ANNUAL
REPORT
JUNE 30, 1998
INSTITUTIONAL FIDUCIARY TRUST
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
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do portfolio share prices. We appreciate your past support
and look forward to serving your investment needs in the years ahead.
Charles B. Johnson
Chairman of the Board
Institutional Fiduciary Trust
CONTENTS
Shareholder Letter .................................... 1
Overview of the Economy................................ 3
Funds at a Glance...................................... 5
Fund Reports
Franklin's IFT
Money Market Portfolio................................. 6
Franklin U.S. Government
Securities Money Market
Portfolio.............................................. 10
Franklin U.S. Treasury
Money Market Portfolio................................. 14
Franklin U.S. Government
Agency Money Market
Fund................................................... 18
Financial Highlights &
Statement of Investments............................... 22
Financial Statements................................... 30
Notes to
Financial Statements................................... 33
SHAREHOLDER LETTER
Dear Shareholder:
We are pleased to bring you the fourteenth annual report for Franklin's
Institutional Fiduciary Trust (the Trust), for the period ended June 30, 1998.
The Trust was developed specifically to meet the needs of institutional
investors. Part of the $236.6 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.
During the twelve-month period, much of the strength in the economy was led by
the consumer sector, as stock market gains combined with low unemployment
boosted consumer confidence to record levels. The Federal Reserve took no
actions during the fiscal year, maintaining a neutral posture in light of the
opposing forces of a strong domestic economy and the possible weakening effects
of the Asian situation.
Within this environment, our managers adhered steadfastly to a disciplined
investment strategy, to seek out attractive opportunities through a variety of
market conditions. We believe this approach benefits our shareholders in the
long run, and we will continue to employ this strategy going forward.
Thank you for your continued support of Franklin's Institutional Fiduciary
Trust. We look forward to serving your investment needs in the months and years
to come.
Sincerely,
Charles B. Johnson
Chairman of the Board
Franklin's Institutional Fiduciary Trust
OVERVIEW OF THE ECONOMY
Strong U.S. economic growth over the past year continued at a healthy pace, as
inflation remained low and short-term interest rates remained relatively stable.
Annualized real GDP grew, averaging 3.8% for the three quarters ended March
1998, a figure considerably above the Federal Reserve Board's targeted long-term
growth rate of 2.5%. Higher income levels, real estate prices, and stock prices
combined with relatively low interest rates to fuel the consumer sector of the
economy, which was the primary driver of domestic growth during the period under
review.
As a result of the strong economic growth, the U.S. unemployment rate declined
to 4.3%, which was the lowest in 28 years. Preliminary estimates for the second
quarter indicate that economic growth slowed slightly due to a wider trade
deficit and a weakening manufacturing sector resulting from the Asian crisis.
Inflation as measured by CPI increased only 1.7% on a year over year basis
through May, down from 2.4% during the same period in the previous year.
Increased international competition, higher domestic productivity, and lower
commodity prices all contributed to the deceleration in the rate of inflation.
While long-term interest rates declined during the period due to the
deceleration in inflation, short-term interest rates remained relatively stable.
The federal funds target rate remained unchanged at 5.5% over the past year, as
low inflation coupled with the crisis in Asia offset strong economic growth.
Given the strength of the domestic economy, the Federal Reserve Board was
discouraged from making any policy changes.
Looking forward, we believe that relatively low interest rates and high equity
and real estate prices will continue to stimulate consumer spending. We expect
this to fuel domestic economic growth and ultimately lead to further wage
pressures. However, we believe low inflation and the dampening effects of the
Asian crisis will most likely offset U.S. economic strength, and prevent the
Federal Reserve Board from making any policy changes in the near term. Until the
uncertainties surrounding the Asian crisis are removed, we expect short-term
interest rates to remain near current levels.
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 securities
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
June 30, 1998
<TABLE>
<CAPTION>
Portfolios/
Characteristics
Franklin's Franklin Franklin Franklin
IFT U.S. Government U.S. Treasury U.S. Government
Money Market Securities Money Money Market Agency Money
Portfolio Market Portfolio Portfolio Market Fund
(#0140) (#0142) (#0143) (#0146)
<S> <C> <C> <C> <C>
Seven-Day Current Yield1 5.41% 5.39% 4.90% 5.03%
Average Weighted Maturity 56 days 24 days 47 days 38 days
Principal
Holdings2
Agencies X
BAs
CDs X
CP X
RPs X X
Treasuries X X X
</TABLE>
1. Yield reflects the interest income per share earned by the Funds' investments
for the 7-day period ended June 30, 1998 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
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
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
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.
The Portfolio's composition as of June 30, 1998, is shown to the left.
The money market securities in which the Portfolio invests are among the highest
quality available. In fact, its emphasis on high credit quality has helped the
Portfolio earn the highest possible rating: "AAAm" by Standard and Poor's
Corporation an independent rating service.2 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.3 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.4
2. 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 the 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). Ratings are subject to change.
3. 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.
4. Regulated investors should review their applicable investment restrictions to
determine whether the Fund is a permissible investment.
PERFORMANCE SUMMARY
The relatively stable short-term interest rate environment was reflected in the
Fund's seven-day yield during the reporting period. The Fund's seven-day yield
began the period at 5.46% on June 30, 1997, and ended at 5.41% as of June 30,
1998.5
In addition, we increased the Fund's average weighted maturity from 39 days on
June 30, 1997, to 56 days on June 30, 1998.
Total returns for the 1-, 3-, 5- and 10-year periods ended June 30, 1998, are
shown on the next page. As you can see, the Fund consistently outperformed its
benchmark, the Lipper Institutional Money Market Index for each of these
periods.6 Of course, past performance is not predictive of future results.
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 5.40%
and 5.55%, 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 Money Market Funds
Index is Lipper Analytical Services, Inc. As of June 30, 1998, there were 192
funds in the Institutional Money Market category. This index is unmanaged, and
one cannot invest directly in an index.
Performance Figures
Period Ended June 30, 1998
7-Day Current Yield:7 5.41%
7-Day Effective Yield:7 5.55%
Average Weighted Maturity: 56 days
7. 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 5.40%
and 5.55%, respectively. Franklin Advisers, Inc. may discontinue these
arrangements at any time, upon notice to the Fund's Board of Trustees.
8. 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 Money Market Funds
Index is Lipper Analytical Services, Inc. As of June 30, 1998, there were 192
funds in the Institutional Money Market category. This index is unmanaged, and
one cannot invest directly in an index.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
FRANKLIN U.S. GOVERNMENT
SECURITIES MONEY MARKET PORTFOLIO
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
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 June 30, 1998 is shown to the left.
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 rating: "AAAm" by Standard and Poor's Corporation, an
independent rating service.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
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 the 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). 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.
PERFORMANCE SUMMARY
As a result of favorable inflationary reports during the reporting period, we
expanded the Fund's average weighted maturity from five days on June 30, 1997,
to 24 days on June 30, 1998. Therefore, the Fund's 7-day yield, which began the
period at 5.29%, rose to 5.39% by June 30, 1998.5
The graph on the next page illustrates how the total returns for the Franklin
U.S. Government Securities Money Market Portfolio performed against its
benchmark, the Lipper Institutional U.S. Government Money Market Funds Index for
the 1-, 3-, and 5-year periods ended June 30, 1998.6 Of course, past performance
cannot guarantee future results.
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 5.35%
and 5.49%, 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 U.S. Government
Money Market Funds Index is Lipper Analytical Services, Inc. As of June 30,
1998, there were 95 funds in the Institutional U.S. Government Money Market
Funds category. This index is unmanaged, and one cannot invest directly in an
index.
GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Figures
Period Ended June 30, 1998
7-Day Current Yield:7 5.39%
7-Day Effective Yield:7 5.54%
Average Weighted Maturity: 24 days
7. 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 5.35%
and 5.49%, respectively. Franklin Advisers, Inc. may discontinue these
arrangements at any time, upon notice to the Fund's Board of Trustees.
8. 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 U.S. Government
Money Market Funds Index is Lipper Analytical Services, Inc. As of June 30,
1998, there were 95 funds in the Institutional U.S. Government 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.
FRANKLIN U.S. TREASURY
MONEY MARKET PORTFOLIO
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
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 June 30, 1998, is shown to the left.
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.
The Franklin U.S. Treasury Money Market Portfolio provides institutional
investors 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 In fact, its emphasis on high credit quality has
helped the Portfolio earn the highest possible ratings: "AAAm-G" by Standard and
Poor's Corporation, an independent rating 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.
2. 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 the 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). 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.
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
During the period, we shortened the Fund's average weighted maturity from 55
days on June 30, 1997, to 47 days on June 30, 1998. The Fund's 7-day yield began
the period at 4.87% and rose slightly to 4.90% on June 30, 1998.4
The chart on the next page illustrates how the Franklin U.S. Treasury Money
Market Portfolio performed against its benchmark, the Lipper Institutional U.S.
Treasury Money Market Funds Index for the 1-, 3-, and 5-year periods ended June
30, 1998.5 Of course, past performance cannot predict future results.
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 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 4.71% and 4.82%, 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 U.S. Treasury Money
Market Funds Index is Lipper Analytical Services, Inc. As of June 30, 1998,
there were 122 funds in the Institutional U.S. Treasury Money Market Funds
category. This index is unmanaged, and one cannot invest directly in an index.
GRAPHIC MATERIAL 6 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Figures
Period Ended June 30, 1998
7-Day Current Yield:6 4.90%
7-Day Effective Yield:6 5.02%
Average Weighted Maturity: 47 days
6. 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 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 4.71% and 4.82%, respectively. The Fund's manager
may discontinue these arrangements at any time, upon notice to the Fund's Board
of Trustees.
7. 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 U.S. Treasury Money
Market Funds Index is Lipper Analytical Services, Inc. As of June 30, 1998,
there were 122 funds in the Institutional U.S. 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
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
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
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.
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 June 30, 1998 is shown on the
previous page.
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
The Fund's average weighted maturity remained relatively unchanged, falling
slightly from 42 days on June 30, 1997, to 38 days on June 30, 1998. The Fund's
7-day yield fell from 5.09% on June 30, 1997, to 5.03% on June 30, 1998.2
The graph on the next page illustrates how the Franklin's U.S. Government Agency
Money Market Fund performed versus its benchmark, the Lipper Institutional U.S.
Government Money Market Funds Index, for the 1- and 3-year period ending June
30, 1998.3 Of course, past performance cannot guarantee future results.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
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.
Franklin Advisers, Inc., 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 4.98% and 5.11%, 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 U.S. Government
Money Market Fund Index is Lipper Analytical Services, Inc. As of June 30, 1998,
there were 95 funds in the Institutional U.S. Government Money Market category.
This index is unmanaged, and one cannot invest directly in an index.
Performance Figures
Period Ended June 30, 1998
7-Day Current Yield:4 5.03%
7-Day Effective Yield:4 5.15%
Average Weighted Maturity: 38 days
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.
Although Franklin Advisers, Inc., 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 there were no expenses waived for the year ended June 30,
1998. The Fund's manager may discontinue the expense reduction 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 U.S. Government
Money Market Fund Index is Lipper Analytical Services, Inc. As of June 30, 1998,
there were 95 funds in the Institutional U.S. Government 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
Financial Highlights
<TABLE>
<CAPTION>
Money Market Portfolio
Year Ended June 30,
-----------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------
Income from investment operations -
net investment income ................................ .054 .053 .055 .053 .033
Less distributions from net investment income ......... (.054) (.053) (.055) (.053) (.033)
-----------------------------------------------------
Net asset value, end of year .......................... $1.00 $1.00 $1.00 $1.00 $1.00
=====================================================
Total return** ........................................ 5.58% 5.42% 5.61% 5.46% 3.35%
Ratios/supplemental data
Net assets, end of year (000's) ....................... $175,881 $185,088 $341,295 $272,147 $218,254
Ratios to average net assets:
Expenses1 ............................................ .20% .20% .19% .15% .15%
Expenses excluding waiver and payments by affiliate1 . .24% .24% .24% .24% .25%
Net investment income ................................ 5.44% 5.27% 5.45% 5.40% 3.24%
**Total return is not annualized.
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, June 30, 1998
Money Market Portfolio SHARES VALUE
Mutual Funds 100.0%
<S> <C> <C>
The Money Market Portfolio (Note 1) (Cost $175,899,949)......................... 175,899,949 $175,899,949
Other Assets, less Liabilities ................................................. (18,580)
-------------
Net Assets 100.0% .............................................................. $175,881,369
=============
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
Franklin U.S. Government Securities Money Market Portfolio
Year Ended June 30,
-----------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------
Income from investment operations -
net investment income ................................ .054 .052 .054 .052 .032
Less distributions from net investment income ......... (.054) (.052) (.054) (.052) (.032)
-----------------------------------------------------
Net asset value, end of year .......................... $1.00 $1.00 $1.00 $1.00 $1.00
=====================================================
Total return** ........................................ 5.51% 5.29% 5.50% 5.32% 3.25%
Ratios/supplemental data
Net assets, end of year (000's) ....................... $131,151 $136,705 $152,173 $334,830 $218,547
Ratios to average net assets:
Expenses1 ............................................ .20% .20% .19% .15% .15%
Expenses excluding waiver and payments by affiliate1 . .26% .26% .26% .23% .25%
Net investment income ................................ 5.34% 5.14% 5.44% 5.26% 3.20%
</TABLE>
**Total return is not annualized.
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, June 30, 1998
<TABLE>
<CAPTION>
Franklin U.S. Government Securities Money Market Portfolio SHARES VALUE
Mutual Funds 100.0%
<S> <C> <C>
The U.S. Government Securities Money Market Portfolio
(Note 1) (Cost $131,160,450) .................................................. 131,160,450 $131,160,450
Other Assets, less Liabilities ................................................ (9,527)
--------------
Net Assets 100.0% ............................................................. $131,150,923
==============
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
Franklin U.S. Treasury Money Market Portfolio
Year Ended June 30,
-----------------------------------------------------
1998 1997 1996 1995 1994
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------
Income from investment operations -
net investment income ................................ .050 .050 .052 .051 .032
Less distributions from net investment income ......... (.050) (.050) (.052) (.051) (.032)
------------------------------------------------------
Net asset value, end of year .......................... $1.00 $1.00 $1.00 $1.00 $1.00
=====================================================
Total return** ........................................ 5.13% 5.09% 5.29% 5.17% 3.23%
Ratios/supplemental data
Net assets, end of year (000's) ....................... $66,745 $68,815 $123,157 $200,935 $195,135
Ratios to average net assets:
Expenses ............................................. .20% .20% .19% .10% .05%
Expenses excluding waiver and payments by affiliate .. .35% .33% .30% .30% .30%
Net investment income ................................ 5.00% 4.97% 5.20% 5.05% 3.17%
</TABLE>
**Total return is not annualized.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, June 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
Franklin U.S. Treasury Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
Short Term Investments 99.1%
a U.S. Treasury Bills, 4.895% - 4.94%, 7/02/98 .................................. $ 2,740,000 $ 2,739,626
a U.S. Treasury Bills, 4.72% - 4.915%, 7/09/98 .................................. 3,610,000 3,606,131
a U.S. Treasury Bills, 4.92% - 4.95%, 7/23/98 ................................... 6,395,000 6,375,758
a U.S. Treasury Bills, 4.935% - 4.94%, 7/30/98 .................................. 2,130,000 2,121,524
a U.S. Treasury Bills, 4.80% - 4.95%, 8/6/98..................................... 2,440,000 2,428,273
a U.S. Treasury Bills, 4.84% - 5.06%, 8/13/98 ................................... 4,175,000 4,150,818
a U.S. Treasury Bills, 4.90% - 5.01%, 8/20/98 ................................... 5,610,000 5,571,107
a U.S. Treasury Bills, 4.915%, 8/27/98 .......................................... 2,510,000 2,490,467
a U.S. Treasury Bills, 4.96%, 9/03/98 ........................................... 70,000 69,383
a U.S. Treasury Bills, 4.875% - 4.97%, 9/10/98 .................................. 3,500,000 3,465,956
a U.S. Treasury Bills, 4.88% - 4.94%, 9/17/98 ................................... 500,000 494,687
U.S. Treasury Notes, 8.25%, 7/15/98 ............................................. 7,000,000 7,008,225
U.S. Treasury Notes, 5.25%, 7/31/98 ............................................. 5,000,000 4,999,779
U.S. Treasury Notes, 6.25%, 7/31/98 ............................................. 4,000,000 4,003,592
U.S. Treasury Notes, 4.75%, 8/31/98 ............................................. 5,000,000 4,994,160
U.S. Treasury Notes, 6.00%, 9/30/98 ............................................. 10,600,000 10,618,551
U.S. Treasury Notes, 5.125%, 12/31/98 ........................................... 1,000,000 998,242
----------------
Total Investments (Cost $66,136,279) 99.1% ...................................... 66,136,279
Other Assets, less Liabilities .9% .............................................. 608,222
----------------
Net Assets 100.0% ............................................................... $66,744,501
================
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin U.S. Government Agency Money Market Fund
Year Ended June 30,
---------------------------------------------------
1998 1997 1996 1995 1994*
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year .................... $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------
Income from investment operations -
net investment income ................................ .051 .049 .051 .051 .013
Less distributions from net investment income ......... (.051) (.049) (.051) (.051) (.013)
---------------------------------------------------
Net asset value, end of year .......................... $1.00 $1.00 $1.00 $1.00 $1.00
===================================================
Total return** ........................................ 5.17% 5.06% 5.23% 5.22% 1.31%
Ratios/supplemental data
Net assets, end of year (000's) ....................... $16,153 $134,362 $71,694 $34,285 $5,065
Ratios to average net assets:
Expenses ............................................. .45% .45% .44% .30% .40%***
Expenses excluding waiver and payments by affiliate .. .49% .48% .47% .47% 1.43%***
Net investment income ................................ 5.07% 4.95% 5.04% 5.39% 3.32%***
</TABLE>
*For the period February 8, 1994 (effective date) to June 30, 1994.
**Total return is not annualized.
***Annualized.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, June 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
Franklin U.S. Government Agency Money Market Fund AMOUNT VALUE
<S> <C> <C>
aU.S. Government Agencies 89.95%
Federal Farm Credit Discount Notes, 5.39%, 7/09/98 .............................. $1,000,000 $ 998,803
Federal Farm Credit Discount Notes, 5.39%, 8/03/98 .............................. 1,000,000 995,059
Federal Farm Credit Discount Notes, 5.39%, 8/07/98 .............................. 1,000,000 994,460
Federal Home Loan Bank Discount Notes, 5.40%, 7/01/98 ........................... 1,000,000 1,000,000
Federal Home Loan Bank Discount Notes, 5.39%, 7/15/98 ........................... 2,000,000 1,995,807
Federal Home Loan Bank Discount Notes, 5.36%, 7/17/98 ........................... 1,000,000 997,618
Federal Home Loan Bank Discount Notes, 5.36%, 7/22/98 ........................... 800,000 797,499
Federal Home Loan Bank Discount Notes, 5.37%, 7/24/98 ........................... 2,800,000 2,790,393
Federal Home Loan Bank Discount Notes, 5.39%, 8/19/98 ........................... 1,000,000 992,663
Federal Home Loan Bank Discount Notes, 5.375%, 8/28/98 .......................... 1,000,000 991,340
Federal Home Loan Bank Discount Notes, 5.38%, 9/02/98 ........................... 1,000,000 990,585
Federal Home Loan Bank Discount Notes, 5.38%, 10/07/98 .......................... 1,000,000 985,355
--------------
Total U.S. Government Agencies (Cost $14,529,582) ............................... 14,529,582
--------------
a U.S. Government Securities 10.5%
U.S. Treasury Bills, 4.90% - 4.98%, 7/30/98 - 10/01/98 (Cost $1,696,844)......... 1,715,000 1,696,844
--------------
Total Investments (Cost $16,226,426) 100.5%...................................... 16,226,426
Other Assets, less Liabilities (.5)%............................................. (73,775)
--------------
Net Assets 100.0% ............................................................... $16,152,651
==============
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Fund.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
June 30, 1998
Franklin U.S. Franklin U.S.
Government Franklin U.S. Government
Money Market Securities Money Treasury Money Agency Money
Portfolio Market Portfolio Market Portfolio Market Fund
--------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in securities, at value and cost .... $175,899,949 $131,160,450 $66,136,279 $16,226,426
Cash ............................................ -- -- 39,605 30,489
Receivables:
Investment securities sold ..................... 268,649 259,167 -- --
Interest ....................................... -- -- 719,583 --
Affiliates ..................................... -- 4,881 3,268 --
--------------------------------------------------------
Total assets ............................... 176,168,598 131,424,498 66,898,735 16,256,915
--------------------------------------------------------
Liabilities:
Payables:
Capital shares redeemed ........................ 31,201 -- -- --
Affiliates ..................................... 4,391 -- -- 88,966
Distributions to shareholders ................... 240,517 259,167 142,500 --
Other liabilities ............................... 11,120 14,408 11,734 15,298
--------------------------------------------------------
Total liabilities .......................... 287,229 273,575 154,234 104,264
--------------------------------------------------------
Net assets, at value ............................. $175,881,369 $131,150,923 $66,744,501 $16,152,651
========================================================
Shares outstanding ............................... 175,881,369 131,150,923 66,744,501 16,152,651
========================================================
Net asset value per share ........................ $1.00 $1.00 $1.00 $1.00
========================================================
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
Statements of Operations
for the year ended June 30, 1998
Franklin U.S. Franklin U.S.
Government Franklin U.S. Government
Money Market Securities Money Treasury Money Agency Money
Portfolio Market Portfolio Market Portfolio Market Fund
-------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends ....................................... $11,528,299 $7,178,302 $-- $--
Interest ........................................ -- -- 3,024,202 6,911,395
-------------------------------------------------------
Total investment income .................... 11,528,299 7,178,302 3,024,202 6,911,395
-------------------------------------------------------
Expenses:
Management fees (Note 3) ........................ -- -- 145,231 187,785
Administrative fees (Note 3) .................... 104,796 66,469 -- --
Distribution fees (Note 3) ...................... -- -- -- 381,785
Transfer agent fees (Note 3) .................... 15,011 21,366 16,004 1,166
Custodian fees .................................. 1,549 8,917 1,392 2,269
Reports to shareholders ......................... 7,947 7,469 3,923 4,423
Registration and filing fees .................... 25,624 13,643 13,673 20,677
Professional fees ............................... 4,435 5,014 13,820 10,851
Trustees' fees and expenses ..................... 8,133 5,865 2,625 5,043
Rating service fees ............................. -- 7,135 6,000 --
Other ........................................... 3,195 2,028 2,575 4,694
-------------------------------------------------------
Total expenses ............................. 170,690 137,906 205,243 618,693
Expenses waived/paid
by affiliate (Note 3) .............. (65,623) (71,350) (89,013) (55,128)
--------------------------------------------------------
Net expenses .............................. 105,067 66,556 116,230 563,565
-------------------------------------------------------
Net investment income .................... 11,423,232 7,111,746 2,907,972 6,347,830
-------------------------------------------------------
Net realized gain (loss) from investments ........ -- -- 4,753 (6,981)
--------------------------------------------------------
Net increase in net assets resulting
from operations ................................. $11,423,232 $7,111,746 $2,912,725 $6,340,849
=======================================================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the years ended June 30, 1998 and 1997
Franklin U.S. Government
Money Market Portfolio Securities Money Market Portfolio
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................... $ 11,423,232 $ 15,886,152 $ 7,111,746 $ 7,237,031
Distributions to shareholders from net
investment income ........................ (11,423,232) (15,886,152) (7,111,746) (7,237,031)
Capital share transactions (Note 2) ...... (9,206,790) (156,206,396) (5,553,740) (15,468,445)
---------------------------------------------------------------
Net decrease in net assets .......... (9,206,790) (156,206,396) (5,553,740) (15,468,445)
Net assets (there is no undistributed net
investment income at
beginning or end of year):
Beginning of year ....................... 185,088,159 341,294,555 136,704,663 152,173,108
--------------------------------------------------------------
End of year ............................. $175,881,369 $185,088,159 $131,150,923 $136,704,663
==============================================================
Franklin U.S. Treasury Franklin U.S. Government Agency
Money Market Portfolio Money Market Fund
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ................... $ 2,907,972 $ 3,294,750 $ 6,347,830 $ 5,338,637
Net realized gain (loss)
from investments ................... 4,753 1,688 (6,981) (890)
---------------------------------------------------------------
Net increase in net assets resulting
from operations .......................... 2,912,725 3,296,438 6,340,849 5,337,747
Distributions to shareholders from net
investment income ........................ (2,912,725)+ (3,296,438)+ (6,340,849)++ (5,337,747)++
Capital share transactions (Note 2) ...... (2,070,600) (54,342,256) (118,209,061) 62,667,765
--------------------------------------------------------------
Net increase (decrease)
in net assets ............... (2,070,600) (54,342,256) (118,209,061) 62,667,765
Net assets (there is no undistributed net
investment income at beginning
or end of year):
Beginning of year ....................... 68,815,101 123,157,357 134,361,712 71,693,947
--------------------------------------------------------------
End of year ............................. $66,744,501 $ 68,815,101 $ 16,152,651 $134,361,712
==============================================================
</TABLE>
+Distributions were increased by net realized gains from security transactions
of $4,753 for the year ended June 30, 1998 and $1,688 for the year ended June
30, 1997.
++Distributions were decreased by net realized losses from security transactions
of $6,981 for the year ended June 30, 1998 and $890 for the year ended June 30,
1997.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (the Trust) is registered under the Investment
Company Act of 1940 as an open-end investment company, consisting of seven
separate series (the Funds). All Funds included in this report are diversified.
The investment objective of the Funds included in this report is to seek current
income.
The Institutional Fiduciary Trust Money Market Portfolio (Money Market Fund) and
the 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. The Portfolios are registered under the Investment Company Act of
1940 as diversified, open-end investment companies having the same investment
objectives as the Funds. The financial statements of the Portfolios, including
the Statements of Investments, are included elsewhere in this report and should
be read in conjunction with the Funds' financial statements.
The following summarizes the Funds' significant accounting policies.
a. Security Valuation:
Securities held by 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.
The Money Market Fund and the U.S. Government Fund hold Portfolio shares that
are valued at their proportionate interest in the net asset values of the
Portfolios, respectively. At June 30, 1998, the Money Market Fund owns 8.61% of
the Money Market Portfolio and the U.S. Government Fund owns 49.83% of the U.S.
Government Securities Money Market Portfolio.
b. Income Taxes:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
c. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividend income is recorded on
the ex-dividend date. Dividends from net investment income and capital gains or
losses are normally declared daily. Such distributions are reinvested in
additional shares of the Funds.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. 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. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, there were an unlimited number of shares authorized (no par
value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
Franklin Franklin Franklin
U.S. Government U.S. Treasury U.S. Government
Money Market Securities Money Money Market Agency Money
Portfolio Market Portfolio Portfolio Market Fund
Year ended June 30, 1998
<S> <C> <C> <C> <C>
Shares sold .................................. $1,903,990,386 $1,083,873,539 $182,325,365 $332,809,628
Shares issued in reinvestment of distributions 7,424,227 3,876,501 1,440,935 4,538,376
Shares redeemed .............................. (1,920,621,403)(1,093,303,780) (185,836,900) (455,557,065)
-----------------------------------------------------------
Net decrease ............................ $ (9,206,790) $ (5,553,740)$ (2,070,600)$(118,209,061)
===========================================================
Year ended June 30, 1997
Shares sold .................................. $3,719,946,335 $1,332,259,122 $332,213,814 $296,873,544
Shares issued in reinvestment of distributions 9,370,014 3,715,845 1,563,133 4,185,797
Shares redeemed .............................. (3,885,522,745)(1,351,443,412) (388,119,203) (238,391,576)
-----------------------------------------------------------
Net increase (decrease) ................. $ (156,206,396) $ (15,468,445)$ (54,342,256) $ 62,667,765
===========================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), and Franklin/Templeton Investor Services, Inc. (Investor
Services), the Funds' investment manager, principal underwriter, and transfer
agent, respectively, and of the Portfolios.
The Franklin U.S. Treasury Money Market Portfolio and the Franklin U.S.
Government Agency Money Market Fund pay investment management fees to Advisers
of .25% and .15%, respectively, per year of the average daily net assets of each
Fund.
The Money Market Fund and the U.S. Government Fund pay an administrative fee to
Advisers of .05% per year of the Funds' average daily net assets.
Advisers agreed in advance to waive management and administrative fees and
assume payment of other expenses, as noted in the Statements of Operations.
The Franklin U.S. Government Agency Money Market Fund reimburses Distributors up
to .30% per year of its average daily net assets for costs incurred in marketing
the Fund's shares.
The Funds paid transfer agent fees of $53,547, of which $8,067 was paid to
Investor Services.
4. INCOME TAXES
At June 30, 1998, the Franklin U.S. Government Agency Money Market Fund had tax
basis capital losses of $4,060 which may be carried over to offset future
capital gains.
Capital loss carryovers expiring in:
2004 ................................. $2,545
2005 ................................. 890
2006 ................................. 625
--------
$4,060
========
At June 30, 1998, the Franklin U.S. Government Agency Money Market Fund has
deferred capital losses occurring subsequent to October 31, 1997 of $6,356. For
tax purposes, such losses will be reflected in the year ending June 30, 1999.
INSTITUTIONAL FIDUCIARY TRUST
Independent Auditor's Report
To the Shareholders and Board of Trustees
of Institutional Fiduciary Trust:
We have audited the accompanying statements of assets and liabilities of each of
the four funds comprising the Institutional Fiduciary Trust (the Funds),
including each Fund's statement of investments, as of June 30, 1998, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the four funds comprising the Institutional Fiduciary Trust as of June 30,
1998, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
July 30, 1998
THE MONEY MARKET PORTFOLIOS
Financial Highlights
<TABLE>
<CAPTION>
The Money Market Portfolio
Year Ended June 30,
----------------------------------------------
1998 1997 1996 1995 1994
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------
Income from investment operations - net investment income .055 .053 .055 .053 .033
Less distributions from net investment income .... (.055) (.053) (.055) (.053) (.033)
-------------------------------------------------
Net asset value, end of year ..................... $1.00 $1.00 $1.00 $1.00 $1.00
================================================
Total return** ................................... 5.64% 5.47% 5.66% 5.46% 3.33%
Ratios/supplemental data
Net assets, end of year (000's) .................. $2,043,629 $1,773,546 $1,550,085 $1,305,574 $219,189
Ratios to average net assets:
Expenses ........................................ .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .16% .16% .16% .16% .17%
Net investment income ........................... 5.50% 5.34% 5.50% 5.42% 3.25%
**Total return is not annualized.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, June 30, 1998
PRINCIPAL
The Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
Certificates of Deposit 26.9%
Australia & New Zealand Banking Group, New York Branch,
5.56% - 5.59%, 8/27/98 - 9/23/98 .......................................... $50,000,000 $ 50,000,000
Bank of Montreal, Chicago Branch, 5.605%, 9/24/98 ......................... 25,000,000 25,000,861
Bank of Nova Scotia, Portland Branch, 5.56%, 8/31/98 ...................... 25,000,000 25,000,000
Bayerische Vereinsbank, New York Branch, 5.85%, 12/18/98 .................. 25,000,000 25,009,492
Commerzbank AG, New York Branch, 5.54%, 8/25/98 ........................... 25,000,000 25,000,743
Credit Agricole, New York Branch, 5.52%, 8/10/98 .......................... 25,000,000 25,000,000
Credit Communal de Belgique, New York Branch, 5.59%, 7/29/98 - 7/30/98 .... 50,000,000 50,000,391
Deutsche Bank AG, New York Branch, 5.59% - 5.60%, 7/08/98 - 7/31/98 ....... 50,000,000 50,000,205
National Westminster Bank, Plc., New York Branch,
5.69% - 5.745%, 7/06/98 - 4/06/99 ......................................... 50,000,000 49,989,281
Royal Bank of Canada, New York Branch, 5.68%, 3/29/99 ..................... 25,000,000 24,985,850
Societe Generale, New York Branch, 5.56% - 5.58%, 8/07/98 - 10/08/98 ...... 75,000,000 75,000,000
Svenska Handelsbanken, New York Branch, 5.58%, 9/22/98 .................... 25,000,000 25,000,000
Swiss Bank Corp., New York Branch, 5.81%, 4/29/99 ......................... 25,000,000 24,992,081
Toronto Dominion Bank, New York Branch, 5.60%, 12/03/98 ................... 25,000,000 25,000,000
Westdeutsche Landesbank, New York Branch, 5.60%, 7/09/98 - 7/10/98 ........ 50,000,000 50,000,000
---------------
Total Certificates of Deposit (Cost $549,978,904).......................... 549,978,904
---------------
a Commercial Paper 57.5%
Abbey National North America, 5.42% - 5.445%, 8/24/98 - 10/22/98 .......... 50,000,000 49,369,469
American Express Credit Corp., 5.50%, 7/13/98 - 8/17/98 ................... 80,000,000 79,556,944
Associates Corp. of North America, 5.50%, 7/21/98 - 8/18/98 ............... 75,000,000 74,660,070
Bank of Montreal, 5.50%, 7/23/98 .......................................... 25,000,000 24,915,972
Chevron U.K. Investment, Plc., 5.51%, 8/11/98 ............................. 10,000,000 9,937,247
CIESCO, L.P., 5.50% - 5.52%, 8/19/98 - 9/08/98 ............................ 75,000,000 74,311,542
Commonwealth Bank of Australia, 5.42% - 5.455%, 10/19/98 - 11/25/98 ....... 50,000,000 49,029,108
Cregem North America, Inc., 5.50%, 7/28/98 ................................ 25,000,000 24,896,875
Deutsche Bank Financial, Inc., 5.50%, 8/14/98 ............................. 25,000,000 24,831,944
General Electric Capital Corp., 5.50%, 7/24/98 - 8/26/98 .................. 75,000,000 74,564,583
Generale Bank, Inc., 5.43% - 5.45%, 9/04/98 - 10/21/98 .................... 75,000,000 73,926,820
Goldman Sachs Group, L.P., 5.50%, 9/03/98 ................................. 25,000,000 24,755,556
J.P. Morgan & Co., Inc., 5.48% - 5.50%, 9/02/98 - 12/04/98 ................ 50,000,000 49,165,708
Merrill Lynch & Co., Inc., 5.50% - 5.51%, 7/01/98 - 8/06/98 ............... 50,000,000 49,862,500
Morgan Stanley Dean Witter & Co., 5.49% - 5.52%, 7/17/98 - 8/28/98 ........ 80,000,000 79,630,214
Motorola, Inc., 5.49%, 9/16/98 ............................................ 25,000,000 24,706,438
National Australian Funding (DE), Inc., 5.45% - 5.505%, 8/12/98 - 12/01/98 75,000,000 73,969,979
National Rural Utilities Cooperative Finance Corp., 5.50%, 8/21/98 - 9/25/98 65,000,000 64,297,986
Royal Bank of Canada, 5.38%, 8/03/98 ...................................... 25,000,000 24,876,708
Salomon Smith Barney Holdings, Inc., 5.50% - 5.52%, 7/14/98 - 8/04/98 ..... 75,000,000 74,766,639
Svenska Handelsbanken, Inc., 5.51% - 5.52%, 7/27/98 - 9/10/98 ............. 50,000,000 49,628,659
Toronto Dominion Holdings USA, Inc., 5.50%, 7/02/98 ....................... 25,000,000 24,996,181
Toyota Motor Credit Corp., 5.50%, 9/21/98 ................................. 25,000,000 24,686,806
U.S. Central Credit Union, 5.50%, 7/16/98 ................................. 25,000,000 24,942,708
Westpac Capital Corp., 5.495%, 7/07/98 .................................... 25,000,000 24,977,104
---------------
Total Commercial Paper (Cost $1,175,263,760) .............................. 1,175,263,760
---------------
Total Investments before Repurchase Agreements (Cost $1,725,242,664)....... 1,725,242,664
---------------
PRINCIPAL
The Money Market Portfolio AMOUNT VALUE
a,dRepurchase Agreements 15.2%
Barclays Capital, Inc., 5.125%, 7/01/98 (Maturity Value $50,007,118)
Collaterallized by U.S. Treasury Notes ................................... $50,000,000 $ 50,000,000
CIBC Oppenheimer Corp., 5.25%, 7/01/98 (Maturity Value $50,007,292)
Collaterallized by U.S. Treasury Notes ................................... 50,000,000 50,000,000
J.P. Morgan Securities, Inc., 5.55%, 7/01/98 (Maturity Value $80,052,340)
Collaterallized by U.S. Treasury Notes ................................... 80,040,000 80,040,000
Morgan Stanley & Co., Inc., 5.65%, 7/01/98 (Maturity Value $80,057,563)
Collaterallized by U.S. Treasury Notes ................................... 80,045,000 80,045,000
SBC Warburg Dillon Read, Inc., 5.25%, 7/01/98 (Maturity Value $50,007,292)
Collaterallized by U.S. Treasury Notes ................................... 50,000,000 50,000,000
---------------
Total Repurchase Agreements (Cost $310,085,000) ........................... 310,085,000
---------------
Total Investments (Cost $2,035,327,664) 99.6% ............................. 2,035,327,664
Other Assets, less Liabilities .4% ........................................ 8,301,639
---------------
Net Assets 100.0% ......................................................... $2,043,629,303
===============
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the portfolio.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The U.S. Government Securities Money Market Portfolio
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------
Income from investment operations - net
investment income ............................... .054 .052 .054 .052 .032
Less distributions from net investment income .... (.054) (.052) (.054) (.052) (.032)
--------------------------------------------------------
Net asset value, end of year ..................... $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------
Total return** ................................... 5.53% 5.34% 5.55% 5.32% 3.25%
Ratios/supplemental data
Net assets, end of year (000's) .................. $263,226 $285,629 $285,701 $474,654 $218,548
Ratios to average net assets:
Expenses ........................................ .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .16% .16% .17% .16% .17%
Net investment income ........................... 5.40% 5.20% 5.45% 5.25% 3.20%
**Total return is not annualized.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, June 30, 1998
PRINCIPAL
The U.S. Government Securities Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
Government Securities 19.0%
U.S. Treasury Notes, 5.25%, 7/31/98 ....................................... $10,000,000 $ 9,997,058
U.S. Treasury Notes, 4.75%, 9/30/98 ....................................... 20,000,000 19,955,490
U.S. Treasury Notes, 5.125%, 11/30/98 ..................................... 10,000,000 9,989,313
U.S. Treasury Notes, 5.125%, 12/31/98 ..................................... 5,000,000 4,991,209
U.S. Treasury Notes, 7.00%, 4/15/99 ....................................... 5,000,000 5,053,922
---------------
Total Government Securities (Cost $49,986,992)............................. 49,986,992
---------------
Repurchase Agreements 80.9%
BancAmerica Robertson Stephens, 5.65%, 7/01/98 (Maturity Value $11,001,726)
Collateralized by U.S. Treasury Bills..................................... 11,000,000 11,000,000
Bear, Stearns & Co., Inc., 5.75%, 7/01/98 (Maturity Value $11,001,757)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Chase Securities, Inc., 5.60%, 7/01/98 (Maturity Value $11,001,711)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
CIBC Oppenheimer Corp., 5.75%, 7/01/98 (Maturity Value $11,001,757)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Donaldson, Lufkin & Jenrette Securities Corp., 5.75%, 7/01/98
(Maturity Value $11,001,757)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Dresdner Kleinwort Benson, North America, L.L.C., 5.70%,
7/01/98 (Maturity Value $11,001,742)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
J.P. Morgan Securities, Inc., 5.55%, 7/01/98 (Maturity Value $40,006,167)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 40,000,000 40,000,000
J.P. Morgan Securities, Inc., 5.45%, 7/01/98 (Maturity Value $16,977,570)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 16,975,000 16,975,000
Merrill Lynch Government Securities, Inc., 5.60%, 7/01/98
(Maturity Value $11,001,711)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Morgan Stanley & Co. Inc., 5.65%, 7/01/98 (Maturity Value $56,983,942)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 56,975,000 56,975,000
Paribas Corp., 6.00%, 7/01/98 (Maturity Value $11,001,833)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 11,000,000 11,000,000
SBC Warburg Dillon Read, Inc., 5.90%, 7/01/98 (Maturity Value $11,001,803)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
---------------
Total Repurchase Agreements (Cost $212,950,000) ........................... 212,950,000
---------------
Total Investments (Cost $262,936,992) 99.9%................................ 262,936,992
Other Assets, less Liabilities .1%......................................... 289,386
---------------
Net Assets 100.0%.......................................................... $263,226,378
===============
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
June 30, 1998
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
------------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost.......................... $1,725,242,664 $ 49,986,992
Repurchase agreements, at value and cost.............................. 310,085,000 212,950,000
Cash.................................................................. 4,644 2,198
Interest Receivable................................................... 8,854,888 609,004
-----------------------------------
Total assets........................................................... 2,044,187,196 263,548,194
-----------------------------------
Liabilities:
Payables:
Capital shares redeemed.............................................. 268,649 259,167
Affiliates........................................................... 277,741 50,590
Other liabilities..................................................... 11,503 12,059
-----------------------------------
Total liabilities...................................................... 557,893 321,816
-----------------------------------
Net assets, at value................................................... $2,043,629,303 $263,226,378
===================================
Shares outstanding..................................................... 2,043,629,303 263,226,378
===================================
Net asset value per share.............................................. $1.00 $1.00
===================================
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statements of Operations
for the year ended June 30, 1998
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
------------------------------------
<S> <C> <C>
Investment income:
Interest.............................................................. $111,619,440 $14,584,936
-----------------------------------
Expenses:
Management fees (Note 3).............................................. 2,963,304 394,321
Custodian fees........................................................ 16,868 2,474
Reports to shareholders............................................... 4,316 855
Professional fees..................................................... 86,132 11,131
Trustees' fees and expenses........................................... 6,833 974
Other................................................................. 20,769 11,625
-----------------------------------
Total expenses....................................................... 3,098,222 421,380
Expenses waived/paid by affiliate (Note 3)........................... (132,446) (26,888)
------------------------------------
Net expenses........................................................... 2,965,776 394,492
-----------------------------------
Net investment income................................................. 108,653,664 14,190,444
-----------------------------------
Net increase in net assets resulting from operations................... $108,653,664 $14,190,444
===================================
See notes to fnancial statements.
THE MONEY MARKET PORTFOLIOS
Statements of Changes in Net Assets
for the years ended June 30, 1998 and 1997
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------------------------------------------
1998 1997 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................... $108,653,664 $90,724,056 $14,190,444 $14,032,778
Net realized gain (loss) from investments. -- (931) -- 3,978
------------------------------------------------------------
Net increase in net assets
resulting from operations ................. 108,653,664 90,723,125 14,190,444 14,036,756
Distributions to shareholders
from net investment income................. (108,653,664) (90,723,125)+ (14,190,444) (14,036,756)++
Capital share transactions (Note 2)........ 270,083,314 223,460,742 4,597,201 (27,071,927)
-------------------------------------------------------------
Net increase (decrease) in net assets....... 270,083,314 223,460,742 4,597,201 (27,071,927)
Net assets (there is no undistributed net
investment income at beginning or end of year):
Beginning of year......................... 1,773,545,989 1,550,085,247 258,629,177 285,701,104
------------------------------------------------------------
End of year............................... $2,043,629,303 $1,773,545,989 $263,226,378 $258,629,177
============================================================
</TABLE>
+Distributions were decreased by a net realized loss from investments of $931.
++Distributions were increased by a net realized gain from investments of
$3,978.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (Money Market) is registered under the Investment
Company Act of 1940 as an open-end, diversified investment company, consisting
of two separate portfolios (the Portfolios). The shares of the Money Market are
issued in private placements and are exempt from registration under the
Securities Act of 1933. The Portfolios' investment objective is to seek current
income. The following summarizes the Portfolios' significant accounting
policies.
a. Security Valuation:
Securities are valued at amortized cost which approximates value.
b. Repurchase Agreements:
The Portfolios may enter into repurchase agreements, which are accounted for as
a loan by the Portfolios to the seller, collateralized by 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 June
30, 1998, all outstanding repurchase agreements held by the Portfolios had been
entered into on that date.
c. Income Taxes:
No provision has been made for income taxes because each Portfolio's policy is
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute all of its taxable income.
d. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Portfolios.
Common expenses incurred by the Money Market are allocated among the Portfolios
based on the ratio of net assets of each Portfolio to the combined net assets.
Other expenses are charged to each Portfolio on a specific identification basis.
e. 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. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Portfolios' shares were as follows:
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
-------------------------------------
1998
Shares sold ....................$5,690,107,931 $963,956,819
Shares issued in reinvestment
of distributions .............. 108,652,953 14,190,262
Shares redeemed ................ (5,528,677,570) (973,549,880)
-------------------------------------
Net increase .................... $ 270,083,314 $ 4,597,201
=====================================
1997
Shares sold ....................$4,134,527,818 $937,979,469
Shares issued in reinvestment
of distributions .............. 90,722,912 14,037,460
Shares redeemed ................ (4,001,789,988) (979,088,856)
-------------------------------------
Net increase (decrease) ......... $ 223,460,742 $(27,071,927)
=====================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Portfolios are also officers and/or
directors of Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor
Services, Inc. (Investor Services), the Portfolios' investment manager and
transfer agent, respectively, and of the Franklin Money Fund, Institutional
Fiduciary Trust, Franklin Templeton Money Fund Trust, and Franklin Federal Money
Fund.
The Portfolios pay an investment management fee to Advisers of .15% per year of
the average daily net assets of each Portfolio. Advisers agreed in advance to
waive management fees for the Portfolios, as noted in the Statement of
Operations.
At June 30, 1998, the shares of The Money Market Portfolio were owned by the
following funds:
Percentage of
Outstanding
Shares Shares
--------------------------------------
Franklin Money Fund ............. 1,714,438,805 83.89%
Institutional Fiduciary Trust -
Money Market Portfolio ......... 175,899,949 8.61%
Institutional Fiduciary Trust -
Franklin Cash Reserves Fund .... 117,900,101 5.77%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund II 35,390,448 1.73%
At June 30, 1998, 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 Money Market Portfolio 131,160,450 49.83%
Franklin Federal Money Fund .... 132,065,928 50.17%
4. INCOME TAXES
At June 30, 1998, The Money Market Portfolio had tax basis capital losses of
$4,721 which may be carried over to offset future capital gains. Such losses
expire as follows:
The Money
Market Portfolio
-----------------
Capital loss carryovers expiring in:
2002............................... $3,560
2006............................... 1,161
----------
................................... $4,721
==========
THE MONEY MARKET PORTFOLIOS
Independent Auditor's Report
To the Shareholders and Board of Trustees
Of The Money Market Portfolios
We have audited the accompanying statements of assets and liabilities of each of
the two Portfolios comprising The Money Market Portfolios (the Portfolios),
including each Portfolio's statement of investments as of June 30, 1998, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Portfolios'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the two Portfolios comprising The Money Market Portfolios as of June 30,
1998, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
July 30, 1998
Franklin's IFT Money Market Portfolio
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the fund's securities breakdown by
sector as a percentage of the fund's total net assets.
Portfolio Breakdown on 6/30/98
Certificates of Deposit 27.0%
Commercial Paper 57.7%
Repurchase Agreements 15.3%
GRAPHIC MATERIAL (2)
This bar chart shows the comparison between Franklin's IFT Money Market
Portfolio's total returns of 5.55%, 17.52%, 28.08%, and 75.97% for the one-,
three-, five- and ten-year periods ended 6/30/98 and the Lipper Institutional
Money Market Funds Index's total returns of 5.40%, 16.87%, 27.04%, and 74.43%
for the one-, three-, five- and ten-year periods ended 6/30/98.
GRAPHIC MATERIAL (3)
This chart shows in pie chart format the fund's securities breakdown by
sector as a percentage of the fund's total net assets.
Portfolio Breakdown on 6/30/98
Repurchase Agreements 81.0%
Treasuries 19.0%
GRAPHIC MATERIAL (4)
This bar chart shows the comparison between Franklin U.S. Government
Securities Money Market Portfolio's total returns of 5.51%, 17.20%, and
27.46% for the one-, three- and five-year periods ended 6/30/98 and the
Lipper Institutional U.S. Government Money Market Funds Index's total returns
of 5.32%, 16.72%, and 26.63% for the one-, three- and five-year periods ended
6/30/98.
GRAPHIC MATERIAL (5)
This chart shows in pie chart format the fund's securities breakdown by
sector as a percentage of the fund's total net assets.
Portfolio Breakdown on 6/30/98
U.S. Treasuries 100.0%
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between Franklin U.S. Treasury Money
Market Portfolio's total returns of 5.13%, 16.32%, and 26.29% for the one-,
three- and five-year periods ended 6/30/98 and the Lipper Institutional U.S.
Treasury Money Market Funds Index's total returns of 5.18%, 16.25%, and
25.83% for the one-, three- and five-year periods ended 6/30/98.
Franklin U.S. Government Agency Money Market Portfolio
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL (7)
This chart shows in pie chart format the fund's securities breakdown by
sector as a percentage of the fund's total net assets.
Portfolio Breakdown on 6/30/98
Federal Home Loan Bank 71.1%
Federal Farm Credit Bank 18.4%
Treasuries 10.5%
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between Franklin U.S. Government Agency
Money Market Portfolio's total returns of 5.18% and 16.29% for the one- and
three-year periods ended 6/30/98 and the Lipper Institutional U.S. Government
Money Market Funds Index's total returns of 5.32% and 16.72% for the one- and
three-year periods ended 6/30/98.
ANNUAL
REPORT
JUNE 30, 1998
INSTITUTIONAL FIDUCIARY TRUST
Franklin Institutional Adjustable
U.S. Government Securities Fund
Franklin Institutional Adjustable
Rate Securities Fund
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do portfolio share prices.
We appreciate your past support and look forward to serving your investment
needs in the years ahead.
Charles B. Johnson
Chairman of the Board
Institutional Fiduciary Trust
CONTENTS
Shareholder Letter ............................................. 1
Overview of the Economy......................................... 3
Fund Reports
Franklin Institutional
Adjustable U.S. Government
Securities Fund................................................. 5
Franklin Institutional
Adjustable Rate
Securities Fund................................................. 11
Financial Highlights &
Statement of Investments........................................ 17
Financial Statements............................................ 21
Notes to
Financial Statements............................................ 24
Independent
Auditor's Report................................................ 27
SHAREHOLDER LETTER
Dear Shareholder,
We are pleased to bring you the seventh annual report for Franklin's
Institutional Fiduciary Trust adjustable rate securities funds, covering the
period ended June 30, 1998.
Franklin's Institutional Fiduciary Trust (the Trust) was developed specifically
to meet the needs of institutional investors. Part of the $236.6 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.
During the twelve month period, much of the strength in the economy was led by
the consumer sector, as stock market gains combined with low unemployment
boosted consumer confidence to record levels. However, the Federal Reserve took
no actions during the twelve months, maintaining a neutral posture in light of
the opposing forces of a strong domestic economy and the possible weakening
effects of the Asian situation.
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
Strong U.S. economic growth over the past year continued at a healthy pace, as
inflation remained low and short-term interest rates remained relatively stable.
Annualized real GDP grew, averaging 3.8% for the three quarters ended March
1998, a figure considerably above the Federal Reserve Board's targeted long-term
growth rate of 2.5%. Higher income levels, real estate prices, and stock prices
combined with relatively low interest rates to fuel the consumer sector of the
economy, which was the primary driver of domestic growth during the period under
review.
As a result of the strong economic growth, the U.S. unemployment rate declined
to 4.3%, which was the lowest in 28 years. Preliminary estimates for the second
quarter indicate that economic growth slowed slightly due to a wider trade
deficit and a weakening manufacturing sector resulting from the Asian crisis.
Inflation as measured by CPI increased only 1.7% on a year over year basis
through May, down from 2.4% during the same period in the previous year.
Increased international competition, higher domestic productivity, and lower
commodity prices all contributed to the deceleration in the rate of inflation.
While long-term interest rates declined during the period due to the
deceleration in inflation, short-term interest rates remained relatively stable.
The federal funds target rate remained unchanged at 5.5% over the past year, as
low inflation coupled with the crisis in Asia offset strong economic growth.
Given the strength of the domestic economy, the Federal Reserve Board was
discouraged from making any policy changes.
T. Anthony Coffey, CFA
Portfolio Manager
Tony Coffey is a portfolio manager for the Franklin Institutional Adjustable
U.S. Government Securities Fund, the Franklin Institutional 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.
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
Your Fund's Objective: The Franklin Institutional Adjustable U.S. Government
Securities Fund (the 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 These securities have coupons which adjust
with movements in various short-term interest rates. As a consequence, the
prices of these securities remain fairly stable as rates rise and fall, thus
keeping the Fund's net asset value stable. Our portfolio concentrates on
seasoned ARM securities, with slow and stable prepayment histories. These bonds
consistently produce higher yields and lower price volatility relative to other
ARM sectors.
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.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Despite a continued strong domestic economy, bonds benefited from a combination
of dormant inflation pressures and concerns about the ongoing financial crisis
in Asia. In addition, the yield curve became flatter during the period, with
long-term rates declining more than short-term rates. For example, the spread
between the 2-year and 30-year Treasury rates narrowed from 72 basis points to
15 basis points during the period.
The flattening of the yield curve in the last six months has important
implications for ARM securities going forward. In general, a flat yield curve
leads to higher prepayments on ARM securities because most ARMs are tied to
short-term interest rates such as the 1-year Constant Maturity Treasury (CMTs),
the 12-month T-bill, or the 11th District Cost of Funds Index. In contrast,
fixed-rate mortgages (FRMs) are tied to movements in longer rates, such as the
10-year Treasury. As the curve flattens, or the gap between short and long rates
narrow, ARM borrowers have an increased economic incentive to refinance into an
FRM.
ARM prepayments rose substantially in the past few months. If the yield curve
remains flat, or even inverts, ARM prepayments will remain at high levels,
reducing income and limiting price appreciation. We believe our emphasis on
seasoned CMT ARMs will prove most beneficial to shareholders, as a flat yield
curve environment will least negatively affect these securities. Seasoned ARMs
have already been through one or more refinancing cycles, and, thus, are less
likely to prepay than newer ARMs which are refinanceable for the first time.
Going forward, we believe the direction of interest rates will be determined by
which of two opposing forces prevails over the economic landscape. On the one
hand, there is fear that the current crisis in Asia will spread and create a
persistent economic drag in the U.S., keeping inflation subdued and possibly
even leading to deflation. We believe this will push long-term interest rates
lower and force the Federal Reserve Board to ease monetary policy. The other
argument is that U.S. demand will remain strong and the Asian situation will
prove to have less impact than feared. Meanwhile, inflation, led by higher wage
costs, will finally rear its ugly head, leading to higher overall interest rate
levels and forcing the Federal Reserve Board to tighten monetary policy. In the
near-term, we believe that neither factor will completely dominate the other and
that we will remain in a trading range with the 30-year bond yield fluctuating
between 5.5-6.0%.
PERFORMANCE SUMMARY
The Franklin Institutional Adjustable U.S. Government Securities Fund's share
price, as measured by net asset value, fell slightly from $9.36 on June 30,
1997, to $9.35 on June 30, 1998.
The Fund continued to pursue its investment objective of providing high current
income to its shareholders. For the twelve-month period ended June 30, 1998, the
Fund paid monthly income distributions totaling $0.54 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 5.22%,
based on an annualization of the dividends distributed during the last 30 days
of the period ($0.040098 per share) and the net asset value of $9.35 on June 30,
1998.
The Fund provided a cumulative total return of 5.78% for the twelve-month period
ended June 30, 1998. 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.
As illustrated by the chart, your Fund underperformed the six-month Certificate
of Deposits rate and underperformed the Lehman Brothers Short 1-2 Year
Government Index. Of course, unmanaged market indices have inherent performance
differentials in comparison with any fund. They do not pay management fees to
cover the salaries of security analysts or portfolio managers, nor do they pay
commissions to buy and sell bonds. Unlike indices, mutual funds are never fully
invested since they need to keep cash on hand to redeem shares or pay for
upcoming investments. The Fund's performance figures include all fund expenses
and account fees. If operating expenses such as the Fund's had been applied to
this index, the index's performance would have been lower. Please remember that
an index is simply a measure of performance, and one cannot invest directly in
an index.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
2. Performance assumes an initial $1,000,000 investment in the Fund from its
inception (12/2/91). It represents the change in value of an investment over the
period shown and assumes the reinvestment of dividends and capital gains. Past
performance is not indicative of future results. Indices are unmanaged, and one
cannot invest directly in an index.
3. Past expense reductions by the Fund's manager increased the Fund's total
returns.
Performance Figures3
Periods Ended June 30, 1998
Since
Inception
1-Year 5-Year (12/2/91)
Cumulative Total Return:4 5.78% 4.64% 34.54%
Average Annual Total Return:5 5.78% 4.64% 4.61%
30-Day Standardized Yield:6 5.19%
Distribution Rate:7 5.22%
4. Cumulative total return reflects the change in value of an investment over
the periods indicated, assuming reinvestment of dividends and capital gains, if
any.
5. 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.
6. 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.
7. Based on an annualization of the Fund's dividends for the 30-day period
($0.040098 per share) and the net asset value of $9.35 per share on June 30,
1998.
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.
Past performance is not predictive of future results.
FRANKLIN INSTITUTIONAL
ADJUSTABLE RATE SECURITIES FUND
Your Fund's Objective: The Franklin Institutional Adjustable Rate Securities
Fund (the 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.1 These securities have
coupons which adjust with movements in various short-term interest rates. As a
consequence, the prices of these securities remain fairly stable as rates rise
and fall, thus keeping the Fund's net asset value stable. Our portfolio
concentrates on seasoned ARM securities, with slow and stable prepayment
histories. These bonds consistently produce higher yields and lower price
volatility relative to other ARM sectors.
Despite a continued strong domestic economy, bonds benefited from a combination
of dormant inflation pressures and concerns about the ongoing financial crisis
in Asia. In addition, the yield curve became flatter during the period, with
long-term rates declining more than short-term rates. For example, the spread
between the 2-year and 30-year Treasury rates narrowed from 72 basis points to
15 basis points during the period.
1. 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.
The flattening of the yield curve in the last six months has important
implications for ARM securities going forward. In general, a flat yield curve
leads to higher prepayments on ARM securities because most ARMs are tied to
short-term interest rates such as the 1-year Constant Maturity Treasury (CMTs),
the 12-month T-bill, or the 11th District Cost of Funds Index. In contrast,
fixed-rate mortgages (FRMs) are tied to movements in longer rates, such as the
10-year Treasury. As the curve flattens, or the gap between short and long rates
narrow, ARM borrowers have an increased economic incentive to refinance into an
FRM.
ARM prepayments rose substantially in the past few months. If the yield curve
remains flat, or even inverts, ARM prepayments will remain at high levels,
reducing income and limiting price appreciation. We believe our emphasis on
seasoned CMT ARMs will prove most beneficial to shareholders, as a flat yield
curve environment will least negatively affect these securities. Seasoned ARMs
have already been through one or more refinancing cycles, and, thus, are less
likely to prepay than newer ARMs which are refinanceable for the first time.
Going forward, we believe the direction of interest rates will be determined by
which of two opposing forces prevails over the economic landscape. On the one
hand, there is fear that the current crisis in Asia will spread and create a
persistent economic drag in the U.S., keeping inflation subdued and possibly
even leading to deflation. We believe this will push long-term interest rates
lower and force the Federal Reserve Board to ease monetary policy. The other
argument is that U.S. demand will remain strong and the Asian situation will
prove to have less impact than feared. Meanwhile, inflation, led by higher wage
costs, will finally rear its ugly head, leading to higher overall interest rate
levels and forcing the Federal Reserve Board to tighten monetary policy. In the
near-term, we believe that neither factor will completely dominate the other and
that we will remain in a trading range with the 30-year bond yield fluctuating
between 5.5-6.0%.
PERFORMANCE SUMMARY
The Franklin Institutional Adjustable Rate Securities Fund's share price, as
measured by net asset value, rose from $9.93 on June 30, 1997, to $9.94 on June
30, 1998.
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 twelve-months ended June 30, 1998, the Fund paid monthly
income distributions totaling $0.62 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 5.42% based
on the annualization of the dividends distributed over the last 30 days of the
period ($0.044302 per share) and the net asset value of $9.94 per share on June
30, 1998.
The Fund posted a cumulative total return of 6.51% for the twelve-month period
ended June 30, 1998. 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.
As shown in the chart, your Fund's performance since inception has exceeded the
six-month Certificate of Deposits rate and closely tracked the Lehman Brothers
Short 1-2 Year Government Index. Of course, unmanaged market indices have
inherent performance differentials in comparison with any fund. They do not pay
management fees to cover the salaries of security analysts or portfolio
managers, nor do they pay commissions to buy and sell bonds. Unlike indices,
mutual funds are never fully invested since they need to keep cash on hand to
redeem shares or pay for upcoming investments. The Fund's performance figures
include all fund expenses and account fees. If operating expenses such as the
Fund's had been applied to this index, the index's performance would have been
lower. Please remember that an index is simply a measure of performance, and one
cannot invest directly in an index.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
2. Performance assumes an initial $1,000,000 investment in the Fund from its
inception (1/3/92). It represents the change in value of an investment over the
period shown and assumes the reinvestment of dividends and capital gains. Past
performance is not indicative of future results. Indices are unmanaged, and one
cannot invest directly in an index.
3. Past expense reductions by the Fund's manager increased the Fund's total
returns.
Performance Figures3
Periods Ended June 30, 1998
Since
Inception
1-Year 5-Year (1/3/92)
Cumulative Total Return:4 6.51% 31.99% 43.55%
Average Annual Total Return:5 6.51% 5.71% 5.73%
30-Day Standardized Yield:6 5.45%
Distribution Rate:7 5.42%
4. Cumulative total return reflects the change in value of an investment over
the periods indicated, assuming reinvestment of dividends and capital gains, if
any.
5. 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.
6. 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.
7. Based on an annualization of the Fund's dividends for the 30-day period
($0.044302 per share) and the net asset value of $9.94 per share on June 30,
1998.
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.
Past performance is not predictive of future results.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin Institutional Adjustable U.S. Government Securities Fund
Year Ended June 30,
------------------------------------------------------
1998 1997 1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ..................... $9.36 $9.28 $9.25 $9.40 $9.86
------------------------------------------------------
Income from investment operations:
Net investment income ................................. .539 .570 .600 .551 .360
Net realized and unrealized gains (losses) ............ (.010) .090 .028 (.155) (.467)
------------------------------------------------------
Total from investment operations ....................... .529 .660 .628 .396 (.107)
Less distributions from net investment income .......... (.539) (.580) (.598) (.546) (.353)
------------------------------------------------------
Net asset value, end of year ........................... $9.35 $9.36 $9.28 $9.25 $9.40
======================================================
Total return* .......................................... 5.78% 7.37% 6.98% 4.41% (1.11)%
Ratios/supplemental data
Net assets, end of year (000's) ........................ $3,497 $7,471 $9,448 $25,020 $51,738
Ratios to average net assets:
Expenses1 ............................................. .45% .43% .38% .23% .07%
Expenses excluding waiver and payments by affiliate1 .. .56% .61% .55% .54% .45%
Net investment income ................................. 5.83% 6.12% 5.90% 5.81% 3.49%
Portfolio turnover rate ................................ 9.46% 6.78% 102.66% 14.86% 29.47%
</TABLE>
*Total return is not annualized.
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, June 30, 1998
<TABLE>
<CAPTION>
Franklin Institutional Adjustable U.S. Government Securities Fund SHARES VALUE
Mutual Funds 100.2%
<S> <C> <C>
U.S. Government Adjustable Rate Mortgage Portfolio (Note 1) (Cost $3,528,270) ....... 371,903 $3,503,322
Other Assets, less Liabilities (.2)% ................................................ (5,912)
Net Assets 100.0% ................................................................... $3,497,410
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin Institutional Adjustable Rate Securities Fund
Year Ended June 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year...................... $9.93 $9.79 $9.78 $9.77 $10.04
----------------------------------------------------
Income from investment operations:
Net investment income.................................. .618 .590 .600 .589 .437
Net realized and unrealized gains (losses)............. .013 .140 .011 .010 (.270)
------------------------------------------------------
Total from investment operations........................ .631 .730 .611 .599 .167
Less distributions from net investment income........... (.618) (.590) (.601) (.589) (.437)
------------------------------------------------------
Net asset value, end of year............................ $9.94 $9.93 $9.79 $9.78 $ 9.77
====================================================
Total return*........................................... 6.51% 7.66% 6.41% 6.35% 1.65%
Ratios/supplemental data
Net assets, end of year (000's)......................... $989 $4,754 $4,453 $8,596 $31,198
Ratios to average net assets:
Expenses1 ............................................. .33% .42% .36% .31% .25%
Expenses excluding waiver and payments by affiliate1 .. .52% .62% .61% .59% .50%
Net investment income.................................. 6.21% 6.03% 6.16% 5.84% 4.32%
Portfolio turnover rate................................. 12.96% 18.02% 45.98% 12.44% 197.22%
</TABLE>
*Total return is not annualized.
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, June 30, 1998
<TABLE>
<CAPTION>
Franklin Institutional Adjustable Rate Securities Fund SHARES VALUE
Mutual Funds 100.3%
<S> <C> <C>
Adjustable Rate Securities Portfolio (Note 1) (Cost $985,202) ......................... 99,746 $992,476
Other Assets, less Liabilities (.3)% .................................................. (3,016)
----------
Net Assets 100.0% ..................................................................... $989,460
==========
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
June 30, 1998
Franklin
Institutional Franklin
Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
<S> <C> <C>
Assets:
Investments in securities:
Cost ....................................................................... $ 3,528,270 $ 985,202
===========================
Value ...................................................................... 3,503,322 992,476
Cash ........................................................................ 187 46
---------------------------
Total assets ........................................................... 3,503,509 992,522
---------------------------
Liabilities:
Payables:
Affiliates ................................................................. 188 45
Shareholders ............................................................... 2,574 --
Professional fees .......................................................... 2,007 2,286
Rating service fees ........................................................ 1,000 --
Other liabilities ........................................................... 330 731
---------------------------
Total liabilities ...................................................... 6,099 3,062
---------------------------
Net assets, at value ................................................. $ 3,497,410 $ 989,460
===========================
Net assets consist of:
Net unrealized appreciation (depreciation) .................................. (24,948) 7,274
Accumulated net realized loss ............................................... (30,564,454) (2,044,895)
Capital shares .............................................................. 34,086,812 3,027,081
---------------------------
Net assets, at value ......................................................... $ 3,497,410 $ 989,460
===========================
Shares outstanding ........................................................... 374,099 99,514
===========================
Net asset value and maximum offering price per share
(net asset value / shares outstanding) ....................................... $9.35 $9.94
===========================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
<TABLE>
<CAPTION>
Statements of Operations
for the year ended June 30, 1998
Franklin
Institutional Franklin
Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
<S> <C> <C>
Investment income:
Dividends ................................................................... $329,104 $112,743
---------------------------
Expenses:
Administrative fees (Note 3) ................................................ 2,694 897
Transfer agent fees (Note 3) ................................................ 533 68
Reports to shareholders ..................................................... 788 443
Registration and filing fees ................................................ 2,271 --
Professional fees ........................................................... 1,984 --
Directors' fees and expenses ................................................ 264 --
Rating service fees ......................................................... 6,000 --
Other ....................................................................... 405 --
---------------------------
Total expenses ......................................................... 14,939 1,408
---------------------------
Net investment income ................................................ 314,165 111,335
---------------------------
Realized and unrealized gains (losses):
Net realized loss from investments .......................................... (229,051) (36,837)
Net unrealized appreciation on investments .................................. 232,193 51,779
---------------------------
Net realized and unrealized gains ............................................ 3,142 14,942
---------------------------
Net increase in net assets resulting from operations ......................... $317,307 $126,277
===========================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
for the years ended June 30, 1998 and 1997
Franklin Institutional Franklin Institutional
Adjustable U.S. Government Adjustable Rate
Securities Fund Securities Fund
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ......................... $ 314,165 $ 529,826 $ 111,335 $ 285,372
Net realized loss from investments ............ (229,051) (142,155) (36,837) (10,103)
Net unrealized appreciation on investments .... 232,193 218,167 51,779 78,349
--------------------------------------------------------
Net increase in net assets
resulting from operations .......... 317,307 605,838 126,277 353,618
Distributions to shareholders
from net investment income.................. (314,165) (544,447) (111,335) (285,372)
Capital share transactions (Note 2) ............ (3,977,215) (2,037,654) (3,779,422) 232,562
--------------------------------------------------------
Net increase (decrease) in net assets ..... (3,974,073) (1,976,263) (3,764,480) 300,808
Net assets (there is no undistributed net investment
income at beginning or end of year):
Beginning of year ............................. 7,471,483 9,447,746 4,753,940 4,453,132
--------------------------------------------------------
End of year ................................... $3,497,410 $7,471,483 $ 989,460 $4,753,940
========================================================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Institutional Fiduciary Trust (the Trust) is registered under the Investment
Company Act of 1940 as an open-end investment company, consisting of seven
separate series (the Funds). All Funds included in this report are diversified.
The investment objectives of the Funds included in this report are to seek high
current income.
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) invest
substantially all of their assets in the U.S. Government Adjustable Rate
Mortgage Portfolio (the Mortgage Portfolio) and the Adjustable Rate Securities
Portfolio (the Securities Portfolio), (the Portfolios), respectively. The
Portfolios are registered under the Investment Company Act of 1940 as
diversified, open-end investment companies having the same investment objectives
as the Funds. The unaudited financial statements of the Portfolios, including
the Statement of Investments, are included elsewhere in this report and should
be read in conjunction with the Funds' financial statements.
The following summarizes the Funds' significant accounting policies.
a. Security Valuation:
The Adjustable U.S. Government Fund and the Adjustable Rate Securities Fund hold
Portfolio shares that are valued at their proportionate interest in the net
asset values of the Mortgage Portfolio and the Securities Portfolio,
respectively. At June 30, 1998, the Adjustable U.S. Government Fund owns 1% of
the Mortgage Portfolio and the Adjustable Rate Securities Fund owns 4% of the
Securities Portfolio. The Portfolios' shares held by the Funds are valued at the
net asset value of the Portfolios.
b. Income Taxes:
No provision has been made for income taxes because each Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
c. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income are normally declared daily. Such distributions are reinvested in
additional shares of the Funds. Other distributions to shareholders are recorded
on the ex-dividend date.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. 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. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, there were an unlimited number of shares authorized (no par
value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
Franklin Institutional Franklin Institutional
Adjustable U.S. Government Adjustable Rate
Securities Fund Securities Fund
------------------------------------------------
Shares Amount Shares Amount
------------------------------------------------
<S> <C> <C> <C> <C>
Year ended June 30, 1998
Shares sold.............................................. 15,440 $ 144,341 10,680 $ 106,230
Shares issued on reinvestment of distributions........... 5,439 50,992 5,768 57,357
Shares redeemed.......................................... (445,054) (4,172,548) (395,776)(3,943,009)
------------------------------------------------
Net decrease........................................ (424,175) $(3,977,215) (379,328)$(3,779,422)
=================================================
Year ended June 30, 1997
Shares sold.............................................. 4,317 $ 40,168 83,275 $ 815,985
Shares issued on reinvestment of distributions........... 6,691 62,259 4,876 48,022
Shares redeemed.......................................... (230,283) (2,140,081) (64,209) (631,445)
------------------------------------------------
Net increase (decrease)............................. (219,275) $(2,037,654) 23,942 $ 232,562
===============================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), and Franklin/Templeton Investor Services, Inc. (Investor
Services), the Funds' investment manager, principal underwriter, and transfer
agent, respectively, and of the Mortgage Portfolio and the Securities Portfolio.
The Funds pay an administrative fee to Advisers of .05% per year of the Funds'
average daily net assets.
4. INCOME TAXES
At June 30, 1998, the Funds had tax basis capital losses, which may be carried
over to offset future capital gains. Such losses expire as follows:
Franklin Franklin
Institutional Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
Capital loss carryovers
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
2005......................... 162,757 108,420
2006......................... 191,179 36,534
--------------------------------
$30,184,698 $2,034,977
================================
4. INCOME TAXES (cont.)
At June 30, 1998, the Adjustable U.S. Government Fund and the Adjustable Rate
Securities Fund have deferred capital losses occurring subsequent to October 31,
1997 of $140,050 and $3,739, respectively. For tax purposes, such losses will be
reflected in the year ending June 30, 1999.
At June 30, 1998, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes were as follows:
Franklin Franklin
Institutional Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
Investments at cost............ $3,767,976 $991,381
================================
Unrealized appreciation........ -- 1,095
Unrealized depreciation........ (264,654) --
--------------------------------
Net unrealized appreciation
(depreciation)................ $ (264,654) $ 1,095
================================
Net realized capital losses differ for financial statement and tax purposes
primarily due to differing treatment of wash sales.
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended June 30, 1998 were as follows:
Franklin Franklin
Institutional AdjustableInstitutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
Purchases $ 511,452 $ 241,940
Sales $4,482,497 $4,043,605
INSTITUTIONAL FIDUCIARY TRUST
Independent Auditor's Report
To the Shareholders and Board of Trustees
of Institutional Fiduciary Trust:
We have audited the accompanying statements of assets and liabilities of the
Franklin Institutional Adjustable U.S. Government Securities Fund and the
Franklin Institutional Adjustable Rate Securities Fund of the Institutional
Fiduciary Trust (the Funds), including each Fund's statement of investments, as
of June 30, 1998, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Franklin Institutional Adjustable U.S. Government Securities Fund and
Franklin Institutional Adjustable Rate Securities Fund of the Institutional
Fiduciary Trust as of June 30, 1998, the results of their operations for the
year then ended, the changes in their net assets for each of the two years in
the period then ended, and the financial highlights for each of the periods
presented, in conformity with generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
July 30, 1998
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Highlights
<TABLE>
<CAPTION>
U.S. Government Adjustable Rate Mortgage Portfolio
Eight Months
Ended
June 30, 1998 Year Ended October 31,
(unaudited) 1997 1996 1995 1994 19931
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ..... $9.48 $9.37 $9.33 $9.19 $9.82 $9.91
-------------------------------------------------------------------
Income from investment operations:
Net investment income ................... .379 .593 .589 .572 .415 .313
Net realized and unrealized gain (loss) . (.060) .110 .040 .140 (.630) (.090)
-------------------------------------------------------------------
Total from investment operations ......... 0.319 .703 .629 .712 (.215) .223
Less distributions from net investment income (0.379) (.593) (.589) (.572) (.415) (.313)
-------------------------------------------------------------------
Net asset value, end of period ........... $9.42 $9.48 $9.37 $9.33 $9.19 $9.82
===================================================================
Total return* ............................ 3.42% 7.74% 6.95% 7.99% (2.22)% 2.28%
Ratios/supplemental data
Net assets, end of period (000's) ........ $309,769 $342,541 $406,431 $522,802 $747,471$2,130,229
Ratios to average net assets:
Expenses ................................ .25%** .25% .25% .18% .02% .27%**
Expenses excluding waiver
and payments by affiliate ............... .43%** .43% 0.42% .43% .42% .41%**
Net investment income ................... 6.02%** 6.31% 6.31% 6.17% 4.01% 4.15%**
Portfolio turnover rate .................. 27.73% 20.84% 24.63% 20.16% 56.43% 76.55%
</TABLE>
1For the nine months ended October 31, 1993.
*Total return is not annualized.
**Annualized.
See notes to financial statements.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Statement of Investments, June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
U.S. Government Adjustable Rate Mortgage Portfolio AMOUNT VALUE
<S> <C> <C>
Adjustable Rate Mortgage Securities 97.0%
Federal Home Loan Mortgage Corp. (FHLMC) 18.2%
FHLMC, Cap 11.253%, Margin 1.75% + CMT, Resets Annually, 7.375%, 11/01/16 ......... $ 4,213,480 $ 4,196,068
FHLMC, Cap 12.744%, Margin 2.00% + CMT, Resets Annually, 7.533%, 7/01/18 .......... 3,694,955 3,679,449
FHLMC, Cap 12.806%, Margin 2.23% + CMT, Resets Annually, 7.722%, 4/01/18 .......... 5,878,745 5,925,633
FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.547%, 9/01/19 .......... 5,107,763 5,041,763
FHLMC, Cap 13.156%, Margin 1.915% + CMT, Resets Annually, 7.468%, 12/01/16 ........ 2,539,296 2,572,658
FHLMC, Cap 13.246%, Margin 2.175% + CMT, Resets Annually, 7.764%, 10/01/18 ........ 2,305,781 2,325,801
FHLMC, Cap 13.292%, Margin 2.115% + CMT, Resets Annually, 7.602%, 3/01/19 ......... 2,074,895 2,090,741
FHLMC, Cap 13.366%, Margin 2.102% + CMT, Resets Annually, 7.532%, 3/01/18 ......... 3,771,809 3,803,286
FHLMC, Cap 13.37%, Margin 2.04% + CMT, Resets Annually, 7.546%, 4/01/19 ........... 8,172,735 8,177,715
FHLMC, Cap 13.65%, Margin 2.249% + CMT, Resets Annually, 7.84%, 7/01/20 ........... 5,003,008 5,010,026
FHLMC, Cap 13.793%, Margin 2.214% + CMT, Resets Annually, 7.834%, 11/01/19 ........ 2,520,941 2,552,563
FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.651%, 4/01/18 ......... 7,103,502 7,152,035
FHLMC, Cap 14.307%, Margin 1.957% + 3CMT, Resets Every 3 Years, 7.754%, 12/01/21 .. 1,385,604 1,356,926
FHLMC, Cap 14.90%, Margin 2.546% + CMT, Resets Annually, 8.128%, 2/01/19 .......... 2,397,498 2,442,372
---------------
Total Federal Home Loan Mortgage Corp. (Cost $56,170,012) ......................... 56,327,036
---------------
Federal National Mortgage Association (FNMA) 74.2%
FNMA, Cap 12.07%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 11/01/18 ........... 19,351 19,496
FNMA, Cap 12.097%, Margin 2.135% + CMT, Resets Annually, 7.096%, 11/01/23 ......... 17,212,232 17,434,782
bFNMA, Cap 12.223%, Margin 1.702% + COFI, Resets Monthly, 6.638%, 1/01/19 .......... 8,231,691 8,227,230
FNMA, Cap 12.24%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 9/01/29 ............ 2,331,542 2,340,635
FNMA, Cap 12.28%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 8/01/28 ............ 1,495,850 1,501,684
FNMA, Cap 12.31%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 4/01/19 ............ 21,723 21,788
FNMA, Cap 12.37%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 12/01/18 ........... 8,665 8,673
FNMA, Cap 12.48%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 5/01/36 ............ 1,469,953 1,478,252
FNMA, Cap 12.5%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 11/01/28 ............ 1,356,395 1,361,685
FNMA, Cap 12.605%, Margin 2.536% + 6 Month DR, Resets Semi-Annually, 7.664%, 11/01/18 1,988,638 2,024,724
FNMA, Cap 12.637%, Margin 2.00% + NCI, Resets Annually, 6.964%, 11/01/17 .......... 14,926,358 14,541,102
FNMA, Cap 12.64%, Margin 2.00% + CMT, Resets Annually, 7.605%, 3/01/19 ............ 3,409,144 3,434,479
FNMA, Cap 12.66%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 6.873%, 1/01/19 9,257,382 9,231,138
FNMA, Cap 12.662%, Margin 1.25% + COFI, Resets Monthly, 6.888%, 1/01/19 ........... 2,933,108 2,959,518
FNMA, Cap 12.705%, Margin 1.25% + COFI, Resets Monthly, 6.218%, 9/01/18 ........... 8,967,983 8,849,071
FNMA, Cap 12.787%, Margin 1.25% + COFI, Resets Monthly, 7.477%, 1/01/19 ........... 2,371,660 2,409,852
FNMA, Cap 12.788%, Margin 2.11% + CMT, Resets Annually, 7.74%, 11/01/20 ........... 3,154,620 3,187,775
FNMA, Cap 12.804%, Margin 1.75% + CMT, Resets Annually, 7.324%, 5/01/19 ........... 4,168,635 4,233,604
FNMA, Cap 12.84%, Margin 2.762% + 6 Month DR, Resets Semi-Annually, 7.892%, 6/01/17 2,485,049 2,525,040
FNMA, Cap 12.85%, Margin 2.078% + 5CMT, Resets Every 5 Years, 8.245%, 10/01/17 .... 4,013,345 4,030,527
FNMA, Cap 12.89%, Margin 2.125% + 6 Month DR, Resets Semi-Annually, 7.286%, 7/01/17 6,090,173 6,136,600
FNMA, Cap 12.916%, Margin 1.25% + COFI, Resets Monthly, 6.233%, 4/01/21 ........... 1,405,526 1,407,789
bFNMA, Cap 12.93%, Margin 2.24% + CMT, Resets Annually, 7.106%, 2/01/27 5,930,360 5,982,971
FNMA, Cap 12.938%, Margin 1.25% + COFI, Resets Monthly, 6.218%, 2/01/19 ........... 6,982,273 6,986,019
FNMA, Cap 12.993%, Margin 2.092% + CMT, Resets Annually, 7.723%, 12/01/19 ......... 2,668,677 2,710,631
FNMA, Cap 13.005%, Margin 1.97% + 3CMT, Resets Every 3 Years, 7.992%, 11/01/17 .... 4,295,599 4,397,024
FNMA, Cap 13.01%, Margin 2.10% + CMT, Resets Annually, 7.641%, 6/01/19 ............ 4,206,767 4,216,245
FNMA, Cap 13.02%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 6/01/27 ............ 631,705 634,129
FNMA, Cap 13.03%, Margin 1.25% + COFI, Resets Monthly, 6.923%, 2/01/20 ............ 8,712,092 8,456,870
FNMA, Cap 13.03%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.046%, 12/01/20 4,618,770 4,653,353
Federal National Mortgage Association (FNMA) (cont.)
FNMA, Cap 13.05%, Margin 1.25% + COFI, Resets Monthly, 6.214%, 1/01/17 ............ $ 42,203 $ 42,313
FNMA, Cap 13.063%, Margin 2.175% + CMT, Resets Annually, 7.667%, 4/01/19 .......... 4,977,862 5,057,291
FNMA, Cap 13.083%, Margin 2.005% + CMT, Resets Annually, 7.523%, 6/01/19 .......... 3,919,259 3,914,727
FNMA, Cap 13.14%, Margin 1.25% + COFI, Resets Monthly, 6.153%, 3/01/31 ............ 22,424 22,513
FNMA, Cap 13.14%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 5/01/29 ............ 41,340 41,503
FNMA, Cap 13.147%, Margin 1.895% + CMT, Resets Annually, 7.508%, 4/01/19 .......... 4,151,491 4,244,615
FNMA, Cap 13.155%, Margin 1.25% + COFI, Resets Monthly, 6.905%, 7/01/19 ........... 33,454 34,007
FNMA, Cap 13.202%, Margin 2.478% + 6 Month DR, Resets Semi-Annually, 7.606%, 11/01/26 2,202,832 2,248,039
FNMA, Cap 13.249%, Margin 2.00% + CMT, Resets Annually, 7.461%, 6/01/19 ........... 2,416,860 2,432,695
FNMA, Cap 13.281%, Margin 2.00% + CMT, Resets Annually, 7.563%, 10/01/19 .......... 6,381,631 6,482,042
FNMA, Cap 13.32%, Margin 1.25% + COFI, Resets Monthly, 7.452%, 4/01/03 ............ 6,105,873 5,963,810
FNMA, Cap 13.452%, Margin 2.148% + CMT, Resets Annually, 7.706%, 9/01/22 .......... 10,222,762 10,153,479
FNMA, Cap 13.457%, Margin 1.903% + CMT, Resets Annually, 7.519%, 6/01/18 .......... 4,731,257 4,672,067
FNMA, Cap 13.662%, Margin 2.177% + CMT, Resets Annually, 7.734%, 3/01/21 .......... 4,118,740 4,192,608
FNMA, Cap 13.791%, Margin 2.143% + CMT, Resets Annually, 7.787%, 12/01/20 ......... 6,381,244 6,453,868
FNMA, Cap 13.797%, Margin 2.20% + CMT, Resets Annually, 7.614%, 3/01/19 ........... 2,267,863 2,292,958
FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.776%, 7/01/24 4,677,625 4,720,802
FNMA, Cap 13.887%, Margin 2.25% + CMT, Resets Annually, 7.75%, 2/01/19 ............ 3,287,587 3,290,363
FNMA, Cap 13.896%, Margin 2.25% + CMT, Resets Annually, 7.81%, 12/01/18 ........... 2,303,269 2,337,478
FNMA, Cap 14.069%, Margin 2.089% + CMT, Resets Annually, 7.665%, 1/01/19 .......... 5,252,977 5,321,184
FNMA, Cap 14.08%, Margin 1.25% + COFI, Resets Monthly, 6.167%, 2/01/26 ............ 37,066 37,206
FNMA, Cap 14.25%, Margin 1.25% + COFI, Resets Monthly, 6.15%, 1/01/16 ............. 20,649 20,699
FNMA, Cap 14.354%, Margin 2.07% + 5CMT, Resets Every 5 Years, 8.115%, 5/01/21 ..... 8,462,776 8,406,488
FNMA, Cap 14.42%, Margin 2.099% + CMT, Resets Annually, 7.711%, 3/01/20 ........... 2,500,894 2,530,347
FNMA, Cap 14.887%, Margin 1.72% + CMT, Resets Annually, 7.298%, 1/01/16 ........... 7,097,340 7,062,471
FNMA, Cap 14.952%, Margin 2.523% + CMT, Resets Annually, 8.011%, 5/01/19 .......... 2,368,164 2,418,975
--------------
Total Federal National Mortgage Association (Cost $229,390,708) ................... 229,797,234
--------------
Government National Mortgage Association (GNMA) 4.6%
GNMA, Cap 10.00%, Margin 1.50% + CMT, Resets Annually, 6.875%, 1/20/24 ............ 5,558,682 5,639,436
GNMA, Cap 11.00%, Margin 2.50% + CMT, Resets Annually, 8.00%, 7/20/25 ............. 3,795,370 3,941,907
GNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.875%, 5/01/28 ............ 4,739,969 4,729,788
--------------
Total Government National Mortgage Association (Cost $14,094,021) ................. 14,311,131
--------------
Total Long Term Investments (Cost $299,654,741) ................................... 300,435,401
--------------
Joint Repurchase Agreement, 5.614%, 7/01/98, (Maturity Value $19,179,699) (Cost $19,176,708) $19,176,708 $ 19,176,708
BancAmerica Robertson Stephens
Barclays Capital, Inc.
Bear, Stearns & Co., Inc.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Oppenheimer Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $318,831,449) 103.2% ...................................... 319,612,109
Other Assets, less Liabilities (3.2)%.............................................. (9,843,017)
--------------
Net Assets 100.0%.................................................................. $309,769,092
==============
</TABLE>
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
NCI -National Median Cost of Funds Index
TB -Treasury Bill Rate
aInvestment is through participation in a joint account with other funds managed
by the investment advisor. At June 30, 1998, all repurchase agreements had been
entered into on that date.
bSufficient collateral has been segregated for securities traded on a
when-issued or delayed delivery basis.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Highlights
<TABLE>
<CAPTION>
Adjustable Rate Securities Portfolio
Eight Months
Ended
June 30, 1998 Year Ended October 31,
(unaudited) 1997 1996 1995 1994 19931
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period ..... $9.95 $9.86 $9.81 $9.69 $10.03 $10.02
-----------------------------------------------------------------
Income from investment operations:
Net investment income ................... .403 .616 .607 .625 .469 .368
Net realized and unrealized gain (loss) . -- .090 .050 .120 (.340) .010
------------------------------------------------------------------
Total from investment operations ......... .403 .706 .657 .745 .129 .378
Less distributions from net investment income (.403) (.616) (.607) (.625) (.469) (.368)
------------------------------------------------------------------
Net asset value, end of period ........... $9.95 $9.95 $9.86 $9.81 $ 9.69 $10.03
==================================================================
Total return* ............................ 4.12% 7.38% 6.91% 7.94% 1.32% 3.83%
Ratios/supplemental data
Net assets, end of period (000's) ........ $24,192 $22,540 $20,534 $27,079 $41,619 $124,309
Ratios to average net assets:
Expenses ................................ .25%** .25% .25% .25% .25% .11%**
Expenses excluding waiver
and payments by affiliate ............... .44%** .44% .47% .47% .43% .47%**
Net investment income ................... 6.11%** 6.20% 6.19% 6.36% 4.55% 4.76%**
Portfolio turnover rate .................. 52.49% 138.32% 46.78% 50.29% 192.06% 158.70%
</TABLE>
1For the nine months ended October 31, 1993.
*Total return is not annualized.
**Annualized.
See notes to financial statements.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Statement of Investments, June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
Adjustable Rate Securities Portfolio AMOUNT VALUE
<S> <C> <C>
aAdjustable Rate Mortgage Securities 79.2%
FNMA, Cap 11.06%, Margin 1.98% + CMT, Resets Annually, 7.392%, 3/01/22 ............ $ 827,441 $ 857,729
FNMA, Cap 12.02%, Margin 1.25% + COFI, Resets Monthly, 6.218%, 11/01/35 ........... 28,557 28,765
FNMA, Cap 12.65%, Margin 1.75% + NCI, Resets Monthly, 6.625%, 10/01/28 ............ 822,164 836,001
FNMA, Cap 13.52%, Margin 1.25% + COFI, Resets Monthly, 6.218%, 8/01/26 ............ 961,442 968,081
FNMA, Cap 13.85%, Margin 2.13% + 3CMT, Resets Every 3 Years, 8.205%, 3/01/22 ...... 819,183 850,424
FNMA, Cap 13.86%, Margin 1.84% + CMT, Resets Annually, 7.33%, 8/01/16 ............. 313,915 325,679
FNMA, Cap 14.68%, Margin 2.125% + 3CMT, Resets Every 3 Years, 8.160%, 8/01/22 ..... 1,600,609 1,677,481
GNMA, Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 7.00%, 11/20/21 ............ 1,559,374 1,605,743
Homeowners Federal Savings, Cap 13.00%, Margin 1.75% + CMT,
Resets Annually, 7.307%, 1/25/18 .................................................. 736,156 746,509
PHMS, Cap 11.67%, Margin 2.67% + CMT, Resets Annually, 8.097%, 7/25/22 ............ 740,943 746,269
PHMS, Cap 13.00%, Margin 2.53% + CMT, Resets Monthly, 8.128%, 8/25/21 ............. 729,163 728,024
RFC, Cap 10.00%, Margin 0.85% + COFI, Resets Monthly, 5.753%, 2/25/22 ............. 543,940 543,452
RFC, Cap 11.46%, Margin 2.25% + CMT, Resets Annually, 7.587%, 11/25/22 ............ 1,030,741 1,039,068
RTC, Cap 12.39%, Margin 1.61% + 6 Month DR, Resets Semi-Annually, 6.861%, 1/25/25 . 1,002,042 999,750
RTC, Cap 13.82%, Margin 0.92% + 3CMT, Resets Every 3 Years, 7.005%, 4/25/22 ....... 1,037,845 1,037,521
RTC, Cap 14.69%, Margin 1.55% + 3CMT, Resets Every 3 Years, 7.385%, 6/25/22 ....... 1,268,697 1,256,010
RTC, Cap 16.48%, Margin NACR - 0.15%, Resets Annually, 7.510%, 7/25/20 ............ 915,192 917,480
Salomon Brothers Mortgage Securities, Cap 14.00%, Margin 0.96% + NACR,
Resets Annually, 7.945%, 10/25/16 ................................................. 1,135,017 1,132,180
Saxon Mortgage Securities Corp., Cap 10.78%, Margin 2.78% + 6 Month LIBOR,
Resets Semi-Annually, 8.713%, 5/25/24 ............................................ 646,966 663,581
Sears Mortgage Securities, Cap 12.34%, Margin 1.10% + COFI,
Resets Monthly, 6.087%, 7/25/21 ................................................... 487,726 478,734
Travelers Mortgage Services, Inc., Cap 13.95%,
Margin 2.25% + CMT, Resets Annually, 7.791%, 12/25/18 ............................. 650,911 649,691
Western Federal Savings and Loan Association, Cap 12.25%,
Margin 0.75% + 1 Month LIBOR, Resets Monthly,
6.406%, 6/25/20 ................................................................... 448,229 445,288
Western Federal Savings and Loan Association, Cap 12.75%,
Margin 0.75% + 1 Month LIBOR, Resets Monthly,
6.406%, 7/25/20 ................................................................... 380,673 378,175
Western Federal Savings and Loan Association, Cap 13.00%,
Margin 1.80% + COFI, Resets Monthly,
6.787%, 3/25/19 ................................................................... 250,205 250,155
-------------
Total Adjustable Rate Mortgage Securities (Cost $19,317,499)....................... 19,161,790
-------------
Fixed Rate Mortgage Securities 2.4%
Countrywide Mortgage-Backed Securities, Inc., Series 1994-I,
Class A8, 6.25%, 7/25/09 (Cost $560,728) ........................................... 576,584 571,344
-------------
Other Adjustable Rate Securities 4.0%
SBA, Cap 12.625%, Margin - 0.125% + Prime, Resets Quarterly,
8.375%, 8/25/20 (Cost $966,065) .................................................... 896,060 969,986
-------------
U.S. Government Securities 8.3%
U.S. Treasury Notes, 5.375%, 1/31/00 .............................................. 1,000,000 997,813
U.S. Treasury Notes, 5.875%, 2/15/00 .............................................. 1,000,000 1,005,626
-------------
Total U.S. Government Securities (Cost $2,004,531) ................................ 2,003,439
-------------
Total Long Term Investments (Cost $22,848,823) .................................... 22,706,559
-------------
Joint Repurchase Agreement, 5.614%, 7/01/98,
(Maturity Value $1,355,289) (Cost $1,355,078)....................................... $1,355,078 $ 1,355,078
BancAmerica Robertson Stephens
Barclays Capital, Inc.
Bear, Stearns & Co., Inc.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Oppenheimer Corp.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $24,203,901) 99.5% ........................................ 24,061,637
Other Assets, less Liabilities .5%................................................. 130,372
-------------
Net Assets 100.0% ................................................................. $24,192,009
=============
</TABLE>
GLOSSARY OF ABBREVIATIONS
3CMT - 3 Year Constant Maturity Treasury Index
CMT - Constant Maturity Treasury Index
COFI - Eleventh District Cost of Funds Index
DR - Discount Rate
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
LIBOR - London Interbank Offered Rate
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
aInvestment is through participation in a joint account with other funds managed
by the investment advisor. At June 30, 1998, all repurchase agreements had been
entered into on that date.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Statements
<TABLE>
<CAPTION>
Statements of Assets and Liabilities
June 30, 1998 (unaudited)
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
<S> <C> <C>
Assets:
Investments in securities:
Cost ................................................................... $318,831,449 $24,203,901
-------------------------------
Value .................................................................. 319,612,109 24,061,637
Cash .................................................................... 979,578 --
Receivables:
Investment securities sold ............................................. 1,346,168 --
Interest ............................................................... 2,126,269 174,213
-------------------------------
Total assets ....................................................... 324,064,124 24,235,850
-------------------------------
Liabilities:
Payables:
Investment securities purchased ........................................ 14,264,238 --
Capital shares redeemed ................................................ -- 30,626
Affiliates ............................................................. 30,770 3,866
Other liabilities ....................................................... 24 9,349
-------------------------------
Total liabilities .................................................. 14,295,032 43,841
-------------------------------
Net assets, at value .............................................. $309,769,092 $24,192,009
===============================
Net assets consist of:
Net unrealized appreciation (depreciation) .............................. $ 780,660 $ (142,264)
Accumulated net realized loss ........................................... (136,892,086) (2,726,896)
Capital shares .......................................................... 445,880,518 27,061,169
-------------------------------
Net assets, at value ..................................................... $309,769,092 $24,192,009
===============================
Shares outstanding ....................................................... 32,884,201 2,431,367
===============================
Net asset value and maximum offering price
per share (net asset value / shares outstanding) ......................... $9.42 $9.95
===============================
</TABLE>
See notes to financial statements.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Statements (continued)
<TABLE>
<CAPTION>
Statements of Operations
for the eight months ended June 30, 1998 (unaudited)
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
<S> <C> <C>
Investment income:
Interest ................................................................ $13,562,437 $964,775
-------------------------------
Expenses:
Management fees (Note 3) ................................................ 865,204 61,046
Custodian fees .......................................................... 1,920 123
Reports to shareholders ................................................. 730 576
Registration and filing fees ............................................ 2,214 --
Professional fees ....................................................... 36,061 3,121
Directors fees and expenses ............................................. 4,140 275
Other ................................................................... 11,782 2,048
-------------------------------
Total expenses ..................................................... 922,051 67,189
Expenses waived/paid by affiliate (Note 3) ......................... (384,049) (29,266)
-------------------------------
Net expenses ...................................................... 538,002 37,923
-------------------------------
Net investment income ............................................ 13,024,435 926,852
-------------------------------
Realized and unrealized gains (losses):
Net realized gain from investments ....................................... 234,795 1,257
Net unrealized appreciation (depreciation) on investments ................ (2,285,575) 1,281
-------------------------------
Net realized and unrealized gain (loss) .................................. (2,050,780) 2,538
-------------------------------
Net increase in net assets resulting from operations ..................... $10,973,655 $929,390
===============================
</TABLE>
See notes to financial statements.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Statements (continued)
Statements of Changes in Net Assets
for the eight months ended June 30, 1998 (unaudited)
and the year ended October 31, 1997
<TABLE>
<CAPTION>
U.S. Government Adjustable Rate
Adjustable Rate Mortgage Portfolio Securities Portfolio
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income ..................... $ 13,024,435 $ 23,464,424 $ 926,852 $ 1,500,611
Net realized gain from investments ........ 234,795 693,708 1,257 14,469
Net unrealized appreciation (depreciation)
on investments ............................. (2,285,575) 3,675,679 1,281 260,606
------------------------------------------------------------
Net increase in net assets resulting
from operations ............................ 10,973,655 27,833,811 929,390 1,775,686
Distributions to shareholders from:
Net investment income ..................... (13,024,435) (23,464,424) (925,758) (1,500,611)
Capital share transactions (Note 2) ........ (30,721,218) (68,259,294) 1,648,515 1,730,540
------------------------------------------------------------
Net increase (decrease) in net assets ..... (32,771,998) (63,889,907) 1,652,147 2,005,615
Net assets (there is no undistributed
net investment income at beginning
or end of period):
Beginning of period ....................... 342,541,090 406,430,997 22,539,862 20,534,247
------------------------------------------------------------
End of period ............................. $309,769,092 $342,541,090 $24,192,009 $22,539,862
============================================================
</TABLE>
See notes to financial statements.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Adjustable Rate Securities Portfolios (the Trust) is registered under the
Investment Company Act of 1940 as an open-end, diversified investment company,
consisting 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 summarizes the Portfolios' significant accounting policies:
a. Security Valuation:
Securities listed or traded on a recognized national exchange or NASDAQ are
valued at the latest reported sales price. Over-the-counter securities and
listed securities for which no sale is reported are valued within the range of
the latest quoted bid and asked prices. Securities for which market quotations
are not readily available are valued at fair value as determined by management
in accordance with procedures established by the Board of Trustees.
b. Income Taxes:
No provision has been made for income taxes because each Portfolio's policy is
to qualify as a regulated investment company under the Internal Revenue Code and
distribute all of its taxable income.
c. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income are normally declared daily and distributed monthly to
shareholders.
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. Other
expenses are charged to each Portfolio on a specific identification basis. d.
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. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in each of the Portfolios' shares were as follows:
<TABLE>
<CAPTION>
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Eight months ended June 30, 1998
Shares sold ....................................... 7,576,189 $ 71,568,917 1,022,683 $10,168,783
Shares issued in reinvestment of distributions .... 1,379,212 13,024,433 93,091 925,759
Shares redeemed ...................................(12,212,171) (115,314,568) (950,310) (9,446,027)
------------------------------------------------------
Net Increase (decrease) ...................... (3,256,770)$ (30,721,218) 165,464 $ 1,648,515
=====================================================
Year Ended October 31, 1997
Shares sold ....................................... 14,468,647 $136,195,699 2,195,631 $21,698,569
Shares issued in reinvestment of distributions .... 2,492,654 23,464,406 151,507 1,500,610
Shares redeemed ...................................(24,217,403) (227,919,399) (2,164,571) (21,468,639)
------------------------------------------------------
Net Increase (decrease) ...................... (7,256,102)$ (68,259,294) 182,567 $ 1,730,540
=====================================================
</TABLE>
3. TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Trust are also officers and/or directors
of Franklin Advisers, Inc. (Advisers), the Portfolios' investment manager (a
wholly-owned subsidiary of Franklin Resources, Inc.) and of Franklin Investors
Securities Trust and Institutional Fiduciary Trust.
The Portfolios pay an investment management fee to Advisers based on the average
net assets of the Portfolios 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
Fees are further reduced on net assets over $15 billion.
Advisers agreed in advance to waive management fees as noted in the Statement of
Operations.
At June 30, 1998, 32,884,201 shares of the Mortgage Portfolio were owned by the
following:
<TABLE>
<CAPTION>
Percentage of
Shares Outstanding
Name Owned Shares
<S> <C> <C>
Franklin Adjustable U.S. Government Securities Fund .............................. 32,512,298 99%
Franklin Institutional Adjustable U.S. Government Securities Fund ................ 371,903 1%
3. TRANSACTIONS WITH AFFILIATES (cont.)
At June 30, 1998, 2,431,367 shares of the Securities Portfolio were owned by the following:
Percentage of
Shares Outstanding
Name Owned Shares
<S> <C> <C>
Franklin Adjustable Rate Securities Fund.......................................... 2,330,042 96%
Franklin Institutional Adjustable Rate Securities Fund............................ 99,746 4%
Franklin Resources, Inc........................................................... 1,579 --
</TABLE>
4. INCOME TAXES
At October 31, 1997, the Portfolios had tax basis capital losses which may be
carried over to offset future capital gains. Such losses expire as follows:
U.S. Government Adjustable
Adjustable Rate Rate Securities
Mortgage Portfolio Portfolio
Capital loss carryovers
Expiring in: 2000 ..... $ 44,745,908 $ 42,138
2001 ........ 17,182,002 50,908
2002 ........ 67,102,060 1,987,888
2003 ........ 7,677,608 609,391
2004 ........ 419,303 37,828
-----------------------------
$137,126,881 $2,728,153
=============================
At June 30, 1998, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes were as follows:
U.S. Government Adjustable
Adjustable Rate Rate Securities
Mortgage Portfolio Portfolio
Investment at cost..... $318,831,449 $24,203,901
-----------------------------
Unrealized
appreciation .......... $ 2,074,757 $ 73,648
Unrealized
depreciation......... (1,294,097) (215,912)
-----------------------------
Net unrealized
appreciation
(depreciation) ........ $ 780,660 $ (142,264)
-----------------------------
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
eight months ended June 30, 1998 were as follows:
U.S. Government Adjustable
Adjustable Rate Rate Securities
Mortgage Portfolio Portfolio
Purchases $ 87,126,861 $12,616,411
Sales $116,387,053 $11,786,829
Franklin Institutional Adjustable U.S. Government Securities Fund
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the fund's securities breakdown by
sector as a percentage of the fund's total net assets.
Portfolio Breakdown on 6/30/98
FNMA 74.8%
FHLMC 18.3%
GNMA 4.7%
Cash & Equivalents 2.2%
GRAPHIC MATERIAL (2)
The following line graph hypothetically compares the performance of the
Franklin Institutional Adjustable U.S. Government Securities Fund to that of
the Lehman Brothers Short 1-2 Year Government Index and the six-month
Certificate of Deposits rate, based on a $1,000,000 investment from 12/2/91
to 6/30/98.
Period Ending Lehman Brothers 6-Month CD Franklin
12/2/91 $ 1,000,000 $ 1,000,000 $ 1,000,000.00
12/31/91 $ 1,012,581 $ 1,003,000 $ 1,005,763.00
1/31/92 $ 1,012,682 $ 1,006,009 $ 1,008,015.94
2/29/92 $ 1,015,619 $ 1,009,128 $ 1,013,299.68
3/31/92 $ 1,016,634 $ 1,012,357 $ 1,018,313.33
4/30/92 $ 1,025,377 $ 1,015,394 $ 1,021,505.08
5/31/92 $ 1,033,991 $ 1,018,440 $ 1,027,510.94
6/30/92 $ 1,042,779 $ 1,021,394 $ 1,035,289.46
7/31/92 $ 1,053,520 $ 1,023,947 $ 1,035,689.49
8/31/92 $ 1,061,000 $ 1,026,507 $ 1,040,608.75
9/30/92 $ 1,069,700 $ 1,028,868 $ 1,045,261.68
10/31/92 $ 1,064,780 $ 1,031,337 $ 1,042,846.61
11/30/92 $ 1,063,821 $ 1,034,225 $ 1,045,257.02
12/31/92 $ 1,072,970 $ 1,036,810 $ 1,048,967.84
1/31/93 $ 1,082,734 $ 1,039,299 $ 1,053,160.53
2/28/93 $ 1,090,313 $ 1,041,689 $ 1,058,546.93
3/31/93 $ 1,093,257 $ 1,044,085 $ 1,059,898.00
4/30/93 $ 1,099,270 $ 1,046,486 $ 1,065,207.09
5/31/93 $ 1,096,852 $ 1,048,893 $ 1,066,864.38
6/30/93 $ 1,103,652 $ 1,051,411 $ 1,072,501.14
7/31/93 $ 1,106,301 $ 1,053,934 $ 1,076,720.47
8/31/93 $ 1,114,045 $ 1,056,358 $ 1,080,246.26
9/30/93 $ 1,117,499 $ 1,058,788 $ 1,079,227.31
10/31/93 $ 1,119,957 $ 1,061,223 $ 1,077,841.78
11/30/93 $ 1,120,965 $ 1,063,664 $ 1,070,334.30
12/31/93 $ 1,124,888 $ 1,066,110 $ 1,067,321.89
1/31/94 $ 1,131,188 $ 1,068,456 $ 1,070,664.35
2/28/94 $ 1,126,211 $ 1,071,234 $ 1,066,444.93
3/31/94 $ 1,123,282 $ 1,074,340 $ 1,058,205.49
4/30/94 $ 1,120,250 $ 1,077,778 $ 1,052,679.41
5/31/94 $ 1,122,154 $ 1,081,550 $ 1,057,198.89
6/30/94 $ 1,124,623 $ 1,085,552 $ 1,060,601.89
7/31/94 $ 1,133,845 $ 1,089,569 $ 1,063,907.89
8/31/94 $ 1,137,473 $ 1,093,600 $ 1,064,247.81
9/30/94 $ 1,136,563 $ 1,097,974 $ 1,063,584.19
10/31/94 $ 1,139,745 $ 1,103,135 $ 1,052,943.74
11/30/94 $ 1,136,098 $ 1,108,209 $ 1,052,265.51
12/31/94 $ 1,138,825 $ 1,113,750 $ 1,049,385.97
1/31/95 $ 1,152,718 $ 1,119,096 $ 1,058,110.70
2/28/95 $ 1,166,436 $ 1,124,356 $ 1,070,549.09
3/31/95 $ 1,173,085 $ 1,129,641 $ 1,077,185.82
4/30/95 $ 1,182,587 $ 1,134,837 $ 1,087,677.18
5/31/95 $ 1,199,024 $ 1,139,830 $ 1,111,161.72
6/30/95 $ 1,205,379 $ 1,144,732 $ 1,107,344.71
7/31/95 $ 1,211,045 $ 1,149,654 $ 1,115,462.50
8/31/95 $ 1,217,705 $ 1,154,597 $ 1,123,656.94
9/30/95 $ 1,223,185 $ 1,159,562 $ 1,131,706.44
10/31/95 $ 1,232,237 $ 1,165,012 $ 1,136,580.89
11/30/95 $ 1,241,355 $ 1,169,905 $ 1,146,766.09
12/31/95 $ 1,250,045 $ 1,174,702 $ 1,150,707.93
1/31/96 $ 1,259,920 $ 1,179,401 $ 1,159,176.88
2/29/96 $ 1,257,148 $ 1,184,000 $ 1,160,354.70
3/31/96 $ 1,257,902 $ 1,188,736 $ 1,167,769.01
4/30/96 $ 1,260,292 $ 1,193,610 $ 1,168,760.99
5/31/96 $ 1,264,073 $ 1,198,504 $ 1,172,494.40
6/30/96 $ 1,272,543 $ 1,203,538 $ 1,184,635.55
7/31/96 $ 1,277,633 $ 1,208,713 $ 1,188,636.95
8/31/96 $ 1,282,871 $ 1,213,789 $ 1,191,353.53
9/30/96 $ 1,293,134 $ 1,218,887 $ 1,200,495.77
10/31/96 $ 1,306,065 $ 1,224,007 $ 1,213,159.41
11/30/96 $ 1,314,424 $ 1,229,147 $ 1,219,434.83
12/31/96 $ 1,316,527 $ 1,234,310 $ 1,225,718.46
1/31/97 $ 1,322,715 $ 1,239,494 $ 1,233,390.57
2/28/97 $ 1,326,551 $ 1,244,948 $ 1,241,018.28
3/31/97 $ 1,327,081 $ 1,250,675 $ 1,244,749.79
4/30/97 $ 1,337,035 $ 1,256,428 $ 1,254,982.54
5/31/97 $ 1,345,993 $ 1,262,207 $ 1,262,666.75
7/31/97 $ 1,366,804 $ 1,273,846 $ 1,284,929.00
8/29/97 $ 1,369,592 $ 1,279,706 $ 1,285,797.46
9/30/97 $ 1,378,891 $ 1,285,593 $ 1,296,109.88
10/31/97 $ 1,387,992 $ 1,291,378 $ 1,303,947.38
11/28/97 $ 1,391,913 $ 1,297,318 $ 1,304,869.43
12/31/97 $ 1,400,682 $ 1,303,232 $ 1,314,045.36
1/31/98 $ 1,407,714 $ 1,309,070 $ 1,324,546.35
2/28/98 $ 1,414,780 $ 1,314,986 $ 1,325,342.06
3/31/98 $ 1,420,581 $ 1,320,950 $ 1,328,871.25
4/30/98 $ 1,427,258 $ 1,326,951 $ 1,334,977.53
5/31/98 $ 1,434,537 $ 1,332,622 $ 1,339,518.27
6/30/98 $ 1,441,709 $ 1,338,623 $ 1,345,262.87
GRAPHIC MATERIAL (3)
The following line graph hypothetically compares the performance of the
Franklin Institutional Adjustable Rate Securities Fund to that of the Lehman
Brothers Short 1-2 Year Government Index and the six-month Certificate of
Deposits rate, based on a $1,000,000 investment from 1/3/92 to 6/30/98.
Period Ending Lehman Brothers 6-Month CD Franklin
01/03/92 $ 1,000,000 $ 1,000,000 $ 1,000,000.00
01/31/92 $ 1,000,090 $ 1,002,710 $ 1,000,000.00
02/28/92 $ 1,002,991 $ 1,005,818 $ 1,002,902.00
03/31/92 $ 1,003,994 $ 1,009,037 $ 1,006,472.29
04/30/92 $ 1,012,628 $ 1,012,064 $ 1,015,035.44
05/29/92 $ 1,021,134 $ 1,015,100 $ 1,019,505.24
06/30/92 $ 1,029,814 $ 1,018,044 $ 1,028,228.56
07/31/92 $ 1,040,421 $ 1,020,589 $ 1,031,395.22
08/31/92 $ 1,047,808 $ 1,023,140 $ 1,038,847.57
09/30/92 $ 1,056,400 $ 1,025,494 $ 1,045,264.85
10/31/92 $ 1,051,540 $ 1,027,955 $ 1,047,028.83
11/30/92 $ 1,050,594 $ 1,030,833 $ 1,050,643.25
12/31/92 $ 1,059,629 $ 1,033,410 $ 1,057,011.16
01/31/93 $ 1,069,272 $ 1,035,890 $ 1,062,116.88
02/28/93 $ 1,076,757 $ 1,038,273 $ 1,070,078.49
03/31/93 $ 1,079,664 $ 1,040,661 $ 1,075,910.18
04/30/93 $ 1,085,602 $ 1,043,054 $ 1,081,496.06
05/31/93 $ 1,083,214 $ 1,045,453 $ 1,084,023.90
06/30/93 $ 1,089,930 $ 1,047,963 $ 1,087,528.35
07/31/93 $ 1,092,545 $ 1,050,478 $ 1,092,990.93
08/31/93 $ 1,100,193 $ 1,052,894 $ 1,097,076.86
09/30/93 $ 1,103,604 $ 1,055,315 $ 1,100,207.60
10/31/93 $ 1,106,032 $ 1,057,743 $ 1,102,841.94
11/30/93 $ 1,107,027 $ 1,060,175 $ 1,104,743.10
12/31/93 $ 1,110,902 $ 1,062,614 $ 1,108,983.28
01/31/94 $ 1,117,123 $ 1,064,952 $ 1,111,629.97
02/28/94 $ 1,112,207 $ 1,067,720 $ 1,109,156.58
03/31/94 $ 1,109,316 $ 1,070,817 $ 1,099,484.07
04/30/94 $ 1,106,321 $ 1,074,243 $ 1,099,312.95
05/31/94 $ 1,108,201 $ 1,078,003 $ 1,103,343.01
06/30/94 $ 1,110,639 $ 1,081,992 $ 1,105,752.62
07/31/94 $ 1,119,747 $ 1,085,995 $ 1,110,744.91
08/31/94 $ 1,123,330 $ 1,090,013 $ 1,116,964.78
09/30/94 $ 1,122,431 $ 1,094,374 $ 1,114,188.39
10/31/94 $ 1,125,574 $ 1,099,517 $ 1,117,522.87
11/30/94 $ 1,121,972 $ 1,104,575 $ 1,118,367.07
12/31/94 $ 1,124,665 $ 1,110,098 $ 1,122,393.27
01/31/95 $ 1,138,386 $ 1,115,426 $ 1,129,077.48
02/28/95 $ 1,151,933 $ 1,120,669 $ 1,139,293.08
03/31/95 $ 1,158,499 $ 1,125,936 $ 1,145,099.01
04/30/95 $ 1,167,882 $ 1,131,115 $ 1,155,015.67
05/31/95 $ 1,184,116 $ 1,136,092 $ 1,168,401.30
06/30/95 $ 1,190,392 $ 1,140,977 $ 1,175,970.11
07/31/95 $ 1,195,987 $ 1,145,883 $ 1,178,480.80
08/31/95 $ 1,202,565 $ 1,150,811 $ 1,189,576.64
09/30/95 $ 1,207,976 $ 1,155,759 $ 1,195,752.96
10/31/95 $ 1,216,915 $ 1,161,191 $ 1,204,489.71
11/30/95 $ 1,225,920 $ 1,166,068 $ 1,211,919.18
12/31/95 $ 1,234,502 $ 1,170,849 $ 1,222,137.24
01/31/96 $ 1,244,254 $ 1,175,533 $ 1,228,524.33
02/29/96 $ 1,241,517 $ 1,180,117 $ 1,228,901.96
03/31/96 $ 1,242,262 $ 1,184,838 $ 1,234,070.58
04/30/96 $ 1,244,622 $ 1,189,695 $ 1,239,079.87
05/31/96 $ 1,248,356 $ 1,194,573 $ 1,241,182.16
06/30/96 $ 1,256,720 $ 1,199,590 $ 1,251,142.11
07/31/96 $ 1,261,747 $ 1,204,749 $ 1,256,240.32
08/31/96 $ 1,266,920 $ 1,209,809 $ 1,261,221.19
09/30/96 $ 1,277,055 $ 1,214,890 $ 1,270,352.91
10/31/96 $ 1,289,826 $ 1,219,992 $ 1,286,021.81
11/30/96 $ 1,298,081 $ 1,225,116 $ 1,294,004.57
12/31/96 $ 1,300,158 $ 1,230,262 $ 1,296,743.51
01/31/97 $ 1,306,268 $ 1,235,429 $ 1,303,117.06
02/28/97 $ 1,310,057 $ 1,240,865 $ 1,308,026.23
03/31/97 $ 1,310,581 $ 1,246,573 $ 1,318,640.37
04/30/97 $ 1,320,410 $ 1,252,307 $ 1,327,552.35
05/31/97 $ 1,329,257 $ 1,258,068 $ 1,336,246.95
06/30/97 $ 1,337,631 $ 1,263,855 $ 1,347,040.81
07/31/97 $ 1,349,809 $ 1,269,668 $ 1,361,395.44
08/28/97 $ 1,352,562 $ 1,275,509 $ 1,364,291.51
09/30/97 $ 1,361,746 $ 1,281,376 $ 1,374,083.63
10/31/97 $ 1,370,734 $ 1,287,142 $ 1,377,480.70
11/28/97 $ 1,374,606 $ 1,293,063 $ 1,381,921.27
12/31/98 $ 1,383,266 $ 1,298,958 $ 1,390,823.69
1/31/98 $ 1,390,210 $ 1,304,777 $ 1,401,787.49
2/28/98 $ 1,397,189 $ 1,310,674 $ 1,406,177.44
3/31/98 $ 1,402,918 $ 1,316,618 $ 1,412,051.94
4/30/98 $ 1,409,511 $ 1,322,599 $ 1,419,417.93
5/31/98 $ 1,416,700 $ 1,328,251 $ 1,426,942.85
6/30/98 $ 1,423,783 $ 1,334,233 $ 1,434,745.95
ANNUAL
REPORT
JUNE 30, 1998
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Thank you for investing with Franklin Templeton. We encourage our investors to
maintain a long-term perspective and remember that all securities markets move
both up and down, as do portfolio share prices. We appreciate your past support
and look forward to serving your investment needs in the years ahead.
GRAPHIC PICTURE OMITTED
Charles B. Johnson
Chairman of the Board
Institutional Fiduciary Trust
SHAREHOLDER LETTER
- --------------------------------------------------------------------------------
Your Fund's Objective: The Franklin Cash Reserves Fund (the Fund) seeks high
current income, consistent with capital preservation and liquidity. The Fund
seeks to achieve this objective by investing 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.
- --------------------------------------------------------------------------------
Dear Shareholder:
We are pleased to bring you the annual report for the Franklin Cash Reserves
Fund (the Fund), for the period ended June 30, 1998.
The Fund is a series of Franklin's Institutional Fiduciary Trust, and it is
offered exclusively to qualified retirement plan participants and other
institutional investors, including corporations, banks, savings and loan
associations, and government entities.
You will find a complete listing of the fund's portfolio holdings, including the
number of shares and dollar values, beginning on page 10 of this report.
CONTENTS
Shareholder Letter ....................... 1
Overview of the Economy .................. 3
Franklin
Cash Reserves Fund ....................... 5
Performance Summary ...................... 7
Financial Highlights &
Statement of Investments ................. 9
Financial Statements ..................... 11
Notes to
Financial Statements ..................... 14
Independent
Auditor's Report ......................... 16
During the past year, the economic environment of moderate growth, tame
inflation, and relatively stable and low interest rates provided an ideal
investment climate. The Asian crisis dampened the effects of strong economic
growth in selected sectors and eased inflationary pressures, thereby eliminating
any need for policy action by the Federal Reserve Board. 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 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
Strong U.S. economic growth over the past year continued at a healthy pace, as
inflation remained low and short-term interest rates remained relatively stable.
Annualized real GDP grew, averaging 3.8% for the three quarters ended March
1998, a figure considerably above the Federal Reserve Board's targeted long-term
growth rate of 2.5%. Higher income levels, real estate prices, and stock prices
combined with relatively low interest rates fueled the consumer sector of the
economy, which was the primary driver of domestic growth during the period under
review.
As a result of the strong economic growth, the U.S. unemployment rate declined
to 4.3%, which was the lowest in 28 years. Preliminary estimates for the second
quarter indicate that economic growth slowed slightly due to a wider trade
deficit and a weakening manufacturing sector resulting from the Asian crisis.
Inflation as measured by the CPI increased only 1.7% on a year over year basis
through May, down from 2.4% during the same period in the previous year.
Increased international competition, higher domestic productivity, and lower
commodity prices all contributed to the deceleration in the rate of inflation.
While long-term interest rates declined during the period due to the
deceleration in inflation, short-term interest rates remained relatively stable.
The federal funds target rate remained unchanged at 5.5% over the past year, as
low inflation coupled with the crisis in Asia offset strong economic growth. The
Federal Reserve Board was discouraged from making any policy changes during the
period.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Source: Bloomberg Financial Markets
Looking forward, we believe that relatively low interest rates and high equity
and real estate prices will continue to stimulate consumer spending. We expect
this to fuel domestic economic growth and ultimately lead to further wage
pressures. However, we believe low inflation and the dampening effects of the
Asian crisis will most likely offset U.S. economic strength, and prevent the
Federal Reserve Board from making any policy changes in the near term. Until the
uncertainties surrounding the Asian crisis are removed, we expect short-term
interest rates to remain near current levels.
Thomas J. Runkel, CFA
Portfolio Manager
GRAPHIC PICTURE OMITTED
- --------------------------------------------------------------------------------
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).
- --------------------------------------------------------------------------------
FRANKLIN CASH RESERVES FUND
The Franklin Cash Reserve 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:
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 chart to the right illustrates the Portfolio's composition on June 30, 1998.
The Portfolio's holdings are limited to money market instruments within the two
highest rating categories assigned by Standard & Poor's, 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.
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.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
SECURITY SELECTION CRITERIA
Portfolio managers employ specific guidelines for determining buy-and-sell
opportunities. Each issuer must meet the majority of our strict internal credit
standards in order to be deemed an approved credit.
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
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.
PERFORMANCE SUMMARY
During the reporting period, the Federal Reserve's target for the federal funds
rate remained unchanged due to an economic climate of moderate growth and tame
inflation. The relatively stable short-term interest rate environment was
reflected in the Fund's seven-day yield, which began the period at 5.15% on June
30, 1997, dropped a basis point to 5.14%, as of June 30, 1998.4 The Fund's
average weighted maturity was extended from 39 days on June 30, 1997, to 56 days
as of June 30, 1998.
Weekly 7-day yields for the reporting period are shown below.5 Of course, past
performance cannot guarantee future results.
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 0.50% per annum of
average net assets. Without these reductions, the Fund's current and effective
7-day yields for the period would have been 4.85% and 4.97%, respectively.
Franklin Advisers, Inc. may discontinue these arrangements at any time, 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 June 30, 1998, there were 192 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.
Past performance is not predictive of future results.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Figures
Period Ended June 30, 1998
- -----------------------------------------------------
Seven-Day Current Yield6 5.14%
Seven-Day Effective Yield6 5.27%
Average Weighted Maturity 56 days
6. 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 0.50% per annum of
average net assets. Without these reductions, the Fund's current and effective
7-day yields for the period would have been 4.85% and 4.97%, respectively.
Franklin Advisers, Inc. may discontinue these arrangements at any time, upon
notice to the Fund's Board of Trustees.
Past performance is not predictive of future results.
<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Highlights
YEAR ENDED JUNE 30,
------------------------------------------------
1998 1997 1996 1995
------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the year)
<S> <C> <C> <C> <C>
Net asset value, beginning of year ....................... $1.00 $1.00 $1.00 $1.00
------------------------------------------------
Income from investment operations - net investment income. .051 .050 .052 .052
Less distributions from net investment income ............ (.051) (.050) (.052) (.052)
------------------------------------------------
Net asset value, end of year ............................. $1.00 $1.00 $1.00 $1.00
================================================
Total return** ........................................... 5.28% 5.11% 5.35% 5.34%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000's) .......................... $119,585 $76,510 $30,381 $14,545
Ratios to average net assets:
Expenses1 ............................................... .50% .50% .49% .40%
Expenses excluding waiver and payments by affiliate1 .... .77% .69% .73% .79%
Net investment income ................................... 5.14% 5.00% 5.10% 5.69%
</TABLE>
**Total return is not annualized.
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
See notes to financial statements.
<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
STATEMENT OF INVESTMENTS, June 30, 1998
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MUTUAL FUNDS 98.6%
The Money Market Portfolio (Note 1) (Cost $117,900,101) ......................... 117,900,101 $117,900,101
OTHER ASSETS, LESS LIABILITIES 1.4% ............................................. 1,684,482
----------
NET ASSETS 100.0% ............................................................... $119,584,583
==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
Assets:
<S> <C>
Investments in securities, at value and cost .................................. $117,900,101
Receivable for capital shares sold............................................. 2,585,188
----------
Total assets ............................................................. 120,485,289
----------
Liabilities:
Payables:
Capital shares redeemed ...................................................... 839,392
Affiliates ................................................................... 48,215
Other liabilities ............................................................. 13,099
----------
Total liabilities ........................................................ 900,706
----------
Net assets, at value (equivalent to $1.00 per share based
on 119,584,583 shares outstanding) ............................................ $119,584,583
==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS
for the year ended June 30, 1998
Investment income:
<S> <C>
Dividends ..................................................................... $6,427,687
----------
Expenses:
Administrative fees (Note 3) .................................................. $292,245
Distribution fees (Note 3) .................................................... 301,356
Transfer agent fees (Note 3) .................................................. 80,208
Custodian fees ................................................................ 1,489
Reports to shareholders ....................................................... 5,691
Registration and filing fees .................................................. 18,657
Professional fees ............................................................. 5,359
Trustees' fees and expenses ................................................... 5,023
Other ......................................................................... 1,120
----------
Total expenses ........................................................... 711,148
Expenses waived/paid by affiliate (Note 3) ............................... (301,859)
----------
Net expenses ............................................................ 409,289
----------
Net investment income .................................................. 6,018,398
----------
Net increase in net assets resulting from operations ........................... $6,018,398
==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements (continued)
STATEMENTS OF CHANGES IN NET ASSETS
for the years ended June 30, 1998 and 1997
1998 1997
-------------------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C>
Net investment income ...................................................... $ 6,018,398 $ 2,961,172
Distributions to shareholders from net investment income .................... (6,018,398) (2,961,172)
Capital share transactions (Note 2) ......................................... 43,074,366 46,129,160
-------------------------
Net increase in net assets ............................................. 43,074,366 46,129,160
Net assets (there is no undistributed net investment income
at beginning or end of year):
Beginning of year ........................................................... 76,510,217 30,381,057
-------------------------
End of year ................................................................. $119,584,583 $76,510,217
=========================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Franklin Cash Reserves Fund (the Fund) is a separate, diversified series of
Institutional Fiduciary Trust (the Trust), which is an open-end investment
company registered under the Investment Company Act of 1940. The Fund's
objective is to seek current income.
The Fund invests substantially all of its assets in The Money Market Portfolio
(the Portfolio), which is registered under the Investment Company Act of 1940 as
a diversified, open-end investment company having the same investment objectives
as the Fund. The financial statements of the Portfolio, including the Statement
of Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The following summarizes the Fund's significant accounting policies.
a. Security Valuation:
The Fund holds Portfolio shares that are valued at its proportionate interest in
net asset value of the Portfolio. As of June 30, 1998, the Fund owns 5.77% of
the Portfolio.
b. Income Taxes:
No provision has been made for income taxes because the Fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute all of its taxable income.
c. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Income and estimated expenses are accrued daily. Dividends from net investment
income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Fund.
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. Other expenses are
charged to each Fund on a specific identification basis.
d. 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. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, there were an unlimited number of shares authorized (no par
value). Transactions in the Fund's shares were as follows:
YEAR ENDED JUNE 30,
---------------------------
1998 1997
---------------------------
Shares sold......................... $326,338,904 $222,797,987
Shares issued in reinvestment.......
of distributions................... 5,965,145 2,916,349
Shares redeemed..................... (289,229,683) (179,585,176)
---------------------------
Net increase ..................... $ 43,074,366 $ 46,129,160
===========================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, Inc. (Advisers), Franklin/Templeton Distributors, Inc.
(Distributors), and Franklin/Templeton Investor Services, Inc. (Investor
Services), the Fund's administrative manager, principal underwriter, and
transfer agent, respectively, and of The Money Market Portfolios.
The Fund pays an administrative fee to Advisers of .25% per year of the Fund's
average daily net assets.
Advisers agreed in advance to waive administrative fees and assume payment of
other expenses as noted in the Statement of Operations.
The Fund reimburses Distributors up to .25% per year of its average daily net
assets, for costs incurred in marketing the Fund's shares.
The Fund paid transfer agent fees of $80,208, of which $9,744 was paid to
Investor Services.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Independent Auditor's Report
To the Shareholders and Board of Trustees
of Institutional Fiduciary Trust
We have audited the accompanying statement of assets and liabilities of the
Franklin Cash Reserve Fund of the Institutional Fiduciary Trust (the Fund),
including the Fund's statement of investments as of June 30, 1998, and the
related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Franklin Cash Reserves Fund of the Institutional Fiduciary Trust as of June 30,
1998, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and its financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
July 30, 1998
THE MONEY MARKET PORTFOLIOS
Financial Highlights
<TABLE>
<CAPTION>
The Money Market Portfolio
Year Ended June 30,
----------------------------------------------
1998 1997 1996 1995 1994
----------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------
Income from investment operations - net investment income .055 .053 .055 .053 .033
Less distributions from net investment income .... (.055) (.053) (.055) (.053) (.033)
-------------------------------------------------
Net asset value, end of year ..................... $1.00 $1.00 $1.00 $1.00 $1.00
================================================
Total return** ................................... 5.64% 5.47% 5.66% 5.46% 3.33%
Ratios/supplemental data
Net assets, end of year (000's) .................. $2,043,629 $1,773,546 $1,550,085 $1,305,574 $219,189
Ratios to average net assets:
Expenses ........................................ .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .16% .16% .16% .16% .17%
Net investment income ........................... 5.50% 5.34% 5.50% 5.42% 3.25%
**Total return is not annualized.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, June 30, 1998
PRINCIPAL
The Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
Certificates of Deposit 26.9%
Australia & New Zealand Banking Group, New York Branch,
5.56% - 5.59%, 8/27/98 - 9/23/98 .......................................... $50,000,000 $ 50,000,000
Bank of Montreal, Chicago Branch, 5.605%, 9/24/98 ......................... 25,000,000 25,000,861
Bank of Nova Scotia, Portland Branch, 5.56%, 8/31/98 ...................... 25,000,000 25,000,000
Bayerische Vereinsbank, New York Branch, 5.85%, 12/18/98 .................. 25,000,000 25,009,492
Commerzbank AG, New York Branch, 5.54%, 8/25/98 ........................... 25,000,000 25,000,743
Credit Agricole, New York Branch, 5.52%, 8/10/98 .......................... 25,000,000 25,000,000
Credit Communal de Belgique, New York Branch, 5.59%, 7/29/98 - 7/30/98 .... 50,000,000 50,000,391
Deutsche Bank AG, New York Branch, 5.59% - 5.60%, 7/08/98 - 7/31/98 ....... 50,000,000 50,000,205
National Westminster Bank, Plc., New York Branch,
5.69% - 5.745%, 7/06/98 - 4/06/99 ......................................... 50,000,000 49,989,281
Royal Bank of Canada, New York Branch, 5.68%, 3/29/99 ..................... 25,000,000 24,985,850
Societe Generale, New York Branch, 5.56% - 5.58%, 8/07/98 - 10/08/98 ...... 75,000,000 75,000,000
Svenska Handelsbanken, New York Branch, 5.58%, 9/22/98 .................... 25,000,000 25,000,000
Swiss Bank Corp., New York Branch, 5.81%, 4/29/99 ......................... 25,000,000 24,992,081
Toronto Dominion Bank, New York Branch, 5.60%, 12/03/98 ................... 25,000,000 25,000,000
Westdeutsche Landesbank, New York Branch, 5.60%, 7/09/98 - 7/10/98 ........ 50,000,000 50,000,000
---------------
Total Certificates of Deposit (Cost $549,978,904).......................... 549,978,904
---------------
a Commercial Paper 57.5%
Abbey National North America, 5.42% - 5.445%, 8/24/98 - 10/22/98 .......... 50,000,000 49,369,469
American Express Credit Corp., 5.50%, 7/13/98 - 8/17/98 ................... 80,000,000 79,556,944
Associates Corp. of North America, 5.50%, 7/21/98 - 8/18/98 ............... 75,000,000 74,660,070
Bank of Montreal, 5.50%, 7/23/98 .......................................... 25,000,000 24,915,972
Chevron U.K. Investment, Plc., 5.51%, 8/11/98 ............................. 10,000,000 9,937,247
CIESCO, L.P., 5.50% - 5.52%, 8/19/98 - 9/08/98 ............................ 75,000,000 74,311,542
Commonwealth Bank of Australia, 5.42% - 5.455%, 10/19/98 - 11/25/98 ....... 50,000,000 49,029,108
Cregem North America, Inc., 5.50%, 7/28/98 ................................ 25,000,000 24,896,875
Deutsche Bank Financial, Inc., 5.50%, 8/14/98 ............................. 25,000,000 24,831,944
General Electric Capital Corp., 5.50%, 7/24/98 - 8/26/98 .................. 75,000,000 74,564,583
Generale Bank, Inc., 5.43% - 5.45%, 9/04/98 - 10/21/98 .................... 75,000,000 73,926,820
Goldman Sachs Group, L.P., 5.50%, 9/03/98 ................................. 25,000,000 24,755,556
J.P. Morgan & Co., Inc., 5.48% - 5.50%, 9/02/98 - 12/04/98 ................ 50,000,000 49,165,708
Merrill Lynch & Co., Inc., 5.50% - 5.51%, 7/01/98 - 8/06/98 ............... 50,000,000 49,862,500
Morgan Stanley Dean Witter & Co., 5.49% - 5.52%, 7/17/98 - 8/28/98 ........ 80,000,000 79,630,214
Motorola, Inc., 5.49%, 9/16/98 ............................................ 25,000,000 24,706,438
National Australian Funding (DE), Inc., 5.45% - 5.505%, 8/12/98 - 12/01/98 75,000,000 73,969,979
National Rural Utilities Cooperative Finance Corp., 5.50%, 8/21/98 - 9/25/98 65,000,000 64,297,986
Royal Bank of Canada, 5.38%, 8/03/98 ...................................... 25,000,000 24,876,708
Salomon Smith Barney Holdings, Inc., 5.50% - 5.52%, 7/14/98 - 8/04/98 ..... 75,000,000 74,766,639
Svenska Handelsbanken, Inc., 5.51% - 5.52%, 7/27/98 - 9/10/98 ............. 50,000,000 49,628,659
Toronto Dominion Holdings USA, Inc., 5.50%, 7/02/98 ....................... 25,000,000 24,996,181
Toyota Motor Credit Corp., 5.50%, 9/21/98 ................................. 25,000,000 24,686,806
U.S. Central Credit Union, 5.50%, 7/16/98 ................................. 25,000,000 24,942,708
Westpac Capital Corp., 5.495%, 7/07/98 .................................... 25,000,000 24,977,104
---------------
Total Commercial Paper (Cost $1,175,263,760) .............................. 1,175,263,760
---------------
Total Investments before Repurchase Agreements (Cost $1,725,242,664)....... 1,725,242,664
---------------
PRINCIPAL
The Money Market Portfolio AMOUNT VALUE
a,dRepurchase Agreements 15.2%
Barclays Capital, Inc., 5.125%, 7/01/98 (Maturity Value $50,007,118)
Collaterallized by U.S. Treasury Notes ................................... $50,000,000 $ 50,000,000
CIBC Oppenheimer Corp., 5.25%, 7/01/98 (Maturity Value $50,007,292)
Collaterallized by U.S. Treasury Notes ................................... 50,000,000 50,000,000
J.P. Morgan Securities, Inc., 5.55%, 7/01/98 (Maturity Value $80,052,340)
Collaterallized by U.S. Treasury Notes ................................... 80,040,000 80,040,000
Morgan Stanley & Co., Inc., 5.65%, 7/01/98 (Maturity Value $80,057,563)
Collaterallized by U.S. Treasury Notes ................................... 80,045,000 80,045,000
SBC Warburg Dillon Read, Inc., 5.25%, 7/01/98 (Maturity Value $50,007,292)
Collaterallized by U.S. Treasury Notes ................................... 50,000,000 50,000,000
---------------
Total Repurchase Agreements (Cost $310,085,000) ........................... 310,085,000
---------------
Total Investments (Cost $2,035,327,664) 99.6% ............................. 2,035,327,664
Other Assets, less Liabilities .4% ........................................ 8,301,639
---------------
Net Assets 100.0% ......................................................... $2,043,629,303
===============
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the portfolio.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The U.S. Government Securities Money Market Portfolio
<TABLE>
<CAPTION>
Year Ended June 30,
--------------------------------------------------------
1998 1997 1996 1995 1994
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year ............... $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------
Income from investment operations - net
investment income ............................... .054 .052 .054 .052 .032
Less distributions from net investment income .... (.054) (.052) (.054) (.052) (.032)
--------------------------------------------------------
Net asset value, end of year ..................... $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------
Total return** ................................... 5.53% 5.34% 5.55% 5.32% 3.25%
Ratios/supplemental data
Net assets, end of year (000's) .................. $263,226 $285,629 $285,701 $474,654 $218,548
Ratios to average net assets:
Expenses ........................................ .15% .15% .15% .15% .15%
Expenses excluding waiver and payments by affiliate .16% .16% .17% .16% .17%
Net investment income ........................... 5.40% 5.20% 5.45% 5.25% 3.20%
**Total return is not annualized.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, June 30, 1998
PRINCIPAL
The U.S. Government Securities Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
Government Securities 19.0%
U.S. Treasury Notes, 5.25%, 7/31/98 ....................................... $10,000,000 $ 9,997,058
U.S. Treasury Notes, 4.75%, 9/30/98 ....................................... 20,000,000 19,955,490
U.S. Treasury Notes, 5.125%, 11/30/98 ..................................... 10,000,000 9,989,313
U.S. Treasury Notes, 5.125%, 12/31/98 ..................................... 5,000,000 4,991,209
U.S. Treasury Notes, 7.00%, 4/15/99 ....................................... 5,000,000 5,053,922
---------------
Total Government Securities (Cost $49,986,992)............................. 49,986,992
---------------
Repurchase Agreements 80.9%
BancAmerica Robertson Stephens, 5.65%, 7/01/98 (Maturity Value $11,001,726)
Collateralized by U.S. Treasury Bills..................................... 11,000,000 11,000,000
Bear, Stearns & Co., Inc., 5.75%, 7/01/98 (Maturity Value $11,001,757)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Chase Securities, Inc., 5.60%, 7/01/98 (Maturity Value $11,001,711)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
CIBC Oppenheimer Corp., 5.75%, 7/01/98 (Maturity Value $11,001,757)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Donaldson, Lufkin & Jenrette Securities Corp., 5.75%, 7/01/98
(Maturity Value $11,001,757)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Dresdner Kleinwort Benson, North America, L.L.C., 5.70%,
7/01/98 (Maturity Value $11,001,742)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
J.P. Morgan Securities, Inc., 5.55%, 7/01/98 (Maturity Value $40,006,167)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 40,000,000 40,000,000
J.P. Morgan Securities, Inc., 5.45%, 7/01/98 (Maturity Value $16,977,570)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 16,975,000 16,975,000
Merrill Lynch Government Securities, Inc., 5.60%, 7/01/98
(Maturity Value $11,001,711)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
Morgan Stanley & Co. Inc., 5.65%, 7/01/98 (Maturity Value $56,983,942)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 56,975,000 56,975,000
Paribas Corp., 6.00%, 7/01/98 (Maturity Value $11,001,833)
Collateralized by U.S. Treasury Bills, U.S. Treasury Notes................ 11,000,000 11,000,000
SBC Warburg Dillon Read, Inc., 5.90%, 7/01/98 (Maturity Value $11,001,803)
Collateralized by U.S. Treasury Notes..................................... 11,000,000 11,000,000
---------------
Total Repurchase Agreements (Cost $212,950,000) ........................... 212,950,000
---------------
Total Investments (Cost $262,936,992) 99.9%................................ 262,936,992
Other Assets, less Liabilities .1%......................................... 289,386
---------------
Net Assets 100.0%.......................................................... $263,226,378
===============
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
June 30, 1998
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
------------------------------------
<S> <C> <C>
Assets:
Investments in securities, at value and cost.......................... $1,725,242,664 $ 49,986,992
Repurchase agreements, at value and cost.............................. 310,085,000 212,950,000
Cash.................................................................. 4,644 2,198
Interest Receivable................................................... 8,854,888 609,004
-----------------------------------
Total assets........................................................... 2,044,187,196 263,548,194
-----------------------------------
Liabilities:
Payables:
Capital shares redeemed.............................................. 268,649 259,167
Affiliates........................................................... 277,741 50,590
Other liabilities..................................................... 11,503 12,059
-----------------------------------
Total liabilities...................................................... 557,893 321,816
-----------------------------------
Net assets, at value................................................... $2,043,629,303 $263,226,378
===================================
Shares outstanding..................................................... 2,043,629,303 263,226,378
===================================
Net asset value per share.............................................. $1.00 $1.00
===================================
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statements of Operations
for the year ended June 30, 1998
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
------------------------------------
<S> <C> <C>
Investment income:
Interest.............................................................. $111,619,440 $14,584,936
-----------------------------------
Expenses:
Management fees (Note 3).............................................. 2,963,304 394,321
Custodian fees........................................................ 16,868 2,474
Reports to shareholders............................................... 4,316 855
Professional fees..................................................... 86,132 11,131
Trustees' fees and expenses........................................... 6,833 974
Other................................................................. 20,769 11,625
-----------------------------------
Total expenses....................................................... 3,098,222 421,380
Expenses waived/paid by affiliate (Note 3)........................... (132,446) (26,888)
------------------------------------
Net expenses........................................................... 2,965,776 394,492
-----------------------------------
Net investment income................................................. 108,653,664 14,190,444
-----------------------------------
Net increase in net assets resulting from operations................... $108,653,664 $14,190,444
===================================
See notes to fnancial statements.
THE MONEY MARKET PORTFOLIOS
Statements of Changes in Net Assets
for the years ended June 30, 1998 and 1997
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
------------------------------------------------------------
1998 1997 1998 1997
------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................... $108,653,664 $90,724,056 $14,190,444 $14,032,778
Net realized gain (loss) from investments. -- (931) -- 3,978
------------------------------------------------------------
Net increase in net assets
resulting from operations ................. 108,653,664 90,723,125 14,190,444 14,036,756
Distributions to shareholders
from net investment income................. (108,653,664) (90,723,125)+ (14,190,444) (14,036,756)++
Capital share transactions (Note 2)........ 270,083,314 223,460,742 4,597,201 (27,071,927)
-------------------------------------------------------------
Net increase (decrease) in net assets....... 270,083,314 223,460,742 4,597,201 (27,071,927)
Net assets (there is no undistributed net
investment income at beginning or end of year):
Beginning of year......................... 1,773,545,989 1,550,085,247 258,629,177 285,701,104
------------------------------------------------------------
End of year............................... $2,043,629,303 $1,773,545,989 $263,226,378 $258,629,177
============================================================
</TABLE>
+Distributions were decreased by a net realized loss from investments of $931.
++Distributions were increased by a net realized gain from investments of
$3,978.
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Notes to Financial Statements
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Money Market Portfolios (Money Market) is registered under the Investment
Company Act of 1940 as an open-end, diversified investment company, consisting
of two separate portfolios (the Portfolios). The shares of the Money Market are
issued in private placements and are exempt from registration under the
Securities Act of 1933. The Portfolios' investment objective is to seek current
income. The following summarizes the Portfolios' significant accounting
policies.
a. Security Valuation:
Securities are valued at amortized cost which approximates value.
b. Repurchase Agreements:
The Portfolios may enter into repurchase agreements, which are accounted for as
a loan by the Portfolios to the seller, collateralized by 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 June
30, 1998, all outstanding repurchase agreements held by the Portfolios had been
entered into on that date.
c. Income Taxes:
No provision has been made for income taxes because each Portfolio's policy is
to qualify as a regulated investment company under the Internal Revenue Code and
to distribute all of its taxable income.
d. Security Transactions, Investment Income, Expenses and Distributions:
Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income and capital gains or losses are normally declared daily. Such
distributions are reinvested in additional shares of the Portfolios.
Common expenses incurred by the Money Market are allocated among the Portfolios
based on the ratio of net assets of each Portfolio to the combined net assets.
Other expenses are charged to each Portfolio on a specific identification basis.
e. 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. SHARES OF BENEFICIAL INTEREST
At June 30, 1998, there were an unlimited number of shares authorized ($0.01 par
value). Transactions in the Portfolios' shares were as follows:
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
-------------------------------------
1998
Shares sold ....................$5,690,107,931 $963,956,819
Shares issued in reinvestment
of distributions .............. 108,652,953 14,190,262
Shares redeemed ................ (5,528,677,570) (973,549,880)
-------------------------------------
Net increase .................... $ 270,083,314 $ 4,597,201
=====================================
1997
Shares sold ....................$4,134,527,818 $937,979,469
Shares issued in reinvestment
of distributions .............. 90,722,912 14,037,460
Shares redeemed ................ (4,001,789,988) (979,088,856)
-------------------------------------
Net increase (decrease) ......... $ 223,460,742 $(27,071,927)
=====================================
3. TRANSACTIONS WITH AFFILIATES
Certain officers and trustees of the Portfolios are also officers and/or
directors of Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor
Services, Inc. (Investor Services), the Portfolios' investment manager and
transfer agent, respectively, and of the Franklin Money Fund, Institutional
Fiduciary Trust, Franklin Templeton Money Fund Trust, and Franklin Federal Money
Fund.
The Portfolios pay an investment management fee to Advisers of .15% per year of
the average daily net assets of each Portfolio. Advisers agreed in advance to
waive management fees for the Portfolios, as noted in the Statement of
Operations.
At June 30, 1998, the shares of The Money Market Portfolio were owned by the
following funds:
Percentage of
Outstanding
Shares Shares
--------------------------------------
Franklin Money Fund ............. 1,714,438,805 83.89%
Institutional Fiduciary Trust -
Money Market Portfolio ......... 175,899,949 8.61%
Institutional Fiduciary Trust -
Franklin Cash Reserves Fund .... 117,900,101 5.77%
Franklin Templeton Money Fund Trust -
Franklin Templeton Money Fund II 35,390,448 1.73%
At June 30, 1998, 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 Money Market Portfolio 131,160,450 49.83%
Franklin Federal Money Fund .... 132,065,928 50.17%
4. INCOME TAXES
At June 30, 1998, The Money Market Portfolio had tax basis capital losses of
$4,721 which may be carried over to offset future capital gains. Such losses
expire as follows:
The Money
Market Portfolio
-----------------
Capital loss carryovers expiring in:
2002............................... $3,560
2006............................... 1,161
----------
................................... $4,721
==========
THE MONEY MARKET PORTFOLIOS
Independent Auditor's Report
To the Shareholders and Board of Trustees
Of The Money Market Portfolios
We have audited the accompanying statements of assets and liabilities of each of
the two Portfolios comprising The Money Market Portfolios (the Portfolios),
including each Portfolio's statement of investments as of June 30, 1998, and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Portfolios'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of June
30, 1998, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the two Portfolios comprising The Money Market Portfolios as of June 30,
1998, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
San Francisco, California
July 30, 1998
Franklin Cash Reserves Fund
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) of REGULATION S-T)
GRAPHIC MATERIAL (1)
The following line graph shows the 90 day Treasury bill yields from
6/30/97-6/30/98.
6/97 5.12%
7/97 5.12%
8/97 5.12%
9/97 4.93%
10/97 4.97%
11/97 5.15%
12/97 5.29%
1/98 5.09%
2/98 5.11%
3/98 5.03%
4/98 5.00%
5/98 5.03%
6/98 4.99%
GRAPHIC MATERIAL (2)
This chart shows in pie chart format the fund's securities breakdown sector
as a percentage of the fund's total net assets.
Portfolio Breakdown on 6/30/98
Certificates of Deposit 27.0%
Commercial Paper 57.7%
Repurchase Agreements 15.3%
GRAPHIC MATERIAL (3)
The bar chart shows the comparison between the Franklin Cash Reserves Fund's
total return of 5.23% and 16.52% for the one- and three-year periods ended
6/30/98 and the Lipper Institutional Money Market Funds Index's total return
of 5.40% and 16.87% for one- and three-year periods ended 6/30/98.
