<PAGE> 1
TEMPLETON INSTITUTIONAL FUNDS, INC.
TIFI
Emerging Markets Series
ANNUAL REPORT
[TEMPLETON LOGO] DECEMBER 31, 1996
<PAGE> 2
Mutual funds, annuities, and other investment products:
- are not FDIC insured;
- are not deposits or obligations of, or guaranteed by, any
financial institution;
- are subject to investment risks, including possible loss of the
principal amount invested.
Investing in developing markets involves special considerations, which may
include risks related to market and currency volatility, adverse social and
political developments, and the relatively small size and lesser liquidity of
these markets. These special considerations are discussed in the Fund's
prospectus. The Fund is designed for the aggressive portion of a
well-diversified portfolio.
<PAGE> 3
December 31, 1996
Dear Shareholder...
Investor confidence returned to the emerging markets in 1996,
as the after-shocks of the Mexico crisis dissipated. This confidence led to a
significant increase in emerging market equity investments from both domestic
and foreign investors. Within this environment, the Templeton Institutional
Funds, Inc. Emerging Markets Series (the "Fund") returned 5.07%, 18.86%, 1.33%,
and 9.25% for the quarter, one-year, three-year, and since inception (May 3,
1993) periods ending December 31, 1996 compared to the unmanaged International
Finance Corporation (IFC) Investable Composite returns of (0.03%), 9.38%,
(4.12%), and 10.72% for the same periods, respectively. The Morgan Stanley
Capital International (MSCI) World index returned 4.7%, 14.0%, 13.5%, and 11.4%
for these comparable periods.
Please remember that the Fund's performance differs from that
of the index because, among other things, the index does not contain cash (the
Fund generally carries a certain percentage of cash at any given time), is not
managed according to any investment strategy and includes no sales charges or
management expenses. Of course, one cannot invest directly in an index.
[PHOTO OF MARK MOBIUS]
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.
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 12/31/96
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 18.86% 1.33% 38.29%
IFC Investable Composite Index 9.38% (4.12%) 45.19%
</TABLE>
(1) Past expense reductions by the Fund's manager increased the Fund's total
returns.
(2) Average annual total return figures represent the average annual 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 total return calculations assume that all dividends and capital gains
distribution were reinvested when paid.
Investment return and principal value will fluctuate with market conditions,
currencies and the economic, social and political climates of the countries
where investments are made. Developing 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. Thus, your
shares, when redeemed, may be worth more or less than their initial cost.
Past performance is not predictive of future results.
continued...
<PAGE> 4
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
letter continued...............................................................
GEOGRAPHIC DISTRIBUTION ON 12/31/96
(% of Total Equity)
<TABLE>
<CAPTION>
<S> <C>
Mid-East/Africa 4.3%
Europe 17.0%
Latin America 34.8%
Asia 43.9%
</TABLE>
FUND ASSET ALLOCATION ON 12/31/96
<TABLE>
<CAPTION>
<S> <C>
Equity 92.2%
Short-term & Other 7.8%
</TABLE>
*Equity includes convertible and preferred stocks
We expect continued short-term volatility in emerging markets;
however, in implementing the Templeton investment philosophy, we rely on share
prices to overreact to market news and sell below their true underlying value.
As a result of fluctuating share prices in 1996, our 19 analysts were able to
identify new investments for our clients, and we were fortunate to have limited
exposure to many of the emerging markets that performed poorly during the year.
The stock markets of Brazil, Hungary, Poland, and Venezuela
rebounded after a poor year in 1995, and were among the best performing markets
in 1996. The Brazilian market was up dramatically in 1996 following a 19% drop
the previous year, partly because the Real Plan reduced inflation from 50% per
month in 1994 to approximately 8% per annum at the end of 1996. To maintain this
lower level of inflation, however, the government adopted a tight monetary
policy. As a result, real interest rates have remained high at around 12% per
annum, suppressing Brazil's economic recovery during 1996. Although GDP growth
fell slightly from 1995 levels, it appears to be recovering, and, if inflation
remains low, could provide a boost to market confidence. A more stable economic
environment and accelerated company earnings growth have attracted significant
interest in Brazil's stock market from both domestic and international
investors. Like many emerging market countries, Brazil would likely benefit from
government plans to sell state-owned companies, to implement other measures to
open the economy to foreign investment, and to reduce the role of the
government.
Following austerity measures introduced by the government in
early 1995, Hungary's inflation and the current account deficit declined
modestly, providing a base for stock market growth in 1996. Inflation remains
relatively high, but it is expected to fall to significantly from its level in
1995. Furthermore, industrial production growth is accelerating and interest
rates are decreasing, which should also help support the stock market.
In Poland, rapid economic growth has fueled a strong increase
in equity prices. At year end, real economic growth remained above 5% per annum,
despite weaker product demand this year from Germany, Poland's main trading
partner. Investment and construction activity, however, have elevated sharply.
Both fiscal and monetary policy remain tight, and inflation is expected to fall
to around 18% in 1996 from 22% in 1995, and should continue to fall in 1997.
Furthermore, we believe that strong long-term economic fundamentals should also
support solid gains in equity prices.
In Venezuela, the reforms initiated by Dr. Rafael Caldera,
President of the Republic, have had a positive impact on the economy and the
stock market. Caldera's reform program has included the liberalization of the
exchange rate, interest rates, and prices and has put the economy on the right
track towards growth and lower inflation. In view of the potential growth in
that market, company valuations remain reasonable.
2
<PAGE> 5
Although many emerging markets performed well in 1996, several
markets were poor performers, including Pakistan, South Korea, and Thailand.
Pakistan's equity market has experienced a sharp decline in both equity prices
and liquidity in the last few months of 1996. The market has been adversely
affected by strikes as well as social and political unrest. Owing to allegations
of corruption, economic mismanagement, and abuse of power, Prime Minister Bhutto
came under increased pressure and was removed from office. The business
community viewed this event positively because Prime Minister Bhutto's
government had been unfriendly to business and was considered by many to be a
divisive influence in the country.
Undermined by decreased economic growth and poor corporate
earnings, the South Korean market declined during 1996. Thailand also
experienced one of the sharpest drops in equity prices in emerging markets, as
it was beset by political and economic concerns. The economy weakened faster
than expected, impacting company earnings and, subsequently, the stock prices.
The markets of Chile, India, Singapore, and Sri Lanka have also weakened overall
during 1996.
Hong Kong continued to be the largest country holding in the
portfolio. Many people are concerned about the economic prospects for Hong Kong
after the handover to China. Although we have not disregarded the possibility of
a political crisis in Hong Kong after the transition, we believe that it is more
likely that Hong Kong's economy will continue to prosper over the long term. The
Chinese government recently announced that funds will be made available to
protect the Hong Kong stock market against attempts by speculators, such as
hedge funds, to short-sell the Hong Kong dollar peg and the U.S. dollar after
the handover. At the end of September 1996, China's foreign reserves totaled
US$97 billion and Hong Kong's Exchange Fund was substantial at US$62 billion.
Statements coming from Beijing indicate that the economic and social status quo
should also be maintained. During 1996, the Hong Kong stock market rallied,
buoyed by a broad economic recovery, particularly in the important retail and
property sectors. Concerns about Hong Kong's capital market appear to be easing
as we approach the June 30, 1997 deadline. Evidence of this can be found in the
narrowing of valuation gaps between Hong Kong stocks and share prices in other
Asian markets.
Another attractive region for bargain hunting has been Africa,
specifically Zimbabwe, Botswana, and Kenya. Zimbabwe's agricultural sector, in
particular, enjoyed a good year. As a result of a disease in Botswana, cattle
had to be slaughtered, prompting the government to compensate affected farmers.
As a result, many people in Botswana are "flush with cash" and boosting retail
sales.
Templeton's emerging markets team has been focusing on
investing in companies we believe have good management and strong expected
earnings growth over a five year horizon. This is a very
INDUSTRY DIVERSIFICATION ON 12/31/96
(% of Total Portfolio)
<TABLE>
<CAPTION>
<S> <C>
Banking 20.4%
Multi-industry 10.3%
Telecommunications 6.7%
Energy Sources 5.8%
Food & Household Products 5.6%
Utilities, Electrical, & Gas 5.3%
Building Materials & Components 4.1%
Chemicals 3.2%
Metals & Mining 3.2%
</TABLE>
10 LARGEST POSITIONS ON 12/31/96
(% of Total Portfolio)
<TABLE>
<CAPTION>
<S> <C>
New World Development Co. Ltd. 2.5%
Telefonos de Mexico SA 2.4%
HSBC Holdings PLC 2.1%
Perez Companc SA 1.9%
Sun Hung Kai Properties Ltd. 1.8%
Cheung Kong Hldgs. Ltd. 1.8%
Banco Comercial Portugues SA 1.5%
Telecomunicacoes Brasileiras SA 1.4%
Cementos Mexicanos SA de CV 1.4%
Petrobras - Petroleo Brasileiro SA,
Ptd. 1.4%
</TABLE>
3
<PAGE> 6
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
letter continued...............................................................
Total Return Index Comparison(1)
$5,000,000 Investment: 05/03/93 - 12/31/96
[LINE GRAPH]
TIFI Emerging Markets Series
- - NOTE: First period return inception date is
05/03/93
<TABLE>
<CAPTION>
Monthly US Dollar US Dollar US Dollar
TIFI - Emerging MSCI World IFC Investable
Markets Series Index Comp
Acct 540 Acct -1 Acct -300
<S> <C> <C> <C>
INCEPT 5000000 5000000 5000000
May-93 5010000 5116243.65 5106751.53
Jun-93 5030000 5073903.39 5249556.88
Jul-93 5040000 5179369.13 5413511.12
Aug-93 5415000 5417629.33 5854415.08
Sep-93 5590000 5318322.17 6091484.05
Oct-93 5840000 5465743.26 6614767.97
Nov-93 6040000 5157429.18 7034120.21
Dec-93 6647000 5410700.92 8235779.89
Jan-94 6727500 5768668.59 8291774.09
Feb-94 6596500 5694765.59 8077666.77
Mar-94 6257500 5450346.81 7261319.69
Apr-94 5913000 5619707.85 7123146.96
May-94 5918000 5635104.31 7291330.97
Jun-94 5776000 5620477.68 7032508.86
Jul-94 5994000 5728252.89 7537262.33
Aug-94 6486000 5901847.96 8506888.5
Sep-94 6557000 5747883.37 8717168.87
Oct-94 6374000 5912240.57 8429342.57
Nov-94 6131000 5657044.27 8105663.87
Dec-94 5889500 5712856.43 7247824.69
Jan-95 5459000 5628175.91 6279004.19
Feb-95 5343500 5711316.78 6197832.74
Mar-95 5517000 5987683.22 6186150.5
Apr-95 5706500 6197459.97 6442152.76
May-95 5896000 6251701.69 6682242.99
Jun-95 5938500 6250962.66 6721720.92
Jul-95 6212000 6565050.42 6936231.07
Aug-95 6043500 6419938.8 6750322.27
Sep-95 5996500 6608160.51 6701176.28
Oct-95 5780500 6505389.15 6446382.53
Nov-95 5743500 6732486.91 6414155.66
Dec-95 5818000 6930716.32 6637326.78
Jan-96 6375500 7056967.28 7202707.06
Feb-96 6272500 7101232.1 7034120.21
Mar-96 6348500 7220939.18 7136843.38
Apr-96 6516500 7391839.88 7422655.5
May-96 6625000 7399538.11 7360014.5
Jun-96 6636000 7438414.17 7446422.82
Jul-96 6332000 7177059.28 6957782.79
Aug-96 6462500 7260969.98 7172897.2
Sep-96 6581500 7546574.29 7278843.06
Oct-96 6565500 7600456.89 7122341.28
Nov-96 6777000 8027678.6 7227682.89
Dec-96 6915500 7900692.84 7260045.2
</TABLE>
Periods ended December 31, 1996
<TABLE>
<CAPTION>
SINCE
INCEPTION
ONE-YEAR (05/03/93)
<S> <C> <C>
Average Annual Total Return(1,2) 18.86% 9.25%
Cumulative Total Return(1,3) 18.86% 38.29%
</TABLE>
(1) Past expense reductions by the Fund's manager increased the Fund's total
returns.
(2) Average annual total return figures represent the average annual 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 total return calculations assume that all dividends and capital gains
distribution were reinvested when paid.
Investment return and principal value will fluctuate with market conditions,
currencies and the economic, social and political climates of the countries
where investments are made. Developing 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. Thus, your
shares, when redeemed, may be worth more or less than the initial cost. Past
performance is not predictive of future results.
information-intensive process, and we are expanding our analytical capability to
meet the challenges of investing in an ever expanding emerging markets universe.
Two new analysts joined our South Africa office at the end of 1996, and we are
looking to recruit new analysts in Latin America, Japan, and the Middle East. We
believe that we have a highly effective team of analysts and researchers
determined to locate potential bargains throughout the world. Since we often
find that the difference between apparent bargain stocks and those that actually
prove to be bargains lies in the competence and integrity of the management of
the companies, we spend most of the year traveling the world visiting emerging
market companies.
This discussion reflects the strategies we employed for the
Fund during the past fiscal year, and includes our opinions as of the close of
the period. Since economic and market conditions are constantly changing, our
strategies, 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. Developing 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. These special risks and other considerations
are discussed in the Fund's prospectus.
As always, we appreciate your continued confidence in our
organization. Please feel free to contact us with any questions with any
questions or comments you might have.
Sincerely,
/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> 7
The following are Dr. Mobius's thoughts regarding a recent visit to Russia with
the emerging markets team.
COUNTRY
FOCUS
MOSCOW, Russia - We arrived in Russia after a two-week trip to India. Our
Russian trip spanned the length and breadth of this great nation, which includes
almost half of the world's 24 time zones. Our itinerary took us from Moscow to
Murmansk, near the Finnish and Norwegian border on the Barents Sea. From
Murmansk we flew south to St. Petersburg, then to Sochi, where such authors as
Pushkin and Lermontov were exiled during the time of the tsars. From Sochi, we
flew to Anapa, then drove to Novorossijsk. The one-hour drive was comfortable,
as the climate was pleasant and warm, and the roads were in excellent condition.
In Novorossijsk, we visited the Novorossijsk Sea Shipping
Company (NovoShip). NovoShip is one of three companies we consider prosperous in
Novorossijsk: NovoShip, NovoCement, and Novoport. Established in 1967, NovoShip
is an offshoot of Baltic Shipping, which was established in 1845. During the
Communist era, the company specialized in transporting bulk cargo, but after
being privatized, it started to ship general cargo, which tends to produce
higher profit margins. Although the nearest container terminal to Novorossijsk
is in Odessa, NovoShip plans to containerize its operations. For this purpose, a
railway link with Odessa is being built.
From Novorossijsk, we headed north to Nizhnevartovsk in the
heart of the Russian oil country, but because the airport landing lights were
not working, we flew to Yekaterinburg. There, we stayed at a hotel where the hot
water taps were out of order, forcing us to shower in the basement. We arrived
at the Nizhnevartovsk airport the next day, intending to visit the
Megionneftegas Company. Our guide told us that it would take only 15 minutes to
drive from the airport to the company's plant. Three and a half hours later,
battered and bruised from the jolts we received on the treacherous roads, we
returned to the airport -- without finding Megionneftegas. Although the driver
blamed it on a road detour, I don't think he knew where he was going.
Russia has many problems such as corruption, the extreme gulf
between the rich and the poor, and an inefficient tax system. Most business
payments are made by barter, and many bills go unpaid, making it difficult for
companies to finance their operations properly. But the potential for growth
here is enormous, and we believe that Russia can overcome
5
<PAGE> 8
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
country focus continued........................................................
many of its political, economic, and social problems. Many stocks are selling at
a fraction of book value and are priced at less than five times earnings.
Moreover, the strength of the Russian people is legendary. In 1941, they
withstood the full onslaught of the Nazi blitzkrieg and stopped the German
panzers outside of Moscow. During the siege of Leningrad, they fought the
Germans bravely for 900 days. Furthermore, this summer, neither violence nor
corruption seemed to mar the presidential elections. We believe that this is a
positive sign for the future of the country, and we will continue to look for
opportunities to invest in the Russian stock market.
[MAP OF RUSSIA]
6
<PAGE> 9
The following are descriptions of several holdings in the portfolio.
Spotlight
ON
CURRENT
HOLDINGS
Astra C.A.P.S.A. - Astra began its activities in 1912, and is mainly engaged in
oil and gas activities in Argentina. Until 1989, it operated as a producer of
crude oil and gas for sale at fixed prices to the state-run YPF. Since then,
Astra has been a major participant in the Argentine privatization process,
expanding its business base to become a diversified energy company. Today the
company is the fifth largest Argentine oil producer, with a 4% market share of
total oil production in Argentina. Since the start of the oil field
privatization process in 1990, Astra has acquired equity stakes in various
important oil and gas fields through its interest in different consortiums. Its
most important assets include La Vizcachera, La Ventana, and Puesto Hernandez in
the oil sector; and Santa Cruz II, Lindero Atravesado and Ramos in the gas
sector. In downstream activities, Astra is involved in operating gas stations.
Astra's petrochemical business is carried out by Carboclor, which is engaged in
the production of industrial alcohol, MTBE, and ketones for local and foreign
markets. Astra is also the leading maritime transport company of liquid
petroleum gas and oil, whose fleet of thirteen ships (ten for oil and three for
gas) has a total capacity of 275,000 tons. Astra holds 25% voting rights (10.2%
economic interest) in Electricidad Argentina S.A., which holds 51% of Edenor
S.A., the largest electricity distributor in Argentina. It also has 20% of Gas
Argentino S.A., a consortium which holds 70% of Metrogas, the largest gas
distributor in Argentina.
Itausa, S.A. - Itausa was founded in 1965 and presently it operates in various
sectors of the Brazilian economy through more than 50 companies, which operate
in the primary, secondary, and tertiary sectors. Itausa's investment strategy is
to expand the group's companies. The emphasis is on the industrial sector, and
within it, on basic segments (chemicals and construction materials), information
processing, electronic consumer products, and real estate. Itausa owns 41% of
Banco Itau S.A., which is the second largest Brazilian private bank with assets
of US$25,206 million as of December 31, 1995. Banco Itau is a universal bank
with a network of over 1,000 branches, which operate under an on-line real time
7
<PAGE> 10
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
spotlight continued............................................................
system. The bank also has a network of over 8,000 ATMs. Itausa also owns 37% of
Duratex, a leader in the Brazilian market for processed wood and brass bathroom
fixtures and occupies an outstanding position in the market for vitreous china
products. In recent years Itausa has diversified its investments into the
petrochemical and chemical industries as well as into technology and computer
goods industries. Itausa owns 79% of Elekeiroz, which controls companies in the
fertilizer, petrochemical and chemical sectors. Itausa's insurance business is
carried out by Itau Seguros (79%-owned), whose products are distributed through
Banco Itau's branch network. Itausa is also involved in real estate through
Sulimob (89%-owned), one of the largest residential construction companies.
Tofas Turk Otomobil Fabrikasi A.S. -- Tofas was established in 1968 as a joint
venture between Internazionale Holding Fiat SpA, the predecessor to Fiat, and
Koc Holding. The company is the leader of the Turkish automobile industry,
holding an approximately 42% market share. The car models manufactured by Tofas
are produced in accordance with license agreements between the company and Fiat.
These agreements prohibit the company from assembling, producing, importing or
selling cars other than Fiats. The company has targeted the middle to lower
portion of the Turkish automobile market, which is the fastest growing segment.
The company's manufacturing and assembly plant is located in Bursa, the fifth
largest city in Turkey, while the corporate headquarters are in Istanbul. There
are three installed production lines with an annual capacity of 200,000 units,
all of which are on Fiat designs. Tofas currently manufactures three series of
passenger vehicles: Bird, Tempra, and Uno, all of which have been uniquely
positioned. The company's products are sold through its sister company, Tofas
Oto Ticaret, which has over 300 dealers and sub-dealers, as well as
approximately 120 authorized representatives, which offer repair services and
give Tofas a broad coverage of the country. The company exports via Ram Dis
Ticaret, another Koc Holding company, to Egypt, Vietnam, and CIS countries. As a
supplier, Tofas also exports CKD (Completely Knocked Down) parts to Egypt and
Vietnam. In addition, Tofas is the sole producer in the world of the Tempra
model. Automobiles are directly exported to Fiat in Italy, and thereafter they
are distributed to customers all over the world.
8
<PAGE> 11
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
<TABLE>
<CAPTION>
PERIOD FROM
MAY 3, 1993
YEAR ENDED DECEMBER 31 (COMMENCEMENT
------------------------------ OF OPERATIONS) TO
1996 1995 1994 DECEMBER 31, 1993
---------- -------- -------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.75 $ 11.21 $ 13.22 $ 10.00
---------- -------- -------- --------
Income from investment operations:
Net investment income .15 .19 .17 .04
Net realized and unrealized gain (loss) 1.86 (.34) (1.65) 3.25
---------- -------- -------- --------
Total from investment operations 2.01 (.15) (1.48) 3.29
---------- -------- -------- --------
Distributions:
Dividends from net investment income (.15) (.17) (.17) (.04)
Distributions from net realized gains (.16) (.14) (.36) (.03)
---------- -------- -------- --------
Total distributions (.31) (.31) (.53) (.07)
---------- -------- -------- --------
Change in net asset value for the period 1.70 (.46) (2.01) 3.22
---------- -------- -------- --------
Net asset value, end of period $ 12.45 $ 10.75 $ 11.21 $ 13.22
========== ======== ======== ========
TOTAL RETURN* 18.86% (1.23)% (11.39)% 32.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $1,565,537 $798,515 $582,878 $ 422,433
Ratio of expenses to average net assets 1.56% 1.52% 1.66% 1.60%**
Ratio of expenses, net of reimbursement, to average net assets 1.56% 1.52% 1.60% 1.60%**
Ratio of net investment income to average net assets 1.56% 2.00% 1.59% .91%**
Portfolio turnover rate 7.92% 13.47% 12.51% 9.42%
Average commission rate paid (per share) $ 0.0019
</TABLE>
* NOT ANNUALIZED FOR PERIOD LESS THAN ONE YEAR.
** ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
9
<PAGE> 12
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES: 92.2%
- ---------------------------------------------------------------------------------------------------------------------------
ARGENTINA: 8.3%
Aluar Aluminio Argentino SA, B Misc Materials & Commodities 294,678 $ 742,722
* Astra Cia Argentina de Petroleo SA Energy Sources 2,018,730 3,856,468
* Atanor Cia Nacional Para la Industria
Quimica SA, D Chemicals 1,894,877 2,748,066
* Banco Bansud SA, B Banking 140,066 1,678,293
Banco de Galicia y Buenos Aires SA, B Banking 3,309,686 19,894,794
Banco Frances del Rio de la Plata SA Banking 693,364 6,484,118
* Buenos Aires Embotelladora SA, ADR Beverages & Tobacco 375,300 1,407,375
Capex SA, A Utilities Electrical & Gas 51,205 422,517
Central Costanera SA, B Utilities Electrical & Gas 297,468 910,416
* Ciadea SA Automobiles 424,725 2,017,808
* Ipako Industrias Petroquimicas
Argentinas SA, B Chemicals 1,257,372 3,848,251
Juan Minetti SA Building Materials & Components 328,202 1,365,566
Juan Minetti SA, conv. Building Materials & Components 50,462 50,471
Molinos Rio de Plata SA, B Food & Household Products 4,063,114 14,467,290
Nobleza Piccardo Sdad Industrial Comercial y
Financial Beverages & Tobacco 127,550 484,777
Perez Companc SA, B Energy Sources 4,200,001 29,531,323
Quilmes Industrial SA Beverages & Tobacco 650,000 5,931,250
Quilmes Industrial SA, reg Beverages & Tobacco 44,000 352,000
* Sevel Argentina SA, C Automobiles 1,025,633 2,585,060
Siderar, A Metals & Mining 225,447 649,404
* Sociedad Comercial del Plata Cadelplata Come Multi-Industry 4,431,890 11,347,681
Transportadora de Gas del Sur SA, B Energy Sources 352,647 867,668
YPF Sociedad Anonima, ADR Energy Sources 722,810 18,250,953
* Zanella Hermanos SA Automobiles 743,582 163,617
-------------
130,057,888
- ---------------------------------------------------------------------------------------------------------------------------
BRAZIL: 10.1%
Aracruz Celulose SA, ADR Forest Products & Paper 12,600 103,950
Banco Bradesco SA Banking 762,798,423 5,175,372
Banco Bradesco SA, pfd. Banking 111,832,897 810,415
* Banco do Brasil SA Banking 779,160,792 6,748,578
* Banco do Brasil SA, wts., A Banking 190,208,236 300,204
* Banco do Brasil SA, wts., B Banking 285,312,354 439,322
* Banco do Brasil SA, wts., C Banking 475,520,591 640,678
* Banco do Brazil SA, pfd. Banking 493,410,390 4,273,596
* Banespa-Banco do Estado de Sao Paulo SA, pfd. Banking 708,897,530 3,411,113
Brasmotor SA, pfd. Multi-Industry 20,198,000 5,607,856
* Cia Mesbla SA, pfd. Merchandising 33,734,000 --
Cia Vale do Rio Doce, pfd. Metals & Mining 332,941 6,408,257
Companhia Siderurgica Nacional Metals & Mining 1,180,000 33,500
Copene-Petroquimica do Nordeste SA, A, pfd. Chemicals 15,725,700 6,053,585
Duratex SA, pfd. Forest Products & Paper 191,931,900 7,203,680
Eletrobras-Centrais Eletricas Brasileiras SA Utilities Electrical & Gas 41,006,000 14,680,235
Eletrobras-Centrais Eletricas Brasileiras SA,
B, pfd. Utilities Electrical & Gas 56,362,106 20,937,131
Itausa-Investimentos Itau SA, pfd. Multi-Industry 25,743,704 19,324,501
* Mannesmann SA Machinery & Engineering 10,362,720 1,408,357
* Mannesmann SA, pfd. Machinery & Engineering 1,670,650 241,168
* Marcopolo SA, pfd. Automobiles 7,243,800 1,212,993
Petrobras-Petroleo Brasileiro SA, pfd. Energy Sources 134,535,666 21,427,825
* Refripar-Refrigeracao Parana Sa, pfd. Appliances & Household Durables 75,597,000 170,968
Telebras-Telecomunicacoes Brasileiras SA Telecommunications 303,867,531 21,786,287
Telecomunicacoes Brasileiras SA (Telebras),
pfd. Telecommunications 68,205,968 5,251,157
Unibanco-Uniao de Bancos Brasileiros SA, pfd. Banking 148,251,168 4,836,603
-------------
158,487,331
- ---------------------------------------------------------------------------------------------------------------------------
CHILE: 0.1%
Antofagasta Holdings PLC Metals & Mining 197,000 1,147,429
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
CHINA: 2.4%
China First Pencil Co. Ltd., B Recreation & Other Consumer
Goods 657,140 $ 290,456
China Southern Glass Co. Ltd., B Building Materials & Components 3,321,240 2,061,148
Chiwan Wharf Holdings Ltd., B Transportation 4,908,000 3,490,077
Guangdong Electric Power Development Co Ltd,
B, 144A Utilities Electrical & Gas 657,000 581,018
* Guangshen Railway Co. Ltd., ADR Transportation 140,000 2,887,500
Guangzhou Shipyard International Co. Ltd., H Machinery & Engineering 5,121,000 1,297,713
Luoyang Glass Co. Ltd., H Misc Materials & Commodities 927,000 284,650
Maanshan Iron & Steel Co. Ltd., H Metals & Mining 2,357,000 505,866
Shandong Huaneng Power Utilities Electrical & Gas 195,000 1,901,250
Shanghai Chlor-Alkali Chemical Co. Ltd., B Chemicals 4,831,000 1,343,018
Shanghai Dazhong Taxi Shareholding Co. Ltd., B Transportation 1,504,100 1,242,387
* Shanghai Erfangji Textile Machinery Co.
Ltd., B Machinery & Engineering 3,557,400 611,873
* Shanghai Industrial Sewing Machine Corp. Machinery & Engineering 930,000 176,700
* Shanghai Jin Jiang Tower Co. Ltd., B Leisure & Tourism 3,129,500 951,368
Shanghai Jinqiao Export Processing Zone
Development, B Real Estate 2,679,300 1,446,822
Shanghai Lujiaxui Finance & Trade Zn Dev
Stock Co Ltd, B Real Estate 6,387,220 6,221,152
* Shanghai Narcissus Electric Appliances Co.
Ltd., B Appliances & Household Durables 726,000 152,460
Shanghai New Asia Group Co. Ltd., B Food & Household Products 1,900,000 828,400
Shanghai Pechemical Co. Ltd., H Chemicals 5,254,000 1,596,341
Shanghai Refrigerator Compressor Co. Ltd., B Industrial Components 853,800 464,467
Shanghai Rubber Belt Co. Ltd., B Industrial Components 41,000 9,840
* Shanghai Shangling Electric Appliance, B Appliances & Household Durables 2,363,000 1,025,542
* Shanghai Steel Tube Co. Ltd., B Machinery & Engineering 2,257,640 428,951
* Shanghai Tyre & Rubber Co. Ltd., B Industrial Components 3,340,000 1,416,160
* Shanghai Vacuum Electron Devices Co. Ltd., B Appliances & Household Durables 2,668,334 517,657
* Shanghai Wingsung Co. Ltd., B Recreation & Other Consumer
Goods 207,000 57,960
* Shanghai Yaohua Pilkington Glass, B Building Materials & Components 5,064,500 2,410,702
* Shenzhen China Bicycles Co. (Holdings) Recreation & Other Consumer
Ltd., B Goods 1,875,000 814,532
Shenzhen Properties & Resources Develop.
(Group) Ltd., B Real Estate 1,874,616 993,720
Shenzhen Vanke Co. Ltd., B Real Estate 2,318,030 1,639,359
Tsann Kuen Enterprise Co. Ltd., B Appliances & Household Durables 600,000 301,765
-------------
37,950,854
- ---------------------------------------------------------------------------------------------------------------------------
COLOMBIA: 3.2%
Banco Ganadero SA, ADR C Banking 131,000 2,816,500
Banco Industrial Colombiano SA Banking 212,705 740,937
Bavaria SA Beverages & Tobacco 19,930 81,210
Cementos Argos SA Building Materials & Components 1,763,262 9,243,895
Cia Colombiana de Tabacos SA Coltabaco Beverages & Tobacco 1,799,040 5,365,652
Compania Nacional de Chocolates SA Food & Household Products 2,339,988 19,813,852
Compania Suramericana de Seguros Insurance 667,829 12,212,337
Promigas SA Utilities Electrical & Gas 97,438 309,880
-------------
50,584,263
- ---------------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC: 1.9%
* CEZ Utilities Electrical & Gas 110,850 3,990,665
* CEZ, GDR Utilities Electrical & Gas 175,030 6,301,080
* CEZ, GDS, 144A Utilities Electrical & Gas 26,000 936,000
Chemopetrol Group AS Chemicals 115,976 5,032,422
Elektrarny Opatovice AS Energy Sources 8,001 1,290,446
Komercni Banka AS Banking 7,822 651,785
</TABLE>
11
<PAGE> 14
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
CZECH REPUBLIC (cont.)
* SPT Telecom AS Telecommunications 51,000 $ 6,350,151
Tabak AS Beverages & Tobacco 17,604 4,434,338
-------------
28,986,887
- ---------------------------------------------------------------------------------------------------------------------------
ECUADOR: 0.0%
La Cemento Nacional CA, GDR Multi-Industry 2,000 458,000
- ---------------------------------------------------------------------------------------------------------------------------
EGYPT: 0.2%
Commercial International Bank Ltd. Banking 19,735 2,978,078
- ---------------------------------------------------------------------------------------------------------------------------
GHANA: 0.2%
Ashanti Goldfields Co. Ltd., GDR Metals & Mining 160,000 1,980,000
- ---------------------------------------------------------------------------------------------------------------------------
GREECE: 4.2%
Alpha Credit Bank Banking 319,670 20,342,990
Alpha Leasing SA Financial Services 159,480 3,102,849
Delta Dairy SA Food & Household Products 406,200 4,643,038
Delta Dairy SA, pfd. Food & Household Products 71,544 594,484
Elais Oleaginous Co. Food & Household Products 61,200 1,747,614
Ergo Bank SA Banking 146,500 7,425,651
Etba Leasing Financial Services 103,940 1,198,611
Fourlis Brothers Corp. SA Appliances & Household Durables 114,240 1,435,467
Hellas Can--Container Manufacturers Metals & Mining 139,580 1,954,720
Hellenic Telecommunications Organizations
OTE Telecommunications 210,320 3,593,283
Hellenic Telecommunications Organizations
OTE Telecommunications 678,000 11,583,519
Intracom SA, reg. Electrical & Electronics 50,000 1,124,802
National Bank of Greece SA Banking 48,320 3,074,963
Titan Cement Co., reg. Building Materials & Components 61,490 3,343,555
X. Benrubi & Son SA Food & Household Products 181,880 583,880
-------------
65,749,426
- ---------------------------------------------------------------------------------------------------------------------------
HONG KONG: 13.9%
Cheung Kong Holdings Ltd. Multi-Industry 3,186,000 28,319,542
China Overseas Land & Investment Ltd. Real Estate 2,723,000 1,381,831
*Citybus Transportation 618,693 163,982
CNT Group Ltd. Multi-Industry 17,824,934 1,451,898
Cross Harbour Tunnel Co. Ltd. Transportation 1,268,010 2,762,424
Dairy Farm International Holdings Ltd. Merchandising 5,909,271 4,756,963
Dickson Concepts (International) Ltd. Merchandising 14,000 52,492
*East Asiatic Co. (Hong Kong) Ltd. (The) Wholesale & International Trade 1,684,000 174,181
*Fu Hui Jewellery Co. (H.K.) Ltd. Recreation & Other Consumer
Goods 2,860,000 266,236
Goldlion Holdings Ltd. Textiles & Apparel 1,248,000 1,024,604
Great Wall Electronic International Ltd. Electrical & Electronics 751,132 93,230
Hang Lung Development Co. Ltd. Real Estate 8,905,000 19,572,694
Hongkong Electric Holdings Ltd. Utilities Electrical & Gas 3,143,000 10,443,480
Hopewell Holdings Ltd. Construction & Housing 8,200,000 5,300,924
HSBC Holdings PLC Banking 1,538,721 32,924,989
IMC Holdings Ltd. Transportation 348,000 184,472
Jardine International Motor Holdings Ltd. Automobiles 866,000 1,158,847
Jardine Matheson Holdings Ltd. (Singapore) Multi-Industry 545,590 3,600,894
Jardine Strategic Holdings Ltd. (Singapore) Multi-Industry 1,226,250 4,439,025
*Jardine Strategic Holdings Ltd., wts. Multi-Industry 136,250 54,500
JCG Holdings Ltd. Financial Services 433,000 422,671
Joyce Boutique Holdings Ltd. Merchandising 1,708,000 432,824
K Wah International Holdings Ltd. Building Materials & Components 12,238,443 3,022,228
*K Wah International Holdings Ltd., wts. Building Materials & Components 1,086,860 70,261
Lai Sun Development Co. Ltd. Real Estate 3,385,000 5,120,499
*Lai Sun Development Co. Ltd., wts. Real Estate 1,146,700 148,258
</TABLE>
12
<PAGE> 15
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
HONG KONG (cont.)
Lai Sun Garment International Ltd. Multi-Industry 1,870,000 $ 2,973,819
Laws International Holdings Ltd. Textiles & Apparel 3,128,000 489,350
Leefung-Asco Printers Holdings Ltd. Broadcasting & Publishing 462,000 45,397
*Luks Industrial Co. Ltd. Appliances & Household Durables 700,000 68,783
*Luks Industrial Co. Ltd., wts. Appliances & Household Durables 140,000 5,159
New World Development Co. Ltd. Real Estate 5,751,183 38,851,808
NG Fund Hong Ltd. Food & Household Products 1,324,000 1,189,708
Orient Overseas International Ltd. Transportation 98,000 63,986
*S. Megga International Holdings Ltd. Electronic Components &
Instruments 1,626,000 107,216
Semi-Tech (Global) Co. Ltd. Appliances & Household Durables 1,972,865 3,264,939
*South Sea Development Co. Ltd. Real Estate 1,845,000 83,490
Stelux International Holdings Ltd. Multi-Industry 2,252,881 582,554
Sun Hung Kai & Co. Ltd. Financial Services 8,332,800 2,133,162
Sun Hung Kai Properties Ltd. Real Estate 2,315,000 28,359,461
Swire Pacific Ltd., B Multi-Industry 1,165,000 1,762,299
Tian An China Investments Co. Ltd. Real Estate 2,451,000 351,750
Tungtex (Holdings) Co. Ltd. Textiles & Apparel 2,972,000 326,615
Wheelock & Co. Ltd. Multi-Industry 1,949,000 5,556,332
Wing Shan International Ltd. Utilities Electrical & Gas 544,000 75,258
*Wo Kee Hong Holdings Ltd. Merchandising 5,148,000 419,321
*Wo Kee Hong Holdings Ltd., wts. Merchandising 1,029,600 11,448
*Yaohan Hongkong Corp. Ltd. Merchandising 4,702,000 188,457
Yue Yuen Industrial (Holdings) Ltd. Recreation & Other Consumer
Goods 9,839,000 3,752,673
-------------
218,006,934
- ---------------------------------------------------------------------------------------------------------------------------
HUNGARY: 0.9%
*Danubius Hotel and Spa RT Leisure & Tourism 17,000 446,815
Egis RT, certificate Multi-Industry 2,350 137,265
Egis RT Multi-Industry 29,000 1,693,908
*Fotex First Hungarian-American Photo-Service Multi-Industry 1,784,000 988,320
Gedeon Richter Ltd., Global invt. ctf Health & Personal Care 11,000 646,250
*Ibusz Leisure & Tourism 51,040 183,792
Inter-Europa Bank RT Banking 1,408 322,177
Mol Magyar Olay -- Es Gazipari RT Energy Sources 6,830 85,322
OTP Bank, GDR Banking 75,000 1,345,083
Pick Szeged RT Food & Household Products 28,000 1,657,143
Pick Szeged RT, GDR Food & Household Products 10,910 645,694
*Tiszai Vegyi Kombinat RT Chemicals 86,176 980,605
*Tiszai Vegyi Kombinat RT, GDR, 144A Chemicals 272,000 3,073,600
*Tiszai Vegyi Kombinat RT, GDR, S Chemicals 157,000 1,774,100
-------------
13,980,074
- ---------------------------------------------------------------------------------------------------------------------------
INDIA: 1.8%
Arvind Mills Ltd. Textiles & Apparel 299,400 1,014,703
Bharat Petroleum Corp., Ltd. Energy Sources 20,000 166,248
Bombay Dyeing & Manufacturing Co. Ltd. Chemicals 39,650 122,213
Bses Ltd. Utilities Electrical & Gas 55,250 318,246
Cochin Refineries Ltd. Energy Sources 69,950 193,167
Grasim Industries Ltd Ord INR10 Multi-Industry 159,850 1,864,917
Great Eastern Shipping Co. Ltd. Transportation 434,000 411,604
Gujarat Narmanda Valley Fertilizers Co. Ltd.,
ADR Chemicals 29,000 79,750
Hindalco Industries Metals & Mining 149,875 2,744,573
Hindustan Organic Chemicals Ltd. Chemicals 34,000 28,926
Hindustan Petroleum Corp. Ltd. Energy Sources 268,400 2,485,601
*India Cements Ltd. Building Materials & Components 178,000 446,862
India Cements Ltd., GDR Building Materials & Components 320,400 801,000
Indian Aluminium Co. Ltd. Metals & Mining 38,900 165,203
</TABLE>
13
<PAGE> 16
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
INDIA (cont.)
Indian Petrochemicals Corp. Ltd. Chemicals 677,400 $ 2,272,172
Indian Rayon & Industries Ltd., GDR Multi-Industry 31,000 265,050
Indian Rayon and Industries Ltd. Multi-Industry 107,300 897,908
Indo Gulf Fertilisers & Chemicals Corp. Ltd. Chemicals 1,110,200 898,070
*Indo Gulf Fertilisers & Chemicals, GDR Chemicals 28,700 20,807
Industrial Credit & Inv. Corp. of India
(ICICI) Financial Services 1,232,850 2,020,361
Industrial Development Bank of India Banking 663,900 1,611,138
ITC Bhadrachalam Paperboards Ltd. Forest Products & Paper 96,700 159,144
Larsen and Toubro Ltd. Multi-Industry 485,000 2,959,379
National Aluminium Co. Ltd. Metals & Mining 703,300 608,153
Oriental Bank of Commerce Banking 205,000 444,596
Reliance Industries Ltd. Chemicals 128,200 726,824
Shipping Corporation of India Ltd. Transportation 516,000 367,029
State Bank of India Banking 74,400 470,059
Steel Authority of India Ltd, GDR, reg S Metals & Mining 45,000 432,585
Steel Authority of India Ltd. Metals & Mining 1,313,000 677,559
Steel Authority of India Ltd., GDR, 144A Metals & Mining 62,000 596,006
*Sterlite Industries (India) Ltd. Metals & Mining 34,700 188,503
Tata Chemicals Ltd. Chemicals 139,050 668,099
Tata Iron & Steel Co. Ltd. Metals & Mining 324,600 1,482,657
Wockhardt Health & Personal Care 7,400 42,057
-------------
28,651,169
- ---------------------------------------------------------------------------------------------------------------------------
INDONESIA: 5.5%
*Asia Pulp & Paper Co. Ltd., ADR Forest Products & Paper 295,500 3,361,312
PT Bank Dagang Nasional Indonesia, fgn. Banking 1,153,000 1,171,549
PT Bank Danamon, fgn. Banking 717,000 675,413
PT Bank PDFCI, fgn. Banking 243,000 226,334
PT Barito Pacific Timber, fgn. Forest Products & Paper 20,657,000 12,681,054
PT BBL Dharmala Finance, fgn. Financial Services 1,433,000 1,759,399
PT Bimantara Citra, fgn. Multi-Industry 1,897,500 2,530,535
PT Branta Mulia, fgn. Automobiles 1,429,200 1,573,209
*PT Charoen Pokphand Indonesia, fgn. Food & Household Products 5,484,000 6,065,601
PT Dharmala Intiland, fgn. Real Estate 1,647,000 2,440,517
PT Duta Pertiwi Nusantura, fgn. Chemicals 59,813 25,956
PT Eratex Djaja, fgn. Textiles & Apparel 215,000 63,717
PT Gadjah Tunggal, fgn. Automobiles 10,945,000 4,749,630
PT Gajah Surya Multi Finance, fgn. Financial Services 731,000 441,014
PT Ganda Wangsa Utama, fgn. Textiles & Apparel 463,600 166,833
PT Intan Wijaya Chemical Industry, fgn. Chemicals 141,000 65,665
PT Inter-Pacific Bank, fgn. Banking 589,500 418,041
PT Jakarta International Hotel & Development,
fgn. Real Estate 3,095,000 2,227,561
PT Japfa Comfeed Indonesia, fgn. Food & Household Products 1,661,000 1,054,826
PT Kalbe Farma, fgn. Health & Personal Care 313,000 357,790
PT Metrodata Electronic, fgn. Electrical & Electronics 45,000 64,776
PT Multibreeder Adirama, fgn. Food & Household Products 221,250 81,962
PT Pabrik Kertas Tjiwi Kimia, fgn. Forest Products & Paper 2,331,790 2,319,943
PT Panasia Indosyntec, fgn. Textiles & Apparel 3,912,500 952,450
PT Polysindo Eka Perkasa, fgn. Textiles & Apparel 12,120,000 6,927,180
PT Pudjiadi Prestige Ltd., fgn. Real Estate 1,713,600 616,664
+*PT Sarasa Nugraha, fgn. Textiles & Apparel 2,333,500 889,141
PT Semen Cibinong, fgn. Building Materials & Components 610,500 1,718,808
PT Sinar Mas Agro Resources & Technology
Corp., fgn. Food & Household Products 3,690,500 2,617,099
PT Sinar Mas Multi Artha, fgn. Financial Services 11,520,600 9,633,017
PT Sumalindo Lestari Jaya, fgn. Forest Products & Paper 2,472,000 1,831,499
PT Summarecon Agung, fgn. Real Estate 1,776,604 601,729
PT Tambang Timah (Persero), fgn. Metals & Mining 1,476,000 2,687,045
</TABLE>
14
<PAGE> 17
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
INDONESIA (cont.)
PT Ultra Jaya Milk, fgn. Food & Household Products 3,254,300 $ 1,515,550
PT Unggul Indah Corp., fgn. Chemicals 2,937,000 2,984,251
PT United Tractors, fgn. Machinery & Engineering 4,071,000 8,531,520
-------------
86,028,590
- ---------------------------------------------------------------------------------------------------------------------------
ISRAEL: 1.2%
Agis Industries Ltd. Health & Personal Care 89,190 653,213
Bank Hapoalim BM Banking 2,437,934 3,862,580
Clal Industries Ltd. Multi-Industry 1,425,878 6,816,894
Discount Investment Corp. Multi-Industry 66,433 4,260,132
First International Bank of Israel Banking 20,139 2,323,540
*Koor Industries Ltd. Multi-Industry 15,000 1,307,009
-------------
19,223,368
- ---------------------------------------------------------------------------------------------------------------------------
KOREA (SOUTH): 2.8%
Asia Cement Co. Ltd. Building Materials & Components 40,190 1,008,317
Boram Bank Co. Ltd. Banking 455,650 3,774,615
*Boram Bank Co. Ltd., new Banking 50,049 387,954
BYC Co. Ltd. Textiles & Apparel 6,200 660,355
Central Banking Corp. Financial Services 213,784 3,288,985
*Cho Hung Bank, GDR 144A Banking 700,000 5,250,000
Dae Duck Electronics Co. Ltd. Electrical & Electronics 16,120 780,246
Daegu Bank Co. Ltd. Banking 243,272 2,904,840
Daehan Synthetic Fiber Co. Ltd. Textiles & Apparel 7,790 677,592
Dongkuk Steel Mill Co. Ltd. Metals & Mining 110,350 2,180,882
Hae In Corp. Ltd. Merchandising 5,500 246,036
*Hana Bank, GDR Banking 240,854 3,644,121
Hankook Cosmetics Co. Ltd. Health & Personal Care 14,940 335,929
Korea First Bank Banking 640,000 3,241,657
Korea Kumho Petrochemical Chemicals 377,000 3,123,077
Kyong Nam Bank Banking 174,550 1,914,886
Kyung Dong Boiler Co Ltd Energy Equipment & Services 27,573 923,451
Moon Bae Steel Co. Ltd. Metals & Mining 9,000 207,692
Samsung Electronics Co. Ltd. Multi-Industry 500 29,683
Shinsung Industries Co. Ltd. Electrical & Electronics 14,000 316,450
Ssangyong Oil Refining Co Ltd Energy Equipment & Services 328,000 7,181,065
Tong Yang Merchant Bank Financial Services 105,093 1,181,519
-------------
43,259,352
- ---------------------------------------------------------------------------------------------------------------------------
MALAYSIA: 3.5%
*Aokam Perdana Bhd. Multi-Industry 2,169,000 2,567,931
Berjaya Singer Bhd. Appliances & Household Durables 2,189,000 3,293,684
Berjaya Singer Bhd., fgn. Appliances & Household Durables 540,000 812,512
Boustead Holdings Bhd., fgn. Food & Household Products 479,000 1,071,610
Federal Flour Mills Bhd. Food & Household Products 957,500 2,388,537
Hong Leong Industries Bhd. Multi-Industry 897,000 3,054,524
*Hong Leong Industries Bhd., new Multi-Industry 531,000 1,797,684
*Hong Leong Industries Bhd., wts., fgn. Multi-Industry 221,250 52,564
Island & Peninsula Bhd., fgn. Real Estate 311,000 1,040,566
Leader Universal Holdings Bhd. Industrial Components 1,419,000 2,977,905
Malayawata Steel Bhd., fgn. Metals & Mining 1,139,000 2,146,759
Malaysian International Shipping Corp. Bhd.,
fgn. Transportation 2,051,333 6,091,862
MBF Capital Bhd. Financial Services 4,461,000 7,242,170
Oriental Holdings Bhd., fgn. Automobiles 745,600 5,077,933
Perlis Plantations Bhd. Multi-Industry 12,500 38,769
Perlis Plantations Bhd., fgn. Multi-Industry 1,956,750 6,082,157
Renong Bhd. Multi-Industry 4,097,000 7,267,694
*Renong Bhd., wts. Multi-Industry 32,750 16,080
</TABLE>
15
<PAGE> 18
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
MALAYSIA (cont.)
Renong, 4.0%, conv., 9/9/2001 Multi-Industry 52,400** $ 21,993
Shangri-La Hotels (Malaysia) Bhd. Leisure & Tourism 1,832,000 1,726,454
-------------
54,769,388
- ---------------------------------------------------------------------------------------------------------------------------
MEXICO: 9.0%
Alfa SA de CV, A Multi-Industry 424,774 1,961,450
Cementos Mexicanos SA de CV (Cemex), B Building Materials & Components 5,529,875 21,565,951
*Cifra SA, C Merchandising 12,503,602 15,248,295
Coca Cola Femsa SA de CV, ADR Beverages & Tobacco 170,700 4,928,963
Cydea SA de CV Chemicals 910,231 1,636,149
*DESC SA, A Multi-Industry 104,000 531,758
*DESC SA, B Multi-Industry 548,544 2,996,366
*DESC SA, C Multi-Industry 398,948 2,176,679
Fomento Economico Mexicano SA de CV, B Beverages & Tobacco 1,198,000 4,108,994
Grupo Carso SA de CV Multi-Industry 74,285 391,619
*Grupo Financiero Banamex Accival SA, B Banking 3,704,000 7,820,183
*Grupo Financiero Banamex Accival SA, L Banking 6,837,518 13,463,101
*Grupo Financiero Bancomer SA de CV, B Banking 15,276,934 6,113,102
*Grupo Financiero Bancomer SA de CV, L Banking 20,434,553 6,879,010
*Grupo Financiero Serfin SA, B Banking 13,486,114 4,642,704
Telmex-Telefonos de Mexico SA, L Telecommunications 181,000 298,448
Telmex-Telefonos de Mexico SA, L, ADR Telecommunications 1,138,500 37,570,500
Vitro SA Food & Household Products 3,644,692 6,620,820
-------------
138,954,092
- ---------------------------------------------------------------------------------------------------------------------------
PAKISTAN: 0.5%
*Bank of Punjab Banking 690,040 277,187
*DG Khan Cement Co. Building Materials & Components 1,156,400 266,884
Engro Chemical Chemicals 321,100 1,077,546
Fauji Fertilizer Co. Ltd. Chemicals 265,000 446,296
Khadim Ali Sham Bukhari & Co. Ltd. Financial Services 219,120 87,473
National Development Leasing Corp. Financial Services 273,375 49,450
*Pakistan Electron Ltd. Appliances & Household Durables 110,000 32,248
*Pakistan International Airlines Corp. Transportation 309,300 67,524
*Pakistan Telecom Corp. PTC, GDR Telecommunications 10,000 620,000
*Pakistan Telecom Corp. PTC Telecommunications 6,993,100 4,379,422
*Pakistan Telecommunications Corp., PTC, A Telecommunications 1,374,000 860,466
*Union Bank Ltd. Banking 530,878 132,455
-------------
8,296,951
- ---------------------------------------------------------------------------------------------------------------------------
PERU: 0.0%
Cpt-Telefonica Del Peru SA, ADR B Telecommunications 28,000 528,500
- ---------------------------------------------------------------------------------------------------------------------------
PHILIPPINES: 1.3%
*Belle Corp. Real Estate 23,446,000 6,507,825
*Keppel Philippine Holdings Inc., B Machinery & Engineering 825,000 90,970
*Philex Minning Corp., B Metals & Mining 10,051,610 1,146,571
Philippine Long Distance Telephone Co., ADR Telecommunications 105,905 5,401,155
*Philippine National Bank Banking 175,894 2,089,995
RFM Corp. Food & Household Products 21,092,100 3,608,914
Sime Darby Pilipinas Inc. Industrial Components 956,400 1,236,411
-------------
20,081,841
- ---------------------------------------------------------------------------------------------------------------------------
POLAND: 1.8%
Bank Gdanski SA Banking 159,470 2,074,434
*Bank Inicjatyw Gospodarczch SA, G Banking 4,497,262 6,273,644
Bank Przemyslowo-Handlowy SA Banking 53,751 3,467,927
*Farm Food S.A., rts. Food & Household Products 9,392 43,236
Farm Food SA Food & Household Products 46,961 756,643
Huta Olawa SA Metals & Mining 20,221 87,445
</TABLE>
16
<PAGE> 19
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
POLAND (cont.)
Mostostal Export SA Construction & Housing 730,880 $ 1,733,272
Polifarb Ceiszyu SA Chemicals 366,950 2,034,772
*Raciborska Fabryka Kotlow SA Energy Equipment & Services 97,732 555,567
+Rolimpex SA Wholesale & International Trade 1,007,306 7,833,900
Warta SA Insurance 66,000 1,070,308
Wielkopolski Bank Kredytowy SA Banking 159,622 1,079,956
Zaklady Cementowo Wapiennicze Gorazdze Chorula Building Materials & Components 49,877 1,243,707
-------------
28,254,811
- ---------------------------------------------------------------------------------------------------------------------------
PORTUGAL: 4.9%
Banco Comercial Portugues SA Banking 1,805,262 23,810,131
Banco Comercial Portugues, 8.75%, conv.,
5/21/02 Banking 3,000,000 3,883,888
Banco Espirito Santo e Comercial de Lisboa Banking 992,255 17,458,056
Banco Totta & Acores SA Banking 593,219 11,187,181
BPI Socieda de Gestora de Participacoes Socias
SA Banking 641,655 7,987,063
*BPI Socieda de Gestora de Participacoes
Socias, new Banking 243,828 2,877,815
Cel-Cat Fabrica Nacional de Conductores
Electricos SA Electronic Components &
Instruments 9,522 163,357
+Compta-Equipamentos e Servicos de Informatica
SA Business & Public Services 75,240 921,999
Espirito Santo Financial Holding SA, ADR Banking 383,420 5,080,315
Portucel Industrial Empresa Product de
Celulose SA Forest Products & Paper 278,000 1,613,673
Portugal Telecom SA Telecommunications 38,000 1,083,263
*Sociedade Portuguesa de Celulose SA Forest Products & Paper 47,510 1,268,568
-------------
77,335,309
- ---------------------------------------------------------------------------------------------------------------------------
RUSSIA: 1.6%
*Chernogorneft Energy Sources 28,000 325,500
GUM Trade House Merchandising 55,000 1,512,500
Irkutskenergo Utilities Electrical & Gas 23,367,000 3,084,444
*Kamaz Automobiles 980,000 1,249,500
*Krasnoyarsk Aluminum Plant Metals & Mining 24,086 281,806
*Lukoil Holdings., pfd. Energy Sources 151,000 1,242,730
Lukoil-Holdings Energy Sources 137,000 1,574,130
*Megionneftegaz Multi-Industry 178,000 569,600
Mosenergo Utilities Electrical & Gas 2,990,000 3,049,800
*Norilsk Nickel Metals & Mining 199,000 1,044,750
*Novolipetsk Mettallurgy Multi-Industry 4,000 134,000
*Noyabrskneftegaz Multi-Industry 84,959 533,118
Primorsk Shipping Transportation 75,000 131,250
*Purneftegaz Energy Sources 746,000 1,939,600
Rostelekom Telecommunications 1,461,000 3,491,790
*Rostelekom, pfd. Telecommunications 261,000 502,425
*Saint Petersburg City Telephone Net, pfd. Telecommunications 10,000 9,250
*Unified Energy System Utilities Electrical & Gas 47,860,000 4,379,190
*Uralmash Machinery & Engineering 3,050 10,370
-------------
25,065,753
- ---------------------------------------------------------------------------------------------------------------------------
SINGAPORE: 2.6%
Acer Computer International Ltd. Electrical & Electronics 943,000 1,621,960
*Acer Computer International Ltd., wts. Electrical & Electronics 114,800 53,956
Acma Ltd., fgn. Electrical & Electronics 332,600 717,825
*Acma Ltd., fgn., wts. Electrical & Electronics 83,150 53,183
British American Tobacco Ltd. Beverages & Tobacco 44,000 188,666
</TABLE>
17
<PAGE> 20
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
SINGAPORE (cont.)
Chemical Industries (Far East) Ltd. Chemicals 800,500 $ 1,887,837
First Capital Corp. Ltd. Real Estate 794,000 2,394,540
First Capital Corp. Ltd., fgn. Real Estate 1,141,000 3,441,021
GP Batteries International Ltd. Electrical & Electronics 37,000 122,840
*GP Batteries International Ltd., wts. Electrical & Electronics 9,250 11,748
Hai Sun Hup Group Ltd. Transportation 2,748,000 2,022,754
Hinds Hotels International Ltd. Leisure & Tourism 268,000 342,829
Hinds Hotels International Ltd., fgn. Leisure & Tourism 188,000 240,492
Hour Glass Ltd. Merchandising 320,000 233,259
Inchcape Bhd., fgn. Wholesale & International Trade 1,135,000 3,942,042
Isetan (Singapore) Ltd., fgn. Merchandising 97,000 209,694
Jaya Holdings Ltd. Transportation 748,000 545,244
Jaya Holdings Ltd., 3.00%, conv. ln. stk.,
8/31/98 Transportation 80,400 65,358
*Jaya Holdings Ltd., wts. Transportation 75,240 31,455
Jurong Shipyard, fgn Machinery & Engineering 1,569,000 7,904,988
Natsteel Ltd. Metals & Mining 954,000 2,168,027
Natsteel Ltd., fgn. Metals & Mining 1,489,000 3,383,849
*Osprey Maritime Ltd. Transportation 331,000 503,845
Prima Ltd. Food & Household Products 100,000 368,041
Sembawang Corp. Ltd. Multi-Industry 857,000 4,532,123
Singapore Bus Service (1978) Ltd., fgn. Transportation 249,600 1,311,056
TIBS Holdings Ltd. Transportation 78,000 137,683
WBL Corp. Ltd. Multi-Industry 810,000 1,898,664
-------------
40,334,979
- ---------------------------------------------------------------------------------------------------------------------------
SLOVAK REPUBLIC: 0.4%
Nafta Gbely AS Utilities Electrical & Gas 53,570 2,673,275
*Slovakofarma AS Health & Personal Care 299 33,593
Slovnaft AS Chemicals 118,971 2,896,072
*Vychodoslovenske Zeleziarne AS Metals & Mining 12,250 214,091
-------------
5,817,031
- ---------------------------------------------------------------------------------------------------------------------------
SOUTH AFRICA: 2.5%
Anglo American Industrial Corp. Ltd. Multi-Industry 55,577 2,013,530
Anglo American Platinum Corp. Ltd. Metals & Mining 33,852 200,789
Anglovaal Industried Ltd. Multi-Industry 235,370 1,064,032
BTR Dunlop Ltd. Industrial Components 1,276,700 1,384,900
CG Smith Ltd. Multi-Industry 131,400 641,763
Del Monte Royal Foods Ltd Food & Household Products 3,351,450 3,366,852
Engen Ltd. Energy Sources 1,426,441 7,622,320
First National Bank Holdings Ltd. Banking 327,400 1,602,535
Kersaf Investments Ltd. Leisure & Tourism 28,000 256,599
Malbak Ltd. Multi-Industry 294,700 1,291,301
*McCarthy Retail Ltd. Appliances & Household Durables 442,000 1,133,697
McCarthy Retail, zero, conv., 9/30/2003 Appliances & Household Durables 105,000** 246,874
Nedcor Ltd. Banking 104,488 1,429,354
Palabora Mining Co. Ltd. Metals & Mining 160,200 2,619,493
Potgietersrust Platinums Ltd. Metals & Mining 65,000 319,547
*Rainbow Chicken Ltd. Food & Household Products 334,500 62,918
*Rainbow Chicken Ltd., conv., pfd. Food & Household Products 802,800 164,730
Rembrandt Group Ltd. Multi-Industry 177,670 1,585,492
Reunert Ltd. Electrical & Electronics 232,400 769,948
Sappi Ltd. Forest Products & Paper 548,540 4,924,373
South African Breweries Ltd. Beverages & Tobacco 69,600 1,762,873
South African Iron & Steel Industrial Corp.
Ltd. Metals & Mining 5,156,326 3,681,122
Sun International (South Africa) Ltd. Leisure & Tourism 1,793,428 1,437,502
-------------
39,582,544
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 21
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
SRI LANKA: 0.0%
Aitken Spence & Co. Ltd. Multi-Industry 50,000 $ 78,882
Associated Motorways Ltd. Automobiles 100,512 47,838
* Ceylon Holiday Resorts Ltd. Leisure & Tourism 185,000 65,221
Lanka Walltile Ltd. Building Materials & Components 34,000 16,182
National Develpoment Bank of Sri Lanka Banking 70,000 240,613
United Motor Lanka Ltd. Automobiles 134,400 65,447
-------------
514,183
- ---------------------------------------------------------------------------------------------------------------------------
TAIWAN: 0.0%
* United Microelectronics Corp. Electronic Components &
Instruments 301,000 426,873
- ---------------------------------------------------------------------------------------------------------------------------
THAILAND: 2.0%
American Standard Sanitaryware (THB) Public
Co. Ltd., fgn Building Materials & Components 180,200 2,388,989
* Asia Fibre Public Co. Ltd., fgn. Textiles & Apparel 669,500 242,781
Ayudhya Insurance Public Co. Ltd. Insurance 4,100 31,654
Ayudhya Insurance Public Co. Ltd., fgn. Insurance 180,800 1,395,867
Bangkok Bank Public Co. Ltd. Banking 286,000 2,130,001
Bangkok Insurance, fgn. Insurance 4,900 69,547
Bangkok Land Public Co. Ltd., fgn. Real Estate 815,000 905,697
Chareon Pokphand Feedmill Public Co. Ltd.,
fgn. Food & Household Products 66,000 239,336
Charoen Pokphand Feedmill Public Co. Ltd. Food & Household Products 762,900 2,379,786
Hua Thai Manufacturing Public Co. Ltd. Textiles & Apparel 125,100 331,701
Karat Sanitaryware Public Co. Ltd., fgn. Building Materials & Components 242,550 282,546
Kian Gwan (Thailand) Public Co. Ltd., fgn. Real Estate 104,000 281,837
* Land and House Public Co. Ltd. Multi-Industry 99,000 671,684
Regional Container Lines Public Co. Ltd., fgn. Transportation 108,400 1,048,241
* Royal Ceramic Industry Public Co. Ltd., fgn. Building Materials & Components 206,700 149,105
Saha Pathanapibul Public Co Ltd., fgn. Food & Household Products 593,100 1,387,585
Saha Union Public Co. Ltd. Multi-Industry 2,622,100 2,249,325
Saha Union Public Co. Ltd., fgn. Multi-Industry 1,074,300 963,460
Sanyo Universal Electric Public Co Ltd., fgn. Appliances & Household Durables 434,100 1,371,056
Sanyo Universal Electric Public Co. Ltd. Appliances & Household Durables 141,800 447,859
Siam Cement Co. Ltd.(The), fgn. Building Materials & Components 66,600 2,087,905
Siam City Bank Public Co. Ltd., fgn. Banking 1,560,000 1,459,877
* Siam Commercial Bank Ltd., loc. Banking 190,000 1,244,639
Sino-Thai Engineering & Construction Public
Co. Construction & Housing 261,000 681,861
Sino-Thai Engineering & Construction Public
Co., fgn. Construction & Housing 637,900 1,666,509
Thai Asahi Glass Public Co. Ltd. Building Materials & Components 94,910 106,397
Thai Asahi Glass Public Co. Ltd., fgn. Building Materials & Components 32,000 35,873
Thai Farmers Bank Public Co. Ltd. Banking 589,000 2,870,818
Thai Rayon Public Co. Ltd. Textiles & Apparel 33,782 128,431
Thai Rayon Public Co. Ltd., fgn. Textiles & Apparel 37,978 207,320
Thai Wacoal Public Co. Ltd., fgn. Textiles & Apparel 236,550 1,044,580
Thai Wah Public Co. Ltd., fgn. Multi-Industry 8,450 5,107
United Motor Works (Siam) Public Co. Ltd. Machinery & Engineering 2,100 7,001
-------------
30,514,375
- ---------------------------------------------------------------------------------------------------------------------------
TURKEY: 4.0%
Akbank Banking 114,349,010 15,552,236
* Akcansa Cimento Building Materials & Components 13,024,740 1,200,990
* Alarko Sanayii ve Ticaret SA Appliances & Household Durables 1,704,000 235,685
* Alcatel Teletas Endustri Tic AS Telecommunications 18,500,000 1,313,509
Anadolu Anonim Turk Sigorta Sirketi Insurance 5,504,000 243,607
Arcelik AS Appliances & Household Durables 49,180,285 4,988,318
Bagfas Chemicals 3,302,000 745,957
Beko Elektronik AS Appliances & Household Durables 23,143,137 2,187,341
Borusan AS Industrial Components 4,898,000 307,113
</TABLE>
19
<PAGE> 22
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM SECURITIES (CONT.)
- ---------------------------------------------------------------------------------------------------------------------------
TURKEY (cont.)
* Celik Halat ve Sanayii ve Ticaret AS Building Materials & Components 2,307,495 $ 119,151
Cimentas Izmir Cimento Fabrikasi Turk AS Building Materials & Components 12,530,450 1,328,725
Cimsa Cimento Sanayi ve Ticaret AS Building Materials & Components 14,151,000 1,304,841
Erciyas Biracilik Food & Household Products 21,635,000 2,344,041
Eregli Demir ve Celik Fabrikalari AS Metals & Mining 56,398,000 6,760,479
Finans Bank AS, br. Banking 37,675,827 738,231
Izocam Ticaret ve Sanayii AS, br. Building Materials & Components 5,761,194 382,486
Kartonsan Forest Products & Paper 13,481,000 1,305,214
Koc Holding AS Multi-Industry 5,493,333 962,410
Koc Yatirim ve Sanayii Mamullesi Pazarlanca AS Multi-Industry 13,065,962 2,499,942
Marshall Boya ve Vernik Sanayii AS Industrial Components 7,106,568 543,887
Netas Northern Electric Telekomunic Asyon AS Electrical & Electronics 3,669,000 828,866
Otosan Otomobil Sanayii AS Automobiles 7,097,500 2,879,576
Petkim Petrokimya Holding AS Chemicals 3,063,000 1,228,589
* Sasa Sun'i Sente Chemicals 4,000,000 269,249
Tat Konserve Sanayii AS Food & Household Products 6,712,331 1,005,767
Tekstil Bankasi AS, br. Banking 1,287,171 35,606
* Tofas Turk Otomobil Fabrikasi AS Automobiles 70,304,750 2,755,142
Trakya Cam Sanayii AS Building Materials & Components 7,337,520 372,120
Turk Demir Dokum, br. Appliances & Household Durables 17,389,995 1,571,433
Turkiye Garanti Bankasi AS Banking 118,673,712 5,361,929
Vakif Finansal Kiralama AS Financial Services 11,368,730 440,283
-------------
61,812,723
- ---------------------------------------------------------------------------------------------------------------------------
VENEZUELA: 1.4%
* Banco Provincial SAICA Banking 118,835 220,825
Ceramica Carabobo CA, A Building Materials & Components 257,400 281,043
Ceramica Carabobo CA, A, ADR Building Materials & Components 143,000 156,135
Ceramica Carabobo CA, B Building Materials & Components 1,443,198 1,575,759
Consolidada Carabobo, A Building Materials & Components 2,153,068 94,372
Consolidada Carabobo, B Building Materials & Components 9,405,918 383,145
Electricidad de Caracas Utilities Electrical & Gas 8,031,745 8,145,495
Fabrica Nacional de Cementos CA Building Materials & Components 428,992 99,084
H.L. Boulton & Co. SA Multi-Industry 15,283,983 1,155,313
Industrias Ventane Utilities Electrical & Gas 280,000 186,959
* Manufacturera de Aparatos Domesticos SA Appliances & Household Durables 180,613 199,478
Mavesa SA, ADR Food & Household Products 661,312 4,428,140
Siderurgica Venezolana Sivensa Saica Svs Metals & Mining 341,648 256,816
Siderurgica Venezolana Sivensa Saica SVS, ADR Metals & Mining 362,630 1,362,941
Siderurgica Venezolana Sivensa SAICA Svs.,
ADR, B, new Metals & Mining 39,177 134,709
Vencemos de Cementos SA Building Materials & Components 1,116,220 3,046,868
Venezolana de Cementos-Vencemos, #2 Building Materials & Components 309,920 826,445
Venezolana Prerreducidos Caroni Venprecar CA,
GDS, 144A Metals & Mining 118 655
-------------
22,554,182
- ---------------------------------------------------------------------------------------------------------------------------
ZIMBABWE: 0.0%
Delta Corp. Multi-Industry 14,000 49,057
* Meikles Africa Ltd. Multi-Industry 200,000 296,000
Ta Holdings Multi-Industry 25,000 4,034
Zimbabwe Sun Ltd. Multi-Industry 640,000 239,015
-------------
588,106
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LONG TERM SECURITIES (cost $1,337,157,131) 1,442,961,284
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 23
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKET SERIES
Investment Portfolio, December 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL IN
COUNTRY/ISSUE INDUSTRY LOCAL CURRENCY VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT TERM OBLIGATIONS: 7.7% (cost $120,776,616)
- ----------------------------------------------------------------------------------------------------------------------------
U. S. Treasury Bills, 4.80% to 5.01% with 121,595,000 $ 120,803,787
maturities to 3/27/97
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS: 99.9% (cost $1,457,933,747) 1,563,765,071
OTHER ASSETS, LESS LIABILITIES: 0.1% 1,771,548
-------------
TOTAL NET ASSETS: 100.0% $1,565,536,619
=============
</TABLE>
* NON-INCOME PRODUCING.
** PRINCIPAL AMOUNT IN CURRENCY OF COUNTRY INDICATED.
+ SEE NOTE 5.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE> 24
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
Assets:
Investment in securities, at value (identified cost $1,457,933,747) $1,563,765,071
Cash 1,459,391
Receivables:
Investment securities sold 1,446,121
Capital shares sold 1,402,153
Dividends and interest 2,658,866
Unamortized organization costs 6,974
--------------
Total assets 1,570,738,576
--------------
Liabilities:
Payables:
Investment securities purchased 2,770,835
Capital shares redeemed 218
Accrued expenses 2,430,904
--------------
Total liabilities 5,201,957
--------------
Net assets, at value $1,565,536,619
==============
Net assets consist of:
Undistributed net investment income $ 865,476
Unrealized appreciation on investments 105,831,324
Accumulated net realized gain 2,340,075
Net capital paid in on shares of capital stock 1,456,499,744
--------------
Net assets, at value $1,565,536,619
==============
Shares outstanding 125,711,773
==============
Net asset value per share
($1,565,536,619 divided by 125,711,773) $ 12.45
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<PAGE> 25
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
for the year ended December 31, 1996
<TABLE>
<S> <C> <C>
Investment income: (net of $1,838,239 foreign taxes withheld)
Dividends $ 29,822,203
Interest 9,361,025
------------
Total income $ 39,183,228
Expenses:
Management fees (Note 3) 15,676,692
Administrative fees (Note 3) 1,127,833
Transfer agent fees (Note 3) 5,800
Custodian fees 2,348,520
Reports to shareholders 23,000
Audit fees 30,700
Legal fees 3,600
Registration and filing fees 274,000
Directors' fees and expenses 42,644
Amortization of organization costs 1,427
Other 31,862
------------
Total expenses 19,566,078
------------
Net investment income 19,617,150
Realized and unrealized gain:
Net realized gain (loss) on:
Investments 20,603,515
Foreign currency transactions (1,264,232)
------------
19,339,283
------------
Net unrealized appreciation on:
Investments 154,119,321
Foreign currency translation of other assets and liabilities 205,647
------------
154,324,968
------------
Net realized and unrealized gain 173,664,251
------------
Net increase in net assets resulting from operations $193,281,401
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE> 26
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 19,617,150 $ 13,593,275
Net realized gain on investments and foreign currency transactions 19,339,283 9,381,337
Net unrealized appreciation (depreciation) 154,324,968 (29,368,581)
-------------- ------------
Net increase (decrease) in net assets resulting from operations 193,281,401 (6,393,969)
Distributions to shareholders:
From net investment income (18,840,261) (12,454,983)
From net realized gain (18,732,279) (9,647,645)
Capital share transactions (Note 2) 611,312,694 244,133,379
-------------- ------------
Net increase in net assets 767,021,555 215,636,782
Net assets:
Beginning of year 798,515,064 582,878,282
-------------- ------------
End of year $1,565,536,619 $798,515,064
============== ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<PAGE> 27
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Emerging Markets Series (the Fund) is a separate series of Templeton
Institutional Funds, Inc. (the Company) which is an open-end, diversified
management investment company registered under the Investment Company Act of
1940. The Fund seeks to achieve 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. SECURITIES VALUATIONS:
Securities listed or traded on a recognized national or foreign stock exchange
or NASDAQ are valued at the last reported sales prices on the principal exchange
on which the securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management in good
faith and approved by the Board of Directors.
B. FOREIGN CURRENCY TRANSLATIONS:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign currencies
are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customarily
enters into foreign exchange contracts to minimize foreign exchange risk between
the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
The Brazilian government has exercised and may continue to exercise substantial
influence over exchange of Brazilian currency. Under Brazilian law, whenever
there occurs a serious imbalance, Brazil's National Monetary Council may, for a
limited period, impose restrictions on foreign capital remittances abroad.
Exchange control regulations may restrict repatriation of investment income,
capital, or the proceeds of securities sales by foreign investors.
C. INCOME TAXES:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all its
taxable income to its shareholders. Therefore, no provision has been made for
federal income taxes.
D. UNAMORTIZED ORGANIZATION COSTS:
Organization costs are being amortized on a straight line basis over a five year
period.
E. SECURITY TRANSACTIONS, INVESTMENT INCOME, DISTRIBUTIONS, AND EXPENSES:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign
securities is recorded as soon as information is available to the Fund. Interest
income and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
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. TRANSACTIONS IN SHARES OF CAPITAL STOCK
At December 31, 1996, there were 700 million shares of the Company's ($0.01 par
value) capital stock authorized of which 225 million shares have been classified
as Fund shares. Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold 53,130,712 $ 630,783,063 25,584,150 $ 278,958,676
Shares issued on reinvestment of
distributions 2,750,716 33,001,287 2,003,414 21,146,824
Shares redeemed (4,431,413) (52,471,656) (5,323,688) (55,972,121)
---------- ------------ ---------- ------------
Net increase 51,450,015 $ 611,312,694 22,263,876 $ 244,133,379
========== ============ ========== ============
</TABLE>
25
<PAGE> 28
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
3. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Company are also directors or officers of Templeton
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 monthly an investment management fee to TAML equal, on an annual
basis, to 1.25% of the average daily net assets of the Fund. The Fund pays FTSI
monthly its allocated share of an administrative fee of 0.15% per annum on the
first $200 million of the Company's aggregate average daily net assets, 0.135%
of the next $500 million, 0.10% of the next $500 million and 0.075% per annum of
such average net assets in excess of $1.2 billion. FTSI has voluntarily agreed
to limit the total expenses of the Fund to an annual rate of 1.60% of the Fund's
average net assets through December 31, 1996. For the year ended December 31,
1996 no reimbursement was necessary under the agreement. For the year ended
December 31, 1996, FTD did not receive any commissions from the sale of the
Fund's shares and FTIS received fees of $5,800.
An officer of the Fund is a partner of Dechert Price & Rhoades, legal counsel
for the Funds, which firm received fees for the year ended December 31, 1996.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the year
ended December 31, 1996 aggregated $697,354,226 and $84,953,490, respectively.
The cost of securities for federal income tax purposes is $1,458,313,504.
Realized gains and losses are reported on an identified cost basis.
At December 31, 1996, the aggregate gross unrealized appreciation and
depreciation of portfolio securities based on cost for federal income tax
purposes, was as follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 256,688,962
Unrealized depreciation (151,237,395)
-------------
Net unrealized appreciation $ 105,451,567
=============
</TABLE>
5. HOLDING OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES
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 December 31, 1996
amounted to $9,645,040. For the year ended December 31, 1996, dividend income
from affiliated companies was $208,017.
26
<PAGE> 29
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Institutional Funds, Inc. -- Emerging Markets Series
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of the Emerging Markets Series of Templeton
Institutional Funds, Inc. as of December 31, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
the three years in the period then ended and the period May 3, 1993
(commencement of operations) to December 31, 1993. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Emerging Markets Series of Templeton Institutional Funds, Inc. as of December
31, 1996, the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles.
[McGLADREY & PULLEN, LLP SIGNATURE]
New York, New York
January 31, 1997
27
<PAGE> 30
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 31
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
[RECYCLE LOGO] Institutional Services: 1-800-321-8563
Fund Information: 1-800-362-6243
