Templeton Institutional Funds NCSR Certified annual shareholder report (management investment company)

Templeton Institutional Funds N-CSRCertified annual shareholder report (management investment company)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORMN-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number811-06135

Templeton Institutional Funds

(Exact name of registrant as specified in charter)

300 S.E. 2^nd Street, Fort Lauderdale, FL 33301-1923

(Address of principal executive offices) Zip code)

Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906

(Name and address of agent for service)

Registrant’s telephone number, including area code: (954)527-7500

Date of fiscal year end: 12/31

Date of reporting period: 12/31/18

Item 1.

Reports to Stockholders.

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Internet Delivery of Fund Reports Unless You Request Paper Copies:Effective January 1, 2021, as permitted by the SEC, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request them from the Fund or your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. If you have not signed up for electronic delivery, we would encourage you to join fellow shareholders who have. You may elect to receive shareholder reports and other communications electronically from the Fund by calling (800)321-8563 or by contacting your financial intermediary.

You may elect to continue to receive paper copies of all your future shareholder reports free of charge by contacting your financial intermediary or, if you invest directly with a Fund, calling (800)321-8563 to let the Fund know of your request. Your election to receive reports in paper will apply to all funds held in your account.

Franklin Templeton

Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.

During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.

Contents

Annual Report



Economic and Market Overview			2

Foreign Smaller Companies Series			3

Global Equity Series			10

International Equity Series			18

Financial Highlights and Statements of Investments			26

Financial Statements			40

Notes to Financial Statements			46

Report of Independent Registered Public Accounting Firm			59

Tax Information			60

Board Members and Officers			62

Shareholder Information			67

Visitftinstitutional.comfor fund updates, to access your account, or to find investment insights.

Not FDIC Insured | May Lose Value | No Bank Guarantee



ftinstitutional.com	Not part of the annual report	1

Annual Report

Economic and Market Overview

The global economy expanded during the 12 months under review, despite weakness in certain regions. Global developed and emerging market stocks were aided at certain points during the period by higher crude oil prices, upbeat economic data, easing trade tensions and encouraging corporate earnings reports, as well as indications of a slower pace of interest-rate increases from the U.S. Federal Reserve (Fed).

However, various factors weighed on global markets during the period, including concerns about tighter regulation of technology companies, political uncertainties in the U.S. and the European Union, and major central banks’ interest-rate path and unwinding of monetary stimulus measures. Markets were further pressured by U.S. trade disputes with its allies and China, and their impact on global growth and corporate earnings. In this environment, global stocks, as measured by the MSCI All Country World Index, had a-8.93% total return for the 12 months ended December 31, 2018.¹

The U.S. economy grew during the12-month period. After moderating for three consecutive quarters, the economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending. However, growth moderated in the third quarter due to declines in exports and housing investment. The unemployment rate declined from 4.1% in December 2017 to 3.9% atperiod-end.² Annual inflation, as measured by the Consumer Price Index, decreased from 2.1% in December 2017 to 1.9% atperiod-end.² The Fed raised its target range for the federal funds rate four times during the period, to 2.25%–2.50%, and continued reducing its balance sheet as part of an ongoing plan to normalize monetary policy. At its December meeting, the Fed reduced the projected 2019 rate increases to two, compared to three projected previously.

In Europe, the U.K.’s quarterly economic growth moderated in 2018’s first quarter, but accelerated in 2018’s second and third quarters. The Bank of England raised its key policy rate once during the review period. After moderating in 2018’s first quarter, the eurozone’s quarterly growth remained stable in the second quarter, but eased in the third quarter. The bloc’s annual inflation rate ended the period higher than in December 2017. The European Central Bank (ECB) kept its benchmark interest rate unchanged during the period. In December 2018, the ECB confirmed its plan to conclude its bond purchase program at the

end of 2018 and reiterated it expects key interest rates to remain unchanged through the summer of 2019.

In Asia, Japan’s quarterly gross domestic product (GDP) grew in 2018’s second quarter, following a contraction in the first quarter, but contracted again in the third quarter. The Bank of Japan left its benchmark interest rate unchanged during the period and continued its monetary stimulus measures.

In emerging markets, Brazil’s quarterly GDP growth remained stable in 2018’s first and second quarters, but accelerated in the third quarter. The Central Bank of Brazil lowered its benchmark interest rate twice during the period. Russia’s annual GDP growth rate accelerated in 2018’s first and second quarters, but moderated in the third quarter. After lowering its key rate twice early in the period, the Bank of Russia raised it twice in the period’s second half to curtail inflation risks. China’s annual GDP grew at a stable rate in 2018’s first quarter, but it moderated in the second and third quarters. The People’s Bank of China left its benchmark interest rate unchanged during the period, but it took measures to improve financial liquidity to mitigate the negative effects of the U.S.-China trade dispute and support economic growth. Overall, emerging market stocks, as measured by the MSCI Emerging Markets Index, had a-14.25% total return during the period.¹

The foregoing information reflects our analysis and opinions as of December 31, 2018. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

1. Source: Morningstar.

2. Source: U.S. Bureau of Labor Statistics

See www.franklintempletondatasources.com for additional data provider information.



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Foreign Smaller Companies Series

This annual report for Foreign Smaller Companies Series (Fund) covers the fiscal year ended December 31, 2018. Effective at the market close on December 10, 2013, the Fund closed to new investors; existing shareholders may add to their accounts. Effective June 25, 2018, the Fund reopened to new investors.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of smaller companies located outside the U.S., including emerging markets.

Performance Overview

The Fund had a-18.48% cumulative total return for the 12 months under review. In comparison, the MSCI All Country World Index (ACWI) ex USA Small Cap Index, which measures performance of global developed and emerging marketsmall-cap equities, excluding the U.S., had a-17.89% total return.¹ Please note, index performance information is provided for reference and we do not attempt to track the index but rather undertake investments on the basis of fundamental research. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recentmonth-end performance, go toftinstitutional.comor call a Franklin Templeton Institutional Services representative at (800)321-8563.

Investment Strategy

When choosing equity investments, we apply abottom-up, value-oriented, long-term approach, focusing on the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, asset value and cash flow potential. We also consider a company’s price/earnings ratio, profit margins and liquidation value.

Manager’s Discussion

The Fund had some underperformers during the period under review. U.K.-based Man Group, an alternative investment

Geographic Composition

Based on Total Net Assets as of 12/31/18

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manager, was impacted by concerns about the U.K.’s exit from the European Union. However, Man Group has continued to experience positive business momentum with sustained net inflows, and we favorably view company management’s diversification of the business through merger and acquisition activity.

Norway-based XXL is a leading sporting-goods retailer. The company enjoys large economies of scale, which position it as alow-cost retailer with no reliance on any specific supplier. Coupled with a weakening competitive landscape, we believe XXL is poised for continued growth in the Nordic region given itslow-price, wide-range product assortment and robust omni-channel platform. This dynamic should, in our view, allow XXL to continue to gain market share as competitors leave the market. We also believe in its ability to scale its successful Nordic model into new geographies, mainly Austria and Switzerland, while continuing to grow its online platform.

Shares of IDOM, Japan’s largest specialist inused-car purchasing, fell due to weak financial results. Looking at the longer term, we believe IDOM can benefit from the growing structural and demographical demand for used cars in Japan, which is still at a low base compared to that of the U.S. IDOM also has a distinct competitive advantage through its larger scale to grow its dealership network in Japan.

It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 27.



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FOREIGN SMALLER COMPANIES SERIES


Portfolio Composition
12/31/18

*Sector/Industry*	% of Total Net Assets
Machinery		11.0%
Leisure Products		10.2%
Textiles, Apparel & Luxury Goods		7.1%
Electronic Equipment, Instruments & Components		6.7%
Food Products		4.9%
Professional Services		3.9%
Banks		4.0%
Household Durables		3.7%
Capital Markets		3.6%
Specialty Retail		3.4%
Containers & Packaging		2.4%
Construction & Engineering		2.3%
Real Estate Management & Development		2.3%
Insurance		2.1%
Personal Products		2.1%
Other		25.2%
Short-Term Investments & Other Net Assets		5.1%

traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the 12 months ended December 31, 2018, the U.S. dollar rose in value relative to most currencies. As a result, the Fund’s performance was negatively affected by the portfolio’s investment predominantly in securities withnon-U.S. currency exposure.

Conversely, several holdings performed well during the period under review. Amer Sports, based in Finland, holds an attractive portfolio of well-known global sports equipment brands that have driven strong operating performance. In September 2018, a consortium made an offer for Amer Sports, and the shares rose in anticipation of the deal, which is expected to close on June 30, 2019.

Capcom is a small-capitalization game software developer based in Japan.² Sales of packaged games and downloadable games for consoles, personal computer games and mobile games are its main earnings drivers. The company has continued to develop popular game franchises such as “Monster Hunter: World,” a major hit in the U.S., Japan and

2. Not held byperiod-end.

See www.franklintempletondatasources.com for additional data provider information.


Top 10 Holdings
12/31/18

Company *Sector/Industry, Country*	% of Total Net Assets
Amer Sports OYJ Leisure Products, Finland		2.9%
Techtronic Industries Co. Ltd. Household Durables, Hong Kong		1.9%
Interpump Group SpA Machinery, Italy		1.9%
Technogym SpA Leisure Products, Italy		1.9%
Fuji Oil Holdings Inc. Food Products, Japan		1.9%
Tsumura & Co. Pharmaceuticals, Japan		1.8%
The Thule Group AB Leisure Products, Sweden		1.7%
Huhtamaki OYJ Containers & Packaging, Finland		1.6%
Man Group PLC Capital Markets, U.K.		1.6%
Gerresheimer AG Life Sciences Tools & Services, Germany		1.6%

Europe. Company management plans to actively seek partnerships in mobile to leverage its intellectual property, and this is a key component of our investment thesis.

Laird is a U.K.-based supplier of products such as“shark-fin” antennae for wireless connections and electromagnetic interference shielding for Apple’s iPhone and iPad products.² The firm’s shares surged during the period after the company agreed to a takeover by a U.S. private equity firm.

Thank you for your continued participation in Foreign Smaller Companies Series. We look forward to serving your future investment needs.

LOGO

Harlan B. Hodes, CPA

Portfolio Manager



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FOREIGN SMALLER COMPANIES SERIES

The foregoing information reflects our analysis, opinions and portfolio holdings as of December 31, 2018, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.



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FOREIGN SMALLER COMPANIES SERIES

Performance Summary as of December 31, 2018

The performance table and graph do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 12/31/18¹



	Cumulative Total Return²		Average Annual Total Return³

1-Year		-18.48%		-18.48%

5-Year		+6.82%		+1.33%

10-Year		+187.16%		+11.13%

See page 8 for Performance Summary footnotes.



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FOREIGN SMALLER COMPANIES SERIES

PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $1,000,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

LOGO

See page 8 for Performance Summary footnotes.



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FOREIGN SMALLER COMPANIES SERIES

PERFORMANCE SUMMARY

Distributions(1/1/18–12/31/18)

Total Annual Operating Expenses⁵

All investments involve risks, including possible loss of principal. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have exhibited greater price volatility than large-company stocks, particularly over the short term. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Political, social or economic disruptions in the region, even in countries in which the Fund is not invested, may adversely affect the value of securities held by the Fund. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 4/30/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

4. Source: Morningstar. The MSCI ACWI ex USA Small Cap Index is a free float-adjusted, market capitalization-weighted index designed to measure performance ofsmall-cap equity securities of global developed and emerging markets, excluding the U.S.

5. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.



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FOREIGN SMALLER COMPANIES SERIES

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions, if applicable; and (2) ongoing Fund costs, including management fees, distribution and service(12b-1) fees, if applicable, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value.” You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.



	Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)

Beginning Account Value 7/1/18	Ending Account Value 12/31/18	Paid During Period 7/1/18–12/31/18^1,2	Ending Account Value 12/31/18	Paid During Period 7/1/18–12/31/18^1,2	Net Annualized Expense Ratio²

$1,000	$832.10	$4.66	$1,020.11	$5.14	1.01%

1. Expenses are equal to the annualized expense ratio for thesix-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect theone-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



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Global Equity Series

This annual report for Global Equity Series (Fund) covers the fiscal year ended December 31, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of companies located anywhere in the world, including developing markets.

Performance Overview

The Fund had a-14.49% cumulative total return for the 12 months under review. For comparison, the Fund’s benchmark, the MSCI All Country World Index (ACWI), which measures stock market performance in global developed and emerging markets, had a-8.93% total return.¹ Please note, index performance information is provided for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 14.

Investment Strategy

We employ abottom-up, value-oriented, long-term investment strategy. We focus on the market price of a company’s securities relative to our evaluation of the company’s long-term earnings, asset value and cash flow potential. We also consider a company’s price/earnings ratio, profit margins and liquidation value. We attempt to identify those companies that offer above-average opportunities for capital appreciation in various countries and industries where economic and political factors, including currency movements, are favorable to capital growth.

Geographic Composition

Based on Total Net Assets as of 12/31/18

LOGO

Manager’s Discussion

Global equities delivered the worst annual loss in a decade in 2018 as growing concerns about geopolitical turmoil, monetary policy tightening and late-cycle economic conditions led to episodes of heightened volatility. Global value stocks underperformed global growth stocks for the past 10 years, extending one of value’s longest droughts on record. Yet, as the year progressed, value improved, breaking out in August and then limiting losses in the volatile fourth quarter. Also encouraging, international and emerging market stocks outperformed the long-dominant U.S. market in the fourth quarter as the globalsell-off accelerated. While it’s far too early to declare a regime change in equity markets, late developments brought some initial signs of the long-anticipated rotation out of last cycle’s winners. We continue to view this shift out of expensive and into cheaper stocks as the ultimate outcome of policy normalization and cycle transition.

The Fund underperformed its benchmark, the MSCI ACWI, during the year in review. Relative weakness during the period was largely due to stock selection in the financials and information technology (IT) sectors, as well as in the U.S. market.²

An overweighted allocation also hindered relative results in the financials sector, led lower by bank stocks in the U.S. and Europe. U.S. universal bank Citigroup, French lender BNP

1. Source: Morningstar.

2. The financials sector comprises banks, capital markets, consumer finance, diversified financial services, insurance, and thrifts and mortgage finance in the SOI. The IT sector comprises communications equipment; electronic equipment, instruments and components; semiconductors and semiconductor equipment; software; and technology hardware, storage and peripherals in the SOI.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

The SOI begins on page 32.

Annual Report

ftinstitutional.com

GLOBAL EQUITY SERIES

Portfolio Composition

12/31/18


*Sector/Industry*	% of Total Net Assets
Banks		13.6%
Pharmaceuticals		11.4%
Oil, Gas & Consumable Fuels		10.0%
Biotechnology		5.6%
Food & Staples Retailing		4.0%
Wireless Telecommunication Services		3.2%
Industrial Conglomerates		3.1%
Chemicals		3.0%
Diversified Telecommunication Services		3.0%
Multi-Utilities		2.8%
Software		2.5%
Semiconductors & Semiconductor Equipment		2.4%
Media		2.2%
Consumer Finance		2.3%
Insurance		2.2%
Technology Hardware, Storage & Peripherals		2.1%
Other		23.3%
Short-Term Investments & Other Net Assets		3.3%

Paribas and Swiss investment bank UBS Group detracted significantly from Fund performance. We continued to gradually reposition our financials holdings in 2018 to consolidate and rationalize exposure amid heightened uncertainty. In the U.S., we’ve been finding what we believe to be the best opportunities recently among cheap universal banks and consumer finance firms with distinct value catalysts. In Europe, we have selectively reduced exposure to a handful of domestically focused banks with concentrated political risks. Our thesis on European banks rests largely on valuation and shareholder returns. European lenders currently trade at the same multiple relative to trailing12-month earnings as they did in the depths of the eurozone sovereign debt crisis, despite significant progress restructuring and recapitalizing to improve asset quality and returns. Depressed valuations combined with generous shareholder returns have resulted in dividend yields exceeding price/earnings ratios recently at a number of European banks. We believe unhealed scars from the global financial crisis assure that banks will remain an easy target for bearish investors during periods of rising risk aversion. Yet, despite depressed valuations, we see fewer excesses and more resilience in the banking system today than during past crisis periods. In our analysis, deep value remains.

Stock-specific weakness and an underweighted allocation pressured the IT sector, led lower by U.S. communications equipment firm CommScope Holding. Its shares slumped after company management announced it would increase leverage for a multi-billion dollar acquisition. The IT sector has been one of the biggest beneficiaries of the macro environment over the course of this cycle, offering good organic growth opportunities in an otherwise tepid economic environment. It has also generated high margins and strong free cash flows during a period of extraordinarily low interest rates. However, we have been wary of the valuation excesses this low interest-rate environment has created, most notably among consumer-oriented internet stocks. Although we never had exposure to what we considered the most overvalued parts of the sector, we have owned a number of outperforming technology stocks, and used strength in 2018 to sell holdings we considered fully valued.

Stock selection in the underweighted consumer discretionary sector and even-weighted materials sector also detracted from relative performance.³ From the consumer discretionary sector, U.K. home improvement retailer Kingfisher declined to levels that we believe are too cheap for a free cash-flow generative company that is well positioned to benefit from restructuring initiatives and cyclical improvements. It is worth noting that the consumer discretionary sector also delivered the Fund’s top contributor in 2018, U.S. automotive supplies retailer Advance Auto Parts (not held atperiod-end). Its shares rallied after the company boosted full-year 2018 sales guidance, citing an improving demand environment. With the stock up significantly in 2018 (compared to a loss for the broad U.S. market), current valuations and higher expectations have reduced the risk-reward proposition, and we took profits during the review period.

From the materials sector, shares of German chemicals firm Lanxess declined as investors overlooked solid results and focused instead on near-term concerns of elevated supply and weak demand in the global petrochemicals segment. The opportunity set remains mixed in the global materials sector more broadly. We believe select chemicals stocks offer opportunities to own high-quality businesses, despite near-term macro headwinds. Similarly, in construction materials, we are seeing some renewed opportunities among stocks that have declined amid cyclical concerns. In mining, we are finding opportunities among precious metals firms featuring cheap valuations, strong balance sheets and defensive characteristics.

3. The consumer discretionary sector comprises auto components; household durables; leisure products; specialty retail; and textiles, apparel and luxury goods in the SOI. The materials sector comprises chemicals, construction materials, and metals and mining in the SOI.



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GLOBAL EQUITY SERIES

We believe these stocks will eventually find support in an environment of historically high debt levels, resurgent volatility and growing central bank reserve demand.

Turning to contributors, stock selection in the overweighted communication services sector aided relative performance.⁴ Chinese telecommunication services operator China Telecom and Luxembourg-based satellite operator SES led the sector. China Telecom’s shares rallied after the company confirmed its entry into the Philippine market as the country’s third major telecommunication services provider. Recent strength notwithstanding, broader industry concerns seem to be overshadowing the solid operating performance and attractive valuation of China Telecom, and we remain holders in anticipation of additional upside. SES advanced after results showed stabilization in the firm’s video business as well as better-than-expected growth in other key segments. Here, too, sentiment remains generally weak, though recent progress highlights some of the positive changes being delivered by a new management team working to repair the balance sheet and seize long-term growth opportunities.

An underweighted allocation and stock selection in the industrials sector also contributed to relative results, led by Danish wind turbine manufacturer Vestas Wind Systems.⁵ Its shares surged after the firm maintained full-year 2018 guidance in the face of tougher competition, signaling to analysts that company management expects a strong finish to the year. We were encouraged by the stabilization in pricing and strength in new orders, and we continue to believe Vestas is well positioned to participate in the long-term growth of the wind manufacturing industry.

From a regional standpoint, stock selection and an unfavorable underweighting in the U.S. were primarily responsible for underperformance. In Asia, an overweighting and stock selection in South Korea detracted from relative results, while in Europe, stock selection in France and an overweighting in Germany hindered results.

CFA^® is a trademark owned by CFA Institute.


Top 10 Holdings
12/31/18


Company *Sector/Industry, Country*	% of Total Net Assets
Oracle Corp. Software, U.S.		2.5%
BP PLC Oil, Gas & Consumable Fuels, U.K.		2.4%
Roche Holding AG Pharmaceuticals, Switzerland		2.1%
Royal Dutch Shell PLC Oil, Gas & Consumable Fuels, U.K.		2.1%
Samsung Electronics Co. Ltd. Technology Hardware, Storage & Peripherals, South Korea		2.1%
Sanofi Pharmaceuticals, France		2.0%
Standard Chartered PLC Banks, U.K.		2.0%
BNP Paribas SA Banks, France		1.8%
Citigroup Inc. Banks, U.S.		1.7%
Shire PLC Biotechnology, U.K.		1.7%

weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the 12 months ended December 31, 2018, the U.S. dollar rose in value relative to most currencies. As a result, the Fund’s performance was negatively affected by the portfolio’s investment predominantly in securities withnon-U.S. currency exposure.

Thank you for your continued participation in Global Equity Series. We look forward to serving your future investment needs.


		Peter A. Nori, CFA
		Antonio T. Docal, CFA
		Matthew R. Nagle, CFA

		Portfolio Management Team

4. The communication services sector comprises diversified telecommunication services, interactive media and services, media and wireless telecommunication services in the SOI.

5. The industrials sector comprises aerospace and defense, air freight and logistics, building products, electrical equipment, industrial conglomerates and machinery in the SOI.

See www.franklintempletondatasources.com for additional data provider information.



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GLOBAL EQUITY SERIES

Performance Summary as of December 31, 2018

Performance as of 12/31/18¹



	Cumulative Total Return²		Average Annual Total Return³

1-Year		-14.49%	-14.49%
5-Year		+2.38%	+0.47%
10-Year		+107.69%	+7.58%

See page 16 for Performance Summary footnotes.



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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

LOGO

See page 16 for Performance Summary footnotes.



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GLOBAL EQUITY SERIES

PERFORMANCE SUMMARY

Distributions(1/1/18–12/31/18)



Net Investment Income	Short-Term Capital Gain		Long-Term Capital Gain		Total
$0.1601		$0.1366		$1.1878		$1.4845

Total Annual Operating Expenses⁵

All investments involve risks, including possible loss of principal. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments; investments in emerging markets involve heightened risks related to the same factors. Because the Fund may invest its assets in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Political, social or economic disruptions in the region, even in countries in which the Fund is not invested, may adversely affect the value of securities held by the Fund. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in companies in Europe. In addition, smaller-company stocks have historically experienced more price volatility than larger-company stocks, especially over the short term. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

4. Source: Morningstar. The MSCI ACWI is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance of global developed and emerging markets.

See www.franklintempletondatasources.com for additional data provider information.



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Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds



	Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)

Beginning Account Value 7/1/18	Ending Account Value 12/31/18	Paid During Period 7/1/18–12/31/18^1,2	Ending Account Value 12/31/18	Paid During Period 7/1/18–12/31/18^1,2	Net Annualized Expense Ratio²

$1,000	$874.10	$4.11	$1,020.82	$4.43	0.87%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



ftinstitutional.com	Annual Report	17

International Equity Series

This annual report for International Equity Series (Fund) covers the fiscal year ended December 31, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in foreign(non-U.S.) equity securities. The Fund predominantly invests in companies located outside the U.S. including companies located in developing markets countries.

Performance Overview

The Fund’s Primary shares had a-14.87% cumulative total return for the 12 months under review. For comparison, the Fund’s benchmark, the MSCI All Country World Index (ACWI) ex USA Index, which measures stock market performance in global developed and emerging markets excluding the U.S., had a-13.78% total return for the period under review.¹ The Fund’s other benchmark, the MSCI Europe, Australasia, Far East (EAFE) Index, which measures stock market performance in global developed markets excluding the U.S. and Canada, had a-13.36% total return.¹ Please note, index performance information is provided for reference and we do not attempt to track an index but rather undertake investments on the basis of fundamental research. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 22.

Investment Strategy

Geographic Composition

Based on Total Net Assets as of 12/31/18

LOGO

countries and industries where economic and political factors, including currency movements, are favorable to capital growth.

Manager’s Discussion

International equities had the worst annual loss in a decade in 2018 as growing concerns about geopolitical turmoil, monetary policy tightening and late-cycle economic conditions led to episodes of heightened volatility. International value stocks underperformed international growth stocks for the past 10 years, extending one of value’s longest droughts on record. Yet, as the year progressed, value improved, breaking out in August and then limiting losses in the volatile fourth quarter. Also encouraging, international and emerging market stocks outperformed the long-dominant U.S. market in the fourth quarter as the globalsell-off accelerated. While it’s far too early to declare a regime change in equity markets, late developments brought some initial signs of the long-anticipated rotation out of last cycle’s winners. We continue to view this shift out of expensive and into cheaper stocks as the ultimate outcome of policy normalization and cycle transition.

The Fund underperformed its benchmark, the MSCI ACWI ex USA Index, during the year in review. Relative weakness during the period was partly due to stock selection in the financials sector and European markets.²

European banks led financials holdings lower. French lender BNP Paribas, Irish lender Bank of Ireland Group, Dutch banking group ING Groep and Swiss investment bank UBS

1. Source: Morningstar.

The indexes are unmanaged and include reinvested dividends. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

2. The financials sector comprises banks, capital markets, insurance, and thrifts and mortgage finance in the SOI.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).

The SOI begins on page 37.



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Group finished among the Fund’s biggest detractors. We continued to gradually reposition our financials portfolio in 2018 to rationalize holdings and reduce concentrated political risk. Our thesis on European banks rests largely on valuation and shareholder returns. European lenders currently trade at the same earnings multiple as they did in the depths of the eurozone sovereign debt crisis, despite significant progress restructuring and recapitalizing to improve asset quality and returns. Depressed valuations combined with generous shareholder returns have resulted in dividend yields exceeding price/earnings ratios recently at a number of European banks. In Asia, we believe prospects for improving corporate governance and political stability, combined with rising interest rates and solid economic growth, should benefit banks over time. We believe unhealed scars from the global financial crisis assure that banks will remain an easy target for bearish investors during periods of rising risk aversion. Yet, despite depressed valuations, we see fewer excesses and more resilience in the banking system today than during past crisis periods. In our analysis, deep value remains.

Stock selection in even-weighted materials³ also hindered relative results, as the sector was pressured by German chemicals firm Lanxess, German cement manufacturer HeidelbergCement⁴ and French materials producer Compagnie de Saint-Gobain. These stocks declined sharply due to concerns about a cyclical slowdown; however, we believe low valuation multiples on reduced earnings expectations should offer downside support and long-term upside potential from current levels. The opportunity set remains mixed in the global materials sector more broadly. As in construction materials, select chemicals stocks are suffering from near-term macro headwinds, creating opportunities in high-quality businesses for patient investors. In mining, we are finding opportunities among precious metals firms featuring cheap valuations, strong balance sheets and defensive characteristics. We believe these stocks will eventually find support in an environment of historically high debt levels, resurgent volatility and growing central bank reserve demand.

Consumer discretionary and information technology (IT) holdings also lagged as stock selection offset the benefits of a cautious underweighting to these expensive sectors.⁵ From the consumer discretionary sector, U.K. home improvement retailer


Portfolio Composition
12/31/18

*Sector/Industry*	% of Total Net Assets
Banks		17.0%
Pharmaceuticals		13.4%
Oil, Gas & Consumable Fuels		11.1%
Diversified Telecommunication Services		5.0%
Semiconductors & Semiconductor Equipment		3.6%
Chemicals		3.6%
Industrial Conglomerates		3.2%
Wireless Telecommunication Services		3.1%
Insurance		3.0%
Multi-Utilities		2.8%
Metals & Mining		2.6%
Technology Hardware, Storage & Peripherals		2.5%
Biotechnology		2.2%
Capital Markets		2.2%
Real Estate Management & Development		2.1%
Other		22.3%
Short-Term Investments & Other Net Assets		0.3%

Kingfisher declined to levels that we believe are too cheap for a free cash-flow generative company that is well positioned to benefit from restructuring initiatives and cyclical improvements. IT stocks were led lower by Japanese factory automation firm Omron, which declined after indicating that U.S.-China trade tensions could negatively impact sales. The IT sector in general has been one of the biggest beneficiaries of the macro environment over the course of this cycle, offering good organic growth opportunities in an otherwise tepid economic environment. It has also generated high margins and strong free cash flows during a period of extraordinarily low interest rates. However, we have been wary of the valuation excesses this low interest-rate environment has created, most notably among consumer-oriented internet stocks. Although we never had exposure to what we considered the most overvalued parts of the sector, we have owned a number of outperforming technology stocks, and used strength in 2018 to sell holdings we considered fully valued.

Turning to contributors, stock selection in the overweighted communication services sector buoyed relative results.⁶ Chinese telecommunication services operator China Telecom

3. The materials sector comprises chemicals, construction materials, and metals and mining in the SOI.

4. Not held atperiod-end.

5. The consumer discretionary sector comprises auto components, household durables, multiline retail and specialty retail in the SOI. The IT sector comprises electronic equipment, instruments and components; semiconductors and semiconductor equipment; and technology hardware, storage and peripherals in the SOI.

6. The communication services sector comprises diversified telecommunication services, entertainment, interactive media and services, media and wireless telecommunication services in the SOI.



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INTERNATIONAL EQUITY SERIES

and Luxembourg-based satellite operator SES were the sector’s top contributors. China Telecom’s shares rallied after the company confirmed its entry into the Philippine market as the country’s third major telecommunication services provider. Recent strength notwithstanding, broader industry concerns seem to be overshadowing the solid operating performance and attractive valuation of China Telecom, and we remain holders in anticipation of additional upside. SES advanced after results showed stabilization in the firm’s video business as well as better-than-expected growth in other key segments. Here, too, sentiment remains generally weak, though recent progress highlights some of the positive changes being delivered by a new management team working to repair the balance sheet and seize long-term growth opportunities.

Overweighted allocations in the health care and energy sectors also notably helped relative results, with the health care sector contributing three of the Fund’s top contributors: U.K.-based medical technology firm LivaNova⁴ (not part of the index), French pharmaceuticals giant Sanofi and U.K. biotechnology firm Shire.⁷ However, the health care sector also had one of the Fund’s biggest detractors: German pharmaceuticals and chemicals firm Bayer, which declined due to an adverse court ruling that was subsequently reduced. In our view, health care remains an attractive sector at this point in the cycle. Unlike other defensive sectors such as consumer staples and utilities, health care is less of a simple bond proxy, offering defensiveness independent of interest-rate fluctuations. The sector also offers growth through innovation and untapped market potential. Indeed, over the past five years, pharmaceuticals industry revenue growth has well exceeded that of the broader market. Atyear-end, the sector was generating significantly higher profit margins than the global market with lower-than-average leverage ratios. Investors might expect to pay a premium for such attributes, but the sector trades at a discount based onprice-to-free-cash flow ratio, with some of that cash returning to shareholders through a dividend yield comparable with10-year U.S. Treasuries. Concerns persist about regulation and pricing in the global pharmaceuticals industry, but we believe history suggests companies capable of innovating to provide products that address unmet medical needs will continue to thrive and profit. These are the companies in which we seek to invest.


Top 10 Holdings
12/31/18

Company *Sector/Industry, Country*	% of Total Net Assets
Royal Dutch Shell PLC		3.5%
Oil, Gas & Consumable Fuels, U.K.
BP PLC		3.4%
Oil, Gas & Consumable Fuels, U.K.
Standard Chartered PLC		2.8%
Banks, U.K.
Sanofi		2.7%
Pharmaceuticals, France
Samsung Electronics Co. Ltd.		2.5%
Technology Hardware, Storage & Peripherals,
South Korea
Roche Holding AG		2.4%
Pharmaceuticals, Switzerland
BNP Paribas SA		2.4%
Banks, France
Shire PLC		2.2%
Biotechnology, U.K.
UBS Group AG		2.1%
Capital Markets, Switzerland
China Telecom Corp. Ltd.		2.0%
Diversified Telecommunication Services, China

Energy remains another high-conviction overweighted allocation. As the price of oil rose above our estimate of the marginal cost of demand in late 2017 through early 2018, we began taking profits on higher-volatility, price-sensitive oilfield services and exploration and production stocks. This allowed us to shift resources into more defensive integrated oil producers with still-modest valuations and high dividend yields. The rise of U.S. shale as the industry’s swing producer means oil market fundamentals are becoming increasingly driven by a highly leveraged,low-intensity production regime functioning in a market-based economy. Compared to the regime led by Saudi Arabia and the Organization of the Petroleum Exporting Countries, that means a more rapid supply response to prevailing imbalances and, ultimately, shorter, more volatile cycles. Going into 2019, we remain constructive on our more defensive positioning, but with oil prices falling back to levels on the cost curve historically associated with support, we have begun using weakness to again search for bargains in the more cyclical parts of the sector.

7. The health care sector comprises biotechnology, health care equipment and supplies, health care providers and services, life sciences tools and services, and pharmaceuticals in the SOI. The energy sector comprises oil, gas and consumable fuels in the SOI.



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Finally, a favorable underweighting in industrials contributed to relative results, led by Danish wind turbine manufacturer Vestas Wind Systems.⁸ Its shares surged after the firm maintained full-year 2018 guidance in the face of tougher competition, signaling to analysts that company management expects a strong finish to the year. We were encouraged by the stabilization in pricing and strength in new orders, and we continue to believe Vestas is well positioned to participate in the long-term growth of the wind manufacturing industry.

From a regional standpoint, stock selection and an underweighting in Asia contributed to relative performance, buoyed by stock selection in China. On the other hand, stock selection in overweighted European holdings detracted, as weakness in France and Germany offset relative strength in Luxembourg, the U.K. and Denmark.

It is important to recognize the effect of currency movements on the Fund’s performance. In general, if the value of the U.S. dollar goes up compared with a foreign currency, an investment traded in that foreign currency will go down in value because it will be worth fewer U.S. dollars. This can have a negative effect on Fund performance. Conversely, when the U.S. dollar weakens in relation to a foreign currency, an investment traded in that foreign currency will increase in value, which can contribute to Fund performance. For the 12 months ended December 31, 2018, the U.S. dollar rose in value relative to most currencies. As a result, the Fund’s performance was negatively affected by the portfolio’s investment predominantly in securities withnon-U.S. currency exposure.

Thank you for your continued participation in International Equity Series. We look forward to serving your future investment needs.

LOGO

Antonio T. Docal, CFA

Lead Portfolio Manager

Peter A. Nori, CFA

Matthew R. Nagle, CFA

Portfolio Management Team

8. The industrials sector comprises building products, electrical equipment, industrial conglomerates and marine in the SOI.

See www.franklintempletondatasources.com for additional data provider information.



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INTERNATIONAL EQUITY SERIES

Performance Summary as of December 31, 2018

The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities.

Performance as of 12/31/18¹



Share Class	Cumulative Total Return²		Average Annual Total Return³

Primary

1-Year		-14.87%		-14.87%

5-Year		-3.83%		-0.78%

10-Year		+73.10%		+5.64%

Service

1-Year		-15.01%		-15.01%

5-Year		-4.58%		-0.93%

10-Year		+70.61%		+5.49%

See page 24 for Performance Summary footnotes.



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PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

LOGO

See page 24 for Performance Summary footnotes.



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INTERNATIONAL EQUITY SERIES

PERFORMANCE SUMMARY

Distributions(1/1/18–12/31/18)


Share Class	Net Investment Income		Short-Term Capital Gain		Long-Term Capital Gain		Total

Primary		$0.4237		$0.0517		$3.4111		$3.8865
Service		$0.3614		$0.0517		$3.4111		$3.8242

Total Annual Operating Expenses⁵


Share Class	With Fee Waiver		Without Fee Waiver

Primary		0.79%		0.79%
Service		0.94%		0.94%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. Foreign investing involves special risks, including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with these markets’ small or midcap size and lesser liquidity. Because the Fund may invest in companies in a specific region, including Europe, it is subject to greater risks of adverse developments in that region and/or the surrounding regions than a fund that is more broadly diversified geographically. Political, social or economic disruptions in the region, even in countries in which the Fund is not invested, may adversely affect the value of securities held by the Fund. Current political uncertainty surrounding the European Union (EU) and the financial instability of some countries in the EU may increase market volatility and the economic risk of investing in companies in Europe. Value securities may not increase in price as anticipated or may decline further in value. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less then one year, if any, has not been annualized.

4. Source: Morningstar. The MSCI ACWI ex USA Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance of global developed and emerging markets, excluding the U.S. The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted index designed to measure equity market performance of global developed markets excluding the U.S. and Canada.

See www.franklintempletondatasources.com for additional data provider information.



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INTERNATIONAL EQUITY SERIES

Your Fund’s Expenses

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 =$64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds



		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)

Share Class	Beginning Account Value 7/1/18	Ending Account Value 12/31/18	Expenses Paid During Period 7/1/18–12/31/18^1,2	Ending Account Value 12/31/18	Expenses Paid During Period 7/1/18–12/31/18^1,2	Net Annualized Expense Ratio²


Primary Shares	$1,000	$882.20	$3.80	$1,021.17	$4.08	0.80%
Service Shares	$1,000	$881.40	$4.51	$1,020.42	$4.84	0.95%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



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TEMPLETON INSTITUTIONAL FUNDS

Financial Highlights

Foreign Smaller Companies Series


	Year Ended December 31,
	2018			2017			2016			2015			2014


Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$25.08			$19.93			$20.90			$20.80			$21.96


Income from investment operations^a:

Net investment income^b		0.37			0.30			0.29			0.28			0.25

Net realized and unrealized gains (losses)		(4.97	)		6.49			(0.48	)		0.12			(0.98)


Total from investment operations		(4.60	)		6.79			(0.19	)		0.40			(0.73)


Less distributions from:

Net investment income		(0.21	)		(0.68	)		(0.41	)		(0.28	)		(0.16)

Net realized gains		(2.31	)		(0.96	)		(0.37	)		(0.02	)		(0.27)


Total distributions		(2.52	)		(1.64	)		(0.78	)		(0.30	)		(0.43)


Net asset value, end of year		$17.96			$25.08			$19.93			$20.90			$20.80


Total return		(18.48)%			34.18%			(0.85)%			1.88%			(3.32)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.01%			0.99%			0.99%			0.98%			0.98%

Expenses net of waiver and payments by affiliates		1.00%^c			0.98%^c			0.98%^c			0.98%^c,d			0.98%

Net investment income		1.54%			1.28%			1.44%			1.28%			1.15%

Supplemental data

Net assets, end of year (000’s)		$739,576			$1,040,180			$931,879			$1,260,407			$1,281,733

Portfolio turnover rate		34.10%			25.97%			21.36%			29.11%			21.36%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.



26	Annual Report \| The accompanying notes are an integral part of these financial statements.	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

Statement of Investments, December 31, 2018

Foreign Smaller Companies Series



		Industry		Shares		Value
	Common Stocks 94.1%
	Belgium 2.5%
	Barco NV		Electronic Equipment, Instruments & Components		93,695	$	10,617,481
	Ontex Group NV		Personal Products		372,131		7,632,340

						18,249,821

	Bermuda 0.7%
	Axis Capital Holdings Ltd.		Insurance		100,730		5,201,697

	Brazil 3.1%
	Camil Alimentos SA		Food Products		5,386,800		9,784,719
	Grendene SA		Textiles, Apparel & Luxury Goods		2,662,100		5,624,276
	M. Dias Branco SA		Food Products		677,000		7,465,533

						22,874,528

	Canada 6.9%
^a	Badger Daylighting Ltd.		Construction & Engineering		442,900		10,464,504
	Canaccord Genuity Group Inc.		Capital Markets		1,507,938		6,374,448
^b	Canada Goose Holdings Inc.		Textiles, Apparel & Luxury Goods		92,900		4,061,887
	Canadian Western Bank		Banks		410,881		7,838,632
	Mullen Group Ltd.		Energy Equipment & Services		655,000		5,859,226
	The North West Co. Inc.		Food & Staples Retailing		385,700		8,878,489
	Russel Metals Inc.		Trading Companies & Distributors		198,300		3,098,823
	Shawcor Ltd.		Energy Equipment & Services		378,800		4,601,270

						51,177,279

	China 5.7%
	China ZhengTong Auto Services Holdings Ltd.		Specialty Retail		9,586,500		5,717,254
	Goodbaby International Holdings Ltd.		Leisure Products		19,530,600		6,135,659
	Greatview Aseptic Packaging Co. Ltd.		Containers & Packaging		11,537,300		6,261,864
	Hollysys Automation Technologies Ltd.		Electronic Equipment, Instruments & Components		461,200		8,075,612
	Shanghai Haohai Biological Technology Co. Ltd., H		Biotechnology		1,075,100		5,368,292
	Xtep International Holdings Ltd.		Textiles, Apparel & Luxury Goods		19,791,300		10,741,718

						42,300,399

	Colombia 0.6%
^b	Gran Tierra Energy Inc.		Oil, Gas & Consumable Fuels		1,985,400		4,334,585

	Denmark 1.2%
^b	Nilfisk Holding AS		Machinery		257,196		9,143,522

	Finland 4.8%
	Amer Sports OYJ		Leisure Products		489,997		21,542,397
	Huhtamaki OYJ		Containers & Packaging		382,149		11,853,041
^b	Outotec OYJ		Machinery		559,478		1,970,587

						35,366,025

	France 0.5%
	Maisons du Monde SA		Specialty Retail		196,571		3,763,611

	Germany 7.8%
	Gerresheimer AG		Life Sciences Tools & Services		172,674		11,347,078
	Grand City Properties SA		Real Estate Management & Development		429,791		9,341,914
	Jenoptik AG		Electronic Equipment, Instruments & Components		314,891		8,210,959
	Rational AG		Machinery		19,861		11,286,595
	Stabilus SA		Machinery		115,360		7,255,663



ftinstitutional.com	Annual Report	27

TEMPLETON INSTITUTIONAL FUNDS

STATEMENT OF INVESTMENTS

Foreign Smaller Companies Series(continued)



		Industry		Shares		Value
	Common Stocks(continued)
	Germany(continued)
^b	zooplus AG		Internet & Direct Marketing Retail		77,365	$	10,604,162

							58,046,371

	Hong Kong 4.7%
^a	PAX Global Technology Ltd.		Electronic Equipment, Instruments & Components		12,976,000		4,689,621
	Techtronic Industries Co. Ltd.		Household Durables		2,686,000		14,269,536
	Value Partners Group Ltd.		Capital Markets		11,573,000		8,025,208
	VTech Holdings Ltd.		Communications Equipment		905,900		7,496,625

							34,480,990

	India 1.3%
	DCB Bank Ltd.		Banks		1,920,522		4,672,249
	Dewan Housing Finance Corp. Ltd.		Thrifts & Mortgage Finance		937,492		3,360,795
	Welspun India Ltd.		Textiles, Apparel & Luxury Goods		1,725,873		1,483,501

							9,516,545

	Indonesia 0.2%
^b	PT XL Axiata Tbk		Wireless Telecommunication Services		9,183,500		1,264,487

	Italy 4.3%
	Interpump Group SpA		Machinery		474,872		14,167,329
	Technogym SpA		Leisure Products		1,311,892		14,075,471
^a	Tod’s SpA		Textiles, Apparel & Luxury Goods		81,719		3,868,899

							32,111,699

	Japan 19.8%
	Anicom Holdings Inc.		Insurance		317,100		10,545,890
	Asahi Co. Ltd.		Specialty Retail		322,100		4,043,883
	Asics Corp.		Textiles, Apparel & Luxury Goods		745,500		9,556,820
	Bunka Shutter Co. Ltd.		Building Products		906,500		5,905,484
	Daibiru Corp.		Real Estate Management & Development		769,400		7,623,799
	Descente Ltd.		Textiles, Apparel & Luxury Goods		267,271		4,404,119
	Dowa Holdings Co. Ltd.		Metals & Mining		249,200		7,503,285
	Fuji Oil Holdings Inc.		Food Products		429,400		13,751,770
	Idec Corp.		Electrical Equipment		418,200		7,192,582
^a	IDOM Inc.		Specialty Retail		1,530,200		5,096,013
	Kobayashi Pharmaceutical Co. Ltd.		Personal Products		114,000		7,769,890
	MEITEC Corp.		Professional Services		277,700		11,313,234
	Morita Holdings Corp.		Machinery		401,500		6,579,325
^a	N Field Co. Ltd.		Health Care Providers & Services		525,700		4,523,130
	Nihon Parkerizing Co. Ltd.		Chemicals		494,500		5,739,088
	Square Enix Holdings Co. Ltd.		Entertainment		162,200		4,420,542
	Tadano Ltd.		Machinery		573,000		5,222,874
	TechnoPro Holdings Inc.		Professional Services		162,300		6,700,798
	Tsumura & Co.		Pharmaceuticals		484,100		13,493,846
	Zojirushi Corp.		Household Durables		533,000		4,692,929

							146,079,301

	Netherlands 4.7%
	Aalberts Industries NV		Machinery		107,221		3,568,903
	Accell Group NV		Leisure Products		223,552		4,825,788
	Arcadis NV		Construction & Engineering		560,239		6,842,887
	Intertrust NV		Professional Services		667,727		11,239,048



28	Annual Report	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

STATEMENT OF INVESTMENTS

Foreign Smaller Companies Series(continued)



			Industry		Shares		Value
	Common Stocks(continued)
	Netherlands(continued)	��
	PostNL NV			Air Freight & Logistics		3,717,996	$	8,507,379

								34,984,005

	Norway 0.3%
^a	XXL ASA			Specialty Retail		754,546		2,284,397

	Poland 0.9%
	CCC SA			Textiles, Apparel & Luxury Goods		123,733		6,390,720

	South Korea 2.3%
	BNK Financial Group Inc.			Banks		1,010,307		6,649,442
	DGB Financial Group Inc.			Banks		1,350,972		10,080,342

								16,729,784

	Spain 1.5%
	Construcciones y Auxiliar de Ferrocarriles SA			Machinery		272,712		11,311,537

	Sweden 4.4%
	Cloetta AB, B			Food Products		1,908,364		5,215,685
	Dometic Group AB			Auto Components		560,286		3,496,650
	Duni AB			Household Durables		294,786		3,259,771
	Granges AB			Metals & Mining		551,828		5,012,533
	Tethys Oil AB			Oil, Gas & Consumable Fuels		394,735		2,877,457
^c	The Thule Group AB, Reg S			Leisure Products		698,770		12,793,787

								32,655,883

	Switzerland 3.2%
	Bucher Industries AG			Machinery		39,521		10,664,337
	Logitech International SA			Technology Hardware, Storage & Peripherals		173,800		5,436,464
^b	Luxoft Holding Inc.			IT Services		144,300		4,389,606
	Tecan Group AG			Life Sciences Tools & Services		16,779		3,267,268

								23,757,675

	Taiwan 6.1%
	Chicony Electronics Co. Ltd.			Technology Hardware, Storage & Peripherals		3,820,037		7,815,613
	Giant Manufacturing Co. Ltd.			Leisure Products		2,030,482		9,589,328
	King Yuan Electronics Co. Ltd.			Semiconductors & Semiconductor Equipment		14,671,000		11,148,176
	Merida Industry Co. Ltd.			Leisure Products		1,414,000		6,377,488
	Tripod Technology Corp.			Electronic Equipment, Instruments
				& Components		4,005,000		10,445,436

								45,376,041

	United Kingdom 6.6%
	Bellway PLC			Household Durables		96,629		3,099,137
	Bovis Homes Group PLC			Household Durables		260,759		2,865,769
	Card Factory PLC			Specialty Retail		1,751,709		3,873,525
	De La Rue PLC			Commercial Services & Supplies		701,690		3,785,131
	Greggs PLC			Hotels, Restaurants & Leisure		692,023		11,172,479
	Man Group PLC			Capital Markets		6,721,157		11,399,636
	Oxford Instruments PLC			Electronic Equipment, Instruments & Components		570,733		6,623,228
	SIG PLC			Trading Companies & Distributors		4,223,764		5,914,218

								48,733,123

	Total Common Stocks (Cost $642,451,179)							696,134,025



ftinstitutional.com	Annual Report	29

TEMPLETON INSTITUTIONAL FUNDS

STATEMENT OF INVESTMENTS

Foreign Smaller Companies Series(continued)

Industry

Shares

Value

Preferred Stocks (Cost $3,527,800) 0.8%

Brazil 0.8%

Alpargatas SA, 2.771%, pfd

Textiles, Apparel & Luxury Goods

1,249,600

5,479,727

Total Investments before Short Term
Investments (Cost $645,978,979)

701,613,752

Principal
Amount

Short Term Investments 3.6%

U.S. Government and Agency Securities (Cost $7,599,092)
1.0%

United States 1.0%

FHLB, 1/02/19

7,600,000

Shares

Investments from Cash Collateral Received for Loaned
Securities 2.6%

Money Market Funds (Cost $19,099,595) 2.6%

United States 2.6%

^g,h

Institutional Fiduciary Trust Money Market Portfolio, 1.99%

19,099,595

Total Investments (Cost $672,677,666) 98.5%

728,313,347

Other Assets, less Liabilities 1.5%

11,262,937

Net Assets 100.0%

739,576,284

See Abbreviations on page 58.

^aA portion or all of the security is on loan at December 31, 2018. See Note 1(c).

^bNon-income producing.

^cSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At December 31, 2018, the value of this security was $12,793,787, representing 1.7% of net assets.

^dVariable rate security. The rate shown represents the yield at period end.

^eThe security was issued on a discount basis with no stated coupon rate.

^fSee Note 1(c) regarding securities on loan.

^gSee Note 3(d) regarding investments in affiliated management investment companies.

^hThe rate shown is the annualizedseven-day effective yield at period end.



30	Annual Report \| The accompanying notes are an integral part of these financial statements.	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

Financial Highlights

Global Equity Series


	Year Ended December 31,

	2018			2017			2016			2015			2014


Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$10.59			$ 8.95			$ 8.73			$ 9.64			$11.53


Income from investment operations^a:

Net investment income^b		0.16			0.16			0.16			0.14			0.25^c

Net realized and unrealized gains (losses)		(1.71)			1.71			0.25			(0.43)			(0.46)


Total from investment operations		(1.55)			1.87			0.41			(0.29)			(0.21)


Less distributions from:

Net investment income		(0.16)			(0.19)			(0.15)			(0.16)			(0.26)

Net realized gains		(1.32)			(0.04)			(0.04)			(0.46)			(1.42)


Total distributions		(1.48)			(0.23)			(0.19)			(0.62)			(1.68)


Net asset value, end of year		$ 7.56			$10.59			$ 8.95			$ 8.73			$ 9.64


Total return		(14.49)%			20.88%			4.67%			(3.43)%			(2.01)%

Ratios to average net assets
Expenses		0.85%	^d		0.82%	^d,e		0.84%	^d		0.81%	^d,e		0.92%
Net investment income		1.54%			1.65%			1.82%			1.47%			2.21%	^c

Supplemental data
Net assets, end of year (000’s)		$243,400			$327,015			$280,709			$282,830			$467,375
Portfolio turnover rate		34.14%			25.27%			27.91%			36.88%			35.50%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.09 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.43%.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^eBenefit of expense reduction rounds to less than 0.01%.



ftinstitutional.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	31

TEMPLETON INSTITUTIONAL FUNDS

Statement of Investments, December 31, 2018

Global Equity Series



		Industry		Shares		Value
	Common Stocks 96.4%
	Canada 2.2%
	Alamos Gold Inc., A		Metals & Mining		288,330	$	1,037,988
	Husky Energy Inc.		Oil, Gas & Consumable Fuels		226,500		2,341,416
	Wheaton Precious Metals Corp.		Metals & Mining		99,900		1,950,500

							5,329,904

	China 5.6%

^a	Baidu Inc., ADR		Interactive Media & Services		14,760		2,340,936
	China Life Insurance Co. Ltd., H		Insurance		1,197,000		2,543,654
	China Mobile Ltd.		Wireless Telecommunication Services		362,000		3,483,392
	China Telecom Corp. Ltd., H		Diversified Telecommunication Services		7,412,000		3,786,220
	Kunlun Energy Co. Ltd.		Oil, Gas & Consumable Fuels		1,408,400		1,492,845

							13,647,047

	Denmark 1.5%
	Vestas Wind Systems AS		Electrical Equipment		46,631		3,530,010

	France 8.8%
	AXA SA		Insurance		130,035		2,809,731
	BNP Paribas SA		Banks		97,232		4,397,847
	Cie Generale des Etablissements Michelin SCA		Auto Components		18,051		1,793,202
	Compagnie de Saint-Gobain		Building Products		67,254		2,247,444
	Sanofi		Pharmaceuticals		55,961		4,851,328
	Total SA		Oil, Gas & Consumable Fuels		35,982		1,903,917
	Veolia Environnement SA		Multi-Utilities		166,767		3,430,870

							21,434,339

	Germany 6.4%
	Bayer AG		Pharmaceuticals		50,089		3,483,780
	E.ON SE		Multi-Utilities		356,068		3,515,014
	Lanxess AG		Chemicals		41,593		1,912,381
	Merck KGaA		Pharmaceuticals		25,730		2,648,569
	Siemens AG, ADR		Industrial Conglomerates		71,437		4,006,187

							15,565,931

	Hong Kong 1.4%
	CK Hutchison Holdings Ltd.		Industrial Conglomerates		350,540		3,366,402

	India 0.2%
	Housing Development Finance Corp. Ltd.		Thrifts & Mortgage Finance		21,285		602,218

	Ireland 2.1%
	Bank of Ireland Group PLC		Banks		396,345		2,205,365
	CRH PLC		Construction Materials		112,877		2,989,882
							5,195,247
	Israel 1.4%

^a	Teva Pharmaceutical Industries Ltd., ADR		Pharmaceuticals		222,363		3,428,837

	Italy 1.2%
	Eni SpA		Oil, Gas & Consumable Fuels		179,243		2,831,661

	Japan 7.6%
	IHI Corp.		Machinery		37,000		1,022,902
	Mitsui Fudosan Co. Ltd.		Real Estate Management & Development		140,500		3,134,329
	Omron Corp.		Electronic Equipment, Instruments & Components		49,800		1,817,518
	Panasonic Corp.		Household Durables		276,600		2,500,000
	Seven & i Holdings Co. Ltd.		Food & Staples Retailing		90,700		3,958,194



32	Annual Report	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

STATEMENT OF INVESTMENTS


Global Equity Series(continued)

			Industry		Shares		Value
		Common Stocks(continued)
		Japan(continued)
		SoftBank Group Corp.		Wireless Telecommunication Services		16,000	$	1,066,423
		Sumitomo Mitsui Financial Group Inc.		Banks		36,100		1,200,589
		Suntory Beverage & Food Ltd.		Beverages		84,700		3,833,139


								18,533,094

		Luxembourg 0.7%
		SES SA, IDR		Media		94,986		1,818,632

		Netherlands 3.0%
		ING Groep NV		Banks		329,684		3,554,645
		NXP Semiconductors NV		Semiconductors & Semiconductor Equipment		33,000		2,418,240
	^a	QIAGEN NV		Life Sciences Tools & Services		41,532		1,419,242


								7,392,127

		Norway 1.2%
		Yara International ASA		Chemicals		75,205		2,898,701

		Singapore 1.4%
		Singapore Telecommunications Ltd.		Diversified Telecommunication Services		1,553,304		3,338,968

		South Korea 2.9%
		Hana Financial Group Inc.		Banks		60,590		1,972,136
		Samsung Electronics Co. Ltd.		Technology Hardware, Storage & Peripherals		144,272		5,013,268


								6,985,404

		Switzerland 4.8%
		Novartis AG		Pharmaceuticals		29,004		2,485,499
		Roche Holding AG		Pharmaceuticals		20,769		5,159,232
		UBS Group AG		Capital Markets		314,933		3,930,231


								11,574,962

		Taiwan 1.4%

		Taiwan Semiconductor Manufacturing Co. Ltd., ADR		Semiconductors & Semiconductor Equipment		90,240		3,330,758


		Thailand 1.5%

		Bangkok Bank PCL, NVDR		Banks		566,300		3,554,697


		United Kingdom 12.9%
		BAE Systems PLC		Aerospace & Defense		274,809		1,609,267
		Barclays PLC		Banks		646,101		1,240,195
		BP PLC		Oil, Gas & Consumable Fuels		940,685		5,949,458
		HSBC Holdings PLC		Banks		354,800		2,936,088
		Kingfisher PLC		Specialty Retail		893,933		2,365,475
		Royal Dutch Shell PLC, B		Oil, Gas & Consumable Fuels		168,100		5,016,247
		Shire PLC		Biotechnology		69,835		4,069,909
		Standard Chartered PLC		Banks		620,149		4,818,618
		Vodafone Group PLC		Wireless Telecommunication Services		1,789,378		3,489,032


								31,494,289

		United States 28.2%
		Allergan PLC		Pharmaceuticals		27,740		3,707,728
		Ally Financial Inc.		Consumer Finance		82,100		1,860,386
		Amgen Inc.		Biotechnology		18,000		3,504,060
		Apache Corp.		Oil, Gas & Consumable Fuels		40,050		1,051,313
		Capital One Financial Corp.		Consumer Finance		47,340		3,578,431
	^a	Celgene Corp.		Biotechnology		40,860		2,618,717
		Citigroup Inc.		Banks		81,620		4,249,137
		Comcast Corp., A		Media		106,340		3,620,877



ftinstitutional.com	Annual Report	33

TEMPLETON INSTITUTIONAL FUNDS

STATEMENT OF INVESTMENTS


Global Equity Series(continued)

			Industry		Shares		Value
		Common Stocks(continued)
		United States(continued)
	^a	CommScope Holding Co. Inc.		Communications Equipment		109,000	$	1,786,510
		Coty Inc., A		Personal Products		216,300		1,418,928
		Eastman Chemical Co.		Chemicals		17,570		1,284,543
		Eli Lilly & Co.		Pharmaceuticals		16,670		1,929,052
		Exxon Mobil Corp.		Oil, Gas & Consumable Fuels		56,800		3,873,192
		Gilead Sciences Inc.		Biotechnology		55,110		3,447,131
		Kellogg Co.		Food Products		42,300		2,411,523
	^a	Knowles Corp.		Electronic Equipment, Instruments & Components		20,000		266,200
		The Kroger Co.		Food & Staples Retailing		87,500		2,406,250
		LyondellBasell Industries NV, A		Chemicals		14,700		1,222,452
	^a	Mattel Inc.		Leisure Products		177,900		1,777,221
		Medtronic PLC		Health Care Equipment & Supplies		13,380		1,217,045
		Oracle Corp.		Software		133,710		6,037,006
		Tapestry Inc.		Textiles, Apparel & Luxury Goods		59,900		2,021,625
		United Parcel Service Inc., B		Air Freight & Logistics		36,500		3,559,845
		Voya Financial Inc.		Diversified Financial Services		82,070		3,294,290
		Walgreens Boots Alliance Inc.		Food & Staples Retailing		51,700		3,532,661
		Wells Fargo & Co.		Banks		66,600		3,068,928

								68,745,051

		Total Common Stocks (Cost $243,881,437)						234,598,279

		Preferred Stocks (Cost $1,775,190) 0.3%
		Germany 0.3%

	^b	Draegerwerk AG & Co. KGaA, 0.99%, pfd		Health Care Equipment & Supplies		14,500		772,253

		Total Investments before Short Term Investments (Cost $245,656,627)						235,370,532


					Principal Amount
		Short Term Investments (Cost $7,000,000) 2.9%
		Time Deposits 2.9%
		United States 2.9%
		Royal Bank of Canada, 2.35%, 1/02/19			$	7,000,000		7,000,000

		Total Investments (Cost $252,656,627) 99.6%						242,370,532
		Other Assets, less Liabilities 0.4%						1,029,488

		Net Assets 100.0%					$	243,400,020

See Abbreviations on page 58.

^aNon-income producing.

^bVariable rate security. The rate shown represents the yield at period end.



34	Annual Report \| The accompanying notes are an integral part of these financial statements.	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

Financial Highlights

International Equity Series



	Year Ended December 31,

	2018			2017			2016			2015			2014


Primary Shares

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$21.99			$18.65			$19.05			$20.05			$22.72


Income from investment operations^a:

Net investment income^b		0.42			0.45			0.45			0.45			0.74^c

Net realized and unrealized gains (losses)		(3.66	)		3.81			(0.20	)		(0.98	)		(2.27)


Total from investment operations		(3.24	)		4.26			0.25			(0.53	)		(1.53)


Less distributions from:

Net investment income		(0.42	)		(0.64	)		(0.46	)		(0.47	)		(0.79)

Net realized gains		(3.46	)		(0.28	)		(0.19	)		—			(0.35)


Total distributions		(3.88	)		(0.92	)		(0.65	)		(0.47	)		(1.14)


Net asset value, end of year		$14.87			$21.99			$18.65			$19.05			$20.05


Total return		(14.87)%			22.92%			1.30%			(2.67)%			(6.78)%

Ratios to average net assets

Expenses^d		0.80%	^e		0.78%			0.78%			0.78%			0.78%

Net investment income		1.98%			2.13%			2.44%			2.16%			3.27%	^c

Supplemental data

Net assets, end of year (000’s)		$2,785,308			$4,412,494			$4,539,205			$5,077,937			$6,210,850

Portfolio turnover rate		25.60%	^f		16.39%	^f		14.88%			16.16%			14.97%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.29 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 2.00%.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^eBenefit of expense reduction rounds to less than 0.01%.

^fExcludes the value of portfolio securities delivered as a result of a redemptionin-kind. See Note 9.



ftinstitutional.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	35

TEMPLETON INSTITUTIONAL FUNDS

FINANCIAL HIGHLIGHTS

International Equity Series(continued)


	Year Ended December 31,

	2018			2017			2016			2015			2014

Service Shares

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$22.07			$18.72			$19.11			$20.11			$22.79


Income from investment operations^a:

Net investment income^b		0.38			0.39			0.42			0.36			0.71^c

Net realized and unrealized gains (losses)		(3.66	)		3.85			(0.20	)		(0.92	)		(2.28)


Total from investment operations		(3.28	)		4.24			0.22			(0.56	)		(1.57)


Less distributions from:

Net investment income		(0.36	)		(0.61	)		(0.42	)		(0.44	)		(0.76)

Net realized gains		(3.46	)		(0.28	)		(0.19	)		—			(0.35)


Total distributions		(3.82	)		(0.89	)		(0.61	)		(0.44	)		(1.11)


Net asset value, end of year		$14.97			$22.07			$18.72			$19.11			$20.11


Total return		(15.01)%			22.73%			1.15%			(2.80)%			(6.95)%

Ratios to average net assets

Expenses^d		0.95%	^e		0.93%			0.93%			0.93%			0.93%

Net investment income		1.83%			1.98%			2.29%			2.01%			3.12%^c

Supplemental data

Net assets, end of year (000’s)		$5,375			$14,164			$8,624			$12,525			$6,985

Portfolio turnover rate		25.60%	^f		16.39%^f			14.88%			16.16%			14.97%

^bBased on average daily shares outstanding.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.

^eBenefit of expense reduction rounds to less than 0.01%.

^fExcludes the value of portfolio securities delivered as a result of a redemptionin-kind. See Note 9.



36	Annual Report \| The accompanying notes are an integral part of these financial statements.	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

Statement of Investments, December 31, 2018

International Equity Series



		Industry		Shares		Value
	Common Stocks 99.7%
	Canada 2.9%
	Goldcorp Inc.		Metals & Mining		2,673,507	$	26,187,617
	Husky Energy Inc.		Oil, Gas & Consumable Fuels		2,073,763		21,437,266
	Wheaton Precious Metals Corp.		Metals & Mining		1,760,681		34,376,460

							82,001,343

	China 8.0%
^a	Baidu Inc., ADR		Interactive Media & Services		202,488		32,114,597
	China Life Insurance Co. Ltd., H		Insurance		19,237,448		40,880,038
	China Mobile Ltd.		Wireless Telecommunication Services		5,045,264		48,548,706
	China Telecom Corp. Ltd., H		Diversified Telecommunication Services		107,876,881		55,105,998
	NetEase Inc., ADR		Entertainment		92,994		21,887,998
	Sinopharm Group Co. Ltd., H		Health Care Providers & Services		6,200,776		26,052,682

							224,590,019

	Denmark 2.9%
	A.P. Moeller-Maersk AS, B		Marine		24,805		31,203,936
	Vestas Wind Systems AS		Electrical Equipment		651,629		49,328,914

							80,532,850

	France 11.9%
	AXA SA		Insurance		1,868,526		40,374,167
	BNP Paribas SA		Banks		1,456,391		65,873,225
	Cie Generale des Etablissements Michelin SCA		Auto Components		354,392		35,205,605
	Compagnie de Saint-Gobain		Building Products		938,617		31,366,004
	Sanofi		Pharmaceuticals		850,652		73,744,063
	Total SA		Oil, Gas & Consumable Fuels		952,046		50,375,650
	Veolia Environnement SA.		Multi-Utilities		1,647,960		33,903,214

							330,841,928

	Germany 10.5%
	Bayer AG		Pharmaceuticals		654,206		45,501,211
	E.ON SE		Multi-Utilities		4,598,490		45,395,137
	Fresenius Medical Care AG & Co. KGaA		Health Care Providers & Services		332,009		21,522,171
	Infineon Technologies AG		Semiconductors & Semiconductor Equipment		1,364,983		27,330,432
	Lanxess AG		Chemicals		565,610		26,005,861
	Merck KGaA		Pharmaceuticals		447,333		46,047,121
	Siemens AG		Industrial Conglomerates		364,226		40,649,971
	Telefonica Deutschland Holding AG		Diversified Telecommunication Services		10,459,680		41,170,246

							293,622,150

	Hong Kong 2.6%
	CK Asset Holdings Ltd.		Real Estate Management & Development		3,311,394		24,231,259
	CK Hutchison Holdings Ltd.		Industrial Conglomerates		5,034,294		48,346,710

							72,577,969

	India 1.1%
	Housing Development Finance Corp. Ltd.		Thrifts & Mortgage Finance		1,113,053		31,491,704

	Ireland 3.3%
	Bank of Ireland Group PLC		Banks		7,223,710		40,194,569
	CRH PLC		Construction Materials		1,997,813		52,763,093

							92,957,662

	Israel 2.0%
^a	Teva Pharmaceutical Industries Ltd., ADR		Pharmaceuticals		3,530,691		54,443,255



ftinstitutional.com	Annual Report	37

TEMPLETON INSTITUTIONAL FUNDS

STATEMENT OF INVESTMENTS


International Equity Series(continued)

		Industry		Shares		Value
	Common Stocks(continued)
	Italy 2.5%
	Eni SpA		Oil, Gas & Consumable Fuels		2,916,584	$	46,075,867
	UniCredit SpA		Banks		2,117,768		23,988,797

							70,064,664

	Japan 10.6%
	Astellas Pharma Inc.		Pharmaceuticals		3,383,700		43,268,755
	Ezaki Glico Co. Ltd.		Food Products		589,200		29,997,591
	Mitsui Fudosan Co. Ltd.		Real Estate Management & Development		1,478,490		32,982,738
	Omron Corp.		Electronic Equipment, Instruments & Components		363,351		13,260,986
	Panasonic Corp.		Household Durables		2,818,945		25,478,530
	Ryohin Keikaku Co. Ltd.		Multiline Retail		31,594		7,653,474
	Seven & i Holdings Co. Ltd.		Food & Staples Retailing		863,700		37,692,309
	Sumitomo Metal Mining Co. Ltd.		Metals & Mining		483,700		13,008,264
	Sumitomo Mitsui Financial Group Inc.		Banks		868,900		28,897,267
	Sumitomo Rubber Industries Ltd.		Auto Components		1,542,554		18,296,717
	Suntory Beverage & Food Ltd.		Beverages		1,001,279		45,313,356


							295,849,987

	Luxembourg 1.8%
	SES SA, IDR		Media		2,655,458		50,842,241

	Netherlands 4.4%
	Akzo Nobel NV		Chemicals		360,410		29,072,226
	ING Groep NV		Banks		4,275,869		46,102,324
	NXP Semiconductors NV		Semiconductors & Semiconductor Equipment		431,896		31,649,339
^a	QIAGEN NV		Life Sciences Tools & Services		435,361		14,877,262


							121,701,151

	Norway 1.0%
	Yara International ASA		Chemicals		712,400		27,458,742

	Singapore 1.5%
	Singapore Telecommunications Ltd.		Diversified Telecommunication Services		19,628,276		42,192,765

	South Korea 5.7%
	Hana Financial Group Inc.		Banks		1,188,465		38,683,191
	KB Financial Group Inc.		Banks		1,181,874		49,346,007
	Samsung Electronics Co. Ltd.		Technology Hardware, Storage & Peripherals		2,020,022		70,193,184

							158,222,382

	Sweden 0.5%
	Getinge AB, B.		Health Care Equipment & Supplies		1,698,552		15,365,019

	Switzerland 6.3%
	Novartis AG		Pharmaceuticals		548,903		47,038,258
	Roche Holding AG		Pharmaceuticals		272,852		67,779,234
	UBS Group AG		Capital Markets		4,782,728		59,686,430

							174,503,922

	Taiwan 1.5%
	Taiwan Semiconductor Manufacturing Co. Ltd.		Semiconductors & Semiconductor Equipment		5,615,492		41,386,196

	Thailand 1.8%
	Bangkok Bank PCL, fgn		Banks		179,132		1,146,578
	Bangkok Bank PCL, NVDR		Banks		7,846,531		49,253,117

							50,399,695



38	Annual Report	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

STATEMENT OF INVESTMENTS


International Equity Series(continued)

		Industry		Shares		Value
	Common Stocks(continued)
	United Kingdom 16.9%
	BP PLC		Oil, Gas & Consumable Fuels		14,959,587	$	94,613,436
	HSBC Holdings PLC		Banks		5,993,515		49,598,336
	Johnson Matthey PLC		Chemicals		467,223		16,677,173
	Kingfisher PLC		Specialty Retail		13,025,425		34,467,145
	Royal Dutch Shell PLC, B.		Oil, Gas & Consumable Fuels		1,247,124		37,215,239
	Royal Dutch Shell PLC, B, ADR		Oil, Gas & Consumable Fuels		1,030,989		61,797,481
	Shire PLC		Biotechnology		1,031,858		60,135,573
	Standard Chartered PLC		Banks		10,087,207		78,378,585
	Vodafone Group PLC		Wireless Telecommunication Services		19,629,019		38,273,783


							471,156,751

	Total Common Stocks (Cost $2,479,833,711)						2,782,202,395


	Short Term Investments (Cost $29,986,483) 1.1%
	Money Market Funds 1.1%
	United States 1.1%
^b,c	Institutional Fiduciary Trust Money Market Portfolio, 1.99%	29,986,483		29,986,483

	Total Investments (Cost $2,509,820,194) 100.8%			2,812,188,878
	Other Assets, less Liabilities (0.8)%			(21,505,614	)

	Net Assets 100.0%		$	2,790,683,264

See Abbreviations on page 58.

^aNon-income producing.

^bSee Note 3(d) regarding investments in affiliated management investment companies.

^cThe rate shown is the annualizedseven-day effective yield at period end.



ftinstitutional.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	39

TEMPLETON INSTITUTIONAL FUNDS

Financial Statements

Statements of Assets and Liabilities

December 31, 2018


	Foreign Smaller Companies Series		Global Equity Series


Assets:
Investments in securities:
Cost - Unaffiliated issuers		$653,578,071		$252,656,627
Cost -Non-controlled affiliates (Note 3d)		19,099,595		—

Value - Unaffiliated issuers⁺		$709,213,752		$242,370,532
Value -Non-controlled affiliates (Note 3d)		19,099,595		—
Cash		1,046,666		267,483
Receivables:
Investment securities sold		24,362,294		69,228
Capital shares sold		4,871,799		17,448
Dividends		2,590,792		848,456
Foreign tax refund		—		9,707
European Union tax reclaims		739,236		51,378
Affiliates		61,260		—
Due from custodian		37,415		—
Other assets		124		40


Total assets		762,022,933		243,634,272

Liabilities:
Payables:
Investment securities purchased		242,273		—
Capital shares redeemed		2,318,242		—
Management fees		618,660		163,970
Transfer agent fees		17,972		4,429
Professional fees		63,161		49,664
Payable upon return of securities loaned		19,137,010		—
Accrued expenses and other liabilities		49,331		16,189

Total liabilities		22,446,649		234,252

Net assets, at value		$739,576,284		$243,400,020

Net assets consist of:
Paid-in capital		$685,168,449		$249,539,436
Total distributable earnings (loss)		54,407,835		(6,139,416	)

Net assets, at value		$739,576,284		$243,400,020

Shares outstanding		41,187,812		32,205,443

Net asset value per share		$17.96		$7.56


⁺Includes securities loaned		$ 18,228,006		$ —



40	Annual Report \| The accompanying notes are an integral part of these financial statements.	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

FINANCIAL STATEMENTS

Statements of Assets and Liabilities(continued)

December 31, 2018


			International Equity Series


Assets:
Investments in securities:
Cost - Unaffiliated issuers			$2,479,833,711
Cost -Non-controlled affiliates (Note 3d)			29,986,483

Value - Unaffiliated issuers.			$2,782,202,395
Value -Non-controlled affiliates (Note 3d)			29,986,483
Receivables:
Investment securities sold			37,134,472
Capital shares sold			2,629,864
Dividends			17,256,657
European Union tax reclaims			7,538,705
Affiliates			146,261
Other assets			521

Total assets			2,876,895,358

Liabilities:
Payables:
Capital shares redeemed			83,866,547
Management fees			1,938,849
Transfer agent fees			78,668
Professional fees			72,270
Accrued expenses and other liabilities			255,760

Total liabilities			86,212,094

Net assets, at value			$2,790,683,264

Net assets consist of:
Paid-in capital			$2,524,461,199
Total distributable earnings (loss)			266,222,065

Net assets, at value			$2,790,683,264


Primary Shares:
Net assets, at value			$2,785,307,986

Shares outstanding			187,300,938

Net asset value per share			$14.87


Service Shares:
Net assets, at value			$ 5,375,278

Shares outstanding			359,016

Net asset value per share			$14.97



ftinstitutional.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	41

TEMPLETON INSTITUTIONAL FUNDS

FINANCIAL STATEMENTS

Statements of Operations

for the year ended December 31, 2018



	Foreign Smaller Companies Series			Global Equity Series


Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers		$ 21,986,973			$ 7,024,582

Interest:
Unaffiliated issuers		750,459			169,262

Income from securities loaned:
Unaffiliated issuers (net of fees and rebates)		1,446,274			—
Non-controlled affiliates (Note 3d)		129,356			2,539
Other income (Note 1d)		263,896			—

Total investment income		24,576,958			7,196,383

Expenses:
Management fees (Note 3a)		9,187,884			2,335,220
Transfer agent fees (Note 3c)		259,852			62,952
Custodian fees (Note 4)		143,207			19,766
Reports to shareholders		21,267			5,896
Registration and filing fees		35,282			23,813
Professional fees		99,841			72,386
Trustees’ fees and expenses		56,485			17,325
Other		38,116			31,478

Total expenses		9,841,934			2,568,836
Expense reductions (Note 4)		(1,932	)		—
Expenses waived/paid by affiliates (Note 3d and 3e)		(135,934	)		(805	)

Net expenses		9,704,068			2,568,031

Net investment income		14,872,890			4,628,352

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:^#
Unaffiliated issuers		76,216,101			42,519,015
Foreign currency transactions		(100,151	)		(1,146	)

Net realized gain (loss)		76,115,950			42,517,869

Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(270,977,841	)		(89,386,207	)
Translation of other assets and liabilities denominated in foreign currencies		(39,791	)		(30,516	)
Change in deferred taxes on unrealized appreciation		120,033			—

Net change in unrealized appreciation (depreciation)		(270,897,599	)		(89,416,723	)

Net realized and unrealized gain (loss)		(194,781,649	)		(46,898,854	)

Net increase (decrease) in net assets resulting from operations		$(179,908,759	)		$(42,270,502	)


*Foreign taxes withheld on dividends		$ 2,571,691			$ 538,848
^#Net of foreign taxes		$ —			$ 9,836



42	Annual Report \| The accompanying notes are an integral part of these financial statements.	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

FINANCIAL STATEMENTS

Statements of Operations(continued)

for the year ended December 31, 2018



	International Equity Series


Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers		$ 106,575,052
Non-controlled affiliates (Note 3d)		795,172
Interest:
Unaffiliated issuers		6,852
Income from securities loaned:
Non-controlled affiliates (Note 3d)		33,970
Other income (Note 1d)		331,673

Total investment income		107,742,719

Expenses:
Management fees (Note 3a)		29,460,564
Transfer agent fees: (Note 3c)
Primary Shares		922,833
Service Shares		2,689
Sub-transfer agent fees - Service Shares (Note 3c)		20,127
Custodian fees (Note 4)		451,207
Reports to shareholders		42,792
Registration and filing fees		74,209
Professional fees		152,676
Trustees’ fees and expenses		229,110
Other		94,727

Total expenses		31,450,934
Expense reductions (Note 4)		(1,514	)
Expenses waived/paid by affiliates (Note 3d and 3e)		(367,304	)

Net expenses		31,082,116

Net investment income		76,660,603

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:⁺
Unaffiliated issuers		567,624,789
Foreign currency transactions		(1,668,501	)

Net realized gain (loss)		565,956,288

Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(1,198,509,000	)
Translation of other assets and liabilities denominated in foreign currencies		(1,116,353	)

Net change in unrealized appreciation (depreciation)		(1,199,625,353	)

Net realized and unrealized gain (loss)		(633,669,065	)

Net increase (decrease) in net assets resulting from operations		$ (557,008,462	)


*Foreign taxes withheld on dividends		$ 10,001,912
⁺Includes gains from a redemptionin-kind (Note 9)		$ 7,694,963



ftinstitutional.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	43

TEMPLETON INSTITUTIONAL FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets



	Foreign Smaller Companies Series						Global Equity Series

	Year Ended December 31,						Year Ended December 31,

	2018			2017			2018			2017

Increase (decrease) in net assets:
Operations:
Net investment income	$	14,872,890		$	13,021,091		$	4,628,352		$	5,016,840
Net realized gain (loss)		76,115,950			73,589,228			42,517,869			6,669,126
Net change in unrealized appreciation (depreciation)		(270,897,599	)		210,102,374			(89,416,723	)		45,386,301

Net increase (decrease) in net assets resulting from operations		(179,908,759	)		296,712,693			(42,270,502	)		57,072,267

Distributions to shareholders (Note 1e)		(96,356,359	)		(64,408,145	)		(40,339,519	)		(6,879,337	)

Capital share transactions (Note 2)		(24,338,362	)		(124,003,541	)		(1,005,433	)		(3,886,825	)

Net increase (decrease) in net assets		(300,603,480	)		108,301,007			(83,615,454	)		46,306,105
Net assets:
Beginning of year		1,040,179,764			931,878,757			327,015,474			280,709,369


End of year (Note 1e)	$	739,576,284		$	1,040,179,764		$	243,400,020		$	327,015,474



44	Annual Report \| The accompanying notes are an integral part of these financial statements.	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

FINANCIAL STATEMENTS

Statements of Changes in Net Assets(continued)



	International Equity Series

	Year Ended December 31,

	2018			2017

Increase (decrease) in net assets:
Operations:
Net investment income	$	76,660,603		$	100,855,422
Net realized gain (loss)		565,956,288			353,346,497
Net change in unrealized appreciation (depreciation)		(1,199,625,353	)		523,980,414

Net increase (decrease) in net assets resulting from operations		(557,008,462	)		978,182,333

Distributions to shareholders: (Note 1e)
Primary Shares		(637,173,060	)		(184,007,377	)
Service Shares		(1,520,248	)		(560,876	)


Total distributions to shareholders		(638,693,308	)		(184,568,253	)


Capital share transactions: (Note 2)
Primary Shares		(435,086,569	)		(918,597,405	)
Service Shares		(5,186,724	)		3,812,990


Total capital share transactions		(440,273,293	)		(914,784,415	)


Net increase (decrease) in net assets		(1,635,975,063	)		(121,170,335	)
Net assets:
Beginning of year		4,426,658,327			4,547,828,662


End of year (Note 1e)	$	2,790,683,264		$	4,426,658,327



ftinstitutional.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	45

TEMPLETON INSTITUTIONAL FUNDS

Notes to Financial Statements

1. Organization and Significant Accounting Policies

Templeton Institutional Funds (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as anopen-end management investment company, consisting of three separate funds (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). International Equity Series offers Primary and Service Shares. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees. Foreign Smaller Companies Series was closed to new investors with limited exceptions effective at the close of market on December 10, 2013. Effective June 25, 2018, Foreign Smaller Companies Series reopened to new investors.

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Funds may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined.Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple

exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

Investments inopen-end mutual funds are valued at the closing NAV. Investments in time deposits are valued at cost, which approximates fair value.

The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Funds’ business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of



46	Annual Report	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

the Funds’ portfolio securities as determined at the foreign market close and the latest indications of value at 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depositary Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Funds. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services. At December 31, 2018, a market event occurred resulting in a portion of the securities held by the Funds being valued using fair value procedures.

When the last day of the reporting period is anon-business day, certain foreign markets may be open on those days that the Funds’ NAV is not calculated, which could result in differences between the value of the Funds’ portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Funds for financial reporting purposes.

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. The Funds may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

The Funds do 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 in the Statements of Operations.

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 denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Securities Lending

Certain or all Funds participate in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Funds. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statements of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower. At December 31, 2018, Global Equity Series and International Equity Series had no securities on loan.



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies(continued)

d. Income and Deferred Taxes

It is each Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Funds may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which the Funds invest. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, certain or all Funds record an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

As a result of several court cases, in certain countries across the European Union, certain or all Funds filed additional tax reclaims for previously withheld taxes on dividends earned in those countries (EU reclaims). These additional filings are subject to various administrative proceedings by the local jurisdictions’ tax authorities within the European Union, as well as a number of related judicial proceedings. Income recognized, if any, for EU reclaims is reflected as other income in the Statements of Operations and any related receivable, if any, is reflected as European Union tax reclaims in the Statements of Assets and Liabilities. When uncertainty exists as to the ultimate resolution of these proceedings, the likelihood of receipt of these EU reclaims, and the potential timing of payment, no amounts are reflected in the financial statements. For U.S. income tax purposes, EU reclaims received by the Funds, if any, reduce the amounts of foreign taxes Fund shareholders can use as tax credits in their individual income tax returns.

Each Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of December 31, 2018, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax

years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

e. 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. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividend income is recorded on theex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Funds. Distributions to shareholders are recorded on theex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

Common expenses incurred by the Trust are allocated among the Funds based on the ratio of net assets of each Fund to the combined net assets of the Trust or based on the ratio of number of shareholders of each Fund to the combined number of shareholders of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

f. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP 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 expenses during the reporting period. Actual results could differ from those estimates.



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

g. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, enters into contracts with service providers

that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

*Effective during the current reporting period, it is no longer required to present certain line items in the Statements of Changes in Net Assets. The below prior period amounts affected by this change are shown as they were in the prior year Statements of Changes in Net Assets.

For the year ended December 31, 2017, distributions to shareholders were as follows:


	Foreign Smaller Companies Series		Global Equity Series
Distributions from net investment income		$ (26,684,552)		$(5,755,645)
Distributions from net realized gains		(37,723,593)		(1,123,692)

	International Equity Series
Distributions from net investment income:
Primary Shares		(127,842,638)
Service Shares		(382,337)
Distributions from net realized gains:
Primary Shares		(56,164,739)
Service Shares		(178,539)

For the year ended December 31, 2017, distributions in excess of net investment income included in net assets were as follows:


Fund	Distributions in excess of net investment income
Foreign Smaller Companies Series		$(11,763,155	)
Global Equity Series		$ (643,910	)
International Equity Series		$(56,754,552	)



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

2. Shares of Beneficial Interest

At December 31, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:



	Foreign Smaller Companies Series						Global Equity Series

	Shares			Amount			Shares			Amount
Year ended December 31, 2018
Shares sold		6,842,715		$	162,910,674			85,559		$	876,948
Shares issued in reinvestment of distributions		4,713,629			87,292,455			5,328,643			40,339,518
Shares redeemed		(11,846,909	)		(274,541,491	)		(4,091,307	)		(42,221,899	)

Net increase (decrease)		(290,565	)	$	(24,338,362	)		1,322,895		$	(1,005,433	)

Year ended December 31, 2017
Shares sold		4,597,046		$	107,028,602			1,172,155		$	11,992,491
Shares issued in reinvestment of distributions		2,304,062			57,025,539			652,710			6,879,337
Shares redeemed		(12,178,847	)		(288,057,682	)		(2,300,263	)		(22,758,653	)

Net increase (decrease)		(5,277,739	)	$	(124,003,541	)		(475,398	)	$	(3,886,825	)



	International Equity Series

	Shares			Amount


Primary Shares:
Year ended December 31, 2018
Shares sold		15,662,166		$	325,319,078
Shares issued in reinvestment of distributions		36,602,476			566,322,098
Shares redeemedin-kind (Note 9)		(5,016,384	)		(93,431,162	)
Shares redeemed		(60,570,466	)		(1,233,296,583	)

Net increase (decrease)		(13,322,208	)	$	(435,086,569	)

Year ended December 31, 2017
Shares sold		25,057,295		$	517,786,830
Shares issued in reinvestment of distributions		7,303,655			159,119,329
Shares redeemedin-kind (Note 9)		(19,099,929	)		(421,197,360	)
Shares redeemed		(55,993,290	)		(1,174,306,204	)

Net increase (decrease)		(42,732,269	)	$	(918,597,405	)

Service Shares:
Year ended December 31, 2018
Shares sold		139,737		$	2,896,584
Shares issued in reinvestment of distributions		93,866			1,508,078
Shares redeemed		(516,313	)		(9,591,386	)

Net increase (decrease)		(282,710	)	$	(5,186,724	)

Year ended December 31, 2017
Shares sold		272,954		$	5,774,008
Shares issued in reinvestment of distributions		25,407			555,560
Shares redeemed		(117,301	)		(2,516,578	)

Net increase (decrease)		181,060		$	3,812,990



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NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. Certain officers and trustees of the Trust are also officers and/or directors of the following subsidiaries:



Subsidiary		Affiliation
Templeton Investment Counsel, LLC (TIC)		Investment manager
Franklin Templeton Services, LLC (FT Services)		Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)		Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)		Transfer agent

a. Management Fees

Foreign Smaller Companies Series pays an investment management fee to TIC based on the average daily net assets of the Fund as follows:



Annualized Fee Rate		Net Assets
0.950%		Up to and including $1 billion
0.930%		Over $1 billion, up to and including $5 billion
0.910%		Over $5 billion, up to and including $10 billion
0.890%		Over $10 billion, up to and including $15 billion
0.870%		Over $15 billion, up to and including $20 billion
0.850%		In excess of $20 billion

Global Equity Series pays an investment management fee to TIC based on the average daily net assets of the Fund as follows:



Annualized Fee Rate		Net Assets
0.780%		Up to and including $200 million
0.765%		Over $200 million, up to and including $700 million
0.730%		Over $700 million, up to and including $1 billion
0.715%		Over $1 billion, up to and including $1.2 billion
0.690%		Over $1.2 billion, up to and including $5 billion
0.675%		Over $5 billion, up to and including $10 billion
0.655%		Over $10 billion, up to and including $15 billion
0.635%		Over $15 billion, up to and including $20 billion
0.615%		Over $20 billion, up to and including $25 billion
0.605%		Over $25 billion, up to and including $30 billion
0.595%		Over $30 billion, up to and including $35 billion
0.585%		Over $35 billion, up to and including $40 billion
0.575%		Over $40 billion, up to and including $45 billion
0.565%		In excess of $45 billion



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates(continued)

a. Management Fees(continued)

International Equity Series pays an investment management fee to TIC based on the average daily net assets of the Fund as follows:



Annualized Fee Rate		Net Assets
0.775%		Up to and including $1 billion
0.755%		Over $1 billion, up to and including $5 billion
0.735%		Over $5 billion, up to and including $10 billion
0.715%		Over $10 billion, up to and including $15 billion
0.695%		Over $15 billion, up to and including $20 billion
0.675%		In excess of $20 billion

For the year ended December 31, 2018, each Fund’s gross effective investment management fee rate based on average daily net assets was as follows:



Foreign Smaller Companies Series		Global Equity Series		International Equity Series
	0.950%		0.776%		0.761%

b. Administrative Fees

Under an agreement with TIC, FT Services provides administrative services to the Funds. The fee is paid by TIC based on each of the Funds’ average daily net assets, and is not an additional expense of the Funds.

c. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets.

For the year ended December 31, 2018, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:



	Foreign Smaller Companies Series		Global Equity Series		International Equity Series
Transfer agent fees		$257,169		$63,168		$929,188

International Equity Series’ Service shares may pay up to 0.15% of average daily net assets forsub-transfer agency fees as noted in the Statements of Operations.



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NOTES TO FINANCIAL STATEMENTS

d. Investments in Affiliated Management Investment Companies

Certain or all Funds invest in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended December 31, 2018, investments in affiliated management investment companies were as follows:



	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions			Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Foreign Smaller Companies Series
Non-Controlled Affiliates
													Income from securities loaned
Institutional Fiduciary Trust Money
Market Portfolio, 1.99%		27,923,489		87,374,033		(96,197,927	)		19,099,595		$ 19,099,595	$	129,356		$ —		$ —

Global Equity Series
Non-Controlled Affiliates
													Income from securities loaned
Institutional Fiduciary Trust Money
Market Portfolio, 1.99%		—		5,143,490		(5,143,490	)		—	$	—	$	2,539		$ —		$ —

International Equity Series
Non-Controlled Affiliates
													Dividends
Institutional Fiduciary Trust Money
Market Portfolio, 1.99%		136,672,218		1,136,808,328		(1,243,494,063	)		29,986,483	$	29,986,483	$	795,172		$ —		$ —
													Income from securities loaned
Institutional Fiduciary Trust Money
Market Portfolio, 1.99%		—		83,340,968		(83,340,968	)		—		—		33,970		—		—

Total Affiliated Securities										$	29,986,483	$	829,142		$ —		$ —

e. Waiver and Expense Reimbursements

Investor Services has voluntarily agreed in advance to waive or limit its fees so that the new transfer agent fee arrangement, effective November 1, 2017, will not increase the fees retained by more than 0.02% based on the average net assets of each class. Investor Services may discontinue this waiver in the future.

f. Interfund Transactions

Certain or all Funds engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. These purchases and sales for the year ended December 31, 2018, were as follows:



	Foreign Smaller Companies Series
Purchases	$	1,012,970
Sales	$	—



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

4. Expense Offset Arrangement

The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended December 31, 2018, the custodian fees were reduced as noted in the Statements of Operations.

5. Income Taxes

For tax purposes, the Funds may elect to defer any portion of a post-October capital loss or late-year ordinary loss to the first day of the following fiscal year. At December 31, 2018, International Equity Series had deferred losses of $9,195,415.

The tax character of distributions during the years ended December 31, 2018 and 2017, were as follows:


	Foreign Smaller Companies Series				Global Equity Series
	2018		2017		2018		2017
Distributions paid from:
Ordinary income	$	7,955,394	$	30,489,899	$	8,061,699	$	5,755,645
Long term capital gain		88,400,965		33,918,246		32,277,820		1,123,692
	$	96,356,359	$	64,408,145	$	40,339,519	$	6,879,337


	International Equity Series
	2018		2017
Distributions paid from:
Ordinary income	$	77,972,193	$	128,224,975
Long term capital gain		560,721,115		56,343,278
	$	638,693,308	$	184,568,253

At December 31, 2018, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:


	Foreign Smaller Companies Series				Global Equity Series				International Equity Series

Cost of investments		$	675,979,997			$	254,263,784			$	2,557,517,908

Unrealized appreciation		$	156,921,597			$	22,334,267			$	535,272,812

Unrealized depreciation			(104,588,247	)			(34,227,519	)			(280,601,842	)

Net unrealized appreciation (depreciation)		$	52,333,350			$	(11,893,252	)		$	254,670,970

Distributable earnings:

Undistributed ordinary income		$	1,196,998			$	620,688			$	13,227,010

Undistributed long term capital gains			—				5,087,179				—

Total distributable earnings		$	1,196,998			$	5,707,867			$	13,227,010

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of passive foreign investment company shares.

The Funds utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from net investment income and realized capital gains.



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

6. Investment Transactions

Purchases and sales of investments (excluding short term securities andin-kind transactions) for the year ended December 31, 2018, were as follows:


	Foreign Smaller Companies Series		Global Equity Series		International Equity Series
Purchases		$313,250,441		$ 99,035,924		$ 969,447,815
Sales		$414,031,336		$133,865,988		$1,862,477,379

At December 31, 2018, in connection with securities lending transactions, certain or all Funds loaned investments and received cash collateral as follows:



		Foreign Smaller Companies Series
Securities lending transactions^a:
Equity investments^b		$19,137,010

^aThe agreements can be terminated at any time.

^bThe gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statements of Assets and Liabilities.

7. Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

8. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matured on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 8, 2019, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 7, 2020, for a total of $2 billion.

Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended December 31, 2018, the Funds did not use the Global Credit Facility.

9. RedemptionIn-Kind

During the years ended December 31, 2018, and December 31, 2017, International Equity Series realized $7,694,963 and $116,160,039, respectively, of net gains resulting from redemptionsin-kind in which a shareholder redeemed fund shares for cash and securities held by the Fund. Because such gains are not taxable to the Fund and are not distributed to remaining shareholders, they have been reclassified from accumulated net realized gains topaid-in capital.



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

10. Fair Value Measurements

The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

A summary of inputs used as of December 31, 2018, in valuing the Funds’ assets carried at fair value, is as follows:



	Level 1		Level 2		Level 3		Total

Foreign Smaller Companies Series
Assets:
Investments in Securities:^a
Equity Investments:^b
Auto Components	$	—	$	3,496,650	$	—	$	3,496,650
Electronic Equipment, Instruments &
Components		40,451,378		8,210,959		—		48,662,337
Food Products		31,002,022		5,215,685		—		36,217,707
Household Durables		24,927,371		3,259,771		—		28,187,142
Internet & Direct Marketing Retail		—		10,604,162		—		10,604,162
Leisure Products		48,470,660		26,869,258		—		75,339,918
Life Sciences Tools & Services		—		14,614,346		—		14,614,346
Machinery		28,653,226		52,517,446		—		81,170,672
Metals & Mining		7,503,285		5,012,533		—		12,515,818
Oil, Gas & Consumable Fuels		4,334,585		2,877,457		—		7,212,042
Real Estate Management & Development		7,623,799		9,341,914		—		16,965,713
Specialty Retail		22,494,286		2,284,397		—		24,778,683
Textiles, Apparel & Luxury Goods		47,742,768		3,868,899		—		51,611,667
All Other Equity Investments		290,236,895		—		—		290,236,895
Short Term Investments		19,099,595		7,600,000		—		26,699,595

Total Investments in Securities	$	572,539,870	$	155,773,477	$	—	$	728,313,347



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	Level 1		Level 2		Level 3		Total

Global Equity Series
Assets:
Investments in Securities:^a
Equity Investments:^b
Banks	$	30,992,880	$	2,205,365	$	—	$	33,198,245
Capital Markets		—		3,930,231		—		3,930,231
Chemicals		2,506,995		4,811,082		—		7,318,077
Construction Materials		—		2,989,882		—		2,989,882
Electrical Equipment		—		3,530,010		—		3,530,010
Health Care Equipment & Supplies		1,217,045		772,253		—		1,989,298
Life Sciences Tools & Services		—		1,419,242		—		1,419,242
Multi-Utilities		3,430,870		3,515,014		—		6,945,884
Oil, Gas & Consumable Fuels		21,628,388		2,831,661		—		24,460,049
Pharmaceuticals		13,916,945		13,777,080		—		27,694,025
All Other Equity Investments		121,895,589		—		—		121,895,589
Short Term Investments		—		7,000,000		—		7,000,000

Total Investments in Securities	$	195,588,712	$	46,781,820	$	—	$	242,370,532


International Equity Series
Assets:
Investments in Securities:^a
Equity Investments:^b
Banks	$	407,278,630	$	64,183,366	$	—	$	471,461,996
Capital Markets		—		59,686,430		—		59,686,430
Chemicals		45,749,399		53,464,603		—		99,214,002
Diversified Telecommunication Services		97,298,763		41,170,246		—		138,469,009
Electrical Equipment		—		49,328,914		—		49,328,914
Health Care Equipment & Supplies		—		15,365,019		—		15,365,019
Health Care Providers & Services		26,052,682		21,522,171		—		47,574,853
Industrial Conglomerates		48,346,710		40,649,971		—		88,996,681
Life Sciences Tools & Services		—		14,877,262		—		14,877,262
Marine		—		31,203,936		—		31,203,936
Multi-Utilities		33,903,214		45,395,137		—		79,298,351
Oil, Gas & Consumable Fuels		265,439,072		46,075,867		—		311,514,939
Pharmaceuticals		171,456,073		206,365,824		—		377,821,897
Semiconductors & Semiconductor Equipment		73,035,535		27,330,432		—		100,365,967
All Other Equity Investments		897,023,139		—		—		897,023,139
Short Term Investments		29,986,483		—		—		29,986,483

Total Investments in Securities	$	2,095,569,700	$	716,619,178	$	—	$	2,812,188,878

^aFor detailed categories, see the accompanying Statement of Investments.

^bIncludes common and preferred stocks.

11. Subsequent Events

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure, other than those already disclosed in the financial statements.



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TEMPLETON INSTITUTIONAL FUNDS

NOTES TO FINANCIAL STATEMENTS

Abbreviations


Selected Portfolio

ADR		American Depositary Receipt
FHLB		Federal Home Loan Bank
IDR		International Depositary Receipt
NVDR		Non-Voting Depositary Receipt



58	Annual Report	ftinstitutional.com

TEMPLETON INSTITUTIONAL FUNDS

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Templeton Institutional Funds and Shareholders of Foreign Smaller Companies Series, Global Equity Series and International Equity Series

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Foreign Smaller Companies Series, Global Equity Series and International Equity Series (the “Funds”) as of December 31, 2018, the related statements of operations for the year ended December 31, 2018, the statements of changes in net assets for each of the two years in the period ended December 31, 2018, including the related notes, and the financial highlights for each of the five years in the period ended December 31, 2018 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of December 31, 2018, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended December 31, 2018 and each of the financial highlights for each of the five years in the period ended December 31, 2018 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2018 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

PricewaterhouseCoopers LLP

San Francisco, California

February 15, 2019

We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.



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TEMPLETON INSTITUTION FUNDS

Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended December 31, 2018:



Foreign Smaller Companies Series		Global Equity Series		International Equity Series

	$90,587,726		$34,926,880	$617,629,219

Under Section 871(k)(2)(C) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended December 31, 2018:



Foreign Smaller Companies Series		Global Equity Series		International Equity Series

	$ —		$3,706,555	$8,406,792

Under Section 854(b)(1)(A) of the Internal Revenue Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended December 31, 2018:



Foreign Smaller Companies Series		Global Equity Series		International Equity Series

	0.00%		18.49%	0.00%

Under Section 854(b)(1)(B) of the Internal Revenue Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Internal Revenue Code for the fiscal year ended December 31, 2018:



Foreign Smaller Companies Series		Global Equity Series		International Equity Series

	$13,724,322		$6,356,181	$91,768,373

Distributions, including qualified dividend income, paid during calendar year 2018 will be reported to shareholders on Form1099-DIV bymid-February 2019. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

At December 31, 2018, more than 50% of the Funds’ total assets were invested in securities of foreign issuers. In most instances, foreign taxes were withheld from income paid to the Funds on these investments. As shown in the table below, the Funds hereby report to shareholders the foreign source income and foreign taxes paid, pursuant to Section 853 of the Internal Revenue Code. This written statement will allow shareholders of record on December 20, 2018, to treat their proportionate share of foreign taxes paid by the Funds as having been paid directly by them. The shareholder shall consider these amounts as foreign taxes paid in the tax year in which they receive the Fund distribution.

The following table provides a detailed analysis of foreign tax paid, foreign source income, and foreign source qualified dividends as reported by the Funds to shareholders of record.



Class	Foreign Tax Paid Per Share		Foreign Source Income Per Share		Foreign Source Qualified Dividends Per Share

Foreign Smaller Companies Series
Fund Shares		$0.0429		$0.3262		$0.1870
Global Equity Series
Fund Shares		$0.0193		$0.1719		$0.1377
International Equity Series
Primary Shares		$0.0514		$0.5188		$0.4110
Service Shares		$0.0514		$0.4582		$0.3628



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TEMPLETON INSTITUTION FUNDS

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you, as a tax credit (assuming you held your shares in the Fund for a minimum of 16 days during the31-day period beginning 15 days before theex-dividend date of the Fund’s distribution to which the foreign taxes relate), or, as a tax deduction.

Foreign Source Income Per Share (Column 2) is the amount per share of income dividends attributable to foreign securities held by the Funds, plus any foreign taxes withheld on these dividends. The amounts reported include foreign source qualified dividends that have not been adjusted for the rate differential applicable to such dividend income.¹

Foreign Source Qualified Dividends Per Share (Column 3) is the amount per share of foreign source qualified dividends, plus any foreign taxes withheld on these dividends. These amounts represent the portion of the Foreign Source Income reported to you in column 2 that were derived from qualified foreign securities held by the Funds.¹

Bymid-February 2019, shareholders will receive Form1099-DIV which will include their share of taxes paid and foreign source income distributed during the calendar year 2018. The Foreign Source Income reported on Form1099-DIV has not been adjusted for the rate differential on foreign source qualified dividend income. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their 2018 individual income tax returns.

1Qualified dividends are taxed at reduced long term capital gains tax rates. In determining the amount of foreign tax credit that may be applied against the U.S. tax liability of individuals receiving foreign source qualified dividends, adjustments may be required to the foreign tax credit limitation calculation to reflect the rate differential applicable to such dividend income. The rules however permit certain individuals to elect not to apply the rate differential adjustments for capital gains and/or dividends for any taxable year. Please consult your tax advisor and the instructions to Form 1116 for more information.



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TEMPLETON INSTITUTIONAL FUNDS

Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of US registered portfolios overseen in the Franklin Templeton Investments fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members


Name,Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years

Harris J. Ashton (1932) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 1992	136	Bar-S Foods (meat packing company) (1981-2010).

Principal Occupation During at Least the Past 5 Years: Director of various companies; andformerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Ann Torre Bates (1958) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 2008	38	Ares Capital Corporation (specialty finance company) (2010-present), United Natural Foods, Inc. (distributor of natural, organic and specialty foods) (2013-present), Allied Capital Corporation (financial services) (2003-2010), SLM Corporation (Sallie Mae) (1997-2014) and Navient Corporation (loan management, servicing and asset recovery) (2014-2016).

Principal Occupation During at Least the Past 5 Years: Director of various companies; andformerly, Executive Vice President and Chief Financial Officer, NHP Incorporated (manager of multifamily housing) (1995-1997); and Vice President and Treasurer, US Airways, Inc. (until 1995).

Mary C. Choksi (1950) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 2016	136	Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present).

Principal Occupation During at Least the Past 5 Years: Director of various companies; andformerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); Founding Partner and Managing Director, Emerging Markets Management LLC (investment management firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial institution) (1977-1987).

Edith E. Holiday (1952) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Lead Independent Trustee	Trustee since 1996 and Lead Independent Trustee since 2007	136	Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc.(manufacture and distribution of titanium) (1999-2015) and H.J. Heinz Company (processed foods and allied products) (1994-2013).

Principal Occupation During at Least the Past 5 Years: Director or Trustee of various companies and trusts; andformerly, Assistant to the President of the United States and Secretary of the Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant Secretary for Public Affairs and Public Liaison-United States Treasury Department (1988-1989).



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Independent Board Members(continued)


Name,Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years

J. Michael Luttig (1954) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 2009	136	Boeing Capital Corporation (aircraft financing) (2006-2013).

Principal Occupation During at Least the Past 5 Years: Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company) (2006-present); andformerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

David W. Niemiec (1949) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 2005	38	Hess Midstream Partners LP (oil and gas midstream infrastructure) (2017-present).

Principal Occupation During at Least the Past 5 Years: Advisor, Saratoga Partners (private equity fund); andformerly, Managing Director, Saratoga Partners (1998-2001) and SBC Warburg Dillon Read (investment banking) (1997-1998); Vice Chairman, Dillon, Read & Co. Inc. (investment banking) (1991-1997); and Chief Financial Officer, Dillon, Read & Co. Inc. (1982-1997).

Larry D. Thompson (1945) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 2005	136	The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012).

Principal Occupation During at Least the Past 5 Years:
Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; previously 2011-2012); andformerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo, Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General, U.S. Department of Justice (2001-2003).

Constantine D. Tseretopoulos (1954) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 1990	24	None

Principal Occupation During at Least the Past 5 Years: Physician, Chief of Staff, owner and operator of the Lyford Cay Hospital (1987-present); director of various nonprofit organizations; andformerly, Cardiology Fellow, University of Maryland (1985-1987); and Internal Medicine Resident, Greater Baltimore Medical Center(1982-1985).

Robert E. Wade (1946) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Trustee	Since 2007	38	El Oro Ltd (investments) (2003-present).

Principal Occupation During at Least the Past 5 Years: Attorney at law engaged in private practice as a sole practitioner (1972-2008) and member of various boards.



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TEMPLETON INSTITUTIONAL FUNDS

Interested Board Members and Officers


Name,Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years

**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	150	None

Principal Occupation During at Least the Past 5 Years: Chairman of the Board, Member – Office of the Chairman, Director and Chief Executive Officer, Franklin Resources, Inc.; officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments; Vice Chairman, Investment Company Institute; andformerly, President, Franklin Resources, Inc. (1994-2015).

**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906	Chairman of the Board, Trustee and Vice President	Chairman of the Board, Trustee since 2013 and Vice President since 1996	136	None

Principal Occupation During at Least the Past 5 Years: Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 40 of the investment companies in Franklin Templeton Investments.

Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.

Norman J. Boersma (1957) Lyford Cay Nassau, Bahamas	President and Chief Executive Officer – Investment Management	Since 2012	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Chairman of the Board, President and Chief Executive Officer, Templeton Global Advisors Ltd.; Chief Investment Officer of Templeton Global Equity Group; officer of five of the investment companies in Franklin Templeton Investments; andformerly, Executive Vice President, Franklin Templeton Investments Corp. (1993-2014).

Aliya S. Gordon (1973) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments.

Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.

Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton Investments; andformerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton Investments (2009-2017).



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TEMPLETON INSTITUTIONAL FUNDS

Interested Board Members and Officers(continued)


Name,Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years

Robert G. Kubilis (1973) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Financial Officer, Chief Accounting Officer and Treasurer	Since 2017	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 16 of the investment companies in Franklin Templeton Investments.

Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President –AML Compliance	Since 2016	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.

Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Associate General Counsel, Franklin Templeton Investments; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton Investments.

Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Compliance Officer	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton Investments; andformerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Associate General Counsel, Franklin Templeton Investments; and officer of 44 of the investment companies in Franklin Templeton Investments.

Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton Investments.

Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President and Secretary	Vice President since 2011 and Secretary since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years: Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton Investments.


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TEMPLETON INSTITUTIONAL FUNDS

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director and major shareholder of Resources.

Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the US Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated each of Ann Torre Bates and David W. Niemiec as an audit committee financial expert. The Board believes that Ms. Bates and Mr. Niemiec qualify as such an expert in view of their extensive business background and experience. Ms. Bates has served as a member of the Fund Audit Committee since 2008. She currently serves as a director of Ares Capital Corporation (2010-present) and United Natural Foods, Inc. (2013-present) and was formerly a director of Navient Corporation from 2014 to 2016, SLM Corporation from 1997 to 2014 and Allied Capital Corporation from 2003 to 2010, Executive Vice President and Chief Financial Officer of NHP Incorporated from 1995 to 1997 and Vice President and Treasurer of US Airways, Inc. until 1995. Mr. Niemiec has served as a member of the Fund Audit Committee since 2005, currently serves as an Advisor to Saratoga Partners and was formerly its Managing Director from 1998 to 2001 and serves as a director of Hess Midstream Partners LP (2017-present). Mr. Niemiec was formerly a director of Emeritus Corporation from 1999 to 2010 and OSI Pharmaceuticals, Inc. from 2006 to 2010, Managing Director of SBC Warburg Dillon Read from 1997 to 1998, and was Vice Chairman from 1991 to 1997 and Chief Financial Officer from 1982 to 1997 of Dillon, Read & Co. Inc. As a result of such background and experience, the Board believes that Ms. Bates and Mr. Niemiec have each acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Ms. Bates and Mr. Niemiec are independent Board members as that term is defined under the applicable US Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request. Shareholders may call (800) DIALBEN/342-5236 to request the SAI.



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TEMPLETON INSTITUTIONAL FUNDS

Shareholder Information

Proxy Voting Policies and Procedures

The Funds’ investment manager has established Proxy Voting Policies and Procedures (Policies) that the Funds use to determine how to vote proxies relating to portfolio securities. Shareholders may view the Funds’ complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954)527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Funds’ proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent12-month period ended June 30.

Quarterly Statement of Investments

The Trust files a complete statement of investments with the U.S. Securities and Exchange Commission for the first and third quarters for each fiscal year on FormN-Q. Shareholders may view the filed FormN-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling(800) SEC-0330.

Householding of Reports

and Prospectuses

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800)632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

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Annual Report

Templeton Institutional Funds

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Shareholder Services

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Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.


© 2019 Franklin Templeton Investments. All rights reserved.		ZTIF A 02/19

Item 2.

Code of Ethics.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal

Item 4.

Principal Accountant Fees and Services.

(a) Audit Fees

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $149,555 for the fiscal year ended December 31, 2018 and $194,933 for the fiscal year ended December 31, 2017.

(b) Audit-Related Fees

The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of Item 4 were $3,102 for the fiscal year ended December 31, 2018 and $3,071 for the fiscal year ended December 31, 2017. The services for which these fees were paid included attestation services.

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.

There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.

There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning.

(d) All Other Fees

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $2,211 for the fiscal

year ended December 31, 2018 and $0 for the fiscal year ended December 31, 2017. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $7,500 for the fiscal year ended December 31, 2018 and $14,000 for the fiscal year ended December 31, 2017. The services for which these fees were paid included the issuance of an Auditor’s Certificate for South Korean regulatory shareholders disclosures and benchmarking services in connection with the ICI TA Survey.

(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:

(i)pre-approval of all audit and audit related services;

(ii)pre-approval of allnon-audit related services to be provided to the Fund by the auditors;

(iii)pre-approval of allnon-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where thenon-audit services relate directly to the operations or financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committeepre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to bepre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule2-01 of regulationS-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregatenon-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $12,813 for the fiscal year

ended December 31, 2018 and $17,071 for the fiscal year ended December 31, 2017.

(h) The registrant’s audit committee of the board has considered whether the provision ofnon-audit services that were rendered to the registrant’s investment adviser (not including anysub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were notpre-approved pursuant to paragraph (c)(7)(ii) of Rule2-01 of RegulationS-X is compatible with maintaining the principal accountant’s independence.

Item 5.

Audit Committee of Listed Registrants. N/A

Item 6.

Schedule of Investments. N/A

Item 7.

Disclosure of Proxy Voting Policies and Procedures forClosed-End Management Investment Companies. N/A

Item 8.

Portfolio Managers ofClosed-End Management Investment Companies. N/A

Item 9.

Purchases of Equity Securities byClosed-End Management Investment Company and Affiliated Purchasers. N/A

Item 10.

Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11.

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on FormN-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures were not effective related to internal control over financial reporting specific to the monitoring of market events following the close of trading in foreign stock markets that assist in determining the reliability of the values of the foreign securities held by the Funds and which may require the use of fair valuation factors to account for changes in the values of those securities subsequent to the local close of the foreign market but prior to the net asset calculation of the Funds. As a result, a material weakness exists at period end for the Foreign Smaller Companies Series, Global Equity Series, and International Equity Series. There are no misstatements to current and previously issued financial statements. However, this material weakness could result in misstatements of security values and unrealized gains or losses and associated disclosures that would result in a material misstatement of the interim or annual financial statements that would not be prevented or detected.

Effective November 1, 2018, the Registrant’s controls were enhanced through the implementation of a daily secondary review of market events following the close of trading on foreign stock markets to ensure the appropriate application of market level fair value. Registrant’s management believes this will facilitate the remediation of the control deficiency we have identified and strengthen the internal control over financial reporting. This material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

(b) Changes in Internal Controls. As described above, there have been changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

Item 12.

Disclosure of Securities Lending Activities forClosed-End Management Investment Company. N/A

Item 13.

Exhibits.

(a)(1)Code of Ethics

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer – Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of

2002 of Matthew T. Hinkle, Chief Executive Officer – Finance and Administration, and Robert G. Kubilis, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


TEMPLETON INSTITUTIONAL FUNDS

By		/s/ MATTHEW T. HINKLE
		Matthew T. Hinkle Chief Executive Officer – Finance and Administration

Date February 26, 2019

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



By		/s/ MATTHEW T. HINKLE
		Matthew T. Hinkle Chief Executive Officer – Finance and Administration

Date February 26, 2019



By		/s/ ROBERT G. KUBILIS
		Robert G. Kubilis Chief Financial Officer and Chief Accounting Officer

Date February 26, 2019

Net Investment
Income

Long-Term
Capital Gain