TEMPLETON INSTITUTIONAL FUNDS, INC.
TIFI Emerging Markets Series
SEMIANNUAL REPORT
JUNE 30, 1998
[LOGO] Templeton
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,
ECONOMIC, AND POLITICAL DEVELOPMENTS, AND THEIR RELATIVELY SMALL SIZE AND LESSER
LIQUIDITY. 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, 1998
[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.
PAGE
Dear Shareholder:
We understand that the recent declines in emerging markets, particularly
those in Asia, have been unsettling for many investors. However, market declines
often give us opportunities to buy stocks at attractive prices. In addition, the
factors which helped build the economies of many Asian countries - discipline,
hard work, a high savings rate, and emphasis on education - have not disappeared
as a result of the recent crisis. Economic adjustments take time and problems
are bound to arise along the way to recovery. Some Asian countries are still at
the early stage of a difficult but constructive reform process. Although some
progress has been made in reforming the region's financial and corporate
sectors, there are significant challenges ahead. Our strategy continues to be to
identify and buy stocks of
TOTAL RETURNS AS OF 6/30/98
<TABLE>
<CAPTION>
CUMULATIVE
ONE-YEAR THREE-YEAR FIVE-YEAR SINCE
AVERAGE AVERAGE AVERAGE INCEPTION(1,3)
ANNUAL(1,2) ANNUAL(1,2) ANNUAL(1,2) (05/03/93)
<S> <C> <C> <C> <C>
TIFI Emerging
Markets Series -39.6% -5.6% -0.1% 0.1%
IFC Investable
Composite Index(4) -38.1% -8.1% -0.1% 4.4%
</TABLE>
(1) The Fund's 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 an annual rate of 1.6% of average net assets through
April 30, 1999. 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, 1999, 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, 1997. Past expense waivers by the Fund's Investment Manager and Fund
Administrator increased the Fund's total returns. If they had not taken this
action, the Fund's total returns would have been lower.
(2) Average annual total return represents the average annual change in value of
an investment over the indicated periods.
(3) Cumulative total return represents the change in value of an investment over
the indicated periods.
(4) The IFC Investable Composite Index is unmanaged, does not contain cash, and
does not include management or operating expenses. The index includes
reinvested dividends. One cannot invest directly in an index.
All calculations assume reinvestment of distributions at net asset value.
Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, currency 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 their relatively small size
and lesser liquidity. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
You will find a complete listing of the Fund's portfolio holdings, including
dollar value and number of shares or principal amount, beginning on page 8
of this report.
continued
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
letter continued...............................................................
GEOGRAPHIC DISTRIBUTION ON 6/30/98
(Equity Assets as a Percentage of Total Net Assets)
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Australia/New Zealand 0.5%
Asia 29.0%
Europe 9.9%
Middle-East/Africa 4.4%
Latin America/Caribbean 26.7%
</TABLE>
FUND ASSET ALLOCATION ON 6/30/98
[PIE CHART APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C>
Short-Term Investments &
Other Net Assets 29.5%
Equity* 70.5%
</TABLE>
*Equity includes convertible and preferred securities
high-quality companies at distressed prices that in our view, have the potential
for long-term capital appreciation. Within this challenging environment, the
unmanaged International Finance Corporation ("IFC") Investable Composite Index
reported cumulative total returns of -21.2% and -15.7% for the quarter and
year-to-date periods ended June 30, 1998, compared to -22.2% and -18.4%
cumulative total returns for the Templeton Institutional Funds, Inc. Emerging
Markets Series (the "Fund"). For the one-year, three-year, and five-year periods
ended June 30, 1998, the Fund reported average annual total returns of -39.6%,
- -5.6%, and -0.1% versus the IFC Investable Composite Index average annual total
returns of -38.1%, -8.1%, and -0.1%, respectively.
The first half of 1998 saw declines in most emerging markets. Markets in
Asia continued to be volatile as a result of sharp exchange rate fluctuations,
signs of economic slowdowns, lower corporate earnings, and, in some cases,
political instability. In June, turmoil in Asia resulted in the U.S. dollar
reaching an eight-year high against the Japanese yen as many investors sought
safety in the U.S. dollar. Realizing that further yen weakness could increase
the risk of a downward spiral in Asia, the U.S. and Japan conducted a joint
currency intervention to prop up the yen that resulted in significant rebounds
of most emerging stock markets. The "Asian contagion" has affected Latin
American and other markets, with many investors not appearing to fully
discriminate between regions and countries. The major exceptions were Greece and
Portugal, where euphoria associated with European integration carried the
markets to all-time highs.
In Brazil, privatization remains the driving factor attracting foreign
investors. Uncertainties over the pace of privatization and prices received for
telecom and electric assets have caused volatility. Although there were renewed
worries about the government's ability to control the deficit, we believe the
country's US $71 billion in foreign reserves could help reduce the pressure for
an abrupt devaluation of the Brazilian real.(1) In Mexico, first quarter
earnings for 1998 were generally positive. Although investor sentiment was
affected by the fall in oil prices and the potential impact of the Asian crisis
on Mexico's exports, many Mexican companies look set to report solid earnings
growth in the future. In Argentina, economic growth has remained vibrant.
However, the Argentine market trades at a premium to Brazil and Mexico.
Argentina's growing current account deficit and banking system credit quality
deterioration have caused concerns. As Asian markets are still experiencing
currency turmoil, the Argentine currency peg remains an issue.
In Thailand, where the currency devaluation triggered the financial crisis
in the region, tight credit conditions and weak Asian demand continued to hurt
the export sector. The good news is that re-capitalization of the banks is
underway, and we believe the foundations
(1)Source: Icatu Securities. Brazilian Central Bank Statistics for June 1998.
2
PAGE
INDUSTRY DIVERSIFICATION ON 6/30/98
(Percent of Total Net Assets)
<TABLE>
<CAPTION>
<S> <C>
Finance 18.9%
Services 13.2%
Materials 12.4%
Energy 8.4%
Multi-Industry 8.0%
Consumer Goods 6.3%
Capital Equipment 3.3%
</TABLE>
10 LARGEST POSITIONS ON 6/30/98
(Percent of Total Net Assets)
<TABLE>
<CAPTION>
<S> <C>
Telefonos de Mexico SA
(Telmex), ADR, L 2.8%
Cemex SA 2.3%
Telecomunicacoes Brasileiras SA
(Telebras) 1.9%
Centrais Eletricas Brasileiras SA 1.8%
Banco Comercial Portugues SA 1.8%
HSBC Holdings Plc. 1.6%
Alpha Credit Bank 1.2%
Akbank 1.2%
Investimentos Itau SA, pfd. 1.1%
Telefonica Del Peru SA, ADR, B 1.0%
</TABLE>
for a healthier banking system have been laid. In addition, the country's
agrarian sector is performing relatively well and could absorb returning urban
workers. In Hong Kong, rising unemployment and lower property prices are problem
areas. However, we believe investors should not be too pessimistic about Hong
Kong's long-term prospects based on its track record in crisis management, its
well-established government structure, and the relatively low valuation of share
prices. In China, slower export growth is expected. But the country's foreign
reserves are substantial, and it maintains a current account surplus that could
absorb export declines. In Korea, there have been more bankruptcies despite the
arrival of rescue loans from the International Monetary Fund. The elimination of
foreign investment restrictions should help stimulate merger and acquisition
activities and allow companies to deleverage their over-stretched balance
sheets. In India, the market reacted rather mutely to the imposition of
sanctions in response to nuclear testing in May, reflecting the minimal likely
impact of the sanctions on India's relatively closed economy. Nevertheless, a
nationalistic government and slow down in economic reforms are causes for worry.
In Greece, the drachma's entry into the Exchange Rate Mechanism, combined
with the government's commitment to press on with privatization, attracted
investors' attentions. Positive factors include enhanced credibility in economic
policy, increased liquidity, structural reforms in the public sector and healthy
earnings growth. However, as the positive news was largely discounted, any
unpleasant surprises, such as a delay in the implementation of the much
publicized privatization program, could trigger a re-assessment of the already
rich valuation of the market. In Portugal, we believe stronger economic growth
and lower interest rates are expected. However, we believe the re-rating to
mainstream Europe has largely happened.
In Russia, the financial crisis that erupted in May affected the Eastern
European region. The Russian government's announced fiscal measures gave the
prospect of an improvement, but more Western aid appears necessary to achieve
short-term stabilization. A sustainable recovery depends on the success of the
basic reforms to address the root problems, such as a growing budget deficit and
an inefficient tax system.
This discussion reflects our views, opinions, and portfolio holdings as of
June 30, 1998, the end of the reporting period. However, market and economic
conditions are changing constantly, which can be expected to affect our
strategies and portfolio composition. Although historical performance is no
guarantee of future results, these insights may help you understand our
investment and management philosophy. 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
3
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
letter continued ..............................................................
Total Return Index Comparison
$5,000,000 Investment: 05/03/93-06/30/98
<TABLE>
<CAPTION>
TIFI-Emerging MSCI World IFC Investable
Markets Series(1) Index(4) Composite Index(4)
---------------- -------------- -----------------
<S> <C> <C> <C>
5/3/93 $5,000,000.00 $ 5,000,000.00 $5,000,000.00
5/31/93 $5,010,000.23 $ 5,116,064.50 $5,105,123.25
6/30/93 $5,030,000.21 $ 5,073,963.38 $5,249,919.50
7/31/93 $5,039,999.96 $ 5,179,304.44 $5,413,646.06
8/31/93 $5,414,999.96 $ 5,417,573.16 $5,853,472.02
9/30/93 $5,590,000.15 $ 5,318,339.47 $6,088,690.15
10/31/93 $5,840,000.15 $ 5,465,762.25 $6,613,702.35
11/30/93 $6,039,999.96 $ 5,157,438.61 $7,032,987.22
12/93 $6,646,548.32 $ 5,410,687.92 $8,234,453.50
1/31/94 $6,726,990.58 $ 5,768,451.28 $8,290,438.65
2/28/94 $6,596,271.66 $ 5,694,730.47 $8,076,365.42
3/31/94 $6,256,977.73 $ 5,450,175.95 $7,260,151.76
4/30/94 $5,912,184.64 $ 5,619,615.38 $7,122,001.24
5/31/94 $5,917,255.24 $ 5,635,042.46 $7,290,158.31
6/30/94 $5,775,281.82 $ 5,620,027.33 $7,030,371.34
7/31/94 $5,993,312.31 $ 5,728,185.88 $7,536,050.28
8/31/94 $6,485,149.43 $ 5,901,393.63 $8,500,687.30
9/30/94 $6,556,136.38 $ 5,747,432.16 $8,714,760.27
10/31/94 $6,373,598.64 $ 5,912,171.96 $8,428,044.66
11/30/94 $6,130,215.62 $ 5,656,594.68 $8,104,407.76
12/94 $5,889,310.20 $ 5,712,406.21 $7,232,373.46
1/31/95 $5,458,513.36 $ 5,627,731.21 $6,278,495.72
2/28/95 $5,342,933.30 $ 5,710,871.20 $6,197,145.25
3/31/95 $5,516,644.40 $ 5,987,234.54 $6,183,250.01
4/30/95 $5,706,147.78 $ 6,197,393.65 $6,441,709.85
5/31/95 $5,895,650.66 $ 6,251,280.67 $6,681,985.63
6/30/95 $5,937,762.41 $ 6,250,923.10 $6,721,449.44
7/31/95 $6,211,489.29 $ 6,564,910.71 $6,929,814.37
8/31/95 $6,043,041.79 $ 6,419,839.31 $6,744,095.34
9/30/95 $5,995,666.44 $ 6,608,078.00 $6,692,840.21
10/31/95 $5,779,843.09 $ 6,505,269.52 $6,438,365.04
11/30/95 $5,742,995.43 $ 6,732,380.19 $6,406,178.36
12/95 $5,817,153.12 $ 6,930,469.02 $6,629,071.73
1/31/96 $6,374,517.41 $ 7,057,076.22 $7,189,323.11
2/29/96 $6,271,467.71 $ 7,101,352.17 $7,022,660.22
3/31/96 $6,347,419.41 $ 7,220,823.19 $7,123,583.56
4/30/96 $6,515,599.13 $ 7,391,922.03 $7,411,478.21
5/31/96 $6,624,101.92 $ 7,399,639.42 $7,345,736.91
6/30/96 $6,634,951.94 $ 7,438,384.23 $7,431,977.34
7/31/96 $6,331,144.12 $ 7,176,865.51 $6,944,692.30
8/31/96 $6,461,347.47 $ 7,260,727.18 $7,160,004.85
9/30/96 $6,580,700.80 $ 7,546,351.99 $7,265,960.75
10/31/96 $6,564,425.51 $ 7,600,396.70 $7,109,742.59
11/30/96 $6,776,005.83 $ 8,027,663.65 $7,214,897.81
12/96 $6,914,453.11 $ 7,900,465.33 $7,246,464.51
1/31/97 $7,425,400.70 $ 7,997,034.29 $7,758,769.24
2/28/97 $7,708,421.04 $ 8,090,378.08 $8,138,172.27
3/31/97 $7,552,470.48 $ 7,931,741.94 $7,937,314.04
4/30/97 $7,624,875.70 $ 8,192,393.26 $7,802,205.07
5/31/97 $7,986,904.46 $ 8,700,244.63 $8,066,573.43
6/30/97 $8,276,526.94 $ 9,135,256.86 $8,414,242.74
7/31/97 $8,655,264.55 $ 9,557,305.73 $8,495,860.89
8/31/97 $7,886,650.26 $ 8,919,833.43 $7,411,789.04
9/30/97 $8,254,248.28 $ 9,405,964.36 $7,652,672.19
10/31/97 $6,717,020.23 $ 8,912,151.23 $6,394,572.88
11/30/97 $6,221,319.56 $ 9,071,678.74 $6,091,470.13
12/97 $6,131,706.46 $ 9,183,260.38 $6,170,050.09
1/31/98 $5,635,020.41 $ 9,440,632.18 $5,763,867.24
2/28/98 $6,190,835.97 $10,080,757.74 $6,352,160.10
3/31/98 $6,433,870.12 $10,507,968.66 $6,601,130.47
4/30/98 $6,445,740.43 $10,612,218.43 $6,620,205.10
5/31/98 $5,537,639.01 $10,480,780.37 $5,794,587.01
6/30/98 $5,002,080.00 $10,731,037.93 $5,202,077.27
</TABLE>
Periods ended June 30, 1998
<TABLE>
<CAPTION>
SINCE
INCEPTION
ONE-YEAR FIVE-YEAR (05/03/93)
<S> <C> <C> <C>
Average Annual
Total Return(1,2) -39.6% -0.1% 0.0%
Cumulative Total
Return(1,3) -39.6% -0.5% 0.1%
</TABLE>
(1) The Fund's 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 an annual rate of 1.6% of average net assets through
April 30, 1999. 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, 1999, 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, 1997. Past expense waivers by the Fund's Investment
Manager and Fund Administrator increased the Fund's total returns. If they
had not taken this action, the Fund's total returns would have been lower.
(2) Average annual total return represents the average annual change in value of
an investment over the indicated periods.
(3) Cumulative total return represents the change in value of an investment over
the indicated periods.
(4) Index is unmanaged and includes reinvested dividends. One cannot invest
directly in an index.
All calculations assume reinvestment of distributions at net asset value.
Since markets can go down as well as up, investment return and principal
value will fluctuate with market conditions, currency 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 their relatively small size
and lesser liquidity. You may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.
markets involve heightened risks related to the same factors, in addition to
those associated with their relatively small size and lesser liquidity.
Investing in any emerging market means accepting a certain amount of volatility
and, in some cases, severe market corrections. While short-term volatility can
be disconcerting, declines of as much as 40% to 50% are not unusual in emerging
markets. For example, the Hong Kong equity market has increased 785% in the last
15 years, but has suffered six quarterly declines of more than 20% during that
time.(2) These special risks and other considerations are discussed in the
Fund's prospectus.
Again, we urge investors not to lose heart. We continue to focus on
long-term value and patience during these volatile times. We appreciate your
continued support and look forward to working on your behalf in the future. Our
strategy continues to be to identify and buy stocks of high-quality companies at
distressed prices that, in our view, have the potential for long-term capital
appreciation.
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.
(2)Source: Bloomberg. Based on quarterly percentage price change over 15 years
ended June 30, 1998. Market returns are measured in Hong Kong dollars.
For the most current portfolio information, please call 1-800-362-6243.
4
PAGE
The following are Dr. Mobius' thoughts regarding a recent visit to Korea with
the emerging markets research team.
Country
FOCUS
SEOUL, Korea -- We write this letter from Seoul, the capital of the Republic of
Korea or what is known as South Korea. This country is in the midst of an
economic and financial crisis. When I first arrived here in 1963, the country
was still recovering from the Korean War, World War II, and before that, the
long period of domination by Imperial Japan. Economic conditions were bad then
and many Koreans went to bed hungry. At that time, the government required that
the much loved white rice had to be mixed with barley or beans to save on that
precious commodity, and which also helped enrich the rice with vegetable
proteins and vitamins which were missing from the meager diet of many people.
Today, despite the financial crisis gripping the country, standards of
living in Korea have risen to heights unimaginable compared to when I was living
in Korea. How did the Koreans do it? It certainly was not because of extensive
natural resources, since the country's mineral reserves were mostly in North
Korea, and the beautiful forests had been decimated first by the wars and then
by desperate people seeking firewood to keep warm and cook during the bitter
winters. They did it by pure force of will and determination. They pulled
themselves up "by the bootstraps" and created a high technology industrial
miracle matching Japan in many areas despite a much smaller domestic market.
They became an export powerhouse, covering the world with a wide range of
electronic goods, automobiles, as well as some of the most efficiently produced
steel in the world. But this powerhouse was built on the basis of state planning
modeled on Japan's government -- an industrial structure where banks were
directed to favor loans to the giant chaebols (major business groups), which
leveraged themselves to the hilt and invested heavily in a wide range of
businesses from shipbuilding to shoes to soup pans.
Now, however, with the crisis starting in Thailand with the crash of the
Thai baht, and the spread of that crisis throughout Asia, Korea is faced with
the biggest challenge to its prosperity since the Korean War. The banks are
packed with non-performing loans, and the chaebols are groaning under loans that
they are unable to pay, at least in the near future. The stock market has hit
new lows, and pessimism is the order of the day. However, as we talk with
managers of companies all over Korea, we find the
5
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC. EMERGING MARKETS SERIES
country focus continued .......................................................
beginnings of recovery because of the determination and discipline exhibited
throughout the country. One banker told us that one-quarter of the bank's
workforce had been terminated with the cooperation of the staff union. The
management had all taken 15% pay cuts to show solidarity with the staff. It is
this kind of effort which may put Korea's economy and the stock market back on
their feet in the not too distant future.*
[MAP OF SOUTH KOREA]
* This letter reflects our opinions as of the close of the period. However,
market and economic conditions are changing constantly, which can be expected to
affect our strategies and the Fund's portfolio composition.
6
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1998 ------------------------------------------------------------
(UNAUDITED) 1997 1996 1995 1994 1993+
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period............ $10.37 $12.45 $10.75 $11.21 $13.22 $10.00
-----------------------------------------------------------------------------
Income from investment operations:
Net investment income.......................... .11 .18 .15 .19 .17 .04
Net realized and unrealized gains (losses)..... (2.01) (1.60) 1.86 (.34) (1.65) 3.25
-----------------------------------------------------------------------------
Total from investment operations................ (1.90) (1.42) 2.01 (.15) (1.48) 3.29
-----------------------------------------------------------------------------
Less distributions from:
Net investment income.......................... (.04) (.18) (.15) (.17) (.17) (.04)
Net realized gains............................. -- (.48) (.16) (.14) (.36) (.03)
-----------------------------------------------------------------------------
Total distributions............................. (.04) (.66) (.31) (.31) (.53) (.07)
-----------------------------------------------------------------------------
Net asset value, end of period.................. $8.43 $10.37 $12.45 $10.75 $11.21 $13.22
==============================================================================
Total Return*................................... (18.40)% (11.32)% 18.86% (1.23)% (11.39)% 32.93%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)............... $1,805,107 $1,923,881 $1,565,537 $798,515 $582,878 $422,433
Ratios to average net assets:
Expenses....................................... 1.55%** 1.57% 1.56% 1.52% 1.60% 1.60%**
Expenses, excluding waiver and payments by
affiliate.................................... 1.55%** 1.57% 1.56% 1.52% 1.66% 1.60%**
Net investment income.......................... 2.24%** 1.42% 1.56% 2.00% 1.59% .91%**
Portfolio turnover rate......................... 21.99% 24.72% 7.92% 13.47% 12.51% 9.42%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period May 3, 1993 (commencement of operations) to December 31, 1993.
See Notes to Financial Statements.
7
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
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LONG TERM INVESTMENTS 70.5%
ARGENTINA 3.0%
*Atanor Cia Nacional Para la Industria Quimica SA, D.... Chemicals 1,894,878 $ 1,686,609
Banco de Galicia y Buenos Aires SA, B................... Banking 918,884 4,135,392
Banco Frances SA........................................ Banking 20,481 154,852
*Buenos Aires Embotelladora SA, ADR..................... Beverages & Tobacco 375,300 3,753
Capex SA, A............................................. Utilities Electrical & Gas 104,385 386,263
Central Costanera SA, B................................. Utilities Electrical & Gas 122,711 355,897
+Garovaglio Y Zorraquin SA.............................. Chemicals 1,212,372 2,449,236
Molinos Rio de Plata SA, B.............................. Food & Household Products 3,530,107 7,731,708
Nobleza Piccardo Sdad Industrial Comercial y
Financial............................................. Beverages & Tobacco 155,388 629,384
Perez Companc SA, B..................................... Energy Sources 2,050,360 10,293,837
Quilmes Industrial SA................................... Beverages & Tobacco 675,000 6,581,250
Renault Argentina SA.................................... Automobiles 63,489 126,356
Siderar SA, A........................................... Metals & Mining 123,000 209,121
Sociedad Comercial del Plata Cadelplata Come............ Multi-Industry 6,387,830 7,027,316
Transportadora de Gas del Sur SA, ADR, B................ Energy Sources 18,500 212,750
Transportadora de Gas del Sur SA, B..................... Energy Sources 1,109,773 2,486,140
YPF Sociedad Anonima, ADR............................... Energy Sources 294,045 8,839,728
*Zanella Hermanos SA.................................... Automobiles 625,452 59,424
--------------
53,369,016
--------------
BRAZIL 9.8%
Aracruz Celulose SA, ADR................................ Forest Products & Paper 994,100 11,370,019
Banco Bradesco SA....................................... Banking 1,464,191,809 11,709,990
Banco Bradesco SA, pfd. ................................ Banking 556,458,350 4,642,766
Banco do Brasil SA...................................... Banking 869,168,792 7,169,177
Banco do Brazil SA, pfd. ............................... Banking 360,480,390 4,020,575
Brasmotor SA, pfd. ..................................... Multi-Industry 39,140,000 3,587,100
Centrais Eletricas Brasileiras SA....................... Utilities Electrical & Gas 396,838,000 11,665,651
Centrais Eletricas Brasileiras SA, B, pfd. ............. Utilities Electrical & Gas 719,835,060 21,658,534
*Centrais Geradoras Do Sul Do Brasil SA................. Utilities Electrical & Gas 396,838,000 542,110
*Centrais Geradoras Do Sul Do Brasil SA, pfd. .......... Utilities Electrical & Gas 719,835,060 1,039,361
Cia Energetica de Minas Gerais, ADR..................... Utilities Electrical & Gas 25,300 787,481
*Cia Mesbla SA, pfd. ................................... Merchandising 33,734,000 0
Cia Vale do Rio Doce, pfd., A........................... Metals & Mining 329,031 6,543,068
Companhia Siderurgica Nacional Sid Nacional............. Metals & Mining 351,753,000 8,813,593
Copene-Petroquimica do Nordeste SA, A, pfd. ............ Chemicals 16,004,700 3,542,455
Duratex SA, pfd. ....................................... Forest Products & Paper 191,931,900 7,467,522
Investimentos Itau SA, pfd. ............................ Multi-Industry 30,540,704 19,276,080
*Mannesmann SA.......................................... Machinery & Engineering 18,076,720 2,070,868
*Mannesmann SA, pfd. ................................... Machinery & Engineering 1,623,650 191,620
Marcopolo SA, pfd. ..................................... Automobiles 184,280 315,472
Petrobras-Petroleo Brasileiro SA, pfd. ................. Energy Sources 63,135,666 11,736,269
Telecomunicacoes Brasileiras SA (Telebras).............. Telecommunications 372,407,531 29,622,595
Telecomunicacoes Brasileiras SA, (Telebras) pfd. ....... Telecommunications 35,451,968 3,856,007
Unibanco Uniao de Bancos Brasileiros SA, unit........... Banking 95,872,584 5,669,795
--------------
177,298,108
--------------
CHILE 1.6%
Antofagasta Holdings Plc. .............................. Metals & Mining 177,518 747,878
Cia Cervecerias Unidas SA, ADR.......................... Beverages & Tobacco 5,500 116,188
Compania De Telecomunicaciones De Chile SA, ADR......... Telecommunications 464,610 9,437,391
Empresa Nacional de Electricidad SA, ADR................ Electrical & Electronics 613,200 8,738,100
Enersis SA, ADR......................................... Utilities Electrical & Gas 371,700 9,083,419
Quinenco SA, ADR........................................ Multi-Industry 72,000 648,000
--------------
28,770,976
--------------
CHINA 1.3%
China First Pencil Co Ltd. ............................. Recreation & Other Consumer Goods 835,882 135,413
China Southern Glass Co. Ltd., B........................ Building Materials & Components 5,540,521 1,072,553
</TABLE>
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
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LONG TERM INVESTMENTS (CONT.)
CHINA (CONT.)
China Vanke Co. Ltd., B................................. Real Estate 3,211,512 $ 1,844,363
Chiwan Wharf Holdings Ltd., B........................... Transportation 4,651,700 1,050,574
Guangshen Railway Co. Ltd., ADR......................... Transportation 475,200 3,237,300
Guangshen Railway Co. Ltd., H........................... Transportation 24,682,000 3,280,910
*Luoyang Glass Co. Ltd., H.............................. Misc Materials & Commodities 3,558,000 165,305
Shandong Huaneng Power Development Co. Ltd., ADR........ Utilities Electrical & Gas 348,900 1,875,338
Shanghai Chlor-Alkali Chemical Co. Ltd., B.............. Chemicals 3,840,733 491,614
*Shanghai Dazhong Taxi Shareholding Co. Ltd., B......... Transportation 1,649,900 900,845
*Shanghai Erfangji Textile Machinery Co. Ltd., B........ Machinery & Engineering 2,868,340 258,151
*Shanghai Jin Jiang Tower Co. Ltd., B................... Leisure & Tourism 4,037,640 569,307
*Shanghai Jinqiao Export Processing Zone Development,
B..................................................... Real Estate 1,472,170 412,208
*Shanghai Lujiaxui Finance & Trade Zn Dev Stock Co.
Ltd., B............................................... Real Estate 4,206,440 1,892,898
Shanghai New Asia Group Co. Ltd., B..................... Food & Household Products 2,205,190 467,500
Shanghai Petrochemical Co. Ltd., H...................... Chemicals 25,992,000 2,918,339
*Shanghai Refrigerator Compressor Co. Ltd., B........... Industrial Components 915,240 144,608
*Shanghai Steel Tube Co. Ltd., B........................ Machinery & Engineering 2,091,540 163,140
*Shanghai Tyre & Rubber Co. Ltd., B..................... Industrial Components 3,325,100 538,666
*Shanghai Vacuum Electron Devices Co. Ltd., B........... Appliances & Household Durables 2,322,434 422,683
*Shanghai Wingsung Co. Ltd., B.......................... Recreation & Other Consumer Goods 176,050 27,464
Shanghai Yaohua Pilkington Glass, B..................... Building Materials & Components 4,858,200 631,566
*Shenzhen Properties & Resources Development Ltd., B.... Real Estate 1,392,516 172,523
*Yanzhou Coal Mining Company Ltd. ...................... Energy Sources 5,430,000 1,037,142
--------------
23,710,410
--------------
COLOMBIA 2.2%
Banco Ganadero SA, ADR C................................ Banking 105,200 1,854,150
Bancolombia SA.......................................... Banking 683,969 1,471,040
Bavaria SA.............................................. Beverages & Tobacco 313,838 1,830,466
Cementos Argos SA....................................... Building Materials & Components 2,645,080 8,874,658
Cia Colombiana de Tabacos SA............................ Beverages & Tobacco 2,097,040 3,134,200
Compania Nacional de Chocolates SA...................... Food & Household Products 2,538,413 11,381,607
Compania Suramericana de Inversiones SA................. Insurance 3,239,752 10,156,555
Promigas SA............................................. Utilities Electrical & Gas 122,266 606,151
Valores Bavaria SA...................................... Financial Services 99,286 170,107
--------------
39,478,934
--------------
CZECH REPUBLIC 1.6%
*CEZ AS................................................. Utilities Electrical & Gas 410,030 11,333,008
Elektrarny Opatovice AS................................. Energy Sources 8,251 1,055,821
Komercni Banka AS....................................... Banking 26,122 876,483
Komercni Banka AS, GDR.................................. Banking 69,500 873,963
*Leciva AS.............................................. Health & Personal Care 1,370 104,950
*SPT Telecom AS......................................... Telecommunications 518,300 7,162,766
Tabak AS................................................ Beverages & Tobacco 17,104 4,122,633
Unipetrol............................................... Chemicals 1,275,736 2,791,143
--------------
28,320,767
--------------
ECUADOR .1%
La Cemento Nacional SA, GDR............................. Multi-Industry 5,000 800,000
La Cemento Nacional CA, GDR, 144A....................... Multi-Industry 3,946 631,360
--------------
1,431,360
--------------
EGYPT .2%
Commercial International Bank Ltd. ..................... Banking 256,555 2,827,840
Eastern Tobacco Co. .................................... Beverages & Tobacco 82,560 1,480,695
--------------
4,308,535
--------------
GHANA .3%
Ashanti Goldfields Co. Ltd., GDR........................ Metals & Mining 655,456 5,325,580
--------------
</TABLE>
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EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
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LONG TERM INVESTMENTS (CONT.)
GREECE 1.5%
Alpha Credit Bank....................................... Banking 260,764 $ 21,137,584
*Alpha Credit Bank, rts. ............................... Banking 383,764 681,059
Alpha Leasing SA........................................ Financial Services 153,318 2,644,317
*Etba Leasing........................................... Financial Services 18,018 177,650
Fourlis Brothers Corp. SA............................... Appliances & Household Durables 65,120 802,550
Hellenic Telecommunications Organizations............... Telecommunications 13,216 338,783
Hellenic Telecommunications Organizations, 144A......... Telecommunications 50,450 1,293,250
National Bank of Greece SA.............................. Banking 6,168 790,333
--------------
27,865,526
--------------
HONG KONG 5.2%
CDL Hotel International Ltd. ........................... Leisure & Tourism 2,816,000 835,867
Cheung Kong Holdings Ltd. .............................. Multi-Industry 3,212,000 15,793,459
Citic Pacific Ltd. ..................................... Multi-Industry 10,000 17,681
Cross Harbour Tunnel Co. Ltd. .......................... Transportation 425,010 510,104
Dairy Farm International Holdings Ltd. ................. Merchandising 6,219,577 6,654,947
Goldlion Holdings Ltd. ................................. Textiles & Apparel 51,000 5,726
Great Wall Electronic International Ltd. ............... Electrical & Electronics 689,108 17,698
Hang Lung Development Co. Ltd. ......................... Real Estate 7,588,000 7,540,407
Hong Kong & Shanghai Hotels Ltd. ....................... Leisure & Tourism 1,235,000 617,612
Hong Kong Electric Holdings Ltd. ....................... Utilities Electrical & Gas 1,858,900 5,757,634
HSBC Holdings PLC....................................... Banking 1,185,925 29,003,018
IMC Holdings Ltd. ...................................... Transportation 98,000 11,130
Jardine International Motor Holdings Ltd. .............. Automobiles 164,000 60,321
Jardine Matheson Holdings Ltd. ......................... Multi-Industry 1,148,912 3,160,377
Jardine Strategic Holdings Ltd. ........................ Multi-Industry 722,750 1,373,225
Joyce Boutique Holdings Ltd. ........................... Merchandising 1,524,000 24,585
K Wah International Holdings Ltd. ...................... Building Materials & Components 8,942,124 623,177
Lai Sun Development Co. Ltd. ........................... Real Estate 1,197,000 149,845
Lai Sun Garment International Ltd. ..................... Multi-Industry 760,000 163,797
New World Development Co. Ltd. ......................... Real Estate 4,679,367 9,058,476
Semi-Tech Co. Ltd. ..................................... Appliances & Household Durables 8,289,633 411,882
*Sun Hung Kai & Co. Ltd. ............................... Financial Services 25,800 1,598
*Sun Hung Kai & Co. Ltd., wts. ......................... Financial Services 566,960 6,512
Sun Hung Kai Properties Ltd. ........................... Real Estate 1,606,212 6,819,861
Wheelock and Company Ltd. .............................. Multi-Industry 5,741,000 3,389,654
*Wo Kee Hong Holdings Ltd. ............................. Merchandising 16,303,400 212,509
Yue Yuen Industrial (Holdings) Ltd. .................... Recreation & Other Consumer Goods 897,400 1,604,030
--------------
93,825,132
--------------
HUNGARY 1.2%
Borsodchem RT........................................... Chemicals 34,512 1,008,795
Borsodchem RT, GDR...................................... Chemicals 83,000 2,388,325
Egis RT................................................. Multi-Industry 51,940 1,828,037
Egis RT, certificates................................... Multi-Industry 2,350 82,709
Fotex First Hung-Amer Photo Co., 12.00%, cvt.,
5/11/00............................................... Multi-Industry 16,000** 16,000
Fotex First Hungarian-American Photo Service Co. ....... Multi-Industry 1,892,831 1,522,709
Graboplast Textil Es Muborgyarto Rt..................... Textiles & Apparel 23,650 598,871
*Ibusz RT............................................... Leisure & Tourism 44,270 149,739
Inter-Europa Bank RT.................................... Banking 2,816 172,476
Inter-Europa Bank RT ORD NEW............................ Banking 704 39,097
Pick Szeged RT.......................................... Food & Household Products 10,000 584,606
Pick Szeged RT, GDR..................................... Food & Household Products 54,550 637,805
Tiszai Vegyi Kombinat RT................................ Chemicals 176,615 3,434,943
Tiszai Vegyi Kombinat RT, GDR, 144A..................... Chemicals 272,000 5,358,400
Tiszai Vegyi Kombinat RT, GDR, Reg S.................... Chemicals 157,000 3,092,900
--------------
20,915,412
--------------
</TABLE>
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
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LONG TERM INVESTMENTS (CONT.)
INDIA 2.9%
*Andhra Valley Power Supply Co. Ltd. ................... Utilities Electrical & Gas 17,300 $ 33,375
Arvind Mills Ltd. ...................................... Textiles & Apparel 741,550 741,987
Bajaj Auto Ltd. ........................................ Automobiles 106,600 1,438,943
Bank of Baroda.......................................... Banking 297,900 582,443
Bharat Petroleum Corporation, Ltd. ..................... Energy Sources 57,600 476,772
Bombay Dyeing & Manufacturing Co. Ltd. ................. Chemicals 47,000 77,640
BSES Ltd. .............................................. Utilities Electrical & Gas 100 368
Grasim Industries Ltd. ................................. Multi-Industry 287,850 2,430,167
Great Eastern Shipping Co. Ltd. ........................ Transportation 1,525,200 1,112,181
Gujarat Ambuja Cements Ltd. ............................ Building Materials & Components 447,600 2,759,012
Gujarat Industries Power Ltd. .......................... Energy Equipment & Services 89,000 51,352
Gujarat Narmada Valley Fertilizers Co. Ltd. ............ Chemicals 959,800 500,568
Gujarat Narmada Valley Fertilizers Co. Ltd., ADR........ Chemicals 329,000 789,600
Hindalco Industries Inc. ............................... Metals & Mining 140,025 2,205,704
Hindalco Industries Inc., GDR........................... Metals & Mining 11,000 153,450
Hindustan Organic Chemicals Ltd. ....................... Chemicals 51,800 12,224
Hindustan Petroleum Corporation Ltd. ................... Energy Sources 405,500 3,736,820
India Cements Ltd. ..................................... Building Materials & Components 388,400 458,289
India Cements Ltd., GDR................................. Building Materials & Components 265,658 350,669
Indian Aluminium Co. Ltd. .............................. Metals & Mining 146,600 259,815
Indian Petrochemicals Corp. Ltd. ....................... Chemicals 2,283,800 2,775,592
Indian Rayon & Industries Ltd. ......................... Multi-Industry 169,950 822,177
Indian Rayon & Industries Ltd., GDR..................... Multi-Industry 83,499 267,197
Indo Gulf Fertilisers & Chemicals Corp. Ltd. ........... Chemicals 1,261,700 1,054,022
Indo Gulf Fertilisers & Chemicals Corp. Ltd., GDR....... Chemicals 28,700 20,808
Industrial Credit & Inv. Corp. of India................. Financial Services 1,522,000 2,780,007
Industrial Credit & Inv. Corp. of India, GDR............ Financial Services 29,100 295,001
Industrial Development Bank of India.................... Banking 1,219,500 1,861,986
Larsen & Toubro Ltd. ................................... Multi-Industry 1,078,450 5,835,719
Larsen and Toubro Ltd., GDR Reg S....................... Multi-Industry 136,500 1,245,563
Madras Cements Ltd. .................................... Building Materials & Components 2,535 213,867
Mahanagar Telephone Nigam Ltd. ......................... Telecommunications 393,600 1,657,068
National Aluminium Co. Ltd. ............................ Metals & Mining 1,823,200 903,533
Oriental Bank of Commerce............................... Banking 1,857,600 2,064,731
Reliance Industries Ltd. ............................... Chemicals 377,600 1,276,934
Reliance Industries Ltd., GDR........................... Chemicals 254,100 1,677,060
Shipping Corporation of India Ltd. ..................... Transportation 624,100 572,184
State Bank of India..................................... Banking 74,400 370,990
Steel Authority of India Ltd. .......................... Metals & Mining 1,750,200 371,724
Steel Authority of India Ltd., GDR, 144a................ Metals & Mining 62,000 154,070
Steel Authority of India Ltd., GDR, Reg S............... Metals & Mining 21,000 52,185
Sterlite Industries Ltd. ............................... Metals & Mining 101 419
Tata Chemicals Ltd. .................................... Chemicals 303,850 899,181
*Tata Engineering & Locomotive Co., GDR................. Machinery & Engineering 222,600 712,320
Tata Engineering & Locomotive Co. Telco................. Machinery & Engineering 1,011,450 3,974,193
Tata Hydro-Electric Power Co. .......................... Utilities Electrical & Gas 60,000 122,124
Tata Iron & Steel Co., Ltd. ............................ Metals & Mining 530,900 1,577,352
Thermax Ltd. ........................................... Energy Equipment & Services 5,300 16,472
Wockhardt............................................... Health & Personal Care 24,900 119,461
--------------
51,865,319
--------------
INDONESIA 1.6%
Asia Pulp & Paper Co. Ltd., ADR......................... Forest Products & Paper 476,100 5,356,125
*PT Bank International Indonesia, fgn. ................. Banking 30,245,500 613,084
PT Barito Pacific Timber TBK............................ Forest Products & Paper 28,660,500 484,130
*PT BBL Dharmala Finance, fgn. ......................... Financial Services 2,596,000 228,027
PT BDNI Capital Corporation, fgn. ...................... Financial Services 1,462,000 19,757
+*PT Charoen Pokphand Indonesia......................... Food & Household Products 14,686,500 260,487
PT Ciputra Dev. ........................................ Real Estate 8,149,500 82,596
PT Dharmala Intiland TBK................................ Real Estate 4,795,600 40,503
</TABLE>
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
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LONG TERM INVESTMENTS (CONT.)
INDONESIA (CONT.)
PT Gadjah Tunggal....................................... Automobiles 37,047,500 $ 250,321
PT Gudang Garam......................................... Beverages & Tobacco 3,022,500 1,776,740
PT Hanjaya Mandala Sampoerna............................ Beverages & Tobacco 1,593,500 218,030
PT Indah Kiat Pulp & Paper Corp. ....................... Forest Products & Paper 15,147,000 2,891,235
*PT Indah Kiat Pulp & Paper Corp. TBK, wts. ............ Forest Products & Paper 519,200 60,690
PT Indocement Tunggal Prakarsa.......................... Building Materials & Components 9,455,000 2,555,405
PT Indofoods Sukses Makmur.............................. Food & Household Products 8,166,870 800,133
PT Indosat.............................................. Telecommunications 1,528,500 1,776,365
PT Inter-Pacific Bank, fgn. ............................ Banking 589,500 49,789
PT Jakarta International Hotel & Development............ Real Estate 3,170,000 91,030
PT Kalbe Farma.......................................... Health & Personal Care 1,760,000 47,568
PT Lippo Life Insurance TBK............................. Insurance 5,684,500 105,624
*PT Metrodata Electronic................................ Electrical & Electronics 48,000 6,568
*PT Modern Photo Film Co. .............................. Multi-Industry 167,000 9,309
PT Pakuwon Jati......................................... Real Estate 7,321,750 24,737
*PT Semen Cibinong, loc. ............................... Building Materials & Components 15,482,500 418,446
PT Semen Gresik......................................... Building Materials & Components 5,580,500 3,167,311
*PT Sinar Mas Agro Resources & Technology Corp. ........ Food & Household Products 4,428,600 418,922
PT Sinar Mas Multi Artha, fgn. ......................... Financial Services 5,954,600 1,528,884
PT Sumalindo Lestari Jaya TBK........................... Forest Products & Paper 2,472,000 54,284
PT Summarecon Agung..................................... Real Estate 1,829,902 24,728
PT Tambang Timah (Persero).............................. Metals & Mining 6,510,500 2,914,329
PT Telekomunikasi Indonesia (Persero), B................ Telecommunications 271,500 76,589
PT Tempo Scan Pacific................................... Health & Personal Care 7,092,000 107,818
PT Tjiwi Kimia TBK...................................... Forest Products & Paper 9,950,014 1,243,752
*PT Tjiwi Kimia TBK, wts. .............................. Forest Products & Paper 621,945 34,039
PT Ultra Jaya Milk...................................... Food & Household Products 3,254,300 241,874
PT Unggul Indah Corp. .................................. Chemicals 5,874,000 575,493
*PT United Tractors..................................... Machinery & Engineering 3,617,000 109,976
--------------
28,664,698
--------------
ISRAEL .5%
Clal Industries Ltd. ................................... Multi-Industry 761,491 4,111,514
First International Bank of Israel...................... Banking 80 625
Koor Industries Ltd. ................................... Multi-Industry 35,477 4,097,756
--------------
8,209,895
--------------
JORDAN
Jordan Cement Factories Ltd. ........................... Building Materials & Components 158,750 462,184
--------------
KAZAKHSTAN .1%
*Kazkommertsbank, ADR, 144A............................. Banking 46,646 1,002,889
--------------
MALAYSIA 2.9%
AMMB Holdings Bhd. ..................................... Financial Services 5,021,200 2,639,232
Berjaya Singer Bhd. .................................... Appliances & Household Durables 2,478,000 615,392
Boustead Holdings Bhd. ................................. Food & Household Products 1,465,000 897,191
Cement Industries of Malaysia Bhd. ..................... Building Materials & Components 146,000 75,332
Federal Flour Mills Bhd. ............................... Food & Household Products 1,070,500 797,552
Genting Bhd. ........................................... Leisure & Tourism 2,913,000 5,267,631
Golden Hope Plantations Bhd. ........................... Misc Materials & Commodities 200,000 183,243
Hong Leong Industries Bhd., wts. ....................... Multi-Industry 221,250 18,137
Hong Leong Industries Bhd. ............................. Multi-Industry 2,361,000 1,753,316
Hong Leong Properties Bhd. ............................. Real Estate 3,826,000 544,265
Island & Peninsula Bhd. ................................ Real Estate 1,792,000 747,477
Kian Joo Can Factory Bhd. .............................. Industrial Components 934,000 855,744
Leader Universal Holdings Bhd. ......................... Industrial Components 10,027,000 1,498,913
Malayawata Steel Bhd. .................................. Metals & Mining 1,696,500 417,222
Malaysian Airlines System Bhd. ......................... Transportation 3,207,000 1,059,335
Malaysian International Shipping Corp., fgn. ........... Transportation 2,112,333 3,081,281
</TABLE>
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EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
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LONG TERM INVESTMENTS (CONT.)
MALAYSIA (CONT.)
MBF Capital Bhd. ....................................... Financial Services 21,385,000 $ 3,583,502
Oriental Holdings Bhd. ................................. Automobiles 1,190,760 1,981,011
Perlis Plantations Bhd. ................................ Multi-Industry 2,699,250 2,342,929
Perusahaan Otomobil Nasional Bhd. ...................... Automobiles 1,803,000 1,152,007
Public Bank Bhd. ....................................... Banking 10,237,800 3,036,165
Public Bank Bhd., fgn. ................................. Banking 5,009,800 1,509,885
Public Finance Bhd., fgn. .............................. Financial Services 1,858,000 450,221
*Renong Bhd. ........................................... Multi-Industry 20,066,000 3,338,286
Renong, 4.00%, conv., 5/22/01........................... Multi-Industry 42,400** 1,942
Resorts World Bhd. ..................................... Leisure & Tourism 8,222,000 9,039,740
Shangri La Hotels (Malaysia) Bhd. ...................... Leisure & Tourism 2,948,000 703,682
Tanjong Plc. ........................................... Recreation & Other Consumer Goods 1,509,000 2,092,043
Technology Resources Industries Bhd. ................... Multi-Industry 4,083,000 2,805,678
YTL Corp. Berhad........................................ Construction & Housing 354,000 266,300
--------------
52,754,654
--------------
MEXICO 8.3%
Alfa SA de CV, A........................................ Multi-Industry 426,774 1,771,497
*Altos Hornos de Mexico SA.............................. Metals & Mining 2,723,700 2,879,496
Cemex SA................................................ Building Materials & Components 280,436 1,053,273
Cemex SA, B............................................. Building Materials & Components 9,347,875 41,090,704
*Cifra SA, C............................................ Merchandising 7,310,602 10,153,162
Coca Cola Femsa SA de CV, ADR........................... Beverages & Tobacco 116,200 2,018,975
Cydea SA de CV.......................................... Multi-Industry 349,231 575,186
DESC SA de CV DESC, A................................... Multi-Industry 81,000 396,617
DESC SA de CV DESC, B................................... Multi-Industry 463,544 2,362,599
DESC SA de CV DESC, C................................... Multi-Industry 87,807 429,947
*Grupo Financiero Banamex Accival SA, B................. Banking 1,917,000 3,733,307
*Grupo Financiero Banamex Accival SA, L................. Banking 7,831,018 12,897,737
Grupo Financiero Bancomer SA de CV, B................... Banking 10,243,934 3,818,960
Grupo Financiero Bancomer SA de CV, L................... Banking 24,156,553 5,900,694
*Grupo Financiero Serfin SA de CV, B.................... Banking 15,180,114 1,723,093
Hylsamex SA de CV, B.................................... Metals & Mining 100,000 344,981
Nacional de Drogas SA................................... Health & Personal Care 494,500 353,843
Panamerican Beverages Inc., A........................... Food & Household Products 68,100 2,140,894
Telefonos de Mexico SA (Telmex), ADR, L................. Telecommunications 1,050,700 50,499,147
Vitro SA................................................ Food & Household Products 2,786,692 5,892,182
--------------
150,036,294
--------------
NEW ZEALAND .5%
Brierley Investments Ltd. .............................. Wholesale & International Trade 17,719,000 8,830,021
--------------
PAKISTAN .5%
*Bank of Punjab......................................... Banking 562,360 84,162
DG Khan Cement Co. ..................................... Building Materials & Components 954,400 95,223
Engro Chemical Pakistan Ltd. ........................... Chemicals 761,087 817,131
Fauji Fertilizer Co. Ltd. .............................. Chemicals 357,500 387,702
*Khadim Ali Sham Bukhari & Co. Ltd. .................... Financial Services 217,120 98,894
National Development Leasing Corp. ..................... Financial Services 192,868 16,733
*Pakistan Electron Ltd. ................................ Appliances & Household Durables 109,000 9,457
*Pakistan International Airlines Corp. ................. Transportation 404,300 30,692
Pakistan Telecom Corp. PTC.............................. Telecommunications 27,000 931,500
Pakistan Telecommunications Corp., PTC, A............... Telecommunications 16,303,600 5,728,626
*Union Bank Ltd. ....................................... Banking 510,878 77,565
--------------
8,277,685
--------------
PERU 1.0%
Telefonica Del Peru SA, ADR B........................... Telecommunications 903,930 18,474,069
--------------
</TABLE>
13
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
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SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
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<S> <C> <C> <C>
LONG TERM INVESTMENTS (CONT.)
PHILIPPINES .9%
*A Soriano Corp. ....................................... Multi-Industry 43,826,500 $ 1,177,115
Ayala Corp., B.......................................... Multi-Industry 1,804,460 465,179
*Belle Corp. ........................................... Real Estate 37,726,000 958,982
*Digital Telecommunications Philippines Inc. ........... Telecommunications 21,286,000 663,592
Filinvest Development Corp. ............................ Real Estate 9,731,000 490,050
*Keppel Philippine Holdings Inc., B..................... Machinery & Engineering 1,043,625 25,027
*Metro Pacific Corp. MDI................................ Multi-Industry 28,699,050 653,815
*Petron Corporation..................................... Energy Sources 4,085,000 431,031
*Philex Mining Corp., B................................. Metals & Mining 19,380,915 348,578
Philippine Commercial International Bank Inc. .......... Banking 654,950 2,387,348
Philippine Long Distance Telephone Co., ADR............. Telecommunications 110,810 2,507,076
*Philippine National Bank............................... Banking 548,263 650,816
RFM Corp. .............................................. Food & Household Products 22,857,100 3,288,791
RFM Corporation, 10.00%, conv., pfd. ................... Food & Household Products 3,834,927** 551,788
Sime Darby Pilipinas Inc. .............................. Industrial Components 943,400 667,393
*Southeast Asia Cement Holdings Inc. ................... Building Materials & Components 12,348,000 103,640
--------------
15,370,221
--------------
POLAND 1.7%
Bank Handlowy W Warszawie SA............................ Banking 155,294 2,961,586
Bank Przemyslowo-Handlowy SA............................ Banking 53,751 3,853,671
Big Bank Gdanski SA, G.................................. Banking 7,739,414 10,320,698
Big Bank Gdanski SA, GDR................................ Banking 58,767 1,140,073
*Elektrim SA............................................ Multi-Industry 92,500 1,127,402
Farm Food SA............................................ Food & Household Products 53,452 390,888
Gorazdze SA............................................. Building Materials & Components 42,550 774,857
Huta Olawa SA........................................... Metals & Mining 20,221 51,611
*Impexmetal SA, A....................................... Metals & Mining 183,151 1,370,875
Mostostal Export SA..................................... Construction & Housing 721,615 1,117,500
*Orbis SA............................................... Leisure & Tourism 21,426 190,481
Polifarb Cieszyn Wroclaw SA............................. Chemicals 356,525 920,196
*Raciborska Fabryka Kotlow SA........................... Energy Equipment & Services 17,632 48,795
+*Rolimpex SA........................................... Wholesale & International Trade 1,145,299 1,970,689
Warta SA................................................ Insurance 122,566 2,179,264
Wielkopolski Bank Kredytowy SA.......................... Banking 248,622 1,925,091
Zaklady Piwowarskie W Zywcu SA.......................... Beverages & Tobacco 1,520 183,080
*Zaklady Plyt Wiorowych Grajewo AS...................... Forest Products & Paper 6,829 171,361
--------------
30,698,118
--------------
PORTUGAL 2.2%
*Banco Comercial Portugues SA ORD NEW................... Banking 856,942 24,332,291
Banco Comercial Portugues SA............................ Banking 282,782 7,883,972
*Banco Espirito Santo E Comercial De Lisboa............. Banking 169,489 4,951,993
BPI Socieda de Gestora de Participacoes Socias SA....... Banking 89,873 2,900,243
--------------
40,068,499
--------------
RUSSIA 1.4%
Aeroflot................................................ Transportation 13,500 924,750
*Chelyabenergo.......................................... Telecommunications 1,860,000 168,330
GUM Trade House......................................... Merchandising 540,000 769,500
Irkutskenergo........................................... Utilities Electrical & Gas 11,381,800 1,115,416
*JSC Chernogorneft...................................... Energy Sources 3,000 9,750
*Kamaz.................................................. Automobiles 794,380 432,937
*Krasnoyarsk Aluminum Plant............................. Metals & Mining 23,086 277,032
Lukoil-Holdings......................................... Energy Sources 43,000 361,200
Mosenergo............................................... Utilities Electrical & Gas 28,560,000 1,428,000
Norilsk Nickel.......................................... Metals & Mining 146,000 302,950
*Novorosissk Sea Shipping............................... Transportation 1,010,000 212,100
*Noyabrskneftegaz....................................... Energy Sources 54,959 72,821
</TABLE>
14
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
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INDUSTRY PRINCIPAL AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
RUSSIA (CONT.)
*Primorsk Sea Shipping.................................. Transportation 67,800 $ 115,260
*Purneftegaz............................................ Energy Sources 586,000 1,435,700
*Red October............................................ Food & Household Products 67,000 366,825
*Rostelekom............................................. Telecommunications 2,511,000 5,687,415
Rostelekom, pfd. ....................................... Telecommunications 2,195,200 2,436,672
*Saint Petersburg City Telephone Network, pfd., A....... Telecommunications 285,000 69,825
*St. Petersburg International Telephone................. Telecommunications 143,970 97,900
*St. Petersburg MMT, pfd................................ Telecommunications 152,100 95,063
*Tyumen Aviatrans....................................... Telecommunications 1,930,000 67,550
Unified Energy System................................... Utilities Electrical & Gas 63,010,000 8,128,290
Unified Energy System, pfd. ............................ Utilities Electrical & Gas 4,930,000 305,660
*Uralmash Zavody........................................ Machinery & Engineering 27,684 179,946
--------------
25,060,892
--------------
SINGAPORE 3.3%
Acer Computer International Ltd. ....................... Electrical & Electronics 2,327,000 814,450
*Acer Computer International Ltd., wts. ................ Electrical & Electronics 93,800 5,628
Acma Ltd. .............................................. Electrical & Electronics 1,680,600 1,014,627
*Acma Ltd., wts. ....................................... Electrical & Electronics 79,150 5,153
Asia Pacific Breweries Ltd. ............................ Beverages & Tobacco 93,000 208,624
British American Tobacco Co. (Singapore) Ltd. .......... Beverages & Tobacco 44,000 101,569
Chemical Industries (Far East) Ltd. .................... Chemicals 606,900 754,359
*Chemical Industries (Far East) Ltd., wts. ............. Chemicals 184,800 24,884
City Developments Ltd. ................................. Construction & Housing 1,601,000 4,472,755
Cycle & Carriage Ltd. .................................. Automobiles 1,644,000 4,009,044
Delgro Corp. ........................................... Transportation 1,260,200 902,540
First Capital Corp. Ltd. ............................... Real Estate 3,441,000 1,171,101
Fraser and Neave Ltd. .................................. Beverages & Tobacco 2,056,000 5,524,854
GP Batteries International Ltd. ........................ Electrical & Electronics 24,000 43,753
*GP Batteries International Ltd., wts. ................. Electrical & Electronics 9,250 4,818
Hai Sun Hup Group Ltd. ................................. Transportation 4,212,000 984,753
*Hai Sun Hup Group Ltd., wts. .......................... Transportation 870,400 36,063
Hinds Hotels International Ltd. ........................ Leisure & Tourism 414,000 257,295
*Hong Leong Finance Ltd., fgn. ......................... Financial Services 478,000 390,435
Hour Glass Ltd. ........................................ Merchandising 320,000 56,822
*Inchcape Marketing Services Ltd. ...................... Broadcasting & Publishing 1,458,000 349,506
Inchcape Motores Ltd. .................................. Wholesale & International Trade 1,441,000 989,381
Isetan (Singapore) Ltd. ................................ Merchandising 68,000 64,197
Jaya Holdings Ltd. ..................................... Transportation 718,000 169,991
*Jaya Holdings Ltd., wts. .............................. Transportation 75,240 1,447
Jurong Shipyard Ltd. ................................... Machinery & Engineering 1,876,000 9,049,660
Keppel Corp., Ltd. ..................................... Transportation 3,277,000 4,926,653
MCL Land Ltd. .......................................... Real Estate 5,173,000 1,852,421
Metro Holdings Ltd. .................................... Wholesale & International Trade 985,000 594,673
Natsteel Ltd. .......................................... Metals & Mining 5,447,000 5,287,410
*Neptune Orient Lines Ltd. ............................. Transportation 3,741,000 1,295,345
*Osprey Maritime Ltd. .................................. Transportation 1,003,000 463,060
Osprey Maritime Ltd., cvt., pfd. ....................... Transportation 179,280 63,669
*Overseas Union Enterprise Ltd. ........................ Leisure & Tourism 1,463,000 2,156,182
Prima Ltd. ............................................. Food & Household Products 98,000 154,584
Republic Hotels & Resorts Ltd. ......................... Leisure & Tourism 657,000 272,211
Robinson & Co., Ltd. ................................... Merchandising 264,200 672,424
SBS Bus Service Ltd., fgn. ............................. Transportation 354,600 145,870
Sembawang Corp. Ltd. ................................... Multi-Industry 3,188,000 3,755,028
Singapore Petroleum Company, fgn. ...................... Chemicals 87,000 31,154
Tibs Holdings Ltd. ..................................... Transportation 89,500 34,963
Times Publishing Ltd. .................................. Broadcasting & Publishing 278,000 460,728
United Industrial Corporation Ltd. ..................... Real Estate 17,164,000 4,927,221
United Overseas Land Ltd. .............................. Real Estate 2,752,000 1,482,285
</TABLE>
15
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
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SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
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LONG TERM INVESTMENTS (CONT.)
SINGAPORE (CONT.)
*Van Der Horst Ltd. .................................... Machinery & Engineering 551,000 $ 97,840
WBL Corp. Ltd. ......................................... Multi-Industry 446,000 290,382
--------------
60,371,812
--------------
SLOVAK REPUBLIC .2%
Nafta Gbely AS.......................................... Utilities Electrical & Gas 99,331 1,413,602
Slovakofarma AS......................................... Health & Personal Care 348 33,657
Slovnaft AS............................................. Chemicals 106,971 2,100,814
Vychodoslovenske Zeleziarne AS.......................... Metals & Mining 68,977 569,344
--------------
4,117,417
--------------
SOUTH AFRICA 3.3%
Aeci Ltd. .............................................. Chemicals 716,100 2,847,649
Alpha Ltd. ............................................. Building Materials & Components 106,100 780,017
Anglo American Industrial Corp. Ltd. ................... Multi-Industry 413,707 6,843,274
Anglo-American Corp of South Africa Ltd. ............... Metals & Mining 96,500 3,224,728
Anglovaal Industried Ltd. .............................. Multi-Industry 1,463,370 1,589,291
Bonnita Holdings Ltd. .................................. Food & Household Products 197,000 83,935
BTR Dunlop Ltd. ........................................ Industrial Components 1,573,400 557,328
CG Smith Ltd. .......................................... Multi-Industry 803,000 2,186,951
De Beers/Centenary Linked Units, Reg. .................. Misc Materials & Commodities 186,500 3,247,001
*Del Monte Royal Foods Ltd. ............................ Food & Household Products 4,463,450 2,013,586
Edgars Stores Ltd. ..................................... Textiles & Apparel 316,861 2,779,482
Engen Ltd. ............................................. Energy Sources 2,270,141 6,220,604
Kersaf Investments Ltd. ................................ Leisure & Tourism 393,600 1,775,639
Malbak Ltd. ............................................ Multi-Industry 2,146,025 1,434,269
McCarthy Retail Ltd. ................................... Multi-Industry 561,728 516,208
McCarthy Retail Ltd., zero coupon, cvt., 9/30/03........ Multi-Industry 66,833** 75,376
Palabora Mining Co. Ltd. ............................... Metals & Mining 304,205 1,601,101
Polifin Ltd. ........................................... Chemicals 67,900 60,129
*Rainbow Chicken Ltd. .................................. Food & Household Products 197,716 13,214
Rembrandt Group Ltd. ................................... Multi-Industry 322,870 1,996,022
Reunert Ltd. ........................................... Electrical & Electronics 2,296,000 2,570,292
*Sappi Ltd. ............................................ Forest Products & Paper 1,300,760 4,835,741
Sasol Ltd. ............................................. Energy Sources 387,500 2,223,997
South African Breweries Ltd. ........................... Beverages & Tobacco 106,095 2,162,672
South African Iron & Steel Industrial Corp. Ltd. ....... Metals & Mining 27,186,652 5,087,561
Sun International (South Africa) Ltd. .................. Leisure & Tourism 4,624,028 1,537,480
Tongaat-Hulett Group Ltd. .............................. Multi-Industry 152,400 1,126,767
Toyota South Africa Limited............................. Automobiles 73,500 264,035
Voltex Holdings Ltd. ................................... Electrical & Electronics 310,894 114,280
--------------
59,768,629
--------------
SOUTH KOREA 2.7%
Asia Cement Manufacturing Company Ltd. ................. Building Materials & Components 91,810 434,643
*Boram Bank Co. Ltd. ................................... Banking 712,349 1,255,561
BYC Co. Ltd. ........................................... Textiles & Apparel 7,180 196,103
*Cho Hung Bank Co. Ltd. ................................ Banking 300,000 182,447
*Cho Hung Bank Co. Ltd., GDR............................ Banking 240,000 150,000
*Cho Hung Bank Co. Ltd., GDR 144A....................... Banking 700,000 437,500
*Daegu Bank Co. Ltd. ................................... Banking 439,542 464,192
Daewoo Electric Components Co. Ltd. .................... Electronic Components & 290,000 485,798
Instruments
*Daewoo Electronics Co. ................................ Electrical & Electronics 1,058,900 2,776,431
Dongbu Steel Co. Ltd. .................................. Metals & Mining 116,000 232,338
Dongkuk Steel Mill Co. Ltd. ............................ Metals & Mining 200,660 701,506
Hae In Corp. Ltd. ...................................... Merchandising 55,000 220,721
Hana Bank............................................... Banking 165,723 597,472
Hana Bank, GDR.......................................... Banking 607,889 2,158,006
Hankook Cosmetics Co. Ltd. ............................. Health & Personal Care 14,940 81,610
</TABLE>
16
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
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SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
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<S> <C> <C> <C>
LONG TERM INVESTMENTS (CONT.)
SOUTH KOREA (CONT.)
*Hotel Shilla Co. ...................................... Leisure & Tourism 216,490 $ 711,122
Korea Electric Power Corp. ............................. Utilities Electrical & Gas 1,318,720 14,070,829
*Kyong Nam Bank......................................... Banking 365,750 314,337
Kyung Dong Boiler Co. Ltd. ............................. Energy Equipment & Services 27,573 142,584
LG Electronics Inc. .................................... Electrical & Electronics 193,000 1,581,391
LG Industrial Systems Ltd. ............................. Electrical & Electronics 268,000 653,897
Moon Bae Steel Co. Ltd. ................................ Metals & Mining 9,000 37,429
Saehan Precision Co. Ltd. .............................. Electrical & Electronics 48,218 516,245
Samsung Display Devices Ltd. ........................... Electrical & Electronics 173,229 4,731,309
Samsung Electronics Co. Ltd. ........................... Multi-Industry 309,237 9,572,158
*Samsung Heavy Industries Co. Ltd. ..................... Machinery & Engineering 704,000 3,512,309
Seah Steel Corp. ....................................... Metals & Mining 16,483 67,229
Shin Poong Paper Manufacturing Co. Ltd. ................ Forest Products & Paper 32,692 216,677
Shin Young Wocoal Inc. ................................. Textiles & Apparel 8,210 283,433
Ssangyong Oil Refining Co. Ltd. ........................ Energy Equipment & Services 318,660 2,158,440
*Tong Yang Merchant Bank................................ Financial Services 274,596 673,990
--------------
49,617,707
--------------
SRI LANKA
Aitken Spence & Co. Ltd. ............................... Multi-Industry 46,533 67,594
Associated Motorways Ltd. .............................. Automobiles 4,432 2,609
*Ceylon Holiday Resorts Inc. ........................... Leisure & Tourism 90,300 38,661
*Lanka Walltile Ltd. ................................... Building Materials & Components 8,000 1,284
National Development Bank of Sri Lanka.................. Banking 280,000 535,168
United Motor Lanka Ltd. ................................ Automobiles 74,400 36,688
--------------
682,004
--------------
THAILAND 3.7%
Advanced Info Service Ltd., fgn. ....................... Telecommunications 675,800 2,875,745
American Standard Sanitaryware Public Co. Ltd., fgn. ... Building Materials & Components 180,200 719,948
*Asia Fibre Public Co. Ltd., fgn. ...................... Textiles & Apparel 444,200 14,702
Ayudhya Insurance Public Co. Ltd., fgn. ................ Insurance 186,800 680,076
Bangkok Bank Public Co. Ltd. ........................... Banking 11,434,600 11,758,986
Bangkok Bank Public Co. Ltd., fgn. ..................... Banking 44,500 54,704
Bangkok Insurance Public Co. Ltd. BKI................... Insurance 85,000 391,844
Bangkok Insurance Public Co. Ltd. BKI, fgn. ............ Insurance 4,900 37,069
Bank of Ayudhya Public Co. Ltd., fgn. .................. Banking 13,076,000 1,700,189
Banpu Public Co. Ltd. .................................. Energy Sources 501,800 486,378
Banpu Public Co. Ltd., fgn. ............................ Energy Sources 47,400 77,319
Charoen Pokphand Feedmill Public Co. Ltd. .............. Food & Household Products 2,408,700 1,765,241
Charoen Pokphand Feedmill Public Co. Ltd., fgn. ........ Food & Household Products 523,500 439,344
*Dusit Thani Public Company Ltd., fgn. ................. Leisure & Tourism 135,000 130,213
*Hana Microelectronics Co. Ltd., fgn. .................. Electrical & Electronics 814,800 2,080,340
*Hua Thai Manufacturing Public Co. Ltd. ................ Textiles & Apparel 125,100 171,532
Industrial Finance Corp. of Thailand.................... Financial Services 1,744,417 346,409
Industrial Finance Corp. of Thailand, fgn. ............. Financial Services 10,569,883 2,173,948
*Italian-Thai Development Public Co. Ltd. .............. Construction & Housing 30,000 15,248
*Italian-Thai Development Public Co. Ltd., fgn. ........ Construction & Housing 695,100 353,301
*Jasmine International Public Co. Ltd. ................. Telecommunications 521,000 166,277
*Jasmine International Public Co. Ltd., fgn. ........... Telecommunications 4,140,000 1,345,745
*Karat Sanitaryware Public Co. Ltd., fgn. .............. Building Materials & Components 311,466 46,389
Kian Gwan (Thailand) Public Co. Ltd., fgn. ............. Real Estate 104,000 121,702
*Land and House Public Co. Ltd. ........................ Real Estate 3,088,011 547,520
*Land and House Public Co. Ltd., fgn. .................. Real Estate 2,045,871 483,657
*National Petrochemical Public Company Ltd., fgn. ...... Chemicals 343,200 95,333
*Phatra Thanakit Public Co. Ltd., fgn. ................. Financial Services 6,930,413 622,590
Regional Container Lines Public Co. Ltd. ............... Transportation 108,997 85,033
Regional Container Lines Public Co. Ltd., fgn. ......... Transportation 486,903 460,428
Saha Pathanapibul Public Co. Ltd., fgn. ................ Food & Household Products 593,100 496,003
Saha Union Public Co. Ltd. ............................. Multi-Industry 4,696,100 2,692,209
</TABLE>
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
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SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
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<S> <C> <C> <C>
LONG TERM INVESTMENTS (CONT.)
THAILAND (CONT.)
Saha Union Public Co. Ltd., fgn. ....................... Multi-Industry 1,074,300 $ 653,977
*Sanyo Universal Electric Public Co. Ltd., fgn. ........ Appliances & Household Durables 575,900 108,917
*Serm Suk Public Co. Ltd. .............................. Food & Household Products 410,000 1,938,534
*Serm Suk Public Co. Ltd., fgn. ........................ Food & Household Products 8,200 58,156
*SG Asia Credit Public Co. Ltd. ........................ Financial Services 40,000 7,943
*SG Asia Credit Public Co. Ltd., fgn. .................. Financial Services 170,130 59,324
Shinawatra Computer & Comm. Public Co. Ltd. ............ Electrical & Electronics 25,500 71,738
*Siam Cement Public Co. Ltd. ........................... Building Materials & Components 807,000 3,434,043
*Siam Cement Public Co. Ltd., fgn. ..................... Building Materials & Components 357,000 1,721,702
Siam Commercial Bank Ltd., fgn. ........................ Banking 4,643,832 1,482,074
Siam Commercial Bank Ltd., loc. ........................ Banking 3,347,634 1,028,824
Siam Makro Public Company Ltd., fgn. ................... Merchandising 1,763,000 2,417,352
*Sino-Thai Engineering & Construction Public Co.,
fgn. ................................................. Construction & Housing 893,900 99,322
Thai Airways International Public Co. Ltd., fgn. ....... Transportation 1,747,400 1,456,167
*Thai Asahi Glass Public Co. Ltd. ...................... Building Materials & Components 94,910 7,853
*Thai Asahi Glass Public Co. Ltd., fgn. ................ Building Materials & Components 32,000 2,648
*Thai Engine Manufacturing Public Company Ltd. ......... Machinery & Engineering 405,000 141,223
Thai Farmers Bank Public Co. Ltd. ...................... Banking 13,619,800 9,820,423
*Thai Investments and Securities Ltd. .................. Financial Services 1,450,600 171,466
Thai Military Bank Ltd., fgn. .......................... Banking 10,181,700 1,251,651
*Thai Petrochemical Industry Public Co. Ltd., fgn. ..... Chemicals 5,528,960 392,125
Thai Plastic and Chemical Co. Ltd., fgn. ............... Chemicals 2,200 4,083
Thai Rayon Public Co. Ltd. ............................. Textiles & Apparel 33,546 45,600
Thai Rayon Public Co. Ltd., fgn. ....................... Textiles & Apparel 38,214 51,946
*Thai Telephone & Telecommunication Public Co. Ltd. .... Telecommunications 37,000 4,286
*Thai Telephone & Telecommunication Public Co. Ltd.,
fgn. ................................................. Telecommunications 6,479,500 811,852
Thai Wacoal Public Co. Ltd., fgn. ...................... Textiles & Apparel 236,550 575,996
*Tipco Asphalt Public Co. Ltd., fgn. ................... Building Materials & Components 1,434,200 1,627,461
*Total Access Communication Public Co. Ltd. ............ Telecommunications 2,823,800 3,021,466
*United Communications Industries, fgn. ................ Telecommunications 3,087,000 1,459,574
United Motor Works (Siam) Public Co. Ltd. .............. Machinery & Engineering 2,100 1,390
--------------
67,364,538
--------------
TURKEY 4.0%
Akbank ORD New.......................................... Banking 444,833,592 14,360,244
Akbank.................................................. Banking 281,211,520 8,022,551
Alarko Sanayii ve Ticaret SA............................ Appliances & Household Durables 3,833,998 241,064
*Anadolu Anonim Turk Sigorta Sirketi, br. .............. Insurance 21,308,000 363,932
Arcelik AS.............................................. Appliances & Household Durables 95,960,854 4,502,668
Beko Elektronik AS...................................... Appliances & Household Durables 63,877,200 1,678,455
Borusan AS.............................................. Industrial Components 4,688,000 193,574
*Cimentas Izmir Cimento Fabrikasi Turk AS............... Building Materials & Components 31,258,625 1,760,058
Erciyas Biracilik....................................... Food & Household Products 29,847,000 4,537,551
*Eregli Demir ve Celik Fabrikalari AS................... Metals & Mining 46,002,000 7,166,227
*Finansbank ORD New..................................... Banking 75,355,420 876,884
Finansbank.............................................. Banking 112,927,481 1,610,827
Izocam Ticaret ve Sanayii AS, br. ...................... Building Materials & Components 24,204,776 381,607
Kartonsan............................................... Forest Products & Paper 17,680,250 1,377,122
Koc Holding AS.......................................... Multi-Industry 14,636,591 2,856,992
Marshall Boya ve Vernik Sanayii AS...................... Industrial Components 6,022,568 847,771
*Netas Northern Electric Telekomunic Asyon AS........... Electrical & Electronics 2,143,000 571,145
Sabanci Holdings AS, ADR................................ Multi-Industry 720,000 11,088,000
Tat Konserve Sanayii AS................................. Food & Household Products 13,990,210 467,391
*Tofas Turk Otomobil Fabrikasi AS....................... Automobiles 33,404,125 1,410,647
Turk Demir Dokum, br. .................................. Appliances & Household Durables 25,494,646 435,438
*Turkiye Garanti Bankasi AS............................. Banking 169,658,345 7,801,482
Vakif Finansal Kiralama AS.............................. Financial Services 35,843,612 518,010
--------------
73,069,640
--------------
</TABLE>
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TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1998 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
SHARES/
INDUSTRY PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
LONG TERM INVESTMENTS (CONT.)
VENEZUELA .7%
Ceramica Carabobo CA, A................................. Building Materials & Components 332,420 $ 66,153
Ceramica Carabobo CA, A, ADR............................ Building Materials & Components 31,585 62,855
Ceramica Carabobo CA, B................................. Building Materials & Components 1,243,290 260,914
Corporacion Industrial Carabobo Saca SIC, B............. Building Materials & Components 6,750,959 77,554
Electricidad de Caracas SAICA SACA...................... Utilities Electrical & Gas 13,654,677 6,169,561
Industrias Ventane IVE.................................. Utilities Electrical & Gas 1,120,000 48,629
*International Briquettes Holdings...................... Metals & Mining 39 215
*Manufacturera de Aparatos Domesticos SA................ Appliances & Household Durables 180,613 65,023
Mavesa SA, ADR.......................................... Food & Household Products 1,092,112 3,481,107
Siderurgica Venezolana Sivensa Saica Svs., ADR, A....... Metals & Mining 33,771 207,421
Vencemos de Cementos SA................................. Building Materials & Components 1,043,634 1,038,432
Venezolana de Cementos-Vencemos, #2..................... Building Materials & Components 688,996 684,939
--------------
12,162,803
--------------
ZIMBABWE .1%
Delta Corp. ............................................ Multi-Industry 492,604 322,750
Meikles Africa Ltd. .................................... Multi-Industry 115,000 140,875
TA Holdings............................................. Multi-Industry 25,000 1,458
Zimbabwe Sun Ltd. ...................................... Multi-Industry 2,685,627 417,532
--------------
882,615
--------------
TOTAL LONG TERM INVESTMENTS (COST $1,999,605,653)....... 1,272,432,359
--------------
SHORT TERM INVESTMENTS (COST $493,801,924) 27.4%
U.S. Treasury Bills, 4.935% to 5.13% with maturities to
12/17/98.............................................. 501,912,000 494,000,267
--------------
TOTAL INVESTMENTS (COST $2,493,407,577) 97.9%........... 1,766,432,626
OTHER ASSETS, LESS LIABILITIES 2.1%..................... 38,674,544
--------------
TOTAL NET ASSETS 100.0%................................. $1,805,107,170
--------------
--------------
</TABLE>
*Non-income producing.
**Securities traded in U.S. dollars.
+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,
1998, were $4,680,412.
See Notes to Financial Statements.
19
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$2,493,407,577)........................................... $1,766,432,626
Receivables:
Investment securities sold................................ 40,213,184
Capital shares sold....................................... 1,832,053
Dividends and interest.................................... 9,235,878
--------------
Total assets........................................... 1,817,713,741
--------------
Liabilities:
Payables:
Investment securities purchased........................... 9,204,091
Capital shares redeemed................................... 61,237
To affiliates............................................. 2,054,544
Funds advanced by custodian................................ 2,168
Accrued liabilities........................................ 1,284,531
--------------
Total liabilities...................................... 12,606,571
--------------
Net assets, at value........................................ $1,805,107,170
==============
Net assets consist of:
Undistributed net investment income........................ $ 16,107,941
Net unrealized depreciation................................ (726,974,951)
Accumulated net realized loss.............................. (4,489,906)
Capital shares............................................. 2,520,464,086
--------------
Net assets, at value........................................ $1,805,107,170
==============
Net asset value per share ($1,805,107,170 / 214,100,660
shares outstanding)....................................... $8.43
==============
</TABLE>
See Notes to Financial Statements.
20
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $1,953,043)
Dividends.................................................. $ 27,776,234
Interest................................................... 11,058,952
-------------
Total investment income................................ $ 38,835,186
Expenses:
Management fees (Note 3)................................... 12,830,532
Administrative fees (Note 3)............................... 860,977
Transfer agent fees (Note 3)............................... 4,400
Custodian fees............................................. 1,986,820
Reports to shareholders.................................... 11,700
Registration and filing fees............................... 120,000
Professional fees.......................................... 30,000
Directors' fees and expenses............................... 22,000
Amortization of organization costs......................... 5,550
Other...................................................... 16,523
-------------
Total expenses......................................... 15,888,502
-------------
Net investment income............................. 22,946,684
-------------
Realized and unrealized gains (losses):
Net realized gain from:
Investments............................................... 43,370,701
Foreign currency transactions............................. 18,361
-------------
Net realized gain...................................... 43,389,062
Net unrealized appreciation (depreciation) on:
Investments............................................... (460,283,826)
Translation of assets and liabilities denominated in
foreign currencies...................................... 664,885
-------------
Net unrealized depreciation............................ (459,618,941)
-------------
Net realized and unrealized loss............................ (416,229,879)
-------------
Net decrease in net assets resulting from operations........ $(393,283,195)
=============='
</TABLE>
See Notes to Financial Statements.
21
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31,
------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 22,946,684 $ 29,218,762
Net realized gain from investments and foreign currency
transactions............................................ 43,389,062 31,325,228
Net unrealized depreciation on investments and translation
of assets and liabilities denominated in foreign
currencies.............................................. (459,618,941) (373,187,334)
-------------------------------------
Net decrease in net assets resulting from operations... (393,283,195) (312,643,344)
Distributions to shareholders from:
Net investment income..................................... (8,407,637) (29,706,898)
Net realized gains........................................ -- (80,352,717)
Capital share transactions (Note 2)........................ 282,916,772 781,047,570
-------------------------------------
Net increase (decrease) in net assets.................. (118,774,060) 358,344,611
Net assets:
Beginning of period........................................ 1,923,881,230 1,565,536,619
-------------------------------------
End of period.............................................. $1,805,107,170 $1,923,881,230
=====================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 16,107,941 $ 1,568,894
=====================================
</TABLE>
See Notes to Financial Statements.
22
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Emerging Market 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 primarily in equity securities of issuers
in countries with 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. When
the Fund purchases or sells foreign securities it will customarily enter into a
foreign exchange contract to minimize foreign exchange risk from the trade date
to the settlement date of such transactions.
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 and the difference 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 currency 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 $177 million as of June 30, 1998.
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 to
distribute all of its taxable income.
d. 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.
Common expenses incurred by the Company are allocated among the funds comprising
the Company based on the ratio of net assets of each fund to the combined net
assets. Other expenses are charged to each fund on a specific identification
basis.
23
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
e. 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, 1998, there were 700 million shares authorized ($0.01 par value), of
which 225 million have been classified as Fund shares. Transactions in the
Fund's shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 48,861,547 $ 487,610,509 74,259,980 $1,000,379,973
Shares issued on reinvestment of distributions.............. 695,419 7,355,792 10,166,940 103,837,009
Shares redeemed............................................. (20,984,290) (212,049,529) (24,610,709) (323,169,412)
------------------------------------------------------------------
Net increase................................................ 28,572,676 $ 282,916,772 59,816,211 $ 781,047,570
==================================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Company are also officers or directors of Templeton
Asset Management Ltd. (TAML), Franklin Templeton Services, Inc. (FT Services),
Franklin/Templeton Distributors, Inc. (Distributors), and Franklin/Templeton
Investor Services, Inc. (Investor Services), 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 FT Services based on the Company's aggregate average daily
net assets as follows:
<TABLE>
<CAPTION>
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
- -----------------------------------------------------------------
<S> <C>
0.15% First $200 million
0.135% Over $200 million, up to and including $700 million
0.10% Over $700 million, up to and including $1.2 billion
0.075% Over $1.2 billion
</TABLE>
TAML and FT Services agreed in advance to limit total expenses of the Fund to an
annual rate of 1.60% of average net assets through May 1, 1999. For the six
months ended June 30, 1998, no reimbursement was necessary under the agreement.
Legal fees of $40,350 were paid to a law firm in which a partner is an officer
of the Fund.
24
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES
At June 30, 1998, the net unrealized depreciation based on the cost of
investments for income tax purposes of $2,534,113,176 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 107,083,531
Unrealized depreciation..................................... (874,764,081)
-------------
Net unrealized depreciation................................. $(767,680,550)
=============
</TABLE>
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended June 30,1998 aggregated $391,876,534 and $356,352,593,
respectively.
25
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. Like any investment in
securities, the value of the Fund's portfolio will be subject to the risk of
loss from market, currency, economic, political, and other factors, as well as
investment decisions by the Investment Manager, which will not always be
profitable or wise. The Fund and its investors are not protected from such
losses by the Investment Manager. Therefore, investors who cannot accept this
risk should not invest in shares of the Fund.
To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded, and accessed. These calls can be
determined by the presence of a regular beeping tone.
Principal Underwriter:
FRANKLIN TEMPLETON
DISTRIBUTORS, INC.
100 Fountain Parkway
P.O. Box 33030
St. Petersburg, Florida 33733-8030
Institutional Services: 1-800-321-8563
Fund Information: 1-800-362-6243
ZT456 S 6/98
