TEMPLETON INSTITUTIONAL FUNDS, INC.
TIFI Foreign Equity Series
ANNUAL REPORT
[GRAPHIC]
[Templeton Logo] DECEMBER 31, 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>
December 31, 1999
[MOTYL PHOTO]
GARY MOTYL IS PRESIDENT OF TEMPLETON INVESTMENT COUNSEL, INC. HE IS A PORTFOLIO
MANAGER AND RESEARCH ANALYST AND CURRENTLY MANAGES SEVERAL INSTITUTIONAL MUTUAL
FUNDS, IN ADDITION TO MANAGING MANY OF TEMPLETON'S SEPARATE ACCOUNT PORTFOLIOS.
MR. MOTYL'S RESEARCH RESPONSIBILITIES INCLUDE THE GLOBAL AUTOMOBILE INDUSTRY AND
COUNTRY COVERAGE OF GERMANY. PRIOR TO JOINING TEMPLETON IN 1981, 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. HE IS ALSO A CHARTERED FINANCIAL
ANALYST (CFA).
Dear Shareholder:
With the passing of 1999, we look back on a year that provided
a great deal of both anxiety and excitement for investors. For Templeton, the
year brought some interesting changes. We continued our focus on research by
relocating two senior portfolio manager/analysts to
<TABLE>
<CAPTION>
TOTAL RETURNS AS OF 12/31/99
CUMULATIVE
ONE-YEAR THREE-YEAR FIVE-YEAR SINCE
AVERAGE AVERAGE AVERAGE INCEPTION(1),(3)
ANNUAL(1),(2) ANNUAL(1),(2) ANNUAL(1),(2) (10/18/90)
<S> <C> <C> <C> <C>
TIFI Foreign
Equity Series -
Primary Shares 27.34% 16.07% 16.51% 235.78%
MSCI AC World
ex U.S. Free Index(4) 30.91% 15.21% 12.39% 165.65%
MSCI EAFE Index(4) 27.30% 16.07% 13.15% 149.57%
</TABLE>
(1) The Fund's manager and administrator have agreed in advance to waive their
respective fees in order to limit the total expenses of the Fund to an
annual rate of 1.00% of average net assets. If these fee waivers 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 waivers for the
fiscal year ended December 31, 1999. After April 30, 2000, the manager and
administrator may end this arrangement at any time. Past fee waivers by the
Fund's manager and administrator increased the Fund's total returns.
Without these waivers, 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) Source: Morgan Stanley Capital International. The MSCI AC World ex U.S.
Free Index measures the performance of securities located in 46 countries,
including emerging markets in Latin America, Asia, and Eastern Europe. It
includes reinvested dividends. The MSCI EAFE tracks the performance of
approximately 1,000 securities in 20 countries. 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 8 of
this report.
continued...
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC. FOREIGN EQUITY SERIES
letter continued.......................................................
GEOGRAPHIC DISTRIBUTION ON 12/31/99
(Equity Assets as a Percentage of Total Net Assets)
<TABLE>
<CAPTION>
Europe Asia Latin America/Caribbean Australia/New North
Zealand America
<S> <C> <C> <C> <C>
53.8% 19.4% 11.1% 5.1% 2.8%
</TABLE>
FUND ASSET ALLOCATION ON 12/31/99
<TABLE>
<CAPTION>
Short-Term Investments
& Other Net Assets Equity* Fixed Income
<S> <C> <C>
5.0% 92.2% 2.8%
</TABLE>
*Equity includes convertible and preferred securities
Singapore. We believe the location of our analysts in Asia may provide
us with a useful perspective of events unfolding in the region and around the
world.
For the quarter and one-year periods ending December 31, 1999, the
Templeton Institutional Funds, Inc. Foreign Equity Series - Primary Shares (the
"Fund") reported 16.81% and 27.34% cumulative total returns compared to the
unmanaged Morgan Stanley Capital International (MSCI) All Country World ex U.S.
Free Index returns of 18.16% and 30.91% respectively. The MSCI Europe,
Australasia, Far East (EAFE) Index reported cumulative total returns of 17.05%
and 27.30% for these periods.
Last year may be remembered for the wide variety of "issues" investors
pondered in making their investment decisions. We entered the year with the
Asian crisis still weighing heavily on growth expectations around the world.
Asia, Latin America, and Japan were all "hot spots," carefully watched for signs
of further deterioration. The euro was introduced on January 1, 1999, with the
expectation that it would provide the world with another strong currency, a
potential "safe haven" alternative to the dollar. Y2K concerns created a year of
anxiety as investors worried over the potential chaos that the year 2000 might
bring to world economies in general, and specifically to the financial markets.
For each of these three issues, the early opinion was far from the
outcome at year end, providing trepidation as events unfolded, but positive news
for the markets overall. Worries about Asia and Latin America were dealt with
early in the year, as the Brazilian currency devalued and the stock market
rallied. GDP figures for Asian economies quickly gave some signs that the worst
was over. Throughout the year, GDP forecasts were upgraded for the region's
major problem areas, and even Japan, the economic laggard of the 1990s, began to
report positive news. The euro, rather than perform like a new anchor currency,
weakened against the yen and the U.S. dollar. Perhaps supported by a feeling
that
2
<PAGE>
action was necessary in the face of a weak currency, merger and acquisition
activity picked up in Europe, providing investors with strong price movements.
While the outcome of Y2K could not be known until the year was over, the
injection of liquidity into the financial system provided support for a strong
year-end rally.
The Fund's performance was influenced by a number of factors. In
general, value stocks continued to underperform growth stocks in 1999, though
that theme was not consistent across all markets. From an industry perspective,
telecommunications and technology sectors led the way, driven by a belief that
the internet is ushering in a new era of prosperity and that these companies
would be the greatest beneficiaries. Through the year, as economic growth
generally gained momentum, the more cyclical sectors began to perform well.
We remained underweight in the Japanese market, though we were net
buyers throughout the year. While we found bargains in Japan, we believe that
prices remained high relative to our projections of earnings growth rates, and
that restructuring will be a long, drawn-out process. In Europe, investors have
seen a dramatic change in management attitudes, with "shareholder value" seeming
to become the new mantra. We maintained a strong weighting in Europe, with
emphasis on economically sensitive and financial-related companies. In our
opinion, these groups could continue to benefit from global economic growth,
restructuring measures and merger and acquisition activity. Emerging market
investments generally performed well late in the year. The Fund's significant
exposure to these markets and Hong Kong generally boosted its return.
We took advantage of stock price strength to sell some of our holdings
over the past few months, including SKF in Sweden and Electrobras in Brazil. We
also reduced our position in a number of stocks, including Nokia, the Finnish
telecommunications equipment company. We added to several existing holdings over
the quarter, such as ING Groep NV in the Netherlands and AXA SA, the French
financial services firm.
INDUSTRY DIVERSIFICATION ON 12/31/99
(Equity Assets as a Percentage of Total Net Assets)
Finance 24.9%
Services 22.3%
Energy 11.7%
Materials 10.7%
Capital Equipment 9.7%
Consumer Goods 9.6%
Multi-Industry 3.3%
10 LARGEST POSITIONS ON 12/31/99
(Percent of Total Net Assets)
Sony Corp. 2.9%
Development Bank of
Singapore Ltd. 2.6%
Koninklijke Philips
Electronics NV 1.8%
Total Fina SA 1.7%
Aventis SA 1.7%
Telefonos de Mexico SA (Telmex) 1.7%
Telefonica SA 1.7%
Hutchison Whampoa Ltd. 1.5%
Nokia Corp. 1.5%
Banque Nationale de Paris 1.5%
3
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC. FOREIGN EQUITY SERIES
[letter continued]
The nineties was a tremendous decade for many equity investors,
providing spectacular returns driven by, among other things, the confluence of
falling interest rates, technological advancement, and business restructuring.
As we enter the year 2000, economic growth continues to surge, with a large
portion of the world participating. To some extent, we believe that 1999's
market performance may have anticipated this growth. We remain comfortable with
our portfolio composition; we believe the value orientation is well suited to
the environment in which we currently find ourselves. We continue to remain
vigilant, taking profits where we consider a stock's price to have run ahead of
its underlying fundamentals.
This discussion reflects our views, opinions, and portfolio holdings as
of December 31, 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.
Of course, it should be remembered that investing in foreign securities
involves special risks related to market and currency volatility, and economic,
social, political, and other factors in the countries where the Fund invests.
Emerging market securities involve heightened risks related to the same factors,
in addition to those associated with these markets' 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. The Fund's definition of "emerging markets" as used by the Fund's
manager may differ from the definition of the same terms as used in managing
other Franklin Templeton funds. While short-term volatility can be
disconcerting, declines in excess of 50% are not unusual in emerging markets.
Templeton Foreign Equity Series - Primary Shares
Total Return Index Comparison
$5,000,000 Investment: 10/18/90 - 12/31/99
<TABLE>
<CAPTION>
TIFI Foreign Equity Series- MSCI EAFE MSCI AC World ex U.S.
Primary Shares(1) Index(4) CPI Index(5) Free Index(4)
<S> <C> <C> <C> <C>
10/18/90 $ 5,000,000.00 $ 5,000,000.00 $ 5,000,000.00 $ 5,000,000.00
10/31/90 $ 4,970,000.00 $ 5,327,390.18 $ 5,012,580.65 $ 5,301,096.77
11/30/90 $ 4,875,000.00 $ 5,014,654.90 $ 5,023,844.97 $ 5,006,355.79
12/31/90 $ 4,860,000.00 $ 5,097,844.71 $ 5,023,845.87 $ 5,097,972.10
1/31/91 $ 5,005,000.00 $ 5,264,165.01 $ 5,053,883.95 $ 5,257,538.63
2/28/91 $ 5,614,715.00 $ 5,830,025.21 $ 5,061,393.41 $ 5,822,198.28
3/31/91 $ 5,452,703.00 $ 5,481,442.58 $ 5,068,902.85 $ 5,501,977.38
4/30/91 $ 5,503,332.00 $ 5,536,863.42 $ 5,076,412.33 $ 5,561,948.93
5/31/91 $ 5,579,275.00 $ 5,596,270.70 $ 5,091,431.25 $ 5,640,928.60
6/30/91 $ 5,295,754.00 $ 5,186,515.67 $ 5,106,450.21 $ 5,248,319.97
7/31/91 $ 5,604,589.00 $ 5,442,746.82 $ 5,113,959.70 $ 5,500,764.16
8/31/91 $ 5,614,715.00 $ 5,333,546.81 $ 5,128,978.69 $ 5,406,151.02
9/30/91 $ 5,756,475.00 $ 5,635,740.03 $ 5,151,507.16 $ 5,681,324.11
10/31/91 $ 5,736,223.00 $ 5,717,043.98 $ 5,159,016.67 $ 5,780,747.28
11/30/91 $ 5,685,595.00 $ 5,451,663.94 $ 5,174,035.60 $ 5,523,504.02
12/31/91 $ 5,899,356.00 $ 5,734,913.70 $ 5,177,790.29 $ 5,810,173.88
1/31/92 $ 6,060,450.00 $ 5,614,098.62 $ 5,185,299.80 $ 5,729,412.47
2/29/92 $ 6,154,884.00 $ 5,414,697.07 $ 5,204,073.48 $ 5,553,519.50
3/31/92 $ 6,108,304.00 $ 5,058,741.06 $ 5,230,356.71 $ 5,217,531.57
4/30/92 $ 6,304,442.00 $ 5,084,069.36 $ 5,237,866.19 $ 5,234,749.43
5/31/92 $ 6,657,491.00 $ 5,425,937.34 $ 5,245,375.20 $ 5,552,498.72
6/30/92 $ 6,584,639.00 $ 5,170,374.93 $ 5,264,148.87 $ 5,284,313.03
7/31/92 $ 6,360,482.00 $ 5,039,702.80 $ 5,275,413.10 $ 5,171,757.16
8/31/92 $ 6,181,155.00 $ 5,357,514.58 $ 5,290,432.09 $ 5,447,411.82
9/30/92 $ 6,024,245.00 $ 5,253,420.96 $ 5,305,451.05 $ 5,335,739.88
10/31/92 $ 5,811,295.00 $ 4,979,450.38 $ 5,324,224.76 $ 5,101,500.90
11/30/92 $ 5,822,502.00 $ 5,027,836.40 $ 5,331,734.26 $ 5,129,559.15
12/31/92 $ 5,820,811.00 $ 5,055,364.00 $ 5,327,980.71 $ 5,172,647.45
1/31/93 $ 5,843,979.00 $ 5,056,254.56 $ 5,354,263.64 $ 5,172,130.18
2/28/93 $ 5,971,400.00 $ 5,210,483.42 $ 5,373,037.35 $ 5,330,397.37
3/31/93 $ 6,119,128.00 $ 5,666,177.81 $ 5,391,811.07 $ 5,769,089.07
4/30/93 $ 6,316,145.00 $ 6,205,469.88 $ 5,406,830.06 $ 6,278,499.64
5/31/93 $ 6,484,189.00 $ 6,338,043.79 $ 5,414,339.56 $ 6,418,510.18
6/30/93 $ 6,362,502.00 $ 6,240,618.99 $ 5,421,849.03 $ 6,341,488.05
7/31/93 $ 6,466,806.00 $ 6,460,506.95 $ 5,421,850.00 $ 6,552,025.46
8/31/93 $ 6,924,581.00 $ 6,810,730.45 $ 5,436,868.96 $ 6,903,869.23
9/30/93 $ 6,872,430.00 $ 6,658,919.54 $ 5,448,133.18 $ 6,761,649.52
10/31/93 $ 7,278,054.00 $ 6,865,592.90 $ 5,470,661.64 $ 7,006,421.23
11/30/93 $ 7,110,009.00 $ 6,266,909.90 $ 5,474,416.38 $ 6,472,531.93
12/31/93 $ 7,801,439.00 $ 6,720,849.45 $ 5,474,417.36 $ 6,977,389.42
1/31/94 $ 8,357,848.00 $ 7,290,513.62 $ 5,489,436.32 $ 7,550,930.84
2/28/94 $ 8,129,428.00 $ 7,271,818.26 $ 5,508,210.02 $ 7,493,543.76
3/31/94 $ 7,768,919.00 $ 6,960,159.91 $ 5,526,983.77 $ 7,150,339.46
4/30/94 $ 7,881,598.00 $ 7,257,022.08 $ 5,534,493.28 $ 7,392,735.96
5/31/94 $ 7,911,250.00 $ 7,216,906.35 $ 5,538,248.05 $ 7,394,953.79
6/30/94 $ 7,656,240.00 $ 7,320,511.25 $ 5,557,021.77 $ 7,447,457.96
7/31/94 $ 7,988,347.00 $ 7,392,525.31 $ 5,572,040.73 $ 7,568,851.52
8/31/94 $ 8,261,148.00 $ 7,569,172.66 $ 5,594,569.21 $ 7,823,921.82
9/30/94 $ 8,065,443.00 $ 7,332,435.81 $ 5,609,588.17 $ 7,629,888.56
10/31/94 $ 8,237,426.00 $ 7,578,317.97 $ 5,613,342.89 $ 7,835,132.56
11/30/94 $ 7,881,598.00 $ 7,215,768.06 $ 5,620,852.37 $ 7,457,479.17
12/31/94 $ 7,819,892.00 $ 7,262,640.17 $ 5,620,853.38 $ 7,440,326.97
1/31/95 $ 7,594,903.00 $ 6,985,367.82 $ 5,643,381.87 $ 7,102,536.12
2/28/95 $ 7,713,478.00 $ 6,967,108.98 $ 5,665,910.36 $ 7,063,472.17
3/31/95 $ 7,749,977.00 $ 7,403,609.36 $ 5,684,684.07 $ 7,462,558.35
4/30/95 $ 8,090,635.00 $ 7,684,023.29 $ 5,703,457.80 $ 7,753,598.13
5/31/95 $ 8,297,464.00 $ 7,594,405.99 $ 5,714,722.01 $ 7,719,482.30
6/30/95 $ 8,346,129.00 $ 7,463,241.56 $ 5,725,986.25 $ 7,612,953.44
7/31/95 $ 8,759,786.00 $ 7,929,905.44 $ 5,725,987.28 $ 8,045,369.20
8/31/95 $ 8,534,708.00 $ 7,629,333.63 $ 5,741,006.26 $ 7,766,194.89
9/30/95 $ 8,692,871.00 $ 7,780,319.67 $ 5,752,270.51 $ 7,898,996.82
10/31/95 $ 8,504,292.00 $ 7,573,179.09 $ 5,771,044.25 $ 7,688,093.60
11/30/95 $ 8,638,122.00 $ 7,785,872.50 $ 5,767,289.61 $ 7,868,763.80
12/31/95 $ 8,834,439.00 $ 8,101,557.48 $ 5,763,535.11 $ 8,179,579.97
1/31/96 $ 9,117,594.00 $ 8,136,742.46 $ 5,797,327.81 $ 8,291,640.22
2/29/96 $ 9,262,241.00 $ 8,166,279.81 $ 5,816,101.53 $ 8,291,640.22
3/31/96 $ 9,331,739.00 $ 8,341,768.18 $ 5,846,139.60 $ 8,445,864.73
4/30/96 $ 9,672,913.00 $ 8,586,345.57 $ 5,868,668.05 $ 8,701,774.43
5/31/96 $ 9,786,638.00 $ 8,430,390.58 $ 5,879,932.31 $ 8,571,247.81
6/30/96 $ 9,755,048.00 $ 8,479,902.51 $ 5,883,687.06 $ 8,614,961.18
7/31/96 $ 9,502,326.00 $ 8,234,177.24 $ 5,894,951.32 $ 8,328,944.46
8/31/96 $ 9,780,320.00 $ 8,254,343.81 $ 5,906,215.57 $ 8,454,711.53
9/30/96 $ 9,862,544.00 $ 8,475,712.60 $ 5,924,989.30 $ 8,586,605.03
10/31/96 $ 9,957,437.00 $ 8,391,084.22 $ 5,943,763.04 $ 8,500,738.98
11/30/96 $10,469,859.00 $ 8,727,046.45 $ 5,955,027.31 $ 8,828,867.50
12/31/96 $10,741,158.00 $ 8,616,881.02 $ 5,955,028.38 $ 8,726,452.64
1/31/97 $10,938,364.00 $ 8,317,304.98 $ 5,973,802.08 $ 8,565,885.91
2/28/97 $11,089,455.00 $ 8,455,350.12 $ 5,992,575.83 $ 8,722,641.62
3/31/97 $11,201,336.00 $ 8,488,052.20 $ 6,007,594.60 $ 8,704,324.07
4/30/97 $11,148,686.00 $ 8,535,143.40 $ 6,015,103.98 $ 8,777,440.39
5/31/97 $11,609,376.00 $ 9,092,673.57 $ 6,011,349.59 $ 9,319,886.21
6/30/97 $12,122,715.00 $ 9,596,180.00 $ 6,018,858.97 $ 9,834,343.93
7/31/97 $12,563,661.00 $ 9,753,397.58 $ 6,026,368.34 $10,033,981.11
8/31/97 $11,852,883.00 $ 9,026,975.45 $ 6,037,632.22 $ 9,244,306.80
9/30/97 $12,807,168.00 $ 9,534,694.16 $ 6,052,650.95 $ 9,744,423.80
10/31/97 $11,859,464.00 $ 8,803,900.47 $ 6,067,669.40 $ 8,915,173.33
11/30/97 $11,780,489.00 $ 8,716,182.19 $ 6,063,914.12 $ 8,803,733.66
12/31/97 $11,968,833.00 $ 8,794,213.47 $ 6,056,404.56 $ 8,904,976.60
1/31/98 $12,113,617.00 $ 9,198,448.28 $ 6,067,668.93 $ 9,171,235.40
2/28/98 $12,885,800.00 $ 9,790,811.34 $ 6,078,932.71 $ 9,782,956.80
3/31/98 $13,833,182.00 $10,094,498.51 $ 6,090,197.03 $10,121,447.11
4/30/98 $14,013,103.00 $10,176,696.60 $ 6,101,461.28 $10,194,321.53
5/31/98 $13,860,862.00 $10,129,612.59 $ 6,112,725.49 $10,009,804.31
6/30/98 $13,729,381.00 $10,208,550.33 $ 6,120,234.97 $ 9,971,767.05
7/31/98 $13,971,583.00 $10,314,314.79 $ 6,127,744.44 $10,066,498.84
8/31/98 $11,722,566.00 $ 9,038,757.51 $ 6,135,253.38 $ 8,647,122.50
9/30/98 $11,549,565.00 $ 8,764,007.12 $ 6,142,762.32 $ 8,464,668.22
10/31/98 $12,442,252.00 $ 9,680,039.02 $ 6,157,780.76 $ 9,351,765.45
11/30/98 $13,113,497.00 $10,178,360.65 $ 6,157,780.76 $ 9,856,760.78
12/31/98 $13,184,950.00 $10,582,357.29 $ 6,154,025.74 $10,201,747.41
1/31/99 $13,043,894.00 $10,553,501.85 $ 6,169,044.64 $10,200,727.23
2/28/99 $12,746,936.00 $10,304,425.49 $ 6,176,553.60 $ 9,976,311.23
3/31/99 $13,435,674.00 $10,737,049.06 $ 6,195,327.30 $10,455,174.17
4/30/99 $14,537,325.00 $11,174,570.71 $ 6,240,384.24 $10,977,932.88
5/31/99 $14,001,386.00 $10,601,541.86 $ 6,240,384.24 $10,461,970.04
6/30/99 $14,663,866.00 $11,017,310.90 $ 6,240,384.24 $10,943,220.66
7/31/99 $14,745,745.00 $11,347,318.91 $ 6,259,157.94 $11,205,857.95
8/31/99 $14,671,309.00 $11,391,293.18 $ 6,274,176.91 $11,250,681.39
9/30/99 $14,373,566.00 $11,508,493.86 $ 6,304,214.85 $11,329,436.16
10/31/99 $14,604,317.00 $11,942,070.15 $ 6,315,479.16 $11,748,625.29
11/30/99 $15,333,788.00 $12,359,453.87 $ 6,319,236.87 $12,218,570.31
12/31/99 $16,789,276.00 $13,471,157.45 $ 6,319,236.87 $13,379,334.48
</TABLE>
Periods ended December 31, 1999
<TABLE>
<CAPTION>
SINCE
INCEPTION
ONE-YEAR FIVE-YEAR (10/18/90)
<S> <C> <C> <C>
Average Annual
Total Return(1),(2) 27.34% 16.51% 14.07%
Cumulative Total
Return(1),(3) 27.34% 114.70% 235.78%
</TABLE>
(1) The Fund's manager and administrator have agreed in advance to waive their
respective fees in order to limit the total expenses of the Primary Shares
to an annual rate of 1.00% of average net assets. If these fee waivers are
insufficient to so limit the Primary Shares expenses, the manager and
administrator have agreed to assume as their own expenses certain expenses
otherwise payable by the Fund. These voluntary agreements did not result in
any fee waivers for the fiscal year ended December 31, 1999. After April
30, 2000, the manager and administrator may end this arrangement at any
time. Past fee waivers by the Fund's manager and administrator increased
the Fund's total returns. Without these waivers, the Primary Shares 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.
(5) Source: U.S. Bureau of Labor Statistics (January 2000).
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.
4
<PAGE>
In fact, the Mexican Bolsa Index has increased 4,121.31% 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.
From everyone at the Templeton organization, we would like to thank you
for your support over the past year.
Best regards,
/s/Donald F. Reed
Donald F. Reed, CFA, CIC
President
Templeton Institutional Funds, Inc.
/s/Gary P. Motyl
Gary P. Motyl, CFA
President
Templeton Investment Counsel, Inc.
Templeton Foreign Equity Series - Service Shares*
Total Return Index Comparison
$5,000,000 Investment: 10/18/90 - 12/31/99
<TABLE>
<CAPTION>
TIFI Foreign Equity Series- MSCI EAFE MSCI AC World ex U.S.
Service Shares(1) Index(4) CPI Index(5) Free Index(4)
<S> <C> <C> <C> <C>
10/18/90 $ 5,000,000 $ 5,000,000.00 $ 5,000,000.00 $ 5,000,000.00
10/31/90 $ 4,970,000 $ 5,327,390.18 $ 5,012,580.65 $ 5,301,096.77
11/30/90 $ 4,875,000 $ 5,014,654.90 $ 5,023,844.97 $ 5,006,355.79
12/31/90 $ 4,860,000 $ 5,097,844.71 $ 5,023,845.87 $ 5,097,972.10
1/31/91 $ 5,005,000 $ 5,264,165.01 $ 5,053,883.95 $ 5,257,538.63
2/28/91 $ 5,614,715 $ 5,830,025.21 $ 5,061,393.41 $ 5,822,198.28
3/31/91 $ 5,452,705 $ 5,481,442.58 $ 5,068,902.85 $ 5,501,977.38
4/30/91 $ 5,503,335 $ 5,536,863.42 $ 5,076,412.33 $ 5,561,948.93
5/31/91 $ 5,579,275 $ 5,596,270.70 $ 5,091,431.25 $ 5,640,928.60
6/30/91 $ 5,295,755 $ 5,186,515.67 $ 5,106,450.21 $ 5,248,319.97
7/31/91 $ 5,604,590 $ 5,442,746.82 $ 5,113,959.70 $ 5,500,764.16
8/31/91 $ 5,614,715 $ 5,333,546.81 $ 5,128,978.69 $ 5,406,151.02
9/30/91 $ 5,756,480 $ 5,635,740.03 $ 5,151,507.16 $ 5,681,324.11
10/31/91 $ 5,736,225 $ 5,717,043.98 $ 5,159,016.67 $ 5,780,747.28
11/30/91 $ 5,685,595 $ 5,451,663.94 $ 5,174,035.60 $ 5,523,504.02
12/31/91 $ 5,899,360 $ 5,734,913.70 $ 5,177,790.29 $ 5,810,173.88
1/31/92 $ 6,060,455 $ 5,614,098.62 $ 5,185,299.80 $ 5,729,412.47
2/29/92 $ 6,154,890 $ 5,414,697.07 $ 5,204,073.48 $ 5,553,519.50
3/31/92 $ 6,108,305 $ 5,058,741.06 $ 5,230,356.71 $ 5,217,531.57
4/30/92 $ 6,304,445 $ 5,084,069.36 $ 5,237,866.19 $ 5,234,749.43
5/31/92 $ 6,657,495 $ 5,425,937.34 $ 5,245,375.20 $ 5,552,498.72
6/30/92 $ 6,584,640 $ 5,170,374.93 $ 5,264,148.87 $ 5,284,313.03
7/31/92 $ 6,360,485 $ 5,039,702.80 $ 5,275,413.10 $ 5,171,757.16
8/31/92 $ 6,181,155 $ 5,357,514.58 $ 5,290,432.09 $ 5,447,411.82
9/30/92 $ 6,024,245 $ 5,253,420.96 $ 5,305,451.05 $ 5,335,739.88
10/31/92 $ 5,811,295 $ 4,979,450.38 $ 5,324,224.76 $ 5,101,500.90
11/30/92 $ 5,822,505 $ 5,027,836.40 $ 5,331,734.26 $ 5,129,559.15
12/31/92 $ 5,820,815 $ 5,055,364.00 $ 5,327,980.71 $ 5,172,647.45
1/31/93 $ 5,843,980 $ 5,056,254.56 $ 5,354,263.64 $ 5,172,130.18
2/28/93 $ 5,971,405 $ 5,210,483.42 $ 5,373,037.35 $ 5,330,397.37
3/31/93 $ 6,119,130 $ 5,666,177.81 $ 5,391,811.07 $ 5,769,089.07
4/30/93 $ 6,316,145 $ 6,205,469.88 $ 5,406,830.06 $ 6,278,499.64
5/31/93 $ 6,484,190 $ 6,338,043.79 $ 5,414,339.56 $ 6,418,510.18
6/30/93 $ 6,362,505 $ 6,240,618.99 $ 5,421,849.03 $ 6,341,488.05
7/31/93 $ 6,466,805 $ 6,460,506.95 $ 5,421,850.00 $ 6,552,025.46
8/31/93 $ 6,924,585 $ 6,810,730.45 $ 5,436,868.96 $ 6,903,869.23
9/30/93 $ 6,872,430 $ 6,658,919.54 $ 5,448,133.18 $ 6,761,649.52
10/31/93 $ 7,278,055 $ 6,865,592.90 $ 5,470,661.64 $ 7,006,421.23
11/30/93 $ 7,110,010 $ 6,266,909.90 $ 5,474,416.38 $ 6,472,531.93
12/31/93 $ 7,801,445 $ 6,720,849.45 $ 5,474,417.36 $ 6,977,389.42
1/31/94 $ 8,357,855 $ 7,290,513.62 $ 5,489,436.32 $ 7,550,930.84
2/28/94 $ 8,129,435 $ 7,271,818.26 $ 5,508,210.02 $ 7,493,543.76
3/31/94 $ 7,768,920 $ 6,960,159.91 $ 5,526,983.77 $ 7,150,339.46
4/30/94 $ 7,881,600 $ 7,257,022.08 $ 5,534,493.28 $ 7,392,735.96
5/31/94 $ 7,911,255 $ 7,216,906.35 $ 5,538,248.05 $ 7,394,953.79
6/30/94 $ 7,656,245 $ 7,320,511.25 $ 5,557,021.77 $ 7,447,457.96
7/31/94 $ 7,988,350 $ 7,392,525.31 $ 5,572,040.73 $ 7,568,851.52
8/31/94 $ 8,261,150 $ 7,569,172.66 $ 5,594,569.21 $ 7,823,921.82
9/30/94 $ 8,065,445 $ 7,332,435.81 $ 5,609,588.17 $ 7,629,888.56
10/31/94 $ 8,237,430 $ 7,578,317.97 $ 5,613,342.89 $ 7,835,132.56
11/30/94 $ 7,881,600 $ 7,215,768.06 $ 5,620,852.37 $ 7,457,479.17
12/31/94 $ 7,819,750 $ 7,262,640.17 $ 5,620,853.38 $ 7,440,326.97
1/31/95 $ 7,594,765 $ 6,985,367.82 $ 5,643,381.87 $ 7,102,536.12
2/28/95 $ 7,713,335 $ 6,967,108.98 $ 5,665,910.36 $ 7,063,472.17
3/31/95 $ 7,749,830 $ 7,403,609.36 $ 5,684,684.07 $ 7,462,558.35
4/30/95 $ 8,090,485 $ 7,684,023.29 $ 5,703,457.80 $ 7,753,598.13
5/31/95 $ 8,297,305 $ 7,594,405.99 $ 5,714,722.01 $ 7,719,482.30
6/30/95 $ 8,345,970 $ 7,463,241.56 $ 5,725,986.25 $ 7,612,953.44
7/31/95 $ 8,759,620 $ 7,929,905.44 $ 5,725,987.28 $ 8,045,369.20
8/31/95 $ 8,534,545 $ 7,629,333.63 $ 5,741,006.26 $ 7,766,194.89
9/30/95 $ 8,692,705 $ 7,780,319.67 $ 5,752,270.51 $ 7,898,996.82
10/31/95 $ 8,504,130 $ 7,573,179.09 $ 5,771,044.25 $ 7,688,093.60
11/30/95 $ 8,637,960 $ 7,785,872.50 $ 5,767,289.61 $ 7,868,763.80
12/31/95 $ 8,834,275 $ 8,101,557.48 $ 5,763,535.11 $ 8,179,579.97
1/31/96 $ 9,117,425 $ 8,136,742.46 $ 5,797,327.81 $ 8,291,640.22
2/29/96 $ 9,262,065 $ 8,166,279.81 $ 5,816,101.53 $ 8,291,640.22
3/31/96 $ 9,331,560 $ 8,341,768.18 $ 5,846,139.60 $ 8,445,864.73
4/30/96 $ 9,672,730 $ 8,586,345.57 $ 5,868,668.05 $ 8,701,774.43
5/31/96 $ 9,786,450 $ 8,430,390.58 $ 5,879,932.31 $ 8,571,247.81
6/30/96 $ 9,754,860 $ 8,479,902.51 $ 5,883,687.06 $ 8,614,961.18
7/31/96 $ 9,502,145 $ 8,234,177.24 $ 5,894,951.32 $ 8,328,944.46
8/31/96 $ 9,780,130 $ 8,254,343.81 $ 5,906,215.57 $ 8,454,711.53
9/30/96 $ 9,862,350 $ 8,475,712.60 $ 5,924,989.30 $ 8,586,605.03
10/31/96 $ 9,957,240 $ 8,391,084.22 $ 5,943,763.04 $ 8,500,738.98
11/30/96 $10,469,655 $ 8,727,046.45 $ 5,955,027.31 $ 8,828,867.50
12/31/96 $10,740,950 $ 8,616,881.02 $ 5,955,028.38 $ 8,726,452.64
1/31/97 $10,938,155 $ 8,317,304.98 $ 5,973,802.08 $ 8,565,885.91
2/28/97 $11,089,240 $ 8,455,350.12 $ 5,992,575.83 $ 8,722,641.62
3/31/97 $11,201,115 $ 8,488,052.20 $ 6,007,594.60 $ 8,704,324.07
4/30/97 $11,148,470 $ 8,535,143.40 $ 6,015,103.98 $ 8,777,440.39
5/31/97 $11,609,150 $ 9,092,673.57 $ 6,011,349.59 $ 9,319,886.21
6/30/97 $12,122,480 $ 9,596,180.00 $ 6,018,858.97 $ 9,834,343.93
7/31/97 $12,563,415 $ 9,753,397.58 $ 6,026,368.34 $10,033,981.11
8/31/97 $11,852,650 $ 9,026,975.45 $ 6,037,632.22 $ 9,244,306.80
9/30/97 $12,806,920 $ 9,534,694.16 $ 6,052,650.95 $ 9,744,423.80
10/31/97 $11,859,230 $ 8,803,900.47 $ 6,067,669.40 $ 8,915,173.33
11/30/97 $11,780,260 $ 8,716,182.19 $ 6,063,914.12 $ 8,803,733.66
12/31/97 $11,968,600 $ 8,794,213.47 $ 6,056,404.56 $ 8,904,976.60
1/31/98 $12,113,380 $ 9,198,448.28 $ 6,067,668.93 $ 9,171,235.40
2/28/98 $12,885,550 $ 9,790,811.34 $ 6,078,932.71 $ 9,782,956.80
3/31/98 $13,832,910 $10,094,498.51 $ 6,090,197.03 $10,121,447.11
4/30/98 $14,012,830 $10,176,696.60 $ 6,101,461.28 $10,194,321.53
5/31/98 $13,860,590 $10,129,612.59 $ 6,112,725.49 $10,009,804.31
6/30/98 $13,729,110 $10,208,550.33 $ 6,120,234.97 $ 9,971,767.05
7/31/98 $13,971,310 $10,314,314.79 $ 6,127,744.44 $10,066,498.84
8/31/98 $11,722,335 $ 9,038,757.51 $ 6,135,253.38 $ 8,647,122.50
9/30/98 $11,549,340 $ 8,764,007.12 $ 6,142,762.32 $ 8,464,668.22
10/31/98 $12,442,005 $ 9,680,039.02 $ 6,157,780.76 $ 9,351,765.45
11/30/98 $13,113,240 $10,178,360.65 $ 6,157,780.76 $ 9,856,760.78
12/31/98 $13,184,695 $10,582,357.29 $ 6,154,025.74 $10,201,747.41
1/31/99 $13,043,645 $10,553,501.85 $ 6,169,044.64 $10,200,727.23
2/28/99 $12,746,690 $10,304,425.49 $ 6,176,553.60 $ 9,976,311.23
3/31/99 $13,435,420 $10,737,049.06 $ 6,195,327.30 $10,455,174.17
4/30/99 $14,537,050 $11,174,570.71 $ 6,240,384.24 $10,977,932.88
5/31/99 $14,007,458 $10,601,541.86 $ 6,240,384.24 $10,461,970.04
6/30/99 $14,663,007 $11,017,310.90 $ 6,240,384.24 $10,943,220.66
7/31/99 $14,745,120 $11,347,318.91 $ 6,259,157.94 $11,205,857.95
8/31/99 $14,669,919 $11,391,293.18 $ 6,274,176.91 $11,250,681.39
9/30/99 $14,372,120 $11,508,493.86 $ 6,304,214.85 $11,329,436.16
10/31/99 $14,610,697 $11,942,070.15 $ 6,315,479.16 $11,748,625.29
11/30/99 $15,339,771 $12,359,453.87 $ 6,319,236.87 $12,218,570.31
12/31/99 $16,787,846 $13,471,157.45 $ 6,319,236.87 $13,379,334.48
</TABLE>
Periods ended December 31, 1999
<TABLE>
<CAPTION>
SINCE
INCEPTION
ONE-YEAR FIVE-YEAR (10/18/90)
<S> <C> <C> <C>
Average Annual
Total Return(1),(2) 27.34% 16.51% 14.07%
Cumulative Total
Return(1),(3) 27.34% 114.70% 235.78%
</TABLE>
*On May 3, 1999, the Fund began selling Service Shares to certain eligible
investors as described in the prospectus. This share class has a Rule 12b-1
plan. Performance quotations have been calculated as follows: (a) For
periods prior to May 3, 1999, figures reflect Primary Shares performance
including the effect of Primary Shares expenses, and does not take into
account the Rule 12b-1 fee applicable to the Service Shares; and (b) for
periods after May 3, 1999, figures reflect actual Service Shares
performance, including the deduction of all fees and expenses applicable to
Service Shares.
(1) The Fund's manager and administrator have agreed in advance to waive
their respective fees in order to limit the total expenses of the
Service Shares to an annual rate of 1.00% of average net assets
exclusive of the Rule 12b-1 fee. If these fee waivers are insufficient
to so limit the Service Shares expenses, the manager and administrator
have agreed to assume as their own expenses certain expenses otherwise
payable by the Fund. These voluntary agreements did not result in any
fee waivers for the fiscal year ended December 31, 1999. After April
30, 2000, the manager and administrator may end this arrangement at
any time. Past fee waivers by the Fund's manager and administrator
increased the Service Shares total returns. Without these waivers, 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.
(5) Source: U.S. Bureau of Labor Statistics (January 2000).
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.
1. Source: Mexico Bolsa Index. Based on quarterly percentage price change over
15 years ended December 31, 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.
5
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Financial Highlights
<TABLE>
<CAPTION>
PRIMARY SHARES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999+ 1998 1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year......................... $17.76 $17.36 $16.34 $14.04 $12.86
------------------------------------------------------------------
Income from investment operations:
Net investment income..................................... .37 .42 .42 .45 .31
Net realized and unrealized gains......................... 4.42 1.29 1.43 2.54 1.35
------------------------------------------------------------------
Total from investment operations........................... 4.79 1.71 1.85 2.99 1.66
------------------------------------------------------------------
Less distributions from:
Net investment income..................................... (.38) (.40) (.43) (.45) (.31)
In excess of net investment income........................ -- -- -- (.02) --
Net realized gains........................................ (.64) (.91) (.40) (.14) (.17)
In excess of net realized gains........................... -- -- -- (.08) --
------------------------------------------------------------------
Total distributions........................................ (1.02) (1.31) (.83) (.69) (.48)
------------------------------------------------------------------
Net asset value, end of year............................... $21.53 $17.76 $17.36 $16.34 $14.04
------------------------------------------------------------------
------------------------------------------------------------------
Total Return............................................... 27.34% 10.16% 11.43% 21.58% 13.00%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................ $5,247,862 $4,551,663 $3,706,006 $2,857,591 $1,817,883
Ratios to average net assets:
Expenses.................................................. .84% .83% .84% .87% .88%
Net investment income..................................... 1.88% 2.33% 2.49% 3.20% 2.70%
Portfolio turnover rate.................................... 10.56% 15.40% 15.25% 7.39% 20.87%
</TABLE>
+Based on average weighted shares outstanding.
6
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Financial Highlights (continued)
<TABLE>
<CAPTION>
SERVICE SHARES
-------------------
YEAR ENDED
DECEMBER 31, 1999+
-------------------
<S> <C>
PER SHARE OPERATING PERFORMANCE
(For a share outstanding throughout the year)
Net asset value, beginning of year.......................... $19.53
------
Income from investment operations:
Net investment income...................................... .25
Net realized and unrealized gains.......................... 2.73
------
Total from investment operations............................ 2.98
------
Less distributions from:
Net investment income...................................... (.37)
Net realized gains......................................... (.61)
------
Total distributions......................................... (.98)
------
Net asset value, end of year................................ $21.53
------------------
------------------
Total Return*............................................... 15.49%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's)............................. $22
Ratios to average net assets:
Expenses................................................... .84%**
Net investment income...................................... 1.91%**
Portfolio turnover rate..................................... 10.56%
</TABLE>
*Total return is not annualized.
**Annualized.
+For the period May 3, 1999 (effective date) to December 31, 1999. Based on
average weighted shares outstanding.
See Notes to Financial Statements.
7
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS 86.7%
AEROSPACE & MILITARY TECHNOLOGY .2%
BAE Systems PLC............................................. United Kingdom 1,554,373 $ 10,286,791
Rolls-Royce PLC............................................. United Kingdom 10,110 34,883
--------------
10,321,674
--------------
APPLIANCES & HOUSEHOLD DURABLES 2.9%
Sony Corp. ................................................. Japan 507,400 150,454,763
--------------
AUTOMOBILES 2.2%
Autoliv Inc. ............................................... Sweden 750,000 21,937,500
Autoliv Inc., SDR........................................... Sweden 9,100 266,420
Fiat SpA.................................................... Italy 926,412 26,440,934
Volkswagen AG............................................... Germany 304,000 17,138,830
Volvo AB, B................................................. Sweden 1,895,125 49,021,458
--------------
114,805,142
--------------
BANKING 14.6%
Argentaria Caja Postal y Banco Hipotecaria SA, ADR.......... Spain 868,000 40,362,000
Australia & New Zealand Banking Group Ltd. ................. Australia 3,384,161 24,618,664
*Banca Nazionale del Lavoro SpA............................. Italy 10,000,000 33,222,591
Banco Bradesco SA, ADR...................................... Brazil 2,128,100 16,692,597
Banco Pinto & Sotto Mayor SA................................ Portugal 356,800 7,643,918
Bank Austria AG............................................. Austria 3,400 191,684
Bank Handlowy W Warszawie SA, GDR, 144A..................... Poland 1,160,000 17,400,000
Banque Nationale de Paris, ADR, 144A........................ France 833,500 76,863,586
BPI Socieda de Gestora de Participacoes Socias SA........... Portugal 3,407,040 14,508,989
Canadian Imperial Bank of Commerce.......................... Canada 1,555,200 37,107,960
Commercial International Bank Ltd., GDR, 144A............... Egypt 21,190 303,547
Credit Suisse Group......................................... Switzerland 297,400 59,106,499
Development Bank of Singapore Ltd., fgn. ................... Singapore 8,256,485 135,335,959
Deutsche Bank AG, Br. ...................................... Germany 718,100 60,763,420
DNB Holding AS.............................................. Norway 43,000 176,584
Foreningssparbanken AB, A................................... Sweden 1,569,680 23,069,959
HSBC Holdings PLC........................................... Hong Kong 3,565,371 49,993,624
Kookmin Bank................................................ South Korea 202,968 3,181,709
Kookmin Bank, GDR, Reg S.................................... South Korea 339,683 4,908,419
*Merita AS.................................................. Finland 9,162,900 53,872,280
National Australia Bank Ltd. ............................... Australia 20,300 310,518
National Bank of Canada..................................... Canada 1,154,200 14,767,757
*Philippine National Bank................................... Philippines 2,058,512 4,852,572
Svenska Handelsbanken, A.................................... Sweden 4,063,350 51,120,335
*Thai Farmers Bank Public Co. Ltd., fgn. ................... Thailand 16,000,000 26,858,513
Unibanco Uniao de Bancos Brasileiros SA, GDR................ Brazil 275,000 8,284,375
Unidanmark AS, A............................................ Denmark 3,400 239,135
--------------
765,757,194
--------------
BROADCASTING & PUBLISHING .6%
Television Broadcasts Ltd................................... Hong Kong 4,579,000 31,219,785
--------------
BUILDING MATERIALS & COMPONENTS 1.4%
Cie de Saint Gobain......................................... France 2,200 413,511
Okumura Corp. .............................................. Japan 1,865,000 6,296,668
Pioneer International Ltd. ................................. Australia 12,477,632 37,599,267
*Siam City Cement Public Co. Ltd., fgn. .................... Thailand 815,746 4,390,639
Svedala Industri, A......................................... Sweden 1,355,000 24,853,616
--------------
73,553,701
--------------
BUSINESS & PUBLIC SERVICES .4%
Esselte AB, A............................................... Sweden 63,000 474,074
Esselte AB, B............................................... Sweden 929,400 7,048,360
Hyder PLC................................................... United Kingdom 1,083,333 4,902,197
Laidlaw Inc. ............................................... Canada 38,600 201,556
</TABLE>
8
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
BUSINESS & PUBLIC SERVICES (CONT.)
Lex Service PLC............................................. United Kingdom 11,400 $ 69,457
TNT Post Group NV........................................... Netherlands 200,000 5,728,380
--------------
18,424,024
--------------
CHEMICALS 2.6%
Akzo Nobel NV............................................... Netherlands 528,256 26,484,596
BASF AG..................................................... Germany 660,000 34,485,050
Bayer AG, Br. .............................................. Germany 899,230 42,729,947
DSM NV, Br. ................................................ Netherlands 8,100 324,555
Imperial Chemical Industries PLC............................ United Kingdom 2,887,000 30,607,043
Kemira OY................................................... Finland 26,100 158,970
Yule Catto & Company PLC.................................... United Kingdom 42,500 168,277
--------------
134,958,438
--------------
CONSTRUCTION & HOUSING .4%
Daito Trust Construction Co. Ltd. .......................... Japan 1,151,300 12,844,175
Fairview Holdings PLC....................................... United Kingdom 1,816,252 4,725,772
*Fletcher Challenge Building Ltd. .......................... New Zealand 1,574,232 2,319,547
Kyudenko Corp. ............................................. Japan 909,000 3,202,427
--------------
23,091,921
--------------
DATA PROCESSING & REPRODUCTION .2%
*Newbridge Networks Corp. .................................. Canada 486,600 10,954,305
--------------
ELECTRICAL & ELECTRONICS 6.5%
*ABB Ltd., A................................................ Sweden 419,499 51,301,319
*ABB Ltd., Br. ............................................. Switzerland 29,603 3,609,466
Alcatel SA.................................................. France 253,287 58,138,967
Fuji Photo Film Co. Ltd. ................................... Japan 6,000 219,015
Hitachi Ltd. ............................................... Japan 4,242,000 68,081,225
Johnson Electric Holdings Ltd. ............................. Hong Kong 90,000 577,732
Koninklijke Philips Electronics NV.......................... Netherlands 706,284 95,991,483
Marconi PLC................................................. United Kingdom 3,625,000 64,090,858
Varitronix International Ltd. .............................. Hong Kong 137,000 315,469
--------------
342,325,534
--------------
ELECTRONIC COMPONENTS & INSTRUMENTS .2%
BICC PLC.................................................... United Kingdom 6,281,099 9,186,603
--------------
ENERGY EQUIPMENT & SERVICES .2%
TransCanada PipeLines Ltd. ................................. Canada 1,259,800 11,023,250
--------------
ENERGY SOURCES 4.8%
Fletcher Challenge Energy Ltd. ............................. New Zealand 1,405,000 3,670,554
MOL Magyar Olay-Es Gazipari RT, GDS, 144A................... Hungary 1,339,742 27,732,659
Norsk Hydro AS.............................................. Norway 306,300 12,807,901
Perez Companc SA, B......................................... Argentina 3,466,500 17,750,965
*Ranger Oil Ltd. ........................................... Canada 32,600 101,875
*Renaissance Energy Ltd. ................................... Canada 1,210,200 12,136,316
Repsol SA................................................... Spain 2,305,800 53,437,548
Shell Transport & Trading Co. PLC........................... United Kingdom 34,750 288,802
Shell Transport & Trading Co. PLC, ADR...................... United Kingdom 670,000 32,997,500
Total Fina SA, B............................................ France 686,187 91,533,049
--------------
252,457,169
--------------
FINANCIAL SERVICES 3.7%
AXA SA...................................................... France 501,507 69,876,743
Housing Development Finance Corp. Ltd. ..................... India 2,400,000 15,779,310
ICICI Ltd., 144A............................................ India 12,867,916 27,214,903
*ICICI Ltd., ADR, 144A...................................... India 1,676,500 24,728,375
ING Groep NV................................................ Netherlands 895,690 54,049,792
</TABLE>
9
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
FINANCIAL SERVICES (CONT.)
Mutual Risk Management Ltd. ................................ Bermuda 14,300 $ 240,419
Nomura Securities Co. Ltd. ................................. Japan 24,000 433,332
--------------
192,322,874
--------------
FOOD & HOUSEHOLD PRODUCTS 1.0%
Northern Foods PLC.......................................... United Kingdom 2,771,811 4,412,357
Panamerican Beverages Inc., A............................... Mexico 1,444,100 29,694,306
Tate & Lyle PLC............................................. United Kingdom 3,088,948 20,267,836
--------------
54,374,499
--------------
FOREST PRODUCTS & PAPER 3.8%
Aracruz Celulose SA, ADR.................................... Brazil 1,233,200 32,371,500
*Asia Pacific Resources International Hldgs. Ltd., A........ Indonesia 103,250 180,688
*Asia Pulp & Paper Co. Ltd., ADR............................ Indonesia 225,100 1,772,663
*Asia Pulp & Paper Co. Ltd., ADR, wts. ..................... Indonesia 37,020 34,706
Assidoman AB................................................ Sweden 260,000 4,233,980
Carter Holt Harvey Ltd. .................................... New Zealand 3,149,000 4,113,372
Cartiere Burgo SpA.......................................... Italy 1,217,760 8,019,096
Fletcher Challenge Ltd. Forestry Division................... New Zealand 20,122,398 8,095,725
Fletcher Challenge Paper Ltd. .............................. New Zealand 2,732,500 1,913,155
Jefferson Smurfit Group PLC................................. United Kingdom 4,300,000 12,786,657
Metsa Serla OY, B........................................... Finland 1,418,000 16,488,372
Mitsubishi Paper Mills Ltd. ................................ Japan 122,000 163,566
*PT Inti Indorayon Utama, ADR............................... Indonesia 29,388 10,286
*PT Tjiwi Kimia TBK......................................... Indonesia 2,530,782 823,976
*PT Tjiwi Kimia TBK, wts. .................................. Indonesia 351,495 63,382
Stora Enso OY, R............................................ Finland 1,903,936 32,706,928
Svenska Cellulosa AB, B..................................... Sweden 613,533 18,178,756
+Unipapel SA................................................ Spain 619,386 5,050,867
UPM-Kymmene Corp. .......................................... Finland 1,305,000 52,552,099
--------------
199,559,774
--------------
HEALTH & PERSONAL CARE 3.5%
Astrazeneca PLC............................................. United Kingdom 778,544 32,954,239
Aventis SA.................................................. France 1,567,712 91,067,132
Internatio-Muller NV........................................ Netherlands 429,100 8,985,483
Medeva PLC.................................................. United Kingdom 1,739,171 4,946,815
Nycomed Amersham PLC........................................ United Kingdom 7,558,120 47,076,102
Ono Pharmaceutical Co Ltd. ................................. Japan 7,000 187,699
--------------
185,217,470
--------------
INDUSTRIAL COMPONENTS
BAE Systems PLC............................................. United Kingdom 490,930 781,496
Granges AB.................................................. Sweden 11,355 236,980
Sylea SA.................................................... France 2,300 112,302
Weir Group PLC.............................................. United Kingdom 67,900 241,414
--------------
1,372,192
--------------
INSURANCE 3.7%
Ace Ltd. ................................................... Bermuda 1,018,200 16,991,213
Istituto Nazionale Delle Assicurazioni SpA.................. Italy 6,104,000 16,235,546
Muenchener Rueckversicherungs-Gesellschaft.................. Germany 88,998 22,668,372
*Muenchener Rueckversicherungs-Gesellschaft, wts. .......... Germany 19 1,014
Partnerre Ltd. ............................................. Bermuda 3,200 103,800
Skandia Foersaekrings AB.................................... Sweden 1,500,000 45,326,279
XL Capital Ltd., A.......................................... Bermuda 500,400 25,958,250
Zurich Allied AG............................................ Switzerland 114,655 65,373,149
--------------
192,657,623
--------------
LEISURE & TOURISM
Toei Co. Ltd. .............................................. Japan 110,000 609,287
--------------
</TABLE>
10
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
MACHINERY & ENGINEERING 1.8%
CNH Global NV............................................... Netherlands 3,181,200 $ 42,349,725
IHC Caland NV............................................... Netherlands 175,605 6,408,619
Invensys PLC................................................ United Kingdom 5,602,719 30,151,840
Makita Corp. ............................................... Japan 740,000 6,662,426
Tata Engineering & Locomotive Co.Telco, GDR, 144A........... India 200,000 1,060,000
VA Technologie AG........................................... Austria 118,510 7,814,764
VA Technologie AG, 144A..................................... Austria 28,000 1,846,371
--------------
96,293,745
--------------
MERCHANDISING 1.2%
Best Denki Co. Ltd. ........................................ Japan 1,125,000 10,569,066
House of Fraser PLC......................................... United Kingdom 1,750,000 2,092,862
Marks & Spencer PLC......................................... United Kingdom 3,315,500 15,766,535
Matsuzakaya Co. Ltd. ....................................... Japan 1,656,000 4,942,800
Safeway PLC................................................. United Kingdom 4,693,700 16,157,184
Somerfield PLC.............................................. United Kingdom 3,110,228 4,498,689
Storehouse.................................................. United Kingdom 13,238,000 9,573,840
--------------
63,600,976
--------------
METALS & MINING 2.8%
Arbed SA.................................................... Luxembourg 3,000 303,232
Boehler-Uddeholm AG......................................... Austria 22,450 1,035,145
Boehler Uddeholm AG, 144A................................... Austria 60,750 2,801,117
*Boliden Ltd. .............................................. Canada 8,089 24,823
Capral Aluminum Ltd. ....................................... Australia 133,000 171,136
Eramet SA................................................... France 5,400 309,876
Goldfields Ltd. ............................................ Australia 3,072,242 2,198,449
Grupo Mexico SA de CV, B.................................... Mexico 3,400,000 16,847,493
Iluka Resources Ltd. ....................................... Australia 4,870,699 12,918,354
Industrias Penoles SA....................................... Mexico 33,900 97,675
Pechiney SA, A.............................................. France 568,000 40,571,429
Pohang Iron & Steel Co. Ltd. ............................... South Korea 205,600 23,500,732
WMC Ltd. ................................................... Australia 8,198,378 45,210,753
--------------
145,990,214
--------------
MISC MATERIALS & COMMODITIES .1%
Agrium Inc. ................................................ Canada 21,500 169,313
Golden Hope Plantations Bhd. ............................... Malaysia 1,960,000 1,764,000
Unitor ASA.................................................. Norway 818,735 6,131,698
--------------
8,065,011
--------------
MULTI-INDUSTRY 3.3%
*Alfa SA de CV, A........................................... Mexico 900,400 4,228,792
*Brierley Investments Ltd. ................................. New Zealand 33,843,199 7,073,212
Broken Hill Proprietary Co. Ltd. ........................... Australia 26,500 347,962
Cheung Kong Holdings Ltd. .................................. Hong Kong 50,000 635,171
*DESC SA de CV DESC, B...................................... Mexico 143,000 117,720
Hutchison Whampoa Ltd. ..................................... Hong Kong 5,560,500 80,830,578
Inchcape PLC................................................ United Kingdom 18,833 83,700
Jardine Matheson Holdings Ltd. ............................. Hong Kong 9,786,341 38,558,184
Jardine Strategic Holdings Ltd. ............................ Hong Kong 5,115,130 10,179,109
Next PLC.................................................... United Kingdom 20,400 195,834
Pilkington PLC.............................................. United Kingdom 137,000 184,875
Preussag AG................................................. Germany 5,036 282,904
Swire Pacific Ltd., A....................................... Hong Kong 4,993,000 29,482,048
Swire Pacific Ltd., B....................................... Hong Kong 154,500 136,145
Trelleborg AB, B............................................ Sweden 20,700 186,190
Williams PLC................................................ United Kingdom 52,000 237,827
--------------
172,760,251
--------------
</TABLE>
11
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
REAL ESTATE .7%
Inversiones y Representacion SA............................. Argentina 3,065,176 $ 9,932,562
Inversiones y Representacion SA, GDR........................ Argentina 25,290 817,973
Taylor Woodrow PLC.......................................... United Kingdom 11,078,810 23,992,122
Union du Credit Bail Immobilier............................. France 2,100 264,905
Unione Immobiliare SpA...................................... Italy 6,104,000 2,832,925
--------------
37,840,487
--------------
TELECOMMUNICATIONS 14.9%
British Telecommunications PLC.............................. United Kingdom 2,930,000 71,028,007
Cable & Wireless HKT Ltd. .................................. Hong Kong 14,505,500 41,892,130
*Cable & Wireless Optus Ltd., 144A.......................... Australia 13,200,000 44,108,900
Cia de Telecomunicaciones de Chile SA, ADR.................. Chile 3,415,550 62,333,788
Koninklijke KPN NV.......................................... Netherlands 406,400 39,645,787
Nippon Telegraph & Telephone Corp. ......................... Japan 2,300 39,389,343
Nokia Corp., A.............................................. Finland 437,800 79,335,548
Nortel Networks Corp. ...................................... Canada 8,160 824,160
Philippine Long Distance Telephone Co., ADR................. Philippines 709,905 18,368,792
Portugal Telecom SA......................................... Portugal 36,000 394,684
PT Indosat, ADR............................................. Indonesia 158,300 3,423,238
*Rostelecom, ADR............................................ Russia 690,000 11,643,750
SK Telecom Co. Ltd., ADR.................................... South Korea 394,549 15,140,807
Telecom Argentina Stet-France Telecom SA, ADR............... Argentina 1,115,400 38,202,450
Telecom Italia SpA, di Risp................................. Italy 7,362,000 44,870,178
Telecomunicacoes Brasileiras SA, ADR........................ Brazil 3,200 411,200
Telefonica de Argentina SA, ADR............................. Argentina 1,534,466 47,376,639
Telefonica del Peru SA, ADR................................. Peru 19,600 262,150
*Telefonica SA.............................................. Spain 3,525,543 88,023,222
Telefonos de Mexico SA (Telmex), ADR........................ Mexico 794,106 89,336,925
Videsh Sanchar Nigam Ltd. .................................. India 1,000,000 41,586,207
Videsh Sanchar Nigam Ltd., GDR, 144A........................ India 127,600 3,138,960
--------------
780,736,865
--------------
TEXTILES & APPAREL
Courtaulds Textiles PLC..................................... United Kingdom 1,500,000 1,587,827
--------------
TRANSPORTATION 2.1%
Autostrade Concessioni e Costruzioni SpA, A................. Italy 4,865,000 33,070,049
British Airways PLC......................................... United Kingdom 4,217,200 27,466,290
Canadian National Railway Co. .............................. Canada 480,000 12,681,375
Hitachi Zosen Corp. ........................................ Japan 121,000 91,178
Hong Kong Ferry Holdings Co. Ltd. .......................... Hong Kong 67,000 65,936
Kvaerner ASA, A............................................. Norway 454,600 9,589,640
Mayne Nickless Ltd., A...................................... Australia 9,050,000 23,349,396
Peninsular & Oriental Steam Navigation Co. ................. United Kingdom 44,980 747,280
Singapore Airlines Ltd. .................................... Singapore 50,800 576,476
Stolt Nielsen SA, ADR....................................... Norway 2,000 35,000
--------------
107,672,620
--------------
UTILITIES ELECTRICAL & GAS 6.9%
BG PLC...................................................... United Kingdom 4,429,607 28,402,259
British Energy Ltd. ........................................ United Kingdom 2,422,782 13,948,900
*Centrais Geradoras Do Sul Do Brasil SA, ADR................ Brazil 117,000 592,610
Centrica PLC................................................ United Kingdom 5,833,935 16,876,616
*CEZ AS..................................................... Czech Republic 5,287,293 13,068,718
Endesa SA, Br. ............................................. Spain 1,567,200 31,097,868
Evn AG...................................................... Austria 88,671 13,390,365
Gener SA, ADR............................................... Chile 840,000 13,020,000
Guangdong Electric Power Development Co Ltd., B, 144A....... China 2,455,129 1,143,316
Hong Kong Electric Holdings Ltd. ........................... Hong Kong 8,563,300 26,768,919
Iberdrola SA, Br. .......................................... Spain 3,027,029 41,932,869
Korea Electric Power Corp. ................................. South Korea 639,410 19,821,428
National Power PLC.......................................... United Kingdom 4,069,416 23,412,770
</TABLE>
12
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
STATEMENT OF INVESTMENTS, DECEMBER 31, 1999 (CONT.)
<TABLE>
<CAPTION>
COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS (CONT.)
UTILITIES ELECTRICAL & GAS (CONT.)
Nova Chemicals.............................................. Canada 37,960 $ 733,103
Shandong Huaneng Power Development Co. Ltd., ADR............ China 5,682,965 24,507,787
Thames Water Group PLC...................................... United Kingdom 3,152,655 38,900,595
Veba AG..................................................... Germany 1,073,700 52,425,702
--------------
360,043,825
--------------
TOTAL COMMON STOCKS (COST $3,027,793,853)................... 4,549,239,043
--------------
PREFERRED STOCKS 5.5%
ABN Amro Holdings NV, cvt. pfd. ............................ Netherlands 457,188 42,575,142
Banco Bradesco SA, pfd. .................................... Brazil 3,586,486,932 28,132,034
*Banco Bradesco SA, rts., pfd. ............................. Brazil 232,885,274 924,322
Banco Itau SA, pfd. ........................................ Brazil 540,250,000 46,354,138
Embratel Participacoes SA, ADR, pfd. ....................... Brazil 1,146,400 31,239,400
News Corp. Ltd., pfd. ...................................... Australia 5,534,958 47,419,761
Tele Celular Sul Participacoes SA, ADR, pfd. ............... Brazil 112,980 3,587,115
Tele Centro Oeste Celular Participacoes SA, ADR, pfd. ...... Brazil 376,596 2,447,874
Tele Centro Sul Participacoes SA, ADR, pfd. ................ Brazil 225,960 20,505,870
Tele Leste Celular Participacoes SA, ADR, pfd. ............. Brazil 22,596 960,330
Tele Nordeste Celular Participacoes SA, ADR, pfd. .......... Brazil 56,490 2,852,745
Tele Norte Celular Participacoes SA, ADR, pfd. ............. Brazil 22,596 970,216
Tele Sudeste Celular Participacoes SA, ADR, pfd. ........... Brazil 225,960 8,770,073
Telemig Celular Participacoes SA, ADR, pfd. ................ Brazil 56,490 2,609,132
Telesp Celular Participacoes SA, ADR, pfd. ................. Brazil 451,920 19,150,110
Telesp Participacoes SA, ADR, pfd. ......................... Brazil 1,139,700 27,851,419
Volkswagen AG, pfd. ........................................ Germany 1,900 61,210
--------------
TOTAL PREFERRED STOCKS (COST $192,184,609).................. 286,410,891
--------------
PRINCIPAL
AMOUNT**
--------
BONDS 2.8%
BG Transco Holdings PLC:
FRN, 7.057%, 12/14/09..................................... United Kingdom 635,626GBP 1,033,559
FRN, 4.186% 12/14/22...................................... United Kingdom 635,626GBP 1,024,673
7.00%, 12/16/24........................................... United Kingdom 635,626GBP 998,067
Government of Australia, 7.50%, 7/15/05..................... Australia 75,100,000AUD 51,007,042
Government of New Zealand, 7.00%, 7/15/09................... New Zealand 90,000,000NZD 46,011,176
United Kingdom, 7.25%, 12/07/07............................. United Kingdom 27,000,000GBP 47,639,551
--------------
TOTAL BONDS (COST $148,175,815)............................. 147,714,068
--------------
SHORT TERM INVESTMENTS (COST $274,171,709) 5.2%
U.S. Treasury Bills, 4.65% to 5.48%, with maturities to
5/25/00................................................... United States 277,507,000 274,276,961
--------------
TOTAL INVESTMENTS (COST $3,642,325,986) 100.2%.............. 5,257,640,963
OTHER ASSETS, LESS LIABILITIES (.2%)........................ (9,756,742)
--------------
TOTAL NET ASSETS 100.0%..................................... $5,247,884,221
--------------
--------------
</TABLE>
CURRENCY ABBREVIATIONS:
<TABLE>
<S> <C>
AUD -- Australian Dollar
GBP -- British Pound
NZD -- New Zealand Dollar
</TABLE>
*Non-income producing.
**Securities denominated in U.S. dollars unless otherwise indicated.
+The Investment Company Act of 1940 defines "affiliated persons" as investments
in portfolio companies in which the Fund owns 5% or more of the outstanding
voting securities. Investments in affiliated companies at December 31, 1999 were
$5,050,867.
See Notes to Financial Statements.
13
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
Assets:
Investments in securities, at value (cost
$3,642,325,986)........................................... $5,257,640,963
Receivables:
Capital shares sold....................................... 16,472,628
Dividends and interest.................................... 14,849,372
--------------
Total assets........................................... 5,288,962,963
--------------
Liabilities:
Payables:
Capital shares redeemed................................... 12,077,780
To affiliates............................................. 3,366,956
Funds advanced by custodian................................ 21,586,310
Deferred tax liability (Note 1d)........................... 3,014,225
Accrued expenses........................................... 1,033,471
--------------
Total liabilities...................................... 41,078,742
--------------
Net assets, at value........................................ $5,247,884,221
--------------
--------------
Net assets consist of:
Undistributed net investment income........................ $ 116,183
Net unrealized appreciation................................ 1,612,349,598
Accumulated net realized gain.............................. 28,930,077
Capital shares............................................. 3,606,488,363
--------------
Net assets, at value........................................ $5,247,884,221
--------------
--------------
PRIMARY SHARES:
Net asset value per share ($5,247,862,170 / 243,727,915
shares outstanding)...................................... $21.53
--------------
--------------
SERVICE SHARES:
Net asset value per share ($22,051 / 1,024 shares
outstanding)............................................. $21.53
--------------
--------------
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Financial Statements (continued)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C> <C>
Investment Income:
(net of foreign taxes of $10,599,391)
Dividends.................................................. $104,372,958
Interest................................................... 22,243,576
------------
Total investment income............................... $ 126,616,534
Expenses:
Management fees (Note 3)................................... 32,611,710
Administrative fees (Note 3)............................... 3,896,265
Transfer agent fees (Note 3)............................... 36,200
Custodian fees............................................. 1,873,400
Reports to shareholders.................................... 57,000
Registration and filing fees............................... 191,200
Professional fees.......................................... 118,300
Directors' fees and expenses............................... 176,300
Other...................................................... 67,814
------------
Total expenses........................................ 39,028,189
--------------
Net investment income........................... 87,588,345
--------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments............................................... 171,226,106
Foreign currency transactions............................. (1,672,571)
------------
Net realized gain..................................... 169,553,535
Net unrealized appreciation (depreciation) on:
Investments............................................... 898,486,095
Deferred taxes (Note 1d).................................. (3,014,225)
Translation of assets and liabilities denominated in
foreign currencies...................................... (21,185)
------------
Net unrealized appreciation........................... 895,450,685
--------------
Net realized and unrealized gain............................ 1,065,004,220
--------------
Net increase in net assets resulting from operations........ $1,152,592,565
--------------
--------------
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................................... $ 87,588,345 $ 100,751,153
Net realized gain from investments and foreign currency
transactions............................................. 169,553,535 210,476,058
Net unrealized appreciation on investments, deferred
taxes, and translation of assets and liabilities
denominated in foreign currencies........................ 895,450,685 69,995,443
--------------------------------
Net increase in net assets resulting from operations.... 1,152,592,565 381,222,654
Distributions to shareholders from:
Net investment income:
Primary Shares........................................... (89,589,385) (95,131,004)
Service Shares........................................... (378) --
Net realized gains:
Primary Shares........................................... (151,647,099) (213,861,645)
Service Shares........................................... (619) --
Capital share transactions (Note 2):
Primary Shares........................................... (215,154,150) 773,427,138
Service Shares........................................... 20,000 --
--------------------------------
Net increase in net assets.............................. 696,220,934 845,657,143
Net assets:
Beginning of year.......................................... 4,551,663,287 3,706,006,144
--------------------------------
End of year................................................ $5,247,884,221 $4,551,663,287
--------------------------------
--------------------------------
Undistributed net investment income included in net assets:
End of year................................................ $ 116,183 $ 4,984,472
--------------------------------
--------------------------------
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Foreign Equity 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 long-term
capital growth. Under normal conditions, the Fund invests primarily in the
equity securities of companies located outside the United States, 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. 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.
Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of the net assets of each class.
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.
d. DEFERRED TAXES:
Deferred taxes are recorded for estimated tax liabilities inherent in certain of
the Fund's foreign portfolio securities which may arise from subsequent sales of
those securities and asset repatriations from countries that impose such taxes.
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.
17
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Notes to Financial Statements (continued)
2. CAPITAL STOCK
The Fund offers two classes of shares: Primary shares and Service shares. The
shares differ by distribution fees and voting rights on matters affecting a
single class and the exchange privilege of each class.
At December 31, 1999, there were 1.14 billion shares authorized ($0.01 par
value), of which 455 million and 100 million were designated as Primary shares
and Service shares, respectively. Transactions in the Fund's shares were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1999 1998
----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY SHARES:
Shares sold.............................................. 107,154,380 $ 2,067,120,582 94,164,555 $ 1,756,499,486
Shares issued on reinvestment of distributions........... 10,874,808 220,380,537 16,340,500 278,597,990
Shares redeemed.......................................... (130,611,950) (2,502,655,269) (67,623,948) (1,261,670,338)
----------------------------------------------------------------------
Net increase (decrease).................................. (12,582,762) $ (215,154,150) 42,881,107 $ 773,427,138
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999+
-------------------------------
SHARES AMOUNT
-------------------------------
<S> <C> <C>
SERVICE SHARES:
Shares sold.............................................. 1,024 $20,000
-------------------------------
Net increase............................................. 1,024 $20,000
-------------------------------
-------------------------------
</TABLE>
+Effective date of Services Shares was May 3, 1999.
Templeton Global Investors, Inc., a subsidiary of Franklin Resources, is the
record owner of 100% of the Fund's Service shares as of December 31, 1999.
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 have agreed in advance to limit total expenses of the Fund
to an annual rate of 1.00% of average daily net assets through April 30, 2000.
For the year ended December 31, 1999, no reimbursement was necessary under the
agreement.
The Fund reimburses Distributors up to .35% per year of the average daily net
assets of Service shares, for costs incurred in marketing the Fund's Service
shares.
18
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Notes to Financial Statements (continued)
4. 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.
At December 31, 1999, the net unrealized appreciation based on the cost of
investments for income tax purposes of $3,643,029,380 was as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $1,989,766,266
Unrealized depreciation..................................... (375,154,683)
--------------
Net unrealized appreciation................................. $1,614,611,583
==============
</TABLE>
Net investment income and net realized capital gains differ for financial
statement and tax purposes primarily due to differing treatments of passive
foreign investment companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the year
ended December 31, 1999 aggregated $460,117,676 and $681,291,829 respectively.
6. CREDIT FACILITY
Certain Franklin Templeton Funds, including Foreign Equity Series, are
participants in a $750 million senior unsecured credit agreement for temporary
borrowing purposes. The termination date of the agreement is March 1, 2000.
Interest is calculated on the Fund's borrowings at market rates. At December 31,
1999, the Fund had not utilized this credit facility.
19
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders of
Templeton Institutional Funds, Inc. - Foreign Equity Series
In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Foreign Equity Series at December
31, 1999, and the results of its operations, the changes in its net assets and
the financial highlights for the year then ended, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provides a reasonable basis for the opinion
expressed above. The financial statements for the year ended December 31, 1998
including the financial highlights for each of the four years in the period then
ended were audited by other independent accountants whose report dated January
28, 1999 expressed an unqualified opinion on those financial statements.
PricewaterhouseCoopers LLP
Ft. Lauderdale, Florida
January 28, 2000
20
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
CHANGE IN INDEPENDENT AUDITOR
On August 13, 1999, McGladrey & Pullen, LLP (McGladrey) resigned as independent
auditors of the Fund. McGladrey resigned pursuant to their agreement to sell
their investment company practice to PricewaterhouseCoopers LLP (PwC). The
McGladrey partners and professionals previously serving the Fund, have joined
PwC and performed the December 31, 1999 audit.
None of the reports of McGladrey on the financial statements of the Fund,
including those of the past two fiscal years have ever contained an adverse
opinion or a disclaimer of opinion, or was qualified or modified as to
uncertainty, audit scope or accounting principles.
During the period McGladrey served the Fund, including the two most recent
fiscal years and subsequent interim period, there were no disagreements with
McGladrey on any matter of accounting principle or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of McGladrey would have caused it to make
reference to the subject matter of disagreement in connection with its report.
On October 21, 1999, the Fund, with the approval of its Board of Directors and
its Audit Committee, engaged PwC as its independent auditors.
21
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES
Tax Designation
Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby
designates $161,066,374 as a capital gain dividend for the fiscal year ended
December 31, 1999.
At December 31, 1999, more than 50% of the Templeton Foreign Equity Series
Fund's total assets were invested in securities of foreign issuers. In most
instances, foreign taxes were withheld from dividends paid to the fund on these
investments. The Fund intends to make an election under Section 853 of the
Internal Revenue Code. This election will allow shareholders to treat their
proportionate share of foreign taxes paid by the Fund as having been paid
directly by them.
The following table provides a breakdown by country of foreign source income and
foreign taxes, as designated by the Fund, to Primary shares and Service shares
shareholders in December 1999.
<TABLE>
<CAPTION>
PRIMARY SECONDARY
------------------------------------------------------------------------
FOREIGN TAX FOREIGN SOURCE FOREIGN TAX FOREIGN SOURCE
COUNTRY PAID PER SHARE INCOME PER SHARE PAID PER SHARE INCOME PER SHARE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Argentina.................... $ 0.0000 $0.0146 $ 0.0000 $0.0146
Australia.................... (0.0021) 0.0034 (0.0021) 0.0034
Austria...................... 0.0006 0.0029 0.0006 0.0029
Belgium...................... 0.0001 0.0005 0.0001 0.0005
Bermuda...................... 0.0000 0.0041 0.0000 0.0041
Brazil....................... 0.0040 0.0221 0.0040 0.0221
Canada....................... 0.0015 0.0079 0.0015 0.0079
Chile........................ 0.0012 0.0026 0.0012 0.0026
China........................ 0.0000 0.0089 0.0000 0.0089
Denmark...................... 0.0000 0.0001 0.0000 0.0001
Finland...................... 0.0033 0.0161 0.0033 0.0161
France....................... 0.0039 0.0227 0.0039 0.0227
Germany...................... 0.0017 0.0128 0.0017 0.0128
Hong Kong.................... 0.0000 0.0291 0.0000 0.0291
Hungary...................... 0.0004 0.0016 0.0004 0.0016
India........................ 0.0000 0.0106 0.0000 0.0106
Indonesia.................... 0.0001 0.0003 0.0001 0.0003
Ireland...................... 0.0001 0.0010 0.0001 0.0010
Italy........................ 0.0022 0.0121 0.0022 0.0121
Japan........................ 0.0010 0.0048 0.0010 0.0048
Malaysia..................... 0.0001 0.0003 0.0001 0.0003
Mexico....................... 0.0004 0.0059 0.0004 0.0059
Netherlands.................. 0.0033 0.0263 0.0033 0.0263
New Zealand.................. 0.0003 0.0014 0.0003 0.0014
Norway....................... 0.0006 0.0030 0.0006 0.0030
Philippines.................. 0.0003 0.0011 0.0003 0.0011
Portugal..................... 0.0003 0.0016 0.0003 0.0016
Singapore.................... 0.0008 0.0024 0.0008 0.0024
South Korea.................. 0.0004 0.0018 0.0004 0.0018
Spain........................ 0.0028 0.0150 0.0028 0.0150
Sweden....................... 0.0037 0.0200 0.0037 0.0200
Switzerland.................. 0.0023 0.0114 0.0023 0.0114
United Kingdom............... 0.0102 0.0869 0.0102 0.0869
------------------------------------------------------------------------
TOTAL........................ $ 0.0435 $0.3553 $ 0.0435 $0.3553
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
In January 2000, shareholders will receive Form 1099-DIV which will include
their share of taxes withheld and foreign source income distributed during the
calendar year 1999. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.
22
<PAGE>
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<PAGE>
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<PAGE>
This report must be preceded or accompanied by the current prospectus of the
Templeton Institutional Funds, Inc. Foreign Equity 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
Fund Information: 1-800-362-6243
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