UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06135

TEMPLETON INSTITUTIONAL FUNDS, INC.
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(Exact name of registrant as specified in charter)

500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
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(Address of principal executive offices) (Zip code)

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: (954) 527-7500
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Date of fiscal year end: 12/31
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Date of reporting period: 12/31/07
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Item 1. Reports to Stockholders.

[GRAPHIC OMITTED]

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ANNUAL REPORT | 12 31 2007
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TEMPLETON INSTITUTIONAL FUNDS, INC.
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Foreign Equity Series

[LOGO](R)
FRANKLIN TEMPLETON
INSTITUTIONAL

Contents

ANNUAL REPORT

TIFI Foreign Equity Series ............................................ 1

Performance Summary ................................................... 6

Your Fund's Expenses .................................................. 9

Financial Highlights and Statement of Investments ..................... 11

Financial Statements .................................................. 18

Notes to Financial Statements ......................................... 21

Report of Independent Registered Public Accounting Firm ............... 30

Tax Designation ....................................................... 31

Board Members and Officers ............................................ 33

Shareholder Information ............................................... 38

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Annual Report

TIFI Foreign Equity Series

YOUR FUND'S GOAL AND MAIN INVESTMENTS: TIFI Foreign Equity Series 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.

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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. PLEASE CALL A FRANKLIN TEMPLETON INSTITUTIONAL SERVICES
REPRESENTATIVE AT 1-800/321-8563 FOR MOST RECENT MONTH-END PERFORMANCE.
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We are pleased to bring you Templeton Institutional Funds, Inc. (TIFI) Foreign
Equity Series' (Fund's) annual report for the fiscal year ended December 31,
2007.

PERFORMANCE OVERVIEW

For the year under review, the Fund's Primary Shares posted a cumulative total
return of +18.45%. The Fund outperformed its benchmarks, the Morgan Stanley
Capital International (MSCI) All Country (AC) World ex USA Index and the MSCI
Europe, Australasia, Far East (EAFE) Index, which posted total returns of
+17.12% and +11.63% for the same period. 1 Please note that index performance
information is provided for reference

1. Source: Standard & Poor's Micropal. The MSCI AC World ex USA Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global developed and emerging markets excluding the U.S.
The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted
index designed to measure equity market performance in global developed markets
excluding the U.S. and Canada. The indexes are unmanaged and include reinvested
dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 13.

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NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
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Annual Report | 1

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 12/31/07

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Europe 67.2%
Asia 20.7%
North America 2.2%
Latin America 1.9%
Australia & New Zealand 1.1%
Middle East & Africa 0.6%
Short-Term Investments & Other Net Assets 6.3%

and that 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 6.

ECONOMIC AND MARKET OVERVIEW

In spite of elevated energy prices and widespread fears of contagion from the
deteriorating U.S. housing situation, the global economy remained resilient in
2007. Consumer and corporate demand strength, particularly in China and other
developing economies, generally favorable employment, and accommodative monetary
policies continued to underpin the current expansionary period that began in
2002.

These factors also contributed to the strength of global equity markets during
2007. However, concerns about slower growth and declining asset quality surfaced
in the first quarter. These were initially centered on the U.S. subprime
mortgage market but spread in August to global capital markets. Difficulties in
assessing risk and the value of collateral in the structured finance industry
contributed to declining risk appetite among lenders and investors. The private
equity industry, which relies on the availability of cheap credit, played a
pivotal role in several large and high-profile acquisitions and helped boost
merger and acquisition activity in the first half of the year. This was an
important driver of equity performance, but as liquidity dried up in the second
half of the year, significantly slower money flows from private equity weighed
on market performance. However, global merger and acquisition activity still
reached record levels. The staggering $4.5 trillion of deals announced in 2007
eclipsed the previous record from 2006 by 24%. 2

To alleviate the credit crunch and restore investor confidence, the world's
major central banks infused capital into the system, and the U.S. Federal
Reserve Board reduced its target interest rate by a full percentage point.
However, credit and equity markets continued to face headwinds as write-downs
and losses from subprime mortgage financing affected many large financial
institutions toward the end of the year, and equity prices remained volatile.

2. Source: "For Deal Makers, Tale of Two Halves," THE WALL STREET JOURNAL,
1/2/08.

2 | Annual Report

emerging market equity returns more than tripled those in developed markets. Led
by the BRIC countries, Brazil, Russia, India and China, emerging market
economies continued to grow at accelerated rates, supporting elevated prices for
oil and other commodities. At the same time, investment inflows from developed
economies continued to underpin equity prices in emerging markets. In addition,
U.S. dollar weakness relative to the currencies of many major trading partners
enhanced equity returns for U.S.-based investors holding stocks denominated in
these currencies.

INVESTMENT STRATEGY

We employ a bottom-up, value-oriented, long-term investment strategy. Our
in-depth fundamental internal research evaluates a company's potential to grow
earnings, asset value and/or cash flow over a five-year horizon. Stocks are
selected for purchase or sale utilizing strict valuation parameters, reflecting
our focus on individual companies rather than countries or sectors.

MANAGER'S DISCUSSION

Templeton's investment philosophy is strictly based on bottom-up stock
selection, and our disciplined application of this process benefited the Fund's
relative performance in 2007. Eight out of 10 major sectors contributed to the
Fund's results relative to the MSCI AC World ex USA Index. Most significant were
the financials and telecommunication services sectors where stock selection and
relative weights contributed. 3 The Fund was underweighted in financials, which
suffered from troubles in the subprime lending market and the fallout from the
subsequent credit crunch. On the other hand, the Fund benefited from its
overweighted exposure to telecommunications companies, which investors sought
out for their defensive, utility-like characteristics and positive growth
prospects in emerging economies.

In the financials sector, the Fund largely avoided exposure to certain Japanese
and U.K.-based banks that were top detractors from index performance in 2007. At
the same time, the Fund maintained sizable positions in Indian financial
companies that contributed to performance. ICICI Bank, India's second-largest
bank, and Housing Development Finance Corp., which finances home ownership and
insurance products throughout India, were

PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 12/31/07

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Commercial Banks 13.2%
Diversified Telecommunication Services 9.6%
Oil, Gas & Consumable Fuels 6.6%
Pharmaceuticals 5.4%
Insurance 5.2%
Media 4.5%
Industrial Conglomerates 4.2%
Food Products 3.9%
Aerospace & Defense 3.9%
Wireless Telecommunication Services 2.8%
Semiconductors & Semiconductor Equipment 2.3%
Electric Utilities 2.3%
Household Durables 2.0%
Other 27.8%
Short-Term Investments & Other Net Assets 6.3%

3. The financials sector comprises capital markets, commercial banks,
diversified financial services, insurance, real estate management and
development, and thrifts and mortgage finance in the SOI. The telecommunication
services sector comprises diversified telecommunication services and wireless
telecommunication services in the SOI.

Annual Report | 3

TOP 10 EQUITY HOLDINGS
12/31/07

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COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
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Telefonica SA, ord. & ADR 2.0%
DIVERSIFIED TELECOMMUNICATION SERVICES,
SPAIN
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Housing Development Finance Corp. 1.9%
THRIFTS & MORTGAGE FINANCE, INDIA
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Siemens AG 1.8%
INDUSTRIAL CONGLOMERATES, GERMANY
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E.ON AG 1.7%
ELECTRIC UTILITIES, GERMANY
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ICICI Bank Ltd. 1.7%
COMMERCIAL BANKS, INDIA
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Rolls-Royce Group PLC, ord. & B 1.6%
AEROSPACE & DEFENSE, U.K.
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Telenor ASA 1.6%
DIVERSIFIED TELECOMMUNICATION SERVICES,
NORWAY
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France Telecom SA 1.6%
DIVERSIFIED TELECOMMUNICATION SERVICES,
FRANCE
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Celesio AG 1.6%
HEALTH CARE PROVIDERS & SERVICES,
GERMANY
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Sanofi-Aventis, ord. & ADR 1.6%
PHARMACEUTICALS, FRANCE
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among the Fund's top 10 contributors for the year. Due in part to these shares'
strong performance, the Fund's weighting in financials approached that of the
index after years of underexposure to this sector. In the telecommunication
services sector, notable contributors included Hong Kong-based China Mobile, the
world's largest wireless operator, as measured by number of subscribers, and
Telefonica, a leading fixed-line and wireless services provider serving Spanish-
and Portuguese-speaking populations worldwide. These two companies were also
among the top 10 contributors to Fund performance for the year.

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, 2007, the U.S. dollar declined in value relative to most
non-U.S. currencies. As a result, the Fund's performance was positively affected
by the portfolio's investment predominantly in securities with non-U.S. currency
exposure. However, one cannot expect the same result in future periods.

Although the Fund performed well, there were some detractors from relative
performance. The Fund's returns in the energy and materials sectors, while still
strong on an absolute basis, underperformed the index's sector returns. 4 Stock
selection and underweightings hindered relative performance. Sector allocations
at Templeton have always resulted from our bottom-up process of stock selection.

The Fund's energy exposure in 2007 was concentrated among large, integrated oil
and gas companies, primarily from Europe. Our analysts have identified the
greatest potential for value creation in this arena over the longer term, and
these holdings generally performed well last year. The Fund's relative
underperformance in the energy sector reflected, instead, the Fund's lack of
exposure to several Brazilian and Indian energy companies that also performed
very well.

4. The energy sector comprises energy equipment and services; and oil, gas and
consumable fuels in the SOI. The materials sector comprises chemicals, and paper
and forest products in the SOI.

4 | Annual Report

Despite our cautionary long-term assessment for the sector, materials-related
stocks continued to climb, in part because demand in emerging market countries
for materials (metals and mining, in particular) remained robust. However, based
on our analysis, we believed that speculative financial elements, rather than
pure underlying economic demand, skewed prices -- of shares and underlying
commodities -- above what the forces of supply and demand might justify.
Therefore, given the high valuations already factored into these shares, we
remained comfortable with the Fund's underweighted position as of year-end 2007,
even if it resulted in near-term underperformance.

As long-term investors, we sought to take advantage of increased market
volatility and consequently paid close attention to share price movements at the
company level. We added new positions and increased existing ones, or trimmed
and liquidated others, as we employed our disciplined valuation parameters
seeking to further what we considered was our shareholders' longer-term best
interests.

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

[PHOTO OMITTED] /s/ Gary P. Motyl

Gary P. Motyl, CFA
Chief Investment Officer -
Templeton Global Equity Group
President - Templeton Investment Counsel, LLC

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF DECEMBER 31, 2007, 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.

Annual Report | 5

Performance Summary as of 12/31/07

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. 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 on the sale of Fund shares.

PRICE AND DISTRIBUTION INFORMATION

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PRIMARY SHARES (SYMBOL: TFEQX) CHANGE 12/31/07 12/31/06
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Net Asset Value (NAV) +$1.93 $28.60 $26.67
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DISTRIBUTIONS (1/1/07-12/31/07)
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Dividend Income $1.1627
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Short-Term Capital Gain $0.0635
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Long-Term Capital Gain $1.6468
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TOTAL $2.8730
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SERVICE SHARES (SYMBOL: N/A) CHANGE 12/31/07 12/31/06
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Net Asset Value (NAV) +$1.91 $28.58 $26.67
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DISTRIBUTIONS (1/1/07-12/31/07)
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Dividend Income $1.1627
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Short-Term Capital Gain $0.0635
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Long-Term Capital Gain $1.6468
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TOTAL $2.8730
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PERFORMANCE

THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

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PRIMARY SHARES 1 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 2 +18.45% +200.28% +196.94%
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Average Annual Total Return 3 +18.45% +24.60% +11.50%
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Value of $1,000,000 Investment 4 $1,184,528 $3,002,801 $2,969,430
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Total Annual Operating Expenses 5 0.82%
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SERVICE SHARES 1-YEAR INCEPTION (9/18/06)
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Cumulative Total Return 2 +18.37% +34.27%
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Average Annual Total Return 3 +18.37% +25.78%
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Value of $1,000,000 Investment 4 $1,183,704 $1,342,726
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Total Annual Operating Expenses 5 0.82%
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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, PLEASE CALL
1-800/321-8563.

6 | Annual Report

Performance Summary (CONTINUED)

TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $1,000,000 INVESTMENT

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

PRIMARY SHARES (1/1/98-12/31/07) 1
$ Millions

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

TIFI Foreign MSCI AC World MSCI EAFE
Date Equity Series ex USA Index 6 Index 6 CPI 6

Dec-97 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Jan-98 $1,012,097 $1,029,913 $1,045,966 $1,001,890
Feb-98 $1,076,613 $1,098,635 $1,113,324 $1,003,891
Mar-98 $1,155,767 $1,136,595 $1,147,857 $1,005,893
Apr-98 $1,170,799 $1,144,735 $1,157,204 $1,007,672
May-98 $1,158,079 $1,123,976 $1,151,850 $1,009,451
Jun-98 $1,147,093 $1,119,751 $1,160,826 $1,010,674
Jul-98 $1,167,330 $1,130,404 $1,172,852 $1,011,897
Aug-98 $ 979,424 $ 970,987 $1,027,807 $1,013,120
Sep-98 $ 964,969 $ 950,476 $ 996,565 $1,014,343
Oct-98 $1,039,553 $1,050,031 $1,100,728 $1,016,789
Nov-98 $1,095,636 $1,106,459 $1,157,393 $1,016,789
Dec-98 $1,101,607 $1,144,580 $1,203,332 $1,016,122
Jan-99 $1,089,821 $1,143,354 $1,200,051 $1,018,679
Feb-99 $1,065,010 $1,117,754 $1,171,728 $1,019,680
Mar-99 $1,122,554 $1,171,721 $1,220,922 $1,022,793
Apr-99 $1,214,597 $1,230,332 $1,270,673 $1,030,131
May-99 $1,169,820 $1,172,543 $1,205,513 $1,030,131
Jun-99 $1,225,170 $1,226,422 $1,252,791 $1,030,131
Jul-99 $1,232,011 $1,255,187 $1,290,316 $1,032,911
Aug-99 $1,225,792 $1,259,542 $1,295,317 $1,036,024
Sep-99 $1,200,916 $1,268,060 $1,308,644 $1,040,471
Oct-99 $1,220,195 $1,315,277 $1,357,946 $1,042,584
Nov-99 $1,281,143 $1,367,868 $1,405,408 $1,043,029
Dec-99 $1,402,750 $1,498,324 $1,531,821 $1,043,029
Jan-00 $1,316,096 $1,417,020 $1,434,758 $1,045,920
Feb-00 $1,352,582 $1,455,296 $1,473,652 $1,051,924
Mar-00 $1,379,843 $1,510,064 $1,531,061 $1,060,374
Apr-00 $1,320,819 $1,425,786 $1,450,768 $1,061,263
May-00 $1,316,228 $1,389,315 $1,415,620 $1,062,041
Jun-00 $1,383,778 $1,448,459 $1,471,313 $1,067,823
Jul-00 $1,364,759 $1,391,275 $1,409,916 $1,070,158
Aug-00 $1,385,089 $1,408,487 $1,422,443 $1,070,158
Sep-00 $1,320,163 $1,330,358 $1,353,463 $1,075,717
Oct-00 $1,265,730 $1,288,074 $1,321,767 $1,077,496
Nov-00 $1,257,204 $1,230,285 $1,272,483 $1,078,163
Dec-00 $1,320,614 $1,272,290 $1,318,009 $1,077,274
Jan-01 $1,341,651 $1,291,384 $1,317,387 $1,084,390
Feb-01 $1,297,241 $1,189,145 $1,218,722 $1,088,948
Mar-01 $1,199,107 $1,105,089 $1,138,029 $1,091,617
Apr-01 $1,266,951 $1,180,249 $1,217,847 $1,095,508
May-01 $1,259,062 $1,147,657 $1,175,831 $1,100,289
Jun-01 $1,230,662 $1,103,641 $1,128,184 $1,102,513
Jul-01 $1,200,685 $1,079,086 $1,107,746 $1,099,066
Aug-01 $1,187,273 $1,052,286 $1,079,915 $1,099,511
Sep-01 $1,041,329 $ 940,650 $ 970,777 $1,104,069
Oct-01 $1,075,251 $ 967,005 $ 995,601 $1,100,289
Nov-01 $1,139,151 $1,011,233 $1,032,366 $1,098,399
Dec-01 $1,160,669 $1,024,260 $1,038,520 $1,094,063
Jan-02 $1,127,781 $ 980,394 $ 983,417 $1,096,954
Feb-02 $1,146,230 $ 987,453 $ 990,363 $1,101,401
Mar-02 $1,201,946 $1,041,094 $1,044,431 $1,107,183
Apr-02 $1,203,553 $1,047,859 $1,051,995 $1,113,520
May-02 $1,225,246 $1,059,273 $1,066,266 $1,113,298
Jun-02 $1,174,629 $1,013,534 $1,024,219 $1,114,187
Jul-02 $1,048,489 $ 914,770 $ 923,186 $1,115,410
Aug-02 $1,050,899 $ 914,822 $ 921,309 $1,118,968
Sep-02 $ 921,545 $ 817,873 $ 822,595 $1,120,747
Oct-02 $ 972,162 $ 861,750 $ 866,870 $1,123,082
Nov-02 $1,038,044 $ 903,191 $ 906,324 $1,122,860
Dec-02 $ 988,887 $ 874,012 $ 875,917 $1,120,414
Jan-03 $ 961,984 $ 843,329 $ 839,416 $1,125,417
Feb-03 $ 933,451 $ 826,241 $ 820,227 $1,134,089
Mar-03 $ 903,188 $ 810,214 $ 804,726 $1,140,872
Apr-03 $1,006,457 $ 888,286 $ 884,521 $1,138,537
May-03 $1,063,009 $ 944,870 $ 938,937 $1,136,313
Jun-03 $1,089,235 $ 971,168 $ 962,176 $1,137,536
Jul-03 $1,144,148 $ 997,000 $ 985,611 $1,138,648
Aug-03 $1,188,406 $1,026,608 $1,009,584 $1,143,207
Sep-03 $1,196,602 $1,055,353 $1,040,907 $1,146,653
Oct-03 $1,287,576 $1,123,764 $1,105,851 $1,145,541
Nov-03 $1,310,525 $1,148,267 $1,130,595 $1,142,095
Dec-03 $1,410,267 $1,235,938 $1,218,974 $1,140,983
Jan-04 $1,431,899 $1,255,782 $1,236,301 $1,146,653
Feb-04 $1,471,836 $1,287,712 $1,265,051 $1,152,435
Mar-04 $1,459,192 $1,295,635 $1,272,665 $1,159,328
Apr-04 $1,425,743 $1,255,368 $1,244,956 $1,162,775
May-04 $1,429,088 $1,259,340 $1,250,347 $1,169,780
Jun-04 $1,459,192 $1,286,636 $1,278,251 $1,173,338
Jul-04 $1,419,054 $1,249,142 $1,236,943 $1,171,003
Aug-04 $1,428,252 $1,259,144 $1,242,686 $1,172,226
Sep-04 $1,480,097 $1,299,628 $1,275,347 $1,174,561
Oct-04 $1,538,632 $1,344,828 $1,318,913 $1,180,787
Nov-04 $1,651,520 $1,438,172 $1,409,378 $1,181,454
Dec-04 $1,709,913 $1,499,928 $1,471,273 $1,177,118
Jan-05 $1,687,980 $1,474,090 $1,444,389 $1,179,564
Feb-05 $1,767,275 $1,546,799 $1,507,129 $1,186,458
Mar-05 $1,726,369 $1,504,841 $1,469,850 $1,195,686
Apr-05 $1,672,713 $1,467,729 $1,436,949 $1,203,691
May-05 $1,694,005 $1,476,934 $1,439,148 $1,202,468
Jun-05 $1,709,336 $1,504,722 $1,458,820 $1,203,135
Jul-05 $1,786,839 $1,560,240 $1,503,634 $1,208,695
Aug-05 $1,816,648 $1,600,171 $1,542,062 $1,214,921
Sep-05 $1,872,007 $1,682,711 $1,611,054 $1,229,820
Oct-05 $1,803,873 $1,621,452 $1,564,114 $1,232,266
Nov-05 $1,850,715 $1,675,967 $1,602,790 $1,222,370
Dec-05 $1,942,663 $1,756,604 $1,677,477 $1,217,478
Jan-06 $2,055,862 $1,879,080 $1,780,589 $1,226,818
Feb-06 $2,043,672 $1,873,655 $1,776,942 $1,229,264
Mar-06 $2,094,121 $1,928,077 $1,836,379 $1,236,046
Apr-06 $2,182,877 $2,027,493 $1,925,442 $1,246,609
May-06 $2,098,514 $1,934,019 $1,852,984 $1,252,835
Jun-06 $2,099,393 $1,932,090 $1,853,663 $1,255,281
Jul-06 $2,139,817 $1,951,857 $1,872,225 $1,258,950
Aug-06 $2,200,452 $2,007,178 $1,924,214 $1,261,396
Sep-06 $2,241,755 $2,008,482 $1,927,563 $1,255,170
Oct-06 $2,334,026 $2,090,267 $2,002,705 $1,248,388
Nov-06 $2,417,510 $2,166,156 $2,063,112 $1,246,498
Dec-06 $2,506,846 $2,233,663 $2,128,005 $1,253,280
Jan-07 $2,534,105 $2,242,005 $2,142,567 $1,257,060
Feb-07 $2,516,246 $2,255,704 $2,160,168 $1,263,843
Mar-07 $2,599,247 $2,319,259 $2,216,253 $1,275,295
Apr-07 $2,739,388 $2,426,810 $2,316,698 $1,283,634
May-07 $2,816,088 $2,493,329 $2,360,430 $1,291,528
Jun-07 $2,832,168 $2,514,564 $2,364,072 $1,294,085
Jul-07 $2,793,330 $2,507,396 $2,329,508 $1,293,751
Aug-07 $2,765,885 $2,468,897 $2,293,661 $1,291,417
Sep-07 $2,924,025 $2,632,390 $2,416,810 $1,294,974
Oct-07 $3,069,833 $2,779,329 $2,512,039 $1,297,754
Nov-07 $2,970,426 $2,654,442 $2,430,084 $1,305,426
Dec-07 $2,969,430 $2,616,074 $2,375,529 $1,304,536

AVERAGE ANNUAL TOTAL RETURN

- ----------------------------------
PRIMARY SHARES 1 12/31/07
- ----------------------------------
1-Year +18.45%
- ----------------------------------
5-Year +24.60%
- ----------------------------------
10-Year +11.50%
- ----------------------------------

SERVICE SHARES (9/18/06-12/31/07)
$ Millions

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

TIFI Foreign MSCI AC World MSCI EAFE
Date Equity Series ex USA Index 6 Index 6 CPI 6

Sep-06 $1,013,121 $1,010,904 $1,014,141 $ 998,055
Oct-06 $1,054,871 $1,052,068 $1,053,675 $ 992,662
Nov-06 $1,092,644 $1,090,264 $1,085,457 $ 991,159
Dec-06 $1,133,066 $1,124,242 $1,119,598 $ 996,552
Jan-07 $1,145,401 $1,128,440 $1,127,260 $ 999,558
Feb-07 $1,138,596 $1,135,336 $1,136,520 $1,004,951
Mar-07 $1,176,157 $1,167,324 $1,166,028 $1,014,057
Apr-07 $1,239,571 $1,221,456 $1,218,875 $1,020,688
May-07 $1,274,277 $1,254,936 $1,241,883 $1,026,965
Jun-07 $1,281,126 $1,265,624 $1,243,799 $1,028,998
Jul-07 $1,263,982 $1,262,016 $1,225,615 $1,028,733
Aug-07 $1,251,564 $1,242,639 $1,206,755 $1,026,876
Sep-07 $1,323,122 $1,324,928 $1,271,546 $1,029,706
Oct-07 $1,389,102 $1,398,885 $1,321,649 $1,031,916
Nov-07 $1,344,124 $1,336,027 $1,278,530 $1,038,016
Dec-07 $1,343,674 $1,316,716 $1,249,827 $1,037,309

AVERAGE ANNUAL TOTAL RETURN

- ----------------------------------
SERVICE SHARES 12/31/07
- ----------------------------------
1-Year +18.37%
- ----------------------------------
Since Inception (9/18/06) +25.78%
- ----------------------------------

Annual Report | 7

Performance Summary (CONTINUED)

ENDNOTES

SPECIAL RISKS ARE ASSOCIATED WITH FOREIGN INVESTING, 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' SMALLER SIZE AND LESSER
LIQUIDITY. THE FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN
INVESTMENT RISKS.

1. Past expense reductions by the Fund's manager and administrator increased the
Fund's total returns. If the manager and administrator had not taken this
action, the Fund's total returns would have been lower.

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

3. Average annual total return represents the average annual change in value of
an investment over the periods indicated.

4. These figures represent the value of a hypothetical $1,000,000 investment in
the Fund over the periods indicated.

5. Figures are as stated in the Fund's prospectus current as of the date of this
report.

6. Source: Standard & Poor's Micropal. The MSCI AC World ex USA Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global developed and emerging markets excluding the U.S.
The MSCI EAFE Index is a free float-adjusted, market capitalization-weighted
index designed to measure equity market performance in global developed markets
excluding the U.S. and Canada. The Consumer Price Index (CPI), calculated by the
U.S. Bureau of Labor Statistics, is a commonly used measure of the inflation
rate.

8 | Annual Report

Your Fund's Expenses

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases, if
applicable, and redemption fees; and

o 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 following table 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 first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.

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:

1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.

Annual Report | 9

Your Fund's Expenses (CONTINUED)

PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.

- -----------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
PRIMARY SHARES VALUE 7/1/07 VALUE 12/31/07 PERIOD* 7/1/07-12/31/07
- -----------------------------------------------------------------------------------------------------------------

Actual $1,000 $1,048.50 $3.98
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.32 $3.92
- -----------------------------------------------------------------------------------------------------------------
SERVICE SHARES
- -----------------------------------------------------------------------------------------------------------------
Actual $1,000 $1,048.10 $4.70
- -----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.62 $4.63
- -----------------------------------------------------------------------------------------------------------------

* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (Primary Shares: 0.77% and Service Shares: 0.91%),
multiplied by the average account value over the period, multiplied by 184/365
to reflect the one-half year period.

10 | Annual Report

Templeton Institutional Funds, Inc.

FINANCIAL HIGHLIGHTS

FOREIGN EQUITY SERIES

-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
PRIMARY SHARES 2007 2006 2005 2004 2003
------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 26.67 $ 22.31 $ 20.27 $ 16.95 $ 12.13
------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ............................. 0.72 0.55 0.42 0.33 0.25
Net realized and unrealized gains (losses) .......... 4.08 5.86 2.32 3.25 4.87
------------------------------------------------------------------------
Total from investment operations ....................... 4.80 6.41 2.74 3.58 5.12
------------------------------------------------------------------------
Less distributions from:
Net investment income ............................... (1.16) (0.74) (0.66) (0.26) (0.30)
Net realized gains .................................. (1.71) (1.31) (0.04) -- --
------------------------------------------------------------------------
Total distributions .................................... (2.87) (2.05) (0.70) (0.26) (0.30)
------------------------------------------------------------------------
Redemption fees ........................................ -- c -- c -- c -- c --
------------------------------------------------------------------------
Net asset value, end of year ........................... $ 28.60 $ 26.67 $ 22.31 $ 20.27 $ 16.95
========================================================================

Total return ........................................... 18.45% 29.04% 13.61% 21.25% 42.61%

RATIOS TO AVERAGE NET ASSETS

Expenses ............................................... 0.78% d 0.80% d 0.81% d 0.82% d 0.83%
Net investment income .................................. 2.46% 2.25% 2.01% 1.89% 1.85%

SUPPLEMENTAL DATA

Net assets, end of year (000's) ........................ $9,081,511 $7,311,236 $6,245,721 $5,658,170 $4,642,764
Portfolio turnover rate ................................ 16.74% 7.59% 12.97% 18.25% 8.93%

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 repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.

b Based on average daily shares outstanding.

c Amount rounds to less than $0.01 per share.

d Benefit of expense reduction rounds to less than 0.01%.

Annual Report |
The accompanying notes are an integral part of these financial statements. | 11

Templeton Institutional Funds, Inc.

FINANCIAL HIGHLIGHTS (CONTINUED)

FOREIGN EQUITY SERIES

--------------------------
YEAR ENDED DECEMBER 31,
SERVICE SHARES 2007 2006 g
--------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year .................................... $ 26.67 $ 25.15
--------------------------
Income from investment operations a:
Net investment income b ............................................ 0.36 0.05
Net realized and unrealized gains (losses) ......................... 4.42 3.31
--------------------------
Total from investment operations ...................................... 4.78 3.36
--------------------------
Less distributions from:
Net investment income .............................................. (1.16) (0.66)
Net realized gains ................................................. (1.71) (1.18)
--------------------------
Total distributions ................................................... (2.87) (1.84)
--------------------------
Redemption fees ....................................................... -- e -- e
--------------------------
Net asset value, end of year .......................................... $ 28.58 $ 26.67
==========================

Total return c ........................................................ 18.37% 13.31%

RATIOS TO AVERAGE NET ASSETS d

Expenses .............................................................. 0.92% f 0.80% f
Net investment income ................................................. 2.32% 2.25%

SUPPLEMENTAL DATA

Net assets, end of year (000's) ....................................... $ 173,247 $ 11
Portfolio turnover rate ............................................... 16.74% 7.59%

b Based on average daily shares outstanding.

c Total return is not annualized for periods less than a year.

d Ratios are annualized for periods less than one year.

e Amount rounds to less than $0.01 per share.

f Benefit of expense reduction rounds to less than 0.01%.

g For the period September 18, 2006 (effective date) to December 31, 2006.

12 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007

- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY SERIES INDUSTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

COMMON STOCKS 93.7%
AUSTRALIA 1.1%
National Australia Bank Ltd. .................. Commercial Banks 2,971,788 $ 98,395,032
---------------
AUSTRIA 0.9%
a Telekom Austria AG ............................ Diversified Telecommunication Services 2,876,013 79,870,992
---------------
BERMUDA 1.3%
ACE Ltd. ...................................... Insurance 1,134,940 70,116,593
Invesco Ltd. .................................. Capital Markets 1,656,230 51,972,498
---------------
122,089,091
---------------
BRAZIL 1.0%
Embraer-Empresa Brasileira de Aeronautica
SA, ADR .................................... Aerospace & Defense 1,982,810 90,396,308
---------------
CANADA 0.6%
George Weston Ltd. ............................ Food & Staples Retailing 136,400 7,432,278
Husky Energy Inc. ............................. Oil, Gas & Consumable Fuels 1,157,180 51,923,176
---------------
59,355,454
---------------
CHINA 2.1%
China Mobile Ltd. ............................. Wireless Telecommunication Services 7,010,500 123,972,243
China Telecom Corp. Ltd., H ................... Diversified Telecommunication Services 91,858,000 73,033,123
---------------
197,005,366
---------------
DENMARK 1.1%
b Vestas Wind Systems AS ........................ Electrical Equipment 964,113 104,157,036
---------------
FINLAND 1.5%
Stora Enso OYJ, R (EUR/FIM Traded) ............ Paper & Forest Products 1,712,875 25,596,765
a Stora Enso OYJ, R (SEK Traded) ................ Paper & Forest Products 2,880,646 43,327,532
UPM-Kymmene OYJ ............................... Paper & Forest Products 3,355,090 67,666,181
---------------
136,590,478
---------------
FRANCE 9.2%
Accor SA ...................................... Hotels, Restaurants & Leisure 506,060 40,396,969
AXA SA ........................................ Insurance 2,582,588 103,230,162
Compagnie Generale des Etablissements
Michelin, B ................................ Auto Components 961,120 110,104,919
France Telecom SA ............................. Diversified Telecommunication Services 4,203,600 151,031,968
Sanofi-Aventis ................................ Pharmaceuticals 1,577,620 144,998,833
Sanofi-Aventis, ADR ........................... Pharmaceuticals 6,963 317,025
Suez SA ....................................... Multi-Utilities 1,513,050 102,829,794
Suez SA, ADR .................................. Multi-Utilities 7,350 501,638
Thomson SA .................................... Household Durables 3,138,760 44,568,744
Total SA, B ................................... Oil, Gas & Consumable Fuels 1,168,558 96,914,192
Vivendi SA .................................... Media 1,247,090 57,109,740
---------------
852,003,984
---------------
GERMANY 10.7%
BASF AG ....................................... Chemicals 365,690 54,039,392
Bayerische Motoren Werke AG ................... Automobiles 2,117,130 132,020,042
Celesio AG .................................... Health Care Providers & Services 2,412,384 149,480,960
Deutsche Post AG .............................. Air Freight & Logistics 3,910,040 133,009,580

Annual Report | 13

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

COMMON STOCKS (CONTINUED)
GERMANY (CONTINUED)
E.ON AG ....................................... Electric Utilities 752,950 $ 159,998,823
b Infineon Technologies AG ...................... Semiconductors & Semiconductor Equipment 6,883,860 81,573,201
Merck KGaA .................................... Pharmaceuticals 339,516 44,181,297
Muenchener Rueckversicherungs-Gesellschaft
AG ......................................... Insurance 328,817 63,749,278
Siemens AG .................................... Industrial Conglomerates 1,068,380 169,041,992
---------------
987,094,565
---------------
HONG KONG 1.9%
Cheung Kong (Holdings) Ltd. ................... Real Estate Management & Development 2,609,000 48,244,803
Cheung Kong (Holdings) Ltd., ADR .............. Real Estate Management & Development 32,235 585,065
Hutchison Whampoa Ltd. ........................ Industrial Conglomerates 4,049,550 45,932,047
Hutchison Whampoa Ltd., ADR ................... Industrial Conglomerates 4,895 275,344
Swire Pacific Ltd., A ......................... Real Estate Management & Development 5,568,000 76,757,159
Swire Pacific Ltd., B ......................... Real Estate Management & Development 157,000 416,756
---------------
172,211,174
---------------
INDIA 5.0%
Bharat Petroleum Corp. Ltd. ................... Oil, Gas & Consumable Fuels 3,541,756 47,057,134
Housing Development Finance Corp. ............. Thrifts & Mortgage Finance 2,433,846 177,416,595
ICICI Bank Ltd. ............................... Commercial Banks 5,051,622 157,990,584
Satyam Computer Services Ltd. ................. IT Services 6,695,072 76,312,437
Satyam Computer Services Ltd., ADR ............ IT Services 95,400 2,549,088
---------------
461,325,838
---------------
ISRAEL 0.6%
b Check Point Software Technologies Ltd. ........ Software 2,499,810 54,895,828
---------------
ITALY 3.4%
a Eni SpA ....................................... Oil, Gas & Consumable Fuels 2,490,109 91,030,208
a Intesa Sanpaolo SpA ........................... Commercial Banks 9,280,780 73,272,531
a Mediaset SpA .................................. Media 7,358,493 74,150,146
a UniCredito Italiano SpA ....................... Commercial Banks 9,510,841 78,836,386
---------------
317,289,271
---------------
JAPAN 4.3%
FUJIFILM Holdings Corp. ....................... Electronic Equipment & Instruments 1,078,600 45,749,702
Hitachi Ltd. .................................. Electronic Equipment & Instruments 6,668,000 49,808,941
Hitachi Ltd., ADR ............................. Electronic Equipment & Instruments 2,325 170,051
Mitsubishi UFJ Financial Group Inc. ........... Commercial Banks 3,522,700 33,074,177
NEC Corp. ..................................... Computers & Peripherals 3,963,000 18,301,977
NEC Corp., ADR ................................ Computers & Peripherals 14,925 66,789
NGK Spark Plug Co. Ltd. ....................... Auto Components 2,402,000 42,131,659
Nintendo Co. Ltd. ............................. Software 175,900 105,525,804
Sompo Japan Insurance Inc. .................... Insurance 900 8,159
Sony Corp. .................................... Household Durables 1,047,000 58,211,003
Sony Corp., ADR ............................... Household Durables 4,505 244,622
Takeda Pharmaceutical Co. Ltd. ................ Pharmaceuticals 781,400 46,036,838
---------------
399,329,722
---------------

14 | Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

COMMON STOCKS (CONTINUED)
MEXICO 0.9%
Telefonos de Mexico SAB de CV (Telmex),
L, ADR ..................................... Diversified Telecommunication Services 2,220,074 $ 81,787,526
---------------
NETHERLANDS 6.0%
ING Groep NV .................................. Diversified Financial Services 2,608,180 101,817,117
ING Groep NV, ADR ............................. Diversified Financial Services 13,265 516,141
Koninklijke Philips Electronics NV ............ Industrial Conglomerates 3,023,351 130,245,993
Koninklijke Philips Electronics NV,
N.Y. shs. .................................. Industrial Conglomerates 12,205 521,764
SBM Offshore NV ............................... Energy Equipment & Services 2,362,240 74,462,432
Unilever NV ................................... Food Products 3,886,570 142,647,424
Unilever NV, N.Y. shs. ........................ Food Products 7,790 284,023
Vedior NV ..................................... Commercial Services & Supplies 1,977,990 49,706,901
Wolters Kluwer NV ............................. Media 1,534,535 50,342,242
---------------
550,544,037
---------------
NORWAY 1.6%
a Telenor ASA ................................... Diversified Telecommunication Services 6,346,300 151,519,445
---------------
PORTUGAL 1.0%
Portugal Telecom SGPS SA ...................... Diversified Telecommunication Services 6,567,060 85,581,894
b PT Multimedia Servicos de Telecomunicacoes
e Multimedia ............................... Media 808,847 11,272,732
---------------
96,854,626
---------------
SINGAPORE 2.4%
DBS Group Holdings Ltd. ....................... Commercial Banks 7,062,185 101,416,788
DBS Group Holdings Ltd., ADR .................. Commercial Banks 7,705 439,378
b Flextronics International Ltd. ................ Electronic Equipment & Instruments 5,052,950 60,938,577
Singapore Telecommunications Ltd. ............. Diversified Telecommunication Services 20,522,000 56,948,212
---------------
219,742,955
---------------
SOUTH KOREA 3.8%
Kookmin Bank .................................. Commercial Banks 921,696 67,941,909
Kookmin Bank, ADR ............................. Commercial Banks 221,568 16,245,366
Korea Electric Power Corp. .................... Electric Utilities 1,173,430 49,705,143
Korea Electric Power Corp., ADR ............... Electric Utilities 12,195 254,266
LG Electronics Inc. ........................... Household Durables 810,880 86,627,851
Samsung Electronics Co. Ltd. .................. Semiconductors & Semiconductor Equipment 220,275 130,840,126
---------------
351,614,661
---------------
SPAIN 4.1%
a Banco Santander SA ............................ Commercial Banks 4,727,230 102,031,520
a Repsol YPF SA ................................. Oil, Gas & Consumable Fuels 2,579,733 91,784,196
a Telefonica SA ................................. Diversified Telecommunication Services 5,560,578 180,311,506
Telefonica SA, ADR ............................ Diversified Telecommunication Services 9,092 887,288
---------------
375,014,510
---------------
SWEDEN 2.8%
a Atlas Copco AB, A ............................. Machinery 6,400,790 95,531,224
Nordea Bank AB, FDR ........................... Commercial Banks 7,448,068 124,019,143
a Securitas AB, B ............................... Commercial Services & Supplies 1,971,720 27,445,567

Annual Report | 15

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

COMMON STOCKS (CONTINUED)
SWEDEN (CONTINUED)
a,b Securitas Direct AB, B ........................ Diversified Consumer Services 1,971,720 $ 7,898,224
a Securitas Systems AB, B ....................... Commercial Services & Supplies 1,971,720 7,013,867
---------------
261,908,025
---------------
SWITZERLAND 5.7%
Adecco SA ..................................... Commercial Services & Supplies 1,055,220 57,035,144
Lonza Group AG ................................ Chemicals 698,230 84,660,080
Nestle SA ..................................... Food Products 273,590 125,544,299
Nestle SA, ADR ................................ Food Products 2,310 265,592
Novartis AG ................................... Pharmaceuticals 2,338,110 128,129,749
Swiss Reinsurance Co. ......................... Insurance 1,074,322 76,270,036
Swiss Reinsurance Co., ADR .................... Insurance 3,295 233,121
UBS AG ........................................ Capital Markets 1,141,790 52,522,340
---------------
524,660,361
---------------
TAIWAN 1.2%
b Chinatrust Financial Holding Co. Ltd. ......... Commercial Banks 81,127,000 57,661,959
Chunghwa Telecom Co. Ltd., ADR ................ Diversified Telecommunication Services 1,280,118 27,023,295
Compal Electronics Inc., GDR .................. Computers & Peripherals 1,141,266 6,276,963
c Compal Electronics Inc., GDR, 144A ............ Computers & Peripherals 4,407,044 24,238,742
---------------
115,200,959
---------------
UNITED KINGDOM 19.3%
Aviva PLC ..................................... Insurance 7,456,150 99,704,937
BAE Systems PLC ............................... Aerospace & Defense 11,572,338 114,508,418
BP PLC ........................................ Oil, Gas & Consumable Fuels 9,455,990 115,549,769
British Sky Broadcasting Group PLC ............ Media 6,294,200 77,413,758
Cadbury Schweppes PLC ......................... Food Products 7,687,260 94,852,795
Compass Group PLC ............................. Hotels, Restaurants & Leisure 15,208,930 93,226,803
G4S PLC ....................................... Commercial Services & Supplies 6,467,443 31,451,566
GlaxoSmithKline PLC ........................... Pharmaceuticals 5,215,010 132,529,528
HSBC Holdings PLC ............................. Commercial Banks 5,006,821 84,558,845
HSBC Holdings PLC, ADR ........................ Commercial Banks 3,870 323,958
Kingfisher PLC ................................ Specialty Retail 6,031,910 17,450,312
National Grid PLC ............................. Multi-Utilities 4,104,459 68,056,440
Old Mutual PLC ................................ Insurance 19,897,660 66,261,762
Pearson PLC ................................... Media 4,834,640 70,317,300
Rolls-Royce Group PLC ......................... Aerospace & Defense 13,873,664 150,511,879
b Rolls-Royce Group PLC, B ...................... Aerospace & Defense 547,650,441 1,196,972
Royal Bank of Scotland Group PLC .............. Commercial Banks 14,093,290 124,331,828
Royal Dutch Shell PLC, B, ADR ................. Oil, Gas & Consumable Fuels 1,465,457 121,632,931
Smiths Group PLC .............................. Industrial Conglomerates 2,033,823 40,936,392
Standard Chartered PLC ........................ Commercial Banks 2,779,300 101,831,773
Vodafone Group PLC ............................ Wireless Telecommunication Services 35,386,763 132,045,434
Yell Group PLC ................................ Media 6,173,390 49,187,534
---------------
1,787,880,934
---------------
UNITED STATES 0.2%
News Corp., A ................................. Media 1,115,479 22,856,165
---------------
TOTAL COMMON STOCKS
(COST $4,812,757,122) ...................... 8,671,594,343
---------------

16 | Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY SERIES PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

SHORT TERM INVESTMENTS 6.4%
U.S. GOVERNMENT AND AGENCY SECURITIES 6.1%
d FHLB, 2/22/08 - 9/04/08 ....................... $ 368,300,000 $ 362,538,184
FHLB, 4.25%, 6/17/08 .......................... 100,000,000 99,901,200
d FNMA, 1/24/08 - 8/01/08 ....................... 105,000,000 103,415,310
---------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES
(COST $565,561,009) ........................ 565,854,694
---------------
TOTAL INVESTMENTS BEFORE MONEY MARKET FUND
(COST $5,378,318,131) ...................... 9,237,449,037
---------------

-----------
SHARES
-----------

MONEY MARKET FUND (COST $28,756,842) 0.3%
e Franklin Institutional Fiduciary Trust
Money Market Portfolio, 4.58% .............. 28,756,842 28,756,842
---------------
TOTAL INVESTMENTS
(COST $5,407,074,973) 100.1% ............... 9,266,205,879
OTHER ASSETS, LESS LIABILITIES (0.1)% ......... (11,448,218)
---------------
NET ASSETS 100.0% ............................. $9,254,757,661
===============

CURRENCY ABBREVIATIONS

EUR - Euro
FIM - Finnish Markka
SEK - Swedish Krona

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
FDR - Foreign Depository Receipt
FHLB - Federal Home Loan Bank
FNMA - Federal National Mortgage Association
GDR - Global Depository Receipt

a A portion or all of the securities purchased on a when-issued or delayed
delivery basis. See Note 1(c).

b Non-income producing for the twelve months ended December 31, 2007.

c Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and 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. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Directors. At December 31, 2007 the value of this security
was $24,238,742, representing 0.26% of net assets.

d The security is traded on a discount basis with no stated coupon rate.

e See Note 7 regarding investments in the Franklin Institutional Fiduciary Trust
Money Market Portfolio. The rate shown is the annualized seven-day yield at
period end.

Annual Report |
The accompanying notes are an integral part of these financial statements. | 17

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007

----------------
FOREIGN
EQUITY SERIES
----------------
Assets:
Investments in securities:
Cost - Unaffiliated issuers ........................... $ 5,378,318,131
Cost - Sweep Money Fund (Note 7) ...................... 28,756,842
----------------
Total cost of investments ............................. $ 5,407,074,973
================
Value - Unaffiliated issuers .......................... $ 9,237,449,037
Value - Sweep Money Fund (Note 7) ..................... 28,756,842
----------------
Total value of investments ............................ 9,266,205,879
Foreign currency, at value (Cost $530,736) ............... 534,290
Receivables:
Capital shares sold ................................... 23,316,786
Dividends and interest ................................ 9,877,919
----------------
Total assets ....................................... 9,299,934,874
----------------
Liabilities:
Payables:
Investment securities purchased ....................... 34,145,543
Capital shares redeemed ............................... 2,249,199
Affiliates ............................................ 5,794,931
Deferred tax ............................................. 2,104,690
Accrued expenses and other liabilities ................... 882,850
----------------
Total liabilities .................................. 45,177,213
----------------
Net assets, at value ............................ $ 9,254,757,661
----------------
Net assets consist of:
Paid-in capital .......................................... $ 5,353,322,295
Distributions in excess of net investment income ......... (158,223,078)
Net unrealized appreciation (depreciation) ............... 3,856,425,448
Accumulated net realized gain (loss) ..................... 203,232,996
----------------
Net assets, at value ............................... $ 9,254,757,661
----------------
PRIMARY SHARES:
Net assets, at value ..................................... $ 9,081,510,857
================
Shares outstanding ....................................... 317,539,548
================
Net asset value per share a .............................. $ 28.60
================
SERVICE SHARES:
Net assets, at value ..................................... $ 173,246,804
================
Shares outstanding ....................................... 6,061,104
================
Net asset value and maximum offering price per share a ... $ 28.58
================

a Redemption price is equal to net asset value less redemption fees retained by
the Fund.

18 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended December 31, 2007

----------------
FOREIGN
EQUITY SERIES
----------------
Investment income:
Dividends (net of foreign taxes of $18,076,938)
Unaffiliated issuers .................................. $ 236,916,797
Sweep Money Fund (Note 7) ............................. 15,373,173
Interest (net of foreign taxes of $272) .................. 19,653,584
----------------
Total investment income ......................... 271,943,554
----------------
Expenses:
Management fees (Note 3a) ................................ 55,517,308
Administrative fees (Note 3b) ............................ 6,729,867
Transfer agent fees (Note 3c) ............................ 135,237
Sub-transfer agent fees (Note 3c)
Service Shares ........................................ 102,300
Custodian fees (Note 4) .................................. 2,242,765
Reports to shareholders .................................. 101,358
Registration and filing fees ............................. 111,957
Professional fees ........................................ 272,928
Directors' fees and expenses ............................. 123,889
Other .................................................... 158,077
----------------
Total expenses ........................................ 65,495,686
Expense reductions (Note 4) ........................... (178,573)
----------------
Net expenses ....................................... 65,317,113
----------------
Net investment income ........................... 206,626,441
----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................... 750,262,749
Foreign currency transactions ......................... 2,590,995
----------------
Net realized gain (loss) ........................ 752,853,744
----------------
Net change in unrealized appreciation (depreciation) on:
Investments ........................................... 446,492,687
Translation of assets and liabilities denominated in
foreign currencies ................................. (737,421)
Change in deferred taxes on unrealized appreciation
(depreciation) ........................................ 1,720,837
----------------
Net change in unrealized appreciation
(depreciation) ............................... 447,476,103
----------------
Net realized and unrealized gain (loss) ..................... 1,200,329,847
----------------
Net increase (decrease) in net assets resulting from
operations ............................................... $ 1,406,956,288
================

Annual Report |
The accompanying notes are an integral part of these financial statements. | 19

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

---------------------------------
FOREIGN EQUITY SERIES
YEAR ENDED DECEMBER 31,
---------------------------------
2007 2006
---------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .................................................................... $ 206,626,441 $ 150,009,730
Net realized gain (loss) from investments and foreign currency transactions .............. 752,853,744 341,264,841
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liabilities denominated in foreign currencies, and deferred taxes .......... 447,476,103 1,213,490,634
---------------------------------
Net increase (decrease) in net assets resulting from operations ....................... 1,406,956,288 1,704,765,205
---------------------------------
Distributions to shareholders from:
Net investment income:
Primary Shares ........................................................................... (337,298,627) (191,899,440)
Service Shares ........................................................................... (6,047,617) (262)
Net realized gains:
Primary Shares ........................................................................... (495,682,366) (343,352,663)
Service Shares ........................................................................... (8,697,904) (469)
---------------------------------
Total distributions to shareholders ............................................................ (847,726,514) (535,252,834)
---------------------------------
Capital share transactions: (Note 2)
Primary Shares ........................................................................... 1,208,441,383 (104,014,174)
Service Shares ........................................................................... 175,811,194 10,000
---------------------------------
Total capital share transactions ............................................................... 1,384,252,577 (104,004,174)
---------------------------------

Redemption fees ................................................................................ 28,313 18,250
---------------------------------
Net increase (decrease) in net assets ................................................. 1,943,510,664 1,065,526,447
Net assets:
Beginning of year ........................................................................... 7,311,246,997 6,245,720,550
---------------------------------
End of year ................................................................................. $9,254,757,661 $ 7,311,246,997
=================================
Distributions in excess of net investment income included in net assets:
End of year ................................................................................. $ (158,223,078) $ (102,604,468)
=================================

20 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS

FOREIGN EQUITY SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Institutional Funds, Inc. (TIFI) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of three separate funds. The Foreign Equity Series (Fund) included in
this report is diversified. The financial statements of the remaining funds in
TIFI are presented separately. The Fund offers two classes of shares: Primary
and Service shares. Each class of shares differs by its voting rights on matters
affecting a single class.

The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

Securities listed on a securities 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. Over-the-counter securities and listed securities for
which there is no reported sale 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. Investments in open-end mutual funds are valued at the closing net asset
value.

Government securities generally trade in the over-the-counter market rather than
on a securities exchange. The Fund may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Fund's pricing services may use valuation models or matrix pricing which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers, or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, option adjusted spread models, prepayment projections, interest
rate spreads and yield curves, to determine current value.

Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.

Annual Report | 21

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

A. SECURITY VALUATION (CONTINUED)

the fair values may differ significantly from the values that would have been
used had a ready market for such investments existed. Occasionally, events occur
between the time at which trading in a security is completed and the close of
the NYSE that might call into question the availability (including the
reliability) of the value of a portfolio security held by the Fund. The
investment manager monitors price movements following the close of trading in
foreign stock markets through a series of country specific market proxies (such
as baskets of American Depository Receipts, futures contracts and exchange
traded funds). These price movements are measured against established trigger
thresholds for each specific market proxy to assist in determining if an event
has occurred. If such an event occurs, the securities may be valued using fair
value procedures, which may include the use of independent pricing services. All
security valuation procedures are approved by the Fund's Board of Directors.

B. FOREIGN CURRENCY TRANSLATION

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities, income and expense items denominated in foreign currencies are
translated into U.S. dollars at the exchange rate in effect on the transaction
date. 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 Fund's Board of Directors.

The Fund does not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments on the
Statement 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.

22 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS

The Fund may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Fund will generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.

D. FOREIGN CURRENCY CONTRACTS

When the Fund purchases or sells foreign securities it may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate at a future date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts, which may be in
excess of the amount reflected in the Statement of Assets and Liabilities.

E. INCOME AND DEFERRED TAXES

No provision has been made for U.S. income taxes because it is the Fund's policy
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute to shareholders substantially all of its taxable income and net
realized gains.

Foreign securities held by the Fund may be subject to foreign taxation on
dividend and interest income received. Foreign taxes, if any, are recorded based
on the tax regulations and rates that exist in the foreign markets in which the
Fund invests.

The Fund may be subject to a tax imposed on net realized gains on securities of
certain foreign countries. The Fund records an estimated deferred tax liability
for net unrealized gains on these securities in an amount that would be payable
if the securities were disposed of on the valuation date.

Annual Report | 23

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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. Dividend income is
recorded on the ex-dividend date except that certain dividends from foreign
securities are recognized as soon as the Fund is notified of the ex-dividend
date. Distributions to shareholders are recorded on the ex-dividend date and are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. 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.

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

Common expenses incurred by TIFI are allocated among the funds based on the
ratio of net assets of each fund to the combined net assets of TIFI. Fund
specific expenses are charged directly to the fund that incurred the expense.

G. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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. REDEMPTION FEES

A short term trading redemption fee will be imposed, with some exceptions, on
any Fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the Fund and accounted for as an addition to paid-in
capital.

24 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

I. GUARANTEES AND INDEMNIFICATIONS

Under TIFI's organizational documents, its officers and directors are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, TIFI, on behalf of the Fund, enters into contracts with service
providers that contain general indemnification clauses. The Funds's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Fund that have not yet occurred. Currently, the
Fund expects the risk of loss to be remote.

2. CAPITAL STOCK

At December 31, 2007, there were 1.2 billion shares of TIFI authorized ($0.01
par value) of which 755 million shares were allocated to the Fund. Transactions
in the Fund's shares were as follows:

-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
2007 2006 a
-----------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------

PRIMARY SHARES:
Shares sold ............................. 62,169,907 $ 1,790,944,002 43,115,685 $ 1,054,636,410
Shares issued in reinvestment
of distributions ..................... 26,528,242 733,703,547 18,348,681 477,022,238
Shares redeemed ......................... (45,282,230) (1,316,206,166) (67,262,525) (1,635,672,822)
-----------------------------------------------------------------
Net increase (decrease) ................. 43,415,919 $ 1,208,441,383 (5,798,159) $ (104,014,174)
=================================================================
SERVICE SHARES:
Shares sold ............................. 5,842,118 $ 170,491,561 397 $ 10,000
Shares issued in reinvestment
of distributions ..................... 531,207 14,745,444 -- --
Shares redeemed ......................... (312,618) (9,425,811) -- --
-----------------------------------------------------------------
Net increase (decrease) ................. 6,060,707 $ 175,811,194 397 $ 10,000
=================================================================

a For the period September 18, 2006 (effective date) to December 31, 2006, for
the Service Shares.

3. TRANSACTIONS WITH AFFILIATES

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

- ---------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ---------------------------------------------------------------------------------------

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

Annual Report | 25

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

A. MANAGEMENT FEES

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

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.700% Up to and including $1 billion
0.680% Over $1 billion, up to and including $5 billion
0.660% Over $5 billion, up to and including $10 billion
0.640% Over $10 billion, up to and including $15 billion
0.620% Over $15 billion, up to and including $20 billion
0.600% In excess of $20 billion

B. ADMINISTRATIVE FEES

The Fund pays its allocated share of an administrative fee to FT Services based
on the aggregate average daily net assets of certain funds within TIFI as
follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.150% Up to and including $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% In excess of $1.2 billion

C. TRANSFER AGENT FEES

For the year ended December 31, 2007, the Fund paid transfer agent fees,
including sub-transfer agency fees, of $237,537, of which $63,353 was retained
by Investor Services.

Service Shares may pay up to 0.15% of average daily net assets for sub-transfer
agency fees. For the year ended December 31, 2007, the Fund paid $102,300 for
sub-transfer agency fees.

4. EXPENSE OFFSET ARRANGEMENT

The Fund has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Fund's custodian expenses. During the year ended December 31, 2007, the
custodian fees were reduced as noted in the Statement of Operations.

26 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

5. INCOME TAXES

The Fund has reviewed the tax positions taken on federal income tax returns, for
each of the three open tax years and as of December 31, 2007 and has determined
that no provision for income tax is required in the Fund's financial statements.

The tax character of distributions paid during the years ended December 31, 2007
and 2006, was as follows:

---------------------------
2007 2006
---------------------------
Distributions paid from:
Ordinary income ............................. $362,163,529 $225,949,128
Long term capital gain ...................... 485,562,985 309,303,706
---------------------------
$847,726,514 $535,252,834
===========================

At December 31, 2007, the cost of investments, net unrealized appreciation
(depreciation), undistributed ordinary income and undistributed long term
capital gains for income tax purposes were as follows:

Cost of investments ......................................... $ 5,573,553,931
================

Unrealized appreciation ..................................... 3,795,830,745
Unrealized depreciation ..................................... (103,178,797)
----------------
Net unrealized appreciation (depreciation) .................. $ 3,692,651,948
================

Undistributed ordinary income ............................... $ 8,314,911
Undistributed long term capital gains ....................... 203,208,431
----------------
Distributable earnings ...................................... $ 211,523,342
================

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions and passive foreign
investment company shares.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, and passive foreign investment company shares.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
year ended December 31, 2007, aggregated $1,752,819,113 and $1,317,019,765,
respectively.

Annual Report | 27

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

7. INVESTMENTS IN FRANKLIN INSTITUTIONAL FIDUCIARY TRUST MONEY MARKET PORTFOLIO

The Fund may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (Sweep Money Fund), an open-end investment company managed by Franklin
Advisers, Inc. (an affiliate of the investment manager). Management fees paid by
the Fund are reduced on assets invested in the Sweep Money Fund, in an amount
not to exceed the management and administrative fees paid by the Sweep Money
Fund.

8. CONCENTRATION OF RISK

Investing in foreign securities may include certain risks and considerations not
typically associated with investing in U.S. securities, such as fluctuating
currency values and changing local and regional economic, political and social
conditions, which may result in greater market volatility. In addition, certain
foreign securities may not be as liquid as U.S. securities.

9. REGULATORY AND LITIGATION MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.

On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above.

28 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN EQUITY SERIES

9. REGULATORY AND LITIGATION MATTERS (CONTINUED)

The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Fund, it is
committed to making the Fund or its shareholders whole, as appropriate.

10. NEW ACCOUNTING PRONOUNCEMENT

In September 2006, Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, "Fair Value Measurement" (SFAS 157), which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. SFAS 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. The Fund
believes the adoption of SFAS 157 will have no material impact on its financial
statements.

Annual Report | 29

Templeton Institutional Funds, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TEMPLETON INSTITUTIONAL FUNDS,
INC. - FOREIGN EQUITY SERIES

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Foreign Equity Series (one of the
funds constituting Templeton Institutional Funds, Inc., hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 2007 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
February 20, 2008

30 | Annual Report

Templeton Institutional Funds, Inc.

TAX DESIGNATION (UNAUDITED)

FOREIGN EQUITY SERIES

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $652,595,294 as a long
term capital gain dividend for the fiscal year ended December 31, 2007.

Under Section 871(k)(2)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $19,139,774 as a short term capital gain dividend for
purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the
fiscal year ended December 31, 2007.

Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $232,241,153 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
December 31, 2007. In January 2008, shareholders will receive Form 1099-DIV
which will include their share of qualified dividends distributed during the
calendar year 2007. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.

Under Section 871(k)(1)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $34,222,109 as interest related dividends for
purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the
fiscal year ended December 31, 2007.

At December 31, 2007, more than 50% of the Fund's total assets were invested in
securities of foreign issuers. In most instances, foreign taxes were withheld
from income paid to the Fund on these investments. As shown in the table below,
the Fund designates to shareholders the foreign source income and foreign taxes
paid, pursuant to Section 853 of the Code. This designation will allow
shareholders of record on December 14, 2007, to treat their proportionate share
of foreign taxes paid by the Fund as having been paid directly by them. The
shareholder shall consider these amounts as foreign taxes paid in the tax year
in which they receive the Fund distribution.

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

Record Date: 12/14/2007

- ------------------------------------------------------------------------------------------------------
FOREIGN TAX PAID FOREIGN SOURCE INCOME FOREIGN QUALIFIED DIVIDENDS
CLASS PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------

Primary Class .............. $0.0609 $0.6814 $0.6185
Service Class .............. $0.0609 $0.6814 $0.6185

Annual Report | 31

Templeton Institutional Funds, Inc.

TAX DESIGNATION (UNAUDITED) (CONTINUED)

FOREIGN EQUITY SERIES

Foreign Tax Paid Per Share (Column 1) is the amount per share available to you,
as a tax credit (assuming you held your shares in the Fund for a minimum of 16
days during the 31-day period beginning 15 days before the ex-dividend date of
the Fund's distribution to which the foreign taxes relate), or, as a tax
deduction.

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

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

In January 2008, shareholders will receive Form 1099-DIV which will include
their share of taxes paid and foreign source income distributed during the
calendar year 2007. The Foreign Source Income reported on Form 1099-DIV has not
been adjusted for the rate differential on foreign source qualified dividend
income. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their 2007 individual income
tax returns.

1 Qualified dividends are taxed at a maximum rate of 15% (5% for those in the
10% and 15% income tax bracket). In determining the amount of foreign tax credit
that may be applied against the U.S. tax liability of individuals receiving
foreign source qualified dividends, adjustments may be required to the foreign
tax credit limitation calculation to reflect the rate differential applicable to
such dividend income. The rules however permit certain individuals to elect not
to apply the rate differential adjustments for capital gains and/or dividends
for any taxable year. Please consult your tax advisor and the instructions to
Form 1116 for more information.

32 | Annual Report

Templeton Institutional Funds, Inc.

BOARD MEMBERS AND OFFICERS

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

INDEPENDENT BOARD MEMBERS

- ------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF PORTFOLIOS IN
NAME, YEAR OF BIRTH LENGTH OF FUND COMPLEX OVERSEEN
AND ADDRESS POSITION TIME SERVED BY BOARD MEMBER* OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------

HARRIS J. ASHTON (1932) Director Since 1992 141 Bar-S Foods (meat packing
500 East Broward Blvd. company).
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING 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).
- -----------------------------------------------------------------------------------------------------------------------------------
FRANK J. CROTHERS (1944) Director Since 1990 20 Fortis, Inc. (utility holding
500 East Broward Blvd. company), Nuinsco Resources
Suite 2100 Limited (mineral exploration),
Fort Lauderdale, FL 33394-3091 Royal Fidelity Merchant Bank &
Trust Limited (financial
services), C.A. Bancorp Inc.
(financial services), Victory
Nickel Inc. (mineral
exploration), ABACO Markets
Limited (retail distributors) and
Belize Electricity Limited
(electric utility).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman, Island Corporate Holdings Ltd.; Director and Vice Chairman, Caribbean Utilities Company Ltd.; Director, Provo Power
Company Ltd.; director of various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment & Power
Ltd. (1977-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Lead Director since 141 Hess Corporation (exploration and
500 East Broward Blvd. Independent 1996 and Lead refining of oil and gas), H.J.
Suite 2100 Director Independent Heinz Company (processed foods
Fort Lauderdale, FL 33394-3091 Director since and allied products), RTI
December 2007 International Metals, Inc.
(manufacture and distribution of
titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).

PRINCIPAL OCCUPATION DURING 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).
- ------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 33

DAVID W. NIEMIEC (1949) Director Since 2005 20 Emeritus Corporation (assisted
500 East Broward Blvd. living) and OSI Pharmaceuticals,
Suite 2100 Inc. (pharmaceutical products).
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Advisor, Saratoga Partners (private equity fund); Director, various private companies; and Managing Director, Saratoga Partners
FORMERLY, (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).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Director Since 2003 141 Hess Corporation (exploration and
500 East Broward Blvd. refining of oil and gas) and
Suite 2100 Sentient Jet (private jet
Fort Lauderdale, FL 33394-3091 service).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
LARRY D. THOMPSON (1945) Director Since 2005 141 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS Director Since 1990 20 None
(1954)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Physician, 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) Director Since April 2007 34 El Oro and Exploration Co.,
500 East Broward Blvd. p.l.c. (investments) and ARC
Suite 2100 Wireless Solutions, Inc.
Fort Lauderdale, FL 33394-3091 (wireless components and network
products).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Practicing attorney.
- ------------------------------------------------------------------------------------------------------------------------------------

34 | Annual Report

INTERESTED BOARD MEMBERS AND OFFICERS

**CHARLES B. JOHNSON (1933) Director, Director and 141 None
One Franklin Parkway Chairman of Vice President
San Mateo, CA 94403-1906 the Board and since 1993 and
Vice President Chairman of the
Board since 1995

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide, 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 42
of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**GREGORY E. JOHNSON (1961) Director Since April 2007 92 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director, Templeton
Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President
Suite 2100 and Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 35

RUPERT H. JOHNSON, JR. (1940) Vice President Since 1996 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN R. KAY (1940) Vice President Since 1994 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice President, Templeton Worldwide, Inc.; Senior Vice President, Franklin Templeton Services, LLC; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments; and FORMERLY, Vice
President and Controller, Keystone Group, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
MARK MOBIUS (1936) Vice President Since 1993 Not Applicable Not Applicable
17th Floor,
The Chater House
8 Connaught Road
Central Hong Kong

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Portfolio Manager of various Templeton advisory affiliates; Managing Director, Templeton Asset Management Ltd.; and officer and/or
director, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of six of the investment companies
in Franklin Templeton Investments; and FORMERLY, President, International Investment Trust Company Limited (investment manager of
Taiwan R.O.C. Fund) (1986-1987); and Director, Vickers da Costa, Hong Kong (1983-1986).
- ------------------------------------------------------------------------------------------------------------------------------------
GARY P. MOTYL (1952) President and Since 2005 Not Applicable Not Applicable
500 East Broward Blvd. and Chief
Suite 2100 Executive
Fort Lauderdale, FL 33394-3091 Officer -
Investment
Management

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

President, Templeton Investment Counsel, LLC; and officer and/or director, of some of the other subsidiaries of Franklin Resources,
Inc. and of six of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT C. ROSSELOT (1960) Secretary Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the
South; and officer of 14 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------

36 | Annual Report

GREGORY R. SEWARD (1956) Treasurer Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice President, Franklin Templeton Services, LLC; officer of 18 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Vice President, JPMorgan Chase (2000-2004) and American General Financial Group (1991-2000).
- ------------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Senior Vice President, Franklin Templeton Services, LLC; officer of some of the other subsidiaries of Franklin Resources, Inc. and
of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc.
(1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and 1991-2004).
- ------------------------------------------------------------------------------------------------------------------------------------

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

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

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, 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.

Note 3: Prior to December 31, 2007, Nicholas F. Brady ceased to be a director of
the Fund.

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 DAVID W. NIEMIEC AS AN AUDIT COMMITTEE FINANCIAL EXPERT. THE BOARD
BELIEVES THAT MR. NIEMIEC QUALIFIES AS SUCH AN EXPERT IN VIEW OF HIS EXTENSIVE
BUSINESS BACKGROUND AND EXPERIENCE. 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. MR. NIEMIEC
IS A DIRECTOR OF EMERITUS CORPORATION AND OSI PHARMACEUTICALS, INC. AND VARIOUS
PRIVATE COMPANIES, AND WAS FORMERLY 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 MR. NIEMIEC HAS 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. MR. NIEMIEC IS AN INDEPENDENT BOARD
MEMBER 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 FRANKLIN TEMPLETON INSTITUTIONAL SERVICES AT
1-800/321-8563 TO REQUEST THE SAI.

Annual Report | 37

Templeton Institutional Funds, Inc.

SHAREHOLDER INFORMATION

FOREIGN EQUITY SERIES

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures (Policies) that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund'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 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Fund'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 Fund files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

38 | Annual Report

This page intentionally left blank.

[LOGO](R) FRANKLIN TEMPLETON INSTITUTIONAL
FRANKLIN TEMPLETON
INSTITUTIONAL 600 Fifth Avenue
New York, NY 10020

ANNUAL REPORT

TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN EQUITY SERIES

INVESTMENT MANAGER

Templeton Investment Counsel, LLC

DISTRIBUTOR

Franklin Templeton Distributors, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906

FRANKLIN TEMPLETON INSTITUTIONAL SERVICES

1-800/321-8563
ftinstitutional.com

Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges,
and expenses before investing. Like any investment in securities, the value of
the Fund's portfolio will be subject to the risk of loss from market, currency,
economic, political, and other factors. The Fund and its investors are not
protected from such losses by the investment manager. Therefore, investors who
cannot accept this risk should not invest in shares of the Fund. The prospectus
contains this and other information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded, and accessed. These calls can be
identified by the presence of a regular beeping tone.

ZT454 A2007 02/08

[GRAPHIC OMITTED]

- --------------------------------------------------------------------------------
ANNUAL REPORT 12 31 2007
- --------------------------------------------------------------------------------

Emerging Markets Series

[LOGO](R)
FRANKLIN TEMPLETON
INSTITUTIONAL

Contents

ANNUAL REPORT

TIFI Emerging Markets Series .............................................. 1

Performance Summary ....................................................... 6

Your Fund's Expenses ...................................................... 8

Financial Highlights and Statement of Investments ......................... 10

Financial Statements ...................................................... 17

Notes to Financial Statements ............................................. 20

Report of Independent Registered Public Accounting Firm ................... 28

Tax Designation ........................................................... 29

Board Members and Officers ................................................ 31

Shareholder Information ................................................... 36

- --------------------------------------------------------------------------------

Annual Report

TIFI Emerging Markets Series

YOUR FUND'S GOAL AND MAIN INVESTMENTS: TIFI Emerging Markets Series seeks
long-term capital growth. Under normal market conditions, the Fund invests at
least 80% of its net assets in securities issued by emerging market companies.

- --------------------------------------------------------------------------------
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. PLEASE VISIT FTINSTITUTIONAL.COM OR CALL 1-800/321-8563 FOR MOST
RECENT MONTH-END PERFORMANCE.
- --------------------------------------------------------------------------------

This annual report for Templeton Institutional Funds, Inc. (TIFI) Emerging
Markets Series (Fund) covers the fiscal year ended December 31, 2007.

PERFORMANCE OVERVIEW

TIFI Emerging Markets Series posted a +30.10% cumulative total return for the 12
months ended December 31, 2007. The Fund underperformed the Standard &
Poor's/International Finance Corporation Investable (S&P/IFCI) Composite Index
and the Morgan Stanley Capital International (MSCI) Emerging Markets (EM) Index,
which returned +40.28% and +39.78% during the same period. 1 Please note that
index performance is purely for reference and that we do not attempt to tract
any 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.

1. Source: Standard & Poor's Micropal. The S&P/IFCI Composite Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
performance of global emerging markets. The MSCI EM Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global emerging markets. The indexes are unmanaged and
include reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 11.

- --------------------------------------------------------------------------------

- -----------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
- -----------------------------------------------------

Annual Report | 1

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 12/31/07

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Asia 43.2%
Europe 30.0%
Latin America 21.0%
Middle East & Africa 4.9%
Short-Term Investments & Other Net Assets 0.9%

ECONOMIC AND MARKET OVERVIEW

In 2007, emerging markets equities had another positive year. Despite problems
brought on by the U.S. subprime lending crisis, emerging markets registered a
+39.78% gain for the year, bringing cumulative return for the past five years to
+390.79% in U.S. dollar terms, as measured by the MSCI EM Index. 2 Most stock
markets were supported by a robust macroeconomic environment, surging money
supply, rising commodity prices, stronger emerging market currencies, improved
corporate earnings and significant investment inflows. Periods of increased
volatility, however, occurred during the year as nervous investors reacted to
subprime concerns and their impact on the global economy as well as overheating
concerns in China.

In Asia, India and China were among the top performing markets as both economies
continued to benefit from strong economic growth, a large consumer base and vast
foreign reserves. Moreover, Chinese stocks listed in Hong Kong were key
beneficiaries of the expansion of China's Qualified Domestic Institutional
Investor (QDII) program, which allowed domestic fund managers and brokerages to
invest in foreign securities. Neighboring markets in Indonesia, Thailand and
South Korea also recorded respectable gains.

Market returns in Latin America benefited from high commodity prices and
stronger regional currencies. Accelerating economic growth, high foreign
investment flows and lower interest rates pushed the Brazilian stock market to
end the year at record high levels. However, Mexico underperformed its regional
peers as concerns of slowing growth in the U.S. led investors to stay on the
sidelines.

Despite recording double-digit returns, European and African markets
underperformed their emerging market counterparts during the year. Turkey,
however, significantly outperformed global markets as investors responded
favorably to the central bank's adoption of a loosening monetary policy,
improvement in the country's public finances, as well as the completion of
parliamentary and presidential elections. A stronger lira also boosted stock
returns in U.S. dollar terms.

INVESTMENT STRATEGY

Our investment strategy employs a bottom-up, value-oriented, long-term approach.
We focus on the market price of a company's securities relative to our
evaluation of the company's long-term earnings, asset value and cash flow
potential. As we look for investments, we focus on specific companies and

2. Source: Standard & Poor's Micropal. See footnote 1 for a description of the
MSCI EM Index.

2 | Annual Report

undertake in-depth research to construct an "action list" from which we make our
buy decisions. Before we make a purchase, we generally look at the company's
price/earnings ratio, profit margins and liquidation value. During our analysis,
we also consider the company's position in its sector, the economic framework
and political environment.

MANAGER'S DISCUSSION

For the 12 months under review, the Fund's exposure to the materials, energy,
telecommunication services and bank sectors contributed significantly to
absolute performance. 3 Within the materials and energy sectors, holdings in
Chalco (Aluminum Corp. of China), CVRD (Companhia Vale do Rio Doce), Petrobras
(Petroleo Brasileiro) and Tupras (Tupras-Turkiye Petrol Rafinerileri) were among
the largest contributors to performance. Rising oil and commodity prices coupled
with growing demand for oil, coal and metals in China as well as other emerging
markets benefited these companies.

Additional key contributors included Turkcell (Turkcell Iletisim Hizmetleri) and
America Movil in the telecommunication services sector. Turkish and Brazilian
banks, Akbank, Vakifbank (Turkiye Vakiflar Bankasi), Unibanco (Unibanco-Uniao de
Bancos Brasileiros) and Banco Bradesco, also boosted Fund performance during the
period.

Sectors that detracted from Fund performance included retail and real estate. 4
South African stocks Foschini and JD Group declined in value and were the
largest detractors in the retail sector during the period. Over the longer term,
however, we believed that both stocks were well positioned in their respective
markets to benefit from growing demand for their products and services. In the
real estate sector, Beijing Capital Land and Hopson Development Holdings were
detractors during the period.

Geographically, investments in Brazil, Turkey and China made noteworthy
contributions to Fund performance. In addition to stocks discussed earlier, THY
(Turk Hava Yollari Anonim Ortakligi), Turkey's national airline; Souza Cruz,
Brazil's leading major tobacco company; Sinopec (China Petroleum and Chemical),
the largest integrated energy company in China; and PetroChina, a dominant
player in the upstream oil and gas sector, also supported performance.

3. The materials sector comprises chemicals, construction materials, metals and
mining, and paper and forest products in the SOI. The energy sector comprises
energy equipment and services; and oil, gas and consumable fuels in the SOI. The
telecommunication services sector comprises diversified telecommunication
services and wireless telecommunication services in the SOI. The bank sector
comprises commercial banks in the SOI.

4. The retail sector comprises specialty retail in the SOI. The real estate
sector comprises real estate management and development in the SOI.

TOP 10 COUNTRIES
12/31/07

- --------------------------------------------------------------------------------
% OF TOTAL
NET ASSETS
- --------------------------------------------------------------------------------
China 20.2%
- --------------------------------------------------------------------------------
Brazil 15.6%
- --------------------------------------------------------------------------------
Russia 13.2%
- --------------------------------------------------------------------------------
Turkey 10.1%
- --------------------------------------------------------------------------------
South Korea 8.0%
- --------------------------------------------------------------------------------
India 5.5%
- --------------------------------------------------------------------------------
Mexico 4.8%
- --------------------------------------------------------------------------------
South Africa 4.5%
- --------------------------------------------------------------------------------
Taiwan 3.2%
- --------------------------------------------------------------------------------
U.K. 2.2%
- --------------------------------------------------------------------------------

Annual Report | 3

TOP 10 EQUITY HOLDINGS
12/31/07

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
CVRD (Companhia Vale do Rio Doce),
ADR, pfd., A 5.4%
METALS & MINING, BRAZIL
- --------------------------------------------------------------------------------
Petrobras (Petroleo Brasileiro SA),
ADR, pfd. 4.6%
OIL, GAS & CONSUMABLE FUELS, BRAZIL
- --------------------------------------------------------------------------------
Akbank TAS 3.8%
COMMERCIAL BANKS, TURKEY
- --------------------------------------------------------------------------------
Chalco (Aluminum Corp. of China Ltd.),
H & 144A 3.8%
METALS & MINING, CHINA
- --------------------------------------------------------------------------------
Gazprom OAO, ord. & ADR 3.5%
OIL, GAS & CONSUMABLE FUELS, RUSSIA
- --------------------------------------------------------------------------------
SK Energy Co. Ltd. 3.2%
OIL, GAS & CONSUMABLE FUELS,
SOUTH KOREA
- --------------------------------------------------------------------------------
UES (Unified Energy Systems) 3.2%
ELECTRIC UTILITIES, RUSSIA
- --------------------------------------------------------------------------------
Norilsk Nickel (Mining and Metallurgical
Co. Norilsk Nickel) 3.1%
METALS & MINING, RUSSIA
- --------------------------------------------------------------------------------
PetroChina Co. Ltd., H 2.8%
OIL, GAS & CONSUMABLE FUELS, CHINA
- --------------------------------------------------------------------------------
America Movil SAB de CV, L, ADR 2.7%
WIRELESS TELECOMMUNICATION SERVICES,
MEXICO
- --------------------------------------------------------------------------------

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, 2007, the U.S. dollar declined in value relative to most
non-U.S. currencies. As a result, the Fund's performance was positively affected
by the portfolio's investments predominantly in securities with non-U.S.
currency exposure. However, one cannot expect the same result in future periods.

During the reporting period, we made significant purchases in Russia, India,
Mexico and China (via Hong Kong-listed China H shares). 5 Major investments
included shares of America Movil, UES (Unified Energy Systems), China Telecom
and Sberbank (Savings Bank of Russia). We also made select additions in
Pakistan, Peru and Chile as we continued to search for undervalued stocks
trading at attractive valuations.

From a sector perspective, we increased the Fund's allocations to several
sectors based on what we considered favorable market trends. With commodity
prices expected to stay at relatively high levels amid growing global energy
demand, we increased our investments in coal and diversified metals and mining
companies. 6 Greater global demand for consumer products and services also led
us to increase our allocation to integrated telecommunication services, home
furnishing retail and automobile manufacturing companies. 7 We also increased
the Fund's exposure to the information technology (IT) consulting industry
because of strong demand for outsourcing services. 8 We initiated a position in
Tata Consultancy Services, India's leading IT consulting and outsourcing
services provider.

5. "China H" denotes shares of China-incorporated, Hong Kong-listed companies
with most businesses in China.

6. The coal industry is part of oil, gas and consumable fuels in the SOI. The
diversified metals and mining industry is part of metals and mining in the SOI.

7. The integrated telecommunication services industry is part of diversified
telecommunication services in the SOI. The home furnishing retail industry is
part of household durables in the SOI. The automobile manufacturing industry is
part of automobiles in the SOI.

8. The IT consulting industry is part of IT services in the SOI.

4 | Annual Report

To raise funds for redemptions during the reporting period, we sold a number of
holdings. These sales also allowed the Fund to focus on stocks we considered
relatively more attractively valued within our investment universe. We sold
select positions as stocks reached sale price targets. As a result, the Fund's
exposure to the tobacco, semiconductors, diversified banking, and life and
health insurance industries fell. 9 Major sales included all or part of Remgro,
Old Mutual, Samsung Electronics and Hana Financial Group.

We thank you for your continued participation in the Fund and look forward to
serving your future investment needs.

[PHOTO OMITTED] /s/ Mark Mobius

Mark Mobius
Executive Chairman
Templeton Asset Management Ltd.

9. The semiconductors industry is part of semiconductors and semiconductor
equipment in the SOI. The diversified banking industry is part of commercial
banks in the SOI. The life and health insurance industry is part of insurance in
the SOI.

Annual Report | 5

Performance Summary as of 12/31/07

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. 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 on the sale of Fund shares.

PRICE AND DISTRIBUTION INFORMATION

- --------------------------------------------------------------------------------------
SYMBOL: TEEMX CHANGE 12/31/07 12/31/06
- --------------------------------------------------------------------------------------

Net Asset Value (NAV) +$0.37 $21.23 $20.86
- --------------------------------------------------------------------------------------
DISTRIBUTIONS (1/1/07-12/31/07)
- --------------------------------------------------------------------------------------
Dividend Income $0.7856
- --------------------------------------------------------------------------------------
Short-Term Capital Gain $0.5063
- --------------------------------------------------------------------------------------
Long-Term Capital Gain $4.1449
- --------------------------------------------------------------------------------------
TOTAL $5.4368
- --------------------------------------------------------------------------------------

PERFORMANCE 1

THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

- -----------------------------------------------------------------------------------------------
1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------

Cumulative Total Return 2 +30.10% +318.29% +253.54%
- -----------------------------------------------------------------------------------------------
Average Annual Total Return 3 +30.10% +33.14% +13.46%
- -----------------------------------------------------------------------------------------------
Value of $1,000,000 Investment 4 $1,301,036 $4,182,900 $3,535,462
- -----------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5 1.42%
- -----------------------------------------------------------------------------------------------

6 | Annual Report

Performance Summary (CONTINUED)

TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $1,000,000 INVESTMENT 1

1/1/98-12/31/07
$ Millions

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

TIFI Emerging S&P/IFCI
Date Markets Series Composite Index 6 MSCI EM Index 6

Dec-97 $ 1,000,000 $ 1,000,000 $ 1,000,000
Jan-98 $ 918,997 $ 934,429 $ 921,570
Feb-98 $ 1,009,644 $ 1,029,841 $ 1,017,759
Mar-98 $ 1,049,279 $ 1,070,225 $ 1,061,926
Apr-98 $ 1,051,215 $ 1,073,121 $ 1,050,358
May-98 $ 903,116 $ 939,245 $ 906,416
Jun-98 $ 815,999 $ 842,987 $ 811,337
Jul-98 $ 821,807 $ 876,603 $ 837,061
Aug-98 $ 631,117 $ 630,166 $ 595,033
Sep-98 $ 663,060 $ 660,495 $ 632,779
Oct-98 $ 762,760 $ 736,349 $ 699,412
Nov-98 $ 845,038 $ 791,734 $ 757,581
Dec-98 $ 819,691 $ 779,922 $ 746,602
Jan-99 $ 780,235 $ 761,894 $ 734,556
Feb-99 $ 780,235 $ 775,464 $ 741,701
Mar-99 $ 889,301 $ 865,083 $ 839,450
Apr-99 $ 1,063,015 $ 983,046 $ 943,308
May-99 $ 1,034,392 $ 965,473 $ 937,820
Jun-99 $ 1,135,068 $ 1,070,745 $ 1,044,255
Jul-99 $ 1,084,730 $ 1,055,190 $ 1,015,887
Aug-99 $ 1,046,236 $ 1,066,580 $ 1,025,130
Sep-99 $ 999,847 $ 1,036,870 $ 990,437
Oct-99 $ 1,028,470 $ 1,054,507 $ 1,011,527
Nov-99 $ 1,115,327 $ 1,149,300 $ 1,102,225
Dec-99 $ 1,283,502 $ 1,303,352 $ 1,242,406
Jan-00 $ 1,225,794 $ 1,305,207 $ 1,249,810
Feb-00 $ 1,182,016 $ 1,303,938 $ 1,266,317
Mar-00 $ 1,197,498 $ 1,323,007 $ 1,272,497
Apr-00 $ 1,093,973 $ 1,186,137 $ 1,151,873
May-00 $ 1,006,376 $ 1,153,108 $ 1,104,253
Jun-00 $ 1,081,033 $ 1,185,747 $ 1,143,150
Jul-00 $ 1,035,243 $ 1,128,734 $ 1,084,358
Aug-00 $ 1,055,151 $ 1,132,997 $ 1,089,690
Sep-00 $ 951,627 $ 1,031,663 $ 994,542
Oct-00 $ 871,993 $ 948,129 $ 922,435
Nov-00 $ 826,203 $ 864,367 $ 841,783
Dec-00 $ 872,605 $ 889,391 $ 862,106
Jan-01 $ 971,353 $ 1,003,612 $ 980,819
Feb-01 $ 894,773 $ 926,294 $ 904,019
Mar-01 $ 811,140 $ 846,502 $ 815,227
Apr-01 $ 853,461 $ 896,616 $ 855,509
May-01 $ 883,690 $ 923,755 $ 865,720
Jun-01 $ 879,659 $ 907,029 $ 847,950
Jul-01 $ 828,270 $ 845,037 $ 794,367
Aug-01 $ 831,293 $ 833,550 $ 786,532
Sep-01 $ 727,507 $ 704,328 $ 664,793
Oct-01 $ 749,675 $ 747,999 $ 706,049
Nov-01 $ 795,018 $ 835,633 $ 779,763
Dec-01 $ 829,010 $ 905,142 $ 841,657
Jan-02 $ 872,102 $ 937,455 $ 870,179
Feb-02 $ 871,076 $ 955,548 $ 884,475
Mar-02 $ 923,301 $ 1,022,128 $ 937,677
Apr-02 $ 954,146 $ 1,031,598 $ 943,763
May-02 $ 947,977 $ 1,014,709 $ 928,726
Jun-02 $ 888,343 $ 941,490 $ 859,051
Jul-02 $ 841,047 $ 881,874 $ 793,715
Aug-02 $ 838,991 $ 893,296 $ 805,945
Sep-02 $ 777,300 $ 794,045 $ 718,991
Oct-02 $ 797,864 $ 845,037 $ 765,644
Nov-02 $ 862,639 $ 903,710 $ 818,346
Dec-02 $ 845,218 $ 869,509 $ 791,156
Jan-03 $ 835,827 $ 870,290 $ 787,712
Feb-03 $ 834,783 $ 844,517 $ 766,451
Mar-03 $ 804,571 $ 813,505 $ 744,719
Apr-03 $ 888,380 $ 896,551 $ 811,052
May-03 $ 940,761 $ 958,933 $ 869,263
Jun-03 $ 972,190 $ 1,018,288 $ 918,806
Jul-03 $ 1,014,095 $ 1,073,023 $ 976,349
Aug-03 $ 1,062,285 $ 1,150,439 $ 1,041,881
Sep-03 $ 1,093,714 $ 1,163,000 $ 1,049,519
Oct-03 $ 1,178,571 $ 1,257,468 $ 1,138,830
Nov-03 $ 1,202,666 $ 1,273,609 $ 1,152,827
Dec-03 $ 1,300,309 $ 1,366,482 $ 1,236,401
Jan-04 $ 1,341,979 $ 1,413,179 $ 1,280,312
Feb-04 $ 1,391,128 $ 1,481,289 $ 1,339,372
Mar-04 $ 1,389,703 $ 1,508,916 $ 1,356,582
Apr-04 $ 1,311,425 $ 1,394,826 $ 1,245,672
May-04 $ 1,295,340 $ 1,375,854 $ 1,221,138
Jun-04 $ 1,322,148 $ 1,375,919 $ 1,226,716
Jul-04 $ 1,301,774 $ 1,347,608 $ 1,205,025
Aug-04 $ 1,345,738 $ 1,407,843 $ 1,255,467
Sep-04 $ 1,415,438 $ 1,489,131 $ 1,327,979
Oct-04 $ 1,457,258 $ 1,532,184 $ 1,359,793
Nov-04 $ 1,568,777 $ 1,665,311 $ 1,485,745
Dec-04 $ 1,643,613 $ 1,750,667 $ 1,557,271
Jan-05 $ 1,631,632 $ 1,754,897 $ 1,562,200
Feb-05 $ 1,757,980 $ 1,902,213 $ 1,699,374
Mar-05 $ 1,673,517 $ 1,783,436 $ 1,587,418
Apr-05 $ 1,622,072 $ 1,743,475 $ 1,545,108
May-05 $ 1,686,657 $ 1,808,819 $ 1,599,509
Jun-05 $ 1,741,384 $ 1,869,802 $ 1,654,722
Jul-05 $ 1,839,906 $ 1,999,219 $ 1,771,807
Aug-05 $ 1,831,162 $ 2,016,043 $ 1,787,757
Sep-05 $ 1,978,928 $ 2,204,295 $ 1,954,460
Oct-05 $ 1,868,374 $ 2,060,690 $ 1,826,763
Nov-05 $ 2,012,848 $ 2,227,888 $ 1,978,014
Dec-05 $ 2,105,378 $ 2,366,775 $ 2,095,189
Jan-06 $ 2,317,805 $ 2,620,761 $ 2,330,476
Feb-06 $ 2,323,360 $ 2,622,486 $ 2,328,256
Mar-06 $ 2,341,171 $ 2,653,433 $ 2,349,127
Apr-06 $ 2,499,546 $ 2,878,588 $ 2,516,750
May-06 $ 2,260,859 $ 2,593,622 $ 2,253,635
Jun-06 $ 2,236,324 $ 2,582,655 $ 2,248,860
Jul-06 $ 2,293,212 $ 2,615,718 $ 2,282,494
Aug-06 $ 2,335,581 $ 2,692,971 $ 2,341,790
Sep-06 $ 2,335,581 $ 2,716,531 $ 2,361,473
Oct-06 $ 2,447,106 $ 2,838,204 $ 2,473,729
Nov-06 $ 2,584,296 $ 3,058,379 $ 2,658,003
Dec-06 $ 2,717,421 $ 3,197,852 $ 2,777,935
Jan-07 $ 2,682,249 $ 3,161,145 $ 2,749,157
Feb-07 $ 2,656,190 $ 3,154,474 $ 2,733,234
Mar-07 $ 2,760,990 $ 3,285,031 $ 2,843,123
Apr-07 $ 2,902,259 $ 3,450,277 $ 2,975,152
May-07 $ 3,030,078 $ 3,627,432 $ 3,123,284
Jun-07 $ 3,125,625 $ 3,800,163 $ 3,271,014
Jul-07 $ 3,200,966 $ 3,992,873 $ 3,445,297
Aug-07 $ 3,098,723 $ 3,904,230 $ 3,373,209
Sep-07 $ 3,475,464 $ 4,292,353 $ 3,745,987
Oct-07 $ 3,852,219 $ 4,788,122 $ 4,164,034
Nov-07 $ 3,534,682 $ 4,459,128 $ 3,869,118
Dec-07 $ 3,535,462 $ 4,485,844 $ 3,882,940

AVERAGE ANNUAL TOTAL RETURN

- -------------------------------------
12/31/07
- -------------------------------------
1-Year +30.10%
- -------------------------------------
5-Year +33.14%
- -------------------------------------
10-Year +13.46%
- -------------------------------------

ENDNOTES

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

3. Average annual total return represents the average annual change in value of
an investment over the periods indicated.

4. These figures represent the value of a hypothetical $1,000,000 investment in
the Fund over the periods indicated.

5. Figures are as stated in the Fund's prospectus current as of the date of this
report.

6. Source: Standard & Poor's Micropal. The S&P/IFCI Composite Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
performance of global emerging markets. The MSCI EM Index is a free
float-adjusted, market capitalization-weighted index designed to measure equity
market performance in global emerging markets.

Annual Report | 7

Your Fund's Expenses

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.

ACTUAL FUND EXPENSES

The first line (Actual) of the table provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.

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:

1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Information in the second line (Hypothetical) of the table can help you compare
ongoing costs of investing in the Fund with those of other mutual funds. This
information may not be used to estimate the actual ending account balance or
expenses you paid during the period. The hypothetical "Ending Account Value" is
based on the Fund's actual expense ratio and an assumed 5% annual rate of return
before expenses, which does not represent the Fund's actual return. The figure
under the heading "Expenses Paid During Period" shows the hypothetical expenses
your account would have incurred under this scenario. You can compare this
figure with the 5% hypothetical examples that appear in shareholder reports of
other funds.

8 | Annual Report

Your Fund's Expenses (CONTINUED)

PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES, IF APPLICABLE. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you compare total
costs of owning different funds. In addition, if transaction costs were
included, your total costs would have been higher. Please refer to the Fund
prospectus for additional information on operating expenses.

- -------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 7/1/07 VALUE 12/31/07 PERIOD* 7/1/07-12/31/07
- -------------------------------------------------------------------------------------------------------

Actual $1,000 $1,131.10 $7.63
- -------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,018.05 $7.22
- -------------------------------------------------------------------------------------------------------

* Expenses are calculated using the most recent six-month annualized expense
ratio of 1.42%, multiplied by the average account value over the period,
multiplied by 184/365 to reflect the one-half year period.

Annual Report | 9

Templeton Institutional Funds, Inc.

FINANCIAL HIGHLIGHTS

EMERGING MARKETS SERIES

------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
2007 2006 2005 2004 2003
------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)

Net asset value, beginning of year ............... $ 20.86 $ 18.93 $ 15.09 $ 12.18 $ 8.10
------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ....................... 0.50 0.44 0.33 0.21 0.24
Net realized and unrealized gains (losses) .... 5.31 4.96 3.89 2.97 4.10
------------------------------------------------------------------------
Total from investment operations ................. 5.81 5.40 4.22 3.18 4.34
------------------------------------------------------------------------
Less distributions from:
Net investment income ......................... (0.79) (0.54) (0.38) (0.27) (0.26)
Net realized gains ............................ (4.65) (2.93) -- -- --
------------------------------------------------------------------------
Total distributions .............................. (5.44) (3.47) (0.38) (0.27) (0.26)
------------------------------------------------------------------------
Redemption fees .................................. -- c -- c -- c -- c --
------------------------------------------------------------------------
Net asset value, end of year ..................... $ 21.23 $ 20.86 $ 18.93 $ 15.09 $ 12.18
========================================================================

Total return ..................................... 30.10% 29.07% 28.09% 26.40% 53.84%

RATIOS TO AVERAGE NET ASSETS
Expenses ......................................... 1.41% d 1.42% d 1.42% d 1.45% d 1.46%
Net investment income ............................ 2.18% 2.09% 1.98% 1.62% 2.52%

SUPPLEMENTAL DATA
Net assets, end of year (000's) .................. $ 3,184,512 $3,209,602 $2,841,536 $2,063,532 $2,092,229
Portfolio turnover rate .......................... 87.26% 40.84% 36.42% 52.07% 46.83%

b Based on average daily shares outstanding.

c Amount rounds to less than $0.01 per share.

d Benefit of expense reduction rounds to less than 0.01%.

10 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007

- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS SERIES INDUSTRY SHARES/RIGHTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS 99.1%
COMMON STOCKS AND RIGHTS 85.1%
AUSTRIA 1.1%
Erste Bank der oesterreichischen Sparkassen
AG ......................................... Commercial Banks 68,890 $ 4,875,929
a IMMOEAST AG ................................... Real Estate Management & Development 155,420 1,671,605
a Meinl European Land Ltd. ...................... Real Estate Management & Development 152,965 2,105,054
OMV AG ........................................ Oil, Gas & Consumable Fuels 230,099 18,609,757
Wienerberger AG ............................... Building Products 108,400 6,000,281
---------------
33,262,626
---------------
BRAZIL 1.8%
AES Tiete SA .................................. Independent Power Producers & Energy Traders 259,127,491 11,500,602
Companhia de Bebidas das Americas
(AmBev) .................................... Beverages 48,607 3,413,413
b Companhia Energetica de Minas Gerais .......... Electric Utilities 60,672 1,151,745
Energias do Brasil SA ......................... Electrical Equipment 222,712 3,615,942
c Marfrig Frigorificos e Comercio De Alimentos
SA, 144A ................................... Food Products 106,409 911,650
Natura Cosmeticos SA .......................... Personal Products 422,194 4,032,190
Porto Seguro SA ............................... Insurance 138,700 5,142,809
Souza Cruz SA ................................. Tobacco 981,619 26,580,919
---------------
56,349,270
---------------
CHINA 20.2%
Air China Ltd., H ............................. Airlines 8,510,000 12,680,807
Aluminum Corp. of China Ltd., H ............... Metals & Mining 57,380,000 118,467,063
c Aluminum Corp. of China Ltd., H, 144A ......... Metals & Mining 1,114,000 2,299,971
Beijing Capital Land Ltd., H .................. Real Estate Management & Development 5,166,000 3,140,103
China Construction Bank Corp., H .............. Commercial Banks 12,236,000 10,371,752
China International Marine Containers
(Group) Co. Ltd., B ........................ Machinery 2,967,300 5,506,063
China Mobile Ltd. ............................. Wireless Telecommunication Services 3,789,000 67,003,898
China Netcom Group Corp. (Hong Kong) Ltd. ..... Diversified Telecommunication Services 6,412,000 19,281,799
China Petroleum and Chemical Corp., H ......... Oil, Gas & Consumable Fuels 51,590,000 77,933,112
China Shenhua Energy Co. Ltd., H .............. Oil, Gas & Consumable Fuels 2,121,000 12,674,703
China Telecom Corp. Ltd., H ................... Diversified Telecommunication Services 79,252,000 63,010,528
CNOOC Ltd. .................................... Oil, Gas & Consumable Fuels 27,665,000 47,112,912
Denway Motors Ltd. ............................ Automobiles 48,553,000 31,193,564
Dongfeng Motor Corp., H ....................... Automobiles 23,106,000 16,296,662
a Hidili Industry International Development ..... Metals & Mining 8,823,000 13,554,525
a,c Hidili Industry International Development,
144A ....................................... Metals & Mining 620,000 952,488
Huaneng Power International Inc., H ........... Independent Power Producers & Energy Traders 2,960,000 3,116,349
Industrial and Commercial Bank of China, H .... Commercial Banks 2,232,000 1,602,852
Jiangxi Copper Co. Ltd., H .................... Metals & Mining 5,396,000 13,244,180
Nine Dragons Paper Holdings Ltd. .............. Paper & Forest Products 1,213,000 3,067,460
PetroChina Co. Ltd., H ........................ Oil, Gas & Consumable Fuels 49,676,000 88,546,749
Shanghai Industrial Holdings Ltd. ............. Industrial Conglomerates 5,303,000 23,121,273

Annual Report | 11

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
CHINA (CONTINUED)
a Soho China Ltd. ............................... Real Estate Management & Development 5,365,000 $ 5,538,304
a,c Soho China Ltd., 144A ......................... Real Estate Management & Development 1,886,500 1,947,439
Travelsky Technology Ltd., H .................. IT Services 1,594,000 1,694,549
---------------
643,359,105
---------------
EGYPT 0.2%
Orascom Construction Industries ............... Construction & Engineering 49,689 5,170,358
Telecom Egypt ................................. Diversified Telecommunication Services 647,935 2,458,424
---------------
7,628,782
---------------
HONG KONG 1.5%
Citic Pacific Ltd. ............................ Industrial Conglomerates 1,589,000 8,874,078
Dairy Farm International Holdings Ltd. ........ Food & Staples Retailing 1,864,719 8,130,175
GOME Electrical Appliances Holdings Ltd. ...... Specialty Retail 6,674,000 16,945,820
Hopson Development Holdings Ltd. .............. Real Estate Management & Development 1,338,000 3,697,554
Hutchison Whampoa Ltd. ........................ Industrial Conglomerates 635,000 7,202,492
VTech Holdings Ltd. ........................... Communications Equipment 367,000 2,635,514
---------------
47,485,633
---------------
HUNGARY 1.5%
Magyar Telekom PLC ............................ Diversified Telecommunication Services 1,338,679 6,949,764
MOL Hungarian Oil and Gas Nyrt. ............... Oil, Gas & Consumable Fuels 268,120 37,884,168
OTP Bank Ltd. ................................. Commercial Banks 78,063 3,958,086
---------------
48,792,018
---------------
INDIA 5.5%
Ashok Leyland Ltd. ............................ Machinery 4,456,061 5,880,350
a Bharti Airtel Ltd. ............................ Wireless Telecommunication Services 291,948 7,368,529
Dr. Reddy's Laboratories Ltd. ................. Pharmaceuticals 170,635 3,184,277
Gail India Ltd. ............................... Gas Utilities 1,654,039 22,752,743
Grasim Industries Ltd. ........................ Construction Materials 1,513 140,207
Hindalco Industries Ltd. ...................... Metals & Mining 2,375,134 12,950,071
Hindustan Unilever Ltd. ....................... Household Products 1,483,200 8,051,173
Maruti Suzuki India Ltd. ...................... Automobiles 116,216 2,919,925
National Aluminium Co. Ltd. ................... Metals & Mining 912,053 11,391,115
Oil & Natural Gas Corp. Ltd. .................. Oil, Gas & Consumable Fuels 1,301,753 40,848,054
Reliance Industries Ltd. ...................... Oil, Gas & Consumable Fuels 176,100 12,875,343
Satyam Computer Services Ltd. ................. IT Services 301,300 3,434,308
Tata Chemicals Ltd. ........................... Chemicals 488,636 5,116,387
Tata Consultancy Services Ltd. ................ IT Services 876,683 24,102,386
Tata Motors Ltd. .............................. Machinery 125,900 2,371,029
Tata Steel Ltd. ............................... Metals & Mining 545,200 12,933,713
---------------
176,319,610
---------------
INDONESIA 0.4%
PT Bank Central Asia Tbk ...................... Commercial Banks 6,119,500 4,756,173
PT Telekomunikasi Indonesia, B ................ Diversified Telecommunication Services 8,549,000 9,238,472
---------------
13,994,645
---------------

12 | Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
ISRAEL 0.2%
a,b Taro Pharmaceutical Industries Ltd. ........... Pharmaceuticals 704,120 $ 5,421,724
---------------
MEXICO 4.8%
Alfa SAB de CV ................................ Industrial Conglomerates 523,600 3,381,313
America Movil SAB de CV, L, ADR ............... Wireless Telecommunication Services 1,378,478 84,624,764
Cemex SAB de CV, CPO, ADR ..................... Construction Materials 121,160 3,131,986
Consorcio ARA SAB de CV ....................... Household Durables 1,002,937 1,120,805
Fomento Economico Mexicano SAB de CV, ADR ..... Beverages 100,100 3,820,817
Grupo Televisa SA ............................. Media 2,925,981 13,961,194
Kimberly Clark de Mexico SAB de CV, A ......... Household Products 6,675,130 29,141,403
Telefonos de Mexico SAB de CV (Telmex), L,
ADR ........................................ Diversified Telecommunication Services 378,858 13,957,129
---------------
153,139,411
---------------
PAKISTAN 1.0%
MCB Bank Ltd. ................................. Commercial Banks 2,268,043 14,713,768
Oil & Gas Development Co. Ltd. ................ Oil, Gas & Consumable Fuels 2,457,000 4,760,562
Pakistan Telecommunications Corp., A .......... Diversified Telecommunication Services 19,384,833 13,221,934
---------------
32,696,264
---------------
PERU 0.4%
Compania de Minas Buenaventura SA, ADR ........ Metals & Mining 219,360 12,415,776
---------------
PHILIPPINES 0.5%
San Miguel Corp., B ........................... Beverages 11,239,883 16,220,544
---------------
POLAND 0.7%
a Polski Koncern Naftowy Orlen SA ............... Oil, Gas & Consumable Fuels 1,107,756 23,286,701
---------------
RUSSIA 13.2%
Bank Of Moscow ................................ Commercial Banks 32,028 1,673,463
Fifth Power Generation Co. .................... Electric Utilities 2,210,371 387,257
Gazprom OAO ................................... Oil, Gas & Consumable Fuels 1,727,000 24,333,430
Gazprom OAO, ADR .............................. Oil, Gas & Consumable Fuels 590,600 33,487,020
Gazprom, ADR .................................. Oil, Gas & Consumable Fuels 949,300 53,303,195
LUKOIL, ADR ................................... Oil, Gas & Consumable Fuels 367,520 31,625,096
LUKOIL, ADR (London Exchange) ................. Oil, Gas & Consumable Fuels 124,000 10,713,600
Mining and Metallurgical Co. Norilsk Nickel ... Metals & Mining 369,810 97,999,650
OAO TMK, GDR .................................. Energy Equipment & Services 78,000 3,471,000
Sberbank RF ................................... Commercial Banks 8,165,740 34,459,423
TGC-5 JSC ..................................... Independent Power Producers & Energy Traders 72,962,927 66,031
TNK-BP ........................................ Oil, Gas & Consumable Fuels 12,037,973 26,844,680
a Unified Energy Systems ........................ Electric Utilities 77,590,500 101,953,917
---------------
420,317,762
---------------
SINGAPORE 0.8%
ComfortDelGro Corp. Ltd. ...................... Road & Rail 5,257,997 6,675,316
Fraser and Neave Ltd. ......................... Industrial Conglomerates 4,097,290 16,770,621
Keppel Corp. Ltd. ............................. Industrial Conglomerates 239,000 2,155,468
---------------
25,601,405
---------------

Annual Report | 13

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
SOUTH AFRICA 4.5%
Barloworld Ltd. ............................... Industrial Conglomerates 189,750 $ 2,976,850
Foschini Ltd. ................................. Specialty Retail 2,248,671 15,820,948
a Freeworld Coatings Ltd. ....................... Specialty Retail 189,750 291,604
Imperial Holdings Ltd. ........................ Air Freight & Logistics 662,219 10,068,815
JD Group Ltd. ................................. Specialty Retail 1,456,846 10,822,891
Lewis Group Ltd. .............................. Specialty Retail 1,881,725 12,595,086
MTN Group Ltd. ................................ Wireless Telecommunication Services 2,013,336 37,556,855
Remgro Ltd. ................................... Diversified Financial Services 1,208,501 34,955,869
Standard Bank Group Ltd. ...................... Commercial Banks 726,182 10,586,496
Tiger Brands Ltd. ............................. Food Products 307,600 7,527,575
---------------
143,202,989
---------------
SOUTH KOREA 8.0%
Daewoo Shipbuilding & Marine Engineering
Co. Ltd. ................................... Machinery 162,290 8,946,278
GS Holdings Corp. ............................. Oil, Gas & Consumable Fuels 234,040 14,526,707
Kangwon Land Inc. ............................. Hotels, Restaurants & Leisure 889,318 23,371,853
b POSCO ......................................... Metals & Mining 25,850 15,879,227
Samsung Electronics Co. Ltd. .................. Semiconductors & Semiconductor Equipment 33,771 20,059,480
b Samsung Heavy Industries Co. Ltd. ............. Machinery 315,390 13,544,873
SK Energy Co. Ltd. ............................ Oil, Gas & Consumable Fuels 528,834 102,258,377
SK Holdings Co. Ltd. .......................... Industrial Conglomerates 187,565 39,675,092
SKC Co. Ltd. .................................. Household Durables 48,970 1,464,836
b Woori Finance Holdings Co. Ltd. ............... Commercial Banks 701,000 14,116,607
---------------
253,843,330
---------------
SWEDEN 1.2%
Oriflame Cosmetics SA, SDR .................... Personal Products 592,364 37,837,563
---------------
TAIWAN 3.2%
Compal Communications Inc. .................... Communications Equipment 2,044,000 5,073,759
MediaTek Inc. ................................. Semiconductors & Semiconductor Equipment 581,000 7,542,430
Novatek Microelectronics Corp. Ltd. ........... Semiconductors & Semiconductor Equipment 3,708,428 14,179,620
President Chain Store Corp. ................... Food & Staples Retailing 12,858,010 33,780,526
Siliconware Precision Industries Co. .......... Semiconductors & Semiconductor Equipment 11,653,497 20,949,703
Sunplus Technology Co. Ltd. ................... Semiconductors & Semiconductor Equipment 4,632,173 6,941,832
Taiwan Semiconductor Manufacturing Co. Ltd. ... Semiconductors & Semiconductor Equipment 6,418,640 12,271,220
---------------
100,739,090
---------------
THAILAND 2.1%
Kasikornbank Public Co. Ltd., fgn. ............ Commercial Banks 7,206,700 18,720,090
a PTT Aromatics & Refining Public Co. Ltd.,
fgn. ....................................... Oil, Gas & Consumable Fuels 2,791,685 3,563,677
PTT Public Co. Ltd., fgn. ..................... Oil, Gas & Consumable Fuels 588,000 6,563,396
Siam Cement Public Co. Ltd., fgn. ............. Construction Materials 3,543,536 24,615,925
Siam Commercial Bank Public Co. Ltd.,
fgn. ....................................... Commercial Banks 1,271,400 3,283,711

14 | Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS AND RIGHTS (CONTINUED)
THAILAND (CONTINUED)
Thai Beverages Co. Ltd., fgn. ................. Beverages 62,470,000 $ 11,051,268
a True Corp. Public Co. Ltd., fgn., rts.,
3/28/08 .................................... Diversified Telecommunication Services 2,088,420 --
---------------
67,798,067
---------------
TURKEY 10.1%
Akbank TAS .................................... Commercial Banks 16,295,087 121,402,061
Anadolu Efes Biracilik Ve Malt Sanayii AS ..... Beverages 1,056,222 12,572,456
Arcelik AS, Br. ............................... Household Durables 4,327,920 30,205,565
Tupras-Turkiye Petrol Rafineleri AS ........... Oil, Gas & Consumable Fuels 1,922,384 56,383,346
a Turk Hava Yollari Anonim Ortakligi ............ Airlines 607,000 4,470,306
a,c Turk Hava Yollari Anonim Ortakligi, 144A ...... Airlines 2,523,000 18,580,861
Turkcell Iletisim Hizmetleri AS ............... Wireless Telecommunication Services 4,038,549 44,267,546
Turkiye Vakiflar Bankasi T.A.O., D ............ Commercial Banks 9,014,815 31,960,038
---------------
319,842,179
---------------
UNITED KINGDOM 2.2%
Anglo American PLC ............................ Metals & Mining 1,061,183 64,153,266
HSBC Holdings PLC ............................. Commercial Banks 366,800 6,194,786
---------------
70,348,052
---------------
TOTAL COMMON STOCKS AND RIGHTS
(COST $1,760,013,395) 2,709,902,546
---------------
PREFERRED STOCKS 14.0%
BRAZIL 13.8%
Banco Bradesco SA, ADR, pfd. .................. Commercial Banks 1,407,804 45,049,728
Companhia Vale do Rio Doce, ADR, pfd., A ...... Metals & Mining 6,185,130 173,059,938
Itausa - Investimentos Itau SA, pfd. .......... Commercial Banks 562,100 3,710,492
Metalurgica Gerdau SA, pfd. ................... Metals & Mining 302,054 12,048,221
Petroleo Brasileiro SA, ADR, pfd. ............. Oil, Gas & Consumable Fuels 1,511,770 145,462,509
Unibanco - Uniao de Bancos Brasileiros SA,
GDR, pfd. .................................. Commercial Banks 301,500 42,101,460
Usinas Siderurgicas de Minas Gerais SA,
pfd., A .................................... Metals & Mining 424,239 19,424,426
---------------
440,856,774
---------------
CHILE 0.2%
Embotelladora Andina SA, pfd., A .............. Beverages 2,369,708 6,376,963
---------------
TOTAL PREFERRED STOCKS
(COST $155,016,157) ........................ 447,233,737
---------------
TOTAL LONG TERM INVESTMENTS
(COST $1,915,029,552) ...................... 3,157,136,283
---------------

Annual Report | 15

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS SERIES PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

SHORT TERM INVESTMENTS 0.8%
U.S. GOVERNMENT AND AGENCY SECURITIES 0.8%
d FHLB, 1/02/08 - 2/13/08 .................................................................... $ 19,135,000 $ 19,130,365
d FHLMC, 2/19/08 - 4/25/08 ................................................................... 1,890,000 1,868,589
d FNMA, 3/27/08 .............................................................................. 2,751,000 2,724,467
---------------
TOTAL U.S. GOVERNMENT AND AGENCY
SECURITIES (COST $23,716,168) ........................................................... 23,723,421
---------------
TOTAL INVESTMENTS
(COST $1,938,745,720) 99.9% ............................................................. 3,180,859,704
OTHER ASSETS, LESS LIABILITIES 0.1% ........................................................ 3,652,287
---------------
NET ASSETS 100.0% .......................................................................... $3,184,511,991
===============

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
CPO - Certificates of Ordinary Participation
FHLB - Federal Home Loan Bank
FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
GDR - Global Depository Receipt
SDR - Swedish Depository Receipt

a Non-income producing for the twelve months ended December 31, 2007.

b A portion or all of the securities purchased on a when-issued or delayed
delivery basis. See Note 1(c).

c Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and 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. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Directors. At December 31, 2007, the aggregate value of
these securities was $24,692,409 representing 0.78% of net assets.

d The security is traded on a discount basis with no stated coupon rate.

16 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007

----------------
EMERGING
MARKETS SERIES
----------------
Assets:
Investments in securities:
Cost ................................................. $ 1,938,745,720
----------------
Value ................................................ $ 3,180,859,704
Cash .................................................... 11,705
Foreign currency, at value (cost $6,371,301) ............ 6,787,011
Receivables:
Investment securities sold ........................... 15,796,334
Capital shares sold .................................. 3,882,115
Dividends ............................................ 6,409,582
Foreign tax .......................................... 118,079
----------------
Total assets ...................................... 3,213,864,530
----------------
Liabilities:
Payables:
Investment securities purchased ...................... 16,739,740
Capital shares redeemed .............................. 6,285,946
Affiliates ........................................... 3,522,702
Deferred tax ............................................ 1,661,836
Accrued expenses and other liabilities .................. 1,142,315
----------------
Total liabilities ................................. 29,352,539
----------------
Net assets, at value ........................... $ 3,184,511,991
================
Net assets consist of:
Paid-in capital ......................................... $ 1,877,940,754
Distributions in excess of net investment income ........ (25,601,137)
Net unrealized appreciation (depreciation) .............. 1,240,834,549
Accumulated net realized gain (loss) .................... 91,337,825
----------------
Net assets, at value ........................... $ 3,184,511,991
================
Shares outstanding ......................................... 150,008,187
================
Net asset value per share a ................................ $ 21.23
================

a Redemption price is equal to net asset value less redemption fees retained by
the Fund.

Annual Report |
The accompanying notes are an integral part of these financial statements. | 17

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended December 31, 2007

----------------
EMERGING
MARKETS SERIES
----------------
Investment income:
Dividends (net of foreign taxes of $7,644,450) .......... $ 111,846,960
Interest (net of foreign taxes of $29,334) .............. 6,209,240
----------------
Total investment income .............................. 118,056,200
----------------
Expenses:
Management fees (Note 3a) ............................... 39,961,050
Administrative fees (Note 3b) ........................... 2,639,151
Transfer agent fees (Note 3c) ........................... 28,739
Custodian fees (Note 4) ................................. 3,280,515
Reports to shareholders ................................. 54,880
Registration and filing fees ............................ 241,427
Professional fees ....................................... 242,893
Directors' fees and expenses ............................ 48,312
Other ................................................... 71,088
----------------
Total expenses ....................................... 46,568,055
Expense reductions (Note 4) .......................... (48,006)
----------------
Net expenses ...................................... 46,520,049
----------------
Net investment income .......................... 71,536,151
----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments .......................................... 664,321,797
Foreign currency transactions ........................ 293,648
Swap agreements ...................................... (223,080)
----------------
Net realized gain (loss) .......................... 664,392,365
Net change in unrealized appreciation (depreciation) on:
Investments .......................................... 106,602,202
Translation of assets and liabilities denominated
in foreign currencies ............................. 387,850
Change in deferred taxes on unrealized appreciation
(depreciation) ....................................... (1,486,638)
----------------
Net change in unrealized appreciation
(depreciation) .................................. 105,503,414
----------------
Net realized and unrealized gain (loss) .................... 769,895,779
----------------
Net increase (decrease) in net assets resulting from
operations .............................................. $ 841,431,930
================

18 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

-----------------------------------
EMERGING MARKETS SERIES
YEAR ENDED DECEMBER 31,
-----------------------------------
2007 2006
-----------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ...................................................... $ 71,536,151 $ 62,498,611
Net realized gain (loss) from investments, foreign currency transactions,
and swap agreements ..................................................... 664,392,365 488,959,958
Net change in unrealized appreciation (depreciation) on investments,
translation of assets and liabilities denominated in foreign
currencies, and deferred taxes .......................................... 105,503,414 219,700,509
-----------------------------------
Net increase (decrease) in net assets resulting from operations ....... 841,431,930 771,159,078
-----------------------------------
Distributions to shareholders from:
Net investment income ...................................................... (101,637,203) (74,010,838)
Net realized gain .......................................................... (587,388,696) (394,234,085)
-----------------------------------
Total distributions to shareholders .............................................. (689,025,899) (468,244,923)
-----------------------------------
Capital share transactions: (Note 2) ............................................. (177,501,570) 65,143,777
-----------------------------------

Redemption fees .................................................................. 5,283 7,862
-----------------------------------
Net increase (decrease) in net assets ................................. (25,090,256) 368,065,794
Net assets:
Beginning of year ............................................................. 3,209,602,247 2,841,536,453
-----------------------------------
End of year ................................................................... $ 3,184,511,991 $ 3,209,602,247
===================================
Distributions in excess of net investment income included in net assets:
End of year ................................................................... $ (25,601,137) $ (47,974,409)
===================================

Annual Report |
The accompanying notes are an integral part of these financial statements. | 19

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS

EMERGING MARKETS SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Institutional Funds, Inc. (TIFI) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of three separate funds. The Emerging Markets Series (Fund) included
in this report is diversified. The financial statements of the remaining funds
in the Company are presented separately.

The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. The investment manager monitors price movements
following the close of trading in foreign stock markets through a series of
country specific market proxies (such as baskets of American Depository
Receipts, futures contracts and exchange traded funds). These price movements
are measured against established trigger thresholds for each specific market
proxy to assist in determining if an event has occurred. If such an event
occurs, the securities may be valued using fair value procedures, which may
include the use of independent pricing services. All security valuation
procedures are approved by the Fund's Board of Directors.

20 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

EMERGING MARKETS SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. FOREIGN CURRENCY TRANSLATION

C. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS

D. TOTAL RETURN SWAPS

The Fund may enter into total return swaps. A total return swap is an agreement
between the Fund and a counterparty to exchange a market linked return for a
floating rate payment, both based on a notional principal amount. Total return
swaps are marked to market daily based upon quotations from the market makers
and the change in value, if any, is recorded as an unrealized gain or loss in
the Statement of Operations. Payments received or paid are recorded as a
realized gain or loss. The risks of entering into a total return swap include
the unfavorable fluctuation of interest rates or the price of the underlying
security or index, as well as the potential inability of the counterparty to
fulfill their obligations under the swap agreement.

Annual Report | 21

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

EMERGING MARKETS SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. FOREIGN CURRENCY CONTRACTS

F. INCOME AND DEFERRED TAXES

G. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

22 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

EMERGING MARKETS SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)

H. ACCOUNTING ESTIMATES

I. REDEMPTION FEES

A short term trading redemption fee will be imposed, with some exceptions, on
any fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the Fund and accounted for as an addition to paid-in
capital.

J. GUARANTEES AND INDEMNIFICATIONS

Under TIFI's organizational documents, its officers and directors are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, TIFI, on behalf of the Fund, enters into contracts with service
providers that contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Fund that have not yet occurred. Currently, the
Fund expects the risk of loss to be remote.

Annual Report | 23

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

EMERGING MARKETS SERIES

2. CAPITAL STOCK

At December 31, 2007, there were 1.2 billion shares of TIFI authorized ($0.01
par value) of which 325 million have been classified as Fund shares.
Transactions in the Fund's shares were as follows:

---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
2007 2006
---------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------

Shares sold ..................... 11,076,340 $ 251,491,312 21,134,826 $ 441,896,309
Shares issued in reinvestment
of distributions ............. 32,231,074 647,171,797 21,751,689 442,666,138
Shares redeemed ................. (47,192,244) (1,076,164,679) (39,129,699) (819,418,670)
---------------------------------------------------------------
Net increase (decrease) ......... (3,884,830) $ (177,501,570) 3,756,816 $ 65,143,777
===============================================================

3. TRANSACTIONS WITH AFFILIATES

- ------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ------------------------------------------------------------------------------------------

Templeton Asset Management Ltd. (TAML) Investment manager
Franklin Templeton Services, LLC (FT Services) Administrative manager
Franklin Templeton Distributors, Inc. (Distributors) Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services) Transfer agent

A. MANAGEMENT FEES

The Fund pays an investment management fee to TAML based on the average daily
net assets of the Fund as follows:

- -------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- -------------------------------------------------------------------------------
1.250% Up to and including $1 billion
1.200% Over $1 billion, up to and including $5 billion
1.150% Over $5 billion, up to and including $10 billion
1.100% Over $10 billion, up to and including $15 billion
1.050% Over $15 billion, up to and including $20 billion
1.000% In excess of $20 billion

24 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

EMERGING MARKETS SERIES

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

B. ADMINISTRATIVE FEES

The Fund pays its allocated share of an administrative fee to FT Services based
on the aggregate average net assets of certain funds within TIFI as follows:

- -------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- -------------------------------------------------------------------------------
0.150% Up to and including $200 million
0.135% Over $200 million, up to and including $700 million
0.100% Over $700 million, up to and including $1.2 billion
0.075% In excess of $1.2 billion

C. TRANSFER AGENT FEES

For the year ended December 31, 2007, the Fund paid transfer agent fees of
$28,739, of which $3,926 was retained by Investor Services.

4. EXPENSE OFFSET ARRANGEMENT

5. INCOME TAXES

For tax purposes, realized currency losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At December 31, 2007, the Fund deferred realized currency losses of
$1,680,746.

The tax character of distributions paid during the years ended December 31, 2007
and 2006, was as follows:

-----------------------------
2007 2006
-----------------------------
Distributions paid from:
Ordinary income ............................. $ 171,493,747 $ 74,010,838
Long term capital gain ...................... 517,532,152 394,234,085
-----------------------------
$ 689,025,899 $ 468,244,923
=============================

Annual Report | 25

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

EMERGING MARKETS SERIES

5. INCOME TAXES (CONTINUED)

Cost of investments ........................................ $ 1,978,328,416
=================

Unrealized appreciation .................................... $ 1,255,459,149
Unrealized depreciation .................................... (52,927,861)
-----------------
Net unrealized appreciation (depreciation) ................. $ 1,202,531,288
=================

Undistributed ordinary income .............................. $ 26,455,512
Undistributed long term capital gains ...................... 80,544,618
-----------------
Distributable earnings ..................................... $ 107,000,130
=================

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions, passive foreign
investment company shares, and foreign taxes paid on net realized gains.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, passive foreign investment company shares, and foreign taxes paid
on net realized gains.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
year ended December 31, 2007, aggregated $2,774,110,040 and $3,588,567,336,
respectively.

7. CONCENTRATION OF RISK

26 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

EMERGING MARKETS SERIES

8. REGULATORY AND LITIGATION MATTERS

9. NEW ACCOUNTING PRONOUNCEMENT

Annual Report | 27

Templeton Institutional Funds, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TEMPLETON INSTITUTIONAL FUNDS,
INC. - EMERGING MARKETS SERIES

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Emerging Markets Series (one of the
funds constituting Templeton Institutional Funds, Inc., hereafter referred to as
the "Fund") at December 31, 2007, the results of its operations for the year
then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the five years and
the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
February 20, 2008

28 | Annual Report

Templeton Institutional Funds, Inc.

TAX DESIGNATION (UNAUDITED)

EMERGING MARKETS SERIES

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $570,193,985 as long
term capital gain dividends for the fiscal year ended December 31, 2007.

Under Section 871(k)(2)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $49,423,793 as a short term capital gain dividend for
purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the
fiscal year ended December 31, 2007.

Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $73,313,625 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
December 31, 2007. In January 2008, shareholders will receive Form 1099-DIV
which will include their share of qualified dividends distributed during the
calendar year 2007. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.

Under Section 871(k)(1)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $6,042,520 as interest related dividends for purposes
of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year
ended December 31, 2007.

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

Record Date: 12/14/2007

- ------------------------------------------------------------------------------------------------------------
FOREIGN TAX PAID FOREIGN SOURCE INCOME FOREIGN QUALIFIED DIVIDENDS
PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------------

Fund shares ....................... $0.0599 $0.6732 $0.4138

Annual Report | 29

Templeton Institutional Funds, Inc.

TAX DESIGNATION (UNAUDITED) (CONTINUED)

EMERGING MARKETS SERIES

30 | Annual Report

Templeton Institutional Funds, Inc.

BOARD MEMBERS AND OFFICERS

INDEPENDENT BOARD MEMBERS

HARRIS J. ASHTON (1932) Director Since 1992 141 Bar-S Foods (meat packing company).
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING 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).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK J. CROTHERS (1944) Director Since 1990 20 Fortis, Inc. (utility holding company),
500 East Broward Blvd. Nuinsco Resources Limited (mineral
Suite 2100 exploration), Royal Fidelity Merchant
Fort Lauderdale, FL 33394-3091 Bank & Trust Limited (financial
services), C.A. Bancorp Inc. (financial
services), Victory Nickel Inc. (mineral
exploration), ABACO Markets Limited
(retail distributors) and Belize
Electricity Limited (electric utility).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman, Island Corporate Holdings Ltd.; Director and Vice Chairman, Caribbean Utilities Company Ltd.; Director, Provo Power
Company Ltd.; director of various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment & Power
Ltd. (1977-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Lead Director since 141 Hess Corporation (exploration and
500 East Broward Blvd. Independent 1996 and Lead refining of oil and gas), H.J. Heinz
Suite 2100 Director Independent Company (processed foods and allied
Fort Lauderdale, FL 33394-3091 Director since products), RTI International Metals,
December 2007 Inc. (manufacture and distribution of
titanium), Canadian National Railway
(railroad) and White Mountains Insurance
Group, Ltd. (holding company).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Annual Report | 31

DAVID W. NIEMIEC (1949) Director Since 2005 20 Emeritus Corporation (assisted living)
500 East Broward Blvd. and OSI Pharmaceuticals, Inc.
Suite 2100 (pharmaceutical products).
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Advisor, Saratoga Partners (private equity fund); Director, various private companies; 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).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Director Since 2003 141 Hess Corporation (exploration and
500 East Broward Blvd. refining of oil and gas) and Sentient
Suite 2100 Jet (private jet service).
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Physician, 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) Director Since April 34 El Oro and Exploration Co., p.l.c.
500 East Broward Blvd. 2007 (investments) and ARC Wireless
Suite 2100 Solutions, Inc. (wireless components and
Fort Lauderdale, FL 33394-3091 network products).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Practicing attorney.
- ------------------------------------------------------------------------------------------------------------------------------------

32 | Annual Report

INTERESTED BOARD MEMBERS AND OFFICERS

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide, 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 42
of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**GREGORY E. JOHNSON (1961) Director Since April 92 None
One Franklin Parkway 2007
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director,
Templeton Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of
Franklin Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Not Applicable Not Applicable
One Franklin Parkway Compliance Compliance
San Mateo, CA 94403-1906 Officer and Officer since
Vice President 2004 and Vice
- AML President -
Compliance AML Compliance
since 2006

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Annual Report | 33

RUPERT H. JOHNSON, JR. (1940) Vice President Since 1996 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Vice President, Templeton Worldwide, Inc.; Senior Vice President, Franklin Templeton Services, LLC; and officer of some of the
other subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Vice President and Controller, Keystone Group, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
MARK MOBIUS (1936) Vice President Since 1993 Not Applicable Not Applicable
17th Floor,
The Chater House
8 Connaught Road
Central, Hong Kong

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Portfolio Manager of various Templeton advisory affiliates; Managing Director, Templeton Asset Management Ltd.; and officer and/or
director, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of six of the investment companies
in Franklin Templeton Investments; and FORMERLY, President, International Investment Trust Company Limited (investment manager of
Taiwan R.O.C. Fund) (1986-1987); and Director, Vickers da Costa, Hong Kong (1983-1986).
- ------------------------------------------------------------------------------------------------------------------------------------
GARY P. MOTYL (1952) President Since 2005 Not Applicable Not Applicable
500 East Broward Blvd. and Chief
Suite 2100 Executive
Fort Lauderdale, FL 33394-3091 Officer -
Investment
Management

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

34 | Annual Report

GREGORY R. SEWARD (1956) Treasurer Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman &
Sterling, LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, 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.

Note 3: Prior to December 31, 2007, Nicholas F. Brady ceased to be a director of
the Fund.

Annual Report | 35

Templeton Institutional Funds, Inc.

SHAREHOLDER INFORMATION

EMERGING MARKETS SERIES

PROXY VOTING POLICIES AND PROCEDURES

QUARTERLY STATEMENT OF INVESTMENTS

36 | Annual Report

[LOGO](R) FRANKLIN TEMPLETON INSTITUTIONAL
FRANKLIN TEMPLETON 600 Fifth Avenue
INSTITUTIONAL New York, NY 10020

ANNUAL REPORT

TEMPLETON INSTITUTIONAL FUNDS, INC.
EMERGING MARKETS SERIES

INVESTMENT MANAGER

Templeton Asset Management Ltd.

DISTRIBUTOR

Franklin Templeton Distributors, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906

FRANKLIN TEMPLETON INSTITUTIONAL SERVICES

1-800/321-8563
ftinstitutional.com

ZT456 A2007 02/08

[GRAPHIC OMITTED]

ANNUAL REPORT

- --------------------------------------------------------------------------------
12 31 2007
- --------------------------------------------------------------------------------

Foreign Smaller Companies Series

[LOGO](R)
FRANKLIN TEMPLETON
INSTITUTIONAL

Contents

ANNUAL REPORT

TIFI Foreign Smaller Companies Series ..................................... 1

Performance Summary ....................................................... 7

Your Fund's Expenses ...................................................... 9

Financial Highlights and Statement of Investments ......................... 11

Financial Statements ...................................................... 17

Notes to Financial Statements ............................................. 20

Report of Independent Registered Public Accounting Firm ................... 28

Tax Designation ........................................................... 29

Board Members and Officers ................................................ 31

Shareholder Information ................................................... 36

- --------------------------------------------------------------------------------

Annual Report

TIFI Foreign Smaller Companies Series

YOUR FUND'S GOAL AND MAIN INVESTMENTS: TIFI Foreign Smaller Companies Series
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.

We are pleased to bring you Templeton Institutional Funds, Inc. (TIFI) Foreign
Smaller Companies Series' (Fund's) annual report for the fiscal year ended
December 31, 2007.

PERFORMANCE OVERVIEW

The Fund posted a +15.09% cumulative total return for the 12-month period ended
December 31, 2007. The Fund performed comparably to its benchmark, the
S&P/Citigroup Global Equity ex-U.S. less than $2 Billion Index, which returned
+14.84% during the same period. 1 Please note that index performance information
is provided for reference and that we do not attempt to track the index but
rather undertake investments on the basis of fundamental research. You can find
more of the Fund's performance data in the Performance Summary beginning on page
7.

1. Source: Standard & Poor's Micropal. The S&P/Citigroup Global Equity ex-U.S.
less than $2 Billion Index is a free float-adjusted, market
capitalization-weighted index designed to measure performance of global
developed and emerging market equity securities, excluding the U.S., with market
capitalizations less than $2 billion. The index is unmanaged and includes
reinvested dividends. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 12.

- --------------------------------------------------------------------------------

- -----------------------------------------------------
NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE
- -----------------------------------------------------

Annual Report | 1

GEOGRAPHIC BREAKDOWN
Based on Total Net Assets as of 12/31/07

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Asia 39.7%
Europe 37.4%
North America 11.1%
Latin America 4.7%
Australia & New Zealand 3.4%
Middle East & Africa 1.4%
Short-Term Investments & Other Net Assets 2.3%

ECONOMIC AND MARKET OVERVIEW

In spite of elevated energy prices and widespread fears of contagion from the
deteriorating U.S. housing situation, the global economy remained resilient in
2007. Consumer and corporate demand strength, particularly in China and other
developing economies, generally favorable employment and accommodative monetary
policies continued to underpin the current expansionary period that began in
2002.

To alleviate the credit crunch and restore investor confidence, the world's
major central banks infused capital into the system, and the U.S. Federal
Reserve Board reduced its target interest rate by a full percentage point.
However, credit and equity markets continued to face headwinds as write-downs
and losses from subprime mortgage financing prevailed among large financial
institutions toward the end of the year, and equity prices remained volatile.

For the year, however, global and non-U.S. equity markets registered the fifth
consecutive year of double-digit total returns, making this an exceptionally
strong period for investors in global equities. Broad-based stock performance by
European and Asian shares at least doubled that of U.S. stocks, while emerging
market equity returns more than tripled those in developed markets. Led by the
BRIC countries, Brazil, Russia, India and China, emerging market economies
continued to grow at accelerated rates, supporting elevated prices for oil and
other commodities. At the same time, investment inflows from

2. Source: "For Deal Makers, Tale of Two Halves," THE WALL STREET JOURNAL,
1/2/08.

2 | Annual Report

developed economies continued to underpin equity prices in emerging markets. In
addition, U.S. dollar weakness versus the currencies of many major trading
partners enhanced equity returns for U.S.-based investors holding stocks
denominated in these currencies.

INVESTMENT STRATEGY

When choosing equity investments, 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 potential long-term (typically five
years) earnings, asset value and cash flow. We also consider a company's
price/earnings ratio, profit margins, liquidation value and other factors.

MANAGER'S DISCUSSION

Several holdings performed well during the year under review. U.K.-based GAME
Group, a major European retailer of computer software, video games, consoles and
related products, was among the most significant contributors to Fund
performance. GAME Group's shares performed well as the company acquired
GameStation, the U.K.'s second-largest specialty video game retailer. The deal,
in our view, made financial and strategic sense. It removed the takeover risk of
GameStation by Gamestop, GAME Group's competitor, and effectively blocked what
could have been Gamestop's entry point to the U.K. market. The transaction also
gives GAME Group access to a large, higher margin, existing sales base, and we
believe it offered synergies, and magnified the positive impact of the current
game console cycle. Consistent with our investment strategy, we believed GAME
Group was fundamentally strong with a solid balance sheet.

The Fund also benefited from Denmark-based Vestas Wind Systems, the world's
leading wind turbine manufacturer. In our assessment, the company's success
stemmed from its ability to develop durable, reliable and cost effective wind
turbines. Wind power is the cheapest source of renewable energy when costs of
environmental degradation from traditional power sources are factored in. Vestas
benefited from rising energy prices and increasing global attention on renewable
energy and environmentally friendly power sources.

Another contributor for the period was Taiwan-based D-Link, a global data
networking vendor that sells branded wireless local area network (WLAN)
products, broadband access equipment, LAN switches and other networking
equipment. Rising notebook personal computer penetration rates and increasing
broadband adoption rates bolstered demand from home users and small businesses
for D-Link's products. The company continued to gain market share along with
larger companies such as Linksys and NetGear, while smaller

PORTFOLIO BREAKDOWN
Based on Total Net Assets as of 12/31/07

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Textiles, Apparel & Luxury Goods 8.8%
Specialty Retail 8.1%
Commercial Services & Supplies 7.4%
Machinery 7.3%
Commercial Banks 5.6%
Electronic Equipment & Instruments 4.9%
Energy Equipment & Services 3.5%
Leisure Equipment & Products 3.3%
Capital Markets 3.3%
Communications Equipment 3.2%
Food Products 2.8%
Health Care Providers & Services 2.7%
Computers & Peripherals 2.3%
Electrical Equipment 2.0%
Other 32.5%
Short-Term Investments & Other Net Assets 2.3%

Annual Report | 3

TOP 10 EQUITY HOLDINGS
12/31/07

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY, COUNTRY NET ASSETS
- --------------------------------------------------------------------------------
GAME Group PLC 5.0%
SPECIALTY RETAIL, U.K.
- --------------------------------------------------------------------------------
Vedior NV 2.3%
COMMERCIAL SERVICES & SUPPLIES,
NETHERLANDS
- --------------------------------------------------------------------------------
North West Co. Fund 1.9%
DIVERSIFIED FINANCIAL SERVICES, CANADA
- --------------------------------------------------------------------------------
Amer Sports OYJ 1.8%
LEISURE EQUIPMENT & PRODUCTS, FINLAND
- --------------------------------------------------------------------------------
Lojas Renner SA 1.8%
MULTI-LINE RETAIL, BRAZIL
- --------------------------------------------------------------------------------
Bank of Pusan 1.7%
COMMERCIAL BANKS, SOUTH KOREA
- --------------------------------------------------------------------------------
Vossloh AG 1.6%
MACHINERY, GERMANY
- --------------------------------------------------------------------------------
Open Text Corp. 1.5%
INTERNET SOFTWARE & SERVICES, CANADA
- --------------------------------------------------------------------------------
Youngone Corp. 1.5%
TEXTILES, APPAREL & LUXURY GOODS,
SOUTH KOREA
- --------------------------------------------------------------------------------
OPG Groep NV 1.5%
HEALTH CARE PROVIDERS & SERVICES,
NETHERLANDS
- --------------------------------------------------------------------------------

competitors lost market share. Recent sales figures indicate to us that the
company was competing well and had the potential to benefit from a pending
upgrade cycle in wireless access equipment.

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, 2007, the U.S. dollar declined in value relative to most
non-U.S. currencies. As a result, the Fund's performance was positively affected
by the portfolio's predominant investment in securities with non-U.S. currency
exposure. However, one cannot expect the same result in future periods.

The Fund also had some underperformers during the year under review. Osim
International is a dominant player in Asia's healthy lifestyle products segment
with franchise outlets in Hong Kong, China, Taiwan, Singapore and Malaysia.
Osim's sales are driven by its flagship massage chair product line, and it has a
number of newer products that were gaining traction in the marketplace. The
company's purchase of U.S.-based Brookstone in 2005 widened its global reach and
gave Osim direct access to a retail network of more than 300 stores. Our
analysis indicated that the company's recent stock price weakness appeared
relatively isolated to a single product and single market as the company
received negative publicity from imitation products spreading to Hong Kong and
Taiwan. At period-end, we continued to hold the stock because we remained
confident in its long-term prospects.

U.K.-based Fiberweb is one of the world's largest producers of nonwoven fabrics.
The company was spun off from BBA Group in November 2006 and its stock price has
declined in value since being added to the portfolio. However, we believed the
stock remained attractively valued based on its restructuring potential. The
company's new management, which assumed control last year, has set out a clearly
defined restructuring plan. After completing a review of the company's business
lines, Fiberweb shut down its underperforming sites and invested in equipment
upgrades to boost the company's competitive edge. We believe these changes are
positive and could contribute to higher margins.

Shares of Takuma, a Japanese environmental equipment company, with a focus on
designing, constructing and running waste and biomass power plants, declined
during the period on lower-than-expected earnings. However, at

4 | Annual Report

period-end, we believed the stock remained attractively valued, due to the
company's strong network. Based on our analysis, we believe the company's
margins should improve if domestic municipal demand for environmental products
improves.

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

[PHOTO OMITTED] /s/ Harlan B. Hodes

Harlan B. Hodes, CPA

[PHOTO OMITTED] /s/ Cynthia L. Sweeting

Cynthia L. Sweeting, CFA

Portfolio Management Team
TIFI Foreign Smaller Companies Series

Annual Report | 5

- --------------------------------------------------------------------------------
HARLAN B. HODES assumed lead portfolio manager responsibilities for TIFI Foreign
Smaller Companies Series in December 2007. Mr. Hodes has global research
responsibilities for leisure equipment and products, small cap financial
services and consumer goods, and Latin American banks. He also has country
research coverage of the U.S., Israel and Egypt. Prior to joining Templeton in
2001, Mr. Hodes worked for Kaufman, Rossin & Co. in Miami. In this position, he
was responsible for the analysis and reporting of hedge funds, taxation of
individuals, corporations, S corporations, and partnerships. His
responsibilities also included valuations, cash flow and financial analysis of
other various entities. Prior to working for Kaufman, Rossin & Co., Mr. Hodes
was with Arthur Andersen, where his responsibilities included the financial
reporting and taxation of international banks.

Mr. Hodes earned a B.A. from the University of Michigan and an M.B.A. from the
Leonard N. Stern School of Business at New York University. He is a Certified
Public Accountant (CPA) and a member of the American Institute of Certified
Public Accountants (AICPA).

- --------------------------------------------------------------------------------

6 | Annual Report

Performance Summary as of 12/31/07

PRICE AND DISTRIBUTION INFORMATION

- --------------------------------------------------------------------------------
SYMBOL: TFSCX CHANGE 12/31/07 12/31/06
- --------------------------------------------------------------------------------
Net Asset Value (NAV) -$2.22 $ 20.20 $ 22.42
- --------------------------------------------------------------------------------
DISTRIBUTIONS (1/1/07-12/31/07)
- --------------------------------------------------------------------------------
Dividend Income $ 0.3852
- --------------------------------------------------------------------------------
Short-Term Capital Gain $ 0.3021
- --------------------------------------------------------------------------------
Long-Term Capital Gain $ 4.6698
- --------------------------------------------------------------------------------
TOTAL $ 5.3571
- --------------------------------------------------------------------------------

PERFORMANCE 1

THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

- --------------------------------------------------------------------------------------------------
1-YEAR 5-YEAR INCEPTION (10/21/02)
- --------------------------------------------------------------------------------------------------

Cumulative Total Return 2 +15.09% +205.18% +208.24%
- --------------------------------------------------------------------------------------------------
Average Annual Total Return 3 +15.09% +25.00% +24.20%
- --------------------------------------------------------------------------------------------------
Value of $1,000,000 Investment 4 $ 1,150,860 $3,051,732 $ 3,082,249
- --------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 5
- --------------------------------------------------------------------------------------------------
Without Waiver 1.07%
- --------------------------------------------------------------------------------------------------
With Waiver 0.95%
- --------------------------------------------------------------------------------------------------

THE MANAGER AND ADMINISTRATOR HAVE CONTRACTUALLY AGREED TO LIMIT FUND EXPENSES
SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 0.95% (OTHER THAN
CERTAIN NON-ROUTINE EXPENSES) UNTIL 4/30/08.

Annual Report | 7

Performance Summary (CONTINUED)

TOTAL RETURN INDEX COMPARISON FOR HYPOTHETICAL $1,000,000 INVESTMENT 1

Total return represents the change in value of an investment over the periods
shown. It includes any 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.

AVERAGE ANNUAL TOTAL RETURN

- -----------------------------------------
12/31/07
- -----------------------------------------
1-Year +15.09%
- -----------------------------------------
5-Year +25.00%
- -----------------------------------------
Since Inception (10/21/02) +24.20%
- -----------------------------------------

10/21/02-12/31/07
$ Millions

[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]

Date TIFI Foreign Smaller S&P/Citigroup Global Equity ex-U.S.
Companies Series less than $2 Billion Index 6
- --------------------------------------------------------------------------------
Oct-02 $1,012,000 $1,002,640
Nov-02 $1,032,000 $1,039,233
Dec-02 $1,010,000 $1,034,512
Jan-03 $ 979,000 $1,035,387
Feb-03 $ 946,000 $1,024,301
Mar-03 $ 950,000 $1,011,659
Apr-03 $1,022,000 $1,085,278
May-03 $1,106,999 $1,178,455
Jun-03 $1,152,999 $1,238,670
Jul-03 $1,217,999 $1,285,780
Aug-03 $1,286,999 $1,366,071
Sep-03 $1,316,999 $1,435,074
Oct-03 $1,411,999 $1,540,404
Nov-03 $1,430,999 $1,547,557
Dec-03 $1,527,201 $1,646,986
Jan-04 $1,580,250 $1,711,255
Feb-04 $1,624,117 $1,773,391
Mar-04 $1,603,946 $1,842,141
Apr-04 $1,566,860 $1,766,102
May-04 $1,569,951 $1,740,645
Jun-04 $1,619,398 $1,805,172
Jul-04 $1,575,101 $1,744,466
Aug-04 $1,572,011 $1,768,308
Sep-04 $1,622,489 $1,835,435
Oct-04 $1,662,664 $1,890,958
Nov-04 $1,779,072 $2,039,434
Dec-04 $1,852,238 $2,140,642
Jan-05 $1,852,238 $2,165,408
Feb-05 $1,931,848 $2,266,644
Mar-05 $1,892,013 $2,211,030
Apr-05 $1,812,423 $2,149,636
May-05 $1,833,936 $2,158,960
Jun-05 $1,882,336 $2,218,226
Jul-05 $1,973,757 $2,315,094
Aug-05 $1,981,285 $2,370,042
Sep-05 $2,043,668 $2,485,124
Oct-05 $1,951,161 $2,398,179
Nov-05 $2,008,169 $2,500,889
Dec-05 $2,079,648 $2,680,780
Jan-06 $2,211,196 $2,870,701
Feb-06 $2,254,665 $2,845,261
Mar-06 $2,326,139 $2,953,665
Apr-06 $2,444,620 $3,113,736
May-06 $2,321,530 $2,939,051
Jun-06 $2,282,410 $2,856,163
Jul-06 $2,285,858 $2,824,901
Aug-06 $2,356,022 $2,913,031
Sep-06 $2,375,581 $2,922,326
Oct-06 $2,454,958 $3,045,956
Nov-06 $2,553,904 $3,192,351
Dec-06 $2,678,214 $3,300,366
Jan-07 $2,711,646 $3,355,218
Feb-07 $2,735,531 $3,435,390
Mar-07 $2,854,769 $3,553,586
Apr-07 $3,010,631 $3,718,884
May-07 $3,147,307 $3,835,955
Jun-07 $3,204,839 $3,879,745
Jul-07 $3,289,964 $3,958,668
Aug-07 $3,185,636 $3,770,915
Sep-07 $3,287,542 $3,957,751
Oct-07 $3,369,053 $4,186,221
Nov-07 $3,099,318 $3,853,207
Dec-07 $3,082,249 $3,790,133

ENDNOTES

THE FUND INVESTS IN FOREIGN SECURITIES, WHICH CAN INVOLVE EXPOSURE TO CURRENCY
VOLATILITY AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. EMERGING MARKETS
INVOLVE HEIGHTENED RISKS RELATED TO THE SAME FACTORS, IN ADDITION TO THOSE
ASSOCIATED WITH THEIR RELATIVELY SMALL SIZE AND LESSER LIQUIDITY. THE FUND'S
INVESTMENTS IN SMALLER-COMPANY STOCKS CARRY SPECIAL RISKS AS SUCH STOCKS HAVE
HISTORICALLY EXHIBITED GREATER PRICE VOLATILITY THAN LARGE-COMPANY STOCKS,
PARTICULARLY OVER THE SHORT TERM. ADDITIONALLY, SMALLER COMPANIES OFTEN HAVE
RELATIVELY SMALL REVENUES, LIMITED PRODUCT LINES AND SMALL MARKET SHARE. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

1. If the manager and administrator had not waived fees, the Fund's total
returns would have been lower.

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

3. Average annual total return represents the average annual change in value of
an investment over the periods indicated.

4. These figures represent the value of a hypothetical $1,000,000 investment in
the Fund over the periods indicated.

5. Figures are as stated in the Fund's prospectus current as of the date of this
report.

6. Source: Standard & Poor's Micropal. The S&P/Citigroup Global Equity ex-U.S.
less than $2 Billion Index is a free float-adjusted, market
capitalization-weighted index designed to measure performance of global
developed and emerging market equity securities, excluding the U.S., with market
capitalizations less than $2 billion.

8 | Annual Report

Your Fund's Expenses

As a Fund Shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases, if
applicable, and redemption fees; and

ACTUAL FUND EXPENSES

The first line (Actual) of the table provides actual account values and
expenses. The "Ending Account Value" is derived from the Fund's actual return,
which includes the effect of Fund expenses.

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:

1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Annual Report | 9

Your Fund's Expenses (CONTINUED)

- ----------------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
VALUE 7/1/07 VALUE 12/31/07 PERIOD* 7/1/07-12/31/07
- ----------------------------------------------------------------------------------------------------------------

Actual $1,000 $ 961.80 $4.70
- ----------------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,020.42 $4.84
- ----------------------------------------------------------------------------------------------------------------

* Expenses are calculated using the most recent six-month annualized expense
ratio, net of expense waivers, of 0.95% multiplied by the average account value
over the period, multiplied by 184/365 to reflect the one-half year period.

10 | Annual Report

Templeton Institutional Funds, Inc.

FINANCIAL HIGHLIGHTS

FOREIGN SMALLER COMPANIES SERIES

----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
2007 2006 2005 2004 2003
----------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $ 22.42 $ 18.18 $ 17.45 $ 14.97 $ 10.10
----------------------------------------------------------------
Income from investment operations a:
Net investment income b ............................. 0.33 0.30 0.38 0.21 0.17
Net realized and unrealized gains (losses) .......... 2.81 4.89 1.74 2.93 4.99
----------------------------------------------------------------
Total from investment operations ....................... 3.14 5.19 2.12 3.14 5.16
----------------------------------------------------------------
Less distributions from:
Net investment income ............................... (0.39) (0.33) (0.36) (0.16) (0.13)
Net realized gains .................................. (4.97) (0.62) (1.03) (0.50) (0.16)
----------------------------------------------------------------
Total distributions .................................... (5.36) (0.95) (1.39) (0.66) (0.29)
----------------------------------------------------------------
Redemption fees ........................................ -- c -- c -- c -- --
----------------------------------------------------------------
Net asset value, end of year ........................... $ 20.20 $ 22.42 $ 18.18 $ 17.45 $ 14.97
================================================================

Total return ........................................... 15.09% 28.78% 12.28% 21.28% 51.21%

RATIOS TO AVERAGE NET ASSETS
Expenses before waiver and payments by affiliates ...... 1.07% 1.07% 1.07% 1.16% 1.58%
Expenses net of waiver and payments by affiliates ...... 0.95% d 0.95% d 0.95% d 0.95% d 0.95%
Net investment income .................................. 1.34% 1.45% 2.12% 1.34% 1.40%

SUPPLEMENTAL DATA
Net assets, end of year (000's) ........................ $135,730 $170,757 $131,567 $97,495 $33,583
Portfolio turnover rate ................................ 20.95% 17.30% 24.59% 27.51% 12.58%

b Based on average daily shares outstanding.

c Amount rounds to less than $0.01 per share.

d Benefit of expense reduction rounds to less than 0.01%.

Annual Report |
The accompanying notes are an integral part of these financial statements. | 11

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007

- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN SMALLER COMPANIES SERIES INDUSTRY SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS 97.7%
COMMON STOCKS 96.8%
AUSTRALIA 3.4%
Billabong International Ltd. .................. Textiles, Apparel & Luxury Goods 72,226 $ 937,822
Downer EDI Ltd. ............................... Commercial Services & Supplies 174,936 824,593
Iluka Resources Ltd. .......................... Metals & Mining 346,251 1,395,492
PaperlinX Ltd. ................................ Paper & Forest Products 626,803 1,460,801
--------------
4,618,708
--------------
BAHAMAS 1.4%
a Steiner Leisure Ltd. .......................... Diversified Consumer Services 43,710 1,930,234
--------------
BELGIUM 0.9%
Barco NV ...................................... Electronic Equipment & Instruments 15,620 1,189,901
--------------
BRAZIL 3.2%
b Companhia de Saneamento de Minas Gerais,
144A ....................................... Water Utilities 106,900 1,861,741
Lojas Renner SA ............................... Multiline Retail 122,000 2,467,416
--------------
4,329,157
--------------
CANADA 9.7%
CAE Inc. ...................................... Aerospace & Defense 57,320 767,728
Dorel Industries Inc., B ...................... Household Durables 50,800 1,502,913
a GSI Group Inc. ................................ Electronic Equipment & Instruments 113,780 1,051,327
Linamar Corp. ................................. Auto Components 59,490 1,220,630
a MDS Inc. ...................................... Health Care Services 86,890 1,677,906
a Mega Brands Inc. .............................. Leisure Equipment & Products 69,800 435,482
North West Co. Fund ........................... Diversified Financial Services 122,350 2,576,891
a Open Text Corp. ............................... Internet Software & Services 66,100 2,087,263
a Saxon Energy Services Inc. .................... Energy Equipment & Services 352,200 1,807,517
--------------
13,127,657
--------------
CAYMAN ISLANDS 1.5%
a Ju Teng International Holdings Ltd. ........... Electronic Equipment & Instruments 1,946,000 591,429
Stella International Holdings Ltd. ............ Textiles, Apparel & Luxury Goods 641,000 1,433,559
--------------
2,024,988
--------------
CHINA 5.0%
a AAC Acoustic Technologies Holdings Inc. ....... Communications Equipment 694,000 934,458
Bio-Treat Technology Ltd. ..................... Commercial Services & Supplies 2,472,000 1,337,653
People's Food Holdings Ltd. ................... Food Products 1,468,000 1,130,445
Sinotrans Ltd., H ............................. Air Freight & Logistics 3,424,000 1,510,440
Travelsky Technology Ltd., H .................. IT Services 1,126,000 1,197,028
Weiqiao Textile Co. Ltd., H ................... Textiles, Apparel & Luxury Goods 470,500 673,341
--------------
6,783,365
--------------
DENMARK 1.1%
a Vestas Wind Systems AS ........................ Electrical Equipment 14,250 1,539,485
--------------

12 | Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
FINLAND 4.0%
Amer Sports OYJ ............................... Leisure Equipment & Products 92,970 $ 2,508,645
Elcoteq SE, A ................................. Communications Equipment 53,770 318,585
Huhtamaki OYJ ................................. Containers & Packaging 126,770 1,502,215
Konecranes OYJ ................................ Machinery 31,300 1,077,079
--------------
5,406,524
--------------
GERMANY 3.9%
Celesio AG .................................... Health Care Providers & Services 25,800 1,598,671
a Jenoptik AG ................................... Electronic Equipment & Instruments 128,600 1,118,528
a Thiel Logistik AG ............................. Air Freight & Logistics 112,430 410,187
Vossloh AG .................................... Machinery 18,700 2,202,290
--------------
5,329,676
--------------
HONG KONG 5.5%
Dah Sing Financial Group ...................... Commercial Banks 103,600 1,024,296
c Fountain Set (Holdings) Ltd. .................. Textiles, Apparel & Luxury Goods 2,470,000 627,153
Giordano International Ltd. ................... Specialty Retail 1,276,000 611,975
Hang Lung Group Ltd. .......................... Real Estate Management & Development 267,000 1,458,586
Hopewell Holdings Ltd. ........................ Transportation Infrastructure 289,000 1,334,171
Texwinca Holdings Ltd. ........................ Textiles, Apparel & Luxury Goods 1,095,000 984,336
Yue Yuen Industrial Holdings Ltd. ............. Textiles, Apparel & Luxury Goods 377,500 1,355,458
--------------
7,395,975
--------------
INDIA 1.3%
Hindustan Petroleum Corp. Ltd. ................ Oil, Gas & Consumable Fuels 106,787 1,000,527
Tata Motors Ltd., ADR ......................... Machinery 38,580 727,619
--------------
1,728,146
--------------
INDONESIA 0.6%
PT Indosat Tbk ................................ Diversified Telecommunication Services 915,400 843,035
--------------
JAPAN 5.4%
Descente Ltd. ................................. Textiles, Apparel & Luxury Goods 261,900 1,345,726
Japan Airport Terminal Co. Ltd. ............... Transportation Infrastructure 49,900 851,542
MEITEC Corp. .................................. Commercial Services & Supplies 20,000 604,403
Sangetsu Co. Ltd. ............................. Household Durables 22,100 478,604
Sohgo Security Services Co. Ltd. .............. Commercial Services & Supplies 102,600 1,621,138
Takuma Co. Ltd. ............................... Machinery 281,000 1,138,968
USS Co. Ltd. .................................. Specialty Retail 21,540 1,342,447
--------------
7,382,828
--------------
NETHERLANDS 8.0%
Aalberts Industries NV ........................ Machinery 90,788 1,801,884
Draka Holding NV .............................. Electrical Equipment 34,565 1,160,176
Imtech NV ..................................... Construction & Engineering 61,470 1,519,624
OPG Groep NV .................................. Health Care Providers & Services 72,640 2,014,136
SBM Offshore NV ............................... Energy Equipment & Services 39,020 1,229,987
Vedior NV ..................................... Commercial Services & Supplies 125,870 3,163,114
--------------
10,888,921
--------------

Annual Report | 13

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
NORWAY 0.7%
Tomra Systems ASA ............................. Commercial Services & Supplies 137,060 $ 970,984
--------------
RUSSIA 0.7%
a,d X 5 Retails Group NV, GDR, Reg S .............. Food & Staples Retailing 27,518 990,648
--------------
SINGAPORE 2.0%
Cerebos Pacific Ltd. .......................... Food Products 435,358 1,322,882
Osim International Ltd. ....................... Specialty Retail 1,121,360 466,763
Venture Corp. Ltd. ............................ Electronic Equipment & Instruments 99,000 879,115
--------------
2,668,760
--------------
SOUTH AFRICA 1.4%
Foschini Ltd. ................................. Specialty Retail 73,352 516,082
JD Group Ltd. ................................. Specialty Retail 51,840 385,118
Massmart Holdings Ltd. ........................ Food & Staples Retailing 91,956 964,433
--------------
1,865,633
--------------
SOUTH KOREA 9.2%
Bank of Pusan ................................. Commercial Banks 140,160 2,350,849
a Binggrae Co. Ltd. ............................. Food Products 34,190 1,377,024
Daeduck Electronics Co. Ltd. .................. Electronic Equipment & Instruments 54,600 330,732
Daegu Bank Co. Ltd. ........................... Commercial Banks 94,590 1,571,363
Halla Climate Control Corp. ................... Auto Components 134,760 1,249,631
a Hansol Paper Co. Ltd. ......................... Paper & Forest Products 39,720 717,128
INTOPS Co. Ltd. ............................... Electronic Equipment & Instruments 25,968 835,038
People & Telecommunication .................... Communications Equipment 117,936 1,285,131
Sindo Ricoh Co. ............................... Office Electronics 9,657 670,589
Youngone Corp. ................................ Textiles, Apparel & Luxury Goods 189,680 2,066,915
--------------
12,454,400
--------------
SPAIN 0.7%
Sol Melia SA .................................. Hotels, Restaurants & Leisure 57,777 878,582
--------------
SWEDEN 2.3%
D. Carnegie & Co. AB .......................... Capital Markets 86,860 1,685,963
Securitas Systems AB, B ....................... Commercial Services & Supplies 413,690 1,471,591
--------------
3,157,554
--------------
SWITZERLAND 2.0%
Verwaltungs-und Privat-Bank AG ................ Capital Markets 5,090 1,258,800
Vontobel Holding AG ........................... Capital Markets 30,640 1,480,357
--------------
2,739,157
--------------
TAIWAN 7.2%
D-Link Corp. .................................. Communications Equipment 1,055,448 1,864,853
Giant Manufacturing Co. Ltd. .................. Leisure Equipment & Products 708,000 1,584,977
KYE Systems Corp. ............................. Computers & Peripherals 975,279 1,560,807
Pihsiang Machinery Manufacturing Co. Ltd. ..... Health Care Equipment & Supplies 361,000 717,993
Simplo Technology Co. Ltd. .................... Computers & Peripherals 318,500 1,595,938
a Ta Chong Bank Ltd. ............................ Commercial Banks 3,036,000 931,489

14 | Annual Report

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
COMMON STOCKS (CONTINUED)
TAIWAN (CONTINUED)
Taiwan Fu Hsing ............................... Building Products 465,110 $ 308,352
Test-Rite International Co. Ltd. .............. Distributors 1,980,171 1,175,402
--------------
9,739,811
--------------
THAILAND 3.6%
Bank of Ayudhya Public Co. Ltd. ............... Commercial Banks 2,145,700 1,672,098
Glow Energy Public Co. Ltd., fgn. ............. Independent Power Producers & Energy Traders 1,490,900 1,482,712
a Total Access Communication Public Co. Ltd.,
fgn. .................................... Wireless Telecommunication Services 1,544,000 1,775,600
--------------
4,930,410
--------------
UNITED KINGDOM 12.1%
Bodycote International PLC .................... Machinery 404,120 1,499,540
b Bodycote International PLC, 144A .............. Machinery 26,520 98,406
Burberry Group PLC ............................ Textiles, Apparel & Luxury Goods 117,890 1,334,006
Electrocomponents PLC ......................... Electronic Equipment & Instruments 158,120 655,058
Fiberweb PLC .................................. Personal Products 246,970 186,472
FKI PLC ....................................... Machinery 1,205,250 1,406,928
Future PLC .................................... Media 981,830 629,148
GAME Group PLC ................................ Specialty Retail 1,359,330 6,752,302
John Wood Group PLC ........................... Energy Equipment & Services 205,260 1,765,953
Kingfisher PLC ................................ Specialty Retail 308,940 893,763
Yule Catto & Company PLC ...................... Chemicals 324,690 1,212,869
--------------
16,434,445
--------------
TOTAL COMMON STOCKS (COST $88,053,517) ........ 131,348,984
--------------
PREFERRED STOCK (COST $312,943) 0.9%
GERMANY 0.9%
Hugo Boss AG, pfd. ............................ Textiles, Apparel & Luxury Goods 22,130 1,247,895
--------------

TOTAL LONG TERM INVESTMENTS
(COST $88,366,460) ......................... 132,596,879
--------------

Annual Report | 15

Templeton Institutional Funds, Inc.

STATEMENT OF INVESTMENTS, DECEMBER 31, 2007 (CONTINUED)

- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN SMALLER COMPANIES SERIES PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

SHORT TERM INVESTMENT 1.6%
U.S. GOVERNMENT AND AGENCY SECURITY (COST $2,215,600) 1.6%
e FHLB, 1/02/08 ............................................................................. $ 2,216,000 $ 2,216,000
--------------
TOTAL INVESTMENTS (COST $90,582,060) 99.3% ................................................ 134,812,879
OTHER ASSETS, LESS LIABILITIES 0.7% ....................................................... 916,970
--------------
NET ASSETS 100.0% ......................................................................... $ 135,729,849
==============

SELECTED PORTFOLIO ABBREVIATIONS

ADR - American Depository Receipt
FHLB - Federal Home Loan Bank
GDR - Global Depository Receipt

a Non-income producing for the twelve months ended December 31, 2007.

b Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and 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. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Directors. At December 31, 2007, the aggregate value of
these securities was $1,960,147, representing 1.44% of net assets.

c A portion or all of the securities purchased on a when-issued or delayed
delivery basis. See Note 1(c).

d Security was purchased pursuant to Regulation S under the Securities Act of
1933, which exempts from registration securities offered and sold outside of the
United States. Such a security cannot be sold in the United States without
either an effective registration statement filed pursuant to the Securities Act
of 1933, or pursuant to an exemption from registration. These securities have
been deemed liquid under guidelines approved by the Fund's Board of Directors.
At December 31, 2007, the value of this security was $990,648, representing
0.73% of net assets.

e The security is traded on a discount basis with no stated coupon rate.

16 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007

-----------------
FOREIGN SMALLER
COMPANIES SERIES
-----------------

Assets:
Investments in securities:
Cost ...................................................................... $ 90,582,060
=================
Value ..................................................................... $ 134,812,879
Cash ......................................................................... 2,098
Foreign currency, at value (cost $790,149) ................................... 791,413
Receivables:
Capital shares sold ....................................................... 342,808
Dividends ................................................................. 187,200
-----------------
Total assets ........................................................... 136,136,398
-----------------
Liabilities:
Payables:
Investment securities purchased ........................................... 139,733
Capital shares redeemed ................................................... 107,699
Affiliates ................................................................ 107,478
Accrued expenses and other liabilities ....................................... 51,639
-----------------
Total liabilities ...................................................... 406,549
-----------------
Net assets, at value ................................................ $ 135,729,849
=================
Net assets consist of:
Paid-in capital .............................................................. $ 88,975,534
Undistributed net investment income .......................................... 309,079
Net unrealized appreciation (depreciation) ................................... 44,234,979
Accumulated net realized gain (loss) ......................................... 2,210,257
-----------------
Net assets, at value ................................................ $ 135,729,849
=================
Shares outstanding ........................................................... 6,718,643
=================
Net asset value per share a .................................................. $ 20.20
=================

a Redemption price is equal to net asset value less redemption fees retained by
the Fund.

Annual Report |
The accompanying notes are an integral part of these financial statements. | 17

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the year ended December 31, 2007

-----------------
FOREIGN SMALLER
COMPANIES SERIES
-----------------

Investment income:
Dividends (net of foreign taxes of $350,400) ................................. $ 3,132,266
Interest (net of foreign taxes of $220) ...................................... 299,126
-----------------
Total investment income ................................................... 3,431,392
-----------------
Expenses:
Management fees (Note 3a) .................................................... 1,125,723
Administrative fees (Note 3b) ................................................ 300,193
Transfer agent fees (Note 3c) ................................................ 17,815
Custodian fees (Note 4) ...................................................... 64,471
Reports to shareholders ...................................................... 19,156
Registration and filing fees ................................................. 14,861
Professional fees ............................................................ 38,937
Directors' fees and expenses ................................................. 10,356
Other ........................................................................ 17,025
-----------------
Total expenses ............................................................ 1,608,537
Expense reductions (Note 4) ............................................... (1,902)
Expenses waived/paid by affiliates (Note 3d) .............................. (180,641)
-----------------
Net expenses ........................................................ 1,425,994
-----------------
Net investment income ............................................ 2,005,398
-----------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ............................................................... 30,448,929
Foreign currency transactions ............................................. (155,776)
-----------------
Net realized gain (loss) ............................................ 30,293,153
-----------------
Net change in unrealized appreciation (depreciation) on:
Investments ............................................................... (12,886,336)
Translation of assets and liabilities denominated in foreign currencies ... 10,756
Change in deferred taxes on unrealized appreciation (depreciation) ........... 17,081
-----------------
Net change in unrealized appreciation (depreciation) ................ (12,858,499)
-----------------
Net realized and unrealized gain (loss) ......................................... 17,434,654
-----------------
Net increase (decrease) in net assets resulting from operations ................. $ 19,440,052
=================

18 | The accompanying notes are an integral part of these financial statements.
| Annual Report

Templeton Institutional Funds, Inc.

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

---------------------------------
FOREIGN SMALLER COMPANIES SERIES
YEAR ENDED DECEMBER 31,
---------------------------------
2007 2006
---------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ................................................................. $ 2,005,398 $ 2,136,691
Net realized gain (loss) from investments and foreign currency transactions ........... 30,293,153 4,316,115
Net change in unrealized appreciation (depreciation) on investments, translation of
assets and liablilities denominated in foreign currencies, and deferred taxes ....... (12,858,499) 31,550,414
---------------------------------
Net increase (decrease) in net assets resulting from operations .................. 19,440,052 38,003,220
---------------------------------
Distributions to shareholders from:
Net investment income ................................................................. (2,190,031) (2,432,984)
Net realized gains .................................................................... (27,624,200) (4,533,082)
---------------------------------
Total distributions to shareholders ...................................................... (29,814,231) (6,966,066)
---------------------------------

Capital share transactions: (Note 2) ..................................................... (24,652,937) 8,152,453
---------------------------------

Redemption fees .......................................................................... 10 300
---------------------------------
Net increase (decrease) in net assets ............................................ (35,027,106) 39,189,907
Net assets:
Beginning of year ........................................................................ 170,756,955 131,567,048
---------------------------------
End of year .............................................................................. $ 135,729,849 $ 170,756,955
=================================
Undistributed net investment income (distributions in excess of net investment income)
included in net assets:
End of year .............................................................................. $ 309,079 $ (345,904)
=================================

Annual Report |
The accompanying notes are an integral part of these financial statements. | 19

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS

FOREIGN SMALLER COMPANIES SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Templeton Institutional Funds, Inc. (TIFI) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as an open-end investment company,
consisting of three separate funds. The Foreign Smaller Companies Series (Fund)
included in this report is diversified. The financial statements of the
remaining funds in TIFI are presented separately.

The following summarizes the Fund's significant accounting policies.

A. SECURITY VALUATION

20 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

B. FOREIGN CURRENCY TRANSLATION

C. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS

D. FOREIGN CURRENCY CONTRACTS

Annual Report | 21

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. INCOME AND DEFERRED TAXES

F. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

G. ACCOUNTING ESTIMATES

22 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

H. REDEMPTION FEES

I. GUARANTEES AND INDEMNIFICATIONS

Under TIFI's organizational documents, its officers and directors are
indemnified by the Fund against certain liabilities arising out of the
performance of their duties to the Fund. Additionally, in the normal course of
business, TIFI, on behalf of the Fund, enters into contracts with service
providers that contain general indemnification clauses. The Fund's maximum
exposure under these arrangements is unknown as this would involve future claims
that may be made against the Fund that have not yet occurred. Currently, the
Fund expects the risk of loss to be remote.

2. CAPITAL STOCK

At December 31, 2007, there were 1.2 billion shares of TIFI authorized ($0.01
par value) of which 60 million shares were allocated to the Fund. Transactions
in the Fund's shares were as follows:

--------------------------------------------------------
YEAR ENDED DECEMBER 31,
2007 2006
--------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------

Shares sold ......................................... 417,004 $ 10,235,055 727,781 $ 14,831,483
Shares issued in reinvestment
of distributions ................................. 1,265,199 24,546,890 269,840 5,836,582
Shares redeemed ..................................... (2,581,541) (59,434,882) (618,009) (12,515,612)
--------------------------------------------------------
Net increase (decrease) ............................. (899,338) $(24,652,937) 379,612 $ 8,152,453
========================================================

3. TRANSACTIONS WITH AFFILIATES

- --------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- --------------------------------------------------------------------------------

Annual Report | 23

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

A. MANAGEMENT FEES

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

-----------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
-----------------------------------------------------------------------
0.750% Up to and including $1 billion
0.730% Over $1 billion, up to and including $5 billion
0.710% Over $5 billion, up to and including $10 billion
0.690% Over $10 billion, up to and including $15 billion
0.670% Over $15 billion, up to and including $20 billion
0.650% In excess of $20 billion

B. ADMINISTRATIVE FEES

The Fund pays an administrative fee to FT Services of 0.20% per year of the
average daily net assets of the Fund.

C. TRANSFER AGENT FEES

For the year ended December 31, 2007, the Fund paid transfer agent fees of
$17,815, of which $10,969 was retained by Investor Services.

D. WAIVER AND EXPENSE REIMBURSEMENTS

FT Services and TIC have agreed in advance to waive a portion of their
respective fees and to assume payment of other expenses through April 30, 2008.
Total expenses waived are not subject to reimbursement by the Fund. After April
30, 2008, FT Services and TIC may discontinue this waiver at any time upon
notice to the Fund's Board of Directors.

4. EXPENSE OFFSET ARRANGEMENT

24 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

5. INCOME TAXES

The tax character of distributions paid during the years ended December 31, 2007
and 2006, was as follows:

--------------------------
2007 2006
--------------------------
Distributions paid from:
Ordinary income ................... $ 3,862,682 $ 2,873,774
Long term capital gain ............ 25,951,549 4,092,292
--------------------------
$ 29,814,231 $ 6,966,066
==========================

Cost of investments .................................. $ 90,864,835
=============

Unrealized appreciation .............................. $ 50,824,215
Unrealized depreciation .............................. (6,876,171)
-------------
Net unrealized appreciation (depreciation) ........... $ 43,948,044
=============

Undistributed ordinary income ........................ $ 309,079
Undistributed long term capital gains ................ 2,493,031
-------------
Distributable earnings ............................... $ 2,802,110
=============

Net investment income differs for financial statement and tax purposes primarily
due to differing treatments of foreign currency transactions and passive foreign
investment company shares.

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
year ended December 31, 2007, aggregated $30,164,127 and $79,342,826,
respectively.

Annual Report | 25

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

7. CONCENTRATION OF RISK

8. REGULATORY AND LITIGATION MATTERS

26 | Annual Report

Templeton Institutional Funds, Inc.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

9. NEW ACCOUNTING PRONOUNCEMENT

Annual Report | 27

Templeton Institutional Funds, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF TEMPLETON INSTITUTIONAL FUNDS,
INC. - FOREIGN SMALLER COMPANIES SERIES

In our opinion, the accompanying statement of assets and liabilities, including
the statement of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Foreign Smaller Companies Series
(one of the funds constituting Templeton Institutional Funds, Inc., hereafter
referred to as the "Fund") at December 31, 2007, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2007 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
February 20, 2008

28 | Annual Report

Templeton Institutional Funds, Inc.

TAX DESIGNATION (UNAUDITED)

FOREIGN SMALLER COMPANIES SERIES

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Fund
designates the maximum amount allowable but no less than $28,035,715 as a long
term capital gain dividend for the fiscal year ended December 31, 2007.

Under Section 871(k)(2)(C) of the Code, the Fund designates the maximum amount
allowable but no less than $1,669,745 as a short term capital gain dividend for
purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the
fiscal year ended December 31, 2007.

Under Section 854(b)(2) of the Code, the Fund designates the maximum amount
allowable but no less than $2,093,265 as qualified dividends for purposes of the
maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
December 31, 2007. In January 2008, shareholders will receive Form 1099-DIV
which will include their share of qualified dividends distributed during the
calendar year 2007. Shareholders are advised to check with their tax advisors
for information on the treatment of these amounts on their individual income tax
returns.

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

Record Date: 12/14/2007

- ------------------------------------------------------------------------------------------------------
FOREIGN TAX PAID FOREIGN SOURCE INCOME FOREIGN QUALIFIED DIVIDENDS
PER SHARE PER SHARE PER SHARE
- ------------------------------------------------------------------------------------------------------

Fund shares ................. $0.0633 $0.4593 $0.2760

Annual Report | 29

Templeton Institutional Funds, Inc.

TAX DESIGNATION (UNAUDITED) (CONTINUED)

FOREIGN SMALLER COMPANIES SERIES

30 | Annual Report

Templeton Institutional Funds, Inc.

BOARD MEMBERS AND OFFICERS

INDEPENDENT BOARD MEMBERS

HARRIS J. ASHTON (1932) Director Since 1992 141 Bar-S Foods (meat packing company).
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING 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).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK J. CROTHERS (1944) Director Since 1990 20 Fortis, Inc. (utility holding company),
500 East Broward Blvd. Nuinsco Resources Limited (mineral
Suite 2100 exploration), Royal Fidelity Merchant
Fort Lauderdale, FL 33394-3091 Bank & Trust Limited (financial
services), C.A. Bancorp Inc. (financial
services). Victory Nickel Inc. (mineral
exploration), ABACO Markets Limited
(retail distributors) and Belize
Electricity Limited (electric utility).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman, Island Corporate Holdings Ltd.; Director and Vice Chairman, Caribbean Utilities Company, Ltd.; Director, Provo Power
Company Ltd.; director of various other business and nonprofit organizations; and FORMERLY, Chairman, Atlantic Equipment & Power
Ltd. (1977-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
EDITH E. HOLIDAY (1952) Lead Director since 141 Hess Corporation (exploration and
500 East Broward Blvd. Independent 1996 and Lead refining of oil and gas), H.J. Heinz
Suite 2100 Director Independent Company (processed foods and allied
Fort Lauderdale, FL 33394-3091 Director since products), RTI International Metals,
December 2007 Inc. (manufacture and distribution
of titanium), Canadian National
Railway (railroad) and White
Mountains Insurance Group, Ltd.
(holding company).

PRINCIPAL OCCUPATION DURING 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).
- ------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 31

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Advisor, Saratoga Partners (private equity fund); Director, various private companies; 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).
- ------------------------------------------------------------------------------------------------------------------------------------
FRANK A. OLSON (1932) Director Since 2003 141 Hess Corporation (exploration and
500 East Broward Blvd. refining of oil and gas) and Sentient
Suite 2100 Jet (private jet service).
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman Emeritus, The Hertz Corporation (car rental) (since 2000) (Chairman of the Board (1980-2000) and Chief Executive Officer
(1977-1999)); and FORMERLY, Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines).
- ------------------------------------------------------------------------------------------------------------------------------------
LARRY D. THOMPSON (1945) Director Since 2005 141 None
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President - Government Affairs, General Counsel and Secretary, PepsiCo, Inc. (consumer products); and FORMERLY,
Director, Delta Airlines (aviation) (2003-2005) and Providian Financial Corp. (credit card provider) (1997-2001); Senior Fellow of
The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and Deputy Attorney General,
U.S. Department of Justice (2001-2003).
- ------------------------------------------------------------------------------------------------------------------------------------
CONSTANTINE D. TSERETOPOULOS Director Since 1990 20 None
(1954)
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Physician, 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) Director Since April 2007 34 El Oro and Exploration Co., p.l.c.
500 East Broward Blvd. (investments) and ARC Wireless
Suite 2100 Solutions, Inc. (wireless components
Fort Lauderdale, FL 33394-3091 and network products).

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Practicing attorney.
- ------------------------------------------------------------------------------------------------------------------------------------

32 | Annual Report

INTERESTED BOARD MEMBERS AND OFFICERS

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Chairman of the Board, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Templeton Worldwide, 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 42
of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
**GREGORY E. JOHNSON (1961) Director Since April 2007 92 None
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, President and Chief Executive Officer, Franklin Resources, Inc.; President, Templeton Worldwide, Inc.; Director, Templeton
Asset Management Ltd.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin
Resources, Inc. and of 33 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JAMES M. DAVIS (1952) Chief Chief Compliance Not Applicable Not Applicable
One Franklin Parkway Compliance Officer since 2004
San Mateo, CA 94403-1906 Officer and and Vice President
Vice President - AML Compliance
- AML since 2006
Compliance

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Director, Global Compliance, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Director of Compliance, Franklin Resources, Inc.
(1994-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
JIMMY D. GAMBILL (1947) Senior Vice Since 2002 Not Applicable Not Applicable
500 East Broward Blvd. President
Suite 2100 and Chief
Fort Lauderdale, FL 33394-3091 Executive
Officer -
Finance and
Administration

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Franklin Templeton Services, LLC; Senior Vice President, Templeton Worldwide, Inc.; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
DAVID P. GOSS (1947) Vice President Since 2000 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; officer and director of one of the subsidiaries of Franklin
Resources, Inc.; and officer of 46 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------

Annual Report | 33

RUPERT H. JOHNSON, JR. (1940) Vice President Since 1996 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice Chairman, Member - Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc. and
Templeton Worldwide, Inc.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the
case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin
Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
JOHN R. KAY (1940) Vice President Since 1994 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Templeton Worldwide, Inc.; Senior Vice President, Franklin Templeton Services, LLC; and officer of some of the other
subsidiaries of Franklin Resources, Inc. and of 32 of the investment companies in Franklin Templeton Investments; and FORMERLY, Vice
President and Controller, Keystone Group, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
MARK MOBIUS (1936) Vice President Since 1993 Not Applicable Not Applicable
17th Floor,
The Chater House
8 Connaught Road
Central Hong Kong

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Portfolio Manager of various Templeton advisory affiliates; Managing Director, Templeton Asset Management Ltd.; and officer and/or
director, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of six of the investment companies
in Franklin Templeton Investments; and FORMERLY, President, International Investment Trust Company Limited (investment manager of
Taiwan R.O.C. Fund) (1986-1987); and Director, Vickers da Costa, Hong Kong (1983-1986).
- ------------------------------------------------------------------------------------------------------------------------------------
GARY P. MOTYL (1952) President Since 2005 Not Applicable Not Applicable
500 East Broward Blvd. and Chief
Suite 2100 Executive
Fort Lauderdale, FL 33394-3091 Officer -
Investment
Management

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
President, Templeton Investment Counsel, LLC; and officer and/or director, of some of the other subsidiaries of Franklin Resources,
Inc. and of six of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------
ROBERT C. ROSSELOT (1960) Secretary Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Secretary and Trust Officer, Fiduciary Trust International of the
South; and officer of 14 of the investment companies in Franklin Templeton Investments.
- ------------------------------------------------------------------------------------------------------------------------------------

34 | Annual Report

GREGORY R. SEWARD (1956) Treasurer Since 2004 Not Applicable Not Applicable
500 East Broward Blvd.
Suite 2100
Fort Lauderdale, FL 33394-3091

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Vice President, Franklin Templeton Services, LLC; officer of 18 of the investment companies in Franklin Templeton Investments; and
FORMERLY, Vice President, JPMorgan Chase (2000-2004) and American General Financial Group (1991-2000).
- ------------------------------------------------------------------------------------------------------------------------------------
CRAIG S. TYLE (1960) Vice President Since 2005 Not Applicable Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
General Counsel and Executive Vice President, Franklin Resources, Inc.; officer of some of the other subsidiaries of Franklin
Resources, Inc. and of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Partner, Shearman & Sterling,
LLP (2004-2005); and General Counsel, Investment Company Institute (ICI) (1997-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
GALEN G. VETTER (1951) Chief Financial Since 2004 Not Applicable Not Applicable
500 East Broward Blvd. Officer and
Suite 2100 Chief
Fort Lauderdale, FL 33394-3091 Accounting
Officer

PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
Senior Vice President, Franklin Templeton Services, LLC; officer of some of the other subsidiaries of Franklin Resources, Inc. and
of 46 of the investment companies in Franklin Templeton Investments; and FORMERLY, Managing Director, RSM McGladrey, Inc.
(1999-2004); and Partner, McGladrey & Pullen, LLP (1979-1987 and 1991-2004).
- ------------------------------------------------------------------------------------------------------------------------------------

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

Note 1: Charles B. Johnson and Rupert H. Johnson, Jr. are brothers and the
father and uncle, respectively, 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.

Note 3: Prior to December 31, 2007, Nicholas F. Brady ceased to be a director of
the Fund.

Annual Report | 35

Templeton Institutional Funds, Inc.

SHAREHOLDER INFORMATION

FOREIGN SMALLER COMPANIES SERIES

PROXY VOTING POLICIES AND PROCEDURES

QUARTERLY STATEMENT OF INVESTMENTS

36 | Annual Report

[LOGO](R) FRANKLIN TEMPLETON INSTITUTIONAL
FRANKLIN TEMPLETON
INSTITUTIONAL 600 Fifth Avenue
New York, NY 10020

ANNUAL REPORT
TEMPLETON INSTITUTIONAL FUNDS, INC.
FOREIGN SMALLER COMPANIES SERIES

INVESTMENT MANAGER

Templeton Investment Counsel, LLC

DISTRIBUTOR

Franklin Templeton Distributors, Inc.
One Franklin Parkway
San Mateo, CA 94403-1906

FRANKLIN TEMPLETON INSTITUTIONAL SERVICES

1-800/321-8563
ftinstitutional.com

ZT458 A2007 02/08

Item 2. Code of Ethics.

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

(d) N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal 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 expert is David W. Niemiec and he is
"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 $215,491 for the fiscal year ended December 31, 2007 and $221,376 for the
fiscal year ended December 31, 2006.

(b) Audit-Related Fees
There were no 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.

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.

The aggregate 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 were $46,000 for the fiscal year ended
December 31, 2007 and $3,961 for the fiscal year ended December 31, 2006. The
services for which these fees were paid included tax compliance and advice.

(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 $0 for the fiscal year ended December 31, 2007
and $5,610 for the fiscal year ended December 31, 2006. 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 other than
services reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year
ended December 31, 2007 and $170,251 for the fiscal year ended December 31,
2006. The services for which these fees were paid included review of materials
provided to the fund Board in connect with the investment management contract
renewal process.

(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 $46,000 for the fiscal year ended December 31, 2007 and $179,822
for the fiscal year ended December 31, 2006.

(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/A

Item 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 Directors 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 ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 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-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(b) Changes in Internal Controls. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. Exhibits.

(a)(1) Code of Ethics

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Galen G. Vetter, Chief Executive Officer - Finance and Administration, and
Laura Fergerson, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Galen G. Vetter, Chief Executive Officer - Finance and Administration, and Laura
Fergerson, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

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

TEMPLETON INSTITUTIONAL FUNDS, INC.

By /s/GALEN G. VETTER
----------------------------------
Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date February 27, 2008

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/GALEN G. VETTER
-------------------------------
Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date February 27, 2008

By /s/LAURA FERGERSON
-------------------------------
Laura Fergerson
Chief Financial Officer and
Chief Accounting Officer
Date February 27, 2008