TEMPLETON INSTITUTIONAL FUNDS, INC.
[TEMPLETON GRAPHIC]
TIFI GROWTH SERIES
SEMIANNUAL REPORT
[LOGO] TEMPLETON JUNE 30, 1999
PAGE
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
- ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF
THE U.S. GOVERNMENT;
- ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK;
- ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
PAGE
June 30, 1999
Dear Shareholder:
During the middle of 1998, investors were clearly worried about the
health of the global economy and the potential for substantial earnings
shortfalls. The Asian crisis appeared to be highly contagious and investor
sentiment plummeted until the Federal Reserve Board (the "Fed") was apparently
able to identify and prescribe corrective measures. Three interest rate
reductions and an ample injection of liquidity seemed to reverse the course of
the Asian crisis and stabilize the global economy. Fortunately, the Templeton
Institutional Funds, Inc. Growth Series (the "Fund") was well-placed to take
advantage of the revitalized health of the global economy. The Fund's holdings
of emerging market and cyclical stocks rebounded forcefully in the first half of
1999 as earnings prospects improved and investors' fears abated. Moreover, the
Fund's underweighting of European shares was helpful to its performance relative
to its benchmarks as the euro's weakness, sluggish European economic growth, and
high equity valuations conspired to produce weak U.S. dollar returns. For the
quarter and year-to-date periods ended June 30, 1999, the Fund reported
cumulative total returns
TOTAL RETURNS AS OF 6/30/99
<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 Growth Series 11.71% 14.11% 14.19% 128.42%
MSCI AC World
Free Index (4) 16.71% 17.52% 16.22% 140.05%
MSCI World Index (4) 16.08% 18.76% 17.25% 149.11%
</TABLE>
(1) The Fund's manager and administrator have agreed in advance to reduce their
respective fees in order to limit the total expenses of the Fund to an annual
rate of 0.90% of average net assets. If these fee reductions are insufficient to
so limit the Fund's expenses, the administrator has agreed to assume as its own
expense certain expenses otherwise payable by the Fund. These voluntary
agreements did not result in any fee reductions for the Fund for the period
ended June 30, 1999. After May 1, 2000, the manager and administrator may end
this arrangement at any time.
(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) Source: Morgan Stanley Capital International. The MSCI AC World Free Index
measures the performance of securities located in 47 countries, including
emerging markets in Latin America, Asia and Eastern Europe. It includes
reinvested dividends. The MSCI World Index tracks the performance of
approximately 1500 securities in 22 countries and is designed to measure world
stock market performance. It includes reinvested dividends.
Indices are unmanaged, do not contain cash, and do not include management or
other operating expenses. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.
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 the Fund invests. 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 6 of
this report.
continued...
[PHOTO OF GARY MOTYL]
GARY MOTYL HAS BEEN A PORTFOLIO MANAGER AND RESEARCH ANALYST WITH TEMPLETON
INVESTMENT COUNSEL, INC. SINCE 1981. HE CURRENTLY MANAGES SEVERAL INSTITUTIONAL
MUTUAL FUNDS, AND IS RESPONSIBLE FOR MANAGING MANY OF OUR SEPARATE ACCOUNT
PORTFOLIOS. MR. MOTYL'S RESEARCH RESPONSIBILITIES INCLUDE THE GLOBAL AUTOMOBILE
INDUSTRY AND U.S.-BASED UTILITIES AS WELL AS COUNTRY COVERAGE OF GERMANY.
PRIOR TO JOINING THE TEMPLETON ORGANIZATION, MR. MOTYL WORKED FROM 1974 TO 1979
AS A SECURITY ANALYST WITH STANDARD & POOR'S CORPORATION. HE THEN WORKED AS A
RESEARCH ANALYST AND PORTFOLIO MANAGER FROM 1979 TO 1981 WITH LANDMARK FIRST
NATIONAL BANK. IN THIS CAPACITY HE HAD RESPONSIBILITY FOR EQUITY RESEARCH AND
MANAGED SEVERAL PENSION AND PROFIT SHARING PLANS.
MR. MOTYL HOLDS A BACHELOR OF SCIENCE IN FINANCE DEGREE FROM LEHIGH UNIVERSITY
IN PENNSYLVANIA AND A MASTER OF BUSINESS ADMINISTRATION DEGREE FROM PACE
UNIVERSITY IN NEW YORK, AND IS A CHARTERED FINANCIAL ANALYST.
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC. GROWTH SERIES
letter continued................................................................
GEOGRAPHIC DISTRIBUTION ON 6/30/99
(Equity Assets as a Percentage of Total Net Assets)
[PIE CHART]
Europe 44.5%
North America 20.2%
Australia/New Zealand 5.4%
Latin America/Caribbean 9.0%
Asia 14.2%
FUND ASSET ALLOCATION ON 6/30/99
[PIE CHART]
Equity* 93.3%
Short-Term Investments & Other Net Assets 6.7%
*Equity includes convertible and preferred securities
of 14.86% and 15.73%, compared to the unmanaged Morgan Stanley Capital
International ("MSCI") All Country World Free Index returns of 5.64% and 9.82%,
respectively. The MSCI World Index reported cumulative total returns of 4.86%
and 8.69% for these periods. Please remember that the Fund's performance differs
from that of an index because, among other things, an index does not contain
cash (the Fund generally carries a certain percentage of cash at any given
time), is not managed according to any investment strategy, and includes no
management or other operating expenses. Of course, one cannot invest directly in
an index, nor is an index representative of the Fund's portfolio.
Given the economy's rapid progress, the Fed apparently determined that
a reduction in inflation fighting measures was warranted. The Fed's 25 basis
point rate hike on June 30, and recent statistics that indicate a slowing in the
very rapid growth rate of money supply in the near future, suggest that the Fed
believed the risk of a global economic crisis had diminished. Presumably, with
global economic stabilization in sight, the Fed could allow the world's various
central banks and finance ministries to focus on more localized problems.
In Europe, policymakers struggled with the need to stimulate sluggish
growth through lower interest rates while simultaneously defending the value of
the beleaguered euro. The weaker currency played a role in encouraging greater
exports and reduced imports, but we believe Europe will also need to address
structural impediments in the labor market to make the euro a long-term success.
Meanwhile, many European companies showed initiative by restructuring and/or
acquiring other companies to gain critical mass and reduce costs, and the Fund
benefited from these trends. Overall, we lightened our positions in European
stocks, as valuations for some stocks were beginning to look rather full to us.
This aided our performance relative to the indices in 1999's first half as
European stocks, particularly the most expensive shares in which we had little
exposure, performed poorly. During the period, we added Marks & Spencer Plc., a
well-known UK retailer which has experienced some operating problems of late.
The stock declined significantly and we believe it holds solid appreciation
potential over the next few years. We liquidated our position in Saga Petroleum
AS, the Norwegian energy company, which was the subject of a takeover bid. We
preferred to take cash rather than stock in the acquiring company. Also,
following strong share price performance, we reduced our position in Nokia
Corp., the Finnish telecommunications equipment maker.
In Latin America, we identified many stocks we believed to be bargain
priced. These markets were some of the primary beneficiaries of the receding
atmosphere of economic crisis during the second quarter of 1999, with Mexican
stocks advancing and even Brazilian stocks managing a double-digit U.S. dollar
gain despite the devaluation of the real. In our opinion, if inflation remains
under control, interest rates fall further, fiscal and trade imbalances are
addressed, and privatizations move forward, the potential for further gains on
our holdings may be significant. During the
2
PAGE
................................................................................
period, we added to our position in the Chilean telecom company, Compania de
Telecomunicaciones de Chile SA.
Southeast Asian stock markets were also major beneficiaries of the
improved health of the global economies and, again, the Fund was well exposed to
this trend. The Korean, Thai, and Singaporean stock markets each rose more than
50% in U.S. dollar terms, and the Hong Kong equities market, the Fund's greatest
exposure in Asia, advanced over 30% during the first six months of 1999.
Government-led bailouts to end the regional banking crisis, some progress on
debt restructuring, improved current account positions, and sharply falling
interest rates all appear to have signaled to the financial markets that the
"point of maximum pessimism" that Templeton's research analysts are always
searching for had passed. We are hopeful to take advantage of
attractively-priced new issues of equity, as we believe that many Asian
companies still need to sell shares in order to rebuild balance sheets weakened
by the economic crisis in 1997-98.
Japanese stocks also posted a strong advance in the second quarter.
While many challenges remain for the Japanese economy, investors' fears that the
nation was entering into a more rapid downward economic spiral never fully
materialized. Should Japan's policymakers find a way to inject liquidity into
its economy, dispose of excess manufacturing capacity, and remove some of the
structural impediments to free competition, we believe that better economic
growth might also be achieved. While many Japanese stocks are still not
inexpensive enough to meet our strict Templeton long-term value criteria, we
were able to identify several shares that could. For example, Nippon Telegraph &
Telephone Corp. has been added to the Fund. This Japanese telecommunications
giant is beginning a long-term restructuring program that we believe may improve
profitability. However, our holdings in these shares still represent an
underweighted position relative to the MSCI World Index and the MSCI AC World
Free Index, and this detracted from our returns versus the indices in the second
quarter.
We believe the Fed's highly successful measures for dealing with the
Asian crisis did have some unfortunate side effects for the U.S. economy. Rate
cuts and liquidity stimulated an already strong domestic economy to a growth
rate we believe to be in excess of its long run potential. While inflation
remained dormant, this growth trend reduced the available labor pool
dramatically, thereby threatening wage gains in excess of productivity growth.
Meanwhile, earnings growth was very strong, enabling the U.S. stock market to
shrug off rising interest rates and move to new record highs. Given these
considerations, as well as the high level of valuations in the U.S. stock
market, our holdings in U.S. stocks remain substantially below that of the MSCI
World Index and the MSCI AC World Free Index. This has impaired results in our
global portfolios thus far in 1999, but we believe that our long-standing
approach of focusing exclusively on bargain-priced shares should ultimately
yield attractive long-term results.
INDUSTRY DIVERSIFICATION ON 6/30/99
(Equity Assets as a Percentage of Total Net Assets)
Finance 23.9%
Services 22.2%
Capital Equipment 13.8%
Energy 13.0%
Consumer Goods 9.1%
Materials 7.7%
Multi-Industry 3.6%
10 LARGEST POSITIONS ON 6/30/99
(Percent of Total Net Assets)
Volvo AB, B 2.3%
ING Groep NV 2.2%
Compania de Telecomunicaciones
de Chile SA, ADR 2.1%
Banco Itau SA, pfd. 2.0%
AXA SA 1.9%
General Electric Co. Plc. 1.8%
Astrazeneca Plc. 1.8%
Merita AS 1.7%
ABB Ltd. 1.7%
Development Bank of
Singapore Ltd., fgn. 1.6%
3
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC. GROWTH SERIES
letter continued................................................................
Total Return Index Comparison
$5,000,000 Investment: 05/03/93-6/30/99
<TABLE>
<CAPTION>
Templeton Inst-Growth MSCI World MSCI All Country CPI
World Free
<S> <C> <C> <C> <C>
5/3/93 $5,000,000.00 $5,000,000.00 $5,000,000.00 $5,000,000.00
5/31/93 $5,100,000.00 $5,116,064.50 $5,106,091.14 $5,006,322.58
6/30/93 $5,040,000.00 $5,074,112.77 $5,072,960.82 $5,013,331.43
7/31/93 $5,115,000.00 $5,179,654.32 $5,178,161.75 $5,013,331.43
8/31/93 $5,445,000.00 $5,417,918.42 $5,423,704.59 $5,027,368.76
9/30/93 $5,455,000.00 $5,318,770.51 $5,332,760.61 $5,037,926.23
10/31/93 $5,725,000.00 $5,466,100.45 $5,490,687.80 $5,058,581.73
11/30/93 $5,595,000.00 $5,157,812.39 $5,205,263.08 $5,062,122.74
12/31/93 $6,002,076.00 $5,411,060.97 $5,486,794.06 $5,062,122.74
1/31/94 $6,393,737.00 $5,768,732.10 $5,850,664.90 $5,075,790.47
2/28/94 $6,175,017.00 $5,694,892.33 $5,766,095.42 $5,093,048.16
3/31/94 $5,898,010.00 $5,450,581.45 $5,507,017.76 $5,110,364.52
4/30/94 $5,995,711.00 $5,620,094.54 $5,656,780.29 $5,117,519.03
5/31/94 $6,057,416.00 $5,635,268.79 $5,690,131.02 $5,121,101.30
6/30/94 $5,882,584.00 $5,620,617.09 $5,662,495.93 $5,138,513.04
7/31/94 $6,124,263.00 $5,728,532.94 $5,787,826.62 $5,152,387.03
8/31/94 $6,386,512.00 $5,902,107.49 $5,993,989.70 $5,172,996.57
9/30/94 $6,201,395.00 $5,748,062.48 $5,853,240.03 $5,186,963.66
10/31/94 $6,257,959.00 $5,912,457.07 $6,003,253.66 $5,190,594.54
11/30/94 $5,949,431.00 $5,657,038.92 $5,742,542.97 $5,197,342.31
12/31/94 $5,922,780.00 $5,713,043.61 $5,762,578.31 $5,197,342.31
1/31/95 $5,814,503.00 $5,628,490.56 $5,645,318.36 $5,218,131.68
2/28/95 $5,957,971.00 $5,711,792.22 $5,705,612.73 $5,239,004.21
3/31/95 $6,050,638.00 $5,988,242.97 $5,966,951.12 $5,256,292.92
4/30/95 $6,301,385.00 $6,197,831.47 $6,183,980.05 $5,273,638.69
5/31/95 $6,503,073.00 $6,251,752.61 $6,252,250.82 $5,284,185.97
6/30/95 $6,579,387.00 $6,251,127.43 $6,253,632.76 $5,294,754.34
7/31/95 $6,884,645.00 $6,564,934.03 $6,556,203.89 $5,294,754.34
8/31/95 $6,748,369.00 $6,419,848.99 $6,412,659.21 $5,308,520.70
9/30/95 $6,868,292.00 $6,607,950.56 $6,589,083.14 $5,319,137.74
10/31/95 $6,661,153.00 $6,504,866.53 $6,478,951.42 $5,336,690.89
11/30/95 $6,764,722.00 $6,731,886.37 $6,682,759.35 $5,332,955.21
12/31/95 $6,964,376.00 $6,929,803.83 $6,883,992.20 $5,329,222.14
1/31/96 $7,187,517.00 $7,056,619.24 $7,037,020.81 $5,360,664.55
2/29/96 $7,242,851.00 $7,101,075.95 $7,066,320.08 $5,377,818.68
3/31/96 $7,373,459.00 $7,220,374.02 $7,175,100.99 $5,405,783.34
4/30/96 $7,622,803.00 $7,391,496.89 $7,350,300.60 $5,426,865.89
5/31/96 $7,694,045.00 $7,398,888.38 $7,357,899.86 $5,437,176.94
6/30/96 $7,688,108.00 $7,437,362.60 $7,398,253.30 $5,440,439.24
7/31/96 $7,409,080.00 $7,175,567.44 $7,121,935.34 $5,450,776.08
8/31/96 $7,646,550.00 $7,259,521.58 $7,209,770.45 $5,461,132.55
9/30/96 $7,800,906.00 $7,544,820.78 $7,476,008.03 $5,478,608.18
10/31/96 $7,937,452.00 $7,599,143.48 $7,505,904.36 $5,496,139.72
11/30/96 $8,358,962.00 $8,026,215.35 $7,907,176.40 $5,506,582.39
12/31/96 $8,536,004.00 $7,899,401.15 $7,792,648.29 $5,506,582.39
1/31/97 $8,746,062.00 $7,995,773.84 $7,923,380.25 $5,524,203.45
2/28/97 $8,847,496.00 $8,089,324.39 $8,031,407.85 $5,541,328.48
3/31/97 $8,853,903.00 $7,930,773.64 $7,870,748.37 $5,555,181.80
4/30/97 $8,821,870.00 $8,191,696.09 $8,123,545.00 $5,561,848.02
5/31/97 $9,238,298.00 $8,698,762.08 $8,608,255.74 $5,558,510.91
6/30/97 $9,705,979.00 $9,133,700.18 $9,048,750.86 $5,565,181.13
7/31/97 $10,116,001.00 $9,555,677.13 $9,457,904.90 $5,571,859.34
8/31/97 $9,558,628.00 $8,918,313.46 $8,794,321.17 $5,582,445.88
9/30/97 $10,314,605.00 $9,404,361.55 $9,263,330.22 $5,596,401.99
10/31/97 $9,552,221.00 $8,910,632.57 $8,711,761.81 $5,610,393.00
11/30/97 $9,494,562.00 $9,070,132.89 $8,845,037.31 $5,607,026.76
12/31/97 $9,583,405.00 $9,181,695.52 $8,961,166.82 $5,600,298.33
1/31/98 $9,513,042.00 $9,438,783.00 $9,158,443.05 $5,610,938.89
2/28/98 $10,061,871.00 $10,078,732.49 $9,784,971.06 $5,621,599.68
3/31/98 $10,686,558.00 $10,506,070.74 $10,202,479.04 $5,632,280.72
4/30/98 $10,826,801.00 $10,610,080.84 $10,298,101.67 $5,642,418.82
5/31/98 $10,448,144.00 $10,478,515.84 $10,102,710.44 $5,652,575.18
6/30/98 $10,223,754.00 $10,728,952.37 $10,284,724.00 $5,659,358.27
7/31/98 $10,265,827.00 $10,712,858.94 $10,288,084.02 $5,666,149.50
8/31/98 $8,442,661.00 $9,285,906.13 $8,846,701.84 $5,672,948.88
9/30/98 $8,358,515.00 $9,452,123.85 $9,022,686.36 $5,679,756.42
10/31/98 $9,129,854.00 $10,308,486.27 $9,846,710.10 $5,693,387.83
11/30/98 $9,760,950.00 $10,922,872.05 $10,444,504.67 $5,693,387.83
12/31/98 $9,868,320.45 $11,458,092.78 $10,929,560.42 $5,689,971.80
1/31/99 $9,808,778.66 $11,710,577.47 $11,152,932.66 $5,703,858.17
2/28/99 $9,495,452.16 $11,400,682.10 $10,872,626.45 $5,710,800.91
3/31/99 $9,943,479.77 $11,877,040.11 $11,361,670.88 $5,728,158.95
4/30/99 $10,899,076.77 $12,346,905.43 $11,852,536.19 $5,769,818.30
5/31/99 $10,734,116.72 $11,897,396.09 $11,433,710.47 $5,769,818.30
6/30/99 $11,421,100.18 $12,456,573.71 $12,002,958.55 $5,769,818.30
</TABLE>
Periods ended June 30, 1999
Since
Inception
One-Year Five-Year (05/03/93)
- --------------------------------------------------------------
Average Annual
Total Return (1), (2) 11.71% 14.19% 14.36%
Cumulative Total
Return (1), (3) 11.71% 94.15% 128.42%
(1) The Fund's manager and administrator have agreed in advance to reduce their
respective fees in order to limit the total expenses of the Fund to an annual
rate of 0.90% of average net assets. If these fee reductions are insufficient to
so limit the Fund's expenses, the administrator has agreed to assume as its own
expense certain expenses otherwise payable by the Fund. These voluntary
agreements did not result in any fee reductions for the Fund for the period
ended June 30, 1999. After May 1, 2000, the manager and administrator may end
this arrangement at any time.
(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) Source: Morgan Stanley Capital International. The MSCI World Index tracks
the performance of approximately 1500 securities in 22 countries and is designed
to measure world stock market performance. It includes reinvested dividends. The
MSCI AC World Free Index measures the performance of securities located in 47
countries, including emerging markets in Latin America, Asia and Eastern Europe.
It includes reinvested dividends. Indices are unmanaged, do not contain cash and
do not include management or other operating expenses. One cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.
(5) Source: U.S. Bureau of Labor Statistics (7/15/99).
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 the Fund invests. 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.
While the current elevated valuations attached to equities in many
parts of the world make the identification of bargains more challenging,
worthwhile opportunities present themselves as nations, industries, or
individual companies fall temporarily out of favor with investors. As other
investors scramble to pay high prices for those stocks with the most appealing
trend, Templeton's analysts diligently search for those shares selling at the
lowest prices in relation to long-term earnings potential. At Templeton, we
remain committed to implementing our disciplined investment process and we are
confident that, in so doing, we will build upon the strong relationship we enjoy
with you now.
This discussion reflects our views, opinions, and portfolio holdings as
of June 30, 1999, the end of the reporting period. However, market and economic
conditions are changing constantly, which can be expected to affect our
strategies and the Fund's portfolio composition. Although past performance is
not predictive of future results, these insights may help you better understand
our investment and management philosophy.
There are, of course, special risks involved in global investing
related to market, currency, economic, social, political and other factors.
Emerging market securities 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, the consequences of severe market corrections.
For example, the Mexican Bolsa Index has increased 3,760% in the last 15 years,
but has suffered 8 declines of more than 15% during that time.(1) While
short-term volatility can be disconcerting, declines in excess of 50% are not
unusual in emerging markets. These special risks and other considerations are
discussed in the Fund's prospectus.
Thank you for allowing us to serve your investment management needs.
Best regards,
/s/DONALD F. REED
Donald F. Reed, CFA, CIC
President
Templeton Institutional Funds, Inc.
/s/GARY P. MOTYL
Gary P. Motyl, CFA
Executive Vice President
Templeton Investment Counsel, Inc.
(1) Source: Mexico Bolsa Index. Based on quarterly percentage price change over
15 years ended June 30, 1999. Market return is measured in U.S. dollars and does
not include reinvested dividends.
For the most current portfolio information, please call 1-800-362-6243.
4
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
Financial Highlights
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -------------------------------------------------------
(UNAUDITED)+ 1998 1997 1996 1995 1994
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the period)
Net asset value, beginning of period................. $6.61 $13.62 $13.41 $11.86 $10.94 $11.80
------------------------------------------------------------------------
Income from investment operations:
Net investment income............................... .08 .19 .73 .30 .27 .20
Net realized and unrealized gains (losses).......... .96 .46 .89 2.32 1.62 (.36)
------------------------------------------------------------------------
Total from investment operations..................... 1.04 .65 1.62 2.62 1.89 (.16)
------------------------------------------------------------------------
Less distributions from:
Net investment income............................... -- (.19) (.87) (.29) (.27) (.20)
Net realized gains.................................. -- (7.47) (.54) (.74) (.70) (.50)
In excess of net realized gains..................... -- -- -- (.04) -- --
------------------------------------------------------------------------
Total distributions.................................. -- (7.66) (1.41) (1.07) (.97) (.70)
------------------------------------------------------------------------
Net asset value, end of period....................... $7.65 $6.61 $13.62 $13.41 $11.86 $10.94
========================================================================
Total Return*........................................ 15.73% 2.98% 12.27% 22.57% 17.59% (1.32)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's).................... $62,425 $55,779 $120,370 $268,158 $226,963 $194,059
Ratios to average net assets:
Expenses............................................ .90%** .89% .86% .87% .88% .95%
Net investment income............................... 2.36%** 2.27% 2.15% 2.34% 2.28% 1.69%
Portfolio turnover rate.............................. 22.90% 13.00% 16.73% 15.61% 30.20% 17.23%
</TABLE>
* Total return is not annualized.
** Annualized.
+ Based on weighted average shares outstanding.
See Notes to Financial Statements.
5
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 88.6%
APPLIANCES & HOUSEHOLD DURABLES .8%
Sony Corp. ................................................. Japan 4,700 $ 506,733
-----------
AUTOMOBILES 3.5%
*Circuit City Stores Inc. - CarMax Group.................... United States 69,000 366,563
Fiat SpA.................................................... Italy 128,500 408,412
Volvo AB, B................................................. Sweden 49,000 1,420,665
-----------
2,195,640
-----------
BANKING 10.0%
*Banca Nazionale Del Lavoro SpA............................. Italy 119,200 375,903
Bank of America Corp. ...................................... United States 8,700 637,819
Banque Nationale de Paris, ADR, 144A........................ France 10,000 833,247
Deutsche Bank AG, Br. ...................................... Germany 15,200 926,390
Development Bank of Singapore Ltd., fgn. ................... Singapore 80,000 977,386
HSBC Holdings Plc. ......................................... Hong Kong 21,069 768,481
Merita AS................................................... Finland 192,000 1,090,977
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 200,000 618,305
-----------
6,228,508
-----------
BUILDING MATERIALS & COMPONENTS 1.3%
Pioneer International Ltd. ................................. Australia 320,000 815,462
-----------
BUSINESS & PUBLIC SERVICES .7%
Esselte AB, A............................................... Sweden 42,000 419,901
-----------
CHEMICALS 3.4%
Akzo Nobel NV............................................... Netherlands 20,000 841,497
Bayer AG, Br. .............................................. Germany 8,600 357,853
Beijing Yanhua Petrochemical Company Ltd., ADR.............. China 34,000 386,750
Imperial Chemical Industries Plc. .......................... United Kingdom 52,000 517,197
-----------
2,103,297
-----------
CONSTRUCTION & HOUSING .2%
Fairview Holdings Plc. ..................................... United Kingdom 64,884 137,557
-----------
DATA PROCESSING & REPRODUCTION 1.1%
*3Com Corp. ................................................ United States 24,500 653,844
-----------
ELECTRICAL & ELECTRONICS 5.1%
*ABB Ltd. .................................................. Sweden 11,235 1,050,569
Alcatel SA.................................................. France 5,416 762,384
General Electric Co. Plc. .................................. United Kingdom 112,084 1,139,532
*Meto AG.................................................... Sweden 42,000 207,975
-----------
3,160,460
-----------
ELECTRONIC COMPONENTS & INSTRUMENTS .4%
BICC Plc. .................................................. United Kingdom 193,861 276,543
-----------
ENERGY EQUIPMENT & SERVICES 3.0%
Sunoco Inc. ................................................ United States 20,000 603,750
TransCanada PipeLines Ltd. ................................. Canada 43,500 609,000
Transocean Offshore Inc. ................................... Cayman Islands 24,400 640,500
-----------
1,853,250
-----------
ENERGY SOURCES 3.7%
Occidental Petroleum Corp. ................................. United States 29,000 612,625
Repsol SA................................................... Spain 42,800 873,920
Societe Elf Aquitane SA, Br. ............................... France 5,628 825,889
-----------
2,312,434
-----------
</TABLE>
6
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FINANCIAL SERVICES 5.5%
AXA SA...................................................... France 9,600 $ 1,171,166
Housing Development Finance Corp. Ltd. ..................... India 5,895 302,083
ICICI Ltd., GDR, 144A....................................... India 60,100 619,030
ING Groep NV................................................ Netherlands 25,055 1,356,489
-----------
3,448,768
-----------
FOOD & HOUSEHOLD PRODUCTS 1.0%
Archer-Daniels Midland Co. ................................. United States 42,025 648,762
-----------
FOREST PRODUCTS & PAPER 2.3%
Carter Holt Harvey Ltd. .................................... New Zealand 166,000 198,797
Fletcher Challenge Ltd. Forestry Division................... New Zealand 625,000 351,058
Metsa Serla OY, B........................................... Finland 45,000 382,386
Stora Enso OYJ, R........................................... Finland 44,994 486,879
-----------
1,419,120
-----------
HEALTH & PERSONAL CARE 3.8%
Astrazeneca Plc. ........................................... United Kingdom 29,059 1,131,333
Pharmacia & Upjohn Inc. .................................... United States 11,100 630,619
Rhone-Poulenc SA, A......................................... France 13,963 638,033
-----------
2,399,985
-----------
INDUSTRIAL COMPONENTS 1.1%
Exide Corp. ................................................ United States 46,600 687,350
-----------
INSURANCE 5.2%
Ace Ltd. ................................................... Bermuda 21,800 615,850
Allstate Corp. ............................................. United States 12,300 441,263
Presidential Life Corp. .................................... United States 32,400 635,850
Torchmark Corp. ............................................ United States 18,500 631,313
XL Capital Ltd., A.......................................... Bermuda 10,700 604,550
Zurich Allied AG............................................ Switzerland 520 295,690
-----------
3,224,516
-----------
MACHINERY & ENGINEERING 2.9%
Invensys Plc. .............................................. United Kingdom 117,793 557,939
New Holland NV.............................................. Netherlands 48,000 822,000
VA Technologie AG, Br. ..................................... Austria 4,600 416,737
-----------
1,796,676
-----------
MERCHANDISING 2.7%
Hudsons Bay Co. ............................................ Canada 34,000 383,328
Marks & Spencer Plc. ....................................... United Kingdom 60,000 346,143
Safeway Plc. ............................................... United Kingdom 66,000 263,981
Storehouse.................................................. United Kingdom 312,100 671,505
-----------
1,664,957
-----------
METALS & MINING .7%
WMC Ltd. ................................................... Australia 108,560 466,345
-----------
MULTI-INDUSTRY 3.6%
Brierley Investments Ltd. .................................. New Zealand 765,889 215,097
Foster Wheeler Corp. ....................................... United States 24,200 341,825
Hutchison Whampoa Ltd. ..................................... Hong Kong 62,000 561,359
Jardine Matheson Holdings Ltd. ............................. Hong Kong 97,531 487,655
Swire Pacific Ltd., A....................................... Hong Kong 132,000 653,293
-----------
2,259,229
-----------
</TABLE>
7
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
REAL ESTATE 1.2%
*Catellus Development Corp. ................................ United States 50,000 $ 775,000
-----------
TELECOMMUNICATIONS 12.1%
*Cable & Wireless Optus Ltd., 144A.......................... Australia 156,452 356,232
Compania de Telecomunicaciones de Chile SA, ADR............. Chile 53,300 1,319,175
Nippon Telegraph & Telephone Corp. ......................... Japan 43 500,909
Nokia Corp., A.............................................. Finland 7,300 639,889
Nortel Networks Corp. ...................................... Canada 10,080 875,070
Philippine Long Distance Telephone Co., ADR................. Philippines 23,211 699,231
PT Indosat, ADR............................................. Indonesia 500 9,750
*Rostelecom, ADR............................................ Russia 21,500 210,969
*Telecom Italia SpA, di Risp................................ Italy 75,700 411,795
Telefonica del Peru SA, B................................... Peru 115,000 172,733
*Telefonica SA.............................................. Spain 19,000 915,221
Telefonos de Mexico SA (Telmex), ADR........................ Mexico 10,900 880,856
Videsh Sanchar Nigam Ltd., GDR, 144A........................ India 42,700 547,094
-----------
7,538,924
-----------
TRANSPORTATION 4.0%
Airborne Freight Corp. ..................................... United States 22,100 611,894
British Airways Plc. ....................................... United Kingdom 51,000 352,503
Burlington Northern Santa Fe Corp. ......................... United States 19,400 601,400
Canadian National Railway Co. .............................. Canada 9,200 621,715
Mayne Nickless Ltd., A...................................... Australia 97,783 334,616
-----------
2,522,128
-----------
UTILITIES ELECTRICAL & GAS 9.3%
Centrais Eletricas Brasileiras SA (Electrobras)............. Brazil 14,000,000 266,819
*Centrais Geradoras Do Sul Do Brasil SA..................... Brazil 7,000,000 5,592
Centrica Plc. .............................................. United Kingdom 219,600 516,618
*CEZ AS..................................................... Czech Republic 190,465 392,003
Endesa SA................................................... Spain 33,600 716,560
Evn AG...................................................... Austria 6,200 906,631
Guangdong Electric Power Development Co Ltd., B. ........... China 728,000 501,043
Iberdrola SA, Br. .......................................... Spain 57,600 877,335
Korea Electric Power Corp. ................................. South Korea 19,720 819,466
Veba AG..................................................... Germany 13,400 790,430
-----------
5,792,497
-----------
TOTAL COMMON STOCKS (COST $44,159,764)...................... 55,307,886
-----------
PREFERRED STOCKS 4.7%
Banco Itau SA, pfd. ........................................ Brazil 2,450,000 1,272,183
Embratel Participacoes SA, ADR, pfd. ....................... Brazil 11,700 162,338
News Corp. Ltd., pfd. ...................................... Australia 83,353 635,023
Tele Celular Sul Participacoes SA, ADR, pfd. ............... Brazil 1,170 25,374
Tele Centro Oeste Celular Participacoes SA, ADR, pfd. ...... Brazil 3,900 15,356
Tele Centro Sul Participacoes SA, ADR, pfd. ................ Brazil 2,340 129,870
Tele Leste Celular Participacoes SA, ADR, pfd. ............. Brazil 234 6,962
Tele Nordeste Celular Participacoes SA, ADR, pfd. .......... Brazil 585 15,795
Tele Norte Celular Participacoes SA, ADR, pfd. ............. Brazil 234 6,333
Tele Norte Leste Participacoes SA, ADR, pfd. ............... Brazil 11,700 217,181
Tele Sudeste Celular Participacoes SA, ADR, pfd. ........... Brazil 2,340 67,860
*Telecomunicacoes Brasileiras SA (Telebras), ADR, pfd. ..... Brazil 11,700 731
Telemig Celular Participacoes SA, ADR, pfd. ................ Brazil 585 14,406
</TABLE>
8
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 1999 (UNAUDITED) (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PREFERRED STOCKS (CONT.)
Telesp Celular Participacoes SA, ADR, pfd. ................. Brazil 4,680 $ 125,190
Telesp Participacoes SA, ADR, pfd. ......................... Brazil 11,700 267,638
-----------
TOTAL PREFERRED STOCKS (COST $2,474,720).................... 2,962,240
-----------
<CAPTION>
PRINCIPAL
AMOUNT**
--------
<S> <C> <C> <C>
SHORT TERM INVESTMENTS (COST $4,117,123) 6.6%
U.S. Treasury Bills, 4.355% to 4.85%, with maturities to
12/09/99.................................................. United States $4,170,000 4,118,500
-----------
TOTAL INVESTMENTS (COST $50,751,607) 99.9%.................. 62,388,626
OTHER ASSETS, LESS LIABILITIES .1%.......................... 36,362
-----------
TOTAL NET ASSETS 100.0%..................................... $62,424,988
===========
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars.
See Notes to Financial Statements.
9
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost $50,751,607)..... $62,388,626
Cash....................................................... 214,305
Receivables:
Capital shares sold....................................... 135,701
Dividends and interest.................................... 335,407
-----------
Total assets.......................................... 63,074,039
-----------
Liabilities:
Payables:
Investment securities purchased........................... 464,483
Capital shares redeemed................................... 76,893
To affiliates............................................. 45,817
Deferred tax liability (Note 1e)........................... 7,063
Accrued expenses........................................... 54,795
-----------
Total liabilities..................................... 649,051
-----------
Net assets, at value........................................ $62,424,988
===========
Net assets consist of:
Undistributed net investment income........................ $ 697,793
Net unrealized appreciation................................ 11,629,956
Accumulated net realized gain.............................. 800,760
Capital shares............................................. 49,296,479
-----------
Net assets, at value........................................ $62,424,988
===========
Net asset value per share ($62,424,988 / 8,164,260 shares
outstanding).............................................. $7.65
===========
</TABLE>
See Notes to Financial Statements.
10
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $96,440)
Dividends.................................................. $ 788,742
Interest................................................... 127,415
----------
Total investment income............................... $ 916,157
Expenses:
Management fees (Note 3)................................... 196,579
Administrative fees (Note 3)............................... 23,523
Transfer agent fees (Note 3)............................... 296
Reports to shareholders.................................... 8,200
Registration and filing fees............................... 5,300
Professional fees.......................................... 17,000
Directors' fees and expenses............................... 1,600
----------
Total expenses........................................ 252,498
----------
Net investment income........................... 663,659
----------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 1,282,779
Foreign currency transactions............................. (26,222)
----------
Net realized gain..................................... 1,256,557
Net unrealized appreciation (depreciation) on:
Investments............................................... 6,473,069
Deferred taxes (Note 1e).................................. (7,063)
----------
Net unrealized appreciation........................... 6,466,006
----------
Net realized and unrealized gain............................ 7,722,563
----------
Net increase in net assets resulting from operations........ $8,386,222
==========
</TABLE>
See Notes to Financial Statements.
11
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
---------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 663,659 $ 1,411,249
Net realized gain from investments and foreign currency
transactions............................................ 1,256,557 1,782,944
Net unrealized appreciation (depreciation) on investments
and deferred taxes....................................... 6,466,006 (1,330,371)
----------------------------------
Net increase in net assets resulting from operations.... 8,386,222 1,863,822
Distributions to shareholders from:
Net investment income..................................... -- (1,406,840)
Net realized gains........................................ -- (37,469,952)
In excess of net realized gains........................... -- (455,797)
Capital share transactions (Note 2)........................ (1,740,667) (27,121,467)
----------------------------------
Net increase (decrease) in net assets................... 6,645,555 (64,590,234)
Net assets:
Beginning of period........................................ 55,779,433 120,369,667
----------------------------------
End of period.............................................. $62,424,988 $ 55,779,433
==================================
Undistributed net investment income included in net assets:
End of period.............................................. $ 697,793 $ 34,134
==================================
</TABLE>
See Notes to Financial Statements.
12
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Growth 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. Under normal market conditions, the Fund invests
primarily in the equity securities of companies located anywhere in the world,
including 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.
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.
e. DEFERRED TAXES:
Deferred taxes are recorded for estimated tax liabilities inherent in the Fund's
portfolio securities which may arise from subsequent sales of those securities
and asset repatriations from countries that impose such taxes.
13
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONT.)
f. ACCOUNTING ESTIMATES:
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the amounts of income and expense during the reporting
period. Actual results could differ from those estimates.
2. CAPITAL STOCK
At June 30, 1999, there were 1.14 billion shares authorized ($0.01 par value),
of which 120 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, 1999 DECEMBER 31, 1998
------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold................................................. 1,157,028 $ 8,150,157 1,936,045 $ 15,134,178
Shares issued on reinvestment of distributions.............. -- -- 5,406,284 38,984,371
Shares redeemed............................................. (1,437,519) (9,890,824) (7,737,881) (81,240,016)
------------------------------------------------------------
Net decrease................................................ (280,491) $(1,740,667) (395,552) $(27,121,467)
============================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Certain officers of the Company are also officers or directors of Templeton
Investment Counsel, Inc. (TICI), 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 TICI of 0.70% 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>
TICI and FT Services agreed in advance to limit total expenses of the Fund to an
annual rate of 0.90% of average daily net assets through April 30, 2000. For the
six months ended June 30, 1999, no fee waiver or reimbursement was necessary
under the agreement.
14
PAGE
TEMPLETON INSTITUTIONAL FUNDS, INC.
GROWTH SERIES
Notes to Financial Statements (unaudited) (continued)
4. INCOME TAXES
At June 30, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $51,003,662 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $16,550,124
Unrealized depreciation..................................... (5,165,161)
-----------
Net unrealized appreciation................................. $11,384,963
===========
</TABLE>
Net realized capital gains differ for financial statement and tax purposes
primarily due to differing treatments of wash sales and losses on the sale of
securities and foreign currencies subsequent to October 31.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the six
months ended June 30, 1999 aggregated $11,746,270 and $11,965,463, respectively.
15
PAGE
This page intentionally left blank.
PAGE
This report must be preceded or accompanied by the current prospectus of the
Templeton Institutional Funds, Inc. Growth Series, 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 manager, which will not always be profitable or
wise. The Fund and its investors are not protected from such losses by the
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
[RECYCLED LOGO] Fund Information: 1-800-362-6243
ZT455 S 6/99
