UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
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: 12/31/21
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
.
Annual
Report
Templeton
Institutional
Funds
December
31,
2021
Foreign
Smaller
Companies
Series
International
Equity
Series
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
ftinstitutional.com
Annual
Report
1
Contents
Annual
Report
Economic
and
Market
Overview
2
Foreign
Smaller
Companies
Series
3
International
Equity
Series
10
Financial
Highlights
and
Statements
of
Investments
18
Financial
Statements
30
Notes
to
Financial
Statements
33
Report
of
Independent
Registered
Public
Accounting
Firm
46
Tax
Information
47
Board
Members
and
Officers
48
Shareholder
Information
53
Visit
ftinstitutional.com
for
fund
updates,
to
access
your
account,
or
to
find
investment
insights.
2
ftinstitutional.com
Annual
Report
ANNUAL
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
+18.54%
total
return
for
the
12
months
ended
December
31,
2021.
1
Global
equities
benefited
from
monetary
and
fiscal
stimulus
measures,
easing
COVID-19
pandemic
restrictions
in
certain
regions
and
the
development
of
treatments
and
vaccines.
However,
the
Chinese
government’s
imposition
of
additional
restrictions
on
some
businesses
pressured
Asian
and
global
emerging
market
stocks.
Additionally,
the
spread
of
the
Delta
and
Omicron
variants
and
higher
inflation
in
an
environment
of
persistent
supply-chain
disruptions
hindered
global
equities
at
certain
points
during
the
12-month
period.
In
the
U.S.,
the
economy
continued
to
recover
and
equities
rallied
amid
monetary
and
fiscal
stimulus
measures
and
the
continued
progress
of
vaccination
programs.
Gross
domestic
product
(GDP)
growth
was
generally
robust,
as
the
lifting
of
many
COVID-19
restrictions
and
strong
consumer
spending
supported
the
economy.
A
rebound
in
corporate
earnings
and
the
passage
of
a
bipartisan
infrastructure
bill
further
bolstered
investor
sentiment.
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
kept
the
federal
funds
target
rate
at
a
record-low
range
of
0.00%–0.25%.
While
the
Fed
also
maintained
quantitative
easing
measures
with
U.S.
Treasury
and
mortgage
bond
purchasing,
it
began
to
reduce
the
rate
of
purchases
beginning
in
November
2021
and
accelerated
the
pace
of
tapering
in
December.
The
Fed
also
noted
that
it
expected
easing
supply
constraints
to
help
reduce
inflationary
pressures
and
that
further
employment
progress
was
needed
before
the
Fed
would
consider
raising
the
range
for
the
federal
funds
target
rate.
The
economic
recovery
in
the
eurozone
was
slow,
as
quarter-over-quarter
GDP
growth
contracted
in
2021’s
first
quarter
before
returning
to
growth
in
2021’s
second
and
third
quarters.
GDP
growth
rates
were
initially
sluggish
among
the
region’s
largest
economies,
although
most
showed
signs
of
improvement
later
in
the
12-month
period.
Business
activity
growth
also
helped
European
developed
market
equities,
as
measured
by
the
MSCI
Europe
Index-NR,
to
post
a
+16.30%
total
return
for
the
12
months
under
review.
1
However,
in
November
2021,
the
annual
inflation
rate
in
the
eurozone
reached
the
highest
level
since
the
introduction
of
the
euro,
and
the
prospect
of
energy
shortages
during
the
winter
months
tempered
investor
optimism.
Asian
developed
and
emerging
market
equities,
as
measured
by
the
MSCI
All
Country
Asia
Index-NR,
posted
a
-2.49%
total
return
for
the
12-month
period.
1
While
many
Asian
countries
experienced
improving
economic
conditions,
Japan’s
quarter-over-quarter
GDP
contracted
in
2021’s
third
quarter.
China’s
economic
recovery
continued,
although
the
country’s
quarter-over-quarter
GDP
growth
in
2021’s
first
three
quarters
was
slower
than
in
2020’s
second
half,
pressured
by
higher
commodity
prices.
Unexpected
regulatory
changes
by
the
Chinese
government,
which
negatively
impacted
education-
and
technology-related
businesses,
and
concerns
about
a
large
Chinese
property
developer’s
solvency
pressured
Asian
stocks
during
2021’s
fourth
quarter.
Global
emerging
market
stocks,
as
measured
by
the
MSCI
Emerging
Markets
Index-NR,
posted
a
-2.54%
total
return
for
the
12
months
under
review.
1
Higher
inflation
led
many
central
banks
in
emerging
market
countries
to
raise
interest
rates,
which
dampened
economic
growth.
The
Omicron
variant
of
COVID-19
also
negatively
impacted
global
emerging
markets,
as
some
countries
reimplemented
restrictions
in
an
effort
to
counter
rising
infections.
The
foregoing
information
reflects
our
analysis
and
opinions
as
of
December
31,
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
Annual
Report
Foreign
Smaller
Companies
Series
This
annual
report
for
Foreign
Smaller
Companies
Series
(Fund)
covers
the
fiscal
year
ended
December
31,
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
+10.72%
cumulative
total
return
for
the
12
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
the
performance
of
global
developed
and
emerging
market
small-cap
equities
excluding
the
U.S.,
posted
a
+12.93%
cumulative
total
return.
1
Also
in
comparison,
the
Fund’s
former
benchmark,
the
MSCI
ACWI
ex
USA
Small
Cap
Index,
posted
a
+13.36%
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
As
bottom-up
investors
with
a
focus
on
what
we
consider
compelling
valuations,
we
construct
the
Fund’s
portfolios
based
on
our
analysis
of
the
attractiveness
of
individual
stocks.
Many
of
the
Fund’s
holdings
performed
well
during
the
12
months
under
review.
Xtep
International
Holdings
is
a
leading
China-based
sportswear
brand
and
wholesaler.
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
fruits
domestically.
We
are
positive
on
company
management’s
initiative
to
facilitate
supply-chain
management,
retail-operating
efficiency
and
online
channels,
Geographic
Composition
12/31/21
%
of
Total
Net
Assets
Europe
47.7%
Asia
39.4%
North
America
4.4%
Latin
America
&
Caribbean
3.2%
Middle East & Africa
1.5%
Short-Term
Investments
&
Other
Net
Assets
3.8%
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.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
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
19
.
Foreign
Smaller
Companies
Series
4
ftinstitutional.com
Annual
Report
which
we
believe
are
the
key
competences
for
driving
sales
growth.
We
expect
Xtep
to
benefit
from
rising
demand
for
domestic
sportswear
brands
by
continuing
to
invest
in
branding
as
well
as
research
and
development.
*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.
Watches
of
Switzerland
Group
(WOSG)
is
a
leading
U.K.-
based
luxury
watch
retailer
with
a
growing
presence
in
the
U.S.
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
remained
cash
generative
during
the
pandemic
lockdown
and
recent
earnings
results
beat
guidance,
driven
by
a
strong
online
performance.
Company
management
has
increased
digital
customer
engagement
activity
and
plans
to
extend
it
going
forward.
We
believe
WOSG
is
still
in
the
nascent
phase
of
its
development,
despite
being
a
long-standing
market
leader
in
the
U.K.
We
see
meaningful
tailwinds
for
the
WOSG
equity
story
from
a
product
and
geographic
perspective.
Sanlorenzo
is
an
Italy-based
global
leader
in
high-end
luxury
yachts.
With
powerful
brand
equity,
scarcity
of
product
and
a
notable
price
premium
to
its
peers,
Sanlorenzo
thrived
during
the
COVID-19
pandemic.
The
company
launched
several
new
models
during
2021
and
sold
out
the
collection
almost
immediately.
Sanlorenzo
has
a
huge
and
growing
backlog
that
we
believe
almost
entirely
secures
near-term
sales
growth
and
even
partially
secures
sales
as
far
out
as
2024.
Given
the
company’s
strong
performance,
its
shares
performed
exceptionally
well
throughout
2021.
We
believe
Sanlorenzo
is
poised
to
continue
along
its
growth
path
in
the
next
few
years,
driven
by
market
share
gains
from
the
introduction
of
more
new
models,
improved
price/
mix
by
moving
up
market
into
even
larger
superyachts
and
expansion
into
underserved
geographies
for
the
company
(namely,
the
U.S.).
In
contrast,
the
Fund
had
some
underperformers
during
the
period
under
review.
Nissei
ASB
Machine
is
a
Japan-
based
market-leading
manufacturer
of
one-step
injection-
molding
machines
for
the
bottling
industry.
We
like
the
company
given
its
substantial
market
share
in
a
niche
industry,
long-term
secular
trends
in
food
and
personal
care
away
from
glass
bottles
and
the
company’s
new
zero
cooling
technology.
This
technology
allows
manufacturers
to
significantly
improve
productivity
in
terms
of
time
and
material
used,
resulting
in
a
packaging
that
is
notably
lighter
(resulting
in
freight
savings),
while
at
the
same
time
increasing
strength
and
improving
visual
appeal.
However,
Nissei
underperformed
due
to
COVID-19-related
issues.
Although
orders
were
initially
strong
early
in
the
pandemic,
trade
shows
and
conferences,
which
are
significant
revenue
drivers
in
the
industry,
were
shut
down
entirely.
In
2021,
clients
in
Europe
and
Asia
held
off
on
capital
spending
due
to
general
uncertainties
amid
the
resurgence
of
COVID-19.
In
addition,
the
company
has
significant
manufacturing
in
India,
which
had
to
be
shut
down
at
times
given
the
rapid
virus
spread
there.
In
the
longer
term,
we
believe
growth
for
the
company’s
products
using
its
zero
cooling
technology
and
its
environmentally
friendly
products
(including
molding
machines
for
returnable
containers)
remain
well
positioned.
China-based
Xiabuxiabu
Catering
Management
China
Holdings
operates
two
lines
of
hot
pot
restaurants
throughout
China.
The
Xiabuxiabu
brand
offers
small,
quick-casual
dining
hotpot
for
individual
customers,
while
the
Coucou
brand
targets
the
mid-
to
high-end
hotpot
segment.
Its
share
price
has
been
under
pressure
because
of
investor
concerns
about
recent
management
changes
in
the
midst
of
the
pandemic.
We
believe
the
concerns
are
overstated
as
the
operating
impact
of
the
changes
is
under
control,
with
Coucou
significantly
increasing
its
number
of
stores
in
2021.
Additionally,
we
believe
earnings
growth
will
be
supported
by
Coucou’s
store
expansion
in
the
next
three
years.
Japan-based
Fuji
Oil
Holdings
is
a
confectionery
and
baking
ingredient
manufacturer
and
a
global
player
in
the
oligopolistic
cocoa
butter
alternative
industry.
We
maintain
our
view
that
fiscal-year
2021
(ended
March
31)
likely
marked
the
near-term
bottom
for
earnings,
given
that
global
demand
for
chocolate
is
climbing.
The
earnings
slump
continues
at
Blommer,
which
Fuji
Oil
acquired
in
2019,
as
a
Portfolio
Composition
12/31/21
%
of
Total
Net
Assets
Machinery
12.0%
Leisure
Products
9.9%
Electronic
Equipment,
Instruments
&
Components
9.3%
Professional
Services
6.3%
Textiles,
Apparel
&
Luxury
Goods
5.4%
Capital
Markets
4.6%
Food
Products
4.2%
Banks
3.9%
Specialty
Retail
3.9%
Food
&
Staples
Retailing
2.6%
Life
Sciences
Tools
&
Services
2.4%
Building
Products
2.3%
Entertainment
2.0%
Pharmaceuticals
2.0%
Other*
25.4%
Short-Term
Investments
&
Other
Net
Assets
3.8%
Foreign
Smaller
Companies
Series
5
ftinstitutional.com
Annual
Report
lack
of
skilled
staff
and
weak
productivity
continue
to
weigh
on
sales
volume,
compounded
by
narrowing
cocoa
press
margins.
It
is
important
to
recognize
the
effect
of
currency
movements
on
the
Fund’s
performance.
In
general,
if
the
value
of
the
U.S.
dollar
goes
up
compared
with
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
go
down
in
value
because
it
will
be
worth
fewer
U.S.
dollars.
This
can
have
a
negative
effect
on
Fund
performance.
Conversely,
when
the
U.S.
dollar
weakens
in
relation
to
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
increase
in
value,
which
can
contribute
to
Fund
performance.
For
the
12
months
ended
December
31,
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
December
31,
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
12/31/21
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Interpump
Group
SpA
2.0%
Machinery,
Italy
Sanlorenzo
SpA
2.0%
Leisure
Products,
Italy
Watches
of
Switzerland
Group
plc
1.8%
Specialty
Retail,
United
Kingdom
Thule
Group
AB
1.7%
Leisure
Products,
Sweden
Siegfried
Holding
AG
1.7%
Life
Sciences
Tools
&
Services,
Switzerland
Intertrust
NV
1.7%
Professional
Services,
Netherlands
Man
Group
plc
1.6%
Capital
Markets,
United
Kingdom
Hana
Microelectronics
PCL
1.6%
Electronic
Equipment,
Instruments
&
Components,
Thailand
Technogym
SpA
1.5%
Leisure
Products,
Italy
Meitec
Corp.
1.5%
Professional
Services,
Japan
CFA
®
is
a
trademark
owned
by
CFA
Institute.
Performance
Summary
as
of
December
31,
2021
Foreign
Smaller
Companies
Series
6
ftinstitutional.com
Annual
Report
The
performance
table
and
graph
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
12/31/21
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
–
1-Year
+10.72%
+10.72%
5-Year
+62.12%
+10.15%
10-Year
+135.27%
+8.93%
See
page
8
for
Performance
Summary
footnotes.
Foreign
Smaller
Companies
Series
Performance
Summary
7
ftinstitutional.com
Annual
Report
See
page
8
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$1,000,000
Investment
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
index
includes
reinvestment
of
any
income
or
distributions.
It
differs
from
the
Fund
in
composition
and
does
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
1/1/12–12/31/21
Foreign
Smaller
Companies
Series
Performance
Summary
8
ftinstitutional.com
Annual
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.
Source:
Morningstar.
The
MSCI
ACWI
ex
USA
Small
Cap
Index
is
a
free
float-adjusted,
market
capitalization-weighted
index
designed
to
measure
the
performance
of
small-cap
equity
securities
in
global
developed
and
emerging
markets,
excluding
the
U.S.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
4.
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.
Distributions
(1/1/21–12/31/21)
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
$0.2759
$0.1413
$3.1576
$3.5748
Total
Annual
Operating
Expenses
4
1.03%
Your
Fund’s
Expenses
Foreign
Smaller
Companies
Series
9
ftinstitutional.com
Annual
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
184/365
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
7/1/21
Ending
Account
Value
12/31/21
Expenses
Paid
During
Period
7/1/21–12/31/21
1,2
Ending
Account
Value
12/31/21
Expenses
Paid
During
Period
7/1/21–12/31/21
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$981.82
$5.27
$1,019.88
$5.38
1.06%
10
ftinstitutional.com
Annual
Report
International
Equity
Series
This
annual
report
for
International
Equity
Series
(Fund)
covers
the
fiscal
year
ended
December
31,
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
+5.75%
cumulative
total
return
for
the
12
months
under
review.
For
comparison,
the
Fund’s
new
primary
benchmark,
the
MSCI
All
Country
World
Index
(ACWI)
ex
USA
Index-NR,
which
measures
the
equity
market
performance
of
global
developed
and
emerging
markets
excluding
the
U.S.,
posted
a
+7.82%
cumulative
total
return.
1
The
Fund’s
former
primary
benchmark,
the
MSCI
ACWI
ex
USA
Index,
posted
a
+8.29%
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
the
equity
market
performance
of
global
developed
markets
excluding
the
U.S.
and
Canada,
posted
a
+11.26%
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
14
.
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
Strategically,
during
the
12
months
under
review,
we
positioned
the
portfolio
to
avoid
what
we
call
the
“double
bubble.”
First,
we
believe
there
is
a
bubble
in
growth
stock
valuations,
which
increased
dramatically
throughout
most
of
the
review
period
(at
least
until
the
Fed’s
hawkish
pivot
in
late
November
2021).
There
is
a
second
bubble
in
what
some
other
investment
managers
and
index
services
provider
MSCI
define
as
value
stocks,
which,
in
our
analysis,
are
not
cheap
and
have
plenty
of
economic
and
balance
sheet
risks.
These
risky
stocks
can
outperform
off
market
bottoms
when
the
Fed
reduces
bankruptcy
risk,
but
then
these
stocks
typically
underperform
after
the
initial
bounce
and
when
interest
rates
increase.
Although
the
extremes
of
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.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
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
26
.
Geographic
Composition
12/31/21
%
of
Total
Net
Assets
Europe
63.4%
Asia
31.1%
Latin
America
&
Caribbean
2.1%
North
America
1.1%
Short-Term
Investments
&
Other
Net
Assets
2.3%
International
Equity
Series
11
ftinstitutional.com
Annual
Report
the
market
drove
returns
for
the
benchmark
MSCI
ACWI
ex
USA
Index-NR
in
2021,
we
believe
the
Fund
has
a
better
balance
of
quality,
earnings
growth
and
valuation
than
the
overall
market
and
is
positioned
to
outperform
going
forward.
We
saw
signs
of
this
positive
rotation
for
the
portfolio
beginning
in
December
2021
December.
Key
contributors
to
Fund
performance
relative
to
the
MSCI
ACWI
ex
USA
Index-NR
during
the
annual
review
period
included
stock
selection
in
the
utilities,
energy,
communication
services,
health
care
and
real
estate
sectors.
In
contrast,
key
detractors
included
stock
selection
in
the
financials,
information
technology,
industrials
and
consumer
staples
sectors.
Utilities
was
the
top
sector
contributor
to
relative
performance,
with
French
water
and
waste
utility
Veolia
Environnement
and
German
electrical
utility
E.ON
finishing
among
the
Fund’s
top
three
contributors.
Veolia
performed
well
after
the
company
received
regulatory
approval
from
the
European
Commission
for
its
acquisition
of
utility
peer
SUEZ.
Although
the
acquisition
presents
some
near-term
operational
challenges,
we
believe
the
company
has
continued
to
execute
strongly
and
appears
well-placed
to
benefit
from
a
reopening
in
Europe
through
2022.
In
our
longer-term
view,
we
see
a
strong
case
for
holding
the
enlarged
Veolia
as
we
believe
the
company
should
benefit
from
a
multi-year
growth
trend
in
the
demand
for
waste,
water
and
recycling
services,
driven
by
increasing
consumer
awareness
and
government
regulation.
Meanwhile,
E.ON
benefited
from
strong
earnings
results
that
highlighted
improvements
across
multiple
business
lines.
We
continue
to
see
numerous
value
catalysts
for
E.ON
over
time,
including
balance
sheet
improvements,
lower
financing
costs
and
the
green
energy
transition,
which,
in
our
view,
will
spur
grid
investment
and
upgrades
in
Germany
that
should
ultimately
help
expand
E.ON’s
regulated
asset
base.
The
energy
sector
also
outperformed,
buoyed
by
stock
selection
and
a
favorable
overweight
allocation.
British
oil
major
BP
was
the
sector’s
top
contributor,
with
its
stock
rallying
as
oil
prices
reached
a
three-year
high
and
as
the
firm
reported
a
sharp
rise
in
quarterly
profits
and
boosted
its
share
buybacks.
We
continue
to
like
the
stock
given
our
assessment
of
the
company’s
huge
cash-generating
capabilities,
generous
shareholder
return
policies
and
discounted
valuations.
We
also
see
considerable
upside
potential
from
the
firm’s
ongoing
transition
from
an
integrated
oil
company
to
an
integrated
energy
company,
which
could
include
potential
renewable
listings
and
increased
disclosures.
We
believe
large
legacy
oil
majors
like
BP
could
actually
become
some
of
the
biggest
winners
in
the
green
energy
transition
given
the
scale
of
their
renewable
investments.
In
the
meantime,
in
the
context
of
tight
energy
fundamentals
and
high
oil
prices,
such
companies
remain
cash-generating
machines,
in
our
analysis.
*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.
Communication
services
benefited
from
stock
selection
and,
to
a
lesser
extent,
a
favorable
underweight
allocation.
Stock
selection
in
health
care
also
notably
contributed,
and
the
sector
delivered
one
of
the
Fund’s
top
five
relative
contributors:
Ireland-based
clinical
research
contractor,
ICON
(not
part
of
the
index).
The
company
reported
solid
results
toward
the
end
of
2021,
with
both
earnings
and
guidance
exceeding
analyst
expectations
amid
a
strong
demand
backdrop.
The
contract
research
industry
has
demonstrated
consistently
strong
growth
over
the
years,
and
ICON
has
been
a
steady
leader
within
the
industry.
The
company
recently
acquired
PRA
Health
Sciences
(another
high
quality
contract
researcher),
providing
additional
scale
and
technology
while
offering
strong
growth
and
value
accretion
financially,
in
our
assessment.
Over
the
long
term,
we
view
ICON
as
an
attractively
valued
play
on
higher
research
and
development
spending
in
the
therapeutics
industry
without
the
binary
risk
associated
with
single-
product
development
stories.
Turning
to
detractors,
stock
selection
and
an
underweight
allocation
in
financials
dampened
relative
returns.
The
sector
was
pressured
by
Hong
Kong-based
life
insurer
AIA
Group,
whose
share
price
fell
as
regulatory
tightening
and
slowing
growth
in
China
led
to
decelerating
new
business
Portfolio
Composition
12/31/21
%
of
Total
Net
Assets
Banks
14.6%
Oil,
Gas
&
Consumable
Fuels
9.7%
Pharmaceuticals
6.9%
Multi-Utilities
5.8%
Semiconductors
&
Semiconductor
Equipment
4.6%
Metals
&
Mining
4.5%
Automobiles
3.8%
Technology
Hardware,
Storage
&
Peripherals
3.4%
Diversified
Telecommunication
Services
3.1%
Construction
&
Engineering
3.1%
Industrial
Conglomerates
2.9%
Aerospace
&
Defense
2.6%
Household
Durables
2.3%
Containers
&
Packaging
1.9%
Other*
28.5%
Short-Term
Investments
&
Other
Net
Assets
2.3%
International
Equity
Series
12
ftinstitutional.com
Annual
Report
in
this
key
end-market.
However,
we
believe
that
current
growth
headwinds
in
China
are
likely
to
be
transient
and
that
long-term
growth
opportunities
in
this
attractive
market
remain
robust
for
an
industry
leader
like
AIA.
With
a
clear
competitive
advantage
centered
around
the
firm’s
premier
sales
agent
network
and
highly
profitable
protection
policies,
we
believe
AIA
is
well-positioned
for
success
over
the
long
term.
The
risk-reward
currently
appears
favorable,
in
our
view,
with
forward
price/embedded
value
toward
the
lower
end
of
the
stock’s
historical
valuation
range.
AIA
remains
a
core
holding
that
we
expect
will
benefit
from
Asia’s
rising
middle
class
and
compound
value
over
time.
Our
industrials
holdings
overall
also
detracted
from
relative
performance,
pressured
by
Japanese
construction
machinery
firm
Komatsu.
The
company’s
recent
operating
results
have
been
positive,
but
investor
concerns
about
a
slowdown
in
China
and
weakness
in
Indonesia,
as
well
as
higher
costs
and
lower
growth
in
the
company’s
aftermarket
segment,
weighed
on
the
stock.
We
continue
to
see
numerous
catalysts
for
the
stock,
including
accelerating
industrial
production,
healthy
residential
construction
fundamentals,
fiscal
stimulus
and
infrastructure,
equipment
replacement
requirements,
and
increasing
mining
intensity.
On
the
other
hand,
industrials
holding
Hitachi,
a
Japanese
industrial
technology
conglomerate,
finished
among
the
Fund’s
top
two
individual
contributors.
Its
shares
rallied
after
the
firm
reported
rising
first-half
2021
profits
on
strong
revenue
growth.
Hitachi
has
become
a
poster
child
for
successful
restructuring
and
is
emblematic
of
the
type
of
opportunities
we
are
finding
in
corporate
Japan.
Hitachi’s
corporate
governance
has
improved
markedly,
as
has
the
firm’s
operating
margin,
which
more
than
doubled
since
the
start
of
the
firm’s
de-conglomeration
more
than
a
decade
ago.
After
years
of
portfolio
restructuring,
we
believe
Hitachi
is
now
a
major
player
in
all
the
right
places.
Its
Lumada
internet-of-things
platform
is
poised
to
become
one
of
the
world’s
biggest
beneficiaries
of
the
digital
industrial
transformation,
in
our
view.
Hitachi
also
commands
dominant
positions
in
multiple
industries
critical
to
the
green
energy
transformation.
The
consumer
staples
and
consumer
discretionary
sectors
also
detracted
from
relative
returns,
albeit
to
lesser
extents.
Netherlands-based
food
delivery
service
provider
Just
Eat
Takeaway.com
(JET),
which
has
operations
in
Germany,
was
the
biggest
detractor
from
these
sectors.
Its
shares
slumped
due
to
continued
investor
concerns
about
competition
and
profitability
in
the
high-stakes
food
delivery
business.
Given
the
dynamics
of
this
marketplace
and
the
winner-
take-all/most
nature
of
the
business,
we
are
not
surprised
by
near-term
stock
volatility.
However,
we
continue
to
believe
JET
has
significant
upside
potential
given
its
cheap
valuation,
re-based
expectations,
competitive
positioning
and
large
potential
market
opportunities.
Although
it
was
largely
ignored
by
the
market,
we
are
encouraged
by
a
wave
of
recent
good
news
surrounding
JET,
including
key
partnerships
in
the
U.S.,
the
U.K.
and
Canada,
the
recent
exit
of
a
major
competitor
from
the
firm’s
primary
German
market
and
industry
consolidation
leading
to
a
more
rational
competitive
landscape.
From
a
geographical
standpoint,
North
America
was
the
biggest
relative
detractor,
pressured
by
Canadian
precious
metals
holdings.
We
were
surprised
by
the
weakness
of
precious
metals
stocks
given
the
macro
environment
of
rising
inflation
and
ultra-low
real
interest
rates,
both
of
which
tend
to
support
gold
prices.
We
believe
these
stocks
offer
good
long-term
value
at
recent
valuations
and
precious
metals
prices,
and
they
represent
an
effective
hedge
against
a
potential
dislocation
in
historically
expensive
equity
markets.
Europe
also
detracted
from
relative
results,
with
strength
in
Norway,
Ireland
and
France
being
more
than
offset
by
weakness
in
Germany,
Switzerland
and
the
Netherlands.
Conversely,
Asia
contributed
to
relative
performance,
due
largely
to
an
underweight
in
China
and
stock
selection
in
Japan.
It
is
important
to
recognize
the
effect
of
currency
movements
on
the
Fund’s
performance.
In
general,
if
the
value
of
the
U.S.
dollar
goes
up
compared
with
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
go
down
in
value
because
it
will
be
worth
fewer
U.S.
dollars.
This
can
Top
10
Holdings
12/31/21
Company
Industry
,
Country
%
of
Total
Net
Assets
A
a
Samsung
Electronics
Co.
Ltd.
3.4%
Technology
Hardware,
Storage
&
Peripherals,
South
Korea
BP
plc
3.3%
Oil,
Gas
&
Consumable
Fuels,
United
Kingdom
Royal
Dutch
Shell
plc
3.3%
Oil,
Gas
&
Consumable
Fuels,
Netherlands
Deutsche
Telekom
AG
3.1%
Diversified
Telecommunication
Services,
Germany
TotalEnergies
SE
3.1%
Oil,
Gas
&
Consumable
Fuels,
France
E.ON
SE
3.0%
Multi-Utilities,
Germany
Lloyds
Banking
Group
plc
3.0%
Banks,
United
Kingdom
Veolia
Environnement
SA
2.8%
Multi-Utilities,
France
Sumitomo
Mitsui
Financial
Group,
Inc.
2.6%
Banks,
Japan
BAE
Systems
plc
2.6%
Aerospace
&
Defense,
United
Kingdom
International
Equity
Series
13
ftinstitutional.com
Annual
Report
have
a
negative
effect
on
Fund
performance.
Conversely,
when
the
U.S.
dollar
weakens
in
relation
to
a
foreign
currency,
an
investment
traded
in
that
foreign
currency
will
increase
in
value,
which
can
contribute
to
Fund
performance.
For
the
12
months
ended
December
31,
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
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
December
31,
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
December
31,
2021
International
Equity
Series
14
ftinstitutional.com
Annual
Report
The
performance
table
and
graphs
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses
of
each
class.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
12/31/21
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
1-Year
+5.75%
+5.75%
5-Year
+29.99%
+5.39%
10-Year
+69.27%
+5.40%
Service
1-Year
+5.69%
+5.69%
5-Year
+29.06%
+5.23%
10-Year
+66.86%
+5.25%
See
page
16
for
Performance
Summary
footnotes.
International
Equity
Series
Performance
Summary
15
ftinstitutional.com
Annual
Report
See
page
16
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$1,000,000
Investment
1
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
index
includes
reinvestment
of
any
income
or
distributions.
It
differs
from
the
Fund
in
composition
and
does
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
Primary
Shares
(1/1/12–12/31/21)
Service
Shares
(1/1/12–12/31/21)
International
Equity
Series
Performance
Summary
16
ftinstitutional.com
Annual
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
1e
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.
Source:
Morningstar.
The
MSCI
ACWI
ex
USA
Index
is
a
free
float-adjusted,
market
capitalization-weighted
index
designed
to
measure
the
equity
market
performance
of
global
developed
and
emerging
markets,
excluding
the
U.S.
The
MSCI
EAFE
Index
is
a
free
float-adjusted,
market
capitalization-weighted
index
designed
to
measure
the
equity
market
performance
of
global
developed
markets
excluding
the
U.S.
and
Canada.
Net
Returns
(NR)
include
income
net
of
tax
withholding
when
dividends
are
paid.
6.
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.
Distributions
(1/1/21–12/31/21)
Share
Class
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Total
Primary
$1.4630
$0.2021
$2.4065
$4.0716
Service
$1.4459
$0.2021
$2.4065
$4.0545
Total
Annual
Operating
Expenses
6
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
17
ftinstitutional.com
Annual
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
184/365
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
7/1/21
Ending
Account
Value
12/31/21
Expenses
Paid
During
Period
7/1/21–12/31/21
1,2
Ending
Account
Value
12/31/21
Expenses
Paid
During
Period
7/1/21–12/31/21
1,2
a
Net
Annualized
Expense
Ratio
2
Primary
$1,000
$972.49
$4.54
$1,020.60
$4.65
0.91%
Service
$1,000
$972.67
$4.96
$1,020.17
$5.08
1.00%
Templeton
Institutional
Funds
Financial
Highlights
Foreign
Smaller
Companies
Series
ftinstitutional.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
18
a
Year
Ended
December
31,
2021
2020
2019
2018
2017
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$23.03
$21.40
$17.96
$25.08
$19.93
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.28
0.17
0.30
0.37
0.30
Net
realized
and
unrealized
gains
(losses)
...........
2.07
1.74
3.79
(4.97)
6.49
Total
from
investment
operations
....................
2.35
1.91
4.09
(4.60)
6.79
Less
distributions
from:
Net
investment
income
..........................
(0.28)
(0.22)
(0.37)
(0.21)
(0.68)
Net
realized
gains
.............................
(3.30)
(0.06)
(0.28)
(2.31)
(0.96)
Total
distributions
...............................
(3.58)
(0.28)
(0.65)
(2.52)
(1.64)
Net
asset
value,
end
of
year
.......................
$21.80
$23.03
$21.40
$17.96
$25.08
Total
return
....................................
10.72%
8.95%
22.86%
(18.48)%
34.18%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.04%
1.04%
1.02%
1.01%
0.99%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
1.04%
c
1.03%
1.02%
c
1.00%
d
0.98%
d
Net
investment
income
...........................
1.13%
0.87%
1.48%
1.54%
1.28%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$739,717
$725,098
$782,971
$739,576
$1,040,180
Portfolio
turnover
rate
............................
31.09%
34.89%
39.48%
34.10%
25.97%
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
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
d
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Templeton
Institutional
Funds
Statement
of
Investments,
December
31,
2021
Foreign
Smaller
Companies
Series
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
19
a
a
Industry
Shares
a
Value
a
Common
Stocks
95.8%
Austria
1.1%
AT&S
Austria
Technologie
&
Systemtechnik
AG
..............
Electronic
Equipment,
Instruments
&
Components
94,364
$
4,625,451
a
DO
&
CO
AG
...................
Commercial
Services
&
Supplies
44,748
3,758,320
8,383,771
Bahamas
1.1%
a
OneSpaWorld
Holdings
Ltd.
........
Diversified
Consumer
Services
787,705
7,892,804
a
Belgium
3.0%
Barco
NV
......................
Electronic
Equipment,
Instruments
&
Components
376,877
8,204,688
Fagron
........................
Health
Care
Providers
&
Services
425,561
7,168,811
a
Kinepolis
Group
NV
..............
Entertainment
113,682
7,077,360
22,450,859
Brazil
1.7%
a
Camil
Alimentos
SA
...............
Food
Products
3,279,000
6,683,070
a
M
Dias
Branco
SA
................
Food
Products
1,352,400
6,192,806
12,875,876
Canada
3.2%
a
Canada
Goose
Holdings,
Inc.
.......
Textiles,
Apparel
&
Luxury
Goods
126,300
4,682,439
Canadian
Western
Bank
...........
Banks
394,371
11,321,208
Computer
Modelling
Group
Ltd.
......
Energy
Equipment
&
Services
1,134,704
3,822,727
North
West
Co.,
Inc.
(The)
..........
Food
&
Staples
Retailing
132,200
3,579,698
23,406,072
China
3.5%
Greatview
Aseptic
Packaging
Co.
Ltd.
.
Containers
&
Packaging
5,478,200
2,002,562
b
JNBY
Design
Ltd.,
Reg
S
..........
Textiles,
Apparel
&
Luxury
Goods
1,592,500
2,532,819
b,c
Shanghai
Haohai
Biological
Technology
Co.
Ltd.,
H,
144A,
Reg
S
.........
Biotechnology
564,000
3,718,113
b,c
Viva
Biotech
Holdings,
144A,
Reg
S
..
Life
Sciences
Tools
&
Services
8,997,000
5,437,155
a,b
Xiabuxiabu
Catering
Management
China
Holdings
Co.
Ltd.,
144A,
Reg
S
....
Hotels,
Restaurants
&
Leisure
2,795,500
2,184,879
c
Xtep
International
Holdings
Ltd.
......
Textiles,
Apparel
&
Luxury
Goods
6,148,540
10,258,933
26,134,461
Denmark
0.7%
Matas
A/S
......................
Specialty
Retail
270,180
5,145,341
Finland
3.4%
Anora
Group
OYJ
................
Beverages
604,930
7,473,508
a
BasWare
OYJ
...................
Software
80,809
2,749,237
Fiskars
OYJ
Abp
.................
Household
Durables
190,477
4,983,793
Huhtamaki
OYJ
..................
Containers
&
Packaging
225,482
9,965,413
25,171,951
France
0.8%
a
Beneteau
SA
....................
Leisure
Products
341,444
5,537,472
a
Germany
5.6%
Grand
City
Properties
SA
..........
Real
Estate
Management
&
Development
141,227
3,351,856
Jenoptik
AG
....................
Electronic
Equipment,
Instruments
&
Components
258,759
10,910,216
a,b
Montana
Aerospace
AG,
144A,
Reg
S
.
Aerospace
&
Defense
167,323
6,208,697
Rational
AG
....................
Machinery
8,639
8,828,682
Stabilus
SA
.....................
Machinery
135,810
9,972,811
Templeton
Institutional
Funds
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Investments
Foreign
Smaller
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Series
(continued)
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
20
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Germany
(continued)
a
VIA
Optronics
AG,
ADR
............
Electronic
Equipment,
Instruments
&
Components
280,400
$
2,060,940
41,333,202
Greece
0.6%
JUMBO
SA
.....................
Specialty
Retail
317,426
4,549,908
Hong
Kong
2.4%
Johnson
Electric
Holdings
Ltd.
......
Auto
Components
1,229,926
2,608,617
Techtronic
Industries
Co.
Ltd.
.......
Machinery
142,500
2,841,125
Value
Partners
Group
Ltd.
..........
Capital
Markets
9,047,000
4,518,625
VTech
Holdings
Ltd.
..............
Communications
Equipment
1,010,300
7,911,141
17,879,508
Indonesia
0.8%
XL
Axiata
Tbk.
PT
................
Wireless
Telecommunication
Services
27,382,900
6,093,824
Israel
1.5%
Max
Stock
Ltd.
..................
Multiline
Retail
1,340,121
4,794,114
a
RADA
Electronic
Industries
Ltd.
......
Aerospace
&
Defense
635,800
5,989,236
10,783,350
Italy
7.2%
a
Brunello
Cucinelli
SpA
.............
Textiles,
Apparel
&
Luxury
Goods
82,941
5,696,285
Interpump
Group
SpA
.............
Machinery
203,887
14,923,091
MARR
SpA
.....................
Food
&
Staples
Retailing
315,705
6,773,744
Sanlorenzo
SpA
.................
Leisure
Products
341,532
14,723,724
b
Technogym
SpA,
144A,
Reg
S
......
Leisure
Products
1,192,656
11,454,457
53,571,301
Japan
18.6%
Anicom
Holdings,
Inc.
.............
Insurance
754,100
5,430,546
Asics
Corp.
.....................
Textiles,
Apparel
&
Luxury
Goods
478,400
10,599,437
Bunka
Shutter
Co.
Ltd.
............
Building
Products
429,500
4,008,395
Dowa
Holdings
Co.
Ltd.
............
Metals
&
Mining
84,400
3,550,216
en
Japan,
Inc.
...................
Professional
Services
177,300
5,007,532
Fuji
Oil
Holdings,
Inc.
.............
Food
Products
346,900
7,001,293
Glory
Ltd.
......................
Machinery
289,000
5,501,533
Hosokawa
Micron
Corp.
...........
Machinery
159,800
4,730,560
Idec
Corp.
......................
Electrical
Equipment
251,700
6,087,923
IDOM,
Inc.
.....................
Specialty
Retail
907,900
5,703,437
Meitec
Corp.
....................
Professional
Services
193,400
11,377,833
Morinaga
&
Co.
Ltd.
..............
Food
Products
62,100
2,029,921
Morita
Holdings
Corp.
.............
Machinery
78,100
888,106
Nichiha
Corp.
...................
Building
Products
324,900
8,633,389
Nihon
Parkerizing
Co.
Ltd.
..........
Chemicals
326,400
3,192,651
Nissei
ASB
Machine
Co.
Ltd.
........
Machinery
190,500
5,239,473
Qol
Holdings
Co.
Ltd.
.............
Food
&
Staples
Retailing
559,200
6,806,357
Shima
Seiki
Manufacturing
Ltd.
......
Machinery
430,100
7,373,787
Square
Enix
Holdings
Co.
Ltd.
.......
Entertainment
62,700
3,214,526
TechnoPro
Holdings,
Inc.
..........
Professional
Services
345,300
10,460,802
Topcon
Corp.
...................
Electronic
Equipment,
Instruments
&
Components
406,700
5,868,526
Tsubakimoto
Chain
Co.
............
Machinery
128,300
3,523,642
Tsumura
&
Co.
..................
Pharmaceuticals
399,600
11,374,891
137,604,776
Templeton
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Foreign
Smaller
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Series
(continued)
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accompanying
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integral
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of
these
financial
statements.
Annual
Report
21
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Netherlands
3.5%
a
Accell
Group
NV
.................
Leisure
Products
79,195
$
4,316,741
b
Flow
Traders,
144A,
Reg
S
.........
Capital
Markets
252,236
9,236,878
a,b
Intertrust
NV,
144A,
Reg
S
.........
Professional
Services
550,016
12,259,364
25,812,983
Norway
1.7%
a,c
PhotoCure
ASA
..................
Pharmaceuticals
306,214
3,560,749
b
Sbanken
ASA,
144A,
Reg
S
........
Banks
443,454
4,715,026
TGS
ASA
......................
Energy
Equipment
&
Services
452,729
4,327,246
12,603,021
Philippines
0.9%
Century
Pacific
Food,
Inc.
..........
Food
Products
11,227,200
6,442,286
South
Korea
2.3%
a
BNK
Financial
Group,
Inc.
..........
Banks
751,772
5,303,568
a
DGB
Financial
Group,
Inc.
..........
Banks
1,008,750
7,948,130
a
Kyung
Dong
Navien
Co.
Ltd.
........
Building
Products
73,113
3,372,533
16,624,231
Spain
0.7%
Construcciones
y
Auxiliar
de
Ferrocarriles
SA
................
Machinery
121,020
4,998,364
Sweden
5.2%
Cloetta
AB,
B
...................
Food
Products
711,836
2,058,614
b
Dometic
Group
AB,
144A
..........
Auto
Components
767,257
10,060,612
a
Electrolux
Professional
AB,
B
.......
Machinery
770,413
5,327,571
Granges
AB
....................
Metals
&
Mining
755,117
8,817,935
b
Thule
Group
AB,
144A,
Reg
S
.......
Leisure
Products
205,218
12,379,640
38,644,372
Switzerland
4.9%
Bucher
Industries
AG
.............
Machinery
22,197
10,925,399
a
Landis+Gyr
Group
AG
.............
Electronic
Equipment,
Instruments
&
Components
90,788
6,120,733
c
Logitech
International
SA
..........
Technology
Hardware,
Storage
&
Peripherals
52,800
4,354,944
a
Siegfried
Holding
AG
..............
Life
Sciences
Tools
&
Services
12,733
12,371,981
a
Zur
Rose
Group
AG
..............
Food
&
Staples
Retailing
9,055
2,331,087
36,104,144
Taiwan
9.3%
Chicony
Electronics
Co.
Ltd.
........
Technology
Hardware,
Storage
&
Peripherals
2,845,037
8,441,043
Giant
Manufacturing
Co.
Ltd.
........
Leisure
Products
635,482
7,895,503
Johnson
Health
Tech
Co.
Ltd.
.......
Leisure
Products
1,891,000
3,833,573
King
Yuan
Electronics
Co.
Ltd.
......
Semiconductors
&
Semiconductor
Equipment
6,322,000
10,193,137
Merida
Industry
Co.
Ltd.
...........
Leisure
Products
751,000
8,851,523
Nan
Pao
Resins
Chemical
Co.
Ltd.
...
Chemicals
755,000
3,866,649
Nien
Made
Enterprise
Co.
Ltd.
......
Household
Durables
447,000
6,644,206
Primax
Electronics
Ltd.
............
Electronic
Equipment,
Instruments
&
Components
2,615,000
5,337,352
Shin
Zu
Shing
Co.
Ltd.
............
Machinery
1,010,000
3,514,687
Topkey
Corp.
...................
Leisure
Products
704,000
3,799,466
Tripod
Technology
Corp.
...........
Electronic
Equipment,
Instruments
&
Components
1,448,000
6,493,699
68,870,838
Templeton
Institutional
Funds
Statement
of
Investments
Foreign
Smaller
Companies
Series
(continued)
ftinstitutional.com
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Report
The
accompanying
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of
these
financial
statements.
22
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Thailand
1.6%
Hana
Microelectronics
PCL
.........
Electronic
Equipment,
Instruments
&
Components
4,342,600
$
11,566,170
United
Kingdom
9.3%
Coats
Group
plc
.................
Textiles,
Apparel
&
Luxury
Goods
3,760,058
3,519,021
Greggs
plc
.....................
Hotels,
Restaurants
&
Leisure
211,685
9,574,184
b
Ibstock
plc,
144A,
Reg
S
...........
Construction
Materials
2,523,917
6,994,561
Man
Group
plc
..................
Capital
Markets
3,875,947
11,920,363
Oxford
Instruments
plc
............
Electronic
Equipment,
Instruments
&
Components
204,140
7,324,947
Pagegroup
plc
..................
Professional
Services
876,710
7,511,450
Rathbones
Group
plc
.............
Capital
Markets
327,581
8,872,262
a,b
Watches
of
Switzerland
Group
plc,
144A
Specialty
Retail
672,022
12,955,230
68,672,018
United
States
1.2%
Axis
Capital
Holdings
Ltd.
..........
Insurance
63,230
3,444,138
a
IMAX
Corp.
.....................
Entertainment
314,500
5,610,680
9,054,818
Total
Common
Stocks
(Cost
$512,056,011)
.....................................
708,207,721
a
Preferred
Stocks
0.3%
Brazil
0.3%
d
Alpargatas
SA,
0.74%
.............
Textiles,
Apparel
&
Luxury
Goods
335,600
2,222,041
Total
Preferred
Stocks
(Cost
$858,316)
.........................................
2,222,041
Warrants
a
a
a
a
a
Warrants
0.1%
Bahamas
0.1%
a
OneSpaWorld
Holdings
Ltd.
,
3/19/24
..
Diversified
Consumer
Services
262,784
817,258
Total
Warrants
(Cost
$221,371)
................................................
817,258
Total
Long
Term
Investments
(Cost
$513,135,698)
...............................
711,247,020
Short
Term
Investments
1.3%
a
a
Industry
Shares
a
Value
a
a
a
a
a
a
e
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
1.3%
Money
Market
Funds
1.3%
f,g
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..........
9,593,212
9,593,212
Total
Investments
from
Cash
Collateral
Received
for
Loaned
Securities
(Cost
$9,593,212)
.................................................................
9,593,212
a
a
a
a
a
Total
Short
Term
Investments
(Cost
$9,593,212
)
.................................
9,593,212
a
a
a
Total
Investments
(Cost
$522,728,910)
97.5%
...................................
$720,840,232
Other
Assets,
less
Liabilities
2.5%
.............................................
18,877,158
Net
Assets
100.0%
...........................................................
$739,717,390
a
a
a
Templeton
Institutional
Funds
Statement
of
Investments
Foreign
Smaller
Companies
Series
(continued)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
23
See
Abbreviations
on
page
45
.
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
December
31,
2021,
the
aggregate
value
of
these
securities
was
$100,137,431,
representing
13.5%
of
net
assets.
c
A
portion
or
all
of
the
security
is
on
loan
at
December
31,
2021.
See
Note
1(d).
d
Variable
rate
security.
The
rate
shown
represents
the
yield
at
period
end.
e
See
Note
1(d)
regarding
securities
on
loan.
f
See
Note
3(d)
regarding
investments
in
affiliated
management
investment
companies.
g
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Templeton
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Funds
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
24
a
Year
Ended
December
31,
2021
2020
2019
2018
2017
Primary
Shares
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$15.22
$15.54
$14.87
$21.99
$18.65
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.26
1.03
c
0.64
0.42
0.45
Net
realized
and
unrealized
gains
(losses)
...........
0.55
(0.32)
1.06
(3.66)
3.81
Total
from
investment
operations
....................
0.81
0.71
1.70
(3.24)
4.26
Less
distributions
from:
Net
investment
income
..........................
(1.46)
(0.67)
(1.02)
(0.42)
(0.64)
Net
realized
gains
.............................
(2.61)
(0.36)
(0.01)
(3.46)
(0.28)
Total
distributions
...............................
(4.07)
(1.03)
(1.03)
(3.88)
(0.92)
Net
asset
value,
end
of
year
.......................
$11.96
$15.22
$15.54
$14.87
$21.99
Total
return
....................................
5.75%
5.30%
11.57%
(14.87)%
22.92%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
0.94%
0.87%
0.82%
0.80%
0.78%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
0.91%
0.84%
0.82%
d
0.80%
d,e
0.78%
d
Net
investment
income
...........................
1.64%
7.51%
c
4.13%
1.98%
2.13%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$386,291
$447,139
$1,695,980
$2,785,308
$4,412,494
Portfolio
turnover
rate
............................
44.73%
89.34%
36.83%
f
25.60%
f
16.39%
f
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
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
e
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
f
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.
Annual
Report
25
a
Year
Ended
December
31,
2021
2020
2019
2018
2017
Service
Shares
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$15.48
$15.79
$14.97
$22.07
$18.72
Income
from
investment
operations
a
:
Net
investment
income
b
.........................
0.24
1.17
c
0.98
0.38
0.39
Net
realized
and
unrealized
gains
(losses)
...........
0.58
(0.47)
0.70
(3.66)
3.85
Total
from
investment
operations
....................
0.82
0.70
1.68
(3.28)
4.24
Less
distributions
from:
Net
investment
income
..........................
(1.45)
(0.65)
(0.85)
(0.36)
(0.61)
Net
realized
gains
.............................
(2.61)
(0.36)
(0.01)
(3.46)
(0.28)
Total
distributions
...............................
(4.06)
(1.01)
(0.86)
(3.82)
(0.89)
Net
asset
value,
end
of
year
.......................
$12.24
$15.48
$15.79
$14.97
$22.07
Total
return
....................................
5.69%
5.16%
11.34%
(15.01)%
22.73%
Ratios
to
average
net
assets
Expenses
before
waiver
and
payments
by
affiliates
......
1.04%
1.01%
0.97%
0.95%
0.93%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
1.00%
0.98%
0.97%
d
0.95%
d,e
0.93%
d
Net
investment
income
...........................
1.52%
8.42%
c
3.98%
1.83%
1.98%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$521
$448
$700
$5,375
$14,164
Portfolio
turnover
rate
............................
44.73%
89.34%
36.83%
f
25.60%
f
16.39%
f
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
Benefit
of
waiver
and
payments
by
affiliates
rounds
to
less
than
0.01%.
e
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
f
Excludes
the
value
of
portfolio
activity
as
a
result
of
in-kind
transactions.
Templeton
Institutional
Funds
Statement
of
Investments,
December
31,
2021
International
Equity
Series
ftinstitutional.com
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Report
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accompanying
notes
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an
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part
of
these
financial
statements.
26
a
a
Industry
Shares
a
Value
a
Common
Stocks
97.7%
Belgium
1.7%
Anheuser-Busch
InBev
SA/NV
......
Beverages
106,329
$
6,405,505
Brazil
2.1%
Wheaton
Precious
Metals
Corp.
.....
Metals
&
Mining
189,381
8,129,380
Canada
1.1%
Barrick
Gold
Corp.
...............
Metals
&
Mining
229,500
4,360,500
China
1.2%
NXP
Semiconductors
NV
..........
Semiconductors
&
Semiconductor
Equipment
20,196
4,600,245
France
9.1%
Danone
SA
.....................
Food
Products
91,589
5,688,624
Eiffage
SA
......................
Construction
&
Engineering
66,978
6,900,228
TotalEnergies
SE
................
Oil,
Gas
&
Consumable
Fuels
236,464
12,026,557
Veolia
Environnement
SA
..........
Multi-Utilities
292,955
10,749,950
35,365,359
Germany
13.9%
adidas
AG
......................
Textiles,
Apparel
&
Luxury
Goods
16,625
4,783,307
a
Continental
AG
..................
Auto
Components
46,119
4,841,684
b
Covestro
AG,
144A,
Reg
S
.........
Chemicals
59,071
3,632,830
Deutsche
Boerse
AG
..............
Capital
Markets
39,805
6,641,164
Deutsche
Telekom
AG
.............
Diversified
Telecommunication
Services
652,079
12,039,267
E.ON
SE
.......................
Multi-Utilities
837,583
11,631,065
Fresenius
Medical
Care
AG
&
Co.
KGaA
Health
Care
Providers
&
Services
99,972
6,475,883
Infineon
Technologies
AG
..........
Semiconductors
&
Semiconductor
Equipment
77,651
3,572,107
53,617,307
Hong
Kong
1.8%
AIA
Group
Ltd.
..................
Insurance
707,000
7,136,650
Hungary
0.8%
Richter
Gedeon
Nyrt
.
.............
Pharmaceuticals
109,872
2,951,866
Ireland
2.7%
CRH
plc
.......................
Construction
Materials
88,246
4,668,054
a
ICON
plc
.......................
Life
Sciences
Tools
&
Services
18,100
5,605,570
10,273,624
Japan
17.1%
Hitachi
Ltd.
.....................
Industrial
Conglomerates
139,000
7,525,514
Honda
Motor
Co.
Ltd.
.............
Automobiles
259,400
7,375,635
Isuzu
Motors
Ltd.
................
Automobiles
577,400
7,182,232
Komatsu
Ltd.
...................
Machinery
253,500
5,924,745
Kyocera
Corp.
...................
Electronic
Equipment,
Instruments
&
Components
92,900
5,805,136
Mitsubishi
Electric
Corp.
...........
Electrical
Equipment
268,700
3,408,546
Sony
Group
Corp.
................
Household
Durables
69,600
8,783,622
Sumitomo
Metal
Mining
Co.
Ltd.
.....
Metals
&
Mining
132,900
5,030,454
Sumitomo
Mitsui
Financial
Group,
Inc.
.
Banks
299,000
10,203,835
Taisei
Corp.
....................
Construction
&
Engineering
163,300
4,962,947
66,202,666
Netherlands
5.7%
ING
Groep
NV
..................
Banks
667,048
9,266,643
Royal
Dutch
Shell
plc,
B
...........
Oil,
Gas
&
Consumable
Fuels
575,433
12,624,274
21,890,917
Templeton
Institutional
Funds
Statement
of
Investments
International
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Series
(continued)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
27
a
a
Industry
Shares
a
Value
a
Common
Stocks
(continued)
Singapore
1.7%
United
Overseas
Bank
Ltd.
.........
Banks
337,100
$
6,726,976
South
Korea
5.7%
KB
Financial
Group,
Inc.
...........
Banks
116,851
5,403,239
Samsung
Electronics
Co.
Ltd.
.......
Technology
Hardware,
Storage
&
Peripherals
198,997
13,068,023
Shinhan
Financial
Group
Co.
Ltd.
....
Banks
117,659
3,635,246
22,106,508
Spain
1.4%
Red
Electrica
Corp.
SA
............
Electric
Utilities
253,434
5,476,028
Switzerland
3.8%
Adecco
Group
AG
................
Professional
Services
136,549
6,950,171
Roche
Holding
AG
...............
Pharmaceuticals
18,928
7,843,455
14,793,626
Taiwan
2.5%
Taiwan
Semiconductor
Manufacturing
Co.
Ltd.
......................
Semiconductors
&
Semiconductor
Equipment
430,492
9,506,420
Thailand
1.0%
Kasikornbank
PCL
...............
Banks
909,200
3,872,094
United
Kingdom
24.4%
AstraZeneca
plc
.................
Pharmaceuticals
65,735
7,669,601
BAE
Systems
plc
................
Aerospace
&
Defense
1,357,395
10,114,138
BP
plc
.........................
Oil,
Gas
&
Consumable
Fuels
2,831,163
12,675,068
CK
Hutchison
Holdings
Ltd.
.........
Industrial
Conglomerates
623,294
4,013,598
a
Compass
Group
plc
..............
Hotels,
Restaurants
&
Leisure
221,558
4,984,034
DS
Smith
plc
....................
Containers
&
Packaging
1,390,980
7,238,204
GlaxoSmithKline
plc
..............
Pharmaceuticals
379,939
8,265,598
a
Informa
plc
.....................
Media
593,565
4,152,516
a,c
International
Consolidated
Airlines
Group
SA
.....................
Airlines
2,751,879
5,351,450
a,b
Just
Eat
Takeaway.com
NV,
144A,
Reg
S
...........................
Internet
&
Direct
Marketing
Retail
58,364
3,168,463
Lloyds
Banking
Group
plc
..........
Banks
17,826,365
11,566,898
Smith
&
Nephew
plc
..............
Health
Care
Equipment
&
Supplies
323,436
5,640,141
Standard
Chartered
plc
............
Banks
995,076
6,045,929
a
WH
Smith
plc
...................
Specialty
Retail
182,867
3,672,590
94,558,228
Total
Common
Stocks
(Cost
$298,275,832)
.....................................
377,973,899
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
$298,275,832)
...............................
377,973,899
Templeton
Institutional
Funds
Statement
of
Investments
International
Equity
Series
(continued)
ftinstitutional.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
28
Short
Term
Investments
1.3%
a
a
Industry
Shares
a
Value
a
a
a
a
a
a
Money
Market
Funds
1.3%
United
States
1.3%
e,f
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..........
5,153,549
$
5,153,549
Total
Money
Market
Funds
(Cost
$5,153,549)
...................................
5,153,549
a
a
a
a
a
Total
Short
Term
Investments
(Cost
$5,153,549
)
.................................
5,153,549
a
a
a
Total
Investments
(Cost
$303,429,381)
99.0%
...................................
$383,127,448
Other
Assets,
less
Liabilities
1.0%
.............................................
3,684,603
Net
Assets
100.0%
...........................................................
$386,812,051
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
December
31,
2021,
the
aggregate
value
of
these
securities
was
$6,801,293,
representing
1.8%
of
net
assets.
c
A
portion
or
all
of
the
security
is
on
loan
at
December
31,
2021.
See
Note
1(d).
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.
Templeton
Institutional
Funds
Statement
of
Investments
International
Equity
Series
(continued)
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
29
At
December
31,
2021,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(c).
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Equity
contracts
MSCI
EAFE
Index
............................
Long
20
$
2,321,800
3/18/22
$
37,869
Total
Futures
Contracts
......................................................................
$37,869
*
As
of
year
end
.
See
Note
6
regarding
other
derivative
information.
Templeton
Institutional
Funds
Financial
Statements
Statements
of
Assets
and
Liabilities
December
31,
2021
ftinstitutional.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
30
Foreign
Smaller
Companies
Series
International
Equity
Series
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
..................................................
$513,135,698
$298,275,832
Cost
-
Non-controlled
affiliates
(Not
e
3d)
.......................................
9,593,212
5,153,549
Value
-
Unaffiliated
issuers
(Includes
securities
loaned
of
$14,800,822
and
$5,083,877
respectively)
............................................................
$711,247,020
$377,973,899
Value
-
Non-controlled
affiliates
(Not
e
3d)
......................................
9,593,212
5,153,549
Cash
...................................................................
26,783,420
—
Foreign
currency,
at
value
(cost
$—
and
$708
respectively)
..........................
—
712
Receivables:
Investment
securities
sold
..................................................
68,865
—
Capital
shares
sold
.......................................................
157,981
461,522
Dividends
..............................................................
1,567,286
4,120,219
European
Union
tax
reclaims
(Note
1
e
)
........................................
987,970
1,874,869
Deposits
with
brokers
for:
Futures
contracts
.......................................................
—
133,298
Total
assets
.........................................................
750,405,754
389,718,068
Liabilities:
Payables:
Capital
shares
redeemed
..................................................
375,568
24,577
Management
fees
........................................................
585,928
245,088
Transfer
agent
fees
.......................................................
10,417
9,978
Trustees'
fees
and
expenses
................................................
30,627
100,742
IRS
closing
agreement
fees
for
European
Union
tax
reclaims
(Note
1
e
)
................
—
2,199,536
Variation
margin
on
futures
contracts
..........................................
—
1,300
Payable
upon
return
of
securities
loaned
(Note
1
d
)
.................................
9,593,212
—
Accrued
expenses
and
other
liabilities
..........................................
92,612
324,796
Total
liabilities
........................................................
10,688,364
2,906,017
Net
assets,
at
value
................................................
$739,717,390
$386,812,051
Net
assets
consist
of:
Paid-in
capital
............................................................
$548,225,950
$310,154,693
Total
distributable
earnings
(losses)
............................................
191,491,440
76,657,358
Net
assets,
at
value
................................................
$739,717,390
$386,812,051
Shares
outstanding
........................................................
33,936,274
—
Net
asset
value
per
share
...................................................
$21.80
—
International
Equity
Series
Primary
Shares:
Net
assets,
at
value
.......................................................................
$386,290,843
Shares
outstanding
........................................................................
32,289,093
Net
asset
value
per
share
...................................................................
$11.96
Service
Shares:
Net
assets,
at
value
.......................................................................
$521,208
Shares
outstanding
........................................................................
42,591
Net
asset
value
per
share
...................................................................
$12.24
Templeton
Institutional
Funds
Financial
Statements
Statements
of
Operations
for
the
year
ended
December
31,
2021
ftinstitutional.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
31
Foreign
Smaller
Companies
Series
International
Equity
Series
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$1,899,539
and
$1,794,367,
respectively)
Unaffiliated
issuers
.......................................................
$15,279,431
$10,104,717
Non-controlled
affiliates
(Not
e
3d)
............................................
—
768
Interest:
Unaffiliated
issuers
.......................................................
43
1,714
Income
from
securities
loaned:
Unaffiliated
entities
(net
of
fees
and
rebates)
....................................
233,365
11,461
Non-controlled
affiliates
(Not
e
3d)
............................................
1,013
55
Other
income
(Not
e
1e
)
.....................................................
709,241
1,355,752
Total
investment
income
..................................................
16,223,093
11,474,467
Expenses:
Management
fees
(Not
e
3a)
..................................................
7,114,739
3,490,635
Transfer
agent
fees:
(Note
3c)
Primary
Shares
.........................................................
—
147,499
Service
Shares
.........................................................
—
130
Transfer
agent
fees
(Not
e
3c)
.................................................
190,869
—
Sub-transfer
agent
fees:
(Note
3c)
Service
Shares
.........................................................
—
700
Custodian
fees
............................................................
98,045
49,975
Reports
to
shareholders
fees
.................................................
42,953
43,453
Registration
and
filing
fees
...................................................
36,264
64,894
Professional
fees
..........................................................
141,427
109,882
Trustees'
fees
and
expenses
.................................................
85,969
143,611
Other
...................................................................
64,465
191,240
Total
expenses
........................................................
7,774,731
4,242,019
Expenses
waived/paid
by
affiliates
(Not
e
3d
and
3e)
.............................
(8,409)
(163,525)
Net
expenses
........................................................
7,766,322
4,078,494
Net
investment
income
...............................................
8,456,771
7,395,973
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
.....................................................
105,265,722
35,682,530
Foreign
currency
transactions
...............................................
(97,170)
42,406
Futures
contracts
........................................................
—
3,146,275
Net
realized
gain
(loss)
.................................................
105,168,552
38,871,211
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
.....................................................
(37,410,957)
(17,555,779)
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
.............
(115,207)
(1,779,144)
Futures
contracts
........................................................
—
(493,279)
Net
change
in
unrealized
appreciation
(depreciation)
...........................
(37,526,164)
(19,828,202)
Net
realized
and
unrealized
gain
(loss)
...........................................
67,642,388
19,043,009
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.........................
$76,099,159
$26,438,982
Templeton
Institutional
Funds
Financial
Statements
Statements
of
Changes
in
Net
Assets
ftinstitutional.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
32
Foreign
Smaller
Companies
Series
International
Equity
Series
Year
Ended
December
31,
2021
Year
Ended
December
31,
2020
Year
Ended
December
31,
2021
Year
Ended
December
31,
2020
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$8,456,771
$5,471,863
$7,395,973
$67,218,880
Net
realized
gain
(loss)
............
105,168,552
13,792,014
38,871,211
84,230,905
Net
change
in
unrealized
appreciation
(depreciation)
.................
(37,526,164)
30,251,773
(19,828,202)
(245,295,604)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
76,099,159
49,515,650
26,438,982
(93,845,819)
Distributions
to
shareholders:
Primary
Shares
..................
—
—
(110,460,144)
(53,111,315)
Service
Shares
..................
—
—
(166,811)
(29,760)
Distributions
to
shareholders
.........
(105,430,343)
(8,851,726)
—
—
Total
distributions
to
shareholders
.....
(105,430,343)
(8,851,726)
(110,626,955)
(53,141,075)
Capital
share
transactions:
(Note
2)
Primary
Shares
..................
—
—
23,198,093
(1,101,888,702)
Service
Shares
..................
—
—
215,336
(218,302)
Capital
share
transactions
(Note
2)
.....
43,950,886
(98,536,876)
—
—
Total
capital
share
transactions
.......
43,950,886
(98,536,876)
23,413,429
(1,102,107,004)
Net
increase
(decrease)
in
net
assets
.....................
14,619,702
(57,872,952)
(60,774,544)
(1,249,093,898)
Net
assets:
Beginning
of
year
..................
725,097,688
782,970,640
447,586,595
1,696,680,493
End
of
year
......................
$739,717,390
$725,097,688
$386,812,051
$447,586,595
Templeton
Institutional
Funds
33
ftinstitutional.com
Annual
Report
Notes
to
Financial
Statements
1.
Organization
and
Significant
Accounting
Policies
Templeton
Institutional
Funds (Trust)
is
registered
under
the
Investment
Company
Act
of
1940
(1940
Act)
as
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.
The
Funds
have
procedures
to
determine
the
fair
value
of
financial
instruments
for
which
market
prices
are
not
reliable
or
readily
available.
Under
these
procedures,
the
Funds
primarily
employ
a
market-based
approach
which
may
use
related
or
comparable
assets
or
liabilities,
recent
transactions,
market
multiples,
book
values,
and
other
relevant
information
for
the
investment
to
determine
the
fair
value
of
the
investment.
An
income-based
valuation
approach
may
also
be
used
in
which
the
anticipated
future
cash
flows
of
the
investment
are
discounted
to
calculate
fair
value.
Discounts
may
also
be
applied
due
to
the
nature
or
duration
of
any
restrictions
on
the
disposition
of
the
investments.
Due
to
the
inherent
uncertainty
of
valuations
of
such
investments,
the
fair
values
may
differ
significantly
from
the
values
that
would
have
been
used
had
an
active
market
existed.
Trading
in
securities
on
foreign
securities
stock
exchanges
and
OTC
markets
may
be
completed
before
4
p.m.
Eastern
time.
In
addition,
trading
in
certain
foreign
markets
may
not
take
place
on
every
Funds'
business
day.
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
34
ftinstitutional.com
Annual
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
December
31,
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.
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.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
35
ftinstitutional.com
Annual
Report
d.
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
and
International
Equity
Series
held
$5,962,156
and
$5,464,191,
respectively
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.
e.
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.
Any
fees
associated
with
these
filings
are
reflected
in
other
expenses
in
the
Statements
of
Operations.
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.
During
the
fiscal
year
ended
December
31,
2021,
certain
or
all
Funds
received
EU
reclaims
in
excess
of
the
foreign
taxes
paid
during
the
year.
Each
Fund
may
recognize
an
income
tax
liability
related
to
its
uncertain
tax
positions
under
U.S.
GAAP
when
the
uncertain
tax
position
has
a
less
than
50%
probability
that
it
will
be
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
December
31,
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
36
ftinstitutional.com
Annual
Report
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.
f.
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.
g.
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.
h.
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)
e.
Income
and
Deferred
Taxes
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
37
ftinstitutional.com
Annual
Report
2.
Shares
of
Beneficial
Interest
At
December
31,
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
Year
ended
December
31,
2021
Shares
sold
...................................
4,047,399
$101,195,141
Shares
issued
in
reinvestment
of
distributions
..........
4,379,342
92,550,331
Shares
redeemed
...............................
(5,981,276)
(149,794,586)
Net
increase
(decrease)
..........................
2,445,465
$43,950,886
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:
Year
ended
December
31,
2021
Shares
sold
...................................
4,888,882
$77,425,011
Shares
issued
in
reinvestment
of
distributions
..........
7,487,110
94,340,837
Shares
redeemed
...............................
(9,461,057)
(148,567,755)
Net
increase
(decrease)
..........................
2,914,935
$23,198,093
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:
Year
ended
December
31,
2021
Shares
sold
...................................
19,254
$316,394
Shares
issued
in
reinvestment
of
distributions
..........
12,776
166,811
Shares
redeemed
...............................
(18,345)
(267,869)
Net
increase
(decrease)
..........................
13,685
$215,336
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
38
ftinstitutional.com
Annual
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
year
ended
December
31,
2021,
each
Fund's
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)
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
39
ftinstitutional.com
Annual
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
year
ended
December
31,
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
year
ended
December
31,
2021,
investments
in
affiliated
management
investment
companies
were
as
follows:
Foreign
Smaller
Companies
Series
International
Equity
Series
Transfer
agent
fees
........................
$190,869
$143,483
aa
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares
Held
at
End
of
Year
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
$97,943,638
$(120,235,860)
$—
$—
$9,593,212
9,593,212
$1,013
Total
Affiliated
Securities
...
$31,885,434
$97,943,638
$(120,235,860)
$—
$—
$9,593,212
$1,013
3.
Transactions
with
Affiliates
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
40
ftinstitutional.com
Annual
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
For
tax
purposes,
the
Funds
may
elect
to
defer
any
portion
of
a
post-October
capital
loss
or
late-year
ordinary
loss
to
the
first
day
of
the
following
fiscal
year.
At
December
31,
2021,
International
Equity
Series
deferred
post-October
capital
losses
of
$1,722,185.
The
tax
character
of
distributions
paid
during
the
years
ended
December
31,
2021
and
2020,
was
as
follows:
aa
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares
Held
at
End
of
Investment
Income
International
Equity
Series
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.
$
5,645,058
$
152,110,419
$
(152,601,928)
$
—
$
—
$
5,153,549
5,153,549
$
768
Non-Controlled
Affiliates
Income
from
securities
loaned
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
.
$5,609,390
$32,539,042
$(38,148,432)
$—
$—
$—
—
$55
Total
Affiliated
Securities
...
$11,254,448
$184,649,461
$(190,750,360)
$—
$—
$5,153,549
$823
Foreign
Smaller
Companies
Series
International
Equity
Series
2021
2020
2021
2020
Distributions
paid
from:
Ordinary
income
........................
$12,309,269
$6,991,704
$45,728,296
$34,560,894
Long
term
capital
gain
....................
93,121,074
1,860,022
64,898,659
18,580,181
$105,430,343
$8,851,726
$110,626,955
$53,141,075
3.
Transactions
with
Affiliates
(continued)
d.
Investments
in
Affiliated
Management
Investment
Companies
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
41
ftinstitutional.com
Annual
Report
At
December
31,
2021,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation),
undistributed
ordinary
income
and
undistributed
long
term
capital
gains
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
currency
transactions
and
wash
sales.
The
Funds,
utilized
a
tax
accounting
practice
to
treat
a
portion
of
the
proceeds
from
capital
shares
redeemed
as
a
distribution
from
net
investment
income
and
realized
capital
gains.
5.
Investment
Transactions
Purchases
and
sales
of
investments
(excluding
short
term
securities)
for
the
year
ended
December
31,
2021,
were
as
follows:
At
December
31,
2021,
in
connection
with
securities
lending
transactions,
certain
or
all
Funds
loaned
investments
and
received
cash
collateral
as
follows:
Foreign
Smaller
Companies
Series
International
Equity
Series
a
a
a
Cost
of
investments
.......................
$532,396,716
$311,915,334
Unrealized
appreciation
.....................
$237,114,653
$88,173,248
Unrealized
depreciation
.....................
(48,671,137)
(16,923,265)
Net
unrealized
appreciation
(depreciation)
.......
$188,443,516
$71,249,983
Distributable
earnings:
Undistributed
ordinary
income
................
$1,991,450
$—
Undistributed
long
term
capital
gains
...........
—
5,311,839
Total
distributable
earnings
..................
$1,991,450
$5,311,839
Foreign
Smaller
Companies
Series
International
Equity
Series
Purchases
..............................
$220,640,951
$184,761,697
Sales
..................................
$272,920,385
$219,475,608
Foreign
Smaller
Companies
Series
International
Equity
Series
Securities
lending
transactions
a
:
Equity
investments
b
........................
$9,593,212
$—
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.
4.
Income
Taxes
(continued)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
42
ftinstitutional.com
Annual
Report
6.
Other
Derivative
Information
At
December
31,
2021,
investments
in
derivative
contracts
are
reflected
in
the
Statements
of
Assets
and
Liabilities
as
follows:
For
the
year
ended
December
31,
2021,
the
effect
of
derivative
contracts
in
the
Statements
of
Operations
was
as
follows:
For
the
year
ended
December
31,
2021,
the
average
month
end
notional
amount
of
futures
contracts
was
$14,754,267.
See
Note
1(c)
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.
Asset
Derivatives
Liability
Derivatives
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statement
of
Assets
and
Liabilities
Location
Fair
Value
Statement
of
Assets
and
Liabilities
Location
Fair
Value
International
Equity
Series
Equity
contracts
...........
Variation
margin
on
futures
contracts
$
37,869
a
Variation
margin
on
futures
contracts
$
—
Total
....................
$37,869
$—
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.
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statement
of
Operations
Location
Net
Realized
Gain
(Loss)
for
the
Year
Statement
of
Operations
Location
Net
Change
in
Unrealized
Appreciation
(Depreciation)
for
the
Year
International
Equity
Series
Net
realized
gain
(loss)
from:
Net
change
in
unrealized
appreciation
(depreciation)
on:
Equity
Contracts
..............
Futures
contracts
$3,146,275
Futures
contracts
$(493,279)
Total
.......................
$3,146,275
$(493,279)
Templeton
Institutional
Funds
Notes
to
Financial
Statements
43
ftinstitutional.com
Annual
Report
9.
Credit
Facility
The
Funds,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
in
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2.675
billion
(Global
Credit
Facility)
which
matured
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.
Effective
February
4,
2022,
the
Borrowers
renewed
the
Global
Credit
Facility
for
a
one-year
term,
maturing
February
3,
2023,
for
a
total
of
$2.675
billion.
Under
the
terms
of
the
Global
Credit
Facility,
the
Funds
shall,
in
addition
to
interest
charged
on
any
borrowings
made
by
the
Funds
and
other
costs
incurred
by
the
Funds,
pay
their
share
of
fees
and
expenses
incurred
in
connection
with
the
implementation
and
maintenance
of
the
Global
Credit
Facility,
based
upon
their
relative
share
of
the
aggregate
net
assets
of
all
of
the
Borrowers,
including
an
annual
commitment
fee
of
0.15%
based
upon
the
unused
portion
of
the
Global
Credit
Facility.
These
fees
are
reflected
in
other
expenses
in
the
Statements
of
Operations.
During
the
year ended
fiscal
year,
the
Funds
did
not
use
the
Global
Credit
Facility.
10.
Fair
Value
Measurements
The Funds
follow
a
fair
value
hierarchy
that
distinguishes
between
market
data
obtained
from
independent
sources
(observable
inputs)
and
the Funds'
own
market
assumptions
(unobservable
inputs).
These
inputs
are
used
in
determining
the
value
of
the Funds' financial
instruments
and
are
summarized
in
the
following
fair
value
hierarchy:
Level
1
–
quoted
prices
in
active
markets
for
identical
financial
instruments
Level
2
–
other
significant
observable
inputs
(including
quoted
prices
for
similar
financial
instruments,
interest
rates,
prepayment
speed,
credit
risk,
etc.)
Level
3
–
significant
unobservable
inputs
(including
the Funds'
own
assumptions
in
determining
the
fair
value
of
financial
instruments)
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
December
31,
2021,
in
valuing
the
Funds'
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
Level
1
Level
2
Level
3
Total
Foreign
Smaller
Companies
Series
Assets:
Investments
in
Securities:
Common
Stocks
:
Austria
..............................
$
—
$
8,383,771
$
—
$
8,383,771
Bahamas
............................
7,892,804
—
—
7,892,804
Belgium
.............................
—
22,450,859
—
22,450,859
Brazil
...............................
—
12,875,876
—
12,875,876
Canada
.............................
23,406,072
—
—
23,406,072
China
...............................
4,535,381
21,599,080
—
26,134,461
Denmark
............................
5,145,341
—
—
5,145,341
Finland
..............................
12,457,301
12,714,650
—
25,171,951
France
..............................
—
5,537,472
—
5,537,472
Germany
............................
18,242,448
23,090,754
—
41,333,202
Greece
..............................
4,549,908
—
—
4,549,908
Hong
Kong
...........................
7,911,141
9,968,367
—
17,879,508
Indonesia
............................
—
6,093,824
—
6,093,824
Israel
...............................
5,989,236
4,794,114
—
10,783,350
Templeton
Institutional
Funds
Notes
to
Financial
Statements
44
ftinstitutional.com
Annual
Report
Level
1
Level
2
Level
3
Total
Foreign
Smaller
Companies
Series
(continued)
Assets:
Investments
in
Securities:
Common
Stocks:
Italy
................................
$
—
$
53,571,301
$
—
$
53,571,301
Japan
...............................
—
137,604,776
—
137,604,776
Netherlands
..........................
—
25,812,983
—
25,812,983
Norway
..............................
4,715,026
7,887,995
—
12,603,021
Philippines
...........................
—
6,442,286
—
6,442,286
South
Korea
..........................
—
16,624,231
—
16,624,231
Spain
...............................
—
4,998,364
—
4,998,364
Sweden
.............................
—
38,644,372
—
38,644,372
Switzerland
...........................
4,354,944
31,749,200
—
36,104,144
Taiwan
..............................
—
68,870,838
—
68,870,838
Thailand
.............................
—
11,566,170
—
11,566,170
United
Kingdom
.......................
22,950,834
45,721,184
—
68,672,018
United
States
.........................
9,054,818
—
—
9,054,818
Preferred
Stocks
........................
—
2,222,041
—
2,222,041
Warrants
..............................
817,258
—
—
817,258
Short
Term
Investments
...................
9,593,212
—
—
9,593,212
Total
Investments
in
Securities
...........
$141,615,724
$579,224,508
a
$—
$720,840,232
International
Equity
Series
Assets:
Investments
in
Securities:
Common
Stocks
:
Belgium
.............................
—
6,405,505
—
6,405,505
Brazil
...............................
8,129,380
—
—
8,129,380
Canada
.............................
4,360,500
—
—
4,360,500
China
...............................
4,600,245
—
—
4,600,245
France
..............................
—
35,365,359
—
35,365,359
Germany
............................
—
53,617,307
—
53,617,307
Hong
Kong
...........................
—
7,136,650
—
7,136,650
Hungary
.............................
2,951,866
—
—
2,951,866
Ireland
..............................
5,605,570
4,668,054
—
10,273,624
Japan
...............................
—
66,202,666
—
66,202,666
Netherlands
..........................
—
21,890,917
—
21,890,917
Singapore
............................
—
6,726,976
—
6,726,976
South
Korea
..........................
—
22,106,508
—
22,106,508
Spain
...............................
—
5,476,028
—
5,476,028
Switzerland
...........................
—
14,793,626
—
14,793,626
Taiwan
..............................
—
9,506,420
—
9,506,420
Thailand
.............................
—
3,872,094
—
3,872,094
United
Kingdom
.......................
—
94,558,228
—
94,558,228
Escrows
and
Litigation
Trusts
...............
—
—
—
b
—
Short
Term
Investments
...................
5,153,549
—
—
5,153,549
Total
Investments
in
Securities
...........
$30,801,110
$352,326,338
c
$—
$383,127,448
Other
Financial
Instruments:
Futures
contracts
........................
$
37,869
$
—
$
—
$
37,869
Total
Other
Financial
Instruments
.........
$37,869
$—
$—
$37,869
a
Includes
foreign
securities
valued
at
$579,224,508,
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
December
31,
2021.
c
Includes
foreign
securities
valued
at
$352,326,338,
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
45
ftinstitutional.com
Annual
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 year.
11.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
(FASB)
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
for
certain
LIBOR
settings
and
2023
for
the
remainder. 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,
other
than
those
already
disclosed
in
the
financial
statements.
Abbreviations
Selected
Portfolio
ADR
American
Depositary
Receipt
10.
Fair
Value
Measurements
(continued)
Templeton
Institutional
Funds
Report
of
Independent
Registered
Public
Accounting
Firm
46
ftinstitutional.com
Annual
Report
To
the
Board
of
Trustees
of
Templeton
Institutional
Funds
and
Shareholders
of
Foreign
Smaller
Companies
Series
and
International
Equity
Series
Opinions
on
the
Financial
Statements
We
have
audited
the
accompanying
statements
of
assets
and
liabilities,
including
the
statements
of
investments,
of
Foreign
Smaller
Companies
Series
and
International
Equity
Series
(constituting
Templeton
Institutional
Funds,
hereafter
collectively
referred
to
as
the
"Funds")
as
of
December
31,
2021,
the
related
statements
of
operations
for
the
year
ended
December
31,
2021,
the
statements
of
changes
in
net
assets
for
each
of
the
two
years
in
the
period
ended
December
31,
2021,
including
the
related
notes,
and
the
financial
highlights
for
each
of
the
five
years
in
the
period
ended
December
31,
2021
(collectively
referred
to
as
the
“financial
statements”).
In
our
opinion,
the
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
each
of
the
Funds
as
of
December
31,
2021,
the
results
of
each
of
their
operations
for
the
year
then
ended,
the
changes
in
each
of
their
net
assets
for
each
of
the
two
years
in
the
period
ended
December
31,
2021
and
each
of
the
financial
highlights
for
each
of
the
five
years
in
the
period
ended
December
31,
2021
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America.
Basis
for
Opinions
These
financial
statements
are
the
responsibility
of
the
Funds’
management.
Our
responsibility
is
to
express
an
opinion
on
the
Funds’
financial
statements
based
on
our
audits.
We
are
a
public
accounting
firm
registered
with
the
Public
Company
Accounting
Oversight
Board
(United
States)
(PCAOB)
and
are
required
to
be
independent
with
respect
to
the
Funds
in
accordance
with
the
U.S.
federal
securities
laws
and
the
applicable
rules
and
regulations
of
the
Securities
and
Exchange
Commission
and
the
PCAOB.
We
conducted
our
audits
of
these
financial
statements
in
accordance
with
the
standards
of
the
PCAOB.
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement,
whether
due
to
error
or
fraud.
Our
audits
included
performing
procedures
to
assess
the
risks
of
material
misstatement
of
the
financial
statements,
whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
financial
statements.
Our
audits
also
included
evaluating
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
financial
statements.
Our
procedures
included
confirmation
of
securities
owned
as
of
December
31,
2021
by
correspondence
with
the
custodian,
transfer
agents
and
brokers;
when
replies
were
not
received
from
brokers,
we
performed
other
auditing
procedures.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinions.
PricewaterhouseCoopers
LLP
San
Francisco,
California
February
17,
2022
We
have
served
as
the
auditor
of
one
or
more
investment
companies
in
the
Franklin
Templeton
Group
of
Funds
since
1948.
Templeton
Institutional
Funds
Tax
Information
(unaudited)
47
ftinstitutional.com
Annual
Report
By
mid-February,
tax
information
related
to
a
shareholder's
proportionate
share
of
distributions
paid
during
the
preceding
calendar
year
will
be
received,
if
applicable.
Please
also
refer
to
www.franklintempleton.com
for
per
share
tax
information
related
to
any
distributions
paid
during
the
preceding
calendar
year.
Shareholders
are
advised
to
consult
with
their
tax
advisors
for
further
information
on
the
treatment
of
these
amounts
on
their
tax
returns.
The
following
tax
information
for
the
Funds
is
required
to
be
furnished
to
shareholders
with
respect
to
income
earned
and
distributions
paid
during
its
fiscal
year.
The
Funds
hereby
report
the
following
amounts,
or
if
subsequently
determined
to
be
different,
the
maximum
allowable
amounts,
for
the
fiscal
year
ended
December
31,
2021:
Note
(1)
-
The
Law
varies
in
each
state
as
to
whether
and
what
percentage
of
dividend
income
attributable
to
Federal
obligations
is
exempt
from
state
income
tax.
Shareholders
are
advised
to
consult
with
their
tax
advisors
to
determine
if
any
portion
of
the
dividends
received
is
exempt
from
state
income
taxes.
Under
Section
853
of
the
Internal
Revenue
Code,
the
Fund
intends
to
elect
to
pass
through
to
its
shareholders
the
following
amounts,
or
amounts
as
finally
determined,
of
foreign
taxes
paid
and
foreign
source
income
earned
by
the
Fund
during
the
fiscal
year
ended
December
31,
2021:
Pursuant
to:
Foreign
Smaller
Companies
Series
International
Equity
Series
Long-Term
Capital
Gain
Dividends
Distributed
§852(b)(3)(C)
$99,155,637
$66,311,756
Qualified
Dividend
Income
Earned
(QDI)
§854(b)(1)(B)
$8,886,941
$9,741,311
Short-Term
Capital
Gain
Dividends
Distributed
§871(k)(2)(C)
$4,789,018
$5,554,038
Section
163(j)
Interest
Dividends
Earned
§163(j)
$43
$768
Interest
Earned
from
Federal
Obligations
Note
(1)
$43
$—
Foreign
Smaller
Companies
Series
Amount
Reported
Foreign
Taxes
Paid
$1,679,002
Foreign
Source
Income
Earned
$11,310,779
Templeton
Institutional
Funds
Board
Members
and
Officers
48
ftinstitutional.com
Annual
Report
The
name,
year
of
birth
and
address
of
the
officers
and
board
members,
as
well
as
their
affiliations,
positions
held
with
the
Trust,
principal
occupations
during
at
least
the
past
five
years
and
number
of
U.S.
registered
portfolios
overseen
in
the
Franklin
Templeton/Legg
Mason
fund
complex,
are
shown
below.
Generally,
each
board
member
serves
until
that
person’s
successor
is
elected
and
qualified.
Independent
Board
Members
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Harris
J.
Ashton
(1932)
Trustee
Since
1992
120
Bar-S
Foods
(meat
packing
company)
(1981-2010).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Director,
RBC
Holdings,
Inc.
(bank
holding
company)
(until
2002);
and
President,
Chief
Executive
Officer
and
Chairman
of
the
Board,
General
Host
Corporation
(nursery
and
craft
centers)
(until
1998).
Ann
Torre
Bates
(1958)
Trustee
Since
2008
30
Ares
Capital
Corporation
(specialty
finance
company)
(2010-present),
United
Natural
Foods,
Inc.
(distributor
of
natural,
organic
and
specialty
foods)
(2013-present),
formerly
,
Allied
Capital
Corporation
(financial
services)
(2003-
2010),
SLM
Corporation
(Sallie
Mae)
(1997-2014)
and
Navient
Corporation
(loan
management,
servicing
and
asset
recovery)
(2014-2016).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Executive
Vice
President
and
Chief
Financial
Officer,
NHP
Incorporated
(manager
of
multifamily
housing)
(1995-1997);
and
Vice
President
and
Treasurer,
US
Airways,
Inc.
(until
1995).
Mary
C.
Choksi
(1950)
Trustee
Since
2016
121
Omnicom
Group
Inc.
(advertising
and
marketing
communications
services)
(2011-present)
and
White
Mountains
Insurance
Group,
Ltd.
(holding
company)
(2017-present);
and
formerly
,
Avis
Budget
Group
Inc.
(car
rental)
(2007-2020).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Founder
and
Senior
Advisor,
Strategic
Investment
Group
(investment
management
group)
(2015-2017);
Founding
Partner
and
Senior
Managing
Director,
Strategic
Investment
Group
(1987-2015);
Founding
Partner
and
Managing
Director,
Emerging
Markets
Management
LLC
(investment
management
firm)
(1987-2011);
and
Loan
Officer/Senior
Loan
Officer/Senior
Pension
Investment
Officer,
World
Bank
Group
(international
financial
institution)
(1977-1987).
Templeton
Institutional
Funds
49
ftinstitutional.com
Annual
Report
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Edith
E.
Holiday
(1952)
Lead
Independent
Trustee
Trustee
since
1996
and
Lead
Independent
Trustee
since
2007
121
Hess
Corporation
(exploration
of
oil
and
gas)
(1993-present),
Santander
Consumer
USA
Holdings,
Inc.
(consumer
finance)
(2016-present);
Santander
Holdings
USA
(holding
company)
(2019-present);
and
formerly
,
Canadian
National
Railway
(railroad)
(2001-2021),
White
Mountains
Insurance
Group,
Ltd.
(holding
company)
(2004-
2021),
RTI
International
Metals,
Inc.
(manufacture
and
distribution
of
titanium)
(1999-2015)
and
H.J.
Heinz
Company
(processed
foods
and
allied
products)
(1994-2013).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
or
Trustee
of
various
companies
and
trusts;
and
formerly
,
Assistant
to
the
President
of
the
United
States
and
Secretary
of
the
Cabinet
(1990-1993);
General
Counsel
to
the
United
States
Treasury
Department
(1989-1990);
and
Counselor
to
the
Secretary
and
Assistant
Secretary
for
Public
Affairs
and
Public
Liaison-United
States
Treasury
Department
(1988-1989).
J.
Michael
Luttig
(1954)
Trustee
Since
2009
121
Boeing
Capital
Corporation
(aircraft
financing)
(2006-2010).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Counselor
and
Special
Advisor
to
the
CEO
and
Board
of
Directors
of
the
Coca-Cola
Company
(beverage
company)
(2021-present);
and
formerly
,
Counselor
and
Senior
Advisor
to
the
Chairman,
CEO,
and
Board
of
Directors,
of
The
Boeing
Company
(aerospace
company),
and
member
of
the
Executive
Council
(May
2019-January
1,
2020);
Executive
Vice
President,
General
Counsel
and
member
of
the
Executive
Council,
The
Boeing
Company
(2006-2019);
and
Federal
Appeals
Court
Judge,
United
States
Court
of
Appeals
for
the
Fourth
Circuit
(1991-
2006).
David
W.
Niemiec
(1949)
Trustee
Since
2005
30
Hess
Midstream
LP
(oil
and
gas
midstream
infrastructure)
(2017-present).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Advisor,
Saratoga
Partners
(private
equity
fund);
and
formerly
,
Managing
Director,
Saratoga
Partners
(1998-2001)
and
SBC
Warburg
Dillon
Read
(investment
banking)
(1997-1998);
Vice
Chairman,
Dillon,
Read
&
Co.
Inc.
(investment
banking)
(1991-1997);
and
Chief
Financial
Officer,
Dillon,
Read
&
Co.
Inc.
(1982-1997).
Larry
D.
Thompson
(1945)
Trustee
Since
2005
121
Graham
Holdings
Company
(education
and
media
organization)
(2011-2021);
The
Southern
Company
(energy
company)
(2014-2020;
previously
2010-
2012)
and
Cbeyond,
Inc.
(business
communications
provider)
(2010-
2012).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
Counsel,
Finch
McCranie,
LLP
(law
firm)
(2015-present);
John
A.
Sibley
Professor
of
Corporate
and
Business
Law,
University
of
Georgia
School
of
Law
(2015-present;
previously
2011-2012);
and
formerly
,
Independent
Compliance
Monitor
and
Auditor,
Volkswagen
AG
(manufacturer
of
automobiles
and
commercial
vehicles)
(2017-2020);
Executive
Vice
President
-
Government
Affairs,
General
Counsel
and
Corporate
Secretary,
PepsiCo,
Inc.
(consumer
products)
(2012-2014);
Senior
Vice
President
-
Government
Affairs,
General
Counsel
and
Secretary,
PepsiCo,
Inc.
(2004-2011);
Senior
Fellow
of
The
Brookings
Institution
(2003-2004);
Visiting
Professor,
University
of
Georgia
School
of
Law
(2004);
and
Deputy
Attorney
General,
U.S.
Department
of
Justice
(2001-2003).
Independent
Board
Members
(continued)
Templeton
Institutional
Funds
50
ftinstitutional.com
Annual
Report
Interested
Board
Members
and
Officers
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Constantine
D.
Tseretopoulos(1954)
Trustee
Since
1990
20
None
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Physician,
Chief
of
Staff,
owner
and
operator
of
the
Lyford
Cay
Hospital
(1987-present);
director
of
various
nonprofit
organizations;
and
formerly
,
Cardiology
Fellow,
University
of
Maryland
(1985-1987);
and
Internal
Medicine
Resident,
Greater
Baltimore
Medical
Center
(1982-
1985).
Robert
E.
Wade
(1946)
Trustee
Since
2007
30
El
Oro
Ltd
(investments)
(2003-
2019).
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Attorney
at
law
engaged
in
private
practice
as
a
sole
practitioner
(1972-2008)
and
member
of
various
boards.
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
**Gregory
E.
Johnson
(1961)
Trustee
Since
2007
132
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
Franklin
Resources,
Inc.;
officer
and/or
director
or
trustee,
as
the
case
may
be,
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex;
Vice
Chairman,
Investment
Company
Institute;
and
formerly
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015)
Franklin
Resources,
Inc.
**Rupert
H.
Johnson,
Jr.
(1940)
Chairman
of
the
Board,
Trustee
and
Vice
President
Chairman
of
the
Board
and
Trustee
since
2013
and
Vice
President
since
1996
121
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
(Vice
Chairman),
Franklin
Resources,
Inc.;
Director,
Franklin
Advisers,
Inc.;
and
officer
and/or
director
or
trustee,
as
the
case
may
be,
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Alan
T.
Bartlett
(1970)
President
and
Chief
Executive
Officer
-
Investment
Management
Since
2019
Not
Applicable
Not
Applicable
Lyford
Cay
Nassau,
Bahamas
Principal
Occupation
During
at
Least
the
Past
5
Years:
President
and
Director,
Templeton
Global
Advisors
Limited;
Chief
Investment
Officer
of
Templeton
Global
Equity
Group;
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex;
Chairman
of
the
Board,
Goodhart
Partners;
and
formerly
,
Chief
Executive
Officer,
Goodhart
Partners
(2009-2019).
Independent
Board
Members
(continued)
Templeton
Institutional
Funds
51
ftinstitutional.com
Annual
Report
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Alison
E.
Baur
(1964)
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Deputy
General
Counsel,
Franklin
Templeton;
and
officer
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Breda
M.
Beckerle
(1958)
Chief
Compliance
Officer
Since
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
Principal
Occupation
During
at
Least
the
Past
5
Years:
Chief
Compliance
Officer,
Fiduciary
Investment
Management
International,
Inc.,
Franklin
Advisers,
Inc.,
Franklin
Mutual
Advisers,
LLC,
Franklin
Templeton
Institutional,
LLC;
and
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Steven
J.
Gray
(1955)
Vice
President
Since
2009
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Associate
General
Counsel,
Franklin
Templeton;
Vice
President,
FASA,
LLC;
Assistant
Secretary,
Franklin
Distributors,
LLC;
and
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Matthew
T.
Hinkle
(1971)
Chief
Executive
Officer
-
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Vice
President,
Franklin
Templeton
Services,
LLC;
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex;
and
formerly
,
Vice
President,
Global
Tax
(2012-April
2017)
and
Treasurer/Assistant
Treasurer,
Franklin
Templeton
(2009-2017).
Susan
Kerr
(1949)
Vice
President
-
AML
Compliance
Since
July
2021
Not
Applicable
Not
Applicable
620
Eighth
Avenue
New
York,
NY
10018
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Compliance
Analyst,
Franklin
Templeton;
Chief
Anti-Money
Laundering
Compliance
Officer,
Legg
Mason
&
Co.,
or
its
affiliates;
Anti
Money
Laundering
Compliance
Officer;
Senior
Compliance
Officer,
LMIS;
and
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Christopher
Kings
(1974)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
January
2022
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting;
and
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Associate
General
Counsel,
Franklin
Templeton;
and
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Interested
Board
Members
and
Officers
(continued)
Templeton
Institutional
Funds
52
ftinstitutional.com
Annual
Report
*We
base
the
number
of
portfolios
on
each
separate
series
of
the
U.S.
registered
investment
companies
within
the
Franklin
Templeton/Legg
Mason
fund
complex.
These
portfolios
have
a
common
investment
manager
or
affiliated
investment
managers.
**Gregory
E.
Johnson
is
considered
to
be
an
interested
person
of
the
Fund
under
the
federal
securities
laws
due
to
his
position
as
an
officer
and
director
of
Franklin
Resources,
Inc.
(Resources),
which
is
the
parent
company
of
the
Fund’s
investment
manager
and
distributor.
Rupert
H.
Johnson,
Jr.
is
considered
to
be
an
interested
person
of
the
Fund
under
the
federal
securities
laws
due
to
his
position
as
an
officer
and
director
and
major
shareholder
of
Resources.
Note
1:
Rupert
H.
Johnson,
Jr.
is
the
uncle
of
Gregory
E.
Johnson.
Note
2:
Officer
information
is
current
as
of
the
date
of
this
report.
It
is
possible
that
after
this
date,
information
about
officers
may
change.
The
Sarbanes-Oxley
Act
of
2002
and
Rules
adopted
by
the
U.S.
Securities
and
Exchange
Commission
require
the
Fund
to
disclose
whether
the
Fund’s
Audit
Committee
includes
at
least
one
member
who
is
an
audit
committee
financial
expert
within
the
meaning
of
such
Act
and
Rules.
The
Fund’s
Board
has
determined
that
there
is
at
least
one
such
financial
expert
on
the
Audit
Committee
and
has
designated
each
of
Ann
Torre
Bates
and
David
W.
Niemiec
as
an
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
qualify
as
such
an
expert
in
view
of
their
extensive
business
background
and
experience.
Ms.
Bates
has
served
as
a
member
of
the
Fund
Audit
Committee
since
2008.
She
currently
serves
as
a
director
of
Ares
Capital
Corporation
(2010-present)
and
United
Natural
Foods,
Inc.
(2013-present)
and
was
formerly
a
director
of
Navient
Corporation
from
2014
to
2016,
SLM
Corporation
from
1997
to
2014
and
Allied
Capital
Corporation
from
2003
to
2010,
Executive
Vice
President
and
Chief
Financial
Officer
of
NHP
Incorporated
from
1995
to
1997
and
Vice
President
and
Treasurer
of
US
Airways,
Inc.
until
1995.
Mr.
Niemiec
has
served
as
a
member
of
the
Fund
Audit
Committee
since
2005,
currently
serves
as
an
Advisor
to
Saratoga
Partners
and
was
formerly
its
Managing
Director
from
1998
to
2001
and
serves
as
a
director
of
Hess
Midstream
LP
(2017-present).
Mr.
Niemiec
was
formerly
a
director
of
Emeritus
Corporation
from
1999
to
2010
and
OSI
Pharmaceuticals,
Inc.
from
2006
to
2010,
Managing
Director
of
SBC
Warburg
Dillon
Read
from
1997
to
1998,
and
was
Vice
Chairman
from
1991
to
1997
and
Chief
Financial
Officer
from
1982
to
1997
of
Dillon,
Read
&
Co.
Inc.
As
a
result
of
such
background
and
experience,
the
Board
believes
that
Ms.
Bates
and
Mr.
Niemiec
have
each
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
statements,
the
general
application
of
such
principles
in
connection
with
the
accounting
estimates,
accruals
and
reserves,
and
analyzing
and
evaluating
financial
statements
that
present
a
breadth
and
level
of
complexity
of
accounting
issues
generally
comparable
to
those
of
the
Fund,
as
well
as
an
understanding
of
internal
controls
and
procedures
for
financial
reporting
and
an
understanding
of
audit
committee
functions.
Ms.
Bates
and
Mr.
Niemiec
are
independent
Board
members
as
that
term
is
defined
under
the
applicable
U.S.
Securities
and
Exchange
Commission
Rules
and
Releases.
The
Statement
of
Additional
Information
(SAI)
includes
additional
information
about
the
board
members
and
is
available,
without
charge,
upon
request.
Shareholders
may
call
(800)
DIAL
BEN/342-5236
to
request
the
SAI.
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Craig
S.
Tyle
(1960)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
General
Counsel
and
Executive
Vice
President,
Franklin
Resources,
Inc.;
and
officer
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Lori
A.
Weber
(1964)
Vice
President
and
Secretary
Vice
President
since
2011
and
Secretary
since
2013
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Associate
General
Counsel,
Franklin
Templeton;
Assistant
Secretary,
Franklin
Resources,
Inc.;
Vice
President
and
Secretary,
Templeton
Investment
Counsel,
LLC;
and
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Interested
Board
Members
and
Officers
(continued)
Templeton
Institutional
Funds
Shareholder
Information
53
ftinstitutional.com
Annual
Report
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
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ZTIF
A
02/22
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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.
(a) Audit Fees
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $89,473 for the fiscal year ended December 31, 2021 and $112,992 for the fiscal year ended December 31, 2020.
(b) Audit-Related Fees
The aggregate fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4 were $3,133 for the fiscal year ended December 31, 2021 and $3,133 for the fiscal year ended December 31, 2020. The services for which these fees were paid included attestation services.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning.
(d) All Other Fees
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $1,208 for the fiscal year ended December 31, 2021 and $0 for the fiscal year ended December 31, 2020. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $35,743 for the fiscal year ended December 31, 2021 and $0 for the fiscal year ended December 31, 2020. The services for which these fees were paid included benchmarking services in connection with the ICI TA Survey, and professional fees in connection with SOC 1 Reports.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $40,084 for the fiscal year ended December 31, 2021 and $3,133 for the fiscal year ended December 31, 2020.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
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 Christopher Kings, Chief Financial Officer, Chief Accounting Officer and Treasurer
(b)
Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Christopher Kings, Chief Financial Officer, Chief Accounting Officer and Treasurer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TEMPLETON INSTITUTIONAL FUNDS
By S\Matthew T. Hinkle ______________________
Matthew T. Hinkle
Chief Executive Officer – Finance and Administration
Date February 28, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By S\Matthew T. Hinkle ______________________
Matthew T. Hinkle
Chief Executive Officer – Finance and Administration
Date February 28, 2022
By S\Christopher Kings________________________
Christopher Kings
Chief Financial Officer, Chief Accounting Officer and Treasurer
Date February 28, 2022