TEMPLETON INSTITUTIONAL FUNDS, INC.
TIFI EMERGING FIXED INCOME MARKETS SERIES SEMIANNUAL REPORT
JUNE 30, 2000
<PAGE>
(BOXED)
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENT PRODUCTS:
o ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT;
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK;
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
INVESTING IN DEVELOPING MARKETS INVOLVES SPECIAL CONSIDERATIONS, WHICH INCLUDE
RISKS RELATED TO MARKET AND CURRENCY VOLATILITY, ADVERSE SOCIAL, ECONOMIC, AND
POLITICAL DEVELOPMENTS, AND THE RELATIVELY SMALL SIZE AND LESSER LIQUIDITY OF
THESE MARKETS. THESE SPECIAL RISK CONSIDERATIONS ARE DISCUSSED IN THE FUND'S
PROSPECTUS. THE FUND IS DESIGNED FOR THE AGGRESSIVE PORTION OF A
WELL-DIVERSIFIED PORTFOLIO.
<PAGE>
June 30, 2000
(PICTURE AND BIO OF UMRAN DEMIRORS)
Portfolio Management Team:
Umran Demirors joined the Templeton organization in 1996, and is currently
executive vice president and chief investment officer for Templeton Global Bond
Managers. In this position, Dr. Demirors directs all investment strategies
within the Fixed Income Group and manages the portfolio team. In addition, Dr.
Demirors is manager of numerous Franklin Templeton mutual funds and corporate
pension accounts.
Dr. Demirors has extensive experience in analyzing international financial
markets, and developed and emerging economies. Prior to joining the Templeton
organization, Dr. Demirors was a principal and portfolio manager for Socimer
Advisory, Inc. in New York. Prior to that, Dr. Demirors was the head of research
and strategy at VestcorPartners Group in Miami, where he directed the firm's
overall investment research and strategy in both fixed income and equity markets
in Latin America. Dr. Demirors has also worked as a senior economic and
financial consultant with IMCA Group, as an economist in the International
Finance Department at the Federal Reserve Bank of New York, and as an economic
consultant for Project LINK at the United Nations.
Dr. Demirors has published research on international finance, macroeconomic
stabilization, macroeconometric models, and pricing models for global emerging
fixed income and derivative instruments.
Dr. Demirors holds a Ph.D. and master of arts degree in economics from New York
University, and a bachelor of arts degree in economics from the Bursa Academy of
Economics and Business Administration in Turkey.
Alex Calvo joined the Templeton organization in 1995, and is currently Director
of Research for Templeton Global Bond Managers. In this capacity, Mr. Calvo
directs all global economic and fixed income research efforts. In addition, he
is a back-up portfolio manager of the funds managed by the TBMB portfolio
management team.
Prior to joining the Templeton organization, Mr. Calvo was an account executive
with Fleishman-Hillard. While there, he served as consultant to firms investing
in Latin America. Prior to Fleishman-Hillard, Mr. Calvo was a research analyst
with Zeta Investments, where he performed corporate analysis in the U.S.
Mr. Calvo received a Master of Arts degree in International Affairs from the
Fletcher School of Law and Diplomacy at Tufts University, and has completed
course work for a Ph.D. in Economics at Boston University. He received a
Bachelor of Arts degree in Economics and Political Science from the State
University of New York at Binghamton. He has also received the Investment
Management Certificate from the Investment Management Authority (IMRO) in the
U.K., and holds the National Association of Securities Dealers Series 6 License
in the U.S.
Dear Shareholder:
The Templeton Institutional Funds, Inc., Emerging Fixed Income Markets
Series (the "Fund") posted a six-month cumulative total return of 5.91% for the
period ended June 30, 2000, compared to the unmanaged JP Morgan Emerging Markets
Bond Index plus ("EMBI+") cumulative total return of 8.10%. Please remember that
the Fund's performance differs from that of the index because, among other
things, the index does not contain cash (the Fund generally carries a certain
percentage of cash at any given time), is not managed according to any
investment strategy, and includes no management or other operating expenses. Of
course, one cannot invest directly in an index, nor is an index representative
of the Fund's portfolio.
(Insert performance chart below)
TOTAL RETURNS AS OF 6/30/00
CUMULATIVE
ONE YEAR SINCE
AVERAGE INCEPTION
ANNUAL/1,2/ (06/04/97)/1,3/
-------------------------------------------------------------------------------
TIFI Emerging Fixed Income Markets Series 11.99% 27.78%
JP Morgan EMBI+/4/ 23.16% 21.35%
1. The Fund's manager and administrator have agreed in advance to limit their
respective fees and to assume as their own expense certain expenses otherwise
payable by the Fund. With this reduction, the Fund paid no management fees and
total annual fund operating expenses were 1.25%. After May 1, 2001, the manager
and administrator may end this arrangement at any time. Past fee reductions by
the Fund's manager and administrator increased the Fund's total returns. Without
these reductions, 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: JP Morgan. The Emerging Markets Bond Index Plus tracks total returns
for external currency-denominated debt instruments of the emerging markets
including Brady Bonds, loans, Eurobonds, and U.S. dollar denominated local
market instruments. It includes reinvested interest. The index is unmanaged,
does not contain cash, and does 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. Also, as a
non-diversified series of an investment company, the Fund may invest in a
relatively small number of issuers and, as a result, be subject to greater risk
of loss with respect to its portfolio securities. 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 ____ of
this report. This semiannual report covers the six months ended June 30, 2000.
During this time the JP Morgan Emerging Markets Bond Index plus ("EMBI+") rose
6.95%, as credit fundamentals in the issuer countries improved and demand for
their bonds increased. The index's top performers were debt instruments issued
by the Russian government. Russian bonds rose 49.78% primarily in response to
the successful restructuring of defaulted debt, a relatively smooth political
transition following the presidential elections, and the implementation of tax
and other economic reforms. This led to an increase in Russia's foreign reserves
and we believe an improvement in the country's creditworthiness.
Overall, Latin American bonds returned 4.18%, and Non-Latins returned 12.56%.
African bonds provided a total return of -4.6%, while European instruments
returned 27.32%, mostly because of Russia's strong performance. The worst
performing country was Nigeria, which fell -17.53%, because of the possibility
of debt restructuring with significant write-offs.
We have emphasized Latin America as a region during the period, generally
because of the relatively higher yields, selecting countries committed to
economic reforms and credit quality improvement policies. The more significant
allocation changes during the period included a reduction of the Fund's exposure
to Argentina and an increase in its allocation to Brazil and Mexico. We believe
the latter countries' economies have performed well as a result of sound
fundamentals.
Looking forward, we will maintain our focus on bonds from those countries that
we believe have positive and sustainable economic growth, are making progress on
reform, and are adhering to prudent demand management policies. We believe the
underlying value of such securities should increase as a result of economic
performance and improved creditworthiness of these countries.
Meanwhile, we will continue to follow a defensive credit and currency posture to
minimize default rates and meet the Fund's investment objective of high total
return.
Of course, global investing involves special risks, such as market and currency
volatility and adverse economic, social, and political developments in the
countries in which the Fund invests. Emerging market securities involve
heightened risks related to the same factors, in addition to those associated
with the relatively small size and lesser liquidity of these markets. Investing
in any emerging market means accepting a certain amount of volatility and, in
some cases, severe market corrections. In addition, the Fund may also invest in
lower-rated "junk bonds," which entail greater credit risks than higher-rated
bonds. These special risks and other considerations are discussed in the Fund's
prospectus. 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.
This discussion reflects our views, opinions, and portfolio holdings as of June
30, 2000, 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 understand our
investment and management philosophy.
We appreciate your support, welcome your comments, and look forward to serving
you in the future.
Best regards,
/s/DONALD F. REED
Donald F. Reed, CFA, CIC
President
Templeton Institutional Funds, Inc.
Portfolio Management Team
TIFI Emerging Fixed Income Markets Series
<PAGE>
INSERT THE FOLLOWING CHARTS ON PAGES 2 AND 3 AS INDICATED
Page 2, left side callout
GEOGRAPHIC DISTRIBUTION ON 6/30/00- pie chart
(FIXED INCOME ASSETS AS A PERCENTAGE OF TOTAL NET ASSETS)
Asia 30.3%
Europe 15.5%
Latin America 49.2%
Other Net Assets 5.0%
FUND ASSET ALLOCATION ON 6/30/00- pie chart
Short-Term Investments and Other Net Assets 5.0%
Fixed Income 95.0%
Page 3, right side callout
Insert shaded box-
10 LARGEST POSITIONS ON 6/30/00
(Percent of Total Net Assets)
Republic of Turkey,11.875%, 1/15/30 16.7%
United Mexican States, 8.625%, 3/12/08 8.7%
Russia Ministry of Finance, Reg S, 10.00%, 6/26/07 6.1%
United Mexican States, 10.375%, 2/17/09 6.0%
Republic of Argentina, 9.75%, 9/19/27 5.3%
Government of Brazil, 12.25%, 3/06/30 5.2%
Government of Brazil, 14.50%, 10/15/09 4.8%
Republic of Venezuela, 9.25%, 9/15/27 4.7%
Cellco Finance NV, 144A, 12.75%, 8/01/05 4.7%
Government of Malaysia, 8.75%, 6/01/09 4.7%
<PAGE>
INSERT GRAPH:
TOTAL RETURN INDEX COMPARISON/1/
$5,000,000 INVESTMENT: 06/04/97-6/30/00
TIFI Emerging Fixed Income Markets Series1
JP Morgan EMBI+/4/
TIFI - Emerging Fixed
Income Market Series JP Morgan EMBI+
-------------------------------------------------------------------------------
INCEPT 5,000,000.00 5,000,000.00
Jun-97 5,005,000.00 5,099,666.67
Jul-97 5,250,000.00 5,311,237.21
Aug-97 5,165,000.00 5,289,595.67
Sep-97 5,360,000.00 5,451,423.50
Oct-97 5,260,000.00 4,823,493.88
Nov-97 5,460,000.00 5,052,507.14
Dec-97 5,620,975.00 5,226,544.44
Jan-98 5,647,820.00 5,215,949.66
Feb-98 5,739,085.00 5,365,180.17
Mar-98 5,823,985.00 5,498,808.78
Apr-98 5,834,930.00 5,512,148.89
May-98 5,703,565.00 5,324,157.88
Jun-98 5,605,040.00 5,170,405.73
Jul-98 5,703,565.00 5,193,661.96
Aug-98 4,138,095.00 3,709,758.65
Sep-98 4,794,935.00 4,072,497.89
Oct-98 5,189,040.00 4,336,073.38
Nov-98 5,446,300.00 4,591,250.30
Dec-98 5,403,400.00 4,476,581.98
Jan-99 5,371,985.00 4,310,232.51
Feb-99 5,296,590.00 4,372,250.21
Mar-99 5,541,630.00 4,703,011.63
Apr-99 5,880,910.00 5,024,082.18
May-99 5,585,610.00 4,737,896.15
Jun-99 5,704,985.00 4,949,790.51
Jul-99 5,692,414.00 4,847,073.39
Aug-99 5,560,471.00 4,840,290.50
Sep-99 5,629,584.00 5,009,224.09
Oct-99 5,730,112.00 5,202,060.53
Nov-99 5,830,641.00 5,349,675.39
Dec-99 6,032,277.00 5,639,091.70
Jan-00 6,004,920.00 5,527,653.67
Feb-00 6,244,296.00 5,883,609.24
Mar-00 6,327,466.00 6,069,016.59
Apr-00 6,286,423.00 5,953,056.44
May-00 6,074,368.00 5,801,565.14
Jun-00 6,389,020.26 6,095,826.39
Periods ended 6/30/00
SINCE
INCEPTION
ONE-YEAR (06/04/97)
------------------------------------------------------------------------------
Average Annual Total Return/1,2/ 11.99% 8.31%
Cumulative Total Return/1,3 / 11.99% 27.78%
1. The Fund's Manager and administrator have agreed in advance to limit their
respective fees and to assume as their own expense certain expenses otherwise
payable by the Fund. With this reduction, the Fund paid no management fees and
total annual fund operating expenses were 1.25%. After May 1, 2001, the manager
and administrator may end this arrangement at any time. Past fee reductions by
the Fund's manager and administrator increased the Fund's total returns. Without
these reductions, 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, 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. Also, as a
non-diversified series of an investment company, the Fund may invest in a
relatively small number of issuers and, as a result, be subject to greater risk
of loss with respect to its portfolio securities. You may have a gain or loss
when you sell your shares. Past performance is not predictive of future results.
FOR THE MOST CURRENT PORTFOLIO INFORMATION, PLEASE CALL 1-800-362-6243.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING FIXED INCOME MARKETS SERIES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000 Year Ended December 31,
-------------------------------------
(uaudited) 1999 1998 1997+
------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE ++
(For a share outstanding throughout the year)
Net asset value, beginning of year $ 8.82 $ 8.59 $10.47 $10.00
--------------------------------------------------------
Income from investment operations:
Net investment income .43 .77 .84 .44
Net realized and unrealized gains (losses) .09 .22 (1.27) .79
-------------------------------------------------------
Total from investment operations .52 .99 (.43) 1.23
-------------------------------------------------------
Less distributions from:
Net investment income -- *** (.76) (.86) (.44)
Net realized gains -- -- (.56) (.32)
Tax return of capital -- -- (.03) -
-------------------------------------------------------
Total distributions -- (.76) (1.45) (.76)
-------------------------------------------------------
Net asset value, end of period $ 9.34 $ 8.82 $8.59 $10.47
========================================================
Total return * 5.91% 11.77% (3.98)% 12.42%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $2,226 $2,103 $1,881 $2,249
Ratios to average net assets:
Expenses 1.25%** 1.25% 1.25% 1.25%**
Expenses, excluding waiver and
payments by affiliate 3.14%** 2.62% 3.74% 6.40%**
Net investment income 9.50%** 8.57% 8.55% 7.26%**
Portfolio turnover rate 109.48% 297.46% 525.94% 172.62%
</TABLE>
* Total return is not annualized.
** Annualized.
*** The Fund paid distributions from net investment income of $0.0016 per share.
+ For the period June 4, 1997 (commencement of operations) to December 31, 1997
++ Based on average weighted shares outstanding effective year ended
December 31, 1999.
See Notes to Financial Statements.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING FIXED INCOME MARKETS SERIES
STATEMENT OF INVESTMENTS, JUNE 30, 2000 (UNAUDITED)
Principal
Amount* Value
-------------------------------------------------------------------------------
LONG TERM SECURITIES 95.0%
ARGENTINA 9.6%
Republic of Argentina:
8.75%, 5/09/02 $100,000 $ 96,050
9.75%, 9/19/27 150,000 117,000
----------
213,050
----------
BRAZIL 10.0%
Government of Brazil:
14.50%, 10/15/09 100,000 106,950
12.25%, 3/06/30 125,000 115,000
----------
221,950
----------
COLOMBIA 1.7%
Republic of Colombia, 9.75%, 4/23/09 50,000 39,125
----------
MALAYSIA 4.7%
Government of Malaysia 8.75%, 6/01/09 100,000 103,700
----------
MEXICO 14.7%
United Mexican States:
8.625%, 3/12/08 200,000 193,000
10.375%, 2/17/09 125,000 133,281
----------
326,281
----------
NETHERLANDS 4.7%
Cellco Finance NV, 144A 12.75%, 8/01/05 100,000 104,250
----------
PANAMA 4.3%
Republic of Panama, 9.375%, 4/01/29 100,000 95,750
----------
PERU 4.2%
Republic of Peru, FRN, 4.50%, 3/07/17 140,000 93,888
---------
POLAND 4.0%
Republic of Poland, FRN, 6.00%, 10/27/14 100,000 89,687
---------
RUSSIA 6.8%
Russia Ministry of Finance,
Reg S, 10.00%, 6/26/07 175,000 135,625
+Vnesheconombank, FRN, 6.906%, 12/15/15 49,940 15,351
---------
150,976
---------
SOUTH KOREA 4.6%
Republic of Korea, 8.875%, 4/15/08 100,000 103,120
---------
TURKEY 21.0%
Republic of Turkey,
144A, 10.00%, 9/19/07 100,000 96,838
11.875%, 1/15/30 350,000 371,438
---------
468,276
---------
VENEZUELA 4.7%
Republic of Venezuela, 9.25%, 9/15/27 160,000 105,500
---------
TOTAL INVESTMENTS (COST $2,143,222) 2,115,553
OTHER ASSETS, LESS LIABILITIES 5.0% 110,301
---------
TOTAL NET ASSETS 100.0% $2,225,854
==========
+Represents bonds in default.
*Securities denominated in U.S. dollars.
See Notes to Financial Statements
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING FIXED INCOME MARKETS SERIES
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
Assets:
Investments in securities, at value (cost $2,143,222) $2,115,553
Cash 18,126
Receivables:
Interest 62,874
From affiliates 61,802
----------
Total assets 2,258,355
----------
Liabilities:
Payable to affiliates 1,500
Accrued expenses 31,001
----------
Total liabilities 32,501
----------
Net assets, at value $2,225,854
==========
Net assets consist of:
Undistributed net investment income $ 102,088
Net unrealized depreciation (27,669)
Accumulated net realized loss (203,927)
Capital shares 2,355,362
----------
Net assets, at value $2,225,854
==========
Net asset value per share ($2,225,854/238,374 shares outstanding) $9.34
=====
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING FIXED INCOME MARKETS SERIES
FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
Investment Income $115,515
---------
Expenses:
Management fees (Note 3) $ 7,519
Administrative fees (Note 3) 741
Report to shareholders 350
Registration and filing fees 10,000
Professional fees 13,900
Directors' fees and expenses 1,100
Other 160
---------
Total expenses 33,770
Expenses waived/paid by affiliate (Note 3) 20,353
--------
Net expenses 13,417
--------
Net investment income 102,098
--------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments 12,073
Foreign currency transactions (30)
---------
Net realized gain 12,043
Net unrealized appreciation on investments 8,887
---------
Net realized and unrealized gain 20,930
---------
Net increase in net assets resulting from operations $123,028
=========
SEE NOTES TO FINANCIAL STATEMENT
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING FIXED INCOME MARKETS SERIES
FINANCIAL STATEMENTS (CONTINUED)
STATEMENTS OF CHANGES IN NET ASSETS
f
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 2000
(UNAUDITED) DECEMBER 31, 1999
---------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 102,098 $ 167,889
Net realized loss from investments and
foreign currency transactions 12,043 (104,520)
Net unrealized appreciation on investments 8,887 158,099
----------------------------------
Net increase in net assets rsulting
from operations 123,028 221,468
Distributions to shareholders from:
Net investment income (381) (167,297)
Capital share transactions (Note 2): 381 167,297
----------------------------------
Net increase in net assets 123,028 221,468
Net assets:
Beginning of period 2,102,826 1,881,358
----------------------------------
End of period $2,225,854 $2,102,826
==================================
Undistributed net investment income included in net assets:
End of period $ 102,088 $ 371
==================================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING FIXED INCOME MARKETS SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Emerging Fixed Income Markets Series (the Fund) is a separate, non-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 high total return consisting of current income and capital
appreciation. Under normal market conditions, the Fund invests at least 65% of
total assets in debt securities of emerging markets issuers, which include
companies, governments and government agencies located in emerging market
countries and entities organized for the purpose of restructuring securities
issued by these issuers. 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 interest and foreign withholding taxes, and the U.S. dollar equivalent of the
amounts actually received or paid. Net unrealized foreign exchange gains and
losses arise from changes in foreign exchange rates on foreign denominated
assets and liabilities other than investments in securities held at the end of
the reporting period.
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.
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.
D. 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.
<PAGE>
TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING FIXED INCOME MARKETS SERIES
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. CAPITAL STOCK
At June 30, 2000, there were 1.14 billion shares authorized ($0.01 par value),
of which 140 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, 2000 DECEMBER 31, 1999
-------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
Shares issued on reinvestment
of distributions 42 $381 19,385 $167,297
-------------- ----------------- -------------- ---------------
Net increase 42 $381 19,385 $167,297
-------------- ----------------- -------------- ---------------
</TABLE>
Templeton Global Investors, Inc., a subsidiary of Franklin Resources, is the
record owner of 100% of the Fund shares as of June 30, 2000.
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:
ANNUALIZED
FEE RATE AVERAGE DAILY NET ASSETS
----------------- -----------------------------------------------------
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
TICI and FT Services have agreed in advance to limit total expenses of the Fund
to an annual rate of 1.25% of average daily net assets through April 30, 2001,
as noted in the Statement of Operations.
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.
The cost of securities for income tax purposes is the same as that shown in the
Statement of Investments. At June 30, 2000, the net unrealized depreciation
based on the cost of investments for income tax purposes was as follows:
Unrealized appreciation $ 60,892
Unrealized depreciation (88,561)
-----------
Net unrealized depreciation $(27,669)
-----------
At December 31, 1999, the Fund had tax basis capital losses of $215,586 which
may be carried over to offset future capital gains. Such losses expire December
31, 2007.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the six
months ended June 30, 2000 aggregated $2,470,284 and $2,182,723, respectively.
<PAGE>
((BACK COVER)
This report must be preceded or accompanied by the current prospectus of the
Templeton Institutional Funds, Inc., Emerging Fixed Income Markets 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
ZT453 S 6/00
