UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06135
Templeton Institutional Funds
(Exact name of registrant as specified in charter)
300 S.E. 2nd 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: 6/30/21
Item 1. Reports to Stockholders.
a.)
The following is a copy of the report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1.)
b.)
Include a copy of each notice transmitted to stockholders in reliance on Rule 30e-3 under the Act (17 CFR 270.30e-3) that contains disclosures specified by paragraph (c)(3) of that rule.
Not Applicable
.
SEMIANNUAL
REPORT
Templeton
Institutional
Funds
June
30,
2021
Foreign
Smaller
Companies
Series
International
Equity
Series
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
ftinstitutional.com
Semiannual
Report
1
Contents
Semiannual
Report
Economic
and
Market
Overview
2
Foreign
Smaller
Companies
Series
3
International
Equity
Series
9
Financial
Highlights
and
Statements
of
Investments
16
Financial
Statements
28
Notes
to
Financial
Statements
31
Shareholder
Information
44
Visit
ftinstitutional.com
for
fund
updates,
to
access
your
account,
or
to
find
investment
insights.
2
ftinstitutional.com
Semiannual
Report
SEMIANNUAL
REPORT
Economic
and
Market
Overview
Global
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
World
Index-NR
(net
of
tax
withholding
when
dividends
are
paid),
posted
a
+12.30%
total
return
for
the
six
months
ended
June
30,
2021.
1
Global
equities
benefited
from
monetary
and
fiscal
stimulus
measures,
rebounding
economic
activity
and
easing
novel
coronavirus
(COVID-19)
pandemic
restrictions
in
many
regions.
The
implementation
of
vaccination
programs
and
additional
fiscal
stimulus
measures
led
many
equity
markets
to
reach
new
all-time
price
highs.
In
the
U.S.,
the
economy
continued
to
recover
and
equities
rallied
amid
an
accommodative
monetary
policy,
additional
fiscal
stimulus
measures
and
ongoing
vaccination
programs.
The
lifting
of
many
COVID-19
restrictions
and
strong
consumer
spending
also
supported
the
economy.
Gross
domestic
product
(GDP)
growth
accelerated
in
2021’s
first
quarter,
with
total
economic
output
nearly
reaching
pre-
pandemic
levels.
The
rebound
in
corporate
earnings
and
progress
toward
a
bipartisan
infrastructure
plan
further
bolstered
investor
sentiment.
The
U.S.
Federal
Reserve
kept
the
federal
funds
target
rate
at
a
record-low
range
of
0.00%–0.25%
and
continued
its
program
of
open-ended
bond
purchases
to
help
keep
markets
functioning.
The
economic
recovery
in
the
eurozone
was
relatively
weak,
as
quarter-over-quarter
GDP
growth
contracted
during
2021’s
first
quarter.
GDP
growth
rates
were
mostly
negative
among
the
region’s
largest
economies
amid
renewed
lockdowns,
delays
in
COVID-19
vaccine
distribution
and
weak
consumer
spending.
Nevertheless,
optimism
that
successful
vaccine
programs
would
lift
global
growth
helped
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index-NR,
to
post
a
+11.80%
total
return
for
the
six
months
under
review.
1
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index-NR,
posted
a
+4.54%
total
return
for
the
six-month
period.
1
The
region’s
economic
recovery
was
pressured
by
weak
domestic
demand,
most
notably
in
China,
despite
improvement
in
manufacturing
and
exports.
Asian
equity
markets
experienced
volatility
near
period-end
due
to
inflation
concerns,
rising
COVID-19
infection
rates
in
many
countries,
especially
India,
and
renewed
lockdowns.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index-NR,
posted
a
+7.45%
total
return
for
the
six
months
under
review.
1
The
recovery
in
oil
and
industrial
metals
prices
supported
global
emerging
market
equities.
Late
in
the
period,
higher
COVID-19
cases
in
some
countries,
limited
vaccine
rollouts
and
concerns
about
rising
interest
rates
and
inflation
amid
higher
commodity
prices
dampened
investor
enthusiasm
in
global
emerging
market
equities.
The
foregoing
information
reflects
our
analysis
and
opinions
as
of
June
30,
2021.
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.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
3
ftinstitutional.com
Semiannual
Report
Foreign
Smaller
Companies
Series
This
semiannual
report
for
Foreign
Smaller
Companies
Series
(Fund)
covers
the
period
ended
June
30,
2021
.
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.
For
purposes
of
this
80%
policy,
the
Fund
defines
smaller
companies
as
those
with
market
capitalizations
that
do
not
exceed
$4
billion.
However,
under
normal
conditions,
when
making
an
initial
purchase
of
securities
of
a
company,
we
will
only
invest
in
securities
of
companies
with
a
market
capitalization
of
not
more
than
$2
billion.
Once
a
security
qualifies
for
initial
purchase,
it
continues
to
qualify
for
additional
purchases
as
long
as
it
is
held
by
the
Fund,
provided
that
the
issuer’s
market
capitalization
does
not
exceed
$4
billion.
Performance
Overview
The
Fund
posted
a
+12.77%
cumulative
total
return
for
the
six
months
under
review.
In
comparison,
the
Fund’s
new
benchmark,
the
MSCI
All
Country
World
Index
(ACWI)
ex
USA
Small
Cap
Index-NR,
which
measures
performance
of
global
developed
and
emerging
market
small-cap
equities,
excluding
the
U.S.,
posted
a
+12.24%
cumulative
total
return.
1
Also
in
comparison,
the
Fund’s
former
benchmark,
the
MSCI
ACWI
ex
USA
Small
Cap
Index,
posted
a
+12.47%
cumulative
total
return.
The
MSCI
ACWI
ex
USA
Small
Cap
Index-NR
(net
of
dividend
tax
withholding)
replaced
the
MSCI
ex
USA
Small
Cap
Index
(gross
of
taxes
on
dividends)
as
a
primary
benchmark
because
the
investment
manager
believes
that
the
actual
withholding
rates
for
the
Fund
are
closer
to
the
assumptions
of
the
MSCI
ACWI
ex
USA
Small
Cap
Index-NR.
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
recent
month-end
performance,
go
to
ftinstitutional.com
or
call
a
Franklin
Templeton
Institutional
Services
representative
at
(800)
321-8563.
Investment
Strategy
When
choosing
equity
investments
for
the
Fund,
we
apply
a
bottom-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.
This
evaluation
includes
an
assessment
of
the
potential
impacts
of
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
We
also
consider
a
company’s
price/earnings
ratio,
profit
margins
and
liquidation
value.
Manager’s
Discussion
During
the
six
months
under
review,
notable
contributors
to
the
Fund’s
performance
relative
to
the
MSCI
ACWI
ex
USA
Small
Cap
Index-NR
included
stock
selection
and
an
overweighting
in
the
consumer
discretionary
sector,
stock
selection
and
an
underweighting
in
the
health
care
sector
and
stock
selection
in
the
financials
sector.
In
contrast,
key
detractors
from
the
Fund’s
relative
performance
included
stock
selection
in
the
industrials
and
materials
sectors
and
stock
selection
and
an
overweighting
in
the
consumer
staples
sector.
Regionally,
key
contributors
to
the
Fund’s
relative
performance
included
stock
selection
in
Europe,
notably
in
the
U.K.,
Sweden
and
the
Netherlands,
as
well
as
stock
selection
in
Asia,
especially
in
China,
Thailand
Geographic
Composition
6/30/21
%
of
Total
Net
Assets
Europe
45.4%
Asia
41.4%
North
America
5.0%
Latin
America
&
Caribbean
3.5%
Other
0.8%
Short-Term
Investments
&
Other
Net
Assets
3.9%
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.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
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
17
.
Foreign
Smaller
Companies
Series
4
ftinstitutional.com
Semiannual
Report
and
Hong
Kong.
In
contrast,
key
detractors
included
stock
selection
in
the
Latin
America
and
Caribbean
region,
particularly
in
Brazil.
Looking
ahead,
we
continue
to
prioritize
resilience,
diversification
and
price-consciousness
in
our
investment
selection
and
portfolio
construction.
*Categories
within
the
Other
category
are
listed
in
full
in
the
Fund's
Statement
of
Investments
(SOI),
which
can
be
found
later
in
this
report.
Notable
individual
contributors
to
the
Fund’s
relative
performance
included
our
investment
in
Xtep
International
Holdings,
a
leading
China-based
sportswear
brand
and
wholesaler,
which
helped
drive
consumer
discretionary
returns.
Its
shares
rallied
after
the
firm
reported
a
substantial
rebound
in
year-on-year
sales
growth,
suggesting
that
recent
investments
in
brand
image
and
product
innovation
are
bearing
fruit
domestically.
The
company’s
competitive
advantage
is
its
ability
to
provide
a
high-quality
product
at
a
steep
discount
relative
to
peers
such
as
Nike
(not
a
Fund
holding)
and
Japan-based
sportswear
exporter
Asics
(also
a
Fund
holding).
Watches
of
Switzerland
Group
(not
part
of
the
index),
a
leading
U.K.-based
luxury
watch
and
jewelry
retailer
with
a
growing
presence
in
the
U.S.,
also
helped
drive
consumer
discretionary
returns.
The
company’s
success
is
built
on
a
more
than
100-year
relationship
with
the
Rolex
brand
and
over
50
years
with
the
Patek
Philippe
brand.
The
company
continued
to
generate
cash
during
the
novel
coronavirus
(COVID-19)
pandemic
lockdown
and
its
fiscal-year
2020
results
exceeded
guidance,
driven
by
its
strong
online
performance.
Company
management
has
increased
digital
customer
engagement
activity
and
plans
to
extend
it
going
forward.
Netherlands-based
electronic
exchange
operator
Flow
Traders’
share
price
rose
amid
higher
trading
volumes
during
the
period.
We
believe
the
stock
continues
to
offer
unique
characteristics
for
the
Fund’s
portfolio,
including
a
negative
beta
(the
stock
is
less
volatile
than
the
overall
market)
and
healthy
dividend
yield.
Furthermore,
in
our
assessment,
the
firm
is
poised
to
benefit
from
numerous
long-term
growth
opportunities
and
potential
acquisition
synergies.
In
contrast,
key
individual
detractors
from
the
Fund’s
relative
performance
included
our
position
in
China-based
Xiabuxiabu
Catering
Management
China
Holdings,
which
operates
two
lines
of
hot
pot
restaurants
throughout
China.
During
the
period,
its
shares
were
impacted
by
the
COVID-19
pandemic.
In
our
longer-term
view,
although
the
company
operates
in
a
competitive
space,
its
centralized
kitchen
enables
it
to
create
barriers
to
entry
and
benefit
from
economies
of
scale.
Historically,
the
company
experienced
strong
growth
as
it
expanded
throughout
China,
more
than
doubling
its
store
base
over
the
past
five
years.
Japan-based
Fuji
Oil
Holdings,
a
confectionery
and
baking
ingredient
manufacturer
and
a
global
player
in
the
oligopolistic
cocoa
butter
alternative
industry,
was
a
significant
detractor
in
the
consumer
staples
sector.
Despite
the
short-term
underperformance
of
its
stock,
we
expect
the
company
to
see
high
demand
for
its
new
products
and
generate
strong
revenue
growth
in
international
sales.
As
the
firm
invests
to
expand
capacity
and
product
lines
unfold,
we
believe
profit
margins
will
improve
as
well.
The
shares
of
Nichiha,
a
market-leading
manufacturer
of
fiber-cement
siding
for
residential,
commercial
and
public
facilities
in
Japan,
were
impacted
by
lower
demand
due
to
the
pandemic.
Looking
at
the
longer
term,
Nichiha
has
captured
nearly
half
of
the
Japanese
market
through
its
innovative
product
offerings
and
expertise,
and
it
has
a
growing
market
share
in
the
U.S.
and
the
rest
of
the
world,
including
China.
Portfolio
Composition
6/30/21
%
of
Total
Net
Assets
Machinery
12.0%
Leisure
Products
9.8%
Electronic
Equipment,
Instruments
&
Components
7.1%
Textiles,
Apparel
&
Luxury
Goods
6.2%
Professional
Services
5.4%
Capital
Markets
5.3%
Food
Products
4.3%
Banks
4.0%
Specialty
Retail
3.1%
Food
&
Staples
Retailing
3.1%
Life
Sciences
Tools
&
Services
3.0%
Technology
Hardware,
Storage
&
Peripherals
2.7%
Auto
Components
2.2%
Entertainment
2.1%
Other*
25.8%
Short-Term
Investments
&
Other
Net
Assets
3.9%
Foreign
Smaller
Companies
Series
5
ftinstitutional.com
Semiannual
Report
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
six
months
ended
June
30,
2021,
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
with
non-U.S.
currency
exposure.
Thank
you
for
your
continued
participation
in
Foreign
Smaller
Companies
Series.
We
look
forward
to
serving
your
future
investment
needs.
Harlan
B.
Hodes,
CPA
Lead
Portfolio
Manager
David
A.
Tuttle,
CFA
Heather
Waddell,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
June
30,
2021,
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.
Top
10
Holdings
6/30/21
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Xtep
International
Holdings
Ltd.
2.1%
Textiles,
Apparel
&
Luxury
Goods,
China
Interpump
Group
SpA
2.0%
Machinery,
Italy
Siegfried
Holding
AG
1.9%
Life
Sciences
Tools
&
Services,
Switzerland
Dometic
Group
AB
1.8%
Auto
Components,
Sweden
Bucher
Industries
AG
1.8%
Machinery,
Switzerland
Technogym
SpA
1.8%
Leisure
Products,
Italy
Asics
Corp.
1.8%
Textiles,
Apparel
&
Luxury
Goods,
Japan
Man
Group
plc
1.6%
Capital
Markets,
United
Kingdom
Hana
Microelectronics
PCL
1.6%
Electronic
Equipment,
Instruments
&
Components,
Thailand
Tsumura
&
Co.
1.5%
Pharmaceuticals,
Japan
CFA
®
is
a
trademark
owned
by
CFA
Institute.
Performance
Summary
as
of
June
30,
2021
Foreign
Smaller
Companies
Series
6
ftinstitutional.com
Semiannual
Report
The
performance
table
does
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
6/30/21
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
recent
month-end
performance,
go
to
ftinstitutional.com
or
call
a
Franklin
Templeton
Institutional
Services
representative
at
(800)
321-8563.
Cumulative
Total
Return
1
Average
Annual
Total
Return
2
–
6-Month
+12.77%
+12.77%
1-Year
+45.75%
+45.75%
5-Year
+71.94%
+11.45%
10-Year
+100.63%
+7.21%
See
page
7
for
Performance
Summary
footnotes.
Foreign
Smaller
Companies
Series
Performance
Summary
7
ftinstitutional.com
Semiannual
Report
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.
From
time
to
time,
the
trading
market
for
a
particular
security
or
type
of
security
may
become
less
liquid
or
even
illiquid.
Reduced
liquidity
will
have
an
adverse
impact
on
the
security’s
value
and
on
the
Fund’s
ability
to
sell
such
securities
when
necessary
to
meet
the
Fund’s
liquidity
needs
or
in
response
to
a
specific
economic
event.
Because
the
Fund
may
invest
its
assets
in
companies
in
a
specif-
ic
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
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
in-
crease
market
volatility.
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
2.
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.
3.
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.
Total
Annual
Operating
Expenses
3
1.03%
Your
Fund’s
Expenses
Foreign
Smaller
Companies
Series
8
ftinstitutional.com
Semiannual
Report
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
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
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.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-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
181/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Beginning
Account
Value
1/1/21
Ending
Account
Value
6/30/21
Expenses
Paid
During
Period
1/1/21–6/30/21
1,2
Ending
Account
Value
6/30/21
Expenses
Paid
During
Period
1/1/21–6/30/21
1,2
Net
Annualized
Expense
Ratio
2
$1,000
$1,127.66
$5.38
$1,019.74
$5.10
1.02%
9
ftinstitutional.com
Semiannual
Report
International
Equity
Series
This
semiannual
report
for
International
Equity
Series
(Fund)
covers
the
period
ended
June
30,
2021
.
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
invests
predominantly
in
companies
located
outside
the
U.S.
including
companies
located
in
developing
market
countries.
Performance
Overview
The
Fund’s
Primary
shares
posted
a
+8.74%
cumulative
total
return
for
the
six
months
under
review.
For
comparison,
the
Fund’s
new
primary
benchmark,
the
MSCI
All
Country
World
Index
(ACWI)
ex
USA
Index-NR,
which
measures
stock
market
performance
in
global
developed
and
emerging
markets
excluding
the
U.S.,
posted
a
+9.16%
cumulative
total
return.
The
Fund’s
former
primary
benchmark,
the
MSCI
ACWI
ex
USA
Index,
posted
a
+9.45%
cumulative
total
return.
1
The
MSCI
ACWI
ex
USA
Index-NR
(net
of
dividend
tax
withholding)
replaced
the
MSCI
ACWI
ex
USA
Index
(gross
of
taxes
on
dividends)
as
the
primary
benchmark
because
the
investment
manager
believes
that
the
actual
withholding
rates
for
the
Fund
are
closer
to
the
assumptions
of
the
MSCI
ACWI-NR.
Also
in
comparison,
the
Fund’s
secondary
benchmark,
the
MSCI
Europe,
Australasia,
Far
East
Index
(EAFE)-NR,
which
measures
stock
market
performance
in
global
developed
markets
excluding
the
U.S.
and
Canada,
posted
a
+8.83%
cumulative
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
13
.
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
recent
month-end
performance,
go
to
ftinstitutional.com
or
call
a
Franklin
Templeton
Institutional
Services
representative
at
(800)
321-8563
.
Investment
Strategy
When
choosing
equity
investments
for
the
Fund,
we
employ
a
bottom-up,
value-oriented,
long-term
investment
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.
This
evaluation
includes
an
assessment
of
the
potential
impacts
of
material
environmental,
social
and
governance
(ESG)
factors
on
the
long-term
risk
and
return
profile
of
a
company.
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.
For
purposes
of
pursuing
the
Fund’s
investment
goal,
we
intend
to
enter
into
equity
derivative
instruments,
including
equity
index
futures
contracts.
We
use
these
derivative
instruments
for
investment
purposes,
including
for
cash
management
purposes
and
to
generate
income,
to
increase
liquidity
and/or
to
adjust
the
Fund’s
exposure
to
certain
equity
markets
in
a
more
efficient
or
less
expensive
way.
Manager’s
Discussion
Global
stocks
overall
entered
2021
amid
a
wave
of
reflation
and
reopening.
The
reflationary
tailwind
was
attributable
to
continued
monetary
stimulus
measures
and
new
fiscal
initiatives
intended
to
counteract
the
negative
economic
and
financial
impacts
of
the
novel
coronavirus
(COVID-19)
pandemic
shutdowns.
The
reopening
tailwind
was
attributable
to
successful
COVID-19
vaccine
trial
results
in
late
2020
followed
by
early
inoculation
efforts
in
2021.
In
this
environment,
interest
rates
rose,
inflationary
pressures
built,
commodity
prices
rallied
and
economically
cyclical
stocks
performed
strongly
along
with
the
value
factor.
This
tailwind
was
especially
evident
when
it
came
to
so-called
reopening
stocks—shares
of
companies
in
industries
such
1.
Source:
Morningstar.
The
indexes
are
unmanaged
and
include
reinvestment
of
any
income
or
distributions.
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.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
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
24
.
Geographic
Composition
6/30/21
%
of
Total
Net
Assets
Europe
54.0%
Asia
35.3%
Latin
America
&
Caribbean
2.9%
North
America
2.3%
Short-Term
Investments
&
Other
Net
Assets
5.5%
International
Equity
Series
10
ftinstitutional.com
Semiannual
Report
as
travel
and
hospitality
that
were
directly
impacted
by
the
pandemic
shutdowns.
The
pro-cyclical
momentum
began
to
fade,
however,
as
the
first
half
of
2021
progressed
and
the
narrative
of
the
so-called
“peak
everything”
began
to
take
shape.
The
combination
of
low
base
effects
from
the
pandemic
a
year
earlier
and
an
unexpectedly
hawkish
message
from
the
U.S.
Federal
Reserve
(Fed)
in
June
2021
left
many
investors
pondering
if
recently
strong
economic
growth,
corporate
profit
and
inflation
data
might
prove
to
be
as
good
as
it
gets.
Market
technical
indicators
underscored
the
growing
investor
concern
that
the
reopening
trade
had
run
its
course.
The
swings
between
factor
returns
became
increasingly
extreme
as
2021’s
second
quarter
progressed,
with
growth
stocks
rebounding
strongly
in
April
before
fading
in
May
and
then
rallying
once
again
in
June.
In
fact,
the
rotation
into
growth
following
the
Fed’s
June
2021
meeting
was
the
most
extreme
of
any
growth
rotation
in
about
seven
decades.
In
this
environment,
the
Fund
delivered
solid
absolute
gains
but
modestly
trailed
its
benchmark.
We
were
encouraged
to
see
the
Fund
benefit
from
stock
selection
during
the
period,
while
overall
relative
weakness
was
largely
attributable
to
unfavorable
allocations
and
the
negative
impact
of
cash
holdings.
The
fund’s
net
cash
balance
remained
in
the
three
to
four
percent
range
during
the
period,
reflecting
our
general
concerns
about
elevated
equity
valuations
following
a
strong
market
rally
from
2020’s
pandemic
lows.
From
a
sector
standpoint,
stock
selection
and
an
underweighted
allocation
in
financials
detracted
from
the
Fund’s
relative
performance.
Nevertheless,
the
Fund’s
financials
holdings
overall
posted
double-digit
percentage
absolute
gains
during
the
period
and
there
were
no
financials
stocks
among
the
Fund’s
10
biggest
relative
detractors.
Given
structural
challenges
(low
interest
rates
combined
with
increasing
and
varying
degrees
of
government
regulation
across
geographies),
we
remained
underweighted
to
the
sector.
We
also
see
an
eventual
credit
cycle
stemming
from
the
COVID-19
recession
(particularly
in
Europe)
as
a
material
future
earnings
risk,
although
banks
are
generally
better
capitalized
than
in
previous
recessions.
Our
focus
is
on
what
we
consider
undervalued
and/or
growth-oriented
opportunities
in
attractive
Asian
markets.
Although
most
commercial
banks
in
the
Western
world
(particularly
in
Europe)
are
failing
to
meet
our
criteria
for
long-term
value
creation,
we
have
found
select
opportunities
among
high-
quality
franchises
that
we
believe
could
benefit
from
some
combination
of
a
steeper
yield
curve,
economic
reflation
and
repaired
consumer
balance
sheets
following
government
transfer
payments
and
a
rising
savings
rate
during
lockdown.
*Categories
within
the
Other
category
are
listed
in
full
in
the
Fund's
Statement
of
Investments
(SOI),
which
can
be
found
later
in
this
report.
The
only
other
significant
sector
detractor
from
relative
results
was
stock
selection
in
information
technology
(IT),
pressured
by
our
position
in
South
Korea-based
electronics
products
and
semiconductor
manufacturer
Samsung
Electronics,
whose
share
price
declined
slightly
amid
little
news
flow.
In
our
view,
Samsung
remains
a
key
beneficiary
of
a
demand
uptrend
in
memory
chips.
Other
positive
catalysts
include
long-term
opportunities
in
the
firm’s
foundry
business,
optionality
around
capital
deployment
and
a
competitive
advantage
from
being
one
of
the
three
semiconductor
manufacturers
globally
that
can
compete
at
the
leading
edge.
Overall,
we
believe
Samsung
is
a
well-run
global
technology
leader
with
a
strong
balance
sheet.
Other
key
relative
detractors
included
our
positions
in
Japan-
based
beverages
manufacturer
Kirin
Holdings
(not
held
at
period-end),
China-based
e-commerce
company
Alibaba
Group
Holding
and
Japan-based
construction
machinery
firm
Komatsu.
Turning
to
contributors,
stock
selection
in
the
industrials
sector
bolstered
relative
results.
Japanese
industrial
equipment
firm
Hitachi
drove
sector
performance
amid
progress
with
its
ongoing
restructuring
initiatives.
Hitachi’s
IT
business
also
continued
to
perform
well,
and
we
believe
it
could
benefit
from
increasing
demand
for
digital
transformation.
In
our
view,
Hitachi
is
an
underappreciated
Japanese
restructuring
story
with
vastly
improved
Portfolio
Composition
6/30/21
%
of
Total
Net
Assets
Oil,
Gas
&
Consumable
Fuels
7.3%
Pharmaceuticals
5.9%
Banks
5.7%
Metals
&
Mining
5.1%
Multi-Utilities
5.1%
Industrial
Conglomerates
4.8%
Automobiles
4.3%
Hotels,
Restaurants
&
Leisure
4.2%
Semiconductors
&
Semiconductor
Equipment
4.0%
Diversified
Telecommunication
Services
3.8%
Construction
&
Engineering
3.1%
Textiles,
Apparel
&
Luxury
Goods
3.1%
Internet
&
Direct
Marketing
Retail
3.1%
Technology
Hardware,
Storage
&
Peripherals
3.0%
Other*
32.0%
Short-Term
Investments
&
Other
Net
Assets
5.5%
International
Equity
Series
11
ftinstitutional.com
Semiannual
Report
governance,
value
accretive
divestments
and
merger
and
acquisition
activities,
as
well
as
improving
profitability
and
business
mix.
Overall,
Hitachi
is
continuing
to
evolve
into
a
more
simplified,
higher-return
company
generating
more
stable
cash
flows.
Based
on
our
long-term
fundamental
expectations,
we
continue
to
believe
the
stock
is
significantly
undervalued
at
recent
levels.
Stock
selection
in
the
utilities,
communication
services,
consumer
discretionary
and
energy
sectors
also
positively
contributed
to
relative
results
during
the
period.
From
these
sectors,
Japanese
light-truck
manufacturer
Isuzu
Motors
(consumer
discretionary)
was
the
top
contributor.
Its
shares
rallied
strongly
after
company
management
reported
better-
than-expected
earnings,
raised
the
dividend
payout
ratio
and
projected
sharply
higher
full-year
profits.
At
period-end,
the
company’s
guidance
for
the
fiscal
year
ending
March
2022
implies
a
return
to
mid-cycle
unit
volumes,
which
leaves
the
stock
trading
at
what
we
consider
undemanding
valuations.
In
our
view,
Isuzu
is
a
high
return-on-equity
business
and
a
market
leader
in
niche
smaller-sized
vehicles
whose
strong
technological
partnerships
with
Toyota
and
Volvo
should
help
it
take
advantage
of
the
transition
to
a
clean
energy
future.
The
company
has
good
growth
potential,
in
our
analysis,
across
a
diverse
range
of
emerging
markets
and
is
improving
shareholder
returns
through
healthy
dividends
and
stock
buybacks.
Elsewhere,
French
multi-utilities
company
Veolia
Environnement
finished
as
the
top
relative
contributor
in
utilities,
German
mobile
telecommunications
incumbent
Deutsche
Telekom
as
the
top
relative
contributor
in
communication
services
and
U.K.-based
oil
and
gas
major
BP
as
the
top
relative
contributor
in
energy.
From
a
regional
standpoint,
notable
contributors
to
the
Fund’s
relative
performance
included
stock
selection
and
an
underweighting
in
Asia,
led
by
Japan
and
China,
as
well
as
stock
selection
and
an
overweighting
in
Europe,
led
by
Norway
and
the
U.K.
In
contrast,
stock
selection
in
North
America
detracted
from
relative
results,
due
to
weakness
among
the
Fund’s
few
Canadian
holdings.
We
believe
the
best
long-term
investment
opportunities
will
not
fall
as
neatly
into
the
traditional
factor
labels
(that
is,
growth,
value,
quality)
that
dominated
the
narrative
during
the
six
months
under
review.
Our
“compound
value”
approach
combines
price
discipline
with
forward-looking
fundamental
analysis
to
find
opportunities
across
a
range
of
different
types
of
value.
We
believe
the
key
to
investing
today
is
to
avoid
the
“double
bubble”
in
over-indebted
value
stocks
and
hugely
overpriced
growth
stocks.
In
our
lifetimes,
we
have
not
seen
a
situation
like
today
in
which
both
the
value
and
growth
indexes
are
in
a
price
bubble.
Against
this
backdrop,
we
have
built
a
framework
for
thinking
about
stocks
and
building
portfolios
that
leverages
the
benefits
of
Templeton’s
proven
valuation
discipline,
while
also
considering
other
factors
that
can
influence
share
prices.
This
is
how
we
build
dynamic
portfolios
with
genuine
diversification
across
different
types
of
value.
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
six
months
ended
June
30,
2021,
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
with
non-U.S.
currency
exposure.
Top
10
Holdings
6/30/21
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Deutsche
Telekom
AG
3.8%
Diversified
Telecommunication
Services,
Germany
Hitachi
Ltd.
3.5%
Industrial
Conglomerates,
Japan
Samsung
Electronics
Co.
Ltd.
3.0%
Technology
Hardware,
Storage
&
Peripherals,
South
Korea
E.ON
SE
2.7%
Multi-Utilities,
Germany
BP
plc
2.6%
Oil,
Gas
&
Consumable
Fuels,
United
Kingdom
Sumitomo
Mitsui
Financial
Group,
Inc.
2.5%
Banks,
Japan
AIA
Group
Ltd.
2.4%
Insurance,
Hong
Kong
Veolia
Environnement
SA
2.4%
Multi-Utilities,
France
BAE
Systems
plc
2.3%
Aerospace
&
Defense,
United
Kingdom
Sony
Group
Corp.
2.3%
Household
Durables,
Japan
International
Equity
Series
12
ftinstitutional.com
Semiannual
Report
Thank
you
for
your
continued
participation
in
International
Equity
Series.
We
look
forward
to
serving
your
future
investment
needs.
Antonio
T.
Docal,
CFA
Lead
Portfolio
Manager
Peter
A.
Nori,
CFA
Matthew
R.
Nagle,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
June
30,
2021,
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.
Performance
Summary
as
of
June
30,
2021
International
Equity
Series
13
ftinstitutional.com
Semiannual
Report
The
performance
table
does
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
6/30/21
1,2
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
recent
month-end
performance,
go
to
ftinstitutional.com
or
call
a
Franklin
Templeton
Institutional
Services
representative
at
(800)
321-8563
.
Share
Class
Cumulative
Total
Return
3
Average
Annual
Total
Return
4
–
Primary
6-Month
+8.74%
+8.74%
1-Year
+34.80%
+34.80%
5-Year
+44.76%
+7.68%
10-Year
+46.20%
+3.87%
Service
6-Month
+8.66%
+8.66%
1-Year
+34.54%
+34.54%
5-Year
+43.61%
+7.51%
10-Year
+43.96%
+3.71%
See
page
14
for
Performance
Summary
footnotes.
International
Equity
Series
Performance
Summary
14
ftinstitutional.com
Semiannual
Report
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
uncertainty
concerning
the
economic
consequences
of
the
departure
of
the
U.K.
from
the
European
Union
may
increase
market
volatility.
Value
securities
may
not
increase
in
price
as
anticipated
or
may
decline
further
in
value.
Derivatives
involve
costs
and
can
create
economic
leverage
in
the
Fund’s
portfolio
which
may
result
in
significant
volatility
and
cause
the
Fund
to
participate
in
losses
(as
well
as
gains)
in
an
amount
that
significantly
exceeds
the
Fund’s
initial
investment.
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
The
Fund’s
prospectus
also
includes
a
description
of
the
main
investment
risks.
1.
The
Fund
has
an
expense
reduction
contractually
guaranteed
through
4/30/22.
Fund
investment
results
reflect
the
expense
reduction;
without
this
reduction,
the
results
would
have
been
lower.
2.
Total
return
was
positively
impacted
by
the
recognition
of
tax
reclaims
for
previously
withheld
taxes
on
dividends
in
certain
countries
across
the
European
Union
(see
Note
1f
in
the
Notes
to
Financial
Statements
section).
Uncertainty
exists
with
respect
to
future
recognition
of
additional
European
Union
tax
reclaims.
Total
return
would
have
been
lower
without
recognition
of
such
tax
reclaims
during
the
year
ended
12/31/20.
3.
Cumulative
total
return
represents
the
change
in
value
of
an
investment
over
the
periods
indicated.
4.
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.
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.
Total
Annual
Operating
Expenses
5
Share
Class
With
Fee
Waiver
Without
Fee
Waiver
Primary
0.83%
0.87%
Service
0.98%
1.02%
Your
Fund’s
Expenses
International
Equity
Series
15
ftinstitutional.com
Semiannual
Report
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”
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
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.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-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
181/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Share
Class
Beginning
Account
Value
1/1/21
Ending
Account
Value
6/30/21
Expenses
Paid
During
Period
1/1/21–6/30/21
1,2
Ending
Account
Value
6/30/21
Expenses
Paid
During
Period
1/1/21–6/30/21
1,2
a
Net
Annualized
Expense
Ratio
2
Primary
$1,000
$1,087.39
$4.66
$1,020.33
$4.51
0.90%
Service
$1,000
$1,086.56
$5.19
$1,019.82
$5.03
1.00%
Templeton
Institutional
Funds
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Highlights
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Companies
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accompanying
notes
are
an
integral
part
of
these
financial
statements.
16
a
Six
Months
Ended
June
30,
2021
(unaudited)
Year
Ended
December
31,
2020
2019
2018
2017
2016
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$23.03
$21.40
$17.96
$25.08
$19.93
$20.90
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.15
0.17
0.30
0.37
0.30
0.29
Net
realized
and
unrealized
gains
(losses)
2.79
1.74
3.79
(4.97)
6.49
(0.48)
Total
from
investment
operations
........
2.94
1.91
4.09
(4.60)
6.79
(0.19)
Less
distributions
from:
Net
investment
income
..............
—
(0.22)
(0.37)
(0.21)
(0.68)
(0.41)
Net
realized
gains
.................
—
(0.06)
(0.28)
(2.31)
(0.96)
(0.37)
Total
distributions
...................
—
(0.28)
(0.65)
(2.52)
(1.64)
(0.78)
Net
asset
value,
end
of
period
..........
$25.97
$23.03
$21.40
$17.96
$25.08
$19.93
Total
return
c
.......................
12.77%
8.95%
22.86%
(18.48)%
34.18%
(0.85)%
Ratios
to
average
net
assets
d
Expenses
before
waiver
and
payments
by
affiliates
..........................
1.02%
1.04%
1.02%
1.01%
0.99%
0.99%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
1.02%
e
1.03%
1.02%
e
1.00%
f
0.98%
f
0.98%
f
Net
investment
income
...............
1.20%
0.87%
1.48%
1.54%
1.28%
1.44%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$746,593
$725,098
$782,971
$739,576
$1,040,180
$931,879
Portfolio
turnover
rate
................
16.73%
34.89%
39.48%
34.10%
25.97%
21.36%
a
The
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.
b
Based
on
average
daily
shares
outstanding.
c
Total
return
is
not
annualized
for
periods
less
than
one
year.
d
Ratios
are
annualized
for
periods
less
than
one
year.
e
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Templeton
Institutional
Funds
Statement
of
Investments
(unaudited),
June
30,
2021
Foreign
Smaller
Companies
Series
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accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
17
a
a
Industry
Shares
a
Value
a
Common
Stocks
95.5%
Bahamas
1.1%
a
OneSpaWorld
Holdings
Ltd.
........
Diversified
Consumer
Services
868,505
$
8,415,814
a
Belgium
3.2%
Barco
NV
......................
Electronic
Equipment,
Instruments
&
Components
318,619
8,724,279
Fagron
........................
Health
Care
Providers
&
Services
402,709
8,999,732
a
Kinepolis
Group
NV
..............
Entertainment
113,682
6,152,350
23,876,361
Brazil
1.8%
a
Camil
Alimentos
SA
...............
Food
Products
3,279,000
6,286,381
a
M
Dias
Branco
SA
................
Food
Products
1,038,600
6,808,370
13,094,751
Canada
3.8%
Canaccord
Genuity
Group,
Inc.
......
Capital
Markets
374,238
4,099,336
a
Canada
Goose
Holdings,
Inc.
.......
Textiles,
Apparel
&
Luxury
Goods
103,900
4,540,675
Canadian
Western
Bank
...........
Banks
391,236
10,982,063
Computer
Modelling
Group
Ltd.
......
Energy
Equipment
&
Services
1,134,704
4,677,022
North
West
Co.,
Inc.
(The)
..........
Food
&
Staples
Retailing
132,200
3,752,465
28,051,561
China
5.3%
Greatview
Aseptic
Packaging
Co.
Ltd.
.
Containers
&
Packaging
5,478,200
2,469,453
b
JNBY
Design
Ltd.,
Reg
S
..........
Textiles,
Apparel
&
Luxury
Goods
2,117,000
3,762,659
b
Shanghai
Haohai
Biological
Technology
Co.
Ltd.,
H,
144A,
Reg
S
.........
Biotechnology
564,000
6,920,791
b
Viva
Biotech
Holdings,
144A,
Reg
S
..
Life
Sciences
Tools
&
Services
6,484,500
8,302,307
a,b
Xiabuxiabu
Catering
Management
China
Holdings
Co.
Ltd.,
144A,
Reg
S
....
Hotels,
Restaurants
&
Leisure
2,795,500
2,929,327
c
Xtep
International
Holdings
Ltd.
......
Textiles,
Apparel
&
Luxury
Goods
8,182,897
15,417,822
39,802,359
Denmark
0.7%
Matas
A/S
......................
Specialty
Retail
303,669
5,501,355
Finland
2.4%
a
BasWare
OYJ
...................
Software
80,809
3,805,896
Fiskars
OYJ
Abp
.................
Household
Durables
128,232
2,788,852
Huhtamaki
OYJ
..................
Containers
&
Packaging
231,255
10,969,826
17,564,574
France
1.3%
a
Beneteau
SA
....................
Leisure
Products
341,444
5,398,272
Nexans
SA
.....................
Electrical
Equipment
44,479
4,059,115
a
Solutions
30
SE
.................
IT
Services
22,923
158,478
9,615,865
Germany
4.7%
a
Grand
City
Properties
SA
..........
Real
Estate
Management
&
Development
220,495
5,955,553
Jenoptik
AG
....................
Electronic
Equipment,
Instruments
&
Components
207,830
5,688,077
c
Rational
AG
....................
Machinery
10,089
9,141,173
Stabilus
SA
.....................
Machinery
135,810
11,063,637
a
VIA
Optronics
AG,
ADR
............
Electronic
Equipment,
Instruments
&
Components
280,400
3,146,088
34,994,528
Templeton
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Funds
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Investments
(unaudited)
Foreign
Smaller
Companies
Series
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notes
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part
of
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financial
statements.
18
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Greece
0.7%
JUMBO
SA
.....................
Specialty
Retail
317,426
$
5,346,897
Hong
Kong
3.4%
Johnson
Electric
Holdings
Ltd.
......
Auto
Components
1,207,347
3,110,955
Techtronic
Industries
Co.
Ltd.
.......
Machinery
405,500
7,066,592
d
Value
Partners
Group
Ltd.
..........
Capital
Markets
8,679,600
5,535,137
VTech
Holdings
Ltd.
..............
Communications
Equipment
888,000
9,344,845
25,057,529
Indonesia
0.7%
XL
Axiata
Tbk
.
PT
................
Wireless
Telecommunication
Services
27,382,900
5,050,215
Israel
0.7%
Max
Stock
Ltd.
..................
Multiline
Retail
1,478,404
5,598,696
Italy
6.9%
a
Brunello
Cucinelli
SpA
.............
Textiles,
Apparel
&
Luxury
Goods
82,941
4,858,874
Interpump
Group
SpA
.............
Machinery
247,506
14,685,874
a
MARR
SpA
.....................
Food
&
Staples
Retailing
310,438
7,411,097
Sanlorenzo
SpA
.................
Leisure
Products
393,004
10,827,868
b
Technogym
SpA
,
144A,
Reg
S
......
Leisure
Products
1,047,903
13,390,583
51,174,296
Japan
18.4%
Anicom
Holdings,
Inc.
.............
Insurance
754,100
6,045,834
Asics
Corp.
.....................
Textiles,
Apparel
&
Luxury
Goods
527,300
13,371,231
Bunka
Shutter
Co.
Ltd.
............
Building
Products
429,500
4,288,304
Dowa
Holdings
Co.
Ltd.
............
Metals
&
Mining
84,400
3,331,816
en
Japan,
Inc.
...................
Professional
Services
138,500
4,918,151
Fuji
Oil
Holdings,
Inc.
.............
Food
Products
378,300
9,000,984
Glory
Ltd.
......................
Machinery
242,300
5,032,741
Hosokawa
Micron
Corp.
...........
Machinery
79,900
4,279,625
Idec
Corp.
......................
Electrical
Equipment
251,700
4,755,196
IDOM,
Inc.
.....................
Specialty
Retail
844,900
4,968,828
Meitec
Corp.
....................
Professional
Services
193,400
10,471,930
Morinaga
&
Co.
Ltd.
..............
Food
Products
82,800
2,648,320
Morita
Holdings
Corp.
.............
Machinery
196,400
2,835,144
Nichiha
Corp.
...................
Building
Products
340,200
8,662,373
Nihon
Parkerizing
Co.
Ltd.
..........
Chemicals
326,400
3,270,318
Nissei
ASB
Machine
Co.
Ltd.
........
Machinery
138,000
6,135,701
Qol
Holdings
Co.
Ltd.
.............
Food
&
Staples
Retailing
559,200
7,823,519
Shima
Seiki
Manufacturing
Ltd.
......
Machinery
368,500
6,316,208
Square
Enix
Holdings
Co.
Ltd.
.......
Entertainment
77,100
3,807,917
TechnoPro
Holdings,
Inc.
..........
Professional
Services
345,300
8,165,636
Topcon
Corp.
...................
Electronic
Equipment,
Instruments
&
Components
237,700
3,536,643
Tsumura
&
Co.
..................
Pharmaceuticals
365,000
11,474,215
Zojirushi
Corp.
..................
Household
Durables
159,900
2,388,103
137,528,737
Netherlands
4.3%
Aalberts
NV
....................
Machinery
63,530
3,421,994
a
Accell
Group
NV
.................
Leisure
Products
68,405
3,674,649
Arcadis
NV
.....................
Construction
&
Engineering
104,778
4,296,564
b
Flow
Traders,
144A,
Reg
S
.........
Capital
Markets
252,236
10,851,858
a,b
Intertrust
NV,
144A,
Reg
S
.........
Professional
Services
538,537
9,704,622
31,949,687
Templeton
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Foreign
Smaller
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part
of
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financial
statements.
Semiannual
Report
19
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Norway
1.3%
b
Sbanken
ASA,
144A,
Reg
S
........
Banks
443,454
$
5,521,606
TGS
ASA
......................
Energy
Equipment
&
Services
333,053
4,247,276
9,768,882
Philippines
0.6%
Century
Pacific
Food,
Inc.
..........
Food
Products
9,584,300
4,590,107
South
Korea
1.8%
BNK
Financial
Group,
Inc.
..........
Banks
751,772
5,152,349
DGB
Financial
Group,
Inc.
..........
Banks
1,008,750
8,317,749
13,470,098
Spain
0.7%
Construcciones
y
Auxiliar
de
Ferrocarriles
SA
................
Machinery
121,020
5,110,476
Sweden
4.9%
Cloetta
AB,
B
...................
Food
Products
711,836
2,125,283
b
Dometic
Group
AB,
144A
..........
Auto
Components
804,851
13,715,577
Granges
AB
....................
Metals
&
Mining
755,117
10,488,771
b
Thule
Group
AB,
144A,
Reg
S
.......
Leisure
Products
237,350
10,522,012
36,851,643
Switzerland
6.0%
Bucher
Industries
AG
.............
Machinery
25,902
13,563,503
a
Landis+Gyr
Group
AG
.............
Electronic
Equipment,
Instruments
&
Components
89,830
6,273,883
c
Logitech
International
SA
..........
Technology
Hardware,
Storage
&
Peripherals
54,600
6,602,232
a
Siegfried
Holding
AG
..............
Life
Sciences
Tools
&
Services
15,346
14,401,478
a
Zur
Rose
Group
AG
..............
Food
&
Staples
Retailing
11,064
4,236,815
45,077,911
Taiwan
9.6%
Chicony
Electronics
Co.
Ltd.
........
Technology
Hardware,
Storage
&
Peripherals
2,845,037
8,193,861
Giant
Manufacturing
Co.
Ltd.
........
Leisure
Products
868,482
9,907,265
Johnson
Health
Tech
Co.
Ltd.
.......
Leisure
Products
1,891,000
5,712,400
King
Yuan
Electronics
Co.
Ltd.
......
Semiconductors
&
Semiconductor
Equipment
6,322,000
10,162,406
Merida
Industry
Co.
Ltd.
...........
Leisure
Products
956,000
10,713,428
Nan
Pao
Resins
Chemical
Co.
Ltd.
...
Chemicals
755,000
4,206,997
Nien
Made
Enterprise
Co.
Ltd.
......
Household
Durables
498,000
7,372,963
Primax
Electronics
Ltd.
............
Technology
Hardware,
Storage
&
Peripherals
2,615,000
5,337,944
Topkey
Corp.
...................
Leisure
Products
614,000
3,452,028
Tripod
Technology
Corp.
...........
Electronic
Equipment,
Instruments
&
Components
1,448,000
7,000,426
72,059,718
Thailand
1.6%
Hana
Microelectronics
PCL
.........
Electronic
Equipment,
Instruments
&
Components
5,268,800
11,724,806
United
Kingdom
8.3%
a
Greggs
plc
.....................
Hotels,
Restaurants
&
Leisure
220,253
7,928,557
b
Ibstock
plc,
144A,
Reg
S
...........
Construction
Materials
1,871,206
5,527,852
Man
Group
plc
..................
Capital
Markets
4,799,198
11,938,713
Oxford
Instruments
plc
............
Electronic
Equipment,
Instruments
&
Components
204,140
6,530,787
a
Pagegroup
plc
..................
Professional
Services
876,710
6,779,779
Rathbone
Brothers
plc
............
Capital
Markets
289,410
7,257,868
Stock
Spirits
Group
plc
............
Beverages
2,347,184
8,491,152
Templeton
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Funds
Statement
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Investments
(unaudited)
Foreign
Smaller
Companies
Series
(continued)
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Semiannual
Report
The
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notes
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an
integral
part
of
these
financial
statements.
20
See
Abbreviations
on
page
43
.
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
United
Kingdom
(continued)
a,b
Watches
of
Switzerland
Group
plc,
144A
Specialty
Retail
672,022
$
7,772,085
62,226,793
United
States
1.3%
Axis
Capital
Holdings
Ltd.
..........
Insurance
70,630
3,461,576
a
IMAX
Corp.
.....................
Entertainment
279,700
6,013,550
9,475,126
Total
Common
Stocks
(Cost
$459,478,148)
.....................................
712,978,785
a
Preferred
Stocks
0.5%
Brazil
0.5%
e
Alpargatas
SA,
0.11%
.............
Textiles,
Apparel
&
Luxury
Goods
381,600
3,848,899
Total
Preferred
Stocks
(Cost
$976,197)
.........................................
3,848,899
Warrants
a
a
a
a
a
Warrants
0.1%
Bahamas
0.1%
a
OneSpaWorld
Holdings
Ltd.
,
3/19/24
..
Diversified
Consumer
Services
262,784
814,630
Total
Warrants
(Cost
$221,371)
................................................
814,630
Total
Long
Term
Investments
(Cost
$460,675,716)
...............................
717,642,314
Short
Term
Investments
1.5%
a
a
Industry
Shares
a
Value
a
a
a
a
a
a
f
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
1.5%
Money
Market
Funds
1.5%
g,h
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..........
11,384,190
11,384,190
Total
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
(Cost
$11,384,190)
................................................................
11,384,190
a
a
a
a
a
Total
Short
Term
Investments
(Cost
$11,384,190
)
................................
11,384,190
a
a
a
a
Total
Investments
(Cost
$472,059,906)
97.6%
...................................
$729,026,504
Other
Assets,
less
Liabilities
2.4%
.............................................
17,566,708
Net
Assets
100.0%
...........................................................
$746,593,212
a
a
a
a
Non-income
producing.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
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.
At
June
30,
2021,
the
aggregate
value
of
these
securities
was
$98,921,279,
representing
13.2%
of
net
assets.
c
A
portion
or
all
of
the
security
is
on
loan
at
June
30,
2021.
See
Note
1(e).
d
A
portion
or
all
of
the
security
purchased
on
a
delayed
delivery
basis.
See
Note
1(c).
e
Variable
rate
security.
The
rate
shown
represents
the
yield
at
period
end.
Templeton
Institutional
Funds
Statement
of
Investments
(unaudited)
Foreign
Smaller
Companies
Series
(continued)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
21
f
See
Note
1(e)
regarding
securities
on
loan.
g
See
Note
3(d)
regarding
investments
in
affiliated
management
investment
companies.
h
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Templeton
Institutional
Funds
Financial
Highlights
International
Equity
Series
ftinstitutional.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
22
a
Six
Months
Ended
June
30,
2021
(unaudited)
Year
Ended
December
31,
2020
2019
2018
2017
2016
Primary
Shares
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$15.22
$15.54
$14.87
$21.99
$18.65
$19.05
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.20
1.03
c
0.64
0.42
0.45
0.45
Net
realized
and
unrealized
gains
(losses)
1.13
(0.32)
1.06
(3.66)
3.81
(0.20)
Total
from
investment
operations
........
1.33
0.71
1.70
(3.24)
4.26
0.25
Less
distributions
from:
Net
investment
income
..............
—
(0.67)
(1.02)
(0.42)
(0.64)
(0.46)
Net
realized
gains
.................
—
(0.36)
(0.01)
(3.46)
(0.28)
(0.19)
Total
distributions
...................
—
(1.03)
(1.03)
(3.88)
(0.92)
(0.65)
Net
asset
value,
end
of
period
..........
$16.55
$15.22
$15.54
$14.87
$21.99
$18.65
Total
return
d
.......................
8.74%
5.30%
11.57%
(14.87)%
22.92%
1.30%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
0.94%
0.87%
0.82%
0.80%
0.78%
0.78%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
0.90%
0.84%
0.82%
f
0.80%
f,g
0.78%
f
0.78%
f
Net
investment
income
...............
2.44%
7.51%
c
4.13%
1.98%
2.13%
2.44%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$467,488
$447,139
$1,695,980
$2,785,308
$4,412,494
$4,539,205
Portfolio
turnover
rate
................
21.34%
89.34%
36.83%
h
25.60%
h
16.39%
h
14.88%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.77
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
1.86%
and
total
return
would
have
been
(0.03)%.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
Templeton
Institutional
Funds
Financial
Highlights
International
Equity
Series
(continued)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
23
a
Six
Months
Ended
June
30,
2021
(unaudited)
Year
Ended
December
31,
2020
2019
2018
2017
2016
Service
Shares
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
period)
Net
asset
value,
beginning
of
period
.....
$15.48
$15.79
$14.97
$22.07
$18.72
$19.11
Income
from
investment
operations
a
:
Net
investment
income
b
.............
0.20
1.17
c
0.98
0.38
0.39
0.42
Net
realized
and
unrealized
gains
(losses)
1.14
(0.47)
0.70
(3.66)
3.85
(0.20)
Total
from
investment
operations
........
1.34
0.70
1.68
(3.28)
4.24
0.22
Less
distributions
from:
Net
investment
income
..............
—
(0.65)
(0.85)
(0.36)
(0.61)
(0.42)
Net
realized
gains
.................
—
(0.36)
(0.01)
(3.46)
(0.28)
(0.19)
Total
distributions
...................
—
(1.01)
(0.86)
(3.82)
(0.89)
(0.61)
Net
asset
value,
end
of
period
..........
$16.82
$15.48
$15.79
$14.97
$22.07
$18.72
Total
return
d
.......................
8.66%
5.16%
11.34%
(15.01)%
22.73%
1.15%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
..........................
1.04%
1.01%
0.97%
0.95%
0.93%
0.93%
Expenses
net
of
waiver
and
payments
by
affiliates
..........................
1.00%
0.98%
0.97%
f
0.95%
f,g
0.93%
f
0.93%
f
Net
investment
income
...............
2.46%
8.42%
c
3.98%
1.83%
1.98%
2.29%
Supplemental
data
Net
assets,
end
of
period
(000’s)
........
$682
$448
$700
$5,375
$14,164
$8,624
Portfolio
turnover
rate
................
21.34%
89.34%
36.83%
h
25.60%
h
16.39%
h
14.88%
a
The
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
repurchas-
es
of
the
Fund’s
shares
in
relation
to
income
earned
and/or
fluctuating
fair
value
of
the
investments
of
the
Fund.
b
Based
on
average
daily
shares
outstanding.
c
Net
investment
income
per
share
includes
approximately
$0.78
per
share
related
to
an
adjustment
for
EU
reclaims
in
connection
with
certain
Fund
holdings.
Excluding
this
amount,
the
ratio
of
net
investment
income
to
average
net
assets
would
have
been
2.77%
and
total
return
would
have
been
(0.14)%.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year.
f
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
h
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
Templeton
Institutional
Funds
Statement
of
Investments
(unaudited),
June
30,
2021
International
Equity
Series
ftinstitutional.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
24
a
a
Industry
Shares
a
Value
a
Common
Stocks
94.5%
Belgium
1.5%
Anheuser-Busch
InBev
SA/NV
......
Beverages
95,275
$
6,868,841
Brazil
2.9%
Wheaton
Precious
Metals
Corp.
.....
Metals
&
Mining
211,381
9,316,280
Yara
International
ASA
............
Chemicals
82,663
4,356,201
13,672,481
Canada
2.3%
Barrick
Gold
Corp.
...............
Metals
&
Mining
256,300
5,300,284
Restaurant
Brands
International,
Inc.
..
Hotels,
Restaurants
&
Leisure
82,700
5,327,888
10,628,172
China
4.7%
a
Alibaba
Group
Holding
Ltd.
.........
Internet
&
Direct
Marketing
Retail
290,600
8,239,573
NXP
Semiconductors
NV
..........
Semiconductors
&
Semiconductor
Equipment
23,796
4,895,313
Yum
China
Holdings,
Inc.
..........
Hotels,
Restaurants
&
Leisure
21,300
1,411,125
Yum
China
Holdings,
Inc.
..........
Hotels,
Restaurants
&
Leisure
112,150
7,311,827
21,857,838
France
7.6%
Danone
SA
.....................
Food
Products
102,237
7,193,486
Eiffage
SA
......................
Construction
&
Engineering
65,717
6,694,279
TotalEnergies
SE
................
Oil,
Gas
&
Consumable
Fuels
233,040
10,558,022
Veolia
Environnement
SA
..........
Multi-Utilities
367,138
11,099,839
35,545,626
Germany
15.8%
adidas
AG
......................
Textiles,
Apparel
&
Luxury
Goods
23,063
8,606,866
Continental
AG
..................
Auto
Components
35,214
5,181,161
b
Covestro
AG,
144A,
Reg
S
.........
Chemicals
79,094
5,114,531
Deutsche
Boerse
AG
..............
Capital
Markets
28,489
4,973,068
Deutsche
Telekom
AG
.............
Diversified
Telecommunication
Services
833,879
17,638,034
E.ON
SE
.......................
Multi-Utilities
1,090,124
12,613,446
Fresenius
Medical
Care
AG
&
Co.
KGaA
Health
Care
Providers
&
Services
122,009
10,139,346
Infineon
Technologies
AG
..........
Semiconductors
&
Semiconductor
Equipment
86,679
3,486,805
a,b
Just
Eat
Takeaway.com
NV,
144A,
Reg
S
...........................
Internet
&
Direct
Marketing
Retail
66,172
6,120,343
73,873,600
Hong
Kong
2.4%
AIA
Group
Ltd.
..................
Insurance
924,200
11,465,162
Hungary
0.5%
Richter
Gedeon
Nyrt
.
.............
Pharmaceuticals
82,751
2,203,556
Ireland
2.6%
CRH
plc
.......................
Construction
Materials
150,067
7,589,726
a,c
ICON
plc
.......................
Life
Sciences
Tools
&
Services
22,500
4,650,975
12,240,701
Japan
20.9%
Hitachi
Ltd.
.....................
Industrial
Conglomerates
285,000
16,334,016
Honda
Motor
Co.
Ltd.
.............
Automobiles
297,400
9,566,210
Isuzu
Motors
Ltd.
................
Automobiles
802,100
10,644,551
Komatsu
Ltd.
...................
Machinery
283,000
7,011,549
Kyocera
Corp.
...................
Electronic
Equipment,
Instruments
&
Components
164,800
10,182,325
Mitsubishi
Electric
Corp.
...........
Electrical
Equipment
569,300
8,265,408
Templeton
Institutional
Funds
Statement
of
Investments
(unaudited)
International
Equity
Series
(continued)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
25
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Japan
(continued)
Sony
Group
Corp.
................
Household
Durables
112,400
$
10,900,102
Sumitomo
Metal
Mining
Co.
Ltd.
.....
Metals
&
Mining
148,500
5,775,798
Sumitomo
Mitsui
Financial
Group,
Inc.
.
Banks
333,900
11,511,229
Taisei
Corp.
....................
Construction
&
Engineering
239,500
7,861,194
98,052,382
Luxembourg
0.8%
ArcelorMittal
SA
.................
Metals
&
Mining
117,408
3,614,952
Netherlands
1.2%
Royal
Dutch
Shell
plc,
B
...........
Oil,
Gas
&
Consumable
Fuels
302,524
5,873,261
Norway
1.2%
Equinor
ASA
....................
Oil,
Gas
&
Consumable
Fuels
267,480
5,662,582
South
Korea
4.9%
KB
Financial
Group,
Inc.
...........
Banks
84,943
4,201,715
Samsung
Electronics
Co.
Ltd.
.......
Technology
Hardware,
Storage
&
Peripherals
199,583
14,239,899
Shinhan
Financial
Group
Co.
Ltd.
....
Banks
131,340
4,726,204
23,167,818
Spain
1.4%
Red
Electrica
Corp.
SA
............
Electric
Utilities
347,968
6,460,984
Switzerland
2.6%
Adecco
Group
AG
................
Professional
Services
62,113
4,226,280
Roche
Holding
AG
...............
Pharmaceuticals
21,128
7,961,836
12,188,116
Taiwan
2.3%
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.
......................
Semiconductors
&
Semiconductor
Equipment
494,492
10,630,164
United
Kingdom
18.9%
AstraZeneca
plc
.................
Pharmaceuticals
73,378
8,816,580
BAE
Systems
plc
................
Aerospace
&
Defense
1,515,233
10,949,897
BP
plc
.........................
Oil,
Gas
&
Consumable
Fuels
2,783,549
12,207,845
a
Burberry
Group
plc
...............
Textiles,
Apparel
&
Luxury
Goods
206,311
5,900,756
CK
Hutchison
Holdings
Ltd.
.........
Industrial
Conglomerates
777,794
6,054,939
a
Compass
Group
plc
..............
Hotels,
Restaurants
&
Leisure
247,320
5,210,893
DS
Smith
plc
....................
Containers
&
Packaging
1,194,414
6,915,732
GlaxoSmithKline
plc
..............
Pharmaceuticals
424,118
8,338,380
a
Informa
plc
.....................
Media
334,286
2,323,375
a
International
Consolidated
Airlines
Group
SA
.....................
Airlines
2,031,825
4,906,334
Smith
&
Nephew
plc
..............
Health
Care
Equipment
&
Supplies
227,140
4,926,396
Standard
Chartered
plc
............
Banks
1,026,683
6,552,563
Unilever
plc
.....................
Personal
Products
40,094
2,343,006
a
WH
Smith
plc
...................
Specialty
Retail
134,022
2,986,462
88,433,158
Total
Common
Stocks
(Cost
$333,071,918)
.....................................
442,439,394
Templeton
Institutional
Funds
Statement
of
Investments
(unaudited)
International
Equity
Series
(continued)
ftinstitutional.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
26
a
a
Industry
Shares
a
Value
a
a
a
a
a
a
Escrows
and
Litigation
Trusts
0.0%
a,d
Hemisphere
Properties
India
Ltd.,
Escrow
Account
................
2,094,964
$
—
Total
Escrows
and
Litigation
Trusts
(Cost
$–)
...................................
—
Total
Long
Term
Investments
(Cost
$333,071,918)
...............................
442,439,394
Short
Term
Investments
3.0%
a
a
Industry
Shares
a
Value
a
a
a
a
a
a
Money
Market
Funds
2.5%
United
States
2.5%
e,f
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..........
11,792,272
11,792,272
Total
Money
Market
Funds
(Cost
$11,792,272)
..................................
11,792,272
g
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
0.5%
Money
Market
Funds
0.5%
e,f
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..........
2,418,256
2,418,256
Total
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
(Cost
$2,418,256)
.................................................................
2,418,256
a
a
a
a
a
Total
Short
Term
Investments
(Cost
$14,210,528
)
................................
14,210,528
a
a
a
a
Total
Investments
(Cost
$347,282,446)
97.5%
...................................
$456,649,922
Other
Assets,
less
Liabilities
2.5%
.............................................
11,519,847
Net
Assets
100.0%
...........................................................
$468,169,769
a
a
a
a
Non-income
producing.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
may
be
sold
in
transactions
exempt
from
registration
only
to
qualified
institutional
buyers
or
in
a
public
offering
registered
under
the
Securities
Act
of
1933.
Regulation
S
securities
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.
At
June
30,
2021,
the
aggregate
value
of
these
securities
was
$11,234,874,
representing
2.4%
of
net
assets.
c
A
portion
or
all
of
the
security
is
on
loan
at
June
30,
2021.
See
Note
1(e).
d
Fair
valued
using
significant
unobservable
inputs.
See
Note
10
regarding
fair
value
measurements.
e
See
Note
3(d)
regarding
investments
in
affiliated
management
investment
companies.
f
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
g
See
Note
1(e)
regarding
securities
on
loan.
Templeton
Institutional
Funds
Statement
of
Investments
(unaudited)
International
Equity
Series
(continued)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
27
At
June
30,
2021,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(d).
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Equity
contracts
MSCI
EAFE
Index
............................
Long
75
$
8,640,375
9/17/21
$
(219,905)
Total
Futures
Contracts
......................................................................
$(219,905)
*
As
of
period
end.
See
Note
6
regarding
other
derivative
information
.
Templeton
Institutional
Funds
Financial
Statements
Statements
of
Assets
and
Liabilities
June
30,
2021
(unaudited)
ftinstitutional.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
28
Foreign
Smaller
Companies
Series
International
Equity
Series
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
..................................................
$460,675,716
$333,071,918
Cost
-
Non-controlled
affiliates
(Note
3
d
)
.......................................
11,384,190
14,210,528
Value
-
Unaffiliated
issuers
(Includes
securities
loaned
of
$16,097,715
and
$4,418,426
,
respectively)
............................................................
$717,642,314
$442,439,394
Value
-
Non-controlled
affiliates
(Note
3
d
)
......................................
11,384,190
14,210,528
Cash
...................................................................
33,738,292
—
Foreign
currency,
at
value
(cost
$–
and
$26,559
,
respectively)
........................
—
26,556
Receivables:
Investment
securities
sold
..................................................
1,381,786
—
Capital
shares
sold
.......................................................
320,727
333,438
Dividend
and
interest
.....................................................
1,408,358
8,074,821
European
Union
tax
reclaims
(Note
1
f
)
........................................
1,044,414
8,027,057
Deposits
with
brokers
for:
Futures
contracts
.......................................................
—
588,060
Due
from
custodian
.......................................................
—
2,250,400
Total
assets
.........................................................
766,920,081
475,950,254
Liabilities:
Payables:
Investment
securities
purchased
.............................................
575,507
—
Capital
shares
redeemed
..................................................
7,703,036
191,337
Management
fees
........................................................
597,310
290,180
Transfer
agent
fees
.......................................................
8,364
18,878
Trustees'
fees
and
expenses
................................................
13,290
45,713
IRS
closing
agreement
fees
for
European
Union
tax
reclaims
(Note
1f)
................
—
2,234,462
Variation
margin
on
futures
contracts
..........................................
—
66,750
Payable
upon
return
of
securities
loaned
(Note
1
e
)
.................................
11,384,190
4,668,656
Accrued
expenses
and
other
liabilities
..........................................
45,172
264,509
Total
liabilities
........................................................
20,326,869
7,780,485
Net
assets,
at
value
................................................
$746,593,212
$468,169,769
Net
assets
consist
of:
Paid-in
capital
............................................................
$427,860,799
$262,922,504
Total
distributable
earnings
(losses)
............................................
318,732,413
205,247,265
Net
assets,
at
value
................................................
$746,593,212
$468,169,769
Shares
outstanding
........................................................
28,744,536
Net
asset
value
per
share
...................................................
$25.97
International
Equity
Series
Primary
Shares:
Net
assets,
at
value
.......................................................................
$467,488,223
Shares
outstanding
........................................................................
28,253,483
Net
asset
value
per
share
...................................................................
$16.55
Service
Shares:
Net
assets,
at
value
.......................................................................
$681,546
Shares
outstanding
........................................................................
40,522
Net
asset
value
per
share
...................................................................
$16.82
Templeton
Institutional
Funds
Financial
Statements
Statements
of
Operations
for
the
six
months
ended
June
30,
2021
(unaudited)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Semiannual
Report
29
Foreign
Smaller
Companies
Series
International
Equity
Series
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$173,787
and
$1,572,601,
respectively)
Unaffiliated
issuers
.......................................................
$7,422,425
$6,773,451
Non-controlled
affiliates
(Note
3
d
)
............................................
—
414
Interest:
Unaffiliated
issuers
.......................................................
—
1,566
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
....................................
150,876
2,376
Non-controlled
affiliates
(Note
3
d
)
............................................
578
23
Other
income
(Note
1
f
)
......................................................
709,241
978,864
Total
investment
income
..................................................
8,283,120
7,756,694
Expenses:
Management
fees
(Note
3
a
)
..................................................
3,540,440
1,799,198
Transfer
agent
fees:
(Note
3c
)
Primary
Shares
.........................................................
—
82,741
Service
Shares
.........................................................
—
59
Transfer
agent
fees
(Note
3
c
)
.................................................
90,945
—
Sub-transfer
agent
fees:
(Note
3c
)
Service
Shares
.........................................................
—
355
Custodian
fees
............................................................
40,002
43,488
Reports
to
shareholders
.....................................................
15,159
18,220
Registration
and
filing
fees
...................................................
16,503
32,223
Professional
fees
..........................................................
42,269
83,241
Trustees'
fees
and
expenses
.................................................
42,573
72,328
Other
...................................................................
16,959
45,484
Total
expenses
........................................................
3,804,850
2,177,337
Expenses
waived/paid
by
affiliates
(Note
3
d
and
3
e
)
............................
(4,590)
(85,607)
Net
expenses
........................................................
3,800,260
2,091,730
Net
investment
income
...............................................
4,482,860
5,664,964
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
.....................................................
64,332,356
19,948,879
Foreign
currency
transactions
...............................................
(114,838)
242,323
Futures
contracts
........................................................
—
3,275,768
Net
realized
gain
(loss)
.................................................
64,217,518
23,466,970
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
.....................................................
21,444,319
12,113,630
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
.............
(31,932)
(1,646,390)
Futures
contracts
........................................................
—
(751,053)
Net
change
in
unrealized
appreciation
(depreciation)
...........................
21,412,387
9,716,187
Net
realized
and
unrealized
gain
(loss)
...........................................
85,629,905
33,183,157
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.........................
$90,112,765
$38,848,121
Templeton
Institutional
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
ftinstitutional.com
Semiannual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
30
Foreign
Smaller
Companies
Series
International
Equity
Series
Six
Months
Ended
June
30,
2021
(unaudited)
Year
Ended
December
31,
2020
Six
Months
Ended
June
30,
2021
(unaudited)
Year
Ended
December
31,
2020
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$4,482,860
$5,471,863
$5,664,964
$67,218,880
Net
realized
gain
(loss)
............
64,217,518
13,792,014
23,466,970
84,230,905
Net
change
in
unrealized
appreciation
(depreciation)
.................
21,412,387
30,251,773
9,716,187
(245,295,604)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
90,112,765
49,515,650
38,848,121
(93,845,819)
Distributions
to
shareholders:
Primary
Shares
..................
—
—
—
(53,111,315)
Service
Shares
..................
—
—
—
(29,760)
Distributions
to
shareholders
.........
—
(8,851,726)
—
—
Total
distributions
to
shareholders
.....
—
(8,851,726)
—
(53,141,075)
Capital
share
transactions:
(Note
2
)
Primary
Shares
..................
—
—
(18,454,844)
(1,101,888,702)
Service
Shares
..................
—
—
189,897
(218,302)
Capital
share
transactions
(Note
2
)
.....
(68,617,241)
(98,536,876)
—
—
Total
capital
share
transactions
.......
(68,617,241)
(98,536,876)
(18,264,947)
(1,102,107,004)
Net
increase
(decrease)
in
net
assets
.....................
21,495,524
(57,872,952)
20,583,174
(1,249,093,898)
Net
assets:
Beginning
of
period
................
725,097,688
782,970,640
447,586,595
1,696,680,493
End
of
period
.....................
$746,593,212
$725,097,688
$468,169,769
$447,586,595
Templeton
Institutional
Funds
31
ftinstitutional.com
Semiannual
Report
Notes
to
Financial
Statements
(unaudited)
1.
Organization
and
Significant
Accounting
Policies
Templeton
Institutional
Funds (Trust)
is
registered
under
the
Investment
Company
Act
of
1940
(1940
Act)
as
an
open-end
management
investment
company,
consisting
of
two
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
Shares
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.
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
and
derivative
financial
instruments
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
in
open-end
mutual
funds
are
valued
at
the
closing
NAV.
T
he
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.
Events
can
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
Funds.
As
a
result,
differences
may
arise
between
the
value
of
the
Funds'
portfolio
securities
as
determined
at
the
foreign
market
close
and
the
latest
indications
of
value
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
32
ftinstitutional.com
Semiannual
Report
at
4
p.m.
Eastern
time.
In
order
to
minimize
the
potential
for
these
differences,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Funds'
portfolio
securities
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
June
30,
2021,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy
(referred
to
as
“market
level
fair
value”).
See
the
Fair
Value
Measurements
note
for
more
information.
When
the
last
day
of
the
reporting
period
is
a
non-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
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
Purchased
on
a
Delayed
Delivery
Basis
Certain
or
all
Funds
purchase
securities
on
a
delayed
delivery
basis,
with
payment
and
delivery
scheduled
for
a
future
date.
These
transactions
are
subject
to
market
fluctuations
and
are
subject
to
the
risk
that
the
value
at
delivery
may
be
more
or
less
than
the
trade
date
purchase
price.
Although
the
Funds
will
generally
purchase
these
securities
with
the
intention
of
holding
the
securities,
they
may
sell
the
securities
before
the
settlement
date.
d.
Derivative
Financial
Instruments
Certain
or
all
Funds
invested
in
derivative
financial
instruments
in
order
to
manage
risk
or
gain
exposure
to
various
other
investments
or
markets.
Derivatives
are
financial
contracts
based
on
an
underlying
or
notional
amount,
require
no
initial
investment
or
an
initial
net
investment
that
is
smaller
than
would
normally
be
required
to
have
a
similar
response
to
changes
in
market
factors,
and
require
or
permit
net
settlement.
Derivatives
contain
various
risks
including
the
potential
inability
of
the
counterparty
to
fulfill
their
obligations
under
the
terms
of
the
contract,
the
potential
for
an
illiquid
secondary
market,
and/or
the
potential
for
market
movements
which
expose
the
Funds
to
gains
or
losses
in
excess
of
the
amounts
shown
in
the
Statements
of
Assets
and
Liabilities.
Realized
gain
and
loss
and
unrealized
appreciation
and
depreciation
on
these
contracts
for
the
period
are
included
in
the
Statements
of
Operations.
Collateral
requirements
differ
by
type
of
derivative.
Collateral
or
initial
margin
requirements
are
set
by
the
broker
or
exchange
clearing
house
for
exchange
traded
and
centrally
cleared
derivatives.
Initial
margin
deposited
is
held
at
the
exchange
and
can
be
in
the
form
of
cash
and/or
securities.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
33
ftinstitutional.com
Semiannual
Report
Certain
or
all
Funds
entered
into
exchange
traded
futures
contracts
primarily
to
manage
and/or
gain
exposure
to
equity
price
risk.
A
futures
contract
is
an
agreement
between
the
Funds
and
a
counterparty
to
buy
or
sell
an
asset
at
a
specified
price
on
a
future
date.
Required
initial
margins
are
pledged
by
the
Funds,
and
the
daily
change
in
fair
value
is
accounted
for
as
a
variation
margin
payable
or
receivable.
See
Note
6
regarding
other
derivative
information.
e.
Securities
Lending
Certain
or
all
Funds
participate
in
an
agency
based
securities
lending
program
to
earn
additional
income.
The
Funds
receive
collateral
in
the
form
of
cash
and/or
U.S.
Government
and
Agency
securities
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.
Any
cash
collateral
received
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,
and/or
uninvested
cash
as
included
in
due
from
custodian
in
the
Statements
of
Assets
and
Liabilities.
Additionally,
the
Foreign
Smaller
Companies
Series
held
$5,720,278,
in
U.S.
Government
and
Agency
securities
as
collateral.
These
securities
are
held
as
collateral
in
segregated
accounts
with
the
Fund’s
custodian.
The
Fund
cannot
repledge
or
resell
these
securities
held
as
collateral.
As
such,
the
non-cash
collateral
is
excluded
from
the
Statements
of
Assets
and
Liabilities. The
Funds
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
Funds
bear
the
market
risk
with
respect
to any
cash collateral
investment,
securities
loaned,
and
the
risk
that
the
agent
may
default
on
its
obligations
to
the
Funds.
If
the
borrower
defaults
on
its
obligation
to
return
the
securities
loaned,
the
Funds
have
the
right
to
repurchase
the
securities
in
the
open
market
using
the
collateral
received.
The
securities
lending
agent
has
agreed
to
indemnify
the
Funds
in
the
event
of
default
by
a
third
party
borrower.
f.
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). 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
amount
of
foreign
taxes
Fund
shareholders
can
use
as
tax
deductions
or credits
on
their income
tax
returns.
In
the
event
that
EU
reclaims
received
by
the
Funds during a
fiscal
year
exceed
foreign
withholding
taxes
paid
by
the
Funds,
and
the Funds
previously
passed through
to
its
shareholders
foreign
taxes
incurred
by
the
Funds
to
be
used
as
a
credit
or
deduction
on
a
shareholder’s
income
tax
return,
the
Funds will
enter
into
a
closing
agreement
with
the
Internal
Revenue
Service
(IRS)
in
order
to
pay
the
associated
tax
liability
on
behalf
of
the Funds'
shareholders.
1.
Organization
and
Significant
Accounting
Policies
(continued)
d.
Derivative
Financial
Instruments
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
34
ftinstitutional.com
Semiannual
Report
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
June
30,
2021, 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
Funds
invest.
g.
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
the
ex-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
the
ex-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.
h.
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.
i.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
f.
Income
and
Deferred
Taxes
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
35
ftinstitutional.com
Semiannual
Report
2.
Shares
of
Beneficial
Interest
At
June
30,
2021,
there
were
an
unlimited
number
of
shares
authorized
(
without
par
value
)
.
Transactions
in
the
Funds’
shares
were
as
follows:
Foreign
Smaller
Companies
Series
Shares
Amount
Advisor
Class
Six
Months
ended
June
30,
2021
Shares
sold
...................................
1,377,017
$33,941,073
Shares
redeemed
...............................
(4,123,290)
(102,558,314)
Net
increase
(decrease)
..........................
(2,746,273)
$(68,617,241)
Year
ended
December
31,
2020
Shares
sold
...................................
9,412,891
$166,630,256
Shares
issued
in
reinvestment
of
distributions
..........
341,853
7,788,220
Shares
redeemed
...............................
(14,851,654)
(272,955,352)
Net
increase
(decrease)
..........................
(5,096,910)
$(98,536,876)
International
Equity
Series
Shares
Amount
Primary
Shares
Primary
Shares:
Six
Months
ended
June
30,
2021
Shares
sold
...................................
3,906,465
$63,068,842
Shares
redeemed
...............................
(5,027,140)
(81,523,686)
Net
increase
(decrease)
..........................
(1,120,675)
$(18,454,844)
Year
ended
December
31,
2020
Shares
sold
...................................
14,329,539
$202,147,807
Shares
issued
in
reinvestment
of
distributions
..........
3,342,528
46,688,253
Shares
redeemed
...............................
(97,427,178)
(1,350,724,762)
Net
increase
(decrease)
..........................
(79,755,111)
$(1,101,888,702)
Service
Shares
Service
Shares:
Six
Months
ended
June
30,
2021
Shares
sold
...................................
11,767
$192,444
Shares
redeemed
...............................
(151)
(2,547)
Net
increase
(decrease)
..........................
11,616
$189,897
Year
ended
December
31,
2020
Shares
sold
...................................
2,179
$29,850
Shares
issued
in
reinvestment
of
distributions
..........
2,098
29,760
Shares
redeemed
...............................
(19,698)
(277,912)
Net
increase
(decrease)
..........................
(15,421)
$(218,302)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
36
ftinstitutional.com
Semiannual
Report
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:
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:
International
Equity
Series
pays
an
investment
management
fee
to
TIC
based
on
the
average
daily
net
assets
of
the
Fund
as
follows:
For
the
period
ended
June
30,
2021,
each
Fund's
annualized
gross
effective
investment
management
fee
rate
based
on
average
daily
net
assets
was
as
follows:
Effective
January
1,
2021,
under
a
subadvisory
agreement,
FTIC,
an
affiliate
of
TIC,
provides
subadvisory
services
to
Foreign
Smaller
Companies
Series.
The
subadvisory
fee
is
paid
by
TIC
based
on
the
Fund's
average
daily
net
assets,
and
is
not
an
additional
expense
of
the
Fund.
Subsidiary
Affiliation
Templeton
Investment
Counsel,
LLC
(TIC)
Investment
manager
Franklin
Templeton
Investments
Corp.
(FTIC)
Investment
manager
Franklin
Templeton
Services,
LLC
(FT
Services)
Administrative
manager
Franklin
Distributors,
LLC
(Distributors)
(Formerly
Franklin
Templeton
Distributors,
Inc.)
Principal
underwriter
Franklin
Templeton
Investor
Services,
LLC
(Investor
Services)
Transfer
agent
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
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
Foreign
Smaller
Companies
Series
International
Equity
Series
Gross
effective
investment
management
fee
rate
........
0.950%
0.775%
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
37
ftinstitutional.com
Semiannual
Report
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
period
ended
June
30,
2021,
the
Funds
paid
transfer
agent
fees
as
noted
in
the
Statements
of
Operations
of
which
the
following
amounts
were
retained
by
Investor
Services:
International
Equity
Series’
Service
shares
may
pay
up
to
0.15%
of
average
daily
net
assets
for
sub-transfer
agency
fees
as
noted
in
the
Statements
of
Operations.
d.
Investments
in
Affiliated
Management
Investment
Companies
Certain
or
all
Funds
invest
in
one
or
more
affiliated
management
investment
companies.
As
defined
in
the
1940
Act,
an
investment
is
deemed
to
be
a
“Controlled
Affiliate”
of
a
fund
when
a
fund
owns,
either
directly
or
indirectly,
25%
or
more
of
the
affiliated
fund’s
outstanding
shares
or
has
the
power
to
exercise
control
over
management
or
policies
of
such
fund.
The
Funds
do
not
invest
for
purposes
of
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
period
ended
June
30,
2021,
the
Funds
held
investments
in
affiliated
management
investment
companies
were
as
follows:
Foreign
Smaller
Companies
Series
International
Equity
Series
Transfer
agent
fees
........................
$90,945
$72,783
aa
Value
at
Beginning
of
Period
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Period
Number
of
Shares
Held
at
End
of
Period
Investment
Income
a
a
a
a
a
a
a
a
Foreign
Smaller
Companies
Series
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.......
$31,885,434
$41,262,168
$(61,763,412)
$
—
$
—
$11,384,190
11,384,190
$578
Total
Affiliated
Securities
....
$31,885,434
$41,262,168
$(61,763,412)
$—
$—
$11,384,190
$578
3.Transactions
with
Affiliates
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
38
ftinstitutional.com
Semiannual
Report
e.
Waiver
and
Expense
Reimbursements
TIC
has
contractually
agreed
in
advance
to
limit
the
investment
management
fees
for
International
Equity
Series
to
0.74%
of
the
average
daily
net
assets
of
the
Fund
until
April
30,
2022.
Total
expenses
waived
or
paid
are
not
subject
to
recapture
subsequent
to
the
Fund’s
fiscal
year
end.
4.
Income
Taxes
At
June
30,
2021,
the
cost
of
investments
and
net
unrealized
appreciation
(depreciation)
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
EU
reclaims,
passive
foreign
investment
company
shares,
foreign
capital
gains
tax,
foreign
currency
transactions,
corporate
actions,
wash
sales
and
financial
futures
transactions.
aa
Value
at
Beginning
of
Period
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Period
Number
of
Shares
Held
at
End
of
Period
Investment
Income
International
Equity
Series
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.......
$5,645,058
$87,991,710
$(81,844,496)
$—
$—
$11,792,272
11,792,272
$414
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.......
$5,609,390
$18,478,665
$(21,669,799)
$
—
$
—
$2,418,256
2,418,256
$23
Total
Affiliated
Securities
....
$11,254,448
$106,470,375
$(103,514,295)
$—
$—
$14,210,528
$437
Foreign
Smaller
Companies
Series
International
Equity
Series
a
a
a
Cost
of
investments
.......................
$481,548,043
$358,774,456
Unrealized
appreciation
.....................
$271,530,061
$112,170,509
Unrealized
depreciation
.....................
(24,051,600)
(14,514,948)
Net
unrealized
appreciation
(depreciation)
.......
$247,478,461
$97,655,561
3.Transactions
with
Affiliates
(continued)
d.
Investments
in
Affiliated
Management
Investment
Companies
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
39
ftinstitutional.com
Semiannual
Report
5.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
period
ended
June
30,
2021,
were
as
follows:
At
June
30,
2021,
in
connection
with
securities
lending
transactions,
certain
or
all
Funds
loaned
investments
and
received
cash
collateral
as
follows:
6.
Other
Derivative
Information
At
June
30,
2021,
Funds’
investments
in
derivative
contracts
are
reflected
in
the
Statements
of
Assets
and
Liabilities
as
follows:
Foreign
Smaller
Companies
Series
International
Equity
Series
Purchases
..............................
$118,684,053
$103,963,840
Sales
..................................
$182,543,035
$89,235,770
Foreign
Smaller
Companies
Series
International
Equity
Series
Securities
lending
transactions
a
:
Equity
investments
b
........................
$11,384,190
$4,668,65
6
a
The
agreements
can
be
terminated
at
any
time.
b
The
gross
amount
of
recognized
liability
for
such
transactions
is
included
in
payable
upon
return
of
securities
loaned
in
the
Statements
of
Assets
and
Liabilities.
Asset
Derivatives
Liability
Derivatives
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statement
s
of
Assets
and
Liabilities
Location
Fair
Value
Statement
s
of
Assets
and
Liabilities
Location
Fair
Value
International
Equity
Series
Equity
contracts
...........
Variation
margin
on
futures
contracts
$
—
Variation
margin
on
futures
contracts
$
219,905
a
Total
....................
$—
$219,905
a
This
amount
reflects
the
cumulative
appreciation
(depreciation)
of
futures
contracts
as
reported
in
the
Statement
of
Investments.
Only
the
variation
margin
receivable/
payable
at
year
end
is
separately
reported
within
the
Statement
of
Assets
and
Liabilities.
Prior
variation
margin
movements
were
recorded
to
cash
upon
receipt
or
payment.
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
40
ftinstitutional.com
Semiannual
Report
For
the
period
ended
June
30,
2021,
the
effect
of
derivative
contracts
in
the
Statements
of
Operations
was
as
follows:
For
the
period
ended
June
30,
2021,
the
average
month
end
notional
amount
of
futures
contracts
was
$23,265,528.
See
Note
1(d)
regarding
derivative
financial
instruments.
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,
regional
and
global
economic,
political
and
social
conditions,
which
may
result
in
greater
market
volatility.
Political
and
financial
uncertainty
in
many
foreign
regions
may
increase
market
volatility
and
the
economic
risk
of
investing
in
foreign
securities.
In
addition,
certain
foreign
securities
may
not
be
as
liquid
as
U.S.
securities.
8.
Novel
Coronavirus
Pandemic
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the
Funds, their ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and their ability
to
achieve their investment
objectives.
9.
Credit
Facility
The
Funds,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2.675
billion
(Global
Credit
Facility)
which
matures
on
February
4,
2022.
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.
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
period
ended
June
30,
2021,
the
Funds
did
not
use
the
Global
Credit
Facility.
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statements
of
Operations
Location
Net
Realized
Gain
(Loss)
for
the
Period
Statements
of
Operations
Location
Net
Change
in
Unrealized
Appreciation
(Depreciation)
for
the
Period
International
Equity
Series
Net
realized
gain
(loss)
from:
Net
change
in
unrealized
appreciation
(depreciation)
on:
Equity
Contracts
..............
Futures
contracts
$3,275,768
Futures
contracts
$(751,053)
Total
.......................
$3,275,768
$(751,053)
6.
Other
Derivative
Information
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
41
ftinstitutional.com
Semiannual
Report
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
June
30,
2021,
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:
Common
Stocks
:
Bahamas
............................
$
8,415,814
$
—
$
—
$
8,415,814
Belgium
.............................
—
23,876,361
—
23,876,361
Brazil
...............................
13,094,751
—
—
13,094,751
Canada
.............................
28,051,561
—
—
28,051,561
China
...............................
6,232,112
33,570,247
—
39,802,359
Denmark
............................
5,501,355
—
—
5,501,355
Finland
..............................
2,788,852
14,775,722
—
17,564,574
France
..............................
158,478
9,457,387
—
9,615,865
Germany
............................
3,146,088
31,848,440
—
34,994,528
Greece
..............................
—
5,346,897
—
5,346,897
Hong
Kong
...........................
—
25,057,529
—
25,057,529
Indonesia
............................
—
5,050,215
—
5,050,215
Israel
...............................
—
5,598,696
—
5,598,696
Italy
................................
—
51,174,296
—
51,174,296
Japan
...............................
—
137,528,737
—
137,528,737
Netherlands
..........................
14,526,507
17,423,180
—
31,949,687
Norway
..............................
5,521,606
4,247,276
—
9,768,882
Philippines
...........................
4,590,107
—
—
4,590,107
South
Korea
..........................
—
13,470,098
—
13,470,098
Spain
...............................
—
5,110,476
—
5,110,476
Sweden
.............................
—
36,851,643
—
36,851,643
Switzerland
...........................
6,602,232
38,475,679
—
45,077,911
Taiwan
..............................
—
72,059,718
—
72,059,718
Thailand
.............................
—
11,724,806
—
11,724,806
United
Kingdom
.......................
23,043,016
39,183,777
—
62,226,793
United
States
.........................
9,475,126
—
—
9,475,126
Preferred
Stocks
........................
3,848,899
—
—
3,848,899
Warrants
..............................
814,630
—
—
814,630
Short
Term
Investments
...................
11,384,190
—
—
11,384,190
Total
Investments
in
Securities
...........
$147,195,324
$581,831,180
a
$—
$729,026,504
International
Equity
Series
Assets:
Investments
in
Securities:
Common
Stocks
:
Belgium
.............................
—
6,868,841
—
6,868,841
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
42
ftinstitutional.com
Semiannual
Report
A
reconciliation
in
which
Level
3
inputs
are
used
in
determining
fair
value
is
presented
when
there
are
significant
Level
3
assets
and/or
liabilities
at
the
beginning
and/or
end
of
the period.
11.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
In
January
2021,
the
FASB
issued
ASU
No.
2021-01,
with
further
amendments
to
Topic
848.
The
amendments
in
the
ASUs
provide
optional
temporary
accounting
recognition
and financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
London
Interbank
Offered
Rate
(LIBOR)
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021
and
2023. The
ASUs
are
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022.
Management
has
reviewed
the
requirements
and
believes
the
adoption
of
these
ASUs
will
not
have
a
material
impact
on
the
financial
statements.
12.
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.
Level
1
Level
2
Level
3
Total
International
Equity
Series
(continued)
Assets:
Investments
in
Securities:
Common
Stocks:
Brazil
...............................
$
9,316,280
$
4,356,201
$
—
$
13,672,481
Canada
.............................
10,628,172
—
—
10,628,172
China
...............................
6,306,438
15,551,400
—
21,857,838
France
..............................
—
35,545,626
—
35,545,626
Germany
............................
—
73,873,600
—
73,873,600
Hong
Kong
...........................
—
11,465,162
—
11,465,162
Hungary
.............................
—
2,203,556
—
2,203,556
Ireland
..............................
4,650,975
7,589,726
—
12,240,701
Japan
...............................
—
98,052,382
—
98,052,382
Luxembourg
..........................
—
3,614,952
—
3,614,952
Netherlands
..........................
—
5,873,261
—
5,873,261
Norway
..............................
—
5,662,582
—
5,662,582
South
Korea
..........................
—
23,167,818
—
23,167,818
Spain
...............................
—
6,460,984
—
6,460,984
Switzerland
...........................
—
12,188,116
—
12,188,116
Taiwan
..............................
—
10,630,164
—
10,630,164
United
Kingdom
.......................
—
88,433,158
—
88,433,158
Escrows
and
Litigation
Trusts
...............
—
—
—
b
—
Short
Term
Investments
...................
14,210,528
—
—
14,210,528
Total
Investments
in
Securities
...........
$45,112,393
$411,537,529
c
$—
$456,649,922
Liabilities:
Other
Financial
Instruments:
Futures
contracts
........................
219,905
—
—
219,905
a
Includes
foreign
securities
valued
at
$581,831,180,
which
were
categorized
as
Level
2
as
a
result
of
the
application
of
market
level
fair
value
procedures.
See
the
Financial
Instrument
Valuation
note
for
more
information.
b
Includes
securities
determined
to
have
no
value
at
June
30,
2021.
c
Includes
foreign
securities
valued
at
$411,537,529,
which
were
categorized
as
Level
2
as
a
result
of
the
application
of
market
level
fair
value
procedures.
See
the
Financial
Instrument
Valuation
note
for
more
information.
10.
Fair
Value
Measurements
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
(unaudited)
43
ftinstitutional.com
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Report
Abbreviations
Selected
Portfolio
ADR
American
Depositary
Receipt
Templeton
Institutional
Funds
Shareholder
Information
44
ftinstitutional.com
Semiannual
Report
Board
Approval
of
Investment
Management
Agreements
TEMPLETON
INSTITUTIONAL
FUNDS
Foreign
Smaller
Companies
Series
International
Equity
Series
(each
a
Fund)
At
a
meeting
held
on
February
23,
2021
(Meeting),
the
Board
of
Trustees
(Board)
of
Templeton
Institutional
Funds
(Trust),
including
a
majority
of
the
trustees
who
are
not
“interested
persons”
as
defined
in
the
Investment
Company
Act
of
1940
(Independent
Trustees),
reviewed
and
approved
the
continuance
of
the
investment
management
agreement
between
Templeton
Investment
Counsel,
LLC
(TICL)
and
the
Trust,
on
behalf
of
each
Fund,
and
an
investment
sub-
advisory
agreement
between
TICL
and
Franklin
Templeton
Investments
Corp.
(Sub-Adviser),
an
affiliate
of
TICL,
on
behalf
of
the
Foreign
Smaller
Companies
Series,
for
an
additional
one-year
period
(each
a
Management
Agreement).
The
Independent
Trustees
received
advice
from
and
met
separately
with
Independent
Trustee
counsel
in
considering
whether
to
approve
the
continuation
of
each
Management
Agreement.
Although
the
Management
Agreements
for
the
Funds
were
considered
at
the
same
Board
meeting,
the
Board
considered
the
information
provided
to
it
about
the
Funds
together
and
with
respect
to
each
Fund
separately
as
the
Board
deemed
appropriate.
TICL
and
the
Sub-Adviser
are
each
referred
to
herein
as
a
Manager.
In
considering
the
continuation
of
each
Management
Agreement,
the
Board
reviewed
and
considered
information
provided
by
each
Manager
at
the
Meeting
and
throughout
the
year
at
meetings
of
the
Board
and
its
committees.
The
Board
also
reviewed
and
considered
information
provided
in
response
to
a
detailed
set
of
requests
for
information
submitted
to
the
TICL
by
Independent
Trustee
counsel
on
behalf
of
the
Independent
Trustees
in
connection
with
the
annual
contract
renewal
process.
In
addition,
prior
to
the
Meeting,
the
Independent
Trustees
held
a
telephonic
contract
renewal
meeting
at
which
the
Independent
Trustees
conferred
amongst
themselves
and
Independent
Trustee
counsel
about
contract
renewal
matters
and,
in
some
cases,
requested
additional
information
from
the
Managers
relating
to
the
contract.
The
Board
reviewed
and
considered
all
of
the
factors
it
deemed
relevant
in
approving
the
continuance
of
each
Management
Agreement,
including,
but
not
limited
to:
(i)
the
nature,
extent
and
quality
of
the
services
provided
by
each
Manager;
(ii)
the
investment
performance
of
each
Fund;
(iii)
the
costs
of
the
services
provided
and
profits
realized
by
each
Manager
and
its
affiliates
from
the
relationship
with
each
Fund;
(iv)
the
extent
to
which
economies
of
scale
are
realized
as
each
Fund
grows;
and
(v)
whether
fee
levels
reflect
these
economies
of
scale
for
the
benefit
of
Fund
investors.
In
approving
the
continuance
of
each
Management
Agreement,
the
Board,
including
a
majority
of
the
Independent
Trustees,
determined
that
the
terms
of
the
Management
Agreement
are
fair
and
reasonable
and
that
the
continuance
of
such
Management
Agreement
is
in
the
best
interests
of
the
applicable
Fund
and
its
shareholders.
While
attention
was
given
to
all
information
furnished,
the
following
discusses
some
primary
factors
relevant
to
the
Board’s
determination.
Nature,
Extent
and
Quality
of
Services
The
Board
reviewed
and
considered
information
regarding
the
nature,
extent
and
quality
of
investment
management
services
provided
by
each
Manager
and
its
affiliates
to
the
Funds
and
their
shareholders.
This
information
included,
among
other
things,
the
qualifications,
background
and
experience
of
the
senior
management
and
investment
personnel
of
each
Manager,
as
well
as
information
on
succession
planning
where
appropriate;
the
structure
of
investment
personnel
compensation;
oversight
of
third-
party
service
providers;
investment
performance
reports
and
related
financial
information
for
each
Fund;
reports
on
expenses
and
shareholder
services;
legal
and
compliance
matters;
risk
controls;
pricing
and
other
services
provided
by
each
Manager
and
its
affiliates;
and
management
fees
charged
by
each
Manager
and
its
affiliates
to
US
funds
and
other
accounts,
including
management’s
explanation
of
differences
among
accounts
where
relevant.
The
Board
also
reviewed
and
considered
an
annual
report
on
payments
made
by
Franklin
Templeton
(FT)
or
the
Funds
to
financial
intermediaries,
as
well
as
a
memorandum
relating
to
third-
party
servicing
arrangements,
which
included
discussion
of
the
changing
distribution
landscape
for
the
Funds.
The
Board
noted
management’s
continuing
efforts
and
expenditures
in
establishing
effective
business
continuity
plans
and
developing
strategies
to
address
areas
of
heightened
concern
in
the
mutual
fund
industry,
such
as
cybersecurity
in
the
current
work-from-home
environment
and
liquidity
risk
management.
The
Board
also
reviewed
and
considered
the
benefits
provided
to
Fund
shareholders
of
investing
in
a
fund
that
is
part
of
the
FT
family
of
funds.
The
Board
noted
the
financial
position
of
Franklin
Resources,
Inc.
(FRI),
the
Templeton
Institutional
Funds
Shareholder
Information
45
ftinstitutional.com
Semiannual
Report
Managers’
parent,
and
its
commitment
to
the
mutual
fund
business
as
evidenced
by
its
reassessment
of
the
fund
offerings
in
response
to
the
market
environment
and
project
initiatives
and
capital
investments
relating
to
the
services
provided
to
the
Funds
by
the
FT
organization.
The
Board
specifically
noted
FT’s
commitment
to
enhancing
services
and
controlling
costs,
as
reflected
in
its
outsourcing
of
certain
administrative
functions,
and
growth
opportunities,
as
evidenced
by
its
recent
acquisition
of
the
Legg
Mason
companies.
The
Board
also
noted
FT’s
attention
focused
on
expanding
the
distribution
opportunities
for
all
funds
in
the
FT
family
of
funds.
Following
consideration
of
such
information,
the
Board
was
satisfied
with
the
nature,
extent
and
quality
of
services
provided
by
each
Manager
and
its
affiliates
to
the
Funds
and
their
shareholders.
Fund
Performance
The
Board
reviewed
and
considered
the
performance
results
of
each
Fund
over
various
time
periods
ended
November
30,
2020.
The
Board
considered
the
performance
returns
for
each
Fund
in
comparison
to
the
performance
returns
of
mutual
funds
deemed
comparable
to
the
Fund
included
in
a
universe
(Performance
Universe)
selected
by
Broadridge
Financial
Solutions,
Inc.
(Broadridge),
an
independent
provider
of
investment
company
data.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
a
Performance
Universe.
The
Board
also
considered
the
performance
returns
for
the
Foreign
Smaller
Companies
Series
in
comparison
to
the
performance
returns
of
a
customized
peer
group
(Performance
Customized
Peer
Group)
selected
by
TICL.
The
Board
also
reviewed
and
considered
Fund
performance
reports
provided
and
discussions
that
occurred
with
portfolio
managers
at
Board
meetings
throughout
the
year.
A
summary
of
each
Fund’s
performance
results
is
below.
Foreign
Smaller
Companies
Series
-
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
international
small-/mid-cap
growth
funds.
The
Performance
Customized
Peer
Group
for
the
Fund
included
funds
that
are
value
style
and
have
80%
of
the
portfolio
market
value
invested
in
securities
with
a
market
capitalization
of
less
than
$4
billion.
The
Board
noted
that
the
Fund’s
annualized
total
return
for
the
one-,
three-,
five-
and
10-year
periods
was
below
the
median
of
its
Performance
Universe,
however,
was
above
the
median
of
its
Performance
Customized
Peer
Group
for
the
same
periods.
The
Board
further
noted
the
small
size
of
the
Fund’s
Performance
Customized
Peer
Group
for
the
10-year
period
and
that
therefore
no
quintile
information
was
provided
for
the
Fund
for
that
period.
The
Board
discussed
the
performance
of
the
Fund
with
management
and
management
explained
that
the
Performance
Universe
for
the
Fund
was
not
directly
comparable
to
the
Fund
as
the
Performance
Universe
is
not
comprised
solely
of
small-capitalization
funds,
and
includes
mid-capitalization
funds.
Management
further
explained
that
Broadridge
has
categorized
the
Fund
in
Broadridge’s
growth
category,
whereas
management’s
investment
process
focuses
on
longer-term
valuations.
Management
also
explained
that
the
foregoing
are
the
reasons
management
asked
Broadridge
to
include
the
Performance
Customized
Peer
Group,
which
is
comprised
of
value
style
funds
that
have
80%
of
their
portfolios
invested
in
securities
with
market
capitalizations
less
than
$4
billion,
which
is
consistent
with
the
Fund’s
investment
strategies.
The
Board
noted
the
Fund’s
first
(best)
and
second
quintile
performance
compared
to
that
of
its
Performance
Customized
Peer
Group
for
the
one-,
three-
and
five-year
periods
and
that,
while
below
the
median
of
its
Performance
Universe,
the
Fund’s
annualized
total
return
for
each
period
was
positive.
The
Board
concluded
that
the
Fund’s
Management
Agreement
should
be
continued
for
an
additional
one-year
period.
International
Equity
Series
-
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
international
large-cap
value
funds.
The
Board
noted
that
the
Fund’s
annualized
total
return
for
the
three-
and
five-
year
periods
was
below
the
median
of
its
Performance
Universe,
but
for
the
one-
and
10-year
periods
was
above
the
median
of
its
Performance
Universe.
The
Board
discussed
the
performance
of
the
Fund
with
management
and
management
explained
that
the
Performance
Universe
for
the
Fund,
which
has
a
value
discipline,
was
not
directly
comparable
to
the
Fund
as
the
Performance
Universe
includes
funds
that
have
benefited
from
having
more
of
a
blend
style
(owning
some
growth
stocks),
which
negatively
impacted
relative
Fund
rankings
during
a
period
of
sustained
outperformance
of
growth
over
value.
Management
further
explained
that,
on
average,
the
Fund
has
had
a
larger
allocation
to
energy
stocks
as
compared
to
peers,
but
that
during
the
past
year
the
Fund
significantly
reduced
its
allocation
becoming
underweight
versus
peers
at
a
time
when
energy
stocks
underperformed
the
broad
market
by
33%
for
the
one-year
period.
The
Board
noted
the
continued
efforts
from
the
Adviser’s
Global
Equity
Group
to
address
the
Fund’s
performance,
in
particular,
enhancements
to
the
Fund’s
investment
process
and
additions
to
the
Fund’s
portfolio
management
team,
and
the
positive,
first
quintile
(best)
performance
results
experienced
by
the
Fund
for
the
one-year
period.
The
Board
concluded
that
the
Fund’s
performance
was
satisfactory.
Templeton
Institutional
Funds
Shareholder
Information
46
ftinstitutional.com
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Comparative
Fees
and
Expenses
The
Board
reviewed
and
considered
information
regarding
each
Fund’s
actual
total
expense
ratio
and
its
various
components,
including,
as
applicable,
management
fees;
transfer
agent
expenses;
underlying
fund
expenses;
Rule
12b-1
and
non-Rule
12b-1
service
fees;
and
other
non-
management
fees.
The
Board
also
noted
the
quarterly
and
annual
reports
it
receives
on
all
marketing
support
payments
made
by
FT
to
financial
intermediaries.
The
Board
considered
the
actual
total
expense
ratio
and,
separately,
the
contractual
management
fee
rate,
without
the
effect
of
fee
waivers,
if
any
(Management
Rate)
of
each
Fund
in
comparison
to
the
median
expense
ratio
and
median
Management
Rate,
respectively,
of
other
mutual
funds
deemed
comparable
to
and
with
a
similar
expense
structure
to
the
Fund
selected
by
Broadridge
(Expense
Group).
Broadridge
fee
and
expense
data
is
based
upon
information
taken
from
each
fund’s
most
recent
annual
report,
which
reflects
historical
asset
levels
that
may
be
quite
different
from
those
currently
existing,
particularly
in
a
period
of
market
volatility.
While
recognizing
such
inherent
limitation
and
the
fact
that
expense
ratios
and
Management
Rates
generally
increase
as
assets
decline
and
decrease
as
assets
grow,
the
Board
believed
the
independent
analysis
conducted
by
Broadridge
to
be
an
appropriate
measure
of
comparative
fees
and
expenses.
The
Broadridge
Management
Rate
includes
administrative
charges,
and
the
actual
total
expense
ratio,
for
comparative
consistency,
was
shown
for:
(i)
Primary
shares
for
the
International
Equity
Series
and
for
Institutional
Class,
Class
I
and
Class
Y
for
certain
other
funds
in
the
Expense
Group,
and
(ii)
Advisor
Class,
Institutional
Class,
Class
I,
Class
IS,
Class
Y
and
Class
Z
shares
for
certain
funds
in
the
Foreign
Smaller
Companies
Series
Expense
Group.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
an
Expense
Group.
Foreign
Smaller
Companies
Series
-
The
Expense
Group
for
the
Fund
included
the
Fund
and
14
other
international
small-/mid-cap
growth
funds.
The
Board
noted
that
the
Management
Rate
and
actual
total
expense
ratio
for
the
Fund
were
below
the
medians
of
its
Expense
Group.
The
Board
further
noted
that
the
Sub-Adviser’s
fees
are
paid
by
TICL
from
the
management
fee
TICL
receives
from
the
Fund.
The
Board
concluded
that
the
Management
Rate
charged
to
the
Fund
is
reasonable.
International
Equity
Series
-
The
Expense
Group
for
the
Fund
included
the
Fund,
three
other
international
large-cap
value
funds
and
seven
international
large-cap
core
funds.
The
Board
noted
that
the
Management
Rate
for
the
Fund
was
a
half
of
a
basis
point
above
the
median
of
its
Expense
Group.
The
Board
also
noted
that
the
actual
total
expense
ratio
for
the
Fund
was
below
the
median
of
its
Expense
Group.
The
Board
concluded
that
the
Management
Rate
charged
to
the
Fund
is
reasonable.
Profitability
The
Board
reviewed
and
considered
information
regarding
the
profits
realized
by
TICL
and
its
affiliates
in
connection
with
the
operation
of
each
Fund.
In
this
respect,
the
Board
considered
the
Fund
profitability
analysis
provided
that
addresses
the
overall
profitability
of
FT’s
US
fund
business,
as
well
as
its
profits
in
providing
investment
management
and
other
services
to
each
of
the
individual
funds
during
the
12-month
period
ended
September
30,
2020,
being
the
most
recent
fiscal
year-end
for
FRI.
The
Board
noted
that
although
management
continually
makes
refinements
to
its
methodologies
used
in
calculating
profitability
in
response
to
organizational
and
product-related
changes,
the
overall
methodology
has
remained
consistent
with
that
used
in
the
Funds’
profitability
report
presentations
from
prior
years.
The
Board
further
noted
management’s
representation
that
the
profitability
analysis
excluded
the
impact
of
the
recent
acquisition
of
the
Legg
Mason
companies
and
that
management
expects
to
incorporate
the
legacy
Legg
Mason
companies
into
the
profitability
analysis
beginning
next
year.
The
Board
also
noted
that
PricewaterhouseCoopers
LLP,
auditor
to
FRI
and
certain
FT
funds,
has
been
engaged
to
periodically
review
and
assess
the
allocation
methodologies
to
be
used
solely
by
the
Funds’
Board
with
respect
to
the
profitability
analysis.
The
Board
noted
management’s
belief
that
costs
incurred
in
establishing
the
infrastructure
necessary
for
the
type
of
mutual
fund
operations
conducted
by
each
Manager
and
its
affiliates
may
not
be
fully
reflected
in
the
expenses
allocated
to
each
Fund
in
determining
its
profitability,
as
well
as
the
fact
that
the
level
of
profits,
to
a
certain
extent,
reflected
operational
cost
savings
and
efficiencies
initiated
by
management.
As
part
of
this
evaluation,
the
Board
considered
management’s
outsourcing
of
certain
operations,
which
effort
has
required
considerable
upfront
expenditures
by
each
Manager
but,
over
the
long
run
is
expected
to
result
in
greater
efficiencies.
The
Board
also
noted
management’s
expenditures
in
improving
shareholder
services
provided
to
the
Funds,
as
well
as
the
need
to
implement
systems
and
meet
additional
regulatory
and
compliance
requirements
resulting
from
recent
US
Securities
and
Exchange
Commission
and
other
regulatory
requirements.
The
Board
also
considered
the
extent
to
which
each
Manager
and
its
affiliates
might
derive
ancillary
benefits
from
fund
operations,
including
revenues
generated
from
transfer
agent
services,
potential
benefits
resulting
from
personnel
Templeton
Institutional
Funds
Shareholder
Information
47
ftinstitutional.com
Semiannual
Report
and
systems
enhancements
necessitated
by
fund
growth,
as
well
as
increased
leverage
with
service
providers
and
counterparties.
Based
upon
its
consideration
of
all
these
factors,
the
Board
concluded
that
the
level
of
profits
realized
by
each
Manager
and
its
affiliates
from
providing
services
to
each
Fund
was
not
excessive
in
view
of
the
nature,
extent,
and
quality
of
services
provided
to
each
Fund.
Economies
of
Scale
The
Board
reviewed
and
considered
the
extent
to
which
each
Manager
may
realize
economies
of
scale,
if
any,
as
each
Fund
grows
larger
and
whether
each
Fund’s
management
fee
structure
reflects
any
economies
of
scale
for
the
benefit
of
shareholders.
With
respect
to
possible
economies
of
scale,
the
Board
noted
the
existence
of
management
fee
breakpoints,
which
operate
generally
to
share
any
economies
of
scale
with
a
Fund’s
shareholders
by
reducing
the
Fund’s
effective
management
fees
as
the
Fund
grows
in
size.
The
Board
considered
the
Managers’
views
that
any
analyses
of
potential
economies
of
scale
in
managing
a
particular
fund
are
inherently
limited
in
light
of
the
joint
and
common
costs
and
investments
the
Managers
incur
across
the
FT
family
of
funds
as
a
whole.
The
Board
noted
that
the
Foreign
Smaller
Companies
Series
and
International
Equity
Series
had
experienced
a
decrease
in
assets
and
would
not
be
expected
to
demonstrate
additional
economies
of
scale
in
the
near
term,
but
concluded
that
to
the
extent
economies
of
scale
may
be
realized
by
each
Manager
and
its
affiliates,
each
Fund’s
management
fee
structure
provided
a
sharing
of
benefits
with
the
Fund
and
its
shareholders
as
the
Fund
grows.
Conclusion
Based
on
its
review,
consideration
and
evaluation
of
all
factors
it
believed
relevant,
including
the
above-described
factors
and
conclusions,
the
Board
unanimously
approved
the
continuation
of
each
Management
Agreement
for
an
additional
one-year
period.
Liquidity
Risk
Management
Program-
Funds
no
HLIM
Each
Fund
has
adopted
and
implemented
a
written
Liquidity
Risk
Management
Program
(the
“LRMP”)
as
required
by
Rule
22e-4
under
the
Investment
Company
Act
of
1940
(the
“Liquidity
Rule”).
The
LRMP
is
designed
to
assess
and
manage
each
Fund’s
liquidity
risk,
which
is
defined
as
the
risk
that
the
Fund
could
not
meet
requests
to
redeem
shares
issued
by
the
Fund
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
In
accordance
with
the
Liquidity
Rule,
the
LRMP
includes
policies
and
procedures
that
provide
for:
(1)
assessment,
management,
and
review
(no
less
frequently
than
annually)
of
each
Fund’s
liquidity
risk;
(2)
classification
of
each
Fund’s
portfolio
holdings
into
one
of
four
liquidity
categories
(Highly
Liquid,
Moderately
Liquid,
Less
Liquid,
and
Illiquid);
(3)
for
Funds
that
do
not
primarily
hold
assets
that
are
Highly
Liquid,
establishing
and
maintaining
a
minimum
percentage
of
the
Fund’s
net
assets
in
Highly
Liquid
investments
(called
a
“Highly
Liquid
Investment
Minimum”
or
“HLIM”);
and
(4)
prohibiting
the
Fund’s
acquisition
of
Illiquid
investments
that
would
result
in
the
Fund
holding
more
than
15%
of
its
net
assets
in
Illiquid
assets.
The
LRMP
also
requires
reporting
to
the
Securities
and
Exchange
Commission
(“SEC”)
(on
a
non-public
basis)
and
to
the
Board
if
the
Fund’s
holdings
of
Illiquid
assets
exceed
15%
of
the
Fund’s
net
assets.
Funds
with
HLIMs
must
have
procedures
for
addressing
HLIM
shortfalls,
including
reporting
to
the
Board
and,
with
respect
to
HLIM
shortfalls
lasting
more
than
seven
consecutive
calendar
days,
reporting
to
the
SEC
(on
a
non-public
basis).
The
Director
of
Liquidity
Risk
within
the
Investment
Risk
Management
Group
(the
“IRMG”)
is
the
appointed
Administrator
of
the
LRMP.
The
IRMG
maintains
the
Investment
Liquidity
Committee
(the
“ILC”)
to
provide
oversight
and
administration
of
policies
and
procedures
governing
liquidity
risk
management
for
FT
products
and
portfolios.
The
ILC
includes
representatives
from
Franklin
Templeton’s
Risk,
Trading,
Global
Compliance,
Investment
Compliance,
Investment
Operations,
Valuation
Committee,
Product
Management
and
Global
Product
Strategy.
In
assessing
and
managing
each
Fund’s
liquidity
risk,
the
ILC
considers,
as
relevant,
a
variety
of
factors,
including
the
Fund’s
investment
strategy
and
the
liquidity
of
its
portfolio
investments
during
both
normal
and
reasonably
foreseeable
stressed
conditions;
its
short
and
long-term
cash
flow
projections;
and
its
cash
holdings
and
access
to
other
funding
sources
including
the
Funds’
interfund
lending
facility
and
line
of
credit.
Classification
of
the
Fund’s
portfolio
holdings
in
the
four
liquidity
categories
is
based
on
the
number
of
days
it
is
reasonably
expected
to
take
to
convert
the
investment
to
cash
(for
Highly
Liquid
and
Moderately
Liquid
holdings)
or
sell
or
dispose
of
the
investment
(for
Less
Liquid
and
Illiquid
investments),
in
current
market
conditions
without
significantly
changing
the
investment’s
market
value.
Each
Fund
primarily
holds
liquid
assets
that
are
defined
under
the
Liquidity
Rule
as
"Highly
Liquid
Investments,"
and
therefore
is
not
required
to
establish
an
HLIM.
Highly
Liquid
Investments
are
defined
as
cash
and
any
investment
reasonably
expected
to
be
convertible
to
cash
in
current
market
conditions
in
three
business
days
or
less
without
the
conversion
to
cash
significantly
changing
the
market
value
of
the
investment.
Templeton
Institutional
Funds
Shareholder
Information
48
ftinstitutional.com
Semiannual
Report
At
meetings
of
the
Funds’
Board
of
Trustees
held
in
May
2021,
the
Program
Administrator
provided
a
written
report
to
the
Board
addressing
the
adequacy
and
effectiveness
of
the
program
for
the
year
ended
December
31,
2020.
The
Program
Administrator
report
concluded
that
(i.)
the
LRMP,
as
adopted
and
implemented,
remains
reasonably
designed
to
assess
and
manage
each
Fund’s
liquidity
risk;
(ii.)
the
LRMP,
including
the
Highly
Liquid
Investment
Minimum
(“HLIM”)
where
applicable,
was
implemented
and
operated
effectively
to
achieve
the
goal
of
assessing
and
managing
each
Fund’s
liquidity
risk;
and
(iii.)
each
Fund
was
able
to
meet
requests
for
redemption
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
Proxy
Voting
Policies
and
Procedures
The
Trust’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Trust
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Trust’s
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
Trust’s
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
recent
12-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
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
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,
or
receive
notice
of
the
availability
of,
each
Fund’s
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
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
(to
the
extent
received
by
mail)
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.
ZTIF
S
08/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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.
Semiannual
Report
Templeton
Institutional
Funds
Investment
Manager
Distributor
Shareholder
Services
Templeton
Investment
Counsel,
LLC
Franklin
Distributors,
LLC
(800)
321-8563
ftinstitutional.com
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.
(c) N/A
(d) N/A
(f) Pursuant to Item 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2)
The audit committee financial experts are Ann
Torre Bates and David W. Niemiec
and they are "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4.
Principal Accountant Fees and Services. N/A
Item 5. Audit Committee
of Listed Registrants.
N/AItem 6. Schedule of Investments. N/A
Item 7
. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9
. Purchases of Equity Securities by Closed-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 Form N-CSRS, 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 are effective.
(b) Changes in Internal Controls.
There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect the internal control over financial reporting.
Item 12.
Disclosure of Securities Lending Activities for Closed-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 August 25, 2021
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 August 25, 2021
By S\Robert G. Kubilis_______________________________
Robert G. Kubilis
Chief Financial Officer and Chief Accounting Officer
Date August 25, 2021