------
54,980,649
---------------------------------------------------------------------------------------------------------------------
SLOVAK REPUBLIC: 0.3%
* Nafta Gbely AS Utilities Electrical & Gas 97,570 3,192,261
* Slovakofarma AS Health & Personal Care 299 33,794
Slovnaft AS Chemicals 105,971 2,616,101
Vychodoslovenske Zeleziarne AS Metals & Mining 12,250 229,544
-------------
6,071,700
---------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA: 2.9%
Aeci Ltd. Chemicals 81,000 $ 482,036
Alpha Ltd. Building Materials & Components 83,800 1,445,305
Anglo American Industrial Corp. Ltd. Multi-Industry 61,294 2,688,452
Anglo American Platinum Corp. Ltd. Metals & Mining 34,329 283,742
Anglovaal Industried Ltd. Multi-Industry 444,370 1,625,863
BTR Dunlop Ltd. Industrial Components 1,441,400 1,429,645
CG Smith Ltd. Multi-Industry 803,000 4,477,827
Del Monte Royal Foods Ltd Food & Household Products 4,323,150 2,239,234
Edgars Stores Textiles & Apparel 64,500 1,684,648
Engen Ltd. Energy Sources 1,591,341 7,944,429
First National Bank Holdings Ltd. Banking 358,400 3,080,802
Foodcorp Ltd. Food & Household Products 46,783 355,745
Kersaf Investments Ltd. Leisure & Tourism 114,800 798,312
Malbak Ltd. Multi-Industry 354,700 562,892
McCarthy Retail Ltd. Appliances & Household Durables 617,000 1,767,908
McCarthy Retail Ltd., zero, conv., 9/30/03 Appliances & Household Durables 105,000** 302,017
Nedcor Ltd. Banking 106,437 2,357,707
Palabora Mining Co. Ltd. Metals & Mining 160,200 2,966,013
Potgietersrust Platinums Ltd. Metals & Mining 67,251 507,681
* Rainbow Chicken Ltd. Food & Household Durables 334,500 67,092
Rainbow Chicken Ltd., conv., pfd. Food & Household Products 827,983 164,246
Rembrandt Group Ltd. Multi-Industry 177,670 1,895,356
Reunert Ltd. Electrical & Electronics 267,500 916,823
Sappi Ltd. Forest Products & Paper 795,260 7,186,612
Sentrachem Ltd. Chemicals 1,393,700 2,457,483
South African Breweries Ltd. Beverages & Tobacco 164,000 5,033,502
South African Iron & Steel Industrial Corp.
Ltd. Metals & Mining 11,010,123 7,280,222
Sun International (South Africa) Ltd. Leisure & Tourism 2,230,328 1,258,461
Toyota South Africa Limited Automobiles 600 3,795
Voltex Holdings Ltd. Electrical & Electronics 321,700 181,519
-------------
63,445,369
---------------------------------------------------------------------------------------------------------------------
SRI LANKA: 0.0%
Aitken Spence & Co. Ltd. Multi-Industry 50,000 158,147
Associated Motorways Ltd. Automobiles 50,132 31,284
* Ceylon Holiday Resorts Ltd. Leisure & Tourism 108,300 81,470
Lanka Walltile Ltd. Building Materials & Components 34,000 17,439
National Develpoment Bank of Sri Lanka Banking 70,000 311,164
United Motor Lanka Ltd. Automobiles 134,400 121,785
-------------
721,289
---------------------------------------------------------------------------------------------------------------------
THAILAND: 4.9%
American Standard Sanitaryware (THB) Public
Co. Ltd., fgn Building Materials & Components 180,200 966,910
Asia Credit Public Co. Ltd. Financial Services 359,200 755,700
Asia Credit Public Co. Ltd. fgn. Financial Services 81,000 206,369
* Asia Fibre Public Co. Ltd., fgn. Textiles & Apparel 669,500 160,235
Ayudhya Insurance Public Co. Ltd., fgn. Insurance 186,800 1,442,193
Bangkok Bank Public Co. Ltd. Banking 2,289,800 11,402,594
Bangkok Bank Public Co. Ltd., fgn. Banking 100,000 687,126
Bangkok Insurance Insurance 32,200 415,163
Bangkok Insurance, fgn. Insurance 4,900 85,592
Bangkok Land Public Co. Ltd., fgn. Real Estate 694,000 495,619
Bank of Ayudhya Public Co. Ltd. Banking 93,000 143,602
Bank of Ayudhya Public Co. Ltd., fgn. Banking 1,196,600 1,870,770
Charoen Pokphand Feedmill Public Co. Ltd. Food & Household Products 762,900 1,501,946
Chareon Pokphand Feedmill Public Co. Ltd.,
fgn. Food & Household Products 497,800 1,229,847
First Bangkok City Bank Public Co. Ltd., fgn. Banking 2,002,000 1,603,609
Hana Microelectronics Co. Ltd. Electrical & Electronics 131,000 611,890
</TABLE>
21
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
THAILAND (cont.)
Hana Microelectronics Co. Ltd., fgn. Electrical & Electronics 241,900 $ 1,297,977
Hua Thai Manufacturing Public Co. Ltd. Textiles & Apparel 125,100 212,484
Industrial Finance Corp. of Thailand, fgn. Banking 3,190,700 4,064,586
Jasmine International Public Co. Ltd. Telecommunications 1,695,700 1,571,002
Jasmine International Public Co. Ltd., fgn. Telecommunications 677,000 601,081
* Karat Sanitaryware Public Co. Ltd., fgn. Building Materials & Components 242,550 121,720
Kian Gwan (Thailand) Public Co. Ltd., fgn. Real Estate 104,000 264,968
* Land and House Public Company Ltd., fgn. Multi-Industry 1,511,800 3,151,407
Land and House Public Company Ltd. Multi-Industry 910,800 1,446,350
Phatra Thanakit Public Co. Ltd. Multi-Industry 2,618,000 2,678,132
Phatra Thanakit Public Co. Ltd., fgn. Multi-Industry 1,725,100 2,130,986
Regional Container Lines Public Co. Ltd., fgn. Transportation 153,200 910,743
* Royal Ceramic Industry Public Co. Ltd., fgn. Building Materials & Components 167,400 25,848
Saha Pathanapibul Public Co Ltd., fgn. Food & Household Products 593,100 1,053,179
Saha Union Public Co. Ltd. Multi-Industry 4,104,800 2,574,908
Saha Union Public Co. Ltd., fgn. Multi-Industry 1,074,300 787,944
Sanyo Universal Electric Public Co Ltd., fgn. Applicances & Household Durables 474,400 412,044
Sanyo Universal Electric Public Co. Ltd. Applicances & Household Durables 101,500 88,159
Serm Suk Public Co. Ltd. Food & Household Products 190,800 2,356,919
Siam Cement Co. Ltd.(The), fgn. Building Materials & Components 405,800 7,017,887
Siam Cement Public Co. Ltd. (The) Building Materials & Components 45,300 674,997
Siam City Bank Public Co. Ltd., fgn. Banking 6,917,300 4,072,141
Siam Commercial Bank Ltd., fgn. Banking 384,604 1,573,751
Siam Commercial Bank Ltd., loc. Banking 575,696 2,155,665
* Sino-Thai Engineering & Construction Public
Co. Construction & Housing 261,000 725,420
* Sino-Thai Engineering & Construction Public
Co., fgn. Construction & Housing 637,900 1,772,970
* Thai Airways International Public Co. Ltd. Transportation 1,998,800 2,932,036
Thai Asahi Glass Public Co. Ltd. Building Materials & Components 94,910 56,788
Thai Asahi Glass Public Co. Ltd., fgn. Building Materials & Components 32,000 19,147
Thai Farmers Bank Public Co. Ltd. Banking 6,553,400 20,111,766
Thai Farmers Bank Public Co. Ltd., fgn. Banking 214,300 909,979
Thai Investments and Securities Ltd. Financial Services 933,800 1,910,496
Thai Military Bank Ltd., fgn. Banking 2,658,800 2,976,460
Thai Petrochemical Industry Public Co. Ltd.,
fgn. Chemicals 2,076,360 1,302,484
Thai Rayon Public Co. Ltd. Textiles & Apparel 33,546 71,223
Thai Rayon Public Co. Ltd., fgn. Textiles & Apparel 38,214 82,240
* Thai Telephone & Telecommunication Public Co.
Ltd. Telecommunications 1,315,700 545,986
Thai Wacoal Public Co. Ltd., fgn. Textiles & Apparel 236,550 785,304
Thai Wah Public Co. Ltd., fgn. Multi-Industry 8,450 3,262
Tipco Asphalt Public Co. Ltd. Building Materials & Components 179,000 932,831
Tipco Asphalt Public Co. Ltd., fgn, (TASCO) Building Materials & Components 378,000 1,969,890
Total Access Communication Public Co. Ltd. Telecommunications 362,000 1,679,680
United Communications Industries, fgn. Multi-Industry 833,600 3,507,524
United Communications Industry Public Co.
Ltd., loc. Multi-Industry 461,000 1,904,150
United Motor Works (Siam) Public Co. Ltd. Machinery & Engineering 2,100 2,493
-------------
109,026,172
---------------------------------------------------------------------------------------------------------------------
TURKEY: 4.1%
Akbank Banking 312,720,248 26,845,177
Akcansa Cimento Building Materials & Components 5,768,740 796,224
Alarko Gayrimenkul Yatirim Ortakigi AS Real Estate 5,920,000 251,109
Alarko Sanayii ve Ticaret SA Appliances & Household Durables 1,704,000 203,642
Alcatel Teletas Endustri Tic AS Telecommunications 18,500,000 3,425,349
* Anadolu Anonim Turk Sigorta Sirketi Insurance 5,559,000 149,712
</TABLE>
22
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
---------------------------------------------------------------------------------------------------------------------
TURKEY (cont.)
* Anadolu Anonim Turk Sigorta Sirketi, new Insurance 5,504,000 $ 148,231
Arcelik AS Appliances & Household Durables 73,770,428 9,933,739
Bagfas Chemicals 1,678,000 401,070
Beko Elektronik AS Appliances & Household Durables 40,500,490 3,272,216
Borusan AS Industrial Components 4,898,000 296,799
Cimentas Izmir Cimento Fabrikasi Turk AS Building Materials & Components 12,530,450 1,666,227
Cimsa Cimento Sanayi ve Ticaret AS Building Materials & Components 13,223,000 1,780,576
Erciyas Biracilik Food & Household Products 33,547,000 4,009,152
Eregli Demir ve Celik Fabrikalari AS Metals & Mining 56,398,000 9,398,084
Finansbank Banking 75,351,654 862,466
Izocam Ticaret ve Sanayii AS, br. Building Materials & Components 11,575,388 397,472
Kartonsan Forest Products & Paper 16,851,250 1,219,656
Koc Holding AS Multi-Industry 5,493,333 1,294,507
Koc Yatirim ve Sanayii Mamullesi Pazarlanca AS Multi-Industry 13,065,962 3,474,873
Marshall Boya ve Vernik Sanayii AS Industrial Components 7,106,568 885,181
* Netas Northern Electric Telekomunic Asyon AS Electrical & Electronics 2,520,000 695,640
Petkim Petrokimya Holding AS Chemicals 3,063,000 1,051,762
Sasa Suni Ve Sentetik Elyaf Sanayi AS Chemicals 5,600,000 256,388
Tat Konserve Sanayii AS Food & Household Products 16,780,828 1,242,815
Tekstil Bankasi AS, br. Banking 2,574,341 35,532
Tofas Turk Otomobil Fabrikasi AS Automobiles 105,457,125 5,112,212
Turk Demir Dokum, br. Appliances & Household Durables 28,983,325 1,463,558
Turkiye Garanti Bankasi AS Banking 263,719,297 9,943,296
Vakif Finansal Kiralama AS Financial Services 11,368,730 177,965
* Vakif Finansal Kiralama AS, new Financial Services 17,053,094 169,354
-------------
90,859,984
---------------------------------------------------------------------------------------------------------------------
VENEZUELA: 1.4%
Banco Provincial SAICA Banking 149,519 304,379
Ceramica Carabobo CA, A Building Materials & Components 343,200 373,653
Ceramica Carabobo CA, A, ADR Building Materials & Components 287,149 312,628
Ceramica Carabobo CA, B Building Materials & Components 1,924,264 2,055,379
Consolidada Carabobo, B Building Materials & Components 9,505,918 541,879
* Corporacion Industrial Carabobo Saca SIC Building Materials & Components 2,163,581 126,667
Electricidad de Caracas Utilities Electrical & Gas 8,353,015 13,383,046
H.L. Boulton & Co. SA Multi-Industry 8,083,983 635,187
Industrias Ventane Utilities Electrical & Gas 280,000 198,437
* Manufacturera de Aparatos Domesticos SA Appliances & Household Durables 180,613 192,929
Mavesa SA, ADR Food & Household Products 661,312 6,695,784
Siderurgica Venezolana Sivensa Saica Svs Metals & Mining 683,296 353,716
Siderurgica Venezolana Sivensa Saica Svs, ADR Metals & Mining 362,630 1,877,194
Siderurgica Venezolana Sivensa SAICA Svs.,
ADR, B, new Metals & Mining 39,179 181,084
Vencemos de Cementos SA Building Materials & Components 1,113,857 3,775,360
Venezolana de Cementos-Vencemos, #2 Building Materials & Components 111,812 360,606
Venezolana Prerreducidos Caroni Venprecar CA,
GDS, 144A Metals & Mining 118 713
-------------
31,368,641
---------------------------------------------------------------------------------------------------------------------
ZIMBABWE: 0.1%
Delta Corp. Multi-Industry 42,258 64,841
Meikles Africa Ltd. Multi-Industry 200,000 492,000
Ta Holdings Multi-Industry 25,000 4,713
Zimbabwe Sun Ltd. Multi-Industry 2,621,700 976,960
-------------
1,538,514
-------------
TOTAL LONG TERM SECURITIES (cost $1,545,172,445) 1,945,325,275
---------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Investment Portfolio, June 30, 1997 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES / PRINCIPAL
IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
---------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT TERM OBLIGATIONS: 12.2% (cost $271,319,110)
---------------------------------------------------------------------------------------------------------------------
U. S. Treasury Bills, 4.68% to 5.12% with 273,308,000 $ 271,316,931
maturities to 9/25/97
---------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.9% (cost $1,816,491,555) 2,216,642,206
OTHER ASSETS, LESS LIABILITIES: 0.1% 3,150,957
-------------
TOTAL NET ASSETS: 100.0% $2,219,793,163
=============
</TABLE>
* NON-INCOME PRODUCING.
** PRINCIPAL AMOUNT IN CURRENCY OF COUNTRY INDICATED.
+ THE INVESTMENT COMPANY ACT OF 1940 DEFINES "AFFILIATED COMPANIES" AS
INVESTMENTS IN PORTFOLIO COMPANIES IN WHICH THE FUND OWNS 5% OR MORE OF THE
OUTSTANDING VOTING SECURITIES. INVESTMENTS IN AFFILIATED COMPANIES AT JUNE
30, 1997 WERE $14,906,079.
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997 (unaudited)
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (identified cost $1,816,491,555) $2,216,642,206
Cash 6,005,535
Receivables:
Investment securities sold 4,040,934
Capital shares sold 3,430,113
Dividends and interest 7,420,787
Unamortized organization costs 6,268
-------------
Total assets 2,237,545,843
-------------
Liabilities:
Payables:
Investment securities purchased 13,540,988
Fund shares redeemed 74,954
Accrued expenses 4,136,738
-------------
Total liabilities 17,752,680
-------------
Net assets, at value $2,219,793,163
=============
Net assets consist of:
Undistributed net investment income $ 18,242,869
Net unrealized appreciation 400,150,651
Accumulated net realized gain 21,509,789
Net capital paid in on shares of capital stock 1,779,889,854
-------------
Net assets, at value $2,219,793,163
=============
Shares outstanding 149,377,290
=============
Net asset value per share
($2,219,793,163 / 149,377,290 shares outstanding) $ 14.86
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
for the six months ended June 30, 1997 (unaudited)
<TABLE>
<S> <C> <C>
Investment income: (net of $1,493,422 foreign taxes withheld)
Dividends $ 29,192,609
Interest 5,831,455
------------
Total income $ 35,024,064
Expenses:
Management fees (Note 3) 11,815,603
Administrative fees (Note 3) 814,985
Transfer agent fees 3,800
Custodian fees 2,088,750
Reports to shareholders 10,900
Audit fees 21,000
Legal fees (Note 3) 18,000
Registration and filing fees 70,000
Directors' fees and expenses 27,500
Amortization of organization costs 706
Other 79,406
------------
Total expenses 14,950,650
------------
Net investment income 20,073,414
Realized and unrealized gain (loss):
Net realized gain (loss) on:
Investments 22,400,937
Foreign currency transactions (535,235)
------------
21,865,702
Net unrealized appreciation on investments 294,319,327
------------
Net realized and unrealized gain 316,185,029
------------
Net increase in net assets resulting from operations $336,258,443
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECMEBER 31, 1996
------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 20,073,414 $ 19,617,150
Net realized gain on investments and foreign currency transactions 21,865,702 19,339,283
Net unrealized appreciation 294,319,327 154,324,968
-------------- --------------
Net increase in net assets resulting from operations 336,258,443 193,281,401
Distributions to shareholders:
From net investment income (2,696,021) (18,840,261)
From net realized gain (2,695,988) (18,732,279)
Capital share transactions (Note 2) 323,390,110 611,312,694
-------------- --------------
Net increase in net assets 654,256,544 767,021,555
Net assets:
Beginning of period 1,565,536,619 798,515,064
-------------- --------------
End of period $2,219,793,163 $ 1,565,536,619
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Notes to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Emerging Markets Series (the Fund) is a separate, diversified series of
Templeton Institutional Funds, Inc. (the Company), which is an open-end
investment company registered under the Investment Company Act of 1940. The Fund
seeks to achieve long-term capital growth by investing in securities of issuers
of countries having emerging markets. The following summarizes the Fund's
significant accounting policies.
A. SECURITY VALUATION
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Directors.
B. FOREIGN CURRENCY TRANSLATION
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.
The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.
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 recorded amounts
of dividends, interest, and foreign withholding taxes, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.
The Brazilian government has exercised and may continue to exercise substantial
influence over the exchange of Brazilian currency. Under current Brazilian law,
whenever there occurs a serious imbalance of Brazil's balance of payments or
serious reasons to foresee the imminence of such an imbalance. Brazil's National
Monetary Council may, for a limited period, impose restrictions on foreign
capital remittances abroad. Exchange control regulations may restrict
repatriation of investment income, capital, or the proceeds of securities sales
by foreign investors. The Fund has investments in Brazilian companies with a
value of approximately $251,589,738 as of June 30, 1997.
C. INCOME TAXES
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and
distribute substantially all of its taxable income.
D. UNAMORTIZED ORGANIZATION COSTS
Organization costs are amortized on a straight line basis over five years.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Certain income from foreign securities is recorded as soon as information is
available to the Fund. Interest income and estimated expenses are accrued daily.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
F. ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At June 30, 1997, there were 700 million shares authorized ($0.01 par value), of
which 225 million shares have been classified as Fund shares. Transactions in
the Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 33,653,696 $ 461,849,038 53,130,712 $630,783,063
Shares issued on reinvestment of
distributions 441,115 5,995,207 2,750,716 33,001,287
Shares redeemed (10,429,294) (144,454,135) (4,431,413) (52,471,656)
---------- ------------ ---------- ------------
Net increase 23,665,517 $ 323,390,110 51,450,015 $611,312,694
========== ============ ========== ============
</TABLE>
28
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Notes to Financial Statements (unaudited) (cont.)
- --------------------------------------------------------------------------------
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Fund are also officers or directors of Templeton Asset
Management Ltd. (TAML), Franklin Templeton Services, Inc. (FTSI), 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 an investment management fee to TAML of 1.25% per year of the
average daily net assets of the Fund. The Fund pays its allocated share of an
administrative fee to FTSI based on the Company's aggregate average net assets
as follows: 0.15% per annum on the first $200 million, 0.135% of the next $500
million, 0.10% of the next $500 million and 0.075% in excess of $1.2 billion.
TAML and FTSI agreed in advance to limit total expenses of the Fund to an annual
rate of 1.6% of average net assets through May 1, 1998. For the six months ended
June 30, 1997, no reimbursement was necessary under the agreement.
During the period ended June 30, 1997, legal fees of $18,000 were paid to a law
firm in which an officer of the Company is a partner.
4. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 1997, aggregated $296,206,292 and $110,573,109
respectively.
5. INCOME TAXES
At June 30, 1997, the net unrealized appreciation based on the cost of
investments for income tax purposes of $1,816,856,780 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 555,485,450
Unrealized depreciation (155,700,024)
-------------
Net unrealized appreciation $ 399,785,426
=============
</TABLE>
29
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<PAGE>
This report must be preceded or accompanied by the current prospectus of the
Templeton Institutional Funds, Inc., which contains more complete information
including risk factors, charges, and expenses.
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
[RECYCLED LOGO]
<PAGE>
