INSTITUTIONAL FIDUCIARY TRUST, N-30D, 1995-09-01

INSTITUTIONAL FIDUCIARY TRUST
N-30D, 1995-09-01

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Table of Contents
Franklin Institutional
Adjustable U.S. Government Securities Fund Page 5
Seeks a high level of current income,
consistent with lower volatility of principal.

Franklin Institutional
Adjustable Rate Securities Fund Page 8
Seeks a high level of current income,
with lower volatility of principal than
a fund that invests in fixed-rate
securities.

For a current prospectus on one or more Franklin or Templeton funds, please
contact a Franklin Templeton Institutional Services Representative, at
1-800/632-2000. A prospectus contains more complete information about a fund,
including fees and expenses. Please be sure to read it carefully before
investing money. To ensure the highest quality of service, telephone calls to
and from our service departments may be monitored, recorded and accessed. These
calls can be determined by the presence of a regular beeping tone.

July 6, 1995

Dear Shareholder,

We are pleased to bring you the fourth annual report for Franklin's
Institutional Fiduciary Trust adjustable rate securities funds, covering the
fiscal year ended
June 30, 1995.

Franklin's Institutional Fiduciary Trust was developed specifically to meet the
needs of institutional investors. Part of the $125 billion Franklin Templeton
Group, the Trust consists of eight separate and distinct series. This report
pertains to the two adjustable rate securities funds: Franklin Institutional
Adjustable U.S. Government Securities Fund and Franklin Institutional Adjustable
Rate Securities Fund. Each fund is managed to maintain a relatively short
average duration, and the objective for each fund is to seek a high level of
current income, with lower volatility of principal.

After several moves by the Federal Reserve throughout 1994 to raise short-term
interest rates, the recent economic slowdown has marked a stabilization in
interest rates over the past six months. The bond market welcomed this news,
rebounding in the early half of 1995 after enduring a difficult 1994. Our
managers, despite the changes in interest rates, have continued to maintain a
long-term perspective. Rather than betting on the short-term direction of
interest rates, they have adhered to a relative value discipline which enables
them to seek out attractive opportunities through a variety of market
conditions. We believe this approach benefits our shareholders in the long run,
and we will continue to employ this strategy going forward.

Thank you for your continued support of Franklin's Institutional Fiduciary
Trust. We look forward to serving your investment needs in the months and years
to come.

Sincerely,

Charles B. Johnson
Chairman of the Board
Franklin's Institutional Fiduciary Trust

Overview of
the Economy

The U.S. economy continued to post positive growth during the reporting period.
Fueled by strong consumer spending, 1994 fourth quarter Gross Domestic Product
(GDP) peaked at an annualized rate of 5.1%. Economic reports released during the
third and fourth quarters of 1994 showed high levels of manufacturing and
production in the nation's factories, mines and utilities, as well as continued
strength in the employment sector. This growth was tempered by only slight
increases in the Consumer Price Index and the Producer Price Index, two primary
indicators of inflation. Fearing that these moderate price increases were short
lived and that continued expansion would bring unwanted inflationary pressure,
the Federal Reserve Board raised the federal funds rate -- the interest rate
banks charge each other for overnight loans -- by 50 basis points in August
1994, 75 basis points in November 1994, and another 50 basis points in February
1995.

Consequently, domestic growth slowed during the first quarter of 1995, with
inflationary pressures subdued but not altogether eliminated. First quarter 1995
GDP fell to an annualized rate of 2.7%. Retail sales were lower, and activity
declined in interest rate sensitive sectors such as housing and automobiles.
Fundamental changes in consumer buying habits and corporate operations helped
keep inflation fears in check through the second quarter of 1995. Meanwhile, the
weak dollar helped keep exports attractive and continued to support economic
growth by upholding the manufacturing and labor sectors. As a result, the
Federal Reserve did not change the federal funds rate during its March or May
Federal Open Market Committee (FOMC) meetings, and investors continued to see
this as good news for the fixed-income market. By the end of the reporting
period, the federal funds rate stood at 6.00%. With some inflation fears
relieved, bond prices moved higher through the first half of 1995.

As of this writing, the Federal Reserve had announced at the conclusion of its
July FOMC meeting that its target for the federal funds rate had been reduced by
25 basis points, to 5.75%. This move to cut short-term interest rates was the
first in nearly three years, and reversed a trend that began in February 1994
when the Federal Reserve moved on seven occasions to raise the federal funds
rate a total of three percentage points.

Looking forward, although many economic indicators have been mixed, slower
manufacturing activity and a decline in the number of jobs in the economy led
some to expect that the Federal Reserve would further ease monetary policy.
Also, decreased consumer spending has contributed to reduced inflationary
pressure which has opened the door for Federal Reserve action. It is unclear
whether the July 1995 reduction will be a one-time action by the Federal
Reserve, or whether additional cuts will be forthcoming. Clearly, this will
depend on how the economy responds in the months ahead. If reports suggest the
economy is weakening, additional rate cuts will be likely. If the economy picks
up, however, it may be some time before another rate cut occurs.

Tony Coffey is a portfolio manager for the Franklin Institutional Adjustable
U.S. Government Securities Fund and Franklin Institutional Adjustable Rate
Securities Fund. Prior to receiving his MBA and joining Franklin, Mr. Coffey was
an associate for Analysis Group, Inc., an economic consulting firm.

Mr. Coffey received a Bachelor of Arts degree in Applied Mathematics and
Economics from Harvard University and a Master of Business Administration degree
from the University of California at Los Angeles. He is a Chartered Financial
Analyst (CFA), and is a member of the Security Analysts of San Francisco and the
Association for Investment Management and Research.

T. Anthony Coffey, CFA
Portfolio Manager

Franklin Institutional Adjustable
U.S. Government
Securities Fund

The Franklin Institutional Adjustable U.S. Government Securities Fund seeks a
high level of current income, consistent with lower volatility of principal, by
investing all of its assets in the U.S. Government Adjustable Rate Mortgage
Portfolio (the Mortgage Portfolio), which has an investment objective identical
to the fund's. The Mortgage Portfolio, in turn, invests primarily in
mortgage-backed securities created from pools of adjustable rate mortgages
(ARMS) issued or guaranteed by the U.S. government, its agencies or
instrumentalities.1 This has earned the fund a "AAAf" rating from Standard &
Poor's and a "Aaa" rating from Moody's -- the highest mutual fund credit ratings
possible.2 Shown at right is a breakdown of the issuing agencies for the
securities held in the Mortgage Portfolio on June 30, 1995.

Like many other fixed-income funds in 1994, the Franklin Institutional
Adjustable U.S. Government Securities Fund suffered through one of the worst
markets for taxable bond funds in twenty years.

The first half of 1995, however, has seen a reversal in the rise of short-term
interest rates, which reached its peak in late 1994. For example, the yield on
one-year Treasuries fell 150 basis points to 5.64% on 6/30/95, from 7.14% on
12/30/94.

GRAPHIC MATERIAL 1 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

1. Individual securities in the Mortgage Portfolio, but not shares of the
Franklin Institutional Adjustable U.S. Government Securities Fund, are
guaranteed by the U.S. government, its agencies or instrumentalities as to
timely payment of principal and interest.

2. The "AAAf" rating reflects Standard & Poor's assessment of the overall credit
quality of the fund's portfolio, based primarily on the fund's stated investment
objectives and policies. It considers, for example, the credit quality of
portfolio investments and management. The rating does not reflect the yield or
the market price of the fund's shares nor approval by Standard & Poor's. The
"Aaa" rating reflects Moody's assessment of the investment quality of shares in
the fund and factors in the fund's investment objectives and policies, and the
creditworthiness of an investment quality similar to Aaa-rated fixed-income
obligations, which indicates best quality. The rating does not consider the
prospective performance of a fund with respect to appreciation, the volatility
of net asset value, or yield and does not reflect approval by Moody's. Both
ratings are subject to change.

Because of their adjustable coupons, ARMS can reset their coupons periodically
in a stable or slowly changing interest rate environment, according to
prevailing market rates. In the sharply rising interest rate environment
throughout most of 1994, however, ARMS coupon adjustments generally lagged
market rate movements.

In addition, many ARM securities hit their annual caps (certain ARMS may have
interim caps, which limit the level to which coupons may correct during a
specified period of time), thereby reducing their prices. By contrast, declining
interest rates over the first six months of 1995 allowed many of these
securities to "catch up" to last year's movements.

We continued to emphasize securities that typically have less price sensitivity
to changes in interest rates, such as one-year Constant Maturity Treasury (CMT)
ARMS. In proportion to the market, we also remained underweighted in ARMS tied
to the 11th District Cost of Funds Index (COFI) because of its lagging nature.

Looking forward, it appears the Federal Reserve has finally reached the end of
its current credit tightening cycle. With its latest move to ease monetary
policy, the Federal Reserve Board will likely take a "wait and see posture" in
the near term, closely tracking the economy's response as well as inflationary
pressures. The recent drop in mortgage rates should stimulate the housing sector
of the economy and lead to a slight rise in economic activity later in the year.
This could lead to lower interest-rate volatility, which in turn, will benefit
callable securities such as ARMS. We are actively positioning the fund to
perform well in this environment, while seeking to maintain stability of
principal and a yield competitive with short-term alternatives.

Performance Summary

The Franklin Institutional Adjustable U.S. Government Securities Fund's share
price as measured by net asset value, fell from $9.40 on June 30, 1994, to $9.25
on June 30, 1995.

At the end of the reporting period, the fund's distribution rate was 6.30%,
based on an annualization of the fund's dividend of 4.795 cents ($0.04795) per
share over the last 30 days and the net asset value of $9.25, on June 30, 1995.
Dividends will vary based on the earnings of the fund's underlying portfolio,
and past distributions are not necessarily indicative of future trends.

The fund posted a total return of +4.41% for the one-year
period ended June 30, 1995. Total return measures the change in value of an
investment, assuming reinvestment of dividends and capital gains. Of course,
past performance is not indicative of future results.

The graph to the right compares the fund's performance since its inception on
December 2, 1991, with the performance of its narrow-based benchmark, the
6-month Certificate of Deposit, and its broad-based benchmark, the unmanaged
Lehman Brothers Government 1-2 Year Short-Term U.S. Government Index. Please
remember that CDs are insured by the Federal Deposit Insurance Corporation for
up to $100,000 and offer a fixed rate of return. Also note, unmanaged market
indices have inherent performance differentials in comparison to any fund. The
unmanaged market index, such as the Lehman Brothers Government 1-2 Year
Short-Term U.S. Government Index, do not pay commissions or market spreads to
buy and sell bonds. They do not pay management fees to cover salaries to
security analysts or portfolio managers. And, unlike the unmanaged indices,
investment companies are never 100% invested because of the need to have cash on
hand to redeem shares. If operating expenses had been applied to the index, its
performance would have been lower. Please remember that an index is simply a
measure of performance, and cannot be invested in directly.

GRAPHIC MATERIAL 2 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Institutional Adjustable
U.S. Government Securities Fund
Total Return Index Comparison3
Based on $1,000,000 Investment (12/2/91-6/30/95)

Performance Figures3
Periods ended June 30, 1995

Since Inception
1-Year 3-Year (12/2/91)
NAV Cumulative
Total Returns:4 4.41% 6.96% 10.73%

NAV Average Annual
Total Returns:5 4.41% 2.27% 2.89%

Distribution Rate:6 6.30%

30-Day Standardized Yield:7 6.46%

3. Franklin Advisers, Inc., the fund's administrator and the manager of the
fund's underlying portfolio, is voluntarily waiving a portion of its fees, which
reduces expenses and increases the distribution rate, yield and total return to
shareholders. Without these reductions, the fund's distribution rate and total
return would have been lower and the yield would have been 6.05%. The fee waiver
may be discontinued at any time, upon notice to the fund's Board of Trustees.

4. Cumulative total return reflects the change in value of an investment over
the periods indicated, assuming reinvestment of dividends and capital gains.

5. Average annual total return represents the average annual change in value of
an investment over the specified periods, assuming reinvestment of dividends and
capital gains.

6. Based on an annualization of the fund's dividend for the 30-day period,
($0.04795 per share) and the net asset value of $9.25 per share, on June 30,
1995.

7. Yield, calculated as required by the SEC, is based on earnings of the fund's
underlying portfolio during the 30 days ended on the date shown.

Investment return and principal value fluctuate, so that your shares, when
redeemed, may be worth more or less than their original cost. Past performance
cannot guarantee future results.

Franklin Institutional Adjustable Rate
Securities Fund

The Franklin Institutional Adjustable Rate Securities Fund seeks a high level of
current income, with lower volatility of principal than a fund that invests in
fixed-rate securities. The fund seeks to achieve its objective by investing all
of its assets in the Adjustable Rate Securities Portfolio, which in turn invests
in adjustable rate securities, including adjustable rate mortgages (ARMS) issued
or guaranteed by private institutions or by U.S. government agencies.1
Investment in these securities has earned the fund a credit rating of Aa from
Moody's Investors Service.2 Shown to the right is a list of the top five issuers
for the securities held in the Adjustable Rate Securities Portfolio, as of June
30, 1995.

For taxable bond funds, including the Franklin Institutional Adjustable Rate
Securities Fund, rapidly rising interest rates made 1994 one of the worst
markets in 20 years. After peaking in late 1994, however, short-term interest
rates reversed course in the first half of 1995. The yield on one-year
Treasuries fell from 7.14% on 12/30/94 to 5.64% on 6/30/95, a decline of 150
basis points.

1. Individual securities in the Adjustable Rate Securities Portfolio, but not
shares of the Franklin Institutional Adjustable Rate Securities Fund, are
guaranteed by private institutions, the U.S. government, its agencies or
instrumentalities as to the timely payment of principal and interest.

2. The "Aa" rating reflect Moody's assessment of the investment quality of
shares in the fund and factors in the fund's investment objectives and policies,
and the credit worthiness of the fund's investments and management. Funds rated
Aa are judged to be of an investment quality similar to Aa-rated fixed-income
obligations, which indicates the next best level of quality after Aaa. The
rating does not consider the prospective performance of a fund with respect to
appreciation, the volatility of net asset value, or yield and does not reflect
approval by Moody's. The rating is subject to change.

Because of their adjustable coupons, ARMS can reset their coupons periodically.
In a stable or slowly changing interest rate environment, ARMS coupons can reset
according to prevailing market rates. In the sharply rising interest rate
environment of 1994, however, ARMS coupon adjustments generally lagged market
rate movements. In addition, many ARM securities hit their annual caps, which
limit the level to which coupons may correct during a calendar year.

In contrast, declining interest rates over the last six months of the period
allowed many ARM securities to "catch up" to last year's movements. We continued
to concentrate the portfolio's holdings in securities with less price
sensitivity to changes in interest rates, such as one-year Constant Maturity
Treasury (CMT) ARMS. Compared with the market, we remained underweighted in ARMS
tied to the 11th District Cost of Funds Index (COFI) because of its lagging
nature.

Adjustable Rate Securities Portfolio
Top Five Issuers on June 30, 1995
Percent of
Issuer Total Net Assets
1. Resolution Trust Corp. 21.3%
2. Prudential Home Mortgage Corp. 18.7%
3. Glendale Federal Bank 11.7%
4. Residential Funding Corp. 10.8%
5. Salomon Brothers Mortgage Sec. 10.1%

Looking ahead, it appears that the Federal Reserve has finally reached the end
of its credit tightening cycle. With its latest move to ease monetary policy,
the Federal Reserve Board will likely take a "wait and see posture" in the near
term, closely tracking the economy's response as well as inflationary pressures.
The recent drop in mortgage rates should stimulate the housing sector and lead
to a slight rise in economic activity later in the year. This, in turn, could
lead to decreased interest-rate volatility, which will benefit callable
securities such as ARMS. We are actively positioning the fund in this
environment, while seeking to maintain stability of principal and a yield
competitive with short-term alternatives.

Performance Summary

The Franklin Institutional Adjustable Rate Securities Fund's share price as
measured by net asset value, rose from $9.77 on June 30, 1994, to $9.78 on June
30, 1995.

At the end of the reporting period, the fund's distribution rate was 6.64%,
based on an annualization of the fund's dividend of 5.329 cents ($0.05329) per
share over the last 30 days and the net asset value of $9.78, on June 30, 1995.
Dividends will vary based on the earnings of the fund's underlying portfolio,
and past distributions are not necessarily indicative of future trends.

The fund posted a total return of +6.35% for the one-year period ended June 30,
1995. Total return measures the change in value of an investment, assuming
reinvestment of dividends and capital gains at net asset value. Of course, past
performance is not indicative of future results.

GRAPHIC MATERIAL 3 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Franklin Institutional Adjustable
Rate Securities Fund3

Total Return Index Comparison
Based on $1,000,000 Investment (1/3/92-6/30/94)
Performance Figures3
Periods ended June 30, 1995

Since
Inception
1-Year 3-Year (1/3/92)
NAV Cumulative
Total Returns:4 6.35% 14.37% 17.60%
NAV Average Annual
Total Returns:5 6.35% 4.58% 4.75%
Distribution Rate:6 6.64%
30-Day Standardized Yield:7 6.63%

3. Franklin Advisers, Inc., the fund's administrator and the manager of the
fund's underlying portfolio, is voluntarily waiving a portion of its fees, which
reduces expenses and increases the distribution rate, yield and total return to
shareholders. Without these reductions, the fund's distribution rate and total
return would have been lower and the yield would have been 6.14%. The fee waiver
may be discontinued at any time.

4. Cumulative total return reflects the change in value of an investment over
the periods indicated, assuming reinvestment of dividends and capital gains.

5. Average annual total return represents the average annual change in value of
an investment over the specified periods, assuming reinvestment of dividends and
capital gains.

6. Based on an annualization of the fund's dividend for the 30-day period
($0.05329 per share) and the net asset value of $9.78 per share on June 30,
1995.

7. Yield, calculated as required by the SEC, is based on earnings of the
fund's underlying portfolio during the 30 days ended on the date shown.

Investment return and principal value fluctuate, so that your shares, when
redeemed , may be worth more or less than their original cost. Past performance
cannot guarantee future results.

INSTITUTIONAL FIDUCIARY TRUST

Statement of Investments in Securities and Net Assets, June 30, 1995

Value
Shares Franklin Institutional Adjustable U.S. Government Securities Fund (Note 1)
Mutual Funds 100.0%

<C> <C>
2,693,572 U.S. Government Adjustable Rate Mortgage Portfolio (Note 1)........................................ $25,023,285
--------------
Total Investments (Cost $27,032,676) 100.0%........................................................ 25,023,285
Liabilities in Excess of Other Assets, Net ........................................................ (3,338)
--------------
Net Assets 100.0%.................................................................................. $25,019,947
==============

At June 30, 1995, the net unrealized depreciation based on the cost
of investments for income tax purposes of $27,040,527 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost..................................................................... $--
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value..................................................................... (2,017,242)
--------------
Net unrealized depreciation ....................................................................... $(2,017,242)
==============

The accompanying notes are an integral part of these financial statements.

INSTITUTIONAL FIDUCIARY TRUST

Statement of Investments in Securities and Net Assets, June 30, 1995

Value
Shares Franklin Institutional Adjustable Rate Securities Fund (Note 1)
Mutual Funds 100.0%

879,065 Adjustable Rate Securities Portfolio (Note 1) ....................................................... $8,597,255
--------------
Total Investments (Cost $8,828,370) 100.0%........................................................... 8,597,255
Liabilities in Excess of Other Assets, Net .......................................................... (1,203)
--------------
Net Assets 100.0%.................................................................................... $8,596,052
==============

At June 30, 1995, the net unrealized depreciation based on the cost
of investments for income tax purposes of $8,837,066 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ...................................................................... $--
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ...................................................................... (239,811)
--------------
Net unrealized depreciation ......................................................................... $(239,811)
==============

The accompanying notes are an integral part of these financial statements.

INSTITUTIONAL FIDUCIARY TRUST

Financial Statements

Statements of Assets and Liabilities
June 30, 1995

Franklin
Institutional Franklin
Adjustable U.S. Institutional
Government Adjustable Rate
Securities Fund Securities Fund
--------- ---------
Assets:
Investments:
<S> <C> <C>
At identified cost $27,032,676 $ 8,828,370
--------- ---------
At value 25,023,285 8,597,255
Cash 1,090 357
--------- ---------
Total assets 25,024,375 8,597,612
--------- ---------
Liabilities:
Payables:
Administration fees 2,841 352
Shareholder servicing costs 240 106
Accrued expenses and
other liabilities 1,347 1,102
--------- ---------
Total liabilities 4,428 1,560
--------- ---------
Net assets, at value $25,019,947 $ 8,596,052
========= =========
Net assets consist of:
Undistributed net
investment income $42,432 $--
Unrealized depreciation
on investments (2,009,391) (231,115)
Accumulated net realized loss (28,773,996) (1,893,805)
Capital shares 55,760,902 10,720,972
--------- ---------
Net assets, at value $25,019,947 $ 8,596,052
========= =========
Shares outstanding 2,703,982 878,985
========= =========
Net asset value per share $9.25 $9.78
========= =========
Representative computation
(Franklin Institutional Adjustable
U.S. Govt. Securities Fund) of
net asset value, offering price
and redemption price per share:
($25,019,947 O 2,703,982) $9.25
=========

Statements of Operations
for the year ended June 30, 1995
Franklin
Institutional Franklin
Adjustable U.S. Institutional
Government Adjustable Rate
Securities Fund Securities Fund
--------- ---------
Investment income:
Dividends $ 2,222,606 $ 881,066
--------- ---------
Expenses:
Administration fees, net (Note 5) 7,825 --
Shareholder servicing costs
(Note 5) 2,147 3,223
Registration fees 5,766 --
Professional fees 5,022 3,626
Reports to shareholders 4,208 2,161
Directors' fees and expenses 722 71
Other expenses 4,736 3,699
Payments from administrator
(Note 5) -- (4,306)
--------- ---------
Total expenses 30,426 8,474
--------- ---------
Net investment income 2,192,180 872,592
--------- ---------
Realized and unrealized gain
(loss) on investments:
Net realized loss (2,295,273) (772,268)
Net unrealized appreciation
during the year 1,324,517 646,566
--------- ---------
Net realized and unrealized
loss on investments (970,756) (125,702)
--------- ---------
Net increase in net assets
resulting from operations $ 1,221,424 $ 746,890
========= =========

The accompanying notes are an integral part of these financial statements.

</TABLE>

INSTITUTIONAL FIDUCIARY TRUST

Financial Statements (cont.)

Statements of Changes in Net Assets
for the years ended June 30, 1995 and 1994
<TABLE>
<CAPTION>

Franklin Institutional Adjustable Franklin Institutional
U.S. Government Securities Fund Adjustable Rate Securities Fund
-------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------

Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income......................................... $ 2,192,180 $ 12,365,091 $ 872,592 $ 2,912,554
Net realized loss from security transactions.................. (2,295,273) (19,999,149) (772,268) (1,118,153)
Net unrealized appreciation (depreciation) during the year.... 1,324,517 7,745,260 646,566 (868,074)
--------- --------- --------- ---------
Net increase in net assets resulting from operations........... 1,221,424 111,202 746,890 926,327
Distributions to shareholders from undistributed net
investment income............................................. (2,210,136) (12,435,248) (872,592) (2,912,554)
Decrease in net assets from capital share
transactions (Note 3)......................................... (25,729,342) (797,248,947) (22,476,738) (11,549,068)
--------- --------- --------- ---------
Net decrease in net assets..................................... (26,718,054) (809,572,993) (22,602,440) (13,535,295)
Net assets:
Beginning of year............................................. 51,738,001 861,310,994 31,198,492 44,733,787
--------- --------- --------- ---------
End of year................................................... $25,019,947 $ 51,738,001 $ 8,596,052 $31,198,492
========= ========= ========= =========
Undistributed net investment income included in net assets:
Beginning of year............................................. $ 60,388 $ 130,545 $-- $--
========= ========= ========= =========
End of year................................................... $ 42,432 $ 60,388 $-- $--
========= ========= ========= =========

The accompanying notes are an integral part of these financial statements.

</TABLE>

INSTITUTIONAL FIDUCIARY TRUST

Notes to Financial Statements

1. SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (the Trust) is a diversified, open-end management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The Trust currently consists of eight separate and distinct
Funds. These financial statements pertain to the Franklin Institutional
Adjustable U.S. Government Securities Fund (the Adjustable U.S. Government Fund)
and the Franklin Institutional Adjustable Rate Securities Fund (the Adjustable
Rate Securities Fund). Each of the Funds issues a separate series of the Trust's
shares and maintains a totally separate and distinct investment portfolio.

The Adjustable U.S. Government Fund and the Adjustable Rate Securities Fund (the
Funds) invest substantially all of their assets in the Adjustable Rate
Securities Portfolios (the Portfolios), which is a no-load, open-end,
diversified management investment company that has two separate and distinct
Portfolios consisting of: U.S. Government Adjustable Rate Mortgage Portfolio
(the ARM Portfolio) and Adjustable Rate Securities Portfolio. The unaudited
financial statements of the Portfolios, including the statements of investments,
are included elsewhere in this report and should be read in conjunction with the
Funds' financial statements.

On June 20, 1995, the Board of Trustees eliminated the AEA Cash Management Fund,
a series of the Trust.

The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.

a. Security Valuation:

The values of the Adjustable U.S. Government Fund and the Adjustable Rate
Securities Fund reflect the Funds' proportionate interest in the net assets of
the Portfolios. As of June 30, 1995, the Adjustable U.S. Government Fund owns
approximately 4% of the ARM Portfolio and the Adjustable Rate Securities Fund
owns 32% of the Adjustable Rate Securities Portfolio. The Portfolios' shares
held by the Funds are valued at the net asset value of the Portfolios.

b. Income Taxes:

The Trust intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
Each Fund is treated as a separate entity in the determination of compliance
with the Internal Revenue Code.

c. Security Transactions:

Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.

Net realized capital losses differ for financial statement and tax purposes
primarily due to losses deferred for wash sale transactions.

d. Investment Income, Expenses and Distributions:

Distributions to shareholders are recorded on the ex-dividend date. Dividend
income from the Portfolios and estimated expenses are accrued daily.

Distributions are declared daily from net investment income and reinvested
monthly in the form of additional shares of the Fund at net asset value. Daily
allocations of distributions will commence on the date of receipt of an
investor's funds.

e. Expense Allocation:

Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each Fund to the combined net assets. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.

2. CAPITAL LOSS CARRYOVERS

At June 30, 1995, for tax purposes, the Trust had capital loss carryovers as
follows:

<TABLE>
<CAPTION>
Adjustable U.S. Adjustable Rate
Government Fund Securities Fund
----------- ----------
<S> <C> <C>
Capital loss carryovers expiring in: 2001................. $ 6,444,126 $ 1,762
2002...................................................... 20,034,597 1,111,813
2003...................................................... 2,287,422 771,534
----------- ----------
$28,766,145 $1,885,109
=========== ==========

</TABLE>

For tax purposes, the aggregate cost of securities and unrealized depreciation
are higher than for financial reporting purposes at June 30, 1995 by $7,851 in
the Adjustable U.S. Government Securities Fund and $8,696 in the Adjustable Rate
Securities Fund.

3. TRUST SHARES

At June 30, 1995, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Funds' shares for the years
ended June 30, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>

Franklin Institutional Franklin Institutional
Adjustable U.S. Government Adjustable Rate
Securities Fund Securities Fund
Shares Amount Shares Amount

<S> <C> <C> <C> <C>
1995
Shares sold..................................................... 407,666 $ 3,785,853 201,682 $1,956,062
Shares issued in reinvestment of distributions.................. 44,733 412,014 12,800 124,420
Shares redeemed................................................. (3,131,959) (28,795,399) (2,501,030) (24,288,084)
Changes from exercise of exchange privilege:
Shares redeemed................................................ (123,323) (1,131,810) (27,803) (269,136)
------------ ----------- ------------ -----------
Net decrease.................................................... (2,802,883) $(25,729,342) (2,314,351) $(22,476,738)
============ ============ ============ ===========

1994
Shares sold..................................................... 11,524,948 $113,179,875 14,968,560 $150,016,324
Shares issued in reinvestment of distributions.................. 562,589 5,510,131 65,788 655,952
Shares redeemed................................................. (93,006,718) (907,271,659) (15,741,814) (156,743,765)
Changes from exercise of exchange privilege:
Shares sold.................................................... 1,586,444 15,635,155 2,659,335 26,673,334
Shares redeemed................................................ (2,489,057) (24,302,449) (3,214,086) (32,150,913)
------------ ----------- ------------ -----------
Net decrease.................................................... (81,821,794) $(797,248,947) (1,262,217) $(11,549,068)
============ ============ ============ ===========

4. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the year ended June 30, 1995 were as follows:

Franklin Institutional
Adjustable Franklin Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
-------------------- -------------------
<S> <C> <C>
Purchases......................................................................... $ 5,605,802 $ 1,908,557
==================== ===================
Sales............................................................................. $31,718,738 $24,384,048
==================== ===================
</TABLE>

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

Franklin Advisers, Inc., under the terms of an administration agreement,
provides administrative services, office space and facilities to each Fund, and
receives fees computed monthly on the last day of the month at an annualized
rate of 5/100 of 1% of the average daily net assets of each Fund. The terms of
the agreement provide that annual aggregate expenses of the Trust be limited to
the extent necessary to comply with the limitations set forth in the laws,
regulations and administrative interpretations of the states in which the
Trust's shares are registered. The Trust's expenses did not exceed these
limitations; however, for the year ended June 30, 1995, Franklin Advisers, Inc.
agreed in advance to waive a portion of the administrative fees for the
Adjustable U.S. Government Fund and the Adjustable Rate Securities Fund in the
amount of $11,030 and $7,453, respectively, in an effort to minimize the Trust's
expenses. Additionally, Franklin Advisers, Inc. made payments of $4,306 for
other expenses as shown in the Statement of Operations of the Adjustable Rate
Securities Fund.

Pursuant to a shareholder servicing agreement with Franklin/Templeton Investor
Services, Inc., the Trust pays costs on a per shareholder account basis.
Shareholder servicing costs incurred for the year ended June 30, 1995 were
$2,147 and $3,223, of which $696 and $158 were paid to Franklin/Templeton
Investor Services, Inc., for the Adjustable U.S.
Government Securities Fund and Adjustable Rate Securities Fund, respectively.

Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc., and Franklin/Templeton Investor Services, Inc. (both
wholly-owned subsidiaries of Franklin Resources, Inc.).

6. FINANCIAL HIGHLIGHTS

Selected data for each share of beneficial interest outstanding throughout the
year are as follows:
<TABLE>
<CAPTION>

Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ------------------------------
Net Asset Net Realized DistributionsNet Asset Ratio of Ratio of
Value at Net & Unrealized Total From From Net Value at Net Assets at Expenses Net Income Portfolio
Year Beginning Investment Gain (Loss) Investment Investment End Total End of Year to Average to Average Turnover
Ended of Year Income on SecuritiesOperations Income of Year Return++ (in 000) Net Assets3,4 Net Assets Rate

Franklin Institutional Adjustable U.S. Government Securities Fund:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19921 $10.00 $.373 $(.010) $ .363 (.373) $ 9.99 3.70% $1,265,392 .35% 6.24% 62.79%
1993 9.99 .480 (.130) .350 (.480) 9.86 4.01 861,311 .35 4.89 66.55
1994 9.86 .360 (.467) (.107) (.353) 9.40 (1.11) 51,738 .07 3.49 29.47
1995 9.40 .551 (.155) .396 (.546) 9.25 4.41 25,020 .23 5.81 14.86
Franklin Institutional Adjustable Rate Securities Fund:
19922 10.00 .239 .040 .279 (.239) 10.04 2.82 -- -- 7.13 --
1993 10.04 .559 -- .559 (.559) 10.04 5.72 44,734 -- 5.56 74.77
1994 10.04 .437 (.270) .167 (.437) 9.77 1.65 31,198 .25 4.32 197.22
1995 9.77 .589 .010 .599 (.589) 9.78 6.35 8,596 .31 5.84 12.44

1For the period November 1, 1991 (effective date of registration) to June 30, 1992.
2For the period January 3, 1992 (effective date of registration) to June 30, 1992.
3Includes the Funds' share of the Portfolios' allocated expenses.
+Annualized
++Total return measures the change in value of an investment over the years
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains, if any, at net asset value.
4During the years indicated, Franklin Advisers, Inc., the investment manager of
the Funds and Portfolios, agreed in advance to waive a portion of its
administration and management fees and made payments of other expenses incurred
by the Funds and Portfolios. Had such action not been taken, the Funds' ratios
of expenses to average net assets would have been as follows:

Ratio of expenses
to average net assets

Franklin Institutional Adjustable U.S. Government Securities Fund:
<S> <C>
19921...................................................................... .49+
1993....................................................................... .46
1994....................................................................... .45
1995....................................................................... .54
Franklin Institutional Adjustable Rate Securities Fund:
19922...................................................................... 69+
1993....................................................................... .60
1994....................................................................... .50
1995....................................................................... .59

</TABLE>

INSTITUTIONAL FIDUCIARY TRUST

Report of Independent Auditors

To the Shareholders and Board of Trustees of
Institutional Fiduciary Trust:

We have audited the accompanying statements of assets and liabilities of the
Franklin Institutional Adjustable U.S. Government Securities Fund and the
Franklin Institutional Adjustable Rate Securities Fund of the Institutional
Fiduciary Trust (the Funds), including each Fund's statement of investments in
securities and net assets, as of June 30, 1995, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years then ended, and the financial highlights for the periods
indicated in Note 6. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of June 30, 1995, the results of their operations for the year then
ended, the changes in their net assets for each of the two years then ended, and
the financial highlights for each of the periods indicated in Note 6, in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

San Francisco, California
August 4, 1995

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Statement of Investments in Securities and Net Assets, June 30,1995 (unaudited)
<TABLE>
<CAPTION>

Face Value
Amount U.S. Government Adjustable Rate Mortgage Portfolio (Note 1)
Adjustable Rate Mortgage Securities94.2%.....................................................

Federal Home Loan Mortgage Corp. (FHLMC)27.7%
<S> <C> <C> <C> <C> <C> <C>
$ 6,788,564 FHLMC, Cap 11.253%, Margin 1.75% + CMT, Resets Annually, 7.125%, 11/01/16................... $6,922,543
3,410,288 FHLMC, Cap 11.939%, Margin 2.127% + CMT, Resets Annually, 7.351%, 07/01/20.................. 3,463,652
1,234,868 FHLMC, Cap 12.176%, Margin 2.015% + CMT, Resets Annually, 7.252%, 04/01/20.................. 1,247,899
5,070,241 FHLMC, Cap 12.177%, Margin 2.265% + CMT, Resets Annually, 7.363%, 07/01/20.................. 5,164,349
1,021,865 FHLMC, Cap 12.68%, Margin 2.195% + CMT, Resets Annually, 7.531%, 02/01/19................... 1,049,952
3,035,808 FHLMC, Cap 12.723%, Margin 2.189% + CMT, Resets Annually, 7.665%, 04/01/19.................. 3,142,877
5,706,205 FHLMC, Cap 12.744%, Margin 2.00% + CMT, Resets Annually, 7.543%, 07/01/18................... 5,861,516
6,261,301 FHLMC, Cap 12.79%, Margin 2.07% + CMT, Resets Annually, 7.504%, 04/01/19.................... 6,448,738
1,147,224 FHLMC, Cap 12.80%, Margin 2.05% + CMT, Resets Annually, 7.482%, 11/01/18.................... 1,178,037
9,060,148 FHLMC, Cap 12.806%, Margin 2.23% + CMT, Resets Annually, 7.68%, 04/01/18.................... 9,379,436
4,408,778 FHLMC, Cap 12.875%, Margin 1.875% + CMT, Resets Annually, 7.34%, 07/01/17................... 4,507,486
7,799,817 FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.436%, 09/01/19................... 7,995,715
7,688,688 FHLMC, Cap 13.045%, Margin 1.875% + CMT, Resets Annually, 7.214%, 12/01/18.................. 7,856,616
6,104,347 FHLMC, Cap 13.07%, Margin 2.12% + CMT, Resets Annually, 7.748%, 04/01/22.................... 6,274,945
4,386,674 FHLMC, Cap 13.156%, Margin 1.915% + CMT, Resets Annually, 7.326%, 12/01/16.................. 4,479,048
2,379,860 FHLMC, Cap 13.16%, Margin 2.115% + CMT, Resets Annually, 7.559%, 07/01/19................... 2,444,119
4,276,379 FHLMC, Cap 13.246%, Margin 2.175% + CMT, Resets Annually, 7.49%, 10/01/18................... 4,392,276
2,044,108 FHLMC, Cap 13.269%, Margin 2.249% + CMT, Resets Annually, 7.906%, 05/01/19.................. 2,117,407
972,414 FHLMC, Cap 13.286%, Margin 2.164% + CMT, Resets Annually, 7.621%, 10/01/19.................. 998,992
3,040,033 FHLMC, Cap 13.292%, Margin 2.115% + CMT, Resets Annually, 7.624%, 03/01/19.................. 3,123,121
925,683 FHLMC, Cap 13.302%, Margin 2.04% + CMT, Resets Annually, 7.443%, 04/01/18................... 948,634
2,128,188 FHLMC, Cap 13.306%, Margin 2.057% + CMT, Resets Annually, 7.585%, 12/01/18.................. 2,185,952
3,119,011 FHLMC, Cap 13.36%, Margin 2.242% + CMT, Resets Annually, 7.643%, 07/01/20................... 3,215,872
6,108,656 FHLMC, Cap 13.364%, Margin 2.225% + CMT, Resets Annually, 7.775%, 07/01/19.................. 6,289,699
6,171,753 FHLMC, Cap 13.366%, Margin 2.102% + CMT, Resets Annually, 7.597%, 03/01/18.................. 6,339,561
12,001,577 FHLMC, Cap 13.37%, Margin 2.04% + CMT, Resets Annually, 7.557%, 04/01/19.................... 12,352,213
11,060,106 FHLMC, Cap 13.65%, Margin 2.249% + CMT, Resets Annually, 7.644%, 07/01/20................... 11,391,953
911,731 FHLMC, Cap 13.77%, Margin 2.057% + CMT, Resets Annually, 7.57%, 02/01/19.................... 937,346
6,237,789 FHLMC, Cap 13.793%, Margin 2.214% + CMT, Resets Annually, 7.573%, 11/01/19.................. 6,423,625
10,760,787 FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.527%, 04/01/18.................. 11,079,726
3,126,366 FHLMC, Cap 14.307%, Margin 1.957% + 3CMT, Resets Every 3 years, 8.587%, 12/01/21............ 3,232,915
1,783,590 FHLMC, Cap 14.451%, Margin 2.00% + CMT, Resets Annually, 7.289%, 12/01/18................... 1,832,447
4,439,177 FHLMC, Cap 14.90%, Margin 2.546% + CMT, Resets Annually, 8.221%, 02/01/19................... 4,640,360
--------------
Total Federal Home Loan Mortgage Corp. (Cost $159,557,478).................................. 158,919,027
--------------
Federal National Mortgage Association (FNMA)62.1%
3,435,053 FNMA, Cap 12.605%, Margin 2.536% + 6 Month DR, Resets Semi-Annually, 7.208%, 11/01/18....... 3,418,018
19,192,899 FNMA, Cap 12.637%, Margin 2.00% + NCI, Resets Annually, 5.875%, 11/01/17.................... 19,299,612
6,190,826 FNMA, Cap 12.64%, Margin 2.00% + CMT, Resets Annually, 7.375%, 03/01/19..................... 6,385,868
15,580,747 FNMA, Cap 12.66%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 7.051%, 01/01/19......... 15,672,906
4,721,245 c FNMA, Cap 12.662%, Margin 1.25% + COFI, Resets Monthly, 6.90%, 01/01/19..................... 4,707,780
11,747,126 FNMA, Cap 12.705%, Margin 1.25% + COFI, Resets Monthly, 6.175%, 09/01/18.................... 11,680,401
12,013,500 FNMA, Cap 12.729%, Margin 1.875% + NCI, Resets Annually, 5.871%, 07/01/29................... 12,010,256
5,193,599 FNMA, Cap 12.787%, Margin 1.25% + COFI, Resets Monthly, 7.454%, 01/01/19.................... 5,258,259
5,627,636 FNMA, Cap 12.788%, Margin 2.11% + CMT, Resets Annually, 7.534%, 11/01/20.................... 5,832,229
8,359,817 FNMA, Cap 12.804%, Margin 1.75% + CMT, Resets Annually, 7.17%, 05/01/19..................... 8,568,459
4,209,726 FNMA, Cap 12.84%, Margin 2.762% + 6 Month DR, Resets Semi-Annually, 7.497%, 06/01/17........ 4,390,621
8,572,297 FNMA, Cap 12.85%, Margin 2.078% + 5CMT, Resets Every 5 Years, 7.982%, 10/01/17.............. 8,802,410
9,143,453 FNMA, Cap 12.89%, Margin 2.125% + 6 Month DR, Resets Semi-Annually, 6.703%, 07/01/17........ 9,122,970
2,665,005 FNMA, Cap 12.911%, Margin 2.00% + 6 Month DR, Resets Semi-Annually, 7.27%, 02/01/18......... 2,703,981
11,370,581 FNMA, Cap 12.938%, Margin 1.25% + COFI, Resets Monthly, 6.175%, 02/01/19.................... 11,305,995
5,185,253 FNMA, Cap 12.993%, Margin 2.092% + CMT, Resets Annually, 7.386%, 12/01/19................... 5,333,561
7,700,911 FNMA, Cap 13.005%, Margin 1.97% + 3CMT, Resets Every 3 years, 7.97%, 11/01/17............... 7,889,791
Federal National Mortgage Association (FNMA) (cont.)
$ 7,152,314 FNMA, Cap 13.01%, Margin 2.10% + CMT, Resets Annually, 7.515%, 06/01/19..................... $7,377,660
9,369,410 FNMA, Cap 13.021%, Margin 1.986% + CMT, Resets Annually, 7.344%, 07/01/22................... 9,653,865
11,587,396 FNMA, Cap 13.03%, Margin 1.25% + COFI, Resets Monthly, 6.877%, 02/01/20..................... 11,485,426
7,853,660 FNMA, Cap 13.03%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.153%, 12/01/20......... 7,893,477
7,681,433 FNMA, Cap 13.063%, Margin 2.175% + CMT, Resets Annually, 7.696%, 04/01/19................... 7,979,042
8,570,860 FNMA, Cap 13.099%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.229%, 07/01/20........ 8,619,877
5,971,170 FNMA, Cap 13.147%, Margin 1.895% + CMT, Resets Annually, 7.34%, 04/01/19.................... 6,136,120
4,090,074 FNMA, Cap 13.202%, Margin 2.478% + 6 Month DR, Resets Semi-Annually, 7.485%, 11/01/26....... 4,111,816
4,388,872 FNMA, Cap 13.249%, Margin 2.00% + CMT, Resets Annually, 7.687%, 06/01/19.................... 4,529,658
9,852,925 FNMA, Cap 13.281%, Margin 2.00% + CMT, Resets Annually, 7.37%, 10/01/19..................... 10,132,331
8,534,381 FNMA, Cap 13.32%, Margin 1.25% + COFI, Resets Monthly, 7.433%, 04/01/03..................... 8,624,675
17,162,752 FNMA, Cap 13.452%, Margin 2.148% + CMT, Resets Annually, 7.584%, 09/01/22................... 17,779,340
15,326,775 FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 7.408%, 01/01/18................... 15,766,821
8,359,855 FNMA, Cap 13.662%, Margin 2.177% + CMT, Resets Annually, 7.704%, 03/01/21................... 8,625,488
11,383,718 FNMA, Cap 13.791%, Margin 2.143% + CMT, Resets Annually, 7.645%, 12/01/20................... 11,808,865
4,910,629 FNMA, Cap 13.797%, Margin 2.20% + CMT, Resets Annually, 7.802%, 03/01/19.................... 5,102,349
6,407,653 FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.795%, 07/01/24......... 6,265,691
5,752,720 FNMA, Cap 13.887%, Margin 2.25% + CMT, Resets Annually, 7.756%, 02/01/19.................... 5,987,119
4,246,892 FNMA, Cap 13.896%, Margin 2.25% + CMT, Resets Annually, 7.64%, 12/01/18..................... 4,377,270
9,342,598 FNMA, Cap 14.069%, Margin 2.089% + CMT, Resets Annually, 7.219%, 01/01/19................... 9,577,950
2,685,630 FNMA, Cap 14.142%, Margin 2.118% + CMT, Resets Annually, 7.698%, 03/01/21................... 2,780,712
15,916,333 FNMA, Cap 14.354%, Margin 2.07% + 5CMT, Resets Every 5 Years, 8.095%, 05/01/21.............. 16,380,772
4,350,127 FNMA, Cap 14.42%, Margin 2.099% + CMT, Resets Annually, 7.763%, 03/01/20.................... 4,502,163
11,131,514 FNMA, Cap 14.887%, Margin 1.72% + CMT, Resets Annually, 6.973%, 01/01/16.................... 11,320,204
4,366,986 FNMA, Cap 14.952%, Margin 2.523% + CMT, Resets Annually, 8.932%, 05/01/19................... 4,532,127
2,106,786 FNMA, Cap 15.381%, Margin 2.168% + CMT, Resets Annually, 7.439%, 02/01/20................... 2,170,412
--------------
Total Federal National Mortgage Association (Cost $360,132,443)............................. 355,904,347
--------------
Government National Mortgage Association (GNMA)4.4%
5,872,415 GNMA, Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 6.00%, 08/20/24...................... 5,883,720
11,312,085 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.125%, 07/20/23..................... 11,544,889
7,372,414 GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 7.125%, 08/20/23..................... 7,524,139
--------------
Total Government National Mortgage Association (Cost $25,703,262)........................... 24,952,748
--------------
Total Investments before Repurchase Agreements (Cost $545,393,183).......................... 539,776,122
--------------
a,b Receivables from Repurchase Agreements5.6%
32,803,348 Joint Repurchase Agreement, 6.22%, 07/03/95 (Maturity Value $32,054,293) (Cost $32,037,687)
Collateral: U.S. Treasury Bills, 10/19/95 - 06/27/96
U.S. Treasury Notes, 3.875% - 8.625%, 09/30/95 - 02/15/00 ................................ 32,037,687
--------------
Total Investments (Cost $577,430,870)99.8%................................................. 571,813,809
Others Assets and Liabilities, Net.2%...................................................... 1,442,611
--------------
Net Assets 100.0%.......................................................................... $573,256,420
==============

At June 30, 1995, the net unrealized depreciation based on
the cost of investments for income tax purposes of $577,430,870 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.............................................................. $ 946,368
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.............................................................. (6,563,429)
--------------
Net unrealized depreciation ................................................................ $ (5,617,061)
==============

</TABLE>

PORTFOLIO ABBREVIATIONS:
CMT - 1 Year Constant Maturity Treasury Index
3CMT - 3 Year Constant Maturity Treasury Index
5CMT - 5 Year Constant Maturity Treasury Index
COFI - 11th District Cost of Funds Index
DR - Discount Rate
NCI - National Median Cost of Funds Index
TB - Treasury Bill Rate

aFace amount for repurchase agreements is for the underlying collateral.
bSee Note 1 (f) regarding Joint Repurchase Agreement.
cSee Note 1 (g) regarding securities purchased on a when-issued basis.

The accompanying notes are an integral part of these financial statements.

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Statement of Investments in Securities and Net Assets, June 30, 1995 (unaudited)
<TABLE>
<CAPTION>

Face Value
Amount Adjustable Rate Securities Portfolio (Note 1)
Adjustable Rate Mortgage Securities 82.4%

<S> <C> <C>
$ 3,170,400 Glendale Federal Bank, Cap 12.25%, Margin 1.78% + CMT, Resets Monthly, 8.266%, 03/25/30....... $ 3,170,400
1,374,307 Homeowners Federal Savings, Cap 13.00%, Margin 1.75% + CMT, Resets Annually, 7.019%, 12/01/17. 1,388,480
2,176,011 PHMS, Cap 10.88%, Margin 2.50% + CMT, Resets Annually, 7.888%, 01/25/23....................... 2,214,091
2,841,144 PHMS, Cap 11.67%, Margin 2.67% + CMT, Resets Annually, 7.593%, 07/25/22....................... 2,866,004
2,883,691 RFC, Cap 11.46%, Margin 2.25% + CMT, Resets Annually, 7.510%, 11/25/22........................ 2,925,144
1,711,750 RTC, Cap 12.66%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 8.235%, 04/26/21............ 1,676,981
2,464,243 RTC, Cap 14.69%, Margin 1.55% + 3CMT, Resets Every 3 Years, 7.440%, 06/25/22.................. 2,436,521
1,698,772 RTC, Cap 16.48%, Margin NACR - 0.15%, Resets Annually, 7.501%, 07/25/20....................... 1,666,391
1,310,938 Ryland Mortgage Securities Corp., Cap 11.00%, Margin 1.00% + COFI, Resets Monthly,
5.925%, 04/25/21 ............................................................................ 1,303,155
2,735,537 Salomon Brothers Mortgage Securities, Cap 14.00%, Margin 0.96% + NACR, Resets Annually,
7.882%, 10/25/16 ............................................................................ 2,736,395
--------------
Total Adjustable Rate Mortgage Securities (Cost $23,032,338).................................. 22,383,562
--------------
Other Adjustable Rate Securities4.8%
1,300,000 Advanta Credit Card Master Trust, Margin 0.16% + 1 Month LIBOR, Resets Monthly, 6.222%, 09/01/00
(Cost $1,301,523)............................................................................ 1,303,276
--------------
Total Investments before Repurchase Agreements (Cost $24,333,861)............................. 23,686,838
--------------
a,b Receivables from Repurchase Agreements12.4%
3,452,984 Joint Repurchase Agreement, 6.22%, 07/03/95 (Maturity Value $3,374,594) (Cost $3,372,846)
Collateral: U.S Treasury Bills, 10/19/95 - 06/27/96
U.S Treasury Notes, 3.875% - 8.625%, 09/30/95 - 02/15/00................................... 3,372,846
--------------
Total Investments (Cost $27,706,707)99.6% .................................................... 27,059,684
Other Assets and Liabilities, Net.4%.......................................................... 113,170
--------------
Net Assets 100.0% ............................................................................ $27,172,854
==============

At June 30, 1995, the net unrealized depreciation based on the
cost of investments for income tax purposes of $27,706,707 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost................................................................ $8,195
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value................................................................ (655,218)
--------------
Net unrealized depreciation .................................................................. $ (647,023)
==============
</TABLE>

PORTFOLIO ABBREVIATIONS:
3CMT - 3 Year Constant Maturity Treasury Index
CMT - 1 Year Constant Maturity Treasury Index
COFI - 11th District Cost of Funds Index
LIBOR - London Interbank Offered Rate
NACR - National Average Contract Rate
PHMS - Prudential Home Mortgage Securities
RFC - Residential Finance Corp.
RTC - Resolution Trust Corp.
TB - Treasury Bill Rate

aFace amount for repurchase agreements is for the underlying collateral.
bSee Note 1(f) regarding Joint Repurchase Agreement.

The accompanying notes are an integral part of these financial statements.

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Financial Statements

Statements of Assets and Liabilities
June 30, 1995 (unaudited)

<TABLE>
<CAPTION>
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
Assets:
Investments in securities:
<S> <C> <C>
At identified cost......................................................................... $545,393,183 $24,333,861
============ ===========
At value................................................................................... 539,776,122 23,686,838
Receivables from repurchase agreements, at value and cost................................. 32,037,687 3,372,846
Receivables:
Interest.................................................................................. 4,319,885 161,280
Investment securities sold................................................................ 2,720,870 37,461
Unamortized organization costs (Note 2)................................................... -- 3,477
------------ -----------
Total assets............................................................................... 578,854,564 27,261,902
------------ -----------

Liabilities:
Payables:
Investment securities purchased on a when-issued basis (Note 1)............................ 4,747,405 --
Capital shares repurchased................................................................. 716,648 76,390
Management fees............................................................................ 25,017 4,113
Professional fees.......................................................................... 40,290 1,656
Accrued expenses and other liabilities.................................................... 68,784 6,889
------------ -----------

Total liabilities........................................................................ 5,598,144 89,048
------------ -----------

Net assets, at value....................................................................... $573,256,420 $27,172,854
============ ===========

Net assets consist of:
Unrealized depreciation on investments.................................................... $(5,617,061) $ (647,023)
Accumulated net realized loss............................................................. (136,629,486) (2,682,911)
Capital shares............................................................................ 616,844 27,789
Additional paid-in capital................................................................ 714,886,123 30,474,999
------------ -----------

Net assets, at value....................................................................... $573,256,420 $27,172,854
============ ===========

Shares outstanding......................................................................... 61,684,401 2,778,874
============ ===========

Net asset value per share.................................................................. $9.29 $9.78
============ ===========

The accompanying notes are an integral part of these financial statements.

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Financial Statements (cont.)

Statements of Operations
for the eight months ended June 30, 1995 (unaudited)

U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
Investment income:
<S> <C> <C>
Interest (Note 1)......................................................................... $27,061,928 $1,366,251
------------ -----------

Expenses:
Management fees, net (Note 6)............................................................. 534,173 42,170
Custodian fees............................................................................ 48,161 2,177
Professional fees......................................................................... 48,758 4,343
Trustees' fees and expenses............................................................... 6,854 19
Reports to shareholders................................................................... 2,593 1,074
Amortization of organization costs (Note 2)............................................... -- 1,464
Other..................................................................................... 19,611 1,182
------------ -----------

Total expenses.......................................................................... 660,150 52,429
------------ -----------

Net investment income.................................................................. 26,401,778 1,313,822
------------ -----------

Realized and unrealized gain (loss) on investments:
Net realized loss......................................................................... (6,900,891) (579,805)
Net unrealized appreciation on investments................................................ 13,345,862 810,291
------------ -----------

Net realized and unrealized gain on investments............................................ 6,444,971 230,486
------------ -----------

Net increase in net assets resulting from operations....................................... $32,846,749 $1,544,308
============ ===========

</TABLE>

The accompanying notes are an integral part of these financial statements.

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Financial Statements (cont.)

Statements of Changes in Net Assets for the eight months ended June 30, 1995
(unaudited) and the year ended October 31, 1994
<TABLE>
<CAPTION>

U.S. Government Adjustable Rate
Adjustable Rate Mortgage Portfolio Securities Portfolio
---------------------------------- ------------------------
For the eight For the For the eight For the
months ended year ended months ended year ended
6/30/95 10/31/94 6/30/95 10/31/94
---------------- ------------- --------------- -------------

Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income.................................... $ 26,401,778 $ 47,964,106 $ 1,313,822 $4,221,967
Net realized loss from investments....................... (6,900,891) (67,057,492) (579,805) (1,993,495)
Net unrealized appreciation (depreciation) on
investments ............................................ 13,345,862 (12,751,845) 810,291 (1,410,266)
--------------- ------------- -------------- -------------

Net increase (decrease) in net assets
resulting from operations................................. 32,846,749 (31,845,231) 1,544,308 818,206
Distributions to shareholders from undistributed
net investment income (Note 1)........................... (26,401,778) (47,964,106) (1,313,822) (4,221,967)
Decrease in net assets from capital share
transactions (Note 4).................................... (180,659,665) (1,302,948,561) (14,676,385) (79,286,725)
--------------- -------------- ------------- -------------

Net decrease in net assets................................. (174,214,694) (1,382,757,898) (14,445,899) (82,690,486)
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period........................................ 747,471,114 2,130,229,012 41,618,753 124,309,239
--------------- -------------- ------------- -------------
End of period.............................................. $573,256,420 $ 747,471,114 $27,172,854 $ 41,618,753
=============== ============== ============= =============

</TABLE>

The accompanying notes are an integral part of these financial statements.

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Notes to Financial Statements (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

Adjustable Rate Securities Portfolios (the Trust) is a no load, open-end,
diversified management investment company (mutual fund), registered under the
Investment Company Act of 1940 as amended. The Trust currently has two separate
portfolios (the Portfolios) consisting of the U.S. Government Adjustable Rate
Mortgage Portfolio (Mortgage Portfolio) and the Adjustable Rate Securities
Portfolio (Securities Portfolio). The shares of the Trust are issued in private
placements and are thus exempt from registration under the Securities Act of
1933.

a. Securities Valuations:
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. Other securities
for which market quotations are readily available are valued at current market
values, obtained from pricing services, which are based on a variety of factors,
including recent trades, institutional size trading in similar types of
securities (considering yield, risk and maturity) and/or developments related to
specific securities. Portfolio securities which are traded both in the
over-the-counter market and on a securities exchange are valued according to the
broadest and most representative market as determined by the Manager. Other
securities for which market quotations are not available, if any, are valued in
accordance with procedures established by the Board of Trustees.

b. Income Taxes:
The Trust intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
Each Portfolio is treated as a separate entity in the determination of
compliance with the Internal Revenue Code.

c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.

Net realized capital losses differ for financial statement and tax purposes
primarily due to losses deferred from wash sale transactions.

d. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount, if any, is
amortized as required by the Internal Revenue Code. The Fund normally declares
dividends from its net investment income daily and distributes monthly. Daily
allocations of net investment income will commence on the date of receipt of an
investor's funds. Dividends are normally declared each day the New York Stock
Exchange is open for business and are equal to the Portfolio's total net
investment income and are payable to shareholders of record at the beginning of
business on the ex-date. Once each month, dividends are reinvested in additional
shares of the Portfolio or paid in cash as requested by the shareholders.

e. Expense Allocation:
Common expenses incurred by the Trust are allocated among the Portfolios based
on the ratio of net assets of each Portfolio to the combined net assets. In all
other respects, expenses are charged to each Portfolio as incurred on a specific
identification basis.

f. Repurchase Agreements:
The Trust may enter into a Joint Repurchase Agreement whereby its uninvested
cash balance is deposited into a joint cash account to be used to invest in one
or more repurchase agreements with government securities dealers recognized by
the Federal Reserve Board and/or member banks of the Federal Reserve System. The
value and face amount of the Joint Repurchase Agreement are allocated to the
Trust based on its pro rata interest.

In a repurchase agreement, the Trust purchases a U.S. Government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Trust to
the seller, collateralized by the underlying security. The transaction requires
the initial collateralization of the seller's obligation by U.S. Government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Trust, with the value of the underlying
security marked to market daily to maintain coverage of at least 100%. The
collateral is delivered to the Trust's custodian and held until resold to the
dealer or bank. At June 30, 1995, all outstanding joint repurchase agreements
held by the Trust has been entered into on that date.

g. Securities Traded on a When-Issued or Delayed Delivery Basis:
The Trust may trade 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 Trust will
generally purchase these securities with the intention of acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Trust has set aside sufficient investment
securities as collateral for these purchase commitments.

2. UNAMORTIZED ORGANIZATION COSTS

The organization costs of the Securities Portfolio are amortized on a
straight-line basis over a period of five years, from December 26, 1991, the
effective date of registration. In the event Franklin Resources, Inc. (which was
the sole shareholder prior to December 26, 1991) redeems its seed money shares
within the five-year period, the pro rata share of the then-unamortized deferred
organization cost will be deducted from the redemption price paid to Franklin
Resources, Inc. New investors purchasing shares of the portfolio subsequent to
that date bear such costs during the amortization period only as such charges
are accrued daily against investment income.

3. DISTRIBUTIONSANDCAPITAL LOSS CARRYOVERS

At October 31, 1994, for tax purposes, the Portfolios had accumulated net
capital loss carryovers as follows:
<TABLE>
<CAPTION>

U.S. Government
Adjustable Rate Adjustable Rate
Mortgage PortfolioSecurities Portfolio
----------- -----------
Capital loss carryovers
<S> <C> <C>
Expiring in: 2000......................... $ 45,446,278 $ 57,701
2001........................ 17,175,340 50,908
2002........................ 67,102,060 1,987,888
----------- -----------
$129,723,678 $2,096,497
=========== ===========

For tax purposes the aggregate cost of securities and unrealized depreciation of
the Trust are the same as for financial statement purposes at June 30, 1995.

4. TRUSTSHARES

At June 30, 1995, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Portfolio's shares
for the eight months ended June 30, 1995, and the year ended October 31, 1994
are as follows:

U.S. Government Adjustable Adjustable Rate
Rate Mortgage Portfolio Securities Portfolio
------------------------ ----------------------
Shares Amount Shares Amount
---------- ------------ --------- -----------
Eight months ended June 30, 1995
<S> <C> <C> <C> <C>
Shares sold................................................ 3,813,632 $ 35,163,696 976,991 $ 9,434,254
Shares issued in reinvestment of distributions............. 2,872,567 26,401,874 136,620 1,324,188
Shares redeemed............................................ (26,369,607) (242,225,235) (2,631,747) (25,434,827)
---------- ------------ --------- -----------
Net decrease............................................... (19,683,408) $ (180,659,665) (1,518,136) $ (14,676,385)
========== ============ ========= ===========
Year ended October 31, 1994
Shares sold................................................ 3,234,621 $ 31,184,230 9,103,489 $ 90,799,027
Shares issued in reinvestment of distributions............. 5,053,223 47,948,131 426,689 4,211,388
Shares redeemed............................................ (143,954,457) (1,382,080,922) (17,497,118) (172,994,477)
Changes from exercise of the exchange
privilege:
Shares redeemed.......................................... -- -- (132,789) (1,302,663)
---------- ------------ --------- -----------
Net decrease............................................... (135,666,613) $(1,302,948,561) (8,099,729) $ (79,286,725)
========== ============ ========= ===========

5. PURCHASES AND SALES OF SECURITIES

Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the eight months ended June 30, 1995, were as
follows:

U.S. Government
Adjustable Rate Adjustable Rate
Mortgage PortfolioSecurities Portfolio
----------- -----------
<S> <C> <C>
Purchases.................................. $ 90,914,985 $ 6,218,444
=========== ===========
Sales...................................... $281,861,899 $20,756,898
=========== ===========
</TABLE>

6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

Franklin Advisers, Inc., under the terms of a management agreement, provides
investment advice, administrative services, office space and facilities to the
Trust, and receives fees computed monthly based on the average daily net assets
of the Trust during the month. The Trust pays a fee equal to an annualized rate
of 40/100 of 1% for the first $5 billion of net assets, 35/100 of 1% of net
assets in excess of $5 billion up to and including $10 billion, 33/100 of 1% of
net assets in excess of $10 billion up to and including $15 billion, and 30/100
of 1% of net assets in excess of $15 billion. The terms of the management
agreement provide that aggregate annual expenses of the Trust be limited to the
extent necessary to comply with the limitations set forth in the laws,
regulations and administrative interpretations of the states in which the
Trust's shares are registered. The Trust's expenses did not exceed these
limitations; however, for the eight months ended June 30, 1995, Franklin
Advisers, Inc. agreed in advance to waive $1,189,151 and $41,384 of the
management fees for the Mortgage Portfolio and Securities Portfolio,
respectively.

As of June 30, 1995, 58,990,829 shares of the Mortgage Portfolio were owned by
the Franklin Adjustable U.S. Government Securities Fund and 2,693,572 shares
were owned by the Franklin Institutional Adjustable U.S. Government Securities
Fund. This represents 96% and 4%, respectively, of the outstanding shares of the
Mortgage Portfolio.

As of June 30, 1995, 1,898,500 shares of the Securities Portfolio were owned by
the Franklin Adjustable Rate Securities Fund and 879,065 shares were owned by
the Franklin Institutional Adjustable Rate Securities Fund. This represents 68%
and 32%, respectively, of the outstanding shares of the Securities Portfolio.
The remaining 1,309 shares of the Securities Portfolio were owned by Franklin
Resources, Inc.

Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc., a wholly owned subsidiary of Franklin Resources, Inc.

7. FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding throughout each
period by Fund are as follows:
<TABLE>
<CAPTION>

Per Share Operating Performance Ratios/Supplemental Data
--------------------------------------------------- ----------------------------
Net
Realized & Distri- Distri- Net Net Ratio of Ratio of Net
Net Asset Net Unrealized butions butions Asset Assets Expenses Investment
Year Value at Invest- Gain Total From From Net From Total Value at End to Average Income to Portfolio
Ended Beginning ment (Loss)on Investment Investment Capital Distri- at End Total of Year Net Average Turnover
Oct.31, of Year Income Securities Operations Income Gains butions of Year Return+ (in 000's) Assets++ Net Assets Rate

U.S. Government Adjustable Rate Mortgage Portfolio
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19921 $10.00$ .493 $ .013 $ .506 $(.493) $(.003) $(.496) $10.01 5.13% $4,315,658 .31%* 7.25%* 48.96%
19933 10.01 .544 (.100) .444 (.544) -- (.544) 9.91 4.53 4,201,411 .30 5.49 66.44
1993 9.91 .313 (.090) .223 (.313) -- (.313) 9.82 2.28 2,130,229 .27* 4.15* 76.55
1994 9.82 .415 (.630) (.215) (.415) -- (.415) 9.19 (2.22) 747,471 .02 4.01 56.43
19954 9.19 .377 .100 .477 (.377) -- (.377) 9.29 5.30 573,256 .15* 6.16* 14.77
Adjustable Rate Securities Portfolio
19922 10.00 -- -- -- -- -- -- 10.00 -- -- -- -- --
19933 10.00 .599 .020 .619 (.599) -- (.599) 10.02 6.36 44,656 -- 5.80 88.92
1993 10.02 .368 .010 .378 (.368) -- (.368) 10.03 3.83 124,309 .11* 4.76* 158.70
1994 10.03 .469 (.340) .129 (.469) -- (.469) 9.69 1.32 41,619 .25 4.55 192.06
19954 9.69 .413 .090 .503 (.413) -- (.413) 9.78 5.30 27,173 .25* 6.32* 21.78

*Annualized.
1For the period May 20, 1991 (effective date) to January 31, 1992. 2For the
period December 26, 1991 (effective date) to January 31, 1992.
3For the year ended January 31, 1993.
4For the eight months ended June 30,1995.
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and of
capital gains, if any, at net asset value.

++During the periods indicated, Franklin Advisers, Inc., the investment manager,
agreed to waive in advance a portion of its management fees and made payments of
other expenses incurred by the Portfolios. Had such action not been taken, the
ratios of expenses to average net assets would have been as follows:
</TABLE>

Ratio of
Expenses to
Average Net Assets
U.S. Government Adjustable Rate Mortgage Portfolio
19921........................................ .41%*
19933........................................ .42
1993......................................... .41*
1994......................................... .42
19954........................................ .43*
Ratio of
Expenses to
Average Net Assets
Adjustable Rate Securities Portfolio
19933........................................ .64%
1993......................................... .47*
1994......................................... .43
19954........................................ .45*
IFT Adjustable Rate Funds

APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)

GRAPHIC MATERIAL (1)

This chart shows in pie chart format the fund's securities breakdown by issuing
agency as a percentage of the fund's total net assets.

<TABLE>
<CAPTION>
Portfolio Composition on 6/30/95
<S> <C>
FNMA 62.2%
U.S. Treasuries 5.6%
FHLMC 27.8%
GNMA 4.4%

</TABLE>

GRAPHIC MATERIAL(2)

The following line graph hypothetically compares the cumulative return
performance of the Franklin Institutional Adjustable U.S. Government Securities
Fund to that of the Lehman Brothers 1-2 Year Short-Term Government Index and the
6-Month CD, based on a $1,000,000 investment from 12/2/91 to 6/30/95.
<TABLE>
<CAPTION>
Date Inst Adj USG Sec LB Short 1-2 Govt 6-Month CD
<S> <C> <C> <C>
12/91 $1,005,763 $1,013,000 $1,003,100
1/92 $1,008,016 $1,013,100 $1,006,100
2/92 $1,013,300 $1,016,100 $1,009,300
3/92 $1,018,313 $1,017,100 $1,012,500
4/92 $1,021,505 $1,025,800 $1,015,500
5/92 $1,027,510 $1,034,400 $1,018,500
6/92 $1,035,289 $1,043,200 $1,021,400
7/92 $1,035,689 $1,054,000 $1,024,000
8/92 $1,040,608 $1,061,500 $1,026,600
9/92 $1,045,261 $1,070,200 $1,028,900
10/92 $1,042,846 $1,065,300 $1,031,400
11/92 $1,045,257 $1,064,300 $1,034,300
12/92 $1,048,967 $1,073,400 $1,036,900
1/93 $1,053,160 $1,083,200 $1,039,300
2/93 $1,058,546 $1,090,800 $1,041,700
3/93 $1,059,897 $1,093,800 $1,044,100
4/93 $1,065,206 $1,099,800 $1,046,500
5/93 $1,066,863 $1,097,400 $1,048,900
6/93 $1,072,500 $1,104,300 $1,051,400
7/93 $1,076,718 $1,106,900 $1,054,000
8/93 $1,080,244 $1,114,600 $1,056,400
9/93 $1,079,225 $1,118,100 $1,058,800
10/93 $1,077,839 $1,120,500 $1,061,200
11/93 $1,070,331 $1,121,500 $1,063,700
12/93 $1,067,319 $1,125,400 $1,066,100
1/94 $1,070,661 $1,131,800 $1,068,500
2/94 $1,066,441 $1,126,800 $1,071,300
3/94 $1,058,202 $1,123,900 $1,074,400
4/94 $1,052,676 $1,120,900 $1,077,900
5/94 $1,057,195 $1,122,700 $1,081,600
6/94 $1,060,598 $1,125,200 $1,085,600
7/94 $1,063,904 $1,134,400 $1,089,700
8/94 $1,064,243 $1,138,000 $1,093,700
9/94 $1,063,579 $1,137,100 $1,098,100
10/94 $1,052,939 $1,140,300 $1,103,300
11/94 $1,052,260 $1,136,600 $1,108,400
12/94 $1,049,380 $1,139,400 $1,114,000
1/95 $1,058,105 $1,153,300 $1,119,400
2/95 $1,070,544 $1,167,000 $1,124,600
3/95 $1,077,181 $1,173,600 $1,129,900
4/95 $1,087,672 $1,183,100 $1,135,200
5/95 $1,111,157 $1,199,600 $1,140,200
6/95 $1,107,339 $1,205,900 $1,145,000
</TABLE>

GRAPHIC MATERIAL(3)

The following line graph hypothetically compares the cumulative return
performance of the Franklin Institutional Adjustable Rate Securities Fund to
that of the Lehman Brothers 1-2 Year Short-Term Government Index and the 6-Month
CD, based on a $1,000,000 investment from 1/3/92 to 6/30/95.

<TABLE>
<CAPTION>
Date F Inst Adj Rate LB Short 1-2 Govt 6-Month CD
<S> <C> <C> <C>
1/92 $1,000,000 $1,000,000 $1,000,000
2/92 $1,002,902 $1,002,900 $1,003,100
3/92 $1,006,473 $1,003,903 $1,006,310
4/92 $1,015,036 $1,012,536 $1,009,329
5/92 $1,019,506 $1,021,042 $1,012,357
6/92 $1,028,229 $1,029,721 $1,015,293
7/92 $1,031,395 $1,040,327 $1,017,831
8/92 $1,038,848 $1,047,713 $1,020,375
9/92 $1,045,265 $1,056,304 $1,025,177
11/92 $1,050,643 $1,050,499 $1,028,047
12/92 $1,057,011 $1,059,533 $1,030,617
1/93 $1,062,116 $1,069,175 $1,033,091
2/93 $1,070,078 $1,076,659 $1,035,467
3/93 $1,075,909 $1,079,566 $1,037,849
4/93 $1,081,495 $1,085,504 $1,040,236
5/93 $1,084,023 $1,083,116 $1,042,628
6/93 $1,087,528 $1,089,831 $1,045,131
7/93 $1,092,991 $1,092,447 $1,047,639
8/93 $1,097,077 $1,100,094 $1,050,048
9/93 $1,100,207 $1,103,504 $1,052,464
10/93 $1,102,842 $1,105,932 $1,054,884
11/93 $1,104,743 $1,106,927 $1,057,310
12/93 $1,108,983 $1,110,801 $1,059,742
1/94 $1,111,629 $1,117,022 $1,062,074
2/94 $1,109,156 $1,112,107 $1,064,835
3/94 $1,099,484 $1,109,216 $1,067,923
4/94 $1,099,312 $1,106,221 $1,071,340
5/94 $1,103,342 $1,108,101 $1,075,090
6/94 $1,105,751 $1,110,539 $1,079,068
7/94 $1,110,743 $1,119,645 $1,083,061
8/94 $1,116,963 $1,123,228 $1,087,068
9/94 $1,114,187 $1,122,330 $1,091,416
10/94 $1,117,521 $1,125,472 $1,096,546
11/94 $1,118,366 $1,121,871 $1,101,590
12/94 $1,122,392 $1,124,563 $1,107,098
1/95 $1,129,077 $1,138,283 $1,112,412
2/95 $1,139,293 $1,151,828 $1,117,640
3/95 $1,145,098 $1,158,394 $1,122,893
4/95 $1,155,015 $1,167,777 $1,128,058
5/95 $1,168,400 $1,184,009 $1,133,022
6/95 $1,175,969 $1,190,284 $1,137,894

</TABLE>