INSTITUTIONAL FIDUCIARY TRUST, N-30D, 1997-03-10

INSTITUTIONAL FIDUCIARY TRUST
N-30D, 1997-03-10

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INSTITUTIONAL
FIDUCIARY
TRUST

Picture Omitted

SEMI-ANNUAL REPORT
DECEMBER 31, 1996

FRANKLIN'S IFT
MONEY MARKET PORTFOLIO

FRANKLIN U.S. GOVERNMENT
SECURITIES MONEY MARKET PORTFOLIO

FRANKLIN U.S. TREASURY
MONEY MARKET PORTFOLIO

FRANKLIN U.S. GOVERNMENT AGENCY
MONEY MARKET FUND

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CONTENTS

Graphics Omitted

FRANKLIN'S IFT MONEY MARKET PORTFOLIO Page 4

FRANKLIN U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO Page 6

FRANKLIN U.S. TREASURY
MONEY MARKET PORTFOLIO Page 8

FRANKLIN U.S. GOVERNMENT AGENCY
MONEY MARKET FUND Page 10

For a prospectus on any Franklin Templeton fund, please contact a Franklin
Templeton Institutional Services Representative, toll free, at 1-800/632-2000. A
prospectus contains more complete information about a fund, including fees,
charges, expenses, and risks. Be sure to read it carefully before investing or
sending money.

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
determined by the presence of a regular beeping tone.

January 15, 1997

Picture Omitted
Charles B. Johnson
CHAIRMAN OF THE BOARD
- ---------------------

Dear Shareholder:

We are pleased to bring you the semi-annual report for Franklin's
Institutional Fiduciary Trust (the Trust), for the period ended
December 31, 1996.

The Trust was developed specifically to meet the needs of
institutional investors. Part of the $180 billion Franklin Templeton
Group, the Trust consists of seven separate and distinct series. This
report pertains to the following money market funds: Franklin's IFT
Money Market Portfolio, Franklin U.S. Government Securities Money
Market Portfolio, Franklin U.S. Treasury Money Market Portfolio, and
Franklin U.S. Government Agency Money Market Fund. Each portfolio in
the Trust has a unique composition designed to meet specific investor
preferences.

The U.S. economy achieved moderate growth without the threat of rising
inflation, eliminating the need for policy actions by the Federal
Reserve during the reporting period. As a result, the federal funds
rate target remained unchanged, and the 90-day Treasury bill yield
fluctuated within a narrow range. Within this environment, our
managers adhered steadfastly to a disciplined investment strategy
enabling 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 make every
effort 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

Throughout the second half of 1996, U.S. economic growth remained positive,
albeit at an unsteady pace. As the third quarter ended, the unemployment
rate remained near a cyclical low, causing speculation among many bond
investors that further economic growth would push up labor costs, which
would eventually be passed on to consumers in the form of higher prices.
Consumers, meanwhile, spent less in the third quarter than they had earlier
in the year. As a result, third quarter GDP growth turned in an annualized
rate of 2.1%, while "real" final sales posted an increase of only 0.4%. As
inflation expectations declined, interest rates moved lower during the
fourth quarter.

Relatively stable inflation rates, consumer credit problems, and
lower-than-expected economic growth from major U.S. trading partners, such
as Germany, Japan, and Mexico, helped to keep a cap on interest rates
during most of the period, as investors speculated about the future
direction of the Federal Reserve's actions. For the period, the Federal
Reserve did not raise short-term interest rates. In August, Chairman Alan
Greenspan testified before Congress that the Federal Reserve expected
economic growth to slow in the second half of 1996, raising hopes of an
economic "soft landing" without raising rates. At this time, it appears
that this objective has been achieved.

Looking forward, the economy appears headed for more of the same, with most
economists predicting slow growth and low inflation. If this forecast is
correct, the Federal Reserve will have little reason to make additional
policy moves, thus making an argument for continued, stable short-term
rates. Clearly, any changes in monetary policy will depend on the economy's
response in the coming months. If reports suggest weakness, rate hikes will
be unnecessary. On the other hand, if the economy strengthens, the Federal
Reserve may be forced to raise short-term interest rates.

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

Picture Omitted

- ---------------
Thomas J. Runkel, CFA
PORTFOLIO MANAGER

Tom Runkel is a portfolio manager for Franklin's taxable money market funds. He
joined Franklin in 1983 and served as an equity and money market trader from
1985 to 1989.

Mr. Runkel received a Bachelor of Science degree in political science from the
University of California at Davis and a Master of Business Administration degree
from Santa Clara University. He is a Chartered Financial Analyst (CFA).

FUNDS AT A GLANCE

December 31, 1996
- -------------------------------------------------------------------------------

Franklin's IFT Franklin U.S. Franklin U.S. Franklin U.S.
Money Market Government Treasury Government
Portfolios/Characteristics Portfolio Securities Money Money Market Agency Money
(#0140) Market Portfolios Portfolio Market Fund
(#0142) (#0143) (#0146)

<C> <C> <C> <C> <C>
7-Day Current Yield1 5.32% 5.31% 4.94% 4.93%

Avg. Weighted Maturity 48 days 14 days 49 days 30 days

Agencies x
BAs x
Principal CDs x
Holdings2 CP x
RPs x x
Treasuries x x x x

</TABLE>
1. Yield reflects the interest income per share earned by the Fund's
investments for the 7-day period ended December 31, 1996, calculated as an
annual percentage rate.

2. The mix of each Fund's or underlying portfolio's holdings of approved
investments or maturities will fluctuate. U.S. government securities owned or
held under repurchase agreements by the Funds or their underlying portfolios,
but not shares of the Funds, are guaranteed by the U.S. government, its agencies
or instrumentalities, as to the timely payment of principal and interest.

Shares of the Funds are not deposits or obligations of any bank or financial
institution. They are not insured or guaranteed by any such institution, the
FDIC, the U.S. government or any government agency, and involve investment
risks, including possible loss of the principal amount invested.

FRANKLIN'S IFT MONEY
MARKET PORTFOLIO

The investment objective for Franklin's IFT Money Market Portfolio (the Fund) is
high current income, consistent with capital preservation and liquidity. It
pursues this objective by investing all of its assets in The Money Market
Portfolio (the Portfolio), which has an investment objective identical to the
Fund's. The Portfolio, in turn, invests in various money market instruments such
as:

o U.S. government and federal agency obligations1
o Certificates of deposit
o Banker's acceptances
o High grade commercial paper
o High grade short-term corporate obligations
o Repurchase agreements collateralized by U.S.
government securities1

The Portfolio's composition as of December 31, 1996, is shown below.

GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT

The money market securities in which the Portfolio invests are among the highest
quality available. As such, the Portfolio does not invest in exotic derivatives
or other potentially volatile securities that we think involve undue risk.
Instead, we seek to provide shareholders with a high-quality, conservative
investment. In addition, the Portfolio maintains an average weighted maturity of
90 days or less, which is relatively short and allows the Portfolio to adjust
quickly to changing interest rates.

Through investing in a portfolio of high-quality, short-term securities, the
Fund seeks to provide a high level of credit safety combined with a stable net
asset value.2 As a result, investors often use Franklin's IFT Money Market
Portfolio for assets held in fiduciary, advisory, and custodial capacities. The
Fund's competitive yield has also made it an attractive alternative cash
management tool for corporations, banks, savings and loan associations, and
trust companies.3

THE MONEY MARKET PORTFOLIO
PORTFOLIO COMPOSITION AS OF DECEMBER 31, 1996

PERFORMANCE SUMMARY

During the reporting period, the economy achieved moderate growth without the
threat of inflation, thus eliminating the need for policy actions by the Federal
Reserve. As a result, the Federal Reserve left its target for the federal funds
rate unchanged for the six-month period ended December 31, 1996.

The second half of 1996 was generally uneventful for short-term interest rates
and many money market mutual funds. Reflecting this climate, the Fund's 7-day
yield stayed relatively flat over the six-month period, starting at 5.21% on
June 30, 1996, and ending at 5.32% as of December 31, 1996.4 In addition, the
Fund's average weighted maturity fell from 54 days on June 30, 1996, to 48 days
on December 31, 1996, allowing the Fund to adjust more quickly to interest rate
changes.

Total returns for the one-, three-, five-, and ten-year periods ended December
31, 1996, are shown on the right. As you can see, the Fund consistently
outperformed its benchmark, the Lipper Institutional Money Market Funds Index
for all these periods.5 Of course, past performance is not predictive of future
results.

FRANKLIN'S IFT MONEY MARKET PORTFOLIO
TOTAL RETURNS VS. THE LIPPER INSTITUTIONAL
MONEY MARKET FUNDS INDEX5
FOR THE PERIODS ENDED DECEMBER 31, 1996

GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT

PERFORMANCE FIGURES
PERIOD ENDED DECEMBER 31, 1996
- ------------------------------------------------------------------------------

7-DAY CURRENT YIELD:4 5.32%

7-DAY EFFECTIVE YIELD:4 5.46%

AVERAGE WEIGHTED MATURITY: 48 DAYS
- ------------------------------------------------------------------------------

1. U.S. government securities owned or held under repurchase agreement by the
Portfolio, but not shares of Franklin's IFT Money Market Portfolio, are
guaranteed by the U.S. government as to the timely payment of principal and
interest.

2. An investment in Franklin's IFT Money Market Portfolio is neither insured nor
guaranteed by the U.S. government or by any other entity or institution. There
is no assurance that the $1.00 share price will be maintained.

3. Regulated investors should review their applicable investment restrictions to
determine whether the Fund is a permissible investment.

4. Annualized and effective yields are for the 7-day period shown and reflect
fluc-tuations in interest rates on portfolio investments, and Fund expenses.
Past per- formance does not guarantee future results. Franklin Advisers, Inc.,
the Fund's administrator and manager of the underlying portfolio, has agreed in
advance to waive a portion of its management fees and make payments of certain
other expenses to limit total operating expenses to no more than 0.20% per annum
of average net assets. Without these reductions, the Fund's current and
effective 7-day yields for the period would have been 5.28% and 5.42%,
respectively. Franklin Advisers, Inc. may discontinue these arrangements at any
time, upon notice to the Fund's Board of Trustees.

FRANKLIN
U.S. GOVERNMENT
SECURITIES MONEY
MARKET PORTFOLIO

The Franklin U.S. Government Securities Money Market Portfolio's (the Fund's)
investment objective is to earn high current income consistent with capital
preservation and liquidity. It pursues this objective by investing all
of its assets in shares of the U.S. Government Securities Money Market
Portfolio (the Portfolio), which has an investment objective identical to the
Fund's. The Portfolio in turn, invests primarily in repurchase agreements
collateralized by U.S. government securities, and in marketable securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities.1 The Portfolio's composition as of December 31, 1996
is shown below.

U.S. Government Securities
Money Market Portfolio
Portfolio Composition as of December 31, 1996

GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT

The Portfolio was created to comply with the investment criteria of many state,
county, and city governments. It may be an appropriate investment choice for
government investors, corporations, banks, and savings and loan associations
because of its history of principal stability and high degree of credit safety.2
In fact, its emphasis on high credit quality has helped the Portfolio earn the
highest possible ratings: "AAAm" by Standard and Poor's Corporation and "Aaa" by
Moody's Investors Service, two independent rating services.3

Franklin Templeton provides extended times for placing trades in the Franklin
U.S. Government Securities Money Market Portfolio. Investors may purchase and
redeem shares each business day, up to 4:30 p.m. Eastern time/1:30 p.m. Pacific
time. This feature gives our shareholders the opportunity to invest monies
received late in the day and earn same-day dividends, rather than allow that
money to remain idle overnight or over a weekend. When purchasing shares of the
Fund, investors may also request next-day settlement exchanges to any other
money market funds in the Trust.4

PERFORMANCE SUMMARY

INTEREST RATES FLUCTUATED NARROWLY AT THE BEGINNING OF THE PERIOD AND
SUBSEQUENTLY MOVED LOWER, PRIMARILY DUE TO LOWER-THAN-EXPECTED GROWTH IN THE
U.S. ECONOMY DURING THE THIRD QUARTER. WHILE INVESTORS SPECULATED ABOUT THE
FUTURE DIRECTION OF SHORT-TERM INTEREST RATES, THE FEDERAL RESERVE DID NOT RAISE
THE FEDERAL FUNDS RATE TARGET. TO HELP US ADAPT QUICKLY TO POSSIBLE INTEREST
RATES CHANGES, WE MAINTAINED A RELATIVELY SHORT AVERAGE WEIGHTED MATURITY, WHICH
FELL FROM 19 DAYS ON JUNE 30, 1996, TO 14 DAYS ON DECEMBER 31, 1996. THE FUND'S
7-DAY YIELD BEGAN THE PERIOD AT 5.13% AND ROSE TO 5.31% BY YEAR END.

THE GRAPH TO THE RIGHT ILLUSTRATES HOW THE TOTAL RETURNS FOR THE FRANKLIN U.S.
GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO OUTPERFORMED ITS BENCHMARK, THE
LIPPER INSTITUTIONAL TREASURY MONEY MARKET FUNDS INDEX FOR THE ONE-, THREE-, AND
FIVE-YEAR PERIODS ENDED DECEMBER 31, 1996.6 OF COURSE, PAST PERFORMANCE CANNOT
GUARANTEE FUTURE RESULTS.

FRANKLIN U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO
TOTAL RETURNS VS. THE LIPPER INSTITUTIONAL
TREASURY MONEY MARKET FUNDS INDEX5,6
FOR THE PERIODS ENDED DECEMBER 31, 1996

GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT

PERFORMANCE FIGURES
PERIOD ENDED DECEMBER 31, 1996
- ----------------------------------------------------------------------------

7-DAY CURRENT YIELD:5 5.31%
7-DAY EFFECTIVE YIELD:5 5.45%
AVERAGE WEIGHTED MATURITY: 14 DAYS
- ---------------------------------------------------------------------------

1. U.S. Government securities owned or held under repurchase agreement by the
underlying portfolio, but not shares of the franklin u.S. Government securities
money market portfolio, are guaranteed by the u.S. Government as to the timely
payment of principal and interest.

2. Regulated investors should review their applicable investment restrictions to
determine whether the fund is a permissible investment.

3. The aaam rating reflects standard & poor's(r) assessment of the overall
credit quality of the underlying portfolio, based primarily on the portfolio's
stated investment objectives and policies. It considers, for example, the credit
quality of portfolio's investments and management, but does not reflect the
yield or the market price of the fund's shares nor approval by standard &
poor's(r). The aaa rating reflects moody's assessment of the investment quality
of shares in the underlying portfolio and factors in the portfolio's investment
objectives and policies, creditworthiness of the portfolio's investments and
management. Funds rated aaa are judged to be 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, nor does it reflect
approval by moody's. Both ratings are subject to change.

4. The exchange program may be modified or discontinued by the fund.
Shareholders using timing services will be charged a $5 fee for each exchange.
Certain funds do not permit timing accounts or there may be certain
restrictions, as detailed in each fund's prospectus.Ictions, as detailed in each
fund's

5. Annualized and effective yields are for the 7-day period shown and reflect
fluctuations in interest rates on portfolio investments and fund expenses. Past
performance does not guarantee future results. Franklin advisers, inc., The
fund's administrator and manager of the underlying portfolio, has agreed in
advance to waive a portion of its management fees and make payments of certain
other expenses to limit total operating expenses to no more than 0.20% Per annum
of average net assets. Without these reductions, the fund's current and
effective 7-day yields for the period would have been 5.24% And 5.37%,
Respectively. Franklin advisers, inc. May discontinue these arrangements at any
time, upon notice to the fund's board of trustees.

6. Total return calculations show the change in the value of an investment over
the periods indicated and assume reinvestment of dividends and capital gains, if
any, at net asset value. Source for the lipper institutional treasury money
market funds index is lipper analytical services, inc. As of december 1996,
there were 107 funds in the institutional treasury money market funds category.
This index is unmanaged, and one cannot invest directly in an index. An
investment in the franklin u.S. Government securities money market portfolio is
neither insured nor guaranteed by the u.S. Government or by any other entity or
institution. There is no assurance that the $1.00 Share price will be
maintained. That the $1.00 Share price

FRANKLIN
U.S. TREASURY
MONEY MARKET PORTFOLIO

The Franklin U.S. Treasury Money Market Portfolio seeks to earn a high level of
current income, consistent with capital preservation and liquidity, by investing
exclusively in U.S. Treasury securities such as bills, notes and bonds.1 The
Franklin U.S. Treasury Money Market Portfolio does not invest in repurchase
agreements, securities issued by agencies or instrumentalities of the federal
government, or any other type of money market instrument. The Fund's composition
on December 31, 1996, is shown below.

FRANKLIN U.S. TREASURY
MONEY MARKET PORTFOLIO
PORTFOLIO COMPOSITION AS OF DECEMBER 31, 1996

GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT

The Franklin U.S. Treasury Money Market Portfolio provides institutional
investors with an opportunity to take advantage of high current yields, combined
with the high degree of credit safety available from U.S. Treasury securities.
Most investment experts consider U.S. Treasuries to be among the safest
investments available in the marketplace.1 The high credit quality of these
securities has earned the Franklin U.S. Treasury Money Market Portfolio the
highest possible ratings: "AAAm-G," from Standard & Poor's Corporation and "Aaa"
from Moody's Investors Service.2

In addition, the Franklin U.S. Treasury Money Market Portfolio may offer a tax
advantage, since income from U.S. Treasuries, and therefore from the Fund, may
be free of state and local income taxes for most investors. Investors may
therefore earn a higher after-tax return from the portfolio than is available in
a fully taxable money market account.3 Of course, all dividends paid out of U.S.
government obligation interest are fully taxable for federal income tax
purposes. Investors should consult with their own tax advisors for further
information on specific state tax rules.

The Franklin U.S. Treasury Money Market Portfolio should be attractive to
institutional investors seeking an economical and convenient means of investing
in a professionally managed portfolio of high-quality, short-term government
securities that allows them easy access to their money.

PERFORMANCE SUMMARY

MODERATE ECONOMIC GROWTH, RELATIVELY STABLE INFLATION RATES, AND CONSUMER CREDIT
PROBLEMS SUBDUED INTEREST RATES FOR MOST OF THE PERIOD. AS INVESTORS SPECULATED
ABOUT THE FUTURE DIRECTION OF SHORT-TERM INTEREST RATES, THE FUND MAINTAINED A
RELATIVELY SHORT AVERAGE WEIGHTED MATURITY TO HELP US ADAPT QUICKLY TO INTEREST
RATE CHANGES. DURING THE PERIOD, THE FUND'S AVERAGE WEIGHTED MATURITY FELL FROM
58 DAYS ON JUNE 30, 1996, TO 49 DAYS ON DECEMBER 31, 1996. THE FUND'S 7-DAY
YIELD BEGAN THE PERIOD AT 4.92% AND ROSE SLIGHTLY TO 4.94% ON DECEMBER 31,
1996.4

THE CHART ON THE RIGHT ILLUSTRATES HOW THE FRANKLIN U.S. TREASURY MONEY MARKET
PORTFOLIO OUTPERFORMED ITS BENCHMARK, THE LIPPER INSTITUTIONAL TREASURY MONEY
MARKET FUNDS INDEX FOR THE ONE-, THREE-, AND FIVE-YEAR PERIODS ENDED DECEMBER
31, 1996.5 OF COURSE, PAST PERFORMANCE CANNOT PREDICT FUTURE RESULTS.

FRANKLIN U.S. TREASURY MONEY MARKET PORTFOLIO

TOTAL RETURNS VS. THE LIPPER INSTITUTIONAL
TREASURY MONEY MARKET FUNDS INDEX4,5
FOR THE PERIODS ENDED DECEMBER 31, 1996

GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT

PERFORMANCE FIGURES
PERIOD ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------

7-Day Current Yield:4 4.94%

7-Day Effective Yield:4 5.06%

Average Weighted Maturity: 49 days
- -----------------------------------------------------------------------------

1. U.S. Treasury securities owned by the Fund, but not shares of the Fund, are
guaranteed by the U.S. government as to the timely payment of principal and
interest.

2. The AAAm-G rating reflects Standard & Poor's(R) 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(R). 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, creditworthiness of the Fund's investments, and management. Funds
rated Aaa are judged to be 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 nor does it reflect approval by Moody's.
Both ratings are subject to change.

3. Income is subject to federal income tax. Shareholders should consult their
tax advisors regarding the applicability of state and local intangible property
or income taxes to their shares in the Fund and to distributions received from
the Fund.

4. Annualized and effective yields are for the 7-day period shown and reflect
fluctuations in interest rates on portfolio investments, and Fund expenses. Past
performance does not guarantee future results. The Fund's manager has agreed in
advance to waive a portion of its management fees and make payments of certain
other expenses to limit total operating expenses to no more than 0.20% per annum
of average net assets. Without these reductions, the Fund's current and
effective 7-day yields for the period would have been 4.80% and 4.92%,
respectively. The Fund's manager may discontinue these arrangements at any time,
upon notice to the Fund's Board of Trustees.

5. Total return calculations show the change in the value of an investment over
the periods indicated and assume reinvestment of dividends and capital gains, if
any, at net asset value. Source for the Lipper Institutional Treasury Money
Market Funds Index is Lipper Analytical Services, Inc. As of December 1996,
there were 107 funds in the institutional treasury money market funds category.
This index is unmanaged, and one cannot invest directly in an index. An
investment in the Franklin U.S. Treasury Money Market Portfolio is neither
insured nor guaranteed by the U.S. government or by any other entity or
institution. There is no assurance that the $1.00 share price will be
maintained. Regulated investors should review their applicable investment
restrictions to determine whether the Fund is a permissible investment.

FRANKLIN U.S.
GOVERNMENT AGENCY MONEY MARKET FUND

The investment objective of the Franklin U.S. Government Agency Money Market
Fund is to seek capital preservation and liquidity, while seeking high current
income consistent with capital preservation and liquidity.

The Franklin U.S. Government Agency Money Market Fund invests only in U.S.
government securities, consisting of marketable fixed, floating, and variable
rate securities issued or guaranteed by the U.S. government, its agencies, or by
various instrumentalities which have been established or sponsored by the U.S.
government, such as:1

o Federal Farm Credit System

o Federal Home Loan Banks

o Student Loan Marketing Association

o Tennessee Valley Authority

o Federal Deposit Insurance Corporation

o Federal Intermediate Credit Bank

o Government Securities Administration

In addition, the Franklin U.S. Government Agency Money Market Fund may invest in
direct obligations of the U.S. Treasury, including U.S. Treasury bills, notes,
and bonds.1 The Fund does not invest in repurchase agreements or any other type
of money market instruments. Its composition as of December 31, 1996 is shown
below.

FRANKLIN U.S. GOVERNMENT AGENCY
MONEY MARKET FUND
PORTFOLIO COMPOSITION AS OF DECEMBER 31, 1996

GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT

The Fund is designed for investors who want the credit safety of a government
securities money market fund, but seek the higher yield potential of agency
instruments. In certain states, income paid to shareholders from direct U.S.
government obligations may also be exempt from state personal income tax. Of
course, all income paid out of U.S. government obligation interest is fully
taxable for federal income tax purposes. Investors should consult with their own
tax advisors for further information on specific state tax rules.

PERFORMANCE SUMMARY

During the reporting period, the economy achieved moderate growth without the
threat of rising inflation, thus eliminating the need for policy actions by the
Federal Reserve. Although the Federal Reserve did not change its target for the
federal funds rate, the Fund maintained a relatively short average weighted
maturity, as many investors speculated about interest rate changes. The Fund's
average weighted maturity remained relatively unchanged, rising slightly from 38
days on June 30, 1996, to 39 days on December 31, 1996. The Fund's 7-day yield
rose from 4.85% on June 30, 1996, to 4.93% on December 31, 1996.2

The graph to the right illustrates how the Franklin U.S. Government Agency Money
Market Fund outperformed its benchmark, the Lipper Institutional Treasury Money
Market Funds Index, for the one-year period ending December 31, 1996.3 Of
course, past performance cannot guarantee future results.

FRANKLIN U.S. GOVERNMENT AGENCY
MONEY MARKET FUND

TOTAL RETURNS VS. THE LIPPER INSTITUTIONAL
TREASURY MONEY MARKET FUNDS INDEX2,3
FOR THE PERIOD DECEMBER 31, 1996

GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT

PERFORMANCE FIGURES
PERIOD ENDED DECEMBER 31, 1996
- -----------------------------------------------------------------------------

7-Day Current Yield:2 4.93%
7-Day Effective Yield:2 5.05%
Average Weighted Maturity: 39 days
- -----------------------------------------------------------------------------

1. Certain U.S. government securities owned by the Fund, but not shares of the
Fund, are guaranteed by the U.S. government as to the timely payment of
principal and interest.

2. Annualized and effective yields are for the 7-day period shown and reflect
fluctuations in interest rates on portfolio investments, and Fund expenses. Past
performance does not guarantee future results. The Fund's manager has agreed in
advance to waive a portion of its management fees and make payments of certain
other expenses to limit total operating expenses to no more than 0.45% per annum
of average net assets. Without these reductions, the Fund's current and
effective 7-day yields for the period would have been 4.89% and 5.01%,
respectively. The Fund's manager may discontinue these arrangements at any time,
upon notice to the Fund's Board of Trustees.

3. Total return calculations show the change in the value of an investment over
the periods indicated and assume reinvestment of dividends and capital gains, if
any, at net asset value. Source for the Lipper Institutional Treasury Money
Market Fund Index is Lipper Analytical Services, Inc. As of December 1996, there
were 107 funds in the institutional treasury money market category. This index
is unmanaged, and one cannot invest directly in an index. An investment in the
Franklin U.S. Government Agency Money Market Fund is neither insured nor
guaranteed by the U.S. government or by any other entity or institution. There
is no assurance that the $1.00 share price will be maintained. Regulated
investors should review their applicable investment restrictions to determine
whether the Fund is a permissible investment.

INSTITUTIONAL FIDUCIARY TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, DECEMBER 31, 1996
(UNAUDITED)

Value
SHARES MONEY MARKET PORTFOLIO (Note 1)
MUTUAL FUNDS 100.0%
254,807,998 The Money Market Portfolio (Note 1) ............... $254,807,998
---------------
TOTAL INVESTMENTS (COST $254,807,998)100.0%.... ... 254,807,998
OTHER ASSETS AND LIABILITIES, NET.................. 1,066
1 ---------------
NET ASSETS 100.0% .............................. $254,809,064
===============

At December 31, 1996, there was no unrealized appreciation or depreciation
for financial statement or income tax purposes.

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

INSTITUTIONAL FIDUCIARY TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, DECEMBER 31, 1996
VALUE
SHARES FRANKLIN U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO (NOTE 1)

MUTUAL FUNDS 100%
142,857,653 The U.S. Government Securities Money Market
Portfolio (Note 1) .............................. $142,857,653
------------
TOTAL INVESTMENTS (COST $ 142,857,653)100.0% .. 142,857,653
OTHER ASSETS AND LIABILITIES, NET.............. 26,368
------------
NET ASSETS 100.0%.............................. $142,884,021
============

At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.

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

INSTITUTIONAL FIDUCIARY TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, DECEMBER 31, 1996
(UNAUDITED)

FACE VALUE
AMOUNT FRANKLIN U.S. TREASURY MONEY MARKET PORTFOLIO (Note 1)
a.SHORT TERM INVESTMENTS 100.2%

$3,320,000 U.S. Treasury Bills, 5.18%, 01/02/97 ...............$ 3,319,525
2,540,000 U.S. Treasury Bills, 5.19%, 01/09/97 ..................2,537,037
4,170,000 U.S. Treasury Bills, 5.09%, 01/16/97 ..................4,161,248
3,420,000 U.S. Treasury Bills, 5.095%, 01/23/97 .................3,409,577
4,540,000 U.S. Treasury Bills, 5.02%, 01/30/97 ..................4,522,622
6,420,000 U.S. Treasury Bills, 5.135%, 02/06/97 .................6,388,115
6,435,000 U.S. Treasury Bills, 5.06%, 02/13/97 ..................6,397,248
5,050,000 U.S. Treasury Bills, 5.32%, 02/20/97 ..................5,013,341
3,030,000 U.S. Treasury Bills, 5.04%, 02/27/97 ..................3,006,118
3,490,000 U.S. Treasury Bills, 5.30%, 03/06/97 ..................3,458,146
1,730,000 U.S. Treasury Bills, 5.02%, 03/13/97 ..................1,713,337
510,000 U.S. Treasury Bills, 4.93%, 03/27/97 ....................504,063
2,000,000 U.S. Treasury Bills, 4.95%, 04/17/97 ..................1,970,850
1,000,000 U.S. Treasury Bills, 5.06%, 05/08/97 ....................982,149
1,750,000 U.S. Treasury Bills, 5.05%, 05/22/97 ..................1,715,673
2,000,000 U.S. Treasury Bills, 4.97%, 05/29/97 ..................1,959,137
-----------
TOTAL INVESTMENTS (COST $51,058,186)100.2% ..........51,058,186
LIABILITIES IN EXCESS OF OTHER ASSETS(0.2)% ...........(89,834)
-----------
NET ASSETS 100.0% ..................................$50,968,352
===========

At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.

aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.

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

INSTITUTIONAL FIDUCIARY TRUST

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, DECEMBER 31, 1996
(UNAUDITED)

FACE VALUE
AMOUNT FRANKLIN U.S. GOVERNMENT AGENCY MONEY MARKET FUND (Note 1)

aGOVERNMENT AGENCIES 99.5%

$ 2,000,000 Fedderal Farm Credit Discount Notes, 5.21%,01/03/97 $ 1,999,421
4,700,000 Federal Farm Credit Discount Notes, 5.24%, 01/06/97 ....4,696,579
4,000,000 Federal Farm Credit Discount Notes, 5.22%, 01/09/97 ....3,995,360
3,400,000 Federal Farm Credit Discount Notes, 5.38%, 01/14/97 ....3,393,395
2,000,000 Federal Farm Credit Discount Notes, 5.18%, 01/22/97 ....1,993,957
4,000,000 Federal Farm Credit Discount Notes, 5.19%, 01/23/97 ....3,987,313
900,000 Federal Farm Credit Discount Notes, 5.19%, 01/27/97 ......896,626
2,000,000 Federal Farm Credit Discount Notes, 5.18%, 02/04/97 ....1,990,216
685,000 Federal Farm Credit Discount Notes, 5.33%, 02/10/97 ......680,943
2,200,000 Federal Farm Credit Discount Notes, 5.21%, 02/14/97 ....2,185,991
2,300,000 Federal Farm Credit Discount Notes, 5.29%, 03/11/97 ....2,276,680
1,000,000 Federal Farm Credit Discount Notes, 5.23%, 03/14/97 ......989,540
17,585,000 Federal Home Loan Bank Discount Notes, 5.26%, 01/02/97 .7,582,330
5,000,000 Federal Home Loan Bank Discount Notes, 5.28%, 01/07/97..4,995,600
6,500,000 Federal Home Loan Bank Discount Notes, 5.23%, 01/09/97 .6,492,445
7,050,000 Federal Home Loan Bank Discount Notes, 5.21%, 01/16/97 .7,034,713
1,200,000 Federal Home Loan Bank Discount Notes, 5.29%, 01/22/97 .1,196,297
3,200,000 Federal Home Loan Bank Discount Notes, 5.22% - 5.30%,
01/23/97 ...............................................3,189,734
2,740,000 Federal Home Loan Bank Discount Notes, 5.45%, 01/27/97 .2,729,215
5,200,000 Federal Home Loan Bank Discount Notes, 5.21%, 02/06/97 .5,172,908
5,000,000 Federal Home Loan Bank Discount Notes, 5.21% - 5.22%,
02/13/97 ...............................................4,968,861
8,000,000 Federal Home Loan Bank Discount Notes, 5.19% - 5.20%,
02/20/97 ...............................................7,942,277
5,000,000 Federal Home Loan Bank Discount Notes, 5.18%, 02/24/97 .4,961,150
3,000,000 Federal Home Loan Bank Discount Notes, 5.20%, 02/27/97 .2,975,204
5,800,000 Federal Home Loan Bank Discount Notes, 5.20%, 03/06/97 .5,746,349
3,000,000 Federal Home Loan Bank Discount Notes, 5.47%, 03/11/97 .2,968,548
3,000,000 Federal Home Loan Bank Discount Notes, 5.47%, 03/12/97 .2,968,091
17,460,000 Federal Home Loan Bank Discount Notes, 5.23%, 03/13/97 17,279,806
4,500,000 Federal Home Loan Bank Discount Notes, 5.18%, 03/17/97 .4,451,438
6,000,000 Federal Home Loan Bank Discount Notes, 5.29%, 03/20/97 .5,931,230
4,500,000 Federal Home Loan Bank Discount Notes, 5.18%, 03/24/97 .4,446,906
-------------
TOTAL GOVERNMENT AGENCIES (COST $142,119,123) ......142,119,123
-------------
a.GOVERNMENT SECURITIES 0.7%
975,000 U.S. Treasury Bills, 5.02% - 5.19%, 01/02/97 -
03/13/97 (Cost $967,667) .................................967,667
-------------
TOTAL INVESTMENTS (COST $143,086,790)100.2% ........143,086,790
LIABILITIES IN EXCESS OF OTHER ASSETS (0.2)% .........(214,090)
-------------
NET ASSETS 100.0% .................................$142,872,700
=============

At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.

aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.

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

INSTITUTIONAL FIDUCIARY TRUST

FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)

<S> <C> <C> <C> <C>
Investments in securities, at value and cost ..................... $254,807,998 $142,857,653 $51,058,186 $143,086,790
Cash ............................................................. 4,455 -- 794 49,153
Receivables:
Investment securities sold ...................................... 764,821 345,520 -- --
From affiliates (Note 5) ........................................ -- 43,679 24,294 --
Other assets ..................................................... 5,997 -- 5,379 2,535
---------- -------------------------------
Total assets ................................................ 255,583,271 143,246,852 51,088,653 143,138,478
---------- -------------------------------
Liabilities:
Payables:
Management fees.................................................. -- -- 6,620 11,198
Administration fees ............................................. 4,455 -- -- --
Distribution fees ............................................... -- -- -- 62,267
Shareholder servicing costs ..................................... 4,931 1,041 5,486 139
Distributions to shareholders ................................... 764,821 345,520 108,195 170,054
Accrued expenses and other liabilities ........................... -- 16,270 -- 22,120
---------- -------------------------------
Total liabilities ........................................... 774,207 362,831 120,301 265,778
---------- -------------------------------
Net assets, at value .............................................. $254,809,064 $142,884,021 $50,968,352 $142,872,700
========== ===============================
Shares outstanding ................................................ 254,809,064 142,884,021 50,968,352 142,872,700
========== ===============================
Net asset value per share ......................................... $1.00 $1.00 $1.00 $1.00
========== ===============================
</TABLE>

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

INSTITUTIONAL FIDUCIARY TRUST

FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS DECEMBER 31, 1996 (UNAUDITED)
Franklin Franklin Franklin
Money U.S. Government U.S. Treasury U.S. Government
Market Securities Money Money Market Agency Money
Portfolio Market Portfolio Portfolio Market Fund
---------- -------------------------------
Investment income:

<S> <C> <C> <C> <C>
Dividends ......................................................... $10,017,458 $3,821,148 $ -- $ --
Interest........................................................... -- -- 2,099,542 2,661,209
---------- -------------------------------
Total income.................................................. 10,017,458 3,821,148 2,099,542 2,661,209
---------- -------------------------------
Expenses:
Management fees (Note 5) .......................................... -- -- 101,131 74,465
Administration fees (Note 5) ...................................... 94,227 36,864 -- --
Distribution fees (Note 5) ........................................ -- -- -- 141,377
Shareholder servicing costs (Note 5) .............................. 7,476 7,184 9,127 600
Professional fees ................................................. 9,737 10,916 7,174 3,795
Registration fees ................................................. 7,731 11,621 6,016 6,862
Trustees' fees and expenses ....................................... 4,336 3,718 2,632 1,534
Report to shareholders ............................................ 5,972 5,704 3,045 2,528
Custodian fees .................................................... -- -- 504 468
Other ............................................................. 3,026 -- -- 15,887
Management fees waived by manager (Note 5)......................... -- -- (49,636) (26,020)
Administration fees waived by manager (Note 5) .................... (38,988) (36,864) -- --
Other expenses assumed by manager (Note 5) ........................ -- (2,649) -- --
---------- -------------------------------
Total expenses ............................................... 93,517 36,494 79,993 221,496
---------- -------------------------------
Net investment income ....................................... 9,923,941 3,784,654 2,019,549 2,439,713
---------- -------------------------------
Net realized gain on investments ................................... -- -- 1,365 1,598
---------- -------------------------------
Net increase in net assets resulting from operations ............... $ 9,923,941 $3,784,654 $2,020,914 $2,441,311
========== ===============================

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 SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1996

Franklin U.S. Government
Money Market Portfolio Securities Money Market Portfolio
---------------------------------------------
Six months Year Six months Year
ended 12/31/96 ended 06/30/96 ended 12/31/96 ended 06/30/96
---------- ---------------------------------
Increase (decrease) in net assets:
Operations:

<S> <C> <C> <C> <C>
Net investment income...........................................$ 9,923,941 $ 16,816,128 $ 3,784,654 $ 10,665,763
---------- ---------------------------------
Distributions to shareholders from
undistributed net investment income............................. (9,923,941) (16,816,128) (3,784,654) (10,665,763)
Increase (decrease) in net assets from capital
share transactions (Note 2)..................................... (86,485,491) 69,147,853 (9,289,087) (182,657,201)
---------- ---------------------------------
Net increase (decrease) in net assets....................... (86,485,491) 69,147,853 (9,289,087) (182,657,201)
Net assets (there is no undistributed net investment
income at beginning or end of the period):
Beginning of period............................................. 341,294,555 272,146,702 152,173,108 334,830,309
---------- ---------------------------------
End of period................................................... $254,809,064 $341,294,555 $142,884,021 $ 152,173,108
========== =================================

Franklin U.S. Treasury Franklin U.S. Government
Money Market Portfolio Agency Money Market Portfolio
-----------------------------------------------
Six months Year Six months Year
ended 12/31/96 ended 06/30/96 ended 12/31/96 ended 06/30/96
----------- ----------------------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income.........................................$ 2,019,549 $ 8,166,890 $ 2,439,713 $ 3,850,557
Net realized gain (loss) from securities transactions ........ 1,365 7,492 1,598 (2,545)
----------- ----------------------------------
Net increase in net assets resulting from operations ..... 2,020,914 8,174,382 2,441,311 3,848,012
Distributions to shareholders from
undistributed net investment income........................... (2,020,914)a (8,174,382)b (2,441,311)c (3,848,012)d
Increase (decrease) in net assets from capital
share transactions (Note 2)................................... (72,189,005) (77,778,057) 71,178,753 37,409,395
----------- ----------------------------------
Net increase (decrease) in net assets .................... (72,189,005) (77,778,057) 71,178,753 37,409,395
Net assets (there is no undistributed net investment
income at beginning or end of the period):
Beginning of period........................................... 123,157,357 200,935,414 71,693,947 34,284,552
----------- ----------------------------------
End of period................................................. $ 50,968,352 $123,157,357 $142,872,700 $71,693,947
=========== ==================================
</TABLE>

aDistributions were increased by a net realized gain from security transactions
of $1,365.

bDistributions were increased by a net realized gain from security transactions
of $7,492.

cDistributions were increased by a net realized gain from security transactions
of $1,598.

dDistributions were decreased by a net realized loss from security transactions
of $2,545.

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

INSTITUTIONAL FIDUCIARY TRUST
NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES

Institutional Fiduciary Trust (the Trust) is an open-end management investment
company (mutual fund), registered under the Investment Company Act of 1940, as
amended. The Trust consists of seven separate and distinct funds. This report
pertains to four money market funds (the Funds), all diversified series of the
Trust. Each of the Funds issues a separate series of the Trust's shares and
maintains a totally separate and distinct investment portfolio. The investment
objective of the Funds is high current income consistent with capital
preservation and liquidity.

Institutional Fiduciary Trust Money Market Portfolio (Money Market Fund) and
Franklin U.S. Government Securities Money Market Portfolio (U.S. Government
Fund) invest substantially all of their assets in The Money Market Portfolio and
The U.S. Government Securities Money Market Portfolio (the Portfolios),
respectively. Both are no-load, open-end, diversified management investment
companies having the same investment objective as the Money Market Fund and U.S.
Government Fund. The financial statements of The Money Market Portfolio and The
U.S. Government Securities Money Market Portfolio, including the Statements of
Investments in Securities and Net Assets, are included elsewhere in this report
and should be read in conjunction with the financial statements of the Money
Market Fund and U.S. Government Fund.

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

a. SECURITY VALUATION:

Securities in the Franklin U.S. Treasury Money Market Portfolio, and the
Franklin U.S. Government Agency Money Market Fund are valued at amortized cost,
which approximates value. Each of these Funds must maintain a dollar weighted
average maturity of 90 days or less and only purchase instruments having
remaining maturities of 397 days or less. If the Funds have a remaining weighted
average maturity of greater than 90 days, the portfolios will be stated at value
based on recorded closing sales on a national securities exchange or, in the
absence of a recorded sale, within the range of the most recent quoted bid and
asked prices. The trustees have established procedures designed to stabilize, to
the extent reasonably possible, each Fund's price per share as computed for the
purpose of sales and redemptions at $1.00.

The Money Market Fund and the U.S. Government Fund hold Portfolio shares that
are valued at their proportionate interest in the net asset value of The Money
Market Portfolio and The U.S. Government Securities Money Market Portfolio,
respectively. As of December 31, 1996, the Money Market Fund owns 16.64% of The
Money Market Portfolio and the U.S. Government Fund owns 53.35% of The U.S.
Government Securities Money Market Portfolio.

b. INCOME TAXES:

The Funds intend 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 shareholders which will be sufficient to relieve the
Funds from income and excise taxes. 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.

d. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:

Net investment income includes income, calculated on an accrual basis, and
estimated expenses which are accrued daily. The total available for distribution
is computed daily and includes the net investment income, plus or minus any
gains or losses on security transactions and any changes in unrealized portfolio
appreciation or depreciation.

Distributions are normally declared each day the new york stock exchange is open
for business, equal to the total available for distribution (as defined above),
and are payable to shareholders of record as of the close of business that day.
Such distributions are automatically reinvested monthly in additional shares of
these funds at net asset value.

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.

f. ACCOUNTING ESTIMATES:

The preparation of financial statements in accordance with generally accepted
accounting principles 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 expense during the reporting
period. Actual results could differ from those estimates.

2. TRUST SHARES
<TABLE>
<CAPTION>

At December 31, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Funds at $1.00 per share for
the six months ended December 31, 1996 and the year ended June 30, 1996 were as
follows:

Franklin Franklin Franklin
Money U.S. Government U.S. Treasury U.S. Government
Market Securities Money Money Market Agency Money
Portfolio Market Portfolio Portfolio Market Fund
------------- ------------------------------------
Six months ended December 31, 1996
<S> <C> <C> <C> <C>
Shares sold........................................... $ 2,474,800,649 $ 726,866,180 $ 125,658,880 $ 162,094,430
Shares issued in reinvestment of distributions........ 5,742,761 1,924,084 914,620 2,034,869
Shares redeemed....................................... (2,567,028,901) (738,079,351) (198,762,505) (92,950,546)
------------- ------------------------------------
Net increase (decrease)................................ $ (86,485,491) $ (9,289,087) $ (72,189,005) $ 71,178,753
============= ====================================
Year ended June 30, 1996
Shares sold........................................... $ 2,869,272,670 $ 1,106,494,209 $ 429,590,577 $ 239,775,798
Shares issued in reinvestment of distributions........ 7,425,431 6,441,951 2,512,183 3,833,612
Shares redeemed....................................... (2,807,550,248) (1,295,593,361) (509,880,817) (206,200,015)
------------- ------------------------------------
Net increase (decrease)................................ $ 69,147,853 $ (182,657,201) $ (77,778,057) $ 37,409,395
============= ====================================
</TABLE>

3. CAPITAL LOSS CARRYOVERS

At June 30, 1996, for tax purposes, the Franklin U.S. Government Agency
Money Market Fund had an accumulated net capital loss carryover of $2,545 which
expires in the year 2004.

For tax purposes, the aggregate cost of securities of the Funds are the same
for financial statement purposes at December 31, 1996.
<TABLE>
<CAPTION>

4. PURCHASES AND SALES OF SECURITIES

Aggregate purchases and sales/maturities of securities for the six months ended December 31, 1996 were as follows:
Franklin Franklin Franklin
Money U.S. Government U.S. Treasury U.S. Government
Market Securities Money Money Market Agency Money
Portfolio Market Portfolio Portfolio Market Fund
----------- --------------------------------

<S> <C> <C> <C> <C>
Purchases................................................... $1,404,108,123 $513,962,758 $210,786,035 $411,630,545
Sales....................................................... $1,490,614,925 $523,260,124 $282,913,102 $340,808,888
</TABLE>

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. MANAGEMENT/ADMINISTRATION AGREEMENT:

Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers),
provides investment advice, administrative services, office space and facilities
to each Fund below and receives fees computed monthly based on each Fund's
average daily net assets as follows:

<S> <C>
Fund Annualized Fee Rate
----------------------------------------- --------------
Franklin U.S. Treasury Money Market Portfolio 0.25%
Franklin U.S. Government Agency Money Market Fund 0.15%
</TABLE>

Under the terms of an administration agreement with the Money Market Fund and
the U.S. Government Fund, Advisers provides various administrative, statistical,
and other services, and receive fees computed monthly based on each Fund's
average daily net assets at an annualized rate of .05%. During the six months
ended December 31, 1996, Advisers agreed in advance to waive management and
administration fees and assume payment of other expenses, as noted in the
Statement of Operations.

Under an agreement with Advisers, Franklin Templeton Services, Inc. (FT
Services) provides administrative services and facilities for the Franklin U.S.
Treasury Money Market Portfolio and the Franklin U.S. Government Agency Money
Market Fund. The fee is paid by Advisers and computed monthly based on average
daily net assets. It is not a separate expense of the Fund.

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)

b. SHAREHOLDER SERVICES AGREEMENT:

Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended December 31, 1996 aggregated $24,387, of which $4,985 was
paid to Investor Services.

c. DISTRIBUTION PLANS:

Under the terms of a distribution plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plan), the Franklin U.S. Government Agency Money Market
Fund reimburses Franklin/Templeton Distributors, Inc. (Distributors), in an
amount up to 0.30% per annum of the Fund's average daily net assets for costs
incurred in the promotion, offering and marketing of the Fund's shares. Under
terms of distribution plans, Advisers may also be reimbursed for the above
mentioned costs at an approximate annual rate of .15% of the average daily net
assets of the remaining Funds. There were no payments under this plan for these
funds for the six months ended December 31, 1996. The plans do not permit nor
require payments of excess costs after termination.

d. OTHER AFFILIATES AND RELATED PARTY TRANSACTIONS:

Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, and Investor Services, (all wholly-owned subsidiaries of
Franklin Resources, Inc.), and The Money Market Portfolio and The U.S.
Government Securities Money Market Portfolio.

6. FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding throughout the
period by Fund are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
-------------------------------------- ----------------------------
Ratio of Net
Net Asset Distributions Net Ratio of Investment
Year Value at Net From Net Net Asset Assets at Expenses Income
Ended Beginning Investment Investment Value at Total End of Period to Average to Average
June 30 of Period Income Income End of Period Return+ (in 000's) Net Assets4 Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Money Market Portfolio:
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1992 $1.00 $.046 $(.046) $1.00 4.72% $188,846 0.25% 4.69%
1993 1.00 .033 (.033) 1.00 3.30 222,282 0.203 3.25
1994 1.00 .033 (.033) 1.00 3.35 218,254 0.153 3.24
1995 1.00 .053 (.053) 1.00 5.46 272,147 0.153 5.40
1996 1.00 .055 (.055) 1.00 5.61 341,295 0.193 5.45
1996** 1.00 .027 (.027) 1.00 2.68 254,809 0.20*3 5.30*
Franklin U.S. Government Securities Money Market Portfolio:
1992 1.00 .045 (.045) 1.00 4.55 195,286 0.25 4.59
1993 1.00 .031 (.031) 1.00 3.18 310,382 0.193 3.12
1994 1.00 .032 (.032) 1.00 3.25 218,547 0.153 3.20
1995 1.00 .052 (.052) 1.00 5.32 334,830 0.153 5.26
1996 1.00 .054 (.054) 1.00 5.50 152,173 0.193 5.44
1996** 1.00 .026 (.026) 1.00 2.62 142,884 0.20*3 5.18*
Franklin U.S. Treasury Money Market Portfolio:
19921 1.00 .035 (.035) 1.00 3.59 194,223 0.02* 4.38*
1993 1.00 .031 (.031) 1.00 3.14 179,232 0.05 3.12
1994 1.00 .032 (.032) 1.00 3.23 195,135 0.05 3.17
1995 1.00 .051 (.051) 1.00 5.17 200,935 0.10 5.05
1996 1.00 .052 (.052) 1.00 5.29 123,157 0.19 5.20
1996** 1.00 .025 (.025) 1.00 2.55 50,968 0.20* 5.02*
</TABLE>

6. FINANCIAL HIGHLIGHTS (cont.)
Per Share Operating Performance Ratios/Supplemental Data
-------------------------------------- ----------------------------
Ratio of Net
Net Asset Distributions Net Ratio of Investment
Year Value at Net From Net Net Asset Assets at Expenses Income
Ended Beginning Investment Investment Value at Total End of Period to Average to Average
June 30 of Period Income Income End of Period Return+ (in 000's) Net Assets4 Net Assets
- ---------------------------------------------------------------------------------------------------------------------------
Franklin U.S. Government Agency Money Market Fund:
<C> <C> <C> <C> <C> <C> <C> <C> <C>
19942 $1.00 $.013 $(.013) $1.00 1.31% $ 5,065 0.40%* 3.32%*
1995 1.00 .051 (.051) 1.00 5.22 34,285 0.30 5.39
1996 1.00 .051 (.051) 1.00 5.23 71,694 0.44 5.04
1996** 1.00 .025 (.025) 1.00 2.51 142,873 0.45* 4.95*
</TABLE>

*Annualized.

**For the six months ended December 31, 1996.

+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains at net asset value.

1For the period August 2, 1991 (effective date) to June 30, 1992.

2For the period February 8, 1994 (effective date) to June 30, 1994.

3Includes the Fund's share of the Portfolio's allocated expenses.

4During the periods indicated, Advisers agreed in advance to waive a portion of
administration and management fees and made payments of other expenses incurred
by the Funds. Had such action not been taken, the ratio of expenses to average
net assets would have been as follows:

RATIO OF EXPENSES TO
AVERAGE NET ASSETS
------------------
MONEY MARKET PORTFOLIO:
1992......................................... 0.74%
1993......................................... 0.493
1994......................................... 0.253
1995......................................... 0.243
1996......................................... 0.243
1996**....................................... 0.23*3
FRANKLIN U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO:
1992.......................................... 0.59
1993.......................................... 0.453
1994.......................................... 0.253
1995.......................................... 0.233
1996.......................................... 0.263
1996**........................................ 0.27*3

RATIO OF EXPENSES TO
AVERAGE NET ASSETS
------------------
FRANKLIN U.S. TREASURY MONEY MARKET PORTFOLIO:
19921......................................... 0.31%*
1993.......................................... 0.35
1994.......................................... 0.30
1995.......................................... 0.30
1996.......................................... 0.30
1996**........................................ 0.30*
FRANKLIN U.S. GOVERNMENT AGENCY MONEY MARKET FUND:
19942......................................... 1.43*
1995.......................................... 0.47
1996.......................................... 0.47
1996**........................................ 0.50*

THE MONEY MARKET PORTFOLIOS
===========================================================================

Statement of Investments in Securities and Net Assets, December 31, 1996
(unaudited)

FACE VALUE
AMOUNT THE MONEY MARKET PORTFOLIO (Note 1)
- ------------------------------------------------------------------------------
SHORT TERM INVESTMENTS 85.5%
CERTIFICATES OF DEPOSIT 35.7%
$32,000,000 ABN-AMRO Bank NV, Chicago Branch, 5.53% - 5.76%, 03/06/97 -
03/18/97 .........................................$ 31,997,862
25,000,000 Australia & NZ Banking Group, New York Branch, 5.37%,
02/12/97 .............................................25,000,000
45,000,000 Bank of Nova Scotia, Portland Branch, 5.47% - 5.58%,
01/24/97 - 03/20/97 ..................................45,000,000
25,000,000 Banque Nationale de Paris, New York Branch, 5.37%,
01/14/97 .............................................25,000,000
25,000,000 Bayerische Landesbank, New York Branch, 5.41%,
05/07/97 .............................................25,000,670
25,000,000 Bayerische Vereinsbank, New York Branch, 5.75%,
01/07/97 .............................................25,000,000
50,000,000 Credit Agricole, Chicago Branch, 5.40% - 5.47%,
05/05/97 - 05/27/97 ..................................50,000,000
25,000,000 Den Danske Bank, New York Branch, 5.37%, 02/05/97 ....25,000,120
45,000,000 Deutsche Bank, AG, New York Branch, 5.39% - 5.76%,
01/02/97 - 04/07/97 ..................................45,000,661
15,000,000 Dresdner Bank, AG, New York Branch, 4.94%, 01/06/97 ..14,998,629
50,000,000 National Westminster Bank, Plc., New York Branch,
5.51% - 5.80%, 01/27/97 - 03/10/97 ...................50,000,000
25,000,000 Rabobank Nederland, NV, New York Branch, 5.46%,
04/18/97 .............................................25,000,729
45,000,000 Societe Generale, New York Branch, 5.37% - 5.38%,
01/08/97 - 02/18/97 ..................................45,000,000
70,000,000 Svenska Handelsbanken, New York Branch, 5.38% -
5.48%, 03/21/97 - 03/28/97 ...........................70,001,588
45,000,000 Westpac Banking Corp., New York Branch, 5.40% -
5.43%, 03/11/97 - 05/12/97 ...........................45,000,000
--------------
..TOTAL CERTIFICATES OF DEPOSIT
(COST $547,000,259)..............................547,000,259
--------------
COMMERCIAL PAPER 49.8%
42,752,000 Abbey National North America, 5.28% - 5.32%,
03/11/97 - 03/17/97 ..................................42,297,795
50,000,000 American Express Credit Corp., 5.28% - 5.30%,
01/28/97 - 03/19/97 ..................................49,618,292
20,000,000 Ameritech Corp., 5.34%, 03/07/97 .....................19,807,167
25,000,000 ANZ (DE), Inc., 5.27%, 03/24/97 ......................24,699,903
45,000,000 Asociates Corp. of North America, 5.28% - 5.32%,
01/22/97 - 03/26/97 ..................................44,629,933
40,000,000 BIL North America, Inc., 5.33%, 01/07/97 -
01/15/97 ............................................39,934,855
20,000,000 Canadian Imperial Holdings, Inc., 5.317%,
01/06/97 .............................................19,985,231
30,000,000 Cheltnham & Gloucester, Plc., 5.30% - 5.32%,
01/15/97 - 03/24/97 ..................................29,737,867
25,000,000 CIESCO, L.P., 5.32%, 01/10/97 ........................24,966,750
30,000,000 Commonwealth Bank of Australia, 5.325% - 5.37%,
01/21/97 - 03/17/97 ..................................29,828,958
70,000,000 General Electric Capital Corp., 5.29% - 5.59%,
02/06/97 - 05/02/97 ..................................69,275,095
70,000,000 Generale Bank, Inc., 5.325% - 5.43%, 01/03/97 -
03/12/97 .............................................69,551,313
50,000,000 Goldman Sachs Group, L.P., 5.34% - 5.35%,
03/14/97 - 03/20/97 ..................................49,443,208
15,000,000 Kingdom of Sweden, 5.32%, 01/21/97 ...................14,955,666
70,000,000 Merrill Lynch & Co., Inc., 5.30% - 5.33%,
02/19/97 - 03/13/97 ..................................69,363,438
50,000,000 Morgan Stanley Group, Inc., 5.34%, 03/18/97 -
03/25/97 .............................................49,410,375
45,345,000 National Rural Utilities Cooperative Finance Corp.,
5.31%, 01/09/97 - 01/17/97 ...........................45,261,992
45,000,000 Toyota Motor Credit Corp., 5.31% - 5.32%,
01/08/97 - 01/16/97 ..................................44,923,934
25,000,000 Westpac Capital Corp., 5.32%, 01/13/97 ...............24,955,668
-------------
TOTAL COMMERCIAL PAPER (COST $762,647,440) ........762,647,440
-------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENTS
(COST $1,309,647,699) ...........................1,309,647,699
-------------
b.RECEIVABLES FROM REPURCHASE AGREEMENTS 14.1%
14,810,000 Bear, Stearns & Co., Inc., 6.65%, 01/02/97
(Maturity Value $15,005,542)Collateral: U.S.
Treasury Notes, 6.25%, 07/31/98 ......................15,000,000
14,815,000 CIBC Wood Gundy Securities Corp., 6.70%,
01/02/97 (Maturity Value $15,005,583)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 .....15,000,000
87,793,000 J.P. Morgan Securities, Inc., 6.60%, 01/02/97
(Maturity Value $85,971,511)
Collateral: U.S. Treasury Bills, 01/16/97 -
12/11/97 U.S. Treasury Notes, 6.75%, 05/31/99. 85,940,000

$87,225,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97
(Maturity Value $84,964,633)
Collateral: U.S. Treasury Notes, 5.75%, 12/31/98 ..$ 84,935,000
13,910,000 UBS Securities, L.L.C., 6.75%,
01/02/97 (Maturity Value $15,005,625)
Collateral: U.S. Treasury Notes, 7.875%, 08/15/01......15,000,000
--------------
TOTAL RECEIVABLES FROM REPURCHASE AGREEMENTS
(COST $215,875,000) ...............................215,875,000
--------------
TOTAL INVESTMENTS (COST $1,525,522,699) 99.6% ...1,525,522,699
OTHER ASSETS AND LIABILITIES, NET 0.4% ..............5,681,264
--------------
NET ASSETS 100.0% ..............................$1,531,203,963
==============

At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statements or income tax purposes.

PORTFOLIO ABBREVIATIONS:
L.L.C. - LIMITED LIABILITY CORP.
L.P. - LIMITED PARTNERSHIP

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

THE MONEY MARKET PORTFOLIOS

STATEMENT OF INVESTMENTS IN SECURITIES AND NET ASSETS, DECEMBER 31, 1996
(UNAUDITED)

FACE VALUE
AMOUNT THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO (Note 1)

a.SHORT TERM GOVERNMENT SECURITIES 100.1%
GOVERNMENT SECURITIES 14.7%
$40,000,000 U.S. Treasury Bills, 5.05% - 5.135%, 02/06/97 -
05/22/97 (Cost $39,497,317) ......................$ 39,497,317
----------------
b.RECEIVABLES FROM REPURCHASE AGREEMENTS 85.4%
10,116,000 Aubrey G. Lanston & Co., Inc., 6.80%,
01/02/97 (Maturity Value $10,503,967)
Collateral: U.S. Treasury Notes, 7.875%,
01/15/98 .........................................10,500,000
10,755,000 B.A. Securities, Inc., 6.20%, 01/02/97
(Maturity Value $10,503,617)
Collateral: U.S. Treasury Notes, 5.25%,
12/31/97 ...........................................10,500,000
10,335,000 Bear, Stearns & Co., Inc., 6.65%, 01/02/97
(Maturity Value $10,503,879)
Collateral: U.S. Treasury Notes, 6.50%, 08/31/01 ...10,500,000
10,730,000 Barclays de Zoete Wedd Securities, Inc., 6.50%
01/02/97 (Maturity Value $10,503,792)
Collateral: U.S. Treasury Notes, 5.75%, 12/31/98 ...10,500,000
10,500,000 Chase Securities, Inc., 6.40%, 01/02/97
(Maturity Value $10,503,733)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/97 ..10,500,000
10,370,000 CIBC Wood Gundy Securities Corp., 6.70%, 01/02/97
(Maturity Value $10,503,908)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 ...10,500,000
9,555,000 Citicorp Securities, Inc., 6.75%, 01/02/97
(Maturity Value $10,503,938)
Collateral: U.S. Treasury Notes, 8.75%, 08/15/00 ...10,500,000
24,500,000 J.P. Morgan Securities, Inc., 6.50%, 01/02/97
(Maturity Value $24,508,847)
Collateral: U.S. Treasury Bills, 01/02/97 ..........24,500,000
40,000,000 J.P. Morgan Securities, Inc., 6.60%, 01/02/97
(Maturity Value $40,014,667)
Collateral: U.S. Treasury Bills, 01/02/97 ..........40,000,000
35,000,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97
(Maturity Value $35,012,211)
Collateral: U.S. Treasury Bills, 01/02/97 ..........35,000,000
24,075,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97
(Maturity Value $24,083,400)
Collateral: U.S. Treasury Bills, 01/02/97 ..........24,075,000
10,355,000 Nomura Securities International, Inc., 6.00%,
01/02/97 (Maturity Value $10,503,500)
Collateral: U.S. Treasury Notes, 6.75%, 06/30/99 ...10,500,000
10,475,000 SBC Warburg, Inc., 6.80%, 01/02/97
(Maturity Value $10,503,967)
Collateral: U.S. Treasury Notes, 6.00%, 08/31/97 ...10,500,000
10,539,000 UBS Securities, L.L.C., 6.75%, 01/02/97
(Maturity Value $10,503,938)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97 ...10,500,000
-------------
TOTAL RECEIVABLES FROM REPURCHASE AGREEMENTS
(COST $228,575,000) ...............................228,575,000
-------------
TOTAL INVESTMENTS (COST $268,072,317) 100.1% .....268,072,317
LIABILITIES IN EXCESS OF OTHER ASSETS,
NET(0.1%) ..........................................(319,309)
-------------
NET ASSETS 100.0%................................$267,753,008
=============

At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.

PORTFOLIO ABBREVIATIONS:
L.L.C. - LIMITED LIABILITY CORP.

a Certain short-term securities are traded on a discount basis; the rates
shown are the discount rates at the time of purchase by the Fund. Other
securities bear interest at the rates shown, payable at fixed dates or upon
maturity.

b Face amount for repurchase agreements is for the underlying collateral.

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

THE MONEY MARKET PORTFOLIOS

Financial Statements

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996 (UNAUDITED)

THE U.S.
GOVERNMENT
THE MONEY SECURITIES MONEY
MARKET PORTFOLIOMARKET PORTFOLIO
----------- -----------
Assets:
Investment in securities,
at value and cost $1,309,647,699 $ 39,497,317
Receivables from repurchase
agreements, at value
and cost 215,875,000 228,575,000
Cash 668,468 7,545
Receivables:
Interest 5,974,682 41,181
----------- -----------
Total assets 1,532,165,849 268,121,043
----------- -----------
Liabilities:
Payables:
Capital shares repurchased 764,821 345,520
Management fees 186,603 11,289
Distributions to shareholders -- 252
Accrued expenses and
other liabilities 10,462 10,974
----------- -----------
Total liabilities 961,886 368,035
----------- -----------
Net assets, at value $1,531,203,963 $267,753,008
=========== ===========
Shares outstanding 1,531,203,963 267,753,008
=========== ===========
Net asset value per share $1.00 $1.00
=========== ===========

STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)

THE THE U.S.
MONEY GOVERNMENT
MARKET SECURITIES MONEY
PORTFOLIO MARKET PORTFOLIO
--------- -----------
Investment income:
Interest $45,035,668 $7,410,912
--------- -----------
Expenses:
Management fees (Note 5) 1,235,945 208,325
Reports to shareholders 24,798 5,341
Professional fees 21,896 4,698
Custodian fees 12,332 2,136
Trustees' fees and expenses 6,196 884
Other 999 12,960
Management fees waived
by manager (75,306) (27,952)
--------- -----------
Total expenses 1,226,860 206,392
--------- -----------
Net investment
income 43,808,808 7,204,520
--------- -----------
Net realized gain
on investments 230 3,533
--------- -----------
Net increase in net assets
resulting from operations $43,809,038 $7,208,053
========= ===========

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

THE MONEY MARKET PORTFOLIOS

FINANCIAL STATEMENTS (CONT.)

STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
AND THE YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>

The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------ -----------------------
Six Months Year Six Months Year
ended 12/31/96 ended 6/30/96 ended 12/31/96 ended 6/30/96
----------- ------------ ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $ 43,808,808 $ 79,011,040 $ 7,204,520 $ 17,554,934
Net realized gain from security transactions................ 230 -- 3,533 683
----------- ------------ ----------- -----------
Net increase in net assets resulting from operations........ 43,809,038 79,011,040 7,208,053 17,555,617
Distributions to shareholders from undistributed
net investment income....................................... (43,809,038)a (79,011,040) (7,208,053)b (17,555,617)c
Increase (decrease) in net assets from capital share
transactions (Note 2)....................................... (18,881,284) 244,510,834 (17,948,096) (188,953,282)
----------- ------------ ----------- -----------
Net increase (decrease) in net assets........................ (18,881,284) 244,510,834 (17,948,096) (188,953,282)
Net assets (there is no undistributed net investment
income at beginning or end of the period):
Beginning of period ....................................... 1,550,085,247 1,305,574,413 285,701,104 474,654,386
----------- ------------ ----------- -----------
End of period ............................................. $1,531,203,963 $1,550,085,247 $267,753,008 $285,701,104
=========== ============ =========== ===========
</TABLE>

aDistributions were increased by net realized gain from security transactions
of $230.

bDistributions were increased by net realized gain from security transactions
of $3,533.

cDistributions were increased by net realized gain from security transactions
of $683.

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

THE MONEY MARKET PORTFOLIOS

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. SIGNIFICANT ACCOUNTING POLICIES

The Money Market Portfolios (Money Market) is a no-load, open-end,
diversified management investment company (mutual fund), registered under
the Investment Company Act of 1940, as amended. The Money Market has two
portfolios (the Portfolios) consisting of The Money Market Portfolio and
The U.S. Government Securities Money Market Portfolio. The Portfolios'
investment objective is high current income consistent with capital
preservation and liquidity. Each of the Portfolios issues a separate series
of shares and maintains a totally separate and distinct investment
portfolio. The shares of Money Market are issued in private placements and
are thus exempt from registration under the Securities Act of 1933.

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

a. SECURITY VALUATION:

Securities in the Portfolios are valued at amortized cost, which
approximates value. Each of the Portfolios must maintain a dollar weighted
average maturity of 90 days or less and only purchase instruments having
remaining maturities of 397 days or less. If the Portfolio has a remaining
weighted average maturity of greater than 90 days, the Portfolio will be
stated at value based on recorded closing sales on a national securities
exchange or, in the absence of a recorded sale, within the range of the
most recent quoted bid and asked prices. The trustees have established
procedures designed to stabilize, to the extent reasonably possible, each
Portfolio's price per share as computed for the purpose of sales and
redemptions at $1.00.

b. Income Taxes:

Each Portfolio 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 shareholders which will be
sufficient to relieve the Portfolios from income and excise taxes. 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.

D. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS:

Net investment income includes income, calculated on an accrual basis, and
estimated expenses which are accrued daily. The total available for
distribution is computed daily and includes the net investment income, plus
or minus any gains or losses on security transactions and any changes in
unrealized portfolio appreciation or depreciation.

Distributions are normally declared each day the New York Stock Exchange is
open for business, equal to the total available for distributions (as
defined above), and are payable to shareholders of record as of the close
of business that day. Such distributions are automatically reinvested
monthly in additional shares of the Portfolio at net asset value.

e. EXPENSE ALLOCATION:

Common expenses incurred by Money Market 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. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles 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 expense
during the reporting period. Actual results could differ from those
estimates.

g. REPURCHASE AGREEMENTS

The Portfolios may enter into repurchase agreements with government
securities dealers recognized by the Federal Reserve Board and/or member
banks of the Federal Reserve System.

A repurchase agreement is accounted for as a loan by the Portfolios to the
seller, collateralized by underlying U.S. government securities, which are
delivered to the Portfolios' custodian. The market value, including accrued
interest, of the initial collaterization is required to be at least 102% of
the dollar amount invested by the Portfolios, with the value of the
underlying securities marked to market daily to maintain coverage of at
least 100%. At December 31, 1996, all outstanding repurchase agreements
held by the Portfolios had been entered into on that date.

2. TRUST SHARES

At December 31, 1996, there was an unlimited number of $0.01 par value shares
of beneficial interest authorized. Transactions in each of the Portfolios'
shares at $1.00 per share for the six months ended December 31, 1996 and the
year ended June 30, 1996 were as follows:
<TABLE>
<CAPTION>
The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------

Six months ended December 31, 1996
<S> <C> <C>
Shares sold............................................................................... $ 1,875,368,178 $ 547,941,786
Shares issued in reinvestment of distributions ........................................... 43,810,072 7,208,648
Shares redeemed .......................................................................... (1,938,059,534) (573,098,530)
------------ -------------
Net decrease ............................................................................. $ (18,881,284) $ (17,948,096)
============ =============
Year ended June 30, 1996
Shares sold............................................................................... $ 2,507,821,633 $ 824,267,024
Shares issued in reinvestment of distributions ........................................... 79,019,113 17,555,181
Shares redeemed .......................................................................... (2,342,329,912) (1,030,775,487)
------------ -------------
Net increase (decrease) .................................................................. $ 244,510,834 $ (188,953,282)
============ =============
</TABLE>

3. CAPITAL LOSS CARRYOVERS

At June 30, 1996, for tax purposes, The Money Market Portfolio had an
accumulated net realized capital loss carryover expiring in year 2002 of
$3,790. For tax purposes, the aggregate cost of securities are the same for
financial purposes at June 30, 1996.

4. PURCHASES AND SALES OF SECURITIES

Purchases and sales/maturities of securities, including repurchase
agreements, for the six months ended December 31, 1996, were as follows:

The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
Purchases.............................. $36,831,213,679 $30,361,308,906

Sales.................................. $36,850,555,181 $30,379,082,800

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. MANAGEMENT AGREEMENT:

Under the terms of a management agreement, Franklin Advisers, Inc.
(Advisers) provides investment advice, administrative services, office
space and facilities to the Portfolios, and receives fees computed monthly
based on the average daily net assets of the Portfolios during the month.
The Portfolios pay fees equal to an annualized rate of 15/100 of 1% of
their average daily net assets. For the six months ended December 31, 1996,
Advisers agreed in advance to waive management fees for the Portfolios,
aggregating $103,258.

b. OTHER AFFILIATES AND RELATED PARTY TRANSACTIONs:

Certain officers and trustees of the Portfolios are also officers and/or
directors of Advisers and Franklin/Templeton Distributors, Inc. (all
wholly-owned subsidiaries of Franklin Resources, Inc.), and of the Franklin
Money Fund, Institutional Fiduciary Trust, Franklin Templeton Money Fund
Trust and Franklin Federal Money Fund.

At December 31, 1996, the shares of The Money Market Portfolio were owned by
the following funds:

PERCENTAGE OF
SHARES OUTSTANDING SHARES
--------- ------------------
Franklin Money Fund...................... 1,217,967,196 79.54%
Institutional Fiduciary Trust -
Money Market Portfolio.................. 254,807,998 16.64%
Institutional Fiduciary Trust -
Franklin Cash Reserves Fund............. 51,554,346 3.37%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund II........ 6,874,423 0.45%

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)

b. OTHER AFFILIATES AND RELATED PARTY TRANSACTIONS: (CONT.)

At December 31, 1996, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:

Percentage of
Shares Outstanding Shares
----------- -------------
Institutional Fiduciary Trust -
Franklin U.S. Government Securities -
Money Market Portfolio................... 142,857,653 53.35%
Franklin Federal Money Fund............... 124,895,355 46.65%

6. FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding throughout each
period by the Portfolios are as follows:
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE RATIOS/SUPPLEMENTAL DATA
------------------------------------------------------------------------
RATIO OF NET
NET ASSET DISTRIBUTIONS NET ASSETS RATIO OF INVESTMENT
YEAR VALUE AT NET FROM NET NET ASSET AT END EXPENSES INCOME
ENDED BEGINNING INVESTMENT INVESTMENT VALUE AT TOTAL OF PERIOD TO AVERAGE TO AVERAGE
JUNE 30, OF PERIOD INCOME INCOME END OF PERIOD RETURN+ (IN 000'S) NET ASSETS++ NET ASSETS
- -------------------------------------------------------------------------------
THE MONEY MARKET PORTFOLIO
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1993* $1.00 $0.027 $(0.027) $1.00 2.92%** $ 222,358 0.15%** 3.18%**
1994 1.00 0.033 (0.033) 1.00 3.33 219,189 0.15 3.25
1995 1.00 0.053 (0.053) 1.00 5.46 1,305,574 0.15 5.42
1996 1.00 0.055 (0.055) 1.00 5.66 1,550,085 0.15 5.50
1996*** 1.00 0.030 (0.030) 1.00 2.71 1,531,204 0.15** 5.36

THE U.S. GOVERNMENT SECURITIES MONEY MARKET PORTFOLIO
1993* 1.00 0.021 (0.021) 1.00 2.27** 310,319 0.15** 3.05**
1994 1.00 0.032 (0.032) 1.00 3.25 218,548 0.15 3.20
1995 1.00 0.052 (0.052) 1.00 5.32 474,654 0.15 5.25
1996 1.00 0.054 (0.054) 1.00 5.55 285,701 0.15 5.45
1996*** 1.00 0.027 (0.027) 1.00 2.65 267,753 0.15** 5.19
</TABLE>

*July 28, 1992 (Effective date of registration) to June 30, 1993.

**Annualized

***For the six months ended December 31, 1996.

+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains at net asset value.

++During the periods indicated, Advisers agreed to waive in advance a portion
of its management fees of the Portfolios. Had such action not been taken,
the ratios of expenses to average net assets would have been as follows:

Ratio of Expenses to
Average Net Assets
------------------
THE MONEY MARKET PORTFOLIO
1993*...................................... 0.17%**
1994....................................... 0.17
1995....................................... 0.16
1996....................................... 0.16
1996***.................................... 0.16**

THE U.S. GOVERNMENT SECURITIES
MONEY MARKET PORTFOLIO
1993*...................................... 0.18%**
1994....................................... 0.17
1995....................................... 0.16
1996....................................... 0.17
1996***.................................... 0.17**

Franklin Institutional Fiduciary Trust Money Market Funds Semi-Annual Report
December 31, 1996

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 format the portfolio composition of the Franklin IFT
Money Market Portfolio as a percentage of the fund's total net assets on
December 31, 1996.

The Money Market Portfolio Composition as of December 31, 1996

Commercial Paper 49.8%
Certificates of Deposit 35.7%
Repurchase Agreements 14.0%

GRAPHIC MATERIAL (2)

The following line graph compares the total returns of Franklin's IFT Money
Market Portfolio to that of the Lipper Institutional Money Market Funds Index
for the periods ended December 31, 1996.

Franklin's IFT Money Market Portfolio
Total Returns of Franklin's IFT Money Market Portfolio vs. the Lipper
Institutional Money Market Funds Index
for the periods ended December 31, 1996

1 - year 3-year 5-year 10-year
Franklin 5.38% 16.37% 24.51% 79.63%
Lipper 5.16% 15.66% 23.34% 77.05%

GRAPHIC MATERIAL (3)

This chart shows in pie format the portfolio composition of the Franklin U.S.
Government Securities Money Market Portfolio as a percentage of the fund's
total net assets on December 31, 1996.

Franklin U.S. Government Securities Money Market Portfolio
Portfolio Composition as of December 31, 1996

Repurchase Agreements 85.3%
Treasuries 14.7%

GRAPHIC MATERIAL (4)

The following line graph compares the total returns of the Franklin U.S.
Government Securities Money Market Portfolio to that of the Lipper
Institutional Money Market Funds Index for the periods ended December 31,
1996.

Franklin U.S. Government Securities Money Market Portfolio
Total Returns vs. the Lipper Institutional Money market Funds Index
for the periods ended December 31, 1996.

1-year 3-year 5-year
Franklin 5.27% 15.98% 23.80%
Lipper 4.99% 15.05% 22.41%

[OBJECT OMITTED]

GRAPHIC MATERIAL (5)

This chart shows in pie format the portfolio composition of Franklin U.S.
Treasury Money Market Portfolios a percentage of the fund's total net assets
on December 31, 1996.

Franklin U.S. Treasury Money Market Portfolio
Portfolio Composition as of December 31, 1996

U.S. Treasuries 100%

GRAPHIC MATERIAL (6)

The following line graph compares the total returns of the Franklin U.S.
Treasury Money Market Portfolio to that of the Lipper Institutional Money
Market Funds Index for the periods ended December 31, 1996.

Franklin U.S. Treasury Money Market Portfolio
Total Returns vs. the Lipper Institutional Treasury Money Market Funds Index
For the periods ended December 31, 1996

1-year 3-year 5-year
Franklin 5.11% 15.45% 23.28%
Lipper 4.99% 15.05% 22.41%

[OBJECT OMITTED]
GRAPHIC MATERIAL (7)

This chart shows in pie format the portfolio composition of the Franklin U.S.
Government Agency Money Market Fund as a percentage of the fund's total net
assets on December 31, 1996.

Franklin U.S. Government Agency Money Market Fund
Portfolio Composition as of December 31, 1996

Federal Home Loan Bank 79.0%
Federal Farm Credit Bank 20.3%
Treasuries 0.7%

GRAPHIC MATERIAL (8)

The following line graph compares the total returns of the U.S. Government
Agency Money Market Fund to that of the Lipper Institutional Treasury Money
Market Funds Index for the periods ended December 31, 1996.

Franklin U.S. Government Agency Money Market Fund Total returns vs. the Lipper
Institutional Treasury Money Market Funds Index For the periods ended December
31, 1996.

1-year
Franklin 5.02%
Lipper 4.99%

INSTITUTIONAL FIDUCIARY TRUST

Semi-Annual Report
December 31, 1996

Franklin Institutional Adjustable U.S. Government Securities Fund

Franklin Institutional Adjustable Rate Securities Fund

Table of Contents

Franklin Institutional
Adjustable U.S. Government Securities Fund Page 4

Franklin Institutional
Adjustable Rate Securities Fund Page 6

For a current prospectus on one or more Franklin 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,
expenses and risks. 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.

January 15, 1997

Dear Shareholder,

We are pleased to bring you this semi-annual report for Franklin's Institutional
Fiduciary Trust adjustable rate securities funds, covering the period ended
December 31, 1996.

GRAPH PICTURE

Charles B. Johnson
Chairman of the Board

Franklin's Institutional Fiduciary Trust (the Trust) was developed specifically
to meet the needs of institutional investors. Part of the $178 billion Franklin
Templeton Group, the Trust consists of seven 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 both Funds is to seek
a high level of current income, with lower volatility of principal than funds
that invest in fixed-rate securities.

In the second half of 1996, the economy remained strong, although not showing
signs of the kind of economic growth experienced in the second quarter. The
unemployment rate reached a seven-year low in August before returning to its
July 1996 level, but concerns of tight labor conditions persisted. Decreased
consumer spending and a decline in the housing market, however, helped subdue
any inflationary fears, which allowed the Federal Reserve to leave monetary
policy and interest rates unchanged through the end of the year.

Maintaining a long-term investment approach, the Funds' managers have focused on
principal stability, while pursuing current income. This strategy has generally
proved favorable for the Funds despite the occasional short-term market
volatility. Our managers will continue to adhere to this approach, as we believe
it best serves our shareholders.

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

At the beginning of 1996, the U.S. economy continued to experience slow growth
and low inflation, leading the Federal Reserve to lower the target rate for
federal funds for a second consecutive month, to 5.25% in January. Gross
Domestic Product (GDP) growth for the first quarter was 2.2%, a 1.7% increase
over the fourth quarter of 1995. GDP then swelled to 4.7% in the second quarter,
the economy's fastest recorded growth in two years. Economic reports showed a
decrease in the unemployment rate and an increase in the average hourly wage,
raising fears that higher prices were imminent. This, in turn, raised concerns
that the Federal Reserve might increase its target for the federal funds rate to
keep inflation in check.

Third quarter GDP, however, grew to only 2.1%, well off the second quarter mark,
even as unemployment hit a seven year low of 5.1% midway through the quarter.
The dip in the GDP eased inflation fears, as consumers cut their spending and
the housing market began to slow. As a result, inflation remained stable and
interest rates declined into the fourth quarter. Short-term interest rates
reflected these trends during the reporting period. For example, the 1-year
Treasury bill yields fell from 5.83% in July 1996, to 5.48% by December 1996, as
economic growth slowed. Declining mortgage rates later in the year increased the
number of home buying and refinancing applications, thus strengthening a housing
market that had been quiet in the third quarter.

Looking forward, we expect continued slow growth and low inflation, an
environment that should enable interest rates to decline slightly and perhaps
stabilize. We believe any tightening in monetary policy will depend on the
economy's response in the coming months. If reports suggest a weakness, rate
hikes may be unnecessary, but strength may force the Federal Reserve to change
its course and raise short-term rates.

Tony Coffey is a portfolio manager for the Franklin Adjustable U.S. Government
Securities Fund, Franklin Adjustable Rate Securities Fund, and the Franklin
Valuemark U.S. Government Securities Fund. Mr. Coffey's area of expertise is
mortgage-backed securities. Prior to joining Franklin, he was an associate for
Analysis Group, Inc., an economic consulting firm.

GRAPH PICTURE

T. Anthony Coffey, CFA
Portfolio Manager

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.

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

The Institutional Adjustable U.S. Government Securities Fund performed well in
recent months, despite increased volatility in the bond market. Interest rates
rose close to their levels of earlier in the year, after rallying in November on
signs of slower economic growth. If growth strengthens, or if higher labor costs
cause increased inflation, it is possible that the Federal Reserve will vote to
raise its target for the federal funds rate sometime in early 1997. This could
lead to lower ARM prices due to their lagging coupon adjustments.

Overall, ARMS have experienced modest price movements, and we do not believe
they are in danger of reaching their caps. Prepayments, which limit their
potential appreciation, continue to be a concern. They were at high levels
earlier this year, but fell when interest rates rose. The generally lower level
of interest rates, especially long-term rates, earlier in 1996 created an
incentive for homeowners to refinance from ARMS to fixed-rate mortgages, thus
locking in attractively low rates. In an effort to reduce the negative impact of
ARM prepayments, we have maintained an overweighting in seasoned,
non-convertible ARMS, which are less likely to experience high levels of
prepayments. By index, we tend to prefer those which adjust rapidly, such as the
Constant Maturity Treasury (CMT), over those which tend to lag market movements,
such as the Eleventh District Cost of Funds (COFI). The current breakdown of the
portfolio by agency is as follows:

GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT

Going forward, we anticipate a continuation of the current, slower growth, low
inflation environment, which should lead to stable or slightly lower interest
rates and less interest rate volatility. This condition should prove beneficial
to ARMS in general, and we are actively positioning the Fund to take advantage
of this environment. Our main concern continues to be stability of principal
while maintaining a yield competitive with short-term alternatives.

1. Individual securities held by 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.

Performance Summary

The Franklin Institutional Adjustable U.S. Government Securities Fund's share
price, as measured by net asset value, rose from $9.28 on June 30, 1996, to
$9.30 on December 31, 1996.

The Fund continued to pursue its investment objective of providing high current
income to its shareholders. For the six-month period ended December 31, 1996,
the Fund paid monthly income distributions totaling $0.296905 per share. Of
course, dividends will vary based on the earnings of the Fund's underlying
portfolio, and past distributions are not predictive of future trends.

At the end of the reporting period, the Fund's distribution rate was 6.06%,
based on an annualization of the dividends distributed during the last 30 days
of the period ($0.046305 per share) and the net asset value of $9.30 on December
31, 1996.

The Fund provided a cumulative total return of 3.47% for the six-month period.
Cumulative total return reflects the change in value of an investment, assuming
reinvestment of dividends and capital gains, if any. Past performance is not
indicative of future results.

GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT

Performance Figures2
Periods Ended December 31, 1996

Since
Inception
1-Year 5-Year (12/2/91)
Cumulative
Total Return:3 6.52% 21.87% 22.57%

Average Anual
Total Return:4 6.52% 4.03% 4.09%

30-Day Standardized Yield:5 6.06%
Distribution Rate:6 6.06%

2. Franklin Advisers, Inc., the Fund's administrator and the manager of the
Fund's underlying portfolio, has agreed in advance to waive a portion of its
fees, which reduces expenses and increases total return to shareholders. Without
these reductions, the Fund's total return would have been lower. The fee waiver
may be discontinued at any time upon notice to the Fund's Board of Trustees.

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

4. Average annual total return reflects the average annual change in value of an
investment over the periods indicated, assuming reinvestment of dividends and
capital gains, if any. Investment return and principal value fluctuate, so that
your shares, when redeemed, may be worth more or less than their original cost.
Past performance is not indicative of future results.

5. 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.

6. Based on an annualization of the Fund's dividends for the 30-day period
($0.046305 per share) and the net asset value of $9.30 per share on Decem- ber
31, 1996.

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 mortgage securities
(ARMS) issued or guaranteed by private institutions or by U.S. government
agencies.7 Investment in these securities has earned the Fund a credit rating of
"Aa" from Moody's Investors Service.8 Shown to the right is a list of the top
five issuers for the securities held in the Adjustable Rate Securities Portfolio
as of December 31, 1996.

The Institutional Adjustable Rate Securities Fund performed well in recent
months, despite increased volatility in the bond market. Interest rates rose
close to their levels of earlier in the year, after rallying in November on
signs of slower economic growth. If growth strengthens, or if higher labor costs
cause an increase in inflation, it is possible that the Federal Reserve will
vote to raise its target for the federal funds rate sometime in early 1997. This
could lead to lower ARM prices due to their lagging coupon adjustments.

Overall, ARMS have experienced modest price movements, and we do not believe
they are in danger of reaching their caps. Prepayments, which limit their
potential appreciation, continue to be a concern. They were at high levels
earlier this year, but fell when interest rates rose. The generally lower level
of interest rates, especially long-term rates, earlier in 1996 created an
incentive for homeowners to refinance from ARMS to fixed-rate mortgages, thus
locking in attractively low rates. In an effort to reduce the negative impact of
ARM prepayments, we maintained an overweighting in seasoned, non-convertible
ARMS, which are less likely to experience high levels of prepayments. By index,
we tend to prefer those which adjust rapidly, such as the Constant Maturity
Treasury (CMT), over those which tend to lag market movements, such as the
Eleventh District Cost of Funds (COFI).

Going forward, we anticipate a continuation of the current slower growth, low
inflation environment, which should lead to stable or slightly lower interest
rates and less interest rate volatility. This condition should prove beneficial
to ARMS in general, and we are actively positioning the Fund to take advantage
of this environment. Our main concern continues to be stability of principal
while maintaining a yield competitive with short-term alternatives.

Adjustable Rate Securities Portfolio
Top Five Issuers on December 31, 1996
Percent of
Issuer Total Net Assets
- --------------------------------------------------------
1. Resolution Trust Corporation 25.9%
2. Pru-Home 13.2%
3. Salomon 12.2%
4. Residential Funding Corporation 11.2%
5. FMNA 7.3%

7. Individual securities held by 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 timely payment of principal and interest.

8. The "Aa" rating reflects Moody's assessment of the investment quality of
shares in the Fund, which factors in the Fund's investment objectives and
policies, the creditworthiness 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, nor does
it reflect approval by Moody's, and is subject to change.

Performance Summary

The Franklin Institutional Adjustable Rate Securities Fund's share price, as
measured by net asset value, rose from $9.79 on June 30, 1996, to $9.84 on
December 31, 1996.

The Fund continues to pursue its investment objective of providing a high level
of current income by investing in an underlying portfolio of adjustable-rate
securities. For the six-months ended December 31, 1996, the Fund paid monthly
income distributions totaling $.302 per share. Of course, dividends will vary
based on the earnings of the underlying portfolio, and past distributions are
not predictive of future trends.

At the end of the reporting period, the Fund's distribution rate was 6.04% based
on the annualization of the dividends distributed over the last 30 days of the
period ($.048888 per share) and the net asset value of $9.84 per share on
December 31, 1996.

The Fund posted a cumulative total return of 3.64% for the six-month period
ended December 31, 1996. Cumulative total return reflects the change in value of
an investment, assuming reinvestment of dividends and capital gains, if any.
Past performance is not indicative of future results.

GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT

Performance Figures9

Periods Ended December 31, 1996

Since
Inception
1-Year 5-Year (1/3/92)
Cumulative
Total Return:10 6.10% 29.70% 29.70%

Average Annual
Total Return:11 6.10% 5.34% 5.34%

30-Day Standardized Yield:12 6.09%
Distribution Rate:13 6.04%

9. Franklin Advisers, Inc., the Fund's administrator and the manager of the
Fund's underlying portfolio, has agreed in advance to waive a portion of its
fees, which reduces expenses and increases total return to shareholders. Without
these reductions, the Fund's total return would have been lower. The fee waiver
may be discontinued at any time upon notice to the Fund's Board of Trustees.

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

11. Average annual total return reflects the average annual change in value of
an investment over the periods indicated, assuming reinvestment of dividends and
capital gains, if any.

12. 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.

13. Based on an annualization of the Fund's dividends for the 30-day period
($0.048888 per share) and the net asset value of $9.84 per share on December 31,
1996. Investment return and principal value fluctuate, so that your shares, when
redeemed, may be worth more or less than their original cost. Past performance
is not indicative of future results.

<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST

Statement of Investments in Securities and Net Assets, December 31, 1996 (unaudited)

Value
Shares Franklin Institutional Adjustable U.S. Government Securities Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mutual Funds 100.0%
940,069 U.S. Government Adjustable Rate Mortgage Portfolio (Note 1) ........................................... $8,808,451
----------
Total Investments (Cost $9,211,709) 100.0% ................................................. 8,808,451
Other Assets and Liabilities, Net............................................................ 757
----------
Net Assets 100.0% .......................................................................... $8,809,208
==========

At December 31, 1996, the net unrealized depreciation based on the cost of investments
for income tax purposes of $9,430,166 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 ...................................................................... (621,715)
----------
Net unrealized depreciation ......................................................................... $ (621,715)
==========

The accompanying notes are an integral part of these financial statements.
</TABLE>

<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST

Statement of Investments in Securities and Net Assets, December 31, 1996 (unaudited)

Value
Shares Franklin Institutional Adjustable Rate Securities Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
475,684 Adjustable Rate Securities Portfolio (Note 1).......................................................... $4,680,734
----------
Total Investments (Cost $4,773,416) 100.1% ................................................. 4,680,734
Liabilities in Excess of Other Assets(0.1)% ................................................. (4,759)
----------
Net Assets 100.0% .......................................................................... $4,675,975
==========

At December 31, 1996, the net unrealized depreciation based on the cost of investments
for income tax purposes of $4,774,070 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....................................................................... (93,336)
----------
Net unrealized depreciation ......................................................................... $ (93,336)
==========

The accompanying notes are an integral part of these financial statements.
</TABLE>

INSTITUTIONAL FIDUCIARY TRUST

Financial Statements

Statements of Assets and Liabilities
December 31, 1996 (unaudited)

Franklin
Institutional Franklin
Adjustable U.S. Institutional
Government Adjustable Rate
Securities Fund Securities Fund
--------------- ---------------
Assets:
Investments in securities:
At identified cost $ 9,211,709 $ 4,773,416
============ ===========
At value 8,808,451 4,680,734
Cash 457 317
Prepaid expenses 1,043 --
------------ -----------
Total assets 8,809,951 4,681,051
------------ -----------
Liabilities:
Payables:
Administration fees 377 200
Shareholder servicing costs 366 203
Accrued expenses and
other liabilities -- 4,673
------------ -----------
Total liabilities 743 5,076
------------ -----------
Net assets, at value $ 8,809,208 $ 4,675,975
============ ===========
Net assets consist of:
Net unrealized depreciation
on investments $ (403,258) $ (92,682)
Net realized loss (30,236,599) (2,003,070)
Capital shares 39,449,065 6,771,727
------------ -----------
Net assets, at value $ 8,809,208 $ 4,675,975
============ ===========
Shares outstanding 947,234 475,235
============ ===========
Net asset value per share $9.30 $9.84
============ ===========

Statements of Operations
for the six months ended December 31, 1996 (unaudited)

Franklin
Institutional Franklin
Adjustable U.S. Institutional
Government Adjustable Rate
Securities Fund Securities Fund
--------------- ---------------
Investment income:
Dividends $287,371 $150,683
------------ -----------
Expenses:
Administration fees (Note 5) 2,311 1,190
Shareholder servicing costs (Note 5) 674 236
Registration fees 1,977 641
Reports to shareholders 1,525 1,039
Professional fees 1,153 1,751
Trustees' fees and expenses 245 95
Other expenses 450 222
------------ -----------
Total expenses 8,335 5,174
------------ -----------
Net investment income 279,036 145,509
------------ -----------
Realized and unrealized gain
(loss) on investments:
Net realized loss (43,351) (5,115)
Net unrealized appreciation
during the year 72,050 30,172
------------ -----------
Net realized and unrealized
gain on investments 28,699 25,057
------------ -----------
Net increase in net assets
resulting from operations $307,735 $170,566
============ ===========

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

<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST

Financial Statements (cont.)

Statements of Changes in Net Assets
for the six months ended December 31, 1996 (unaudited)
and for the year ended June 30, 1996

Franklin Franklin
Institutional Adjustable Institutional Adjustable
U.S. Government Securities Fund Rate Securities Fund
------------------------------------------
Six months Year Six months Year
ended ended ended ended
12/31/96 6/30/96 12/31/96 6/30/96
--------- ---------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income................................................. $ 279,036 $ 858,385 $ 145,509 $ 529,470
Net realized loss from security transactions.......................... (43,351) (1,419,252) (5,115) (104,150)
Net unrealized appreciation on investments............................ 72,050 1,534,083 30,172 108,261
--------- ---------- ----------- ----------
Net increase in net assets resulting from operations............. 307,735 973,216 170,566 533,581

Distributions to shareholders from
undistributed net investment income................................... (293,657) (886,196) (145,509) (529,470)
Increase (decrease) in net assets from
capital share transactions (Note 3)................................... (652,616) (15,659,221) 197,786 (4,147,031)
--------- ---------- ----------- ----------
Net increase (decrease) in net assets............................ (638,538) (15,572,201) 222,843 (4,142,920)
Net assets:
Beginning of period................................................... 9,447,746 25,019,947 4,453,132 8,596,052
--------- ---------- ----------- ----------
End of period......................................................... $8,809,208 $ 9,447,746 $4,675,975 $ 4,453,132
========= ========== =========== ==========
Undistributed net investment income included in net assets:
Beginning of period................................................... 14,621 42,432 -- --
--------- ---------- ----------- ----------
End of period......................................................... $ -- $ 14,621 $-- $ --
========= ========== =========== ==========

The accompanying notes are an integral part of these financial statements.
</TABLE>

INSTITUTIONAL FIDUCIARY TRUST

Notes to Financial Statements (unaudited)

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 seven 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) (the Funds). Each of the Funds issues a separate series of the
Trust's shares and maintains a totally separate and distinct investment
portfolio. The investment objective of each fund is to seek current income.

The Adjustable U.S. Government Fund and the Adjustable Rate Securities Fund
invest substantially all of their assets in the U.S. Government Adjustable Rate
Mortgage Portfolio (the Mortgage Portfolio) and in the Adjustable Rate
Securities Portfolio (the Securities Portfolio), respectively. Both are no load,
open-end, diversified management investment companies having the same investment
objective as the Funds. The financial statements of the Mortgage Portfolio and
the Securities Portfolio, including the Statements of Investment in Securities
and Net Assets, are included elsewhere in this report and should be read in
conjunction with the financial statements of the Funds.

On June 14, 1996, the Franklin Late Day Money Market Portfolio (a fund of the
Trust) ceased operations pursuant to a resolution approved by the Board of
Trustees on May 14, 1996.

a. Security Valuation:

The Funds hold Portfolio shares that are valued at their proportionate interest
in the net assets of the Mortgage Portfolio and the Securities Portfolio. At
December 31, 1996, the Adjustable U.S. Government Fund owns approximately 2% of
the Mortgage Portfolio and the Adjustable Rate Securities Fund owns 23% of the
Securities Portfolio. The Portfolios' shares held by the Funds are valued at the
net asset value of the Portfolios.

b. Income Taxes:

c. Security Transactions:

d. Investment Income, Expenses and Distributions:

Net investment income includes income, calculated on an accrual basis and
estimated expenses which are accrued daily. The total available for
distributions is computed daily.

Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distributions (as defined above),
and are payable to shareholders of record as of the close of business the
preceding day. Such distributions are automatically reinvested monthly in
additional shares of the Funds at net asset value.

e. Expense Allocation:

f. Accounting Estimates:

<TABLE>
<CAPTION>
2. CAPITAL LOSS CARRYOVERS

At June 30, 1996, for tax purposes, the Funds had accumulated net realized
capital loss carryovers as follows:

Franklin Institutional Franklin Institutional
Adjustable U.S. Government Adjustable Rate
Securities Fund Securities Fund
-----------------------------------
Capital loss carryovers
<S> <C> <C>
Expiring in: 2001.................. $ 6,444,126 $ 1,762
2002................................ 20,034,597 1,111,813
2003................................ 2,287,422 771,534
2004................................ 1,064,617 4,914
----------- ----------
$29,830,762 $1,890,023
=========== ==========
</TABLE>

In addition, during the period November 1, 1995 through June 30, 1996, the
Adjustable U.S. Government Fund and the Adjustable Rate Securities Fund incurred
net realized capital losses of approximately $134,166 and $107,932 respectively.
As permitted by tax regulations, the Funds intend to elect to defer these losses
for tax purposes and treat them as having arisen in the year ended June 30,
1997.

For tax purposes, the aggregate cost of securities and unrealized depreciation
are higher than for financial reporting purposes at December 31, 1996 by
$218,457 in the Adjustable U.S. Government Fund and $654 in the Adjustable Rate
Securities Fund.

<TABLE>
<CAPTION>
3. TRUST SHARES

At December 31, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Funds' shares were as
follows:

Franklin Institutional Franklin Institutional
Adjustable U.S. Government Adjustable Rate
Securities Fund Securities Fund
------------------- -------------------
Shares Amount Shares Amount
-------- ---------- --------- ----------
Six Months ended December 31, 1996
<S> <C> <C> <C> <C>
Shares sold............................................................... 1,831 $ 16,975 53,237 $ 520,484
Shares issued in reinvestment of distributions............................ 3,524 32,676 2,272 22,318
Shares redeemed........................................................... (75,670) (702,267) (35,174) (345,016)
-------- ---------- -------- ----------
Net increase (decrease)................................................... (70,315) $ (652,616) 20,335 $ 197,786
======== ========== ======== ==========
Year ended June 30, 1996
Shares sold............................................................... 22,039 $ 204,794 365,324 $3,579,331
Shares issued in reinvestment of distributions............................ 11,742 109,054 3,008 29,513
Shares redeemed........................................................... (1,720,214) (15,973,069) (792,417) (7,755,875)
-------- ---------- -------- ----------
Net decrease.............................................................. (1,686,433) $(15,659,221) (424,085) $(4,147,031)
======== ========== ======== ==========
</TABLE>

4. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the six months ended December 31, 1996, were as follows:

Franklin Institutional Franklin Institutional
Adjustable U.S. Government Adjustable Rate
Securities Fund Securities Fund
----------------- ---------------
Purchases................... $299,612 $668,999
Sales....................... $969,874 $469,435

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. Administration Agreement:

Under the terms of the administration agreement, Franklin Advisers, Inc.
(Advisers), provides various administrative, statistical and other services, and
receives fees computed monthly based on each Fund's average daily net assets at
an annualized rate of 0.05%.

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)

b. Shareholder Services Agreement

Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended December 31, 1996 aggregated $674 and $236 respectively, of
which $258 and $41 respectively, were paid to Investor Services.

c. Other Affiliates and Related Party Transactions

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

<TABLE>
<CAPTION>
6. FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding throughout the
period by Fund are as follows:

Per Share Operating Performance Ratios/Supplemental Data
----------------------------------------------------- ---------------------------------
Distri- Net Net Ratio of Net
Net Asset Net Realized butions Asset Assets at Ratio of Investment
Period Value at Net & Unrealized Total From From Net Value End of Expenses to Income to Portfolio
Ended Beginning Investment Gain (Loss) Investment Investment at End Total Period Average Net Average Turnover
June 30 of Period Income on Securities Operations Income of Period Return* (in 000's) Assets3** Net Assets Rate
- ------------------------------------------------------------------------------------------------------------------------------------
Franklin Institutional Adjustable U.S. Government Securities Fund:
<C> <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
1996 9.25 .600 .028 .628 (.598) 9.28 6.98 9,448 .38 5.90 102.66
19964 9.28 .283 .034 .317 (.297) 9.30 3.47 8,809 .43+ 6.09+ 3.27

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
1996 9.78 .600 .011 .611 (.601) 9.79 6.41 4,453 .36 6.16 45.98
19964 9.79 .300 .052 .352 (.302) 9.84 3.64 4,676 .47+ 6.17+ 9.99
</TABLE>

+Annualized.
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.
4For the six months ended December 31, 1996.
*Total return measures the change in value of an investment over the period
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains, if any, at net asset value.
**During the periods indicated, Advisers 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:

Ratio of Expenses
to Average
Net Assets3
-----------
Franklin Institutional Adjustable
U.S. Government Securities Fund
19921................................. .49%+
1993.................................. .46
1994.................................. .45
1995.................................. .54
1996.................................. .55
19964................................. .60+
Franklin Institutional Adjustable
Rate Securities Fund
19922................................. .69+
1993.................................. .60
1994.................................. .50
1995.................................. .59
1996.................................. .61
19964................................. .67+

<TABLE>
<CAPTION>
ADJUSTABLE RATE SECURITIES PORTFOLIOS

Statement of Investments in Securities and Net Assets, December 31,1996 (unaudited)

Face Value
Amount U.S. Government Adjustable Rate Mortgage Portfolio (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Mortgage Securities 97.8%
Federal Home Loan Mortgage Corp. (FHLMC)25.0%
$ 5,342,389 FHLMC, Cap 11.253%, Margin 1.75% + CMT, Resets Annually, 7.625%, 11/01/16 ................... $ 5,530,822
2,014,195 FHLMC, Cap 11.939%, Margin 2.127% + CMT, Resets Annually, 7.656%, 07/01/20 .................. 2,064,450
711,485 FHLMC, Cap 12.176%, Margin 2.015% + CMT, Resets Annually, 7.365%, 04/01/20 .................. 726,790
3,342,122 FHLMC, Cap 12.177%, Margin 2.265% + CMT, Resets Annually, 7.557%, 07/01/20 .................. 3,442,219
675,355 FHLMC, Cap 12.68%, Margin 2.195% + CMT, Resets Annually, 7.884%, 02/01/19 ................... 700,019
2,245,046 FHLMC, Cap 12.723%, Margin 2.189% + CMT, Resets Annually, 7.666%, 04/01/19 .................. 2,324,902
5,038,450 FHLMC, Cap 12.744%, Margin 2.00% + CMT, Resets Annually, 7.256%, 07/01/18 ................... 5,183,053
819,150 FHLMC, Cap 12.80%, Margin 2.05% + CMT, Resets Annually, 7.705%, 11/01/18 .................... 833,191
7,309,898 FHLMC, Cap 12.806%, Margin 2.23% + CMT, Resets Annually, 7.749%, 04/01/18 ................... 7,617,937
6,132,462 FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.582%, 09/01/19 ................... 6,347,117
2,920,219 FHLMC, Cap 13.156%, Margin 1.915% + CMT, Resets Annually, 7.645%, 12/01/16 .................. 3,020,468
2,089,002 FHLMC, Cap 13.16%, Margin 2.115% + CMT, Resets Annually, 7.656%, 07/01/19 ................... 2,165,200
2,811,760 FHLMC, Cap 13.246%, Margin 2.175% + CMT, Resets Annually, 7.931%, 10/01/18 .................. 2,924,166
940,321 FHLMC, Cap 13.269%, Margin 2.249% + CMT, Resets Annually, 7.551%, 05/01/19 .................. 974,662
420,169 FHLMC, Cap 13.286%, Margin 2.164% + CMT, Resets Annually, 7.651%, 10/01/19 .................. 428,551
2,339,480 FHLMC, Cap 13.292%, Margin 2.115% + CMT, Resets Annually, 7.675%, 03/01/19 .................. 2,425,799
715,981 FHLMC, Cap 13.302%, Margin 2.04% + CMT, Resets Annually, 7.621%, 04/01/18 ................... 741,235
1,424,607 FHLMC, Cap 13.306%, Margin 2.057% + CMT, Resets Annually, 7.622%, 12/01/18 .................. 1,475,672
1,982,207 FHLMC, Cap 13.36%, Margin 2.242% + CMT, Resets Annually, 7.572%, 07/01/20 ................... 2,055,827
4,403,238 FHLMC, Cap 13.364%, Margin 2.225% + CMT, Resets Annually, 7.583%, 07/01/19 .................. 4,561,675
4,700,699 FHLMC, Cap 13.366%, Margin 2.102% + CMT, Resets Annually, 7.561%, 03/01/18 .................. 4,863,261
9,567,550 FHLMC, Cap 13.37%, Margin 2.04% + CMT, Resets Annually, 7.551%, 04/01/19 .................... 9,907,867
6,974,898 FHLMC, Cap 13.65%, Margin 2.249% + CMT, Resets Annually, 7.709%, 07/01/20 ................... 7,233,946
445,933 FHLMC, Cap 13.77%, Margin 2.057% + CMT, Resets Annually, 7.573%, 02/01/19 ................... 453,158
3,181,674 FHLMC, Cap 13.793%, Margin 2.214% + CMT, Resets Annually, 7.795%, 11/01/19 .................. 3,299,842
8,567,547 FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.628%, 04/01/18 .................. 8,885,745
2,163,440 FHLMC, Cap 14.307%, Margin 1.957% + 3CMT, Resets Every 3 Years, 8.598%, 12/01/21 ............ 2,241,065
1,542,564 FHLMC, Cap 14.451%, Margin 2.00% + CMT, Resets Annually, 7.799%, 12/01/18 ................... 1,597,448
3,532,002 FHLMC, Cap 14.90%, Margin 2.546% + CMT, Resets Annually, 7.956%, 02/01/19 ................... 3,694,086
----------
Total Federal Home Loan Mortgage Corp. (Cost $97,358,345).............................. 97,720,173
----------
Federal National Mortgage Association (FNMA) 66.2%
2,588,846 FNMA, Cap 12.605%, Margin 2.536% + 6 Month DR, Resets Semi-Annually, 7.619%, 11/01/18 ....... 2,683,339
17,148,860 FNMA, Cap 12.637%, Margin 2.00% + NCI, Resets Annually, 6.875%, 11/01/17 .................... 17,394,604
4,574,859 FNMA, Cap 12.64%, Margin 2.00% + CMT, Resets Annually, 7.664%, 03/01/19 ..................... 4,726,196
12,199,445 FNMA, Cap 12.66%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 7.005%, 01/01/19 ......... 12,400,857
3,011,321 FNMA, Cap 12.662%, Margin 1.25% + COFI, Resets Monthly, 6.888%, 01/01/19 .................... 3,002,679
11,415,025 FNMA, Cap 12.705%, Margin 1.25% + COFI, Resets Monthly, 6.089%, 09/01/18 .................... 11,346,647
4,748,946 FNMA, Cap 12.787%, Margin 1.25% + COFI, Resets Monthly, 7.486%, 01/01/19 .................... 4,809,542
4,125,560 FNMA, Cap 12.788%, Margin 2.11% + CMT, Resets Annually, 7.584%, 11/01/20 .................... 4,304,527
5,960,952 FNMA, Cap 12.804%, Margin 1.75% + CMT, Resets Annually, 7.332%, 05/01/19 .................... 6,184,314
3,431,602 FNMA, Cap 12.84%, Margin 2.762% + 6 Month DR, Resets Semi-Annually, 7.843%, 06/01/17 ........ 3,585,853
5,698,426 FNMA, Cap 12.85%, Margin 2.078% + 5CMT, Resets Every 5 Years, 7.986%, 10/01/17 .............. 5,868,981
7,657,293 FNMA, Cap 12.89%, Margin 2.125% + 6 Month DR, Resets Semi-Annually, 7.18%, 07/01/17 ......... 7,826,749
1,996,134 FNMA, Cap 12.911%, Margin 2.00% + 6 Month DR, Resets Semi-Annually, 7.34%, 02/01/18 ......... 2,035,319
10,352,447 FNMA, Cap 12.938%, Margin 1.25% + COFI, Resets Monthly, 6.089%, 02/01/19 .................... 10,283,914
3,635,584 FNMA, Cap 12.993%, Margin 2.092% + CMT, Resets Annually, 7.69%, 12/01/19 .................... 3,789,371
5,766,322 FNMA, Cap 13.005%, Margin 1.97% + 3CMT, Resets Every 3 Years, 8.165%, 11/01/17 .............. 5,946,231
5,851,294 FNMA, Cap 13.01%, Margin 2.10% + CMT, Resets Annually, 7.737%, 06/01/19 ..................... 6,103,758
8,913,532 FNMA, Cap 13.03%, Margin 1.25% + COFI, Resets Monthly, 6.917%, 02/01/20 ..................... 8,887,951
5,719,388 FNMA, Cap 13.03%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.116%, 12/01/20 ......... 5,824,510
6,581,365 FNMA, Cap 13.063%, Margin 2.175% + CMT, Resets Annually, 7.684%, 04/01/19 ................... 6,877,198
Federal National Mortgage Association (FNMA) (cont.)
$ 5,966,037 FNMA, Cap 13.083%, Margin 2.005% + CMT, Resets Annually, 7.413%, 06/01/19 ................... $ 6,191,861
4,668,270 FNMA, Cap 13.147%, Margin 1.895% + CMT, Resets Annually, 7.44%, 04/01/19 .................... 4,845,638
2,913,830 FNMA, Cap 13.202%, Margin 2.478% + 6 Month DR, Resets Semi-Annually, 7.721%, 11/01/26 ....... 3,021,118
3,098,168 FNMA, Cap 13.249%, Margin 2.00% + CMT, Resets Annually, 7.228%, 06/01/19 .................... 3,191,888
8,247,914 FNMA, Cap 13.281%, Margin 2.00% + CMT, Resets Annually, 7.754%, 10/01/19 .................... 8,607,276
8,324,619 FNMA, Cap 13.32%, Margin 1.25% + COFI, Resets Monthly, 7.425%, 04/01/03 ..................... 8,415,191
13,022,191 FNMA, Cap 13.452%, Margin 2.148% + CMT, Resets Annually, 7.637%, 09/01/22 ................... 13,526,150
6,353,806 FNMA, Cap 13.457%, Margin 1.903% + CMT, Resets Annually, 7.595%, 06/01/18 ................... 6,606,155
6,088,889 FNMA, Cap 13.662%, Margin 2.177% + CMT, Resets Annually, 7.654%, 03/01/21 ................... 6,346,278
8,903,463 FNMA, Cap 13.791%, Margin 2.143% + CMT, Resets Annually, 7.647%, 12/01/20 ................... 9,298,064
3,135,002 FNMA, Cap 13.797%, Margin 2.20% + CMT, Resets Annually, 7.511%, 03/01/19 .................... 3,261,217
4,984,485 FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.796%, 07/01/24 ......... 4,970,179
4,477,072 FNMA, Cap 13.887%, Margin 2.25% + CMT, Resets Annually, 7.75%, 02/01/19 ..................... 4,667,124
3,394,132 FNMA, Cap 13.896%, Margin 2.25% + CMT, Resets Annually, 7.975%, 12/01/18 .................... 3,543,872
6,674,084 FNMA, Cap 14.069%, Margin 2.089% + CMT, Resets Annually, 7.639%, 01/01/19 ................... 6,947,926
2,168,336 FNMA, Cap 14.142%, Margin 2.118% + CMT, Resets Annually, 7.723%, 03/01/21 ................... 2,250,907
11,169,225 FNMA, Cap 14.354%, Margin 2.07% + 5CMT, Resets Every 5 Years, 8.025%, 05/01/21 .............. 11,510,557
3,402,832 FNMA, Cap 14.42%, Margin 2.099% + CMT, Resets Annually, 7.646%, 03/01/20 .................... 3,548,337
9,008,030 FNMA, Cap 14.887%, Margin 1.72% + CMT, Resets Annually, 7.092%, 01/01/16 .................... 9,190,442
3,459,283 FNMA, Cap 14.952%, Margin 2.523% + CMT, Resets Annually, 7.838%, 05/01/19 ................... 3,614,778
1,671,640 FNMA, Cap 15.381%, Margin 2.168% + CMT, Resets Annually, 7.674%, 02/01/20 ................... 1,742,369
----------
Total Federal National Mortgage Association (Cost $260,239,295)........................ 259,179,867
----------
Government National Mortgage Association (GNMA) 6.6%
7,886,377 GNMA, Cap 10.00%, Margin 1.50% + CMT, Resets Annually, 6.50%, 01/20/24 ...................... 8,022,416
7,439,099 GNMA, Cap 11.00%, Margin 2.50% + CMT, Resets Annually, 7.00%, 07/20/25 ...................... 7,643,301
10,000,000 eGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 11/05/26 ...................... 10,121,874
----------
Total Government National Mortgage Association (Cost $25,550,854)...................... 25,787,591
----------
Total Long Term Investments (Cost $383,148,494)........................................ 382,687,631
----------
c,dReceivables from Repurchase Agreements 4.2%
16,164,191 Joint Repurchase Agreement, 6.59%, 01/02/97 (Maturity Value $16,448,748) (Cost $16,442,728)
Aubrey G. Lanston & Co., Inc., (Maturity Value $2,061,304)
Collateral: U.S. Treasury Notes, 6.00% - 8.625%, 08/15/97 - 09/30/98
Bear, Stearns & Co., Inc., (Maturity Value $2,061,304)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 10/15/97 - 06/30/01
CIBC Wood Gundy Securities Corp., (Maturity Value $2,061,304)
Collateral: U.S. Treasury Notes, 5.75% - 6.25%, 07/31/98 - 12/31/98
Daiwa Securities America, Inc., (Maturity Value $2,061,304)
Collateral: U.S. Treasury Notes, 6.00% - 9.125%, 05/15/97 - 08/15/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $2,061,304)
Collateral: U.S. Treasury Notes, 6.00% - 8.875%, 11/15/97 - 11/15/01
SBC Warburg, Inc., (Maturity Value $2,019,620)
Collateral: U.S. Treasury Notes, 6.25% - 7.875%, 01/15/98 - 04/30/01
The Nikko Securities Co. International, Inc., (Maturity Value $2,061,304)
Collateral: U.S. Treasury Notes, 6.25% - 8.75%, 08/15/00 - 04/30/01
UBS Securities, L.L.C., (Maturity Value $2,061,304)
Collateral: U.S. Treasury Notes, 6.25% - 8.50%, 06/30/98 - 05/31/01 ....................... 16,442,728
----------
Total Investments (Cost $399,591,222) 102.0%...................................... 399,130,359
Liabilities In Excess of Other Assets(2.0)% ....................................... (7,534,484)
----------
Net Assets 100.0% ................................................................ $391,595,875
==========

At December 31, 1996, the net unrealized depreciation based on the cost of investment
for income tax purposes of $ 399,591,222 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................................ $ 2,111,124
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ............................................................ (2,571,987)
----------
Net unrealized depreciation ............................................................... $ (460,863)
==========

PORTFOLIO ABBREVIATIONS :
3CMT - 3 Year Constant Maturity Treasury Index
5CMT - 5 Year Constant Maturity Treasury Index
CMT - 1 Year Constant Maturity Treasury Index
COFI - Eleventh District Cost of Funds Index
DR - Discount Rate
L.L.C. - Limited Liability Corp.
NCI - National Median Cost of Funds Index
TB - Treasury Bill Rate

cFace amount for repurchase agreements is for the underlying collateral.
dSee Note 1(g) regarding joint repurchase agreement.
eSee Note 1(h) regarding securities purchased on a when-issued basis.

The accompanying notes are an integral part of these financial statements.
</TABLE>

<TABLE>
<CAPTION>
ADJUSTABLE RATE SECURITIES PORTFOLIOS

Statement of Investments in Securities and Net Assets, December 31, 1996 (unaudited)

Face Value
Amount Adjustable Rate Securities Portfolio (Note 1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Mortgage Securities 76.0%
$ 855,995 FNMA, Cap 12.65%, Margin 1.75% + NCI, Resets Monthly, 6.625%, 10/01/28 ......................... $ 858,358
419,926 FNMA, Cap 13.86%, Margin 1.84% + CMT, Resets Annually, 7.311%, 08/01/16 ........................ 434,991
1,000,000e GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 11/05/26 ......................... 1,012,188
1,008,732 Homeowners Federal Savings, Cap 13.00%, Margin 1.75% + CMT, Resets Annually, 7.274%, 01/25/18 .. 1,019,135
1,183,836 PHMS, Cap 11.67%, Margin 2.67% + CMT, Resets Annually, 7.804%, 07/25/22 ........................ 1,176,807
783,549 PHMS, Cap 12.02%, Margin 2.55% + CMT, Resets Annually, 8.052%, 04/25/22 ........................ 799,956
1,697,847 RFC, Cap 11.46%, Margin 2.25% + CMT, Resets Annually, 7.945%, 11/25/22 ......................... 1,749,106
1,263,186 RTC, Cap 12.66%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.249%, 04/26/21 ............. 1,198,053
1,828,337 RTC, Cap 14.69%, Margin 1.55% + 3CMT, Resets Every 3 Years, 7.592%, 06/25/22 ................... 1,812,339
1,269,207 RTC, Cap 16.48%, Margin NACR -0.15%, Resets Annually, 7.508%, 07/25/20 ......................... 1,205,747
1,919,204 Salomon Brothers Mortgage Securities, Cap 14.00%, Margin 0.96% + NACR, Resets Annually,
7.95%, 10/25/16 ............................................................................... 1,908,409
737,193 Saxon Mortgage Securities Corp., Cap 10.78%, Margin 2.78% + 6 Month LIBOR, Resets
Semi-Annually, 8.418%, 05/25/24 ............................................................... 758,865
857,961 Travelers Mortgage Services, Inc., Cap 13.95%, Margin 2.25% + CMT, Resets Annually, 7.815%,
12/25/18 ...................................................................................... 867,882
457,338 Western Federal Savings and Loan Association, Cap 13.00%, Margin 1.80% + COFI, Resets Monthly,
6.674%, 03/25/19 .............................................................................. 455,606
----------
Total Adjustable Rate Mortgage Securities (Cost $15,696,194).............................. 15,257,442
----------
Fixed Rate Mortgage Securities 5.3%
1,096,506 Countrywide Mortgage-Backed Securities, Inc., Series 1994-I, Class A8, 6.25%, 07/25/09
(Cost $1,066,352).............................................................................. 1,071,155
----------
Other Adjustable Rate Securities 6.3%
1,181,923 SBA, Cap 12.625%, Margin -0.125% + Prime, Resets Quarterly, 8.125%, 08/25/20 (Cost $1,274,261).. 1,273,522
U.S. Government and Agency Securities 7.4%
500,000 FNMA, 7.60%, 01/10/97 .......................................................................... 500,246
1,000,000 U.S. Treasury Notes, 4.75%, 08/31/98 ........................................................... 981,875
----------
Total U.S Government and Agency Securities (Cost $1,475,488).............................. 1,482,121
----------
Total Long Term Investments (Cost $19,512,295)............................................ 19,084,240
----------
c,dReceivables from Repurchase Agreements 9.5%
1,865,401 Joint Repurchase Agreement, 6.59%, 01/02/97 (Maturity Value $1,898,385) (Cost $1,897,691)
Aubrey G. Lanston & Co., Inc., (Maturity Value $237,900)
Collateral: U.S. Treasury Notes, 6.00% - 8.625%, 08/15/97 - 09/30/98
Bear, Stearns & Co., Inc., (Maturity Value $237,900)
Collateral: U.S. Treasury Notes, 5.125% - 8.75%, 10/15/97 - 06/30/01
CIBC Wood Gundy Securities Corp., (Maturity Value $237,900)
Collateral: U.S. Treasury Notes, 5.75% - 6.25%, 07/31/98 - 12/31/98
Daiwa Securities America, Inc., (Maturity Value $237,900)
Collateral: U.S. Treasury Notes, 6.00% - 9.125%, 05/15/97 - 08/15/01
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $237,900)
Collateral: U.S. Treasury Notes, 6.00% - 8.875%, 11/15/97 - 11/15/01
SBC Warburg, Inc., (Maturity Value $233,085)
Collateral: U.S. Treasury Notes, 6.25% - 7.875%, 01/15/98 - 04/30/01
The Nikko Securities Co. International, Inc., (Maturity Value $237,900)
Collateral: U.S. Treasury Notes, 6.25% - 8.75%, 08/15/00 - 04/30/01
UBS Securities, L.L.C., (Maturity Value $237,900)
Collateral: U.S. Treasury Notes, 6.25% - 8.50%, 06/30/98 - 05/31/01 .......................... 1,897,691
----------
Total Investments (Cost $21,409,986) 104.5% ......................................... 20,981,931
Liabilities in Excess of Other Assets(4.5)%........................................... (911,640)
----------
Net Assets 100.0%.................................................................... $20,070,291
==========

At December 31, 1996, the net unrealized depreciation based on the cost of investments
for income tax purposes of $21,409,986 as as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................................. $ 24,297
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................................. (452,352)
----------
Net unrealized depreciation .................................................................. $ (428,055)
==========

PORTFOLIO ABBREVIATIONS:
3CMT - 3 Year Constant Maturity Treasury Index
CMT - 1 Year Constant Maturity Treasury Index
COFI - Eleventh District Cost of Funds Index
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
LIBOR - London Interbank Offered Rate
L.L.C. - Limited Liability Corp.
NACR - National Average Contract Rate
NCI - National Median Cost of Funds Index
PHMS - Prudential Home Mortgage Securities
RFC - Residential Finance Corp.
RTC - Resolution Trust Corp.
SBA - Small Business Administration
TB - Treasury Bill Rate

cFace amount for repurchase agreements is for the underlying collateral.
dSee Note 1(g) regarding joint repurchase agreement.
eSee Note 1(h) regarding securities purchased on a when-issued basis.

The accompanying notes are an integral part of these financial statements.
</TABLE>

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Financial Statements

Statements of Assets and Liabilities
December 31, 1996 (unaudited)

U.S. Government
Adjustable Adjustable
Rate Mortgage Rate Securities
Portfolio Portfolio
-----------------------------
Assets:
Investments in securities:
At identified cost $ 383,148,494 $19,512,295
============ ===========
At value 382,687,631 19,084,240
Receivables from repurchase
agreements, at value and cost 16,442,728 1,897,691
Receivables:
Interest 2,882,924 135,170
Investment securities sold 910,352 --
------------ -----------
Total assets 402,923,635 21,117,101
------------ -----------
Liabilities:
Payables:
Investment securities
purchased:
When-Issued basis (Note 1) 10,128,003 1,012,801
Capital shares repurchased 1,078,514 21,400
Management fees 62,469 8,031
Distributions to shareholders 1,897 507
Accrued expenses
and other liabilities 56,877 4,071
------------ -----------
Total liabilities 11,327,760 1,046,810
------------ -----------
Net assets, at value $ 391,595,875 $20,070,291
============ ===========
Net assets consist of:
Net unrealized depreciation
on investments $ (460,863) $ (428,055)
Net realized loss (137,820,589) (2,743,716)
Capital shares 529,877,327 23,242,062
------------ -----------
Net assets, at value $ 391,595,875 $20,070,291
============ ===========
Shares outstanding 41,796,205 2,038,780
============ ===========
Net asset value per share $9.37 $9.84
============ ===========

Statements of Operations
for the two months ended December 31, 1996 (unaudited)

U.S. Government
Adjustable Adjustable
Rate Mortgage Rate Securities
Portfolio Portfolio
---------------------------
Investment income:
Interest $4,414,876 $227,068
------------ -----------
Expenses:
Management fees (Note 5) 265,558 13,535
Professional fees 10,586 1,066
Trustees' fees and expenses 1,235 67
Custodian fees 752 50
Reports to shareholders 218 198
Other 1,377 378
Management fees waived
by manager (Note 5) (113,719) (6,832)
------------ -----------
Total expenses 166,007 8,462
------------ -----------
Net investment income 4,248,869 218,606
------------ -----------
Net unrealized appreciation
(depreciation) on investments 148,581 (23,904)
------------ -----------
Net increase in net assets
resulting from operations $4,397,450 $194,702
============ --=========

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

<TABLE>
<CAPTION>
ADJUSTABLE RATE SECURITIES PORTFOLIOS

Financial Statements (cont.)

Statements of Changes in Net Assets
for the two months ended December 31, 1996 (unaudited)
and the year ended October 31, 1996

U.S Government Adjustable Rate
Adjustable Rate Mortgage Portfolio Securities Portfolio
-----------------------------------------------
For the two For the For the two For the
months ended year ended months ended year ended
12/31/96 10/31/96 12/31/96 10/31/96
---------- ----------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income .......................................... $ 4,248,869 $ 29,813,817 $ 218,606 $ 1,391,109
Net realized loss from security transactions ................... -- (419,303) -- (37,828)
Net unrealized appreciation (depreciation) on investments ...... 148,581 2,011,283 (23,904) 139,862
---------- ----------- ---------- ----------
Net increase in net assets from operations ................. 4,397,450 31,405,797 194,702 1,493,143
Distributions to shareholders from undistributed
net investment income .......................................... (4,248,869) (29,813,817) (218,606) (1,391,109)
Decrease in net assets from capital share transactions (Note 3) . (14,983,703) (117,962,940) (440,052) (6,646,687)
---------- ----------- ---------- ----------
Net decrease in net assets ................................. (14,835,122) (116,370,960) (463,956) (6,544,653)
Net assets (there is no undistributed net investment
income at beginning or end of the period):
Beginning of period ............................................ 406,430,997 522,801,957 20,534,247 27,078,900
---------- ----------- ---------- ----------
End of period .................................................. $391,595,875 $ 406,430,997 $20,070,291 $20,534,247
========== =========== ========== ==========

The accompanying notes are an integral part of these financial statements.
</TABLE>

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 consists of two
separate portfolios (the Portfolios): 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. The investment objective of each Portfolio is to seek current income.

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:

Portfolio securities listed on a securities exchange or on the NASDAQ for which
market quotations are readily available are valued at the last sale price or, if
there is no sale price, within the range of the most recent quoted bid and asked
prices. Other securities are valued based on a variety of factors, including
yield, risk, maturity, trade activity and recent developments related to the
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. The Portfolios may
utilize a pricing service, bank or broker/dealer experienced in such matters to
perform any of the pricing functions, under procedures approved by the Board of
Trustees (the Board). Securities for which market quotations are not available
are valued in accordance with procedures established by the Board.

b. Income Taxes:

The Portfolios intend 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 shareholders which will be sufficient to relieve the
Portfolios from income and excise taxes. Each Portfolio is treated as a separate
entity in the determination of compliance with the Internal Revenue Code.

c. Security 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. The Portfolios normally declare
dividends from their net investment income daily and distribute monthly. Daily
allocations of net investment income will commence on the date following receipt
of an investor's funds. Dividends declared by the Portfolios equal their net
investment income.

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. Accounting Estimates:

g. Repurchase Agreements:

The Portfolios may enter into a joint repurchase agreement whereby their
uninvested cash balances are 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 Portfolios based on their pro-rata interest. A repurchase
agreement is accounted for as a loan by the Portfolios to the seller,
collateralized by underlying U.S. government securities, which are delivered to
the Portfolios' custodian. The market value, including accrued interest, of the
initial collateralization is required to be at least 102% of the dollar amount
invested by the Portfolios, with the value of the underlying securities marked
to market daily to maintain coverage of at least 100%. At December 31, 1996, all
outstanding repurchase agreements held by the Portfolios had been entered into
on that date.

h. Securities Purchased on a When-Issued Basis or Delayed Delivery Basis:

The Portfolios 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
Portfolios will generally purchase these securities with the intention of
holding the securities, they may sell the securities before the settlement date.
These securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Portfolios have set aside sufficient investment
securities as collateral for these purchase commitments.

2. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At October 31, 1996, for tax purposes, the Portfolios had accumulated capital
loss carryovers as follows:

U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
----------- ------------
Capital loss carryovers
Expiring in: 2000................. $ 45,439,616 $ 57,701
2001............................... 17,182,002 50,908
2002............................... 67,102,060 1,987,888
2003............................... 7,677,608 609,391
2004............................... 419,303 37,828
----------- ------------
$137,820,589 $2,743,716
=========== ============

For tax purposes, the aggregate cost of securities and unrealized depreciation
of the Portfolios are the same as for financial statement purposes at December
31, 1996.

<TABLE>
<CAPTION>
3. TRUST SHARES

At December 31, 1996, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Portfolios' shares
were as follows:

U.S Government Adjustable Rate
Adjustable Rate Mortgage Portfolio Securities Portfolio
-----------------------------------------------
Shares Amount Shares Amount
--------- ---------- --------- ---------
Two months ended December 31, 1996
<S> <C> <C> <C> <C>
Shares sold ....................................................... 1,239,520 $ 11,606,013 93,472 $ 921,682
Shares issued in reinvestment of distributions .................... 453,252 4,246,975 22,130 218,100
Shares redeemed ................................................... (3,293,640) (30,836,691) (160,158) (1,579,834)
--------- ---------- --------- ---------
Net decrease.................................................. (1,600,868) $ (14,983,703) (44,556) $ (440,052)
========= ========== ========= =========
Year ended October 31, 1996
Shares sold ....................................................... 8,516,434 $ 79,504,622 741,450 $ 7,267,077
Shares issued in reinvestment of distributions .................... 3,196,067 29,832,645 141,790 1,391,107
Shares redeemed ................................................... (24,351,072) (227,300,207) (1,560,875) (15,304,871)
--------- ---------- --------- ---------
Net decrease.................................................. (12,638,571) $(117,962,940) (677,635) $ (6,646,687)
========= ========== ========= =========
</TABLE>

4. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the two months ended December 31, 1996, were as follows:

U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
------------------ --------------------
Purchases ............................ $10,088,281 $1,972,100
Sales................................. $ 8,063,664 $1,499,433

5.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. Management Agreement:

Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers),
provides investment advice, administrative services, office space and facilities
to each Portfolio, and receives fees computed monthly based on the average net
assets of each Portfolio as follows:

Annualized Fee Rate Average Daily Net Assets
------------- -------------------------------------------------
0.400% First $5 billion
0.350% Over $5 billion, up to and including $10 billion
0.330% Over $10 billion, up to and including $15 billion

5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)

a. Management Agreement: (cont.)

Fees are further reduced on net assets over $15 billion. Advisers agreed in
advance to waive management fees for the Portfolios aggregating $120,551, for
the two months ended December 31, 1996.

b. Other Affiliates and Related Party Transactions:

At December 31, 1996, 40,856,136 shares of the Mortgage Portfolio were owned by
the Franklin Adjustable U.S. Government Securities Fund, and 940,069 shares were
owned by the Franklin Institutional Adjustable U.S. Government Securities Fund.
This represents 98% and 2%, respectively, of the outstanding shares of the
Mortgage Portfolio.

At December 31, 1996, 1,561,657 shares of the Securities Portfolio were owned by
the Franklin Adjustable Rate Securities Fund and 475,684 shares were owned by
the Franklin Institutional Adjustable Securities Fund. This represents 77% and
23%, respectively, of the outstanding shares of the Securities Portfolio. The
remaining 1,439 shares of the Securities Portfolio were owned by Franklin
Resources, Inc. (Resources).

Certain officers and trustees of the Trust are also officers and/or directors of
Advisers (a wholly-owned subsidiary of Resources) and of the Franklin Investors
Securities Trust and Institutional Fiduciary Trust.

<TABLE>
<CAPTION>
6. FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding throughout the
period by Portfolio are as follows:

Per Share Operating Performance Ratios/Supplemental Data
--------------------------------------------------- -------------------------------------
Ratio of Net
Net Asset Net Realized Distributions Ratio of Investment
Year Value at Net & Unrealized Total From From Net Net Asset Net Assets at Expenses to Income to Portfolio
Ended Beginning Investment Gain (Loss) Investment Investment Value at End Total End of Period Average Net Average Turnover
Oct. 31 of Period Income on Securities Operations Income of Period Return+ (in 000's) Assets++ Net Assets Rate
- ------------------------------------------------------------------------------------------------------------------------------------
U.S. Government Adjustable Rate Mortgage Portfolio
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19931 $10.01 $.544 $(.100) $ .444 $(.544) $ 9.91 4.53% $4,201,411 .30% 5.49% 66.44%
19932 9.91 .313 (.090) .223 (.313) 9.82 2.28 2,130,229 .27* 4.15* 76.55
1994 9.82 .415 (.630) (.215) (.415) 9.19 (2.22) 747,471 .02 4.01 56.43
1995 9.19 .572 .140 .712 (.572) 9.33 7.99 522,802 .18 6.17 20.16
1996 9.33 .589 .040 .629 (.589) 9.37 6.95 406,431 .25 6.31 24.63
19963 9.37 .100 -- .100 (.100) 9.37 1.07 391,596 .25* 6.40* 2.11

Adjustable Rate Securities Portfolio
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19931 10.00 .599 .020 .619 (.599) 10.02 6.36 44,656 -- 5.80 88.92
19932 10.02 .368 .010 .378 (.368) 10.03 3.83 124,309 .11* 4.76* 158.70
1994 10.03 .469 (.340) .129 (.469) 9.69 1.32 41,619 .25 4.55 192.06
1995 9.69 .625 .120 .745 (.625) 9.81 7.94 27,079 .25 6.36 50.29
1996 9.81 .607 .050 .657 (.607) 9.86 6.91 20,534 .25 6.19 46.78
19963 9.86 .106 (.020) .086 (.106) 9.84 0.87 20,070 .25* 6.46* 7.86
</TABLE>

*Annualized
1For the year ended January 31, 1993.
2For the nine months ended October 31, 1993.
3For the two months ended December 31, 1996.
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains, if any, at net asset value.
++During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees and to make 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:

Ratio of
Expenses
to Average
Net Assets
----------
U.S. Government Adjustable Rate Mortgage Portfolio
19931................................................ .42%
19932................................................ .41*
1994 ................................................ .42
1995 ................................................ .43
1996 ................................................ .42
19963................................................ .42*

Ratio of
Expenses
to Average
Net Assets
----------
Adjustable Rate Securities Portfolio
19931................................................ .64%
19932................................................ .47*
1994 ................................................ .43
1995 ................................................ .47
1996................................................. .47
19963................................................ .45*

Franklin Institutional Fiduciary Trust Adjustable Rate Mortgage Semi-Annual
Report - December 31, 1996

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 format the portfolio composition of the Franklin U.S.
Government Adjustable Rate Mortgage Portfolio as a percentage of the fund's
total net assets on December 31, 1996.

U.S. Government Adjustable Rate Mortgage Portfolio
Composition by Issuing Agency
December 31, 1996

FNMA 66%
FHLMC 25%
GNMA 7%
Cash and Equivalents 2%

GRAPHIC MATERIAL (2)

The following line graph hypothetically compares a $1,000,000 investment in
the Franklin Institutional Adjustable U.S. Government Securities Fund, the
Lehman Brothers Short 1-2 Government Index and a six month certificate of
deposit from December 2, 1991 to December 31 1996.

Franklin Institutional Adjustable U.S. Government Securities Fund
Total Return Index Comparison
Based on $1,000,000 Investment (12/2/91 - 12/31/96)

Date LB 6 Month CD Franklin

Dec-91 $1,012,581 $1,003,000 $1,005,763
Jan-92 $1,012,682 $1,006,009 $1,008,016
Feb-92 $1,015,619 $1,009,128 $1,013,300
Mar-92 $1,016,634 $1,012,357 $1,018,313
Apr-92 $1,025,377 $1,015,394 $1,021,505
May-92 $1,033,991 $1,018,440 $1,027,510
Jun-92 $1,042,779 $1,021,394 $1,035,289
Jul-92 $1,053,520 $1,023,947 $1,035,689
Aug-92 $1,061,000 $1,026,507 $1,040,608
Sep-92 $1,069,700 $1,028,868 $1,045,261
Oct-92 $1,064,780 $1,031,337 $1,042,846
Nov-92 $1,063,821 $1,034,225 $1,045,257
Dec-92 $1,072,970 $1,036,810 $1,048,967
Jan-93 $1,082,734 $1,039,299 $1,053,160
Feb-93 $1,090,313 $1,041,689 $1,058,546
Mar-93 $1,093,257 $1,044,085 $1,059,897
Apr-93 $1,099,270 $1,046,486 $1,065,206
May-93 $1,096,852 $1,048,893 $1,066,863
Jun-93 $1,103,652 $1,051,411 $1,072,500
Jul-93 $1,106,301 $1,053,934 $1,076,718
Aug-93 $1,114,045 $1,056,358 $1,080,244
Sep-93 $1,117,499 $1,058,788 $1,079,225
Oct-93 $1,119,957 $1,061,223 $1,077,839
Nov-93 $1,120,965 $1,063,664 $1,070,331
Dec-93 $1,124,888 $1,066,110 $1,067,319
Jan-94 $1,131,188 $1,068,456 $1,070,661
Feb-94 $1,126,211 $1,071,234 $1,066,441
Mar-94 $1,123,282 $1,074,340 $1,058,202
Apr-94 $1,120,250 $1,077,778 $1,052,676
May-94 $1,122,154 $1,081,550 $1,057,195
Jun-94 $1,124,623 $1,085,552 $1,060,598
Jul-94 $1,133,845 $1,089,569 $1,063,904
Aug-94 $1,137,473 $1,093,600 $1,064,243
Sep-94 $1,136,563 $1,097,974 $1,063,579
Oct-94 $1,139,745 $1,103,135 $1,052,939
Nov-94 $1,136,098 $1,108,209 $1,052,260
Dec-94 $1,138,825 $1,113,750 $1,049,380
Jan-95 $1,152,718 $1,119,096 $1,058,105
Feb-95 $1,166,436 $1,124,356 $1,070,544
Mar-95 $1,173,085 $1,129,641 $1,077,181
Apr-95 $1,182,587 $1,134,837 $1,087,672
May-95 $1,199,024 $1,139,830 $1,111,157
Jun-95 $1,205,379 $1,144,732 $1,107,339
Jul-95 $1,211,045 $1,149,654 $1,115,457
Aug-95 $1,217,705 $1,154,597 $1,123,652
Sep-95 $1,223,185 $1,159,562 $1,131,701
Oct-95 $1,232,237 $1,165,012 $1,136,576
Nov-95 $1,241,355 $1,169,905 $1,146,760
Dec-95 $1,250,045 $1,174,702 $1,150,702
Jan-96 $1,259,920 $1,179,401 $1,159,171
Feb-96 $1,257,148 $1,184,000 $1,160,348
Mar-96 $1,257,902 $1,188,736 $1,167,762
Apr-96 $1,260,292 $1,193,610 $1,168,754
May-96 $1,264,073 $1,198,504 $1,172,487
Jun-96 $1,272,543 $1,203,538 $1,184,628
Jul-96 $1,277,633 $1,208,713 $1,188,629
Aug-96 $1,282,871 $1,213,789 $1,191,346
Sep-96 $1,293,134 $1,218,887 $1,200,488
Oct-96 $1,306,065 $1,224,007 $1,213,151
Nov-96 $1,314,424 $1,229,147 $1,219,427
Dec-96 $1,316,527 $1,234,310 $1,225,768

GRAPHIC MATERIAL (3)
The following line graph hypothetically compares a $1,000,000 investment in
the Franklin Institutional Adjustable Rate Securities Fund, the Lehman
Brothers Short 1-2 Government Index, and a six month certificate of deposit
from January 1, 1992 to December 31, 1996.

Franklin Institutional Adjustable Rate Securities Fund
Total Return Index Comparison
Based on $1,000,000 Investment (1/3/92 - 12/31/96)
Date LB 6 Month CD Franklin

Jan-92 $1,000,090 $1,002,710 $ 1,000,000
Feb-92 $1,002,991 $1,005,818 $ 1,002,902
Mar-92 $1,003,994 $1,009,037 $ 1,006,473
Apr-92 $1,012,628 $1,012,064 $ 1,015,036
May-92 $1,021,134 $1,015,100 $ 1,019,506
Jun-92 $1,029,814 $1,018,044 $ 1,028,229
Jul-92 $1,040,421 $1,020,589 $ 1,031,395
Aug-92 $1,047,808 $1,023,140 $ 1,038,848
Sep-92 $1,056,400 $1,025,494 $ 1,045,265
Oct-92 $1,051,540 $1,027,955 $ 1,047,029
Nov-92 $1,050,594 $1,030,833 $ 1,050,643
Dec-92 $1,059,629 $1,033,410 $ 1,057,011
Jan-93 $1,069,272 $1,035,890 $ 1,062,116
Feb-93 $1,076,757 $1,038,273 $ 1,070,078
Mar-93 $1,079,664 $1,040,661 $ 1,075,909
Apr-93 $1,085,602 $1,043,054 $ 1,081,495
May-93 $1,083,214 $1,045,453 $ 1,084,023
Jun-93 $1,089,930 $1,047,963 $ 1,087,528
Jul-93 $1,092,545 $1,050,478 $ 1,092,991
Aug-93 $1,100,193 $1,052,894 $ 1,097,077
Sep-93 $1,103,604 $1,055,315 $ 1,100,207
Oct-93 $1,106,032 $1,057,743 $ 1,102,842
Nov-93 $1,107,027 $1,060,175 $ 1,104,743
Dec-93 $1,110,902 $1,062,614 $ 1,108,983
Jan-94 $1,117,123 $1,064,952 $ 1,111,629
Feb-94 $1,112,207 $1,067,720 $ 1,109,156
Mar-94 $1,109,316 $1,070,817 $ 1,099,484
Apr-94 $1,106,321 $1,074,243 $ 1,099,312
May-94 $1,108,201 $1,078,003 $ 1,103,342
Jun-94 $1,110,639 $1,081,992 $ 1,105,751
Jul-94 $1,119,747 $1,085,995 $ 1,110,743
Aug-94 $1,123,330 $1,090,013 $ 1,116,963
Sep-94 $1,122,431 $1,094,374 $ 1,114,187
Oct-94 $1,125,574 $1,099,517 $ 1,117,521
Nov-94 $1,121,972 $1,104,575 $ 1,118,366
Dec-94 $1,124,665 $1,110,098 $ 1,122,392
Jan-95 $1,138,386 $1,115,426 $ 1,129,077
Feb-95 $1,151,933 $1,120,669 $ 1,139,293
Mar-95 $1,158,499 $1,125,936 $ 1,145,098
Apr-95 $1,167,882 $1,131,115 $ 1,155,015
May-95 $1,184,116 $1,136,092 $ 1,168,400
Jun-95 $1,190,392 $1,140,977 $ 1,175,969
Jul-95 $1,195,987 $1,145,883 $ 1,178,479
Aug-95 $1,202,565 $1,150,811 $ 1,189,575
Sep-95 $1,207,976 $1,155,759 $ 1,195,751
Oct-95 $1,216,915 $1,161,191 $ 1,204,488
Nov-95 $1,225,920 $1,166,068 $ 1,211,917
Dec-95 $1,234,502 $1,170,849 $ 1,222,135
Jan-96 $1,244,254 $1,175,533 $ 1,228,522
Feb-96 $1,241,517 $1,180,117 $ 1,228,900
Mar-96 $1,242,262 $1,184,838 $ 1,234,068
Apr-96 $1,244,622 $1,189,695 $ 1,239,078
May-96 $1,248,356 $1,194,573 $ 1,241,180
Jun-96 $1,256,720 $1,199,590 $ 1,251,140
Jul-96 $1,261,747 $1,204,749 $ 1,256,238
Aug-96 $1,266,920 $1,209,809 $ 1,261,219
Sep-96 $1,277,055 $1,214,890 $ 1,270,351
Oct-96 $1,289,826 $1,219,992 $ 1,286,020
Nov-96 $1,298,081 $1,225,116 $ 1,294,231
Dec-96 $1,300,158 $1,230,262 $ 1,296,949

[OBJECT OMITTED]

January 15, 1997

Dear Shareholder:

We are pleased to bring you the semi-annual report for the Franklin Cash
Reserves Fund (the Fund), for the period ended December 31, 1996.

The Fund is a series of Franklin's Institutional Fiduciary Trust, which is
offered exclusively to qualified retirement plan participants and other
institutional investors, including corporations, banks, savings and loan
associations, and government entities. Its investment objective is to seek high
current income, consistent with capital preservation and liquidity. To achieve
this objective, the Fund invests all of its assets in The Money Market Portfolio
(the Portfolio), whose investment objective is the same as the Fund's. The
Fund's underlying portfolio is managed to maintain a stable net asset value of
$1.00 per share, although there is no guarantee that it will accomplish this
goal.

During the reporting period, the economy achieved moderate growth without the
threat of rising inflation, which eliminated the need for policy actions by the
Federal Reserve. As a result, the federal funds rate target remained unchanged.
Moreover, the 90-day Treasury bill yield fluctuated narrowly, from a low of
5.02% to a high of 5.28%. Within this environment, our managers adhered to a
disciplined investment strategy, enabling 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 make every
effort to employ this strategy going forward.

Thank you for your investment in the Franklin Cash Reserves Fund. We look
forward to serving your investment needs in the months and years ahead.

Sincerely,

Charles B. Johnson

Chairman of the Board

OVERVIEW OF THE ECONOMY
Through the second half of 1996, U.S. economic growth remained positive, albeit
at an unsteady pace. As the third quarter ended, the unemployment rate remained
near a cyclical low, causing many bond investors to speculate that further
economic growth would push up labor costs, which would eventually be passed on
to consumers in the form of higher prices. Consumers, meanwhile, did not spend
as much in the third quarter as they had earlier in the year. Consequently,
third quarter GDP growth fell to 2.1%, while real final sales posted an increase
of only 0.4%. This allowed interest rates to move lower during the fourth
quarter, as inflation expectations declined.

Stable inflation rates, consumer credit problems, and lower-than-expected
economic growth from major U.S. trading partners, such as Germany, Japan, and
Mexico, kept a cap on interest rates during most of the period, as investors
speculated about the future direction of the Federal Reserve's actions. For the
period, the Federal Reserve did not raise short-term interest rates. In August,
Chairman Alan Greenspan testified before Congress that the Federal Reserve
expected economic growth to slow in the second half of 1996, raising hopes that
it would achieve an economic "soft landing" without raising rates. At this time,
it appears that the Federal Reserve has achieved its objective.

GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT

Looking forward, the economy appears headed for more of the same, with most
economists predicting slow growth and low inflation. If this forecast is
correct, the Federal Reserve will have little reason to make additional policy
moves, which argues for continued, stable short-term rates. Clearly, any changes
in monetary policy will depend on the economy's response in the coming months.
If reports suggest that the economy is weakening, rate hikes will be
unnecessary. On the other hand, if the economy strengthens, the Federal Reserve
may be forced to raise short-term interest rates.

Tom Runkel is a portfolio manager for Franklin's taxable money market funds. He
joined Franklin in 1983 and served as an equity and money market trader from
1985 to 1989.

Picture Omitted

Thomas J. Runkel, CFA

Portfolio Manager

We will continue to invest the Portfolio's assets in securities that are among
the highest quality available to money market portfolios. Since the Fund's
objective is to provide shareholders with a high quality, conservative
investment, we do not invest in leveraged derivatives or other potentially
volatile securities that we believe involve undue risk.

FRANKLIN CASH RESERVES FUND

The Franklin Cash Reserves Fund's investment objective is to provide high
current income, consistent with capital preservation and liquidity. It seeks to
achieve this by investing all of its assets in The Money Market Portfolio, whose
investment objective is the same as the Fund's. The Portfolio, in turn, invests
in various money market instruments such as:

U.S. government and federal agency obligations1
Certificates of deposit
Banker's acceptances
High grade commercial paper
High grade short-term corporate obligations
Repurchase agreements collateralized by
U.S. government securities1

The chart below illustrates the Portfolio's composition on December 31, 1996.

GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT

The Portfolio's holdings are limited to money market instruments within the two
highest rating categories assigned by Standard & Poor's Corporation or Moody's
Investors Service, or in non-rated securities determined by the managers to be
of comparable quality. In addition, the Portfolio invests 100% of its assets in
securities with remaining maturities of 397 days or less. Such relatively short
maturities allow the Portfolio to adjust quickly to changing interest rates.
Security Selection Criteria Portfolio managers employ specific guidelines for
determining buy-and-sell opportunities. For corporate paper, the selection
process generally includes the following criteria:

Issuer should have a long-term debt rating of "A" or higher from at least
two major credit rating agencies

Cash flow from operations to short-term debt ratio should be 100% or higher

Short-term debt-to-capital ratio should be 15% or lower

Issuer's standard deviation of cash flow growth should be 8.5 or lower

Profitability ratios should be positive and trending higher

Total debt-to-capital ratio should be 35% or lower

Through investing in a portfolio of high quality, short-term securities, the
Franklin Cash Reserves Fund is designed to provide a high level of credit safety
combined with a stable net asset value.2 As a result, investors often use the
Fund for qualified retirement assets, as well as monies held in fiduciary,
advisory and custodial capacities. Its competitive yield has also made it an
attractive alternative cash management tool for corporations, banks, savings and
loan associations and trust companies.3

PERFORMANCE SUMMARY
During the second half of 1996, the federal funds rate target remained
unchanged. Since we maintained a relatively neutral average weighted maturity,
the Fund's 7-day yield reflected this climate. The Fund started the period with
a 7-day yield of 4.90% on June 30, 1996 and finished at 5.02%, as of December
31, 1996.4 The Fund's average weighted maturity was relatively stable,
decreasing slightly from 54 days on June 30, 1996, to 48 days on December 31,
1996.

The following are the Fund's total returns and weekly 7-day yields.5 Of course,
past performance cannot guarantee future results.

GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT

Performance Figures

Period ended December 31, 1996

7-Day Current Yield:4 5.02%
7-Day Effective Yield:4 5.15%
Average Weighted Maturity: 48 days

1. U.S. government securities owned by the Portfolio or held under repurchase
agreement, but not shares of the Franklin Cash Reserves Fund, are guaranteed by
the U.S. government as to the timely payment of principal and interest.

2. An investment in the Franklin Cash Reserves Fund is neither insured nor
guaranteed by the U.S. government or by any other entity or institution. There
is no assurance that the $1.00 share price will be maintained.

3. Regulated investors should review their applicable investment restrictions to
determine whether the Fund is a permissible investment.

4. Annualized and effective yields are for the 7-day period shown and reflect
fluctuations in interest rates on portfolio investments and Fund expenses. Past
performance does not guarantee future results. Franklin Advisers, Inc., the
administrator and manager of the underlying portfolio, has agreed in advance to
waive a portion of its management fees and make payments of certain other
expenses to limit total operating expenses to no more than 0.49% per annum of
average net assets until at least June 30, 1997. Without these reductions, the
Fund's current and effective 7-day yields for the period would have been 4.84%
and 4.96%, respectively. Franklin Advisers, Inc. may discontinue these
arrangements at any time afterJune 30, 1997, upon notice to the Fund's Board of
Trustees.

5. Source for the Lipper Institutional Money Market Funds Index is Lipper
Analytical Services, Inc. As of December 1996, there were 171 funds in the
institutional money market category. This index is unmanaged, and one cannot
invest directly in an index. Total return calculations show the change in the
value of an investment over the periods indicated and assume reinvestment of
dividends and capital gains, if any, at net asset value.

INSTITUTIONAL FIDUCIARY TRUST

Statement of Investments in Securities and Net Assets, December 31, 1996
(unaudited)
<TABLE>
<CAPTION>

Value
Shares Franklin Cash Reserves Fund (Note 1)
Mutual Funds 100.1%

<C> <S> <C>
51,554,346 The Money Market Portfolio (Note 1).................................................. $51,554,346
-------------
Total Investments (Cost $51,554,346) 100.1% .............................. 51,554,346
Liabilities in Excess of Other Assets (0.1)%.............................. (36,941)
-------------
Net Assets 100.0% ........................................................ $51,517,405
=============

</TABLE>
At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.

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

INSTITUTIONAL FIDUCIARY TRUST

Franklin Cash Reserves Fund

Financial Statements

Statement of Assets and Liabilities
December 31, 1996 (unaudited)

Assets:
Investments in securities, at value
and cost $51,554,346
Cash 509
--------------
Total assets 51,554,855
--------------

Liabilities:
Payables:
Distribution fees 14,845
Shareholder servicing costs 315
Accrued expenses and other liabilities 22,290
--------------
Total liabilities 37,450
--------------
Net assets (equivalent to $1.00 per
share based on 51,517,405 shares
of capital stock outstanding) $51,517,405
==============

Statement of Operations
for the six months ended December 31, 1996 (unaudited)

Investment income:
Dividends $1,144,192
--------------

Expenses:
Administration fees (Note 4) $ 53,769
Distribution fees (Note 4) 45,397
Shareholder servicing costs
(Note 4) 2,906
Registration fees 13,606
Reports to shareholders 8,843
Professional fees 2,969
Trustees' fees and expenses 1,023
Administration fees waived by
manager (Note 4) (53,769)
--------------

Total expenses 74,744
--------------

Net investment income $1,069,448
==============

Statements of Changes in Net Assets for the six months ended December 31, 1996
(unaudited) and the year ended June 30, 1996

Six Months
ended Year ended
12/31/96 6/30/96
-------------------
Increase (decrease) in net assets:
Operations:
Net investment income $ 1,069,448 $ 1,251,420
Distributions to
shareholders from net
investment income (1,069,448) (1,251,420)
Increase in net assets
from capital share
transactions (Note 2) 21,136,348 15,835,753
--------- ----------
Net increase in
net assets 21,136,348 15,835,753
Net assets (there is no
undistributed net investment
income at beginning or
end of period):
Beginning of period 30,381,057 14,545,304
---------- ---------
End of period $51,517,405 $30,381,057
========== =========

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

INSTITUTIONAL FIDUCIARY TRUST

Franklin Cash Reserves Fund

Notes to Financial Statements (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

Institutional Fiduciary Trust (the Trust) is an open-end, management investment
company (mutual fund), registered under the Investment Company Act of 1940, as
amended. The Trust consists of seven separate and distinct funds. This report
pertains only to the Franklin Cash Reserves Fund (the Fund), a diversified
series of the Trust. Each of the Funds issues a separate series of the Trust's
shares and maintains a totally separate and distinct investment portfolio. The
Fund's investment objective is high current income consistent with capital
preservation and liquidity.

The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is a no-load, open-end, diversified management investment
company having the same investment objective as the Fund. The financial
statements of the Portfolio, including the Statement of Investments in
Securities and Net Assets, are included elsewhere in this report and should be
read in conjunction with the Fund's financial statements.

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

a. Security Valuation:

The Fund holds Portfolio shares that are valued at its proportionate interest in
the net asset value of the Portfolio. At December 31, 1996, the Fund owned 3.37%
of the Portfolio.

b. Income Taxes:

The Fund 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.

c. Security Transactions:

d. Investment Income, Expenses and Distributions:

Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distribution (as defined above),
and are payable to shareholders of record as of the close of business that day.
Such distributions are automatically reinvested monthly in additional shares of
the Fund at net asset value.

e. Expense Allocation:

f. Accounting Estimates:

2. TRUST SHARES

At December 31, 1996, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in the Fund's shares at $1.00 per
share were as follows:

Six Months
ended Year ended
December 31, 1996 June 30, 1996
------------ -----------
Shares sold.................................... $ 87,861,021 $ 146,315,356
Shares issued in reinvestment of distributions. 1,066,265 1,232,299
Shares redeemed................................ (67,790,938) (131,711,902)
------------ -----------
Net increase................................... $ 21,136,348 $ 15,835,753
============ ===========

3. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities for the six months ended December 31, 1996
aggregated $74,909,387 and $53,760,296, respectively.

4. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. Administration Agreement:

Under the terms of an administration agreement, Franklin Advisers, Inc.
(Advisers), provides various administrative, statistical, and other services,
and receives fees computed monthly based on the Fund's average daily net assets
at an annualized rate of 0.25%.

For the six months ended December 31, 1996, Advisers agreed in advance to waive
the administration fees, as noted in the Statement of Operations.

b. Shareholder Services Agreement:

Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Fund pays costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Fund for
the six months ended December 31, 1996 are noted in the Statement of Operations,
all of which was paid to Investor Services.

c. Distribution Plans:

Under the terms of a distribution plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plan), the Fund reimburses Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to 0.25% per annum of the
Fund's average daily net assets for the costs incurred in the promotion,
offering and marketing of the Fund's shares. The Plan does not permit nor
require payments of excess costs after termination.

d. Other Affiliates and Related Party Transactions:

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

5. FINANCIAL HIGHLIGHTS

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

Six Months
ended Year ended June 30,
December 31, 1996 1996 1995
------------ --------------
Per Share Operating Performance
<S> <C> <C> <C>
Net asset value at beginning of period................................ $1.00 $1.00 $1.00
Net investment income................................................. .025 .052 .052
Distributions from net investment income.............................. (.025) (.052) (.052)
------------ ------- -------
Net asset value at end of period...................................... $1.00 $1.00 $1.00
============ ======= =======
Total Return*......................................................... 2.53% 5.35% 5.34%

Ratios/Supplemental Data
Net assets at end of period (in 000's)................................ $51,517 $30,381 $14,545
Ratio of expenses to average net assets++**........................... .50%+ .49% .40%
Ratio of net investment income to average net assets.................. 5.04%+ 5.10% 5.69%

</TABLE>
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains at net asset value.
+Annualized.
++Includes the Fund's share of the Portfolio's allocated expenses.
+++For the six months ended December 1996.
**During the periods indicated, Advisers agreed in advance to waive a portion of
its administration fees and the management fees of the portfolio. Had such
action not been taken, the Fund's ratio of expenses to average net assets would
have been as follows:

Ratio of Expenses
to Average Net Assets++
1995...................... 0.79%

1996...................... 0.73

1996+++................... 0.77+

THE MONEY MARKET PORTFOLIOS

Statement of Investments in Securities and Net Assets, December 31, 1996
(unaudited)

Face Value
Amount The Money Market Portfolio (Note 1)
a Short Term Investments 85.5%

Certificates of Deposit35.7%
<S> <C> <C>
$32,000,000 ABN-AMRO Bank NV, Chicago Branch, 5.53% - 5.76%, 03/06/97 - 03/18/97 ......... $ 31,997,862
25,000,000 Australia & NZ Banking Group, New York Branch, 5.37%, 02/12/97 ............... 25,000,000
45,000,000 Bank of Nova Scotia, Portland Branch, 5.47% - 5.58%, 01/24/97 - 03/20/97 ..... 45,000,000
25,000,000 Banque Nationale de Paris, New York Branch, 5.37%, 01/14/97 .................. 25,000,000
25,000,000 Bayerische Landesbank, New York Branch, 5.41%, 05/07/97 ...................... 25,000,670
25,000,000 Bayerische Vereinsbank, New York Branch, 5.75%, 01/07/97 ..................... 25,000,000
50,000,000 Credit Agricole, Chicago Branch, 5.40% - 5.47%, 05/05/97 - 05/27/97 .......... 50,000,000
25,000,000 Den Danske Bank, New York Branch, 5.37%, 02/05/97 ............................ 25,000,120
45,000,000 Deutsche Bank, AG, New York Branch, 5.39% - 5.76%, 01/02/97 - 04/07/97 ....... 45,000,661
15,000,000 Dresdner Bank, AG, New York Branch, 4.94%, 01/06/97 .......................... 14,998,629
50,000,000 National Westminster Bank, Plc., New York Branch, 5.51% - 5.80%,
01/27/97 - 03/10/97 ......................................................... 50,000,000
25,000,000 Rabobank Nederland, NV, New York Branch, 5.46%, 04/18/97 ..................... 25,000,729
45,000,000 Societe Generale, New York Branch, 5.37% - 5.38%, 01/08/97 - 02/18/97 ........ 45,000,000
70,000,000 Svenska Handelsbanken, New York Branch, 5.38% - 5.48%, 03/21/97 - 03/28/97 ... 70,001,588
45,000,000 Westpac Banking Corp., New York Branch, 5.40% - 5.43%, 03/11/97 - 05/12/97 ... 45,000,000
-------------
Total Certificates of Deposit (Cost $547,000,259)....................... 547,000,259
-------------
Commercial Paper49.8%
42,752,000 Abbey National North America, 5.28% - 5.32%, 03/11/97 - 03/17/97 ............. 42,297,795
50,000,000 American Express Credit Corp., 5.28% - 5.30%, 01/28/97 - 03/19/97 ............ 49,618,292
20,000,000 Ameritech Corp., 5.34%, 03/07/97 ............................................. 19,807,167
25,000,000 ANZ (DE), Inc., 5.27%, 03/24/97 .............................................. 24,699,903
45,000,000 Associates Corp. of North America, 5.28% - 5.32%, 01/22/97 - 03/26/97 ........ 44,629,933
40,000,000 BIL North America, Inc., 5.33%, 01/07/97 - 01/15/97 .......................... 39,934,855
20,000,000 Canadian Imperial Holdings, Inc., 5.317%, 01/06/97 ........................... 19,985,231
30,000,000 Cheltnham & Gloucester, Plc., 5.30% - 5.32%, 01/15/97 - 03/24/97 ............. 29,737,867
25,000,000 CIESCO, L.P., 5.32%, 01/10/97 ................................................ 24,966,750
30,000,000 Commonwealth Bank of Australia, 5.325% - 5.37%, 01/21/97 - 03/17/97 .......... 29,828,958
70,000,000 General Electric Capital Corp., 5.29% - 5.59%, 02/06/97 - 05/02/97 ........... 69,275,095
70,000,000 Generale Bank, Inc., 5.325% - 5.43%, 01/03/97 - 03/12/97 ..................... 69,551,313
50,000,000 Goldman Sachs Group, L.P., 5.34% - 5.35%, 03/14/97 - 03/20/97 ................ 49,443,208
15,000,000 Kingdom of Sweden, 5.32%, 01/21/97 ........................................... 14,955,666
70,000,000 Merrill Lynch & Co., Inc., 5.30% - 5.33%, 02/19/97 - 03/13/97 ................ 69,363,438
50,000,000 Morgan Stanley Group, Inc., 5.34%, 03/18/97 - 03/25/97 ....................... 49,410,375
45,345,000 National Rural Utilities Cooperative Finance Corp., 5.31%, 01/09/97 - 01/17/97 45,261,992
45,000,000 Toyota Motor Credit Corp., 5.31% - 5.32%, 01/08/97 - 01/16/97 ................ 44,923,934
25,000,000 Westpac Capital Corp., 5.32%, 01/13/97 ....................................... 24,955,668
Total Commercial Paper (Cost $762,647,440).............................. 762,647,440
-------------
Total Investments before Repurchase Agreements (Cost $1,309,647,699).... 1,309,647,699
-------------
$ 14,810,000 Bear, Stearns & Co., Inc., 6.65%, 01/02/97 (Maturity Value $15,005,542)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 ............................ $ 15,000,000
14,815,000 CIBC Wood Gundy Securities Corp., 6.70%, 01/02/97 (Maturity Value $15,005,583)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 ............................ 15,000,000
87,793,000 J.P. Morgan Securities, Inc., 6.60%, 01/02/97 (Maturity Value $85,971,511)
Collateral: U.S. Treasury Bills, 01/16/97 - 12/11/97
U.S. Treasury Notes, 6.75%, 05/31/99 ......................................... 85,940,000
87,225,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97 (Maturity Value $84,964,633)
Collateral: U.S. Treasury Notes, 5.75%, 12/31/98 ............................ 84,935,000
13,910,000 UBS Securities, L.L.C., 6.75%, 01/02/97 (Maturity Value $15,005,625)
Collateral: U.S. Treasury Notes, 7.875%, 08/15/01 ........................... 15,000,000
-------------
Total Receivables from Repurchase Agreements (Cost $215,875,000)........ 215,875,000
Total Investments (Cost $1,525,522,699)99.6% ....................... 1,525,522,699
Other Assets and Liabilities, Net0.4%............................... 5,681,264
-------------
Net Assets100.0% ................................................... $1,531,203,963
=============

</TABLE>

At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statements or income tax purposes.

PORTFOLIO ABBREVIATIONS:
L.L.C. - Limited Liability Corp.
L.P. - Limited Partnership

aCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
bFace amount for repurchase agreements is for the underlying collateral.

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

THE MONEY MARKET PORTFOLIOS

Statement of Investments in Securities and Net Assets, December 31, 1996
(unaudited)
<TABLE>
<CAPTION>

Face Value
Amount The U.S. Government Securities Money Market Portfolio (Note 1)
aShort Term Government Securities 100.1%

Government Securities14.7%
<S> <C> <C>
$40,000,000 U.S. Treasury Bills, 5.05% - 5.135%, 02/06/97 - 05/22/97 (Cost $39,497,317) .... $ 39,497,317
-------------
bReceivables from Repurchase Agreements 85.4%
10,116,000 Aubrey G. Lanston & Co., Inc., 6.80%, 01/02/97 (Maturity Value $10,503,967)
Collateral: U.S. Treasury Notes, 7.875%, 01/15/98 ............................. 10,500,000
10,755,000 B.A. Securities, Inc., 6.20%, 01/02/97 (Maturity Value $10,503,617)
Collateral: U.S. Treasury Notes, 5.25%, 12/31/97 .............................. 10,500,000
10,335,000 Bear, Stearns & Co., Inc., 6.65%, 01/02/97 (Maturity Value $10,503,879)
Collateral: U.S. Treasury Notes, 6.50%, 08/31/01 .............................. 10,500,000
10,730,000 Barclays de Zoete Wedd Securities, Inc., 6.50%, 01/02/97 (Maturity Value $10,503,792)
Collateral: U.S. Treasury Notes, 5.75%, 12/31/98 .............................. 10,500,000
10,500,000 Chase Securities, Inc., 6.40%, 01/02/97 (Maturity Value $10,503,733)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/97 ............................. 10,500,000
10,370,000 CIBC Wood Gundy Securities Corp., 6.70%, 01/02/97 (Maturity Value $10,503,908)
Collateral: U.S. Treasury Notes, 6.25%, 07/31/98 .............................. 10,500,000
9,555,000 Citicorp Securities, Inc., 6.75%, 01/02/97 (Maturity Value $10,503,938)
Collateral: U.S. Treasury Notes, 8.75%, 08/15/00 .............................. 10,500,000
24,500,000 J.P. Morgan Securities, Inc., 6.50%, 01/02/97 (Maturity Value $24,508,847)
Collateral: U.S. Treasury Bills, 01/02/97 ..................................... 24,500,000
40,000,000 J.P. Morgan Securities, Inc., 6.60%, 01/02/97 (Maturity Value $40,014,667)
Collateral: U.S. Treasury Bills, 01/02/97 ..................................... 40,000,000
35,000,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97 (Maturity Value $35,012,211)
Collateral: U.S. Treasury Bills, 01/02/97 ..................................... 35,000,000
24,075,000 Morgan Stanley & Co., Inc., 6.28%, 01/02/97 (Maturity Value $24,083,400)
Collateral: U.S. Treasury Bills, 01/02/97 ..................................... 24,075,000
10,355,000 Nomura Securities International, Inc., 6.00%, 01/02/97 (Maturity Value $10,503,500)
Collateral: U.S. Treasury Notes, 6.75%, 06/30/99 .............................. 10,500,000
10,475,000 SBC Warburg, Inc., 6.80%, 01/02/97 (Maturity Value $10,503,967)
Collateral: U.S. Treasury Notes, 6.00%, 08/31/97 .............................. 10,500,000
10,539,000 UBS Securities, L.L.C., 6.75%, 01/02/97 (Maturity Value $10,503,938)
Collateral: U.S. Treasury Notes, 4.75%, 02/15/97 .............................. 10,500,000
-------------
Total Receivables from Repurchase Agreements (Cost $228,575,000).......... 228,575,000
-------------
Total Investments (Cost $268,072,317)100.1% .......................... 268,072,317
Liabilities in excess of Other Assets, Net(0.1%)...................... (319,309)
-------------
Net Assets 100.0%.................................................... $267,753,008
=============

</TABLE>
At December 31, 1996, there was no unrealized appreciation or depreciation for
financial statement or income tax purposes.

PORTFOLIO ABBREVIATIONS:
L.L.C. - Limited Liability Corp.
aCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed dates or upon maturity.
bFace amount for repurchase agreements is for the underlying collateral.

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

THE MONEY MARKET PORTFOLIOS

Financial Statements

Statement of Assets and Liabilities
December 31, 1996 (unaudited)

The U.S.
Government
The Money Securities Money
Market PortfolioMarket Portfolio
----------- -----------
Assets:
Investment in
securities, at
value and cost $1,309,647,699 $ 39,497,317
Receivables from
repurchase
agreements, at
value and cost 215,875,000 228,575,000
Cash 668,468 7,545
Receivables:
Interest 5,974,682 41,181
----------- -----------
Total assets 1,532,165,849 268,121,043
----------- -----------
Liabilities:
Payables:
Capital shares
repurchased 764,821 345,520
Management fees 186,603 11,289
Distributions to
shareholders -- 252
Accrued expenses
and other liabilities 10,462 10,974
----------- -----------
Total liabilities 961,886 368,035
----------- -----------
Net assets, at value $1,531,203,963 $267,753,008
=========== ===========
Shares outstanding 1,531,203,963 267,753,008
=========== ===========
Net asset value
per share $1.00 $1.00
=========== ===========

Statement of Operations
for the six months ended December 31, 1996 (unaudited)

The U.S.
The Money Government
Market Securities Money
Market PortfolioMarket Portfolio
---------- -----------
Investment income:
Interest $45,035,668 $7,410,912
---------- -----------
Expenses:
Management fees
(Note 5) 1,235,945 208,325
Reports to shareholders 24,798 5,341
Professional fees 21,896 4,698
Custodian fees 12,332 2,136
Trustees' fees and
expenses 6,196 884
Other 999 12,960
Management fees
waived by manager (75,306) (27,952)
---------- -----------
Total expenses 1,226,860 206,392
---------- -----------
Net investment
income 43,808,808 7,204,520
---------- -----------
Net realized gain
on investments 230 3,533
---------- -----------
Net increase in net
assets resulting
from operations $43,809,038 $7,208,053
========== ===========

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

THE MONEY MARKET PORTFOLIOS

Financial Statements (cont.)

Statements of Changes in Net Assets for the six months ended December 31, 1996
(unaudited) and the year ended June 30, 1996
<TABLE>
<CAPTION>

The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------ -----------------------
Six Months Year Six Months Year
ended 12/31/96 ended 6/30/96 ended 12/31/96 ended 6/30/96
----------- ----------- ---------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income...................... $ 43,808,808 $ 79,011,040 $ 7,204,520 $ 17,554,934
Net realized gain from security transactions 230 -- 3,533 683
----------- ----------- ---------------------
Net increase in net assets resulting
from operations............................ 43,809,038 79,011,040 7,208,053 17,555,617
Distributions to shareholders from
undistributed net investment income........ (43,809,038)a (79,011,040) (7,208,053)b (17,555,617)c
Increase (decrease) in net assets from
capital share transactions (Note 2)........ (18,881,284) 244,510,834 (17,948,096) (188,953,282)
----------- ----------- ---------------------
Net increase (decrease) in net assets....... (18,881,284) 244,510,834 (17,948,096) (188,953,282)
Net assets (there is no undistributed
net investment income at beginning or
end of the period):
Beginning of period ...................... 1,550,085,247 1,305,574,413 285,701,104 474,654,386
----------- ----------- ---------------------
End of period ............................ $1,531,203,963 $1,550,085,247 $267,753,008 $285,701,104
=========== =========== =====================

aDistributions were increased by net realized gain from security transactions of $230.
bDistributions were increased by net realized gain from security transactions of $3,533.
cDistributions were increased by net realized gain from security transactions of $683.
</TABLE>
The accompanying notes are an integral part of these financial statements.

THE MONEY MARKET PORTFOLIOS

Notes to Financial Statements (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

The Money Market Portfolios (Money Market) is a no-load, open-end, diversified
management investment company (mutual fund), registered under the Investment
Company Act of 1940, as amended. The Money Market has two portfolios (the
Portfolios) consisting of The Money Market Portfolio and The U.S. Government
Securities Money Market Portfolio. The Portfolios' investment objective is high
current income consistent with capital preservation and liquidity. Each of the
Portfolios issues a separate series of shares and maintains a totally separate
and distinct investment portfolio. The shares of Money Market are issued in
private placements and are thus exempt from registration under the Securities
Act of 1933.

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

a. Security Valuation:

Securities in the Portfolios are valued at amortized cost, which approximates
value. Each of the Portfolios must maintain a dollar weighted average maturity
of 90 days or less and only purchase instruments having remaining maturities of
397 days or less. If the Portfolio has a remaining weighted average maturity of
greater than 90 days, the Portfolio will be stated at value based on recorded
closing sales on a national securities exchange or, in the absence of a recorded
sale, within the range of the most recent quoted bid and asked prices. The
trustees have established procedures designed to stabilize, to the extent
reasonably possible, each Portfolio's price per share as computed for the
purpose of sales and redemptions at $1.00.

b. Income Taxes:

Each Portfolio 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 shareholders which will be sufficient to relieve
the Portfolios from income and excise taxes. Each Portfolio is treated as a
separate entity in the determination of compliance with the Internal Revenue
Code.

c. Security Transactions:

d. Investment Income, Expenses and Distributions:

Distributions are normally declared each day the New York Stock Exchange is open
for business, equal to the total available for distributions (as defined above),
and are payable to shareholders of record as of the close of business that day.
Such distributions are automatically reinvested monthly in additional shares of
the Portfolio at net asset value.

e. Expense Allocation:

Common expenses incurred by Money Market 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. Accounting Estimates

1. SIGNIFICANT ACCOUNTING POLICIES (cont.)

g. Repurchase Agreements

The Portfolios may enter into repurchase agreements with government securities
dealers recognized by the Federal Reserve Board and/or member banks of the
Federal Reserve System.

A repurchase agreement is accounted for as a loan by the Portfolios to the
seller, collateralized by underlying U.S. government securities, which are
delivered to the Portfolios' custodian. The market value, including accrued
interest, of the initial collateralization is required to be at least 102% of
the dollar amount invested by the Portfolios, with the value of the underlying
securities marked to market daily to maintain coverage of at least 100%. At
December 31, 1996, all outstanding repurchase agreements held by the Portfolios
had been entered into on that date.

2. TRUST SHARES

At December 31, 1996, there was an unlimited number of $0.01 par value shares of
beneficial interest authorized. Transactions in each of the Portfolios' shares
at $1.00 per share for the six months ended December 31, 1996 and the year ended
June 30, 1996 were as follows:
<TABLE>
<CAPTION>

The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
Six months ended December 31, 1996
<S> <C> <C>
Shares sold........................................................ $ 1,875,368,178 $ 547,941,786
Shares issued in reinvestment of distributions .................... 43,810,072 7,208,648
Shares redeemed ................................................... (1,938,059,534) (573,098,530)
------------ -------------
Net decrease ...................................................... $ (18,881,284) $ (17,948,096)
============ =============
Year ended June 30, 1996
Shares sold........................................................ $ 2,507,821,633 $ 824,267,024
Shares issued in reinvestment of distributions .................... 79,019,113 17,555,181
Shares redeemed ................................................... (2,342,329,912) (1,030,775,487)
------------ -------------
Net increase (decrease) ........................................... $ 244,510,834 $ (188,953,282)
============ =============

</TABLE>
3. CAPITAL LOSS CARRYOVERS

At June 30, 1996, for tax purposes, The Money Market Portfolio had an
accumulated net realized capital loss carryover expiring in year 2002 of $3,790.
For tax purposes, the aggregate cost of securities are the same for financial
purposes at June 30, 1996.

4. PURCHASES AND SALES OF SECURITIES

Purchases and sales/maturities of securities, including repurchase agreements,
for the six months ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>

The U.S. Government
The Money Securities Money
Market Portfolio Market Portfolio
------------ -------------
<S> <C> <C>
Purchases................................................................. $36,831,213,679 $30,361,308,906
Sales..................................................................... $36,850,555,181 $30,379,082,800

</TABLE>
5. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. Management Agreement:

Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers)
provides investment advice, administrative services, office space and facilities
to the Portfolios, and receives fees computed monthly based on the average daily
net assets of the Portfolios during the month. The Portfolios pay fees equal to
an annualized rate of 15/100 of 1% of their average daily net assets. For the
six months ended December 31, 1996, Advisers agreed in advance to waive
management fees for the Portfolios, aggregating $103,258.

b. Other Affiliates and Related Party Transactions:

At December 31, 1996, the shares of The Money Market Portfolio were owned by the
following funds:
<TABLE>
<CAPTION>

Percentage of
Outstanding
Shares Shares
----------------------------
<S> <C> <C>
Franklin Money Fund............................................................... 1,217,967,196 79.54%
Institutional Fiduciary Trust - Money Market Portfolio............................ 254,807,998 16.64%
Institutional Fiduciary Trust - Franklin Cash Reserves Fund....................... 51,554,346 3.37%
Franklin Templeton Money Fund Trust - Franklin Templeton Money Fund II............ 6,874,423 0.45%

At December 31, 1996, the shares of The U.S. Government Securities Money Market
Portfolio were owned by the following funds:

Percentage of
Outstanding
Shares Shares
----------------------------
Institutional Fiduciary Trust - Franklin U.S. Government Securities -
<S> <C> <C>
Money Market Portfolio........................................................... 142,857,653 53.35%
Franklin Federal Money Fund....................................................... 124,895,355 46.65%

</TABLE>
6. FINANCIAL HIGHLIGHTS

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

Per Share Operating Performance Ratios/Supplemental Data
------------------------------------ -----------------------------
Ratio of Net
Net Asset Distributions Net Asset Net Assets Ratio of Investment
Year Value at Net From Net Value at at End Expenses Income
Ended Beginning Investment Investment End of Total of Period to Average to Average
June 30, of Period Income Income Period Return+ (in 000's) Net Assets++ Net Assets
The Money Market Portfolio
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1993* $1.00 $0.027 $(0.027) $1.00 2.92%** $ 222,358 0.15%** 3.18%**
1994 1.00 0.033 (0.033) 1.00 3.33 219,189 0.15 3.25
1995 1.00 0.053 (0.053) 1.00 5.46 1,305,574 0.15 5.42
1996 1.00 0.055 (0.055) 1.00 5.66 1,550,085 0.15 5.50
1996*** 1.00 0.030 (0.030) 1.00 2.71 1,531,204 0.15** 5.36

The U.S. Government Securities Money Market Portfolio
1993* 1.00 0.021 (0.021) 1.00 2.27** 310,319 0.15** 3.05**
1994 1.00 0.032 (0.032) 1.00 3.25 218,548 0.15 3.20
1995 1.00 0.052 (0.052) 1.00 5.32 474,654 0.15 5.25
1996 1.00 0.054 (0.054) 1.00 5.55 285,701 0.15 5.45
1996*** 1.00 0.027 (0.027) 1.00 2.65 267,753 0.15** 5.19

</TABLE>
*July 28, 1992 (Effective date of registration) to June 30, 1993.
**Annualized
***For the six months ended December 31, 1996.
+Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It assumes reinvestment of dividends and
capital gains at net asset value.
++During the periods indicated, Advisers agreed to waive in advance a portion of
its management fees of the Portfolios. Had such action not been taken, the
ratios of expenses to average net assets would have been as follows:

Ratio of
Expenses
to Average
Net Assets
The Money Market Portfolio
1993*........................................... 0.17%**
1994............................................ 0.17
1995............................................ 0.16
1996............................................ 0.16
1996***......................................... 0.16**
The U.S. Government Securities Money Market Portfolio
1993*........................................... 0.18%**
1994............................................ 0.17
1995............................................ 0.16
1996............................................ 0.17
1996***......................................... 0.17**

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
determined by the presence of a regular beeping tone.

Franklin Cash Reserves Fund Semi-Annual Report December 31, 1996

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 line graph format the 90-Day Treasury bill yields from June
30, 1996 - December 31, 1996.

90- Day Treasury Bill Yields
June 30, 1996 - December 31, 1996

6/96 5.16%
7/96 5.28%
8/96 5.28%
9/96 5.02%
10/96 5.13%
11/96 5.13%
12/96 5.10%

GRAPHIC MATERIAL (2)

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

The Money Market Portfolio
Portfolio Composition as of December 31, 1996

Commercial Paper 50.0%
Certificates of Deposit 35.9%
Repurchase Agreements 14.1%

GRAPHIC MATERIAL(3)

The following line graph compares the total returns of the Franklin Cash
Reserves Fund to that of Lipper Institutional Money Market Index for the year
ended December 31, 1996.

Franklin Cash Reserves Fund Total Returns vs. Lipper Institutional Money Market
Index for the year ended December 31, 1996

1-year
Franklin 5.08%
Lipper 5.16%