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 11
Franklin U.S. Treasury
Money Market Portfolio 15
Franklin U.S. Government
Agency Money Market
Fund 19
Financial Highlights &
Statement of Investments 23
Financial Statements 31
Notes to
Financial Statements 34
SHAREHOLDER LETTER
Dear Shareholder:
We are pleased to bring you the semi-annual report for Franklin's
Institutional Fiduciary Trust (the Trust), for the period ended December 31,
1997.
The Trust was developed specifically to meet the needs of institutional
investors. Part of the $221 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.
At the close of 1997, the economy experienced strong economic growth and
favorable inflation reports, as investors anticipated the effects of the
economic crisis in Asia. The tight labor market pushed the unemployment rate
to a twenty-four year low, fueling personal income gains and boosting
consumer confidence to a twenty-eight year high at the end of the reporting
period. Within this environment, our managers adhered steadfastly to a
disciplined investment strategy enabling them to seek out attractive
opportunities through a variety of market conditions. We believe this
approach benefits our shareholders in the long run, and we will continue to
make every effort to employ this strategy going forward.
Thank you for your continued support of Franklin's Institutional Fiduciary
Trust. We look forward to serving your investment needs in the months and
years to come.
Sincerely,
Charles B. Johnson
Chairman of the Board
Franklin's Institutional Fiduciary Trust
OVERVIEW OF THE ECONOMY
Strong economic growth coupled with mild inflation characterized most of the
economy over the last six months. Real gross domestic product (GDP) growth
through the last two quarters of 1997 was 3.9%, which is considerably above
the Federal Reserve's targeted long-term growth rate of 2.5%. In the labor
market, the rate of unemployment declined to 4.6%, the lowest level
experienced in twenty-four years, as a direct result of the country's
economic strength. Despite the tight labor market, there are still reports of
layoffs as corporations continue to struggle to adapt to changes in
technology and the impact these changes had on products and services.
The Federal Reserve did not react to continued economic strength during the
reporting period, as a result of the Consumer Price Index (CPI) report of an
increase of only 1.7% in 1997 --the lowest increase in eleven years. The Asian
economic crisis in October also prevented the Federal Reserve from taking any
steps which might have induced further volatility in the international
financial markets.
We believe the economy is in the later stages of the current business cycle.
Continued growth should be stimulated by higher private consumption and
increased capital spending, which may ultimately lead to further wage
inflation. However, we believe that any impact wages may have on overall
consumer prices should be mitigated by continued improvements in
manufacturing productivity, as well as by lower exports to the Far East
resulting from the economic crisis in Asia. As a result, we believe the
Federal Reserve will continue to wait on the sidelines and assess the impact
of these variables on economic growth and inflation.
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
<TABLE>
<CAPTION>
December 31, 1997
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 5.47% 5.48% 5.12% 5.17%
Average Weighted Maturity 57 days 38 days 51 days 35 days
Principal
Holdings2
Agencies x
BAs x
CDs x
CP x
RPs x x
Treasuries x x x x
</TABLE>
1. Yield reflects the interest income per share earned by the Funds'
investments for the seven-day period ended December 31, 1997, 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.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
FRANKLIN'S IFT
MONEY MARKET PORTFOLIO
The investment objective for Franklin's IFT Money Market Portfolio (the Fund)
is high current income, consistent with capital preservation and liquidity.
It pursues this objective by investing all of its assets in The Money Market
Portfolio (the Portfolio), which has an investment objective identical to the
Fund's. The Portfolio, in turn, invests in various money market instruments
such as:
o U.S. government and federal agency obligations1
o Certificates of deposit
o Banker's acceptances
o High grade commercial paper
o High grade short-term corporate obligations
o Repurchase agreements collateralized by U.S. government securities1
The Portfolio's composition as of December 31, 1997, is shown to the left.
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 money market securities in which the Portfolio invests are among the
highest quality available. As such, the Portfolio does not invest in exotic
derivatives or other potentially volatile securities that we think involve
undue risk. Instead, we seek to provide shareholders with a high-quality,
conservative investment. In addition, the Portfolio maintains an average
weighted maturity of 90 days or less, which is relatively short and allows
the Portfolio to adjust quickly to changing interest rates.
Through investing in a portfolio of high-quality, short-term securities, the
Fund seeks to provide a high level of credit safety combined with a stable
net asset value.2 As a result, investors often use Franklin's IFT Money
Market Portfolio for assets held in fiduciary, advisory, and custodial
capacities. The Fund's competitive yield has also made it an attractive
alternative cash management tool for corporations, banks, savings and loan
associations, and trust companies.3
2. An investment in Franklin's IFT Money Market Portfolio is neither insured
nor guaranteed by the U.S. government or by any other entity or institution.
There is no assurance that the $1.00 share price will be maintained.
3. Regulated investors should review their applicable investment restrictions
to determine whether the Fund is a permissible investment.
PERFORMANCE SUMMARY
During the reporting period, the economy achieved strong growth without much
threat of rising inflation, thus eliminating the need for policy actions by
the Federal Reserve. As a result, the Federal Reserve left its target for the
federal funds rate unchanged for the six-month period ended December 31, 1997.
Short-term interest rates were generally stable during the second half of
1997. Reflecting this climate, the Fund's seven-day yield stayed relatively
flat over the six-month period, starting at 5.46% on June 30, 1997, and
ending at 5.47% as of December 31, 1997.4 During that time, managers
increased the Fund's average weighted maturity from 39 days on June 30, 1997,
to 57 days on December 31, 1997.
4. Annualized and effective yields are for the seven-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 seven-day yields for the period would have been 5.44% and 5.59%,
respectively. Franklin Advisers, Inc. may discontinue these arrangements at any
time, upon notice to the Fund's Board of Trustees.
Total returns for the one-, three-, five-, and ten-year periods ended
December 31, 1997, are shown on the next page. As you can see, the Fund
consistently outperformed its benchmark, the Lipper Institutional Money
Market Funds Index for all these periods.5 Of course, past performance is not
predictive of future results.
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 Money
Market Funds Index is Lipper Analytical Services, Inc. As of December 31,
1997, there were 188 funds in the institutional money market funds category.
This index is unmanaged, and one cannot invest directly in an index.
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Figures
Period Ended December 31, 1997
Seven-Day Current Yield:6 5.47%
Seven-Day Effective Yield:6 5.62%
Average Weighted Maturity: 57 days
6. Annualized and effective yields are for the seven-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 seven-day yields
for the period would have been 5.44% and 5.59%, respectively. Franklin
Advisers, Inc. 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 Money
Market Funds Index is Lipper Analytical Services, Inc. As of December 31,
1997, there were 188 funds in the institutional money market funds category.
This index is unmanaged, and one cannot invest directly in an index.
FRANKLIN U.S. GOVERNMENT
SECURITIES MONEY MARKET PORTFOLIO
The Franklin U.S. Government Securities Money Market Portfolio's (the Fund)
investment objective is to earn high current income consistent with capital
preservation and liquidity. It pursues this objective by investing all of its
assets in shares of the U.S. Government Securities Money Market Portfolio
(the Portfolio), which has an investment objective identical to the Fund's.
The Portfolio in turn, invests primarily in repurchase agreements
collateralized by U.S. government securities, and in marketable securities
issued or guaranteed by the U.S. government, its agencies and
instrumentalities.1 The Portfolio's composition as of December 31, 1997 is
shown to the right.
The Portfolio was created to comply with the investment criteria of many
state, county, and city governments. It may be an appropriate investment
choice for government investors, corporations, banks, and savings and loan
associations because of its history of principal stability and high degree of
credit safety.2 In fact, its emphasis on high credit quality has helped the
Portfolio earn the highest possible ratings, "AAAm," by Standard and Poor's
Corporation.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.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
PERFORMANCE SUMMARY
The Asian crisis caused inflationary pressures to ease during the six-month
period ended December 31, 1997, as the economy continued to experience strong
growth. While investors speculated about the future direction of short-term
interest rates, the Federal Reserve did not raise the federal funds rate
target. As a result of the favorable inflationary reports, we expanded the
Fund's average weighted maturity from five days on June 30, 1997, to 38 days
on December 31, 1997. The Fund's seven-day yield began the period at 5.29%
and rose to 5.48% by year end.
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 Treasury Money Market Funds for the one-,
three-, and five-year periods ended December 31, 1997.5 Of course, past
performance cannot guarantee future results.
5. Total return calculations show the change in the value of an investment
over the periods indicated and assume reinvestment of dividends and capital
gains, if any, at net asset value. Source for the Lipper Institutional
Treasury Money Market Funds Index is Lipper Analytical Services, Inc. As of
December 31, 1997, there were 125 funds in the institutional treasury 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 December 31, 1997
Seven-Day Current Yield:6 5.48%
Seven-Day Effective Yield:6 5.63%
Average Weighted Maturity: 38 days
6. Annualized and effective yields are for the seven-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 seven-day yields
for the period would have been 5.42% and 5.56%, respectively. Franklin
Advisers, Inc. 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
Treasury Money Market Funds Index is Lipper Analytical Services, Inc. As of
December 31, 1997, there were 125 funds in the institutional treasury money
market funds category. This index is unmanaged, and one cannot invest
directly in an index.
An investment in the Franklin U.S. Government Securities Money Market
Portfolio is neither insured nor guaranteed by the U.S. government or by any
other entity or institution. There is no assurance that the $1.00 share price
will be maintained.
GRAPHIC MATERIAL 5 OMITTED - SEE APPENDIX AT END OF DOCUMENT
FRANKLIN U.S. TREASURY
MONEY MARKET PORTFOLIO
The Franklin U.S. Treasury Money Market Portfolio (the Fund) seeks to earn a
high level of current income, consistent with capital preservation and
liquidity, by investing exclusively in U.S. Treasury securities such as
bills, notes, and bonds.1 The Franklin U.S. Treasury Money Market Portfolio
does not invest in repurchase agreements, securities issued by agencies or
instrumentalities of the federal government, or any other type of money
market instrument. The Fund's composition on December 31, 1997, is shown to
the right.
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 The high credit quality of
these securities has earned the Franklin U.S. Treasury Money Market Portfolio
the highest possible ratings, "AAAm-G," from Standard & Poor's Corporation.2
1. U.S. Treasury securities owned by the Fund, but not shares of the Fund,
are guaranteed by the U.S. government as to the timely payment of principal
and interest.
2. The AAAm-G rating reflects Standard & Poor's(R) assessment of the overall
credit quality of the Fund's portfolio, based primarily on the Fund's stated
investment objectives and policies. It considers, for example, the credit
quality of portfolio investments, and management. The rating does not reflect
the yield or the market price of the Fund's shares, nor approval by Standard
& Poor's(R). Ratings are subject to change.
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 from state and local income taxes for most investors.
Investors may therefore earn a higher after-tax return from the portfolio
than is available in a fully taxable money market account.3 Of course, all
dividends paid out of U.S. government obligation interest are fully taxable
for federal income tax purposes. Investors should consult with their own tax
advisors for further information on specific state tax rules.
The Franklin U.S. Treasury Money Market Portfolio should be attractive to
institutional investors seeking an economical and convenient means of
investing in a professionally managed portfolio of high-quality, short-term
government securities that allows them easy access to their money.
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.
PERFORMANCE SUMMARY
Strong economic growth, favorable inflation reports, and the crisis in Asia
subdued interest rates for most of the period. As investors speculated about
the future direction of short-term interest rates, the Fund's average
weighted maturity remained relatively unchanged. During the period, the
Fund's average weighted maturity fell slightly from 55 days on June 30, 1997,
to 51 days on December 31, 1997. The Fund's seven-day yield began the period
at 4.87% and rose to 5.12% on December 31, 1997.4
The chart on the next page illustrates how the Franklin U.S. Treasury Money
Market Portfolio performed against its benchmark, the Lipper Institutional
Treasury Money Market Funds Index for the one-, three-, and five-year periods
ended December 31, 1997.5 Of course, past performance cannot predict future
results.
4. Annualized and effective yields are for the seven-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 seven-day
yields for the period would have been 4.94% and 5.06%, respectively. The
Fund's manager may discontinue these arrangements at any time, upon notice to
the Fund's Board of Trustees.
5. Total return calculations show the change in the value of an investment
over the periods indicated and assume reinvestment of dividends and capital
gains, if any, at net asset value. Source for the Lipper Institutional
Treasury Money Market Funds Index is Lipper Analytical Services, Inc. As of
December 31, 1997, there were 125 funds in the institutional 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 December 31, 1997
Seven-Day Current Yield:6 5.12%
Seven-Day Effective Yield:6 5.25%
Average Weighted Maturity: 51 days
6. Annualized and effective yields are for the seven-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 seven-day
yields for the period would have been 4.94% and 5.06%, 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
Treasury Money Market Funds Index is Lipper Analytical Services, Inc.
As of December 31, 1997, there were 125 funds in the institutional treasury
money market funds category. This index is unmanaged, and one cannot invest
directly in an index.
An investment in the Franklin U.S. Treasury Money Market Portfolio is neither
insured nor guaranteed by the U.S. government or by any other entity or
institution. There is no assurance that the $1.00 share price will be
maintained. Regulated investors should review their applicable investment
restrictions to determine whether the Fund is a permissible investment.
FRANKLIN U.S. GOVERNMENT AGENCY
MONEY MARKET FUND
The investment objective of the Franklin U.S. Government Agency Money Market
Fund (the 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 General Services Administration
In addition, the Fund may invest in direct obligations of the U.S. Treasury,
including U.S. Treasury bills, notes, and bonds.2 The Fund does not invest in
repurchase agreements or any other type of money market instruments. Its
composition as of December 31, 1997 is shown to the left.
2. 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.
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.
GRAPHIC MATERIAL 7 OMITTED - SEE APPENDIX AT END OF DOCUMENT
PERFORMANCE SUMMARY
During the reporting period, the economy achieved moderate growth without the
threat of rising inflation, thus eliminating the need for policy actions by
the Federal Reserve. Although the Federal Reserve did not change its target
for the federal funds rate, the Fund maintained a relatively short average
weighted maturity, as many investors speculated about interest rate changes.
The Fund's average weighted maturity fell from 42 days on June 30, 1997, to
35 days on December 31, 1997. The Fund's seven-day yield rose from 5.09% on
June 30, 1997, to 5.17% on December 31, 1997.3
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 Treasury Money Funds Index, for the one- and three-year period
ending December 31, 1997.4
Of course, past performance cannot guarantee future results.
3. Annualized and effective yields are for the seven-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 seven-day
yields for the period would have been 5.14% and 5.27%, respectively. The
Fund's manager may discontinue these arrangements at any time, upon notice to
the Fund's Board of Trustees.
4. Total return calculations show the change in the value of an investment
over the periods indicated and assume reinvestment of dividends and capital
gains, if any, at net asset value. Source for the Lipper Institutional
Treasury Money Market Funds Index is Lipper Analytical Services, Inc. As of
December 31, 1997, there were 125 funds in the institutional treasury money
market category. This index is unmanaged, and one cannot invest directly in
an index.
GRAPHIC MATERIAL 8 OMITTED - SEE APPENDIX AT END OF DOCUMENT
Performance Figures
Period Ended December 31, 1997
Seven-Day Current Yield:5 5.17%
Seven-Day Effective Yield:5 5.30%
Average Weighted Maturity: 35 days
5. Annualized and effective yields are for the seven-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 seven-day
yields for the period would have been 5.14% and 5.27%, respectively. The
Fund's manager may discontinue these arrangements at any time, upon notice to
the Fund's Board of Trustees.
6. Total return calculations show the change in the value of an investment
over the periods indicated and assume reinvestment of dividends and capital
gains, if any, at net asset value. Source for the Lipper Institutional
Treasury Money Market Funds Index is Lipper Analytical Services, Inc.
As of December 31, 1997, there were 125 funds in the institutional treasury
money market category. This index is unmanaged, and one cannot invest
directly in an index.
An investment in the Franklin U.S. Government Agency Money Market Fund is
neither insured nor guaranteed by the U.S. government or by any other entity
or institution. There is no assurance that the $1.00 share price will be
maintained. Regulated investors should review their applicable investment
restrictions to determine whether the Fund is a permissible investment.
Past performance is not predictive of future results.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
<TABLE>
<CAPTION>
Money Market Portfolio
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------
Income from investment operations -
net investment income.................... .027 .053 .055 .053 .033 .033
Less distributions from net investment income (.027) (.053) (.055) (.053) (.033) (.033)
-----------------------------------------------------------
Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===========================================================
Total return**............................ 2.78% 5.42% 5.61% 5.46% 3.35% 3.30%
Ratios/supplemental data
Net assets, end of period (000's)......... $192,773 $185,088 $341,295 $272,147 $218,254 $222,282
Ratios to average net assets:
Expenses1,2.............................. .20%*** .20% .19% .15% .15% .20%
Expenses excluding waiver
and payments by affiliate1,2 ............ .24%*** .24% .24% .24% .25% .49%
Net investment income.................... 5.50%*** 5.27% 5.45% 5.40% 3.24% 3.25%
</TABLE>
**Total return is not annualized.
***Annualized
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
2During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees incurred by the Portfolio, and a portion of its
administration fees incurred by the Fund.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Money Market Portfolio SHARES VALUE
<S> <C> <C>
Mutual Funds 100.0%
The Money Market Portfolio (Note 1) ............................................ 192,790,791 $192,790,791
-------------
Total Investments (Cost $192,790,791) 100.0% ................................... 192,790,791
Other Assets, less Liabilities.................................................. (17,915)
-------------
Net Assets 100.0%............................................................... $192,772,876
=============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin U.S. Government Securities Money Market Portfolio
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------
Income from investment
operations - net investment income....... .027 .052 .054 .052 .032 .031
Less distributions from net investment income (.027) (.052) (.054) (.052) (.032) (.031)
-------------------------------------------------------------
Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=============================================================
Total return**............................ 2.73% 5.29% 5.50% 5.32% 3.25% 3.18%
Ratios/supplemental data
Net assets, end of period (000's)......... $117,491 $136,705 $152,173 $334,830 $218,547 $310,382
Ratios to average net assets:
Expenses1,2.............................. .20%*** .20% .19% .15% .15% .19%
Expenses excluding waiver
and payments by affiliate1,2............. .28%*** .26% .26% .23% .25% .45%
Net investment income.................... 5.38%*** 5.14% 5.44% 5.26% 3.20% 3.12%
</TABLE>
**Total return is not annualized.
***Annualized
1The expense ratio includes the
Fund's share of the Portfolio's allocated expenses.
2During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees incurred by the Portfolio, and a portion of its
administration fees incurred by the Fund.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, December 31, 1997 (unaudited)
<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).................. 117,534,517 $117,534,517
-------------
Total Investments (Cost $117,534,517) 100.0% .................................. 117,534,517
Other Assets, less Liabilities................................................. (43,286)
-------------
Net Assets 100.0%.............................................................. $117,491,231
=============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin U.S. Treasury Money Market Portfolio
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------
Income from investment
operations - net investment income....... .025 .050 .052 .051 .032 .031
Less distributions from net investment income (.025) (.050) (.052) (.051) (.032) (.031)
------------------------------------------------------------------
Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==================================================================
Total return**............................ 2.54% 5.09% 5.29% 5.17% 3.23% 3.14%
Ratios/supplemental data
Net assets, end of period (000's)......... $58,414 $68,815 $123,157 $200,935 $195,135 $179,232
Ratios to average net assets:
Expenses................................. .20%*** .20% .19% .10% .05% .05%
Expenses excluding waiver
and payments by affiliate................ .35%*** .33% .30% .30% .30% .35%
Net investment income.................... 5.02%*** 4.97% 5.20% 5.05% 3.17% 3.12%
</TABLE>
**Total return is not annualized.
*** Annualized
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
Franklin U.S. Treasury Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
a U.S. Government Securities 99.6%
U.S. Treasury Bills, 4.97%, 1/02/98........................................... $ 1,540,000$ 1,539,787
U.S. Treasury Bills, 5.11% - 5.30%, 1/08/98................................... 1,710,000 1,708,299
U.S. Treasury Bills, 4.945%, 1/15/98.......................................... 100,000 99,808
U.S. Treasury Bills, 5.13% - 5.26%, 1/22/98................................... 9,885,000 9,855,137
U.S. Treasury Bills, 5.06%, 1/29/98........................................... 1,690,000 1,683,349
U.S. Treasury Bills, 5.09% - 5.41%, 2/05/98................................... 4,080,000 4,059,673
U.S. Treasury Bills, 5.04% - 5.20%, 2/12/98................................... 4,700,000 4,672,336
U.S. Treasury Bills, 5.03%, 2/19/98........................................... 1,550,000 1,539,388
U.S. Treasury Bills, 5.45%, 2/26/98........................................... 2,330,000 2,310,247
U.S. Treasury Bills, 5.195%, 3/05/98.......................................... 5,000,000 4,954,544
U.S. Treasury Bills, 5.23%, 3/12/98........................................... 600,000 593,898
U.S. Treasury Bills, 5.18%, 3/19/98........................................... 1,140,000 1,127,369
U.S. Treasury Bills, 5.13% - 5.14%, 3/26/98................................... 2,020,000 1,995,788
U.S. Treasury Bills, 5.115%, 4/16/98.......................................... 2,520,000 2,482,405
U.S. Treasury Notes, 5.00%, 1/31/98........................................... 11,000,000 10,993,855
U.S. Treasury Notes, 5.125%, 3/31/98.......................................... 5,000,000 4,996,192
U.S. TreasuryNotes, 9.00%, 5/15/98............................................ 3,500,000 3,544,059
-------------
Total Investments (Cost $58,156,134) 99.6%.................................... 58,156,134
Other Assets, less Liabilities .4%............................................ 257,705
-------------
Net Assets 100.0%............................................................. $58,413,839
=============
</TABLE>
aU.S. Treasury Bills 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
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994*
<S> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------
Income from investment
operations - net investment income....... .026 .049 .051 .051 .013
Less distributions from net investment income (.026) (.049) (.051) (.051) (.013)
---------------------------------------------------------------------
Net asset value, end of period............ $1.00 $1.00 $1.00 $1.00 $1.00
=====================================================================
Total return**............................ 2.59% 5.06% 5.23% 5.22% 1.31%
Ratios/supplemental data
Net assets, end of period (000's) $155,324 $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 .51%*** .48% .47% .47% 1.43%***
Net investment income 5.12%*** 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, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
Franklin U.S. Government Agency Money Market Fund AMOUNT VALUE
<S> <C> <C>
a U.S. Government Agencies 99.8%
Federal Farm Credit Discount Notes, 5.66%, 1/08/98 .......................... $ 3,000,000 $ 2,996,698
Federal Farm Credit Discount Notes, 5.39%, 1/09/98 .......................... 2,000,000 1,997,605
Federal Farm Credit Discount Notes, 5.65%, 1/14/98 .......................... 2,000,000 1,995,920
Federal Farm Credit Discount Notes, 5.43%, 2/10/98 .......................... 5,000,000 4,969,833
Federal Farm Credit Discount Notes, 5.52%, 2/18/98 .......................... 2,000,000 1,985,281
Federal Farm Credit Discount Notes, 5.58%, 3/16/98 .......................... 1,000,000 988,530
Federal Farm Credit Discount Notes, 5.45%, 5/15/98........................... 212,000 207,699
Federal Home Loan Bank Discount Notes, 5.37%, 1/02/98 ....................... 7,800,000 7,798,837
Federal Home Loan Bank Discount Notes, 5.39%, 1/05/98 ....................... 5,000,000 4,997,006
Federal Home Loan Bank Discount Notes, 5.37%, 1/07/98 ....................... 19,330,000 19,312,595
Federal Home Loan Bank Discount Notes, 5.41%, 1/09/98 ....................... 5,000,000 4,993,989
Federal Home Loan Bank Discount Notes, 5.50%, 1/13/98 ....................... 8,000,000 7,985,334
Federal Home Loan Bank Discount Notes, 5.42%, 1/14/98 ....................... 2,800,000 2,794,523
Federal Home Loan Bank Discount Notes, 5.60%, 1/16/98 ....................... 5,000,000 4,988,334
Federal Home Loan Bank Discount Notes, 5.47%, 1/20/98 ....................... 3,800,000 3,789,030
Federal Home Loan Bank Discount Notes, 5.67%, 1/21/98 ....................... 2,070,000 2,063,480
Federal Home Loan Bank Discount Notes, 5.48%, 1/23/98 ....................... 3,500,000 3,488,279
Federal Home Loan Bank Discount Notes, 5.59%, 1/28/98 ....................... 6,411,000 6,384,122
Federal Home Loan Bank Discount Notes, 5.61%, 1/30/98 ....................... 10,569,000 10,521,092
Federal Home Loan Bank Discount Notes, 5.56%, 2/02/98 ....................... 3,500,000 3,482,702
Federal Home Loan Bank Discount Notes, 5.42%, 2/04/98........................ 13,600,000 13,530,023
Federal Home Loan Bank Discount Notes, 5.50%, 2/05/98 ....................... 3,377,000 3,358,649
Federal Home Loan Bank Discount Notes, 5.34%, 2/06/98 ....................... 8,030,000 7,985,380
Federal Home Loan Bank Discount Notes, 5.34%, 2/10/98 ....................... 2,000,000 1,988,133
Federal Home Loan Bank Discount Notes, 5.63%, 2/11/98 ....................... 3,000,000 2,980,763
Federal Home Loan Bank Discount Notes, 5.59%, 2/25/98 ....................... 1,400,000 1,388,044
Federal Home Loan Bank Discount Notes, 5.62%, 2/27/98 ....................... 3,284,000 3,254,778
Federal Home Loan Bank Discount Notes, 5.59%, 3/06/98 ....................... 7,000,000 6,930,472
Federal Home Loan Bank Discount Notes, 5.56%, 3/13/98 ....................... 3,314,000 3,277,660
Federal Home Loan Bank Discount Notes, 5.48%, 5/06/98 ....................... 4,825,000 4,733,190
Federal Home Loan Bank Discount Notes, 5.43%, 5/07/98 ....................... 5,000,000 4,904,974
Federal Home Loan Bank Discount Notes, 5.45%, 5/13/98 ....................... 3,000,000 2,940,050
-------------
Total U.S. Government Agencies (Cost $155,013,005) .......................... 155,013,005
-------------
a U.S. Government Securities .3%
U.S. Treasury Bills, 4.945% - 5.18%, 1/08/98 - 3/12/98 (Cost $473,459) ...... 475,000 473,459
Total Investments (Cost $155,486,464) 100.1% ................................ 155,486,464
Other Assets, less Liabilities (0.1)%........................................ (162,123)
-------------
Net Assets 100.0%............................................................ $155,324,341
=============
</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
December 31, 1997 (unaudited)
Franklin
U.S. Government Franklin Franklin
Securities U.S. TreasuryU.S. Government
Money Market Money Market Money Market Agency Money
Portfolio Portfolio Portfolio Market Fund
<S> <C> <C> <C> <C>
Assets:
Investments in securities, at value and cost...... $192,790,791 $117,534,517 $58,156,134 $155,486,464
Cash.............................................. -- -- 12,186 67,548
Receivables:
Investment securities sold......................... 5,165,275 257,698 -- --
Interest........................................... -- -- 336,531 --
Affiliates......................................... -- -- 41,120 --
-------------------------------------------------------
Total assets....................................... 197,956,066 117,792,215 58,545,971 155,554,012
=======================================================
Liabilities:
Payables:
Capital shares redeemed............................ 4,838,384 -- -- --
Affiliates......................................... 9,882 9,503 12,289 101,960
Shareholders....................................... 12,441 8,213 2,446 169
Distributions to shareholders..................... 311,645 257,698 117,397 111,816
Other liabilities................................. 10,838 25,570 -- 15,726
-------------------------------------------------------
Total liabilities.................................. 5,183,190 300,984 132,132 229,671
-------------------------------------------------------
Net assets, at value............................... $192,772,876 $117,491,231 $58,413,839 $155,324,341
=======================================================
Shares outstanding................................. 192,772,876 117,491,231 58,413,839 155,324,341
=======================================================
Net asset value per share.......................... $1.00 $1.00 $1.00 $1.00
=======================================================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
Statements of Operations
for the six months ended December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Franklin
U.S. Government Franklin Franklin
Securities U.S. TreasuryU.S. Government
Money Market Money Market Money Market Agency Money
Portfolio Portfolio Portfolio Market Fund
<S> <C> <C> <C> <C>
Investment income:
Dividends......................................... $5,645,054 $3,536,823 $-- $--
Interest.......................................... -- -- 1,363,107 4,298,732
-------------------------------------------------------
Total investment income............................ 5,645,054 3,536,823 1,363,107 4,298,732
-------------------------------------------------------
Expenses:
Management fees (Note 3).......................... -- -- 65,870 116,616
Administrative fees (Note 3)...................... 51,269 32,712 -- --
Distribution fees (Note 3)........................ -- -- -- 244,788
Transfer agent fees (Note 3)...................... 7,842 12,519 7,371 626
Reports to shareholders........................... 7,137 4,871 1,794 3,112
Registration and filing fees...................... 10,653 5,347 6,429 5,569
Professional fees................................. 3,477 3,354 5,286 9,675
Trustees' fees and expenses....................... 4,755 3,061 1,371 3,295
Rating service fees .............................. -- 6,000 -- --
Other............................................. 2,181 -- 4,614 7,217
-------------------------------------------------------
Total expenses..................................... 87,314 67,864 92,735 390,898
Expenses waived/paid by affiliate (Note 3)......... (35,978) (35,073) (40,041) (41,002)
-------------------------------------------------------
Net expenses...................................... 51,336 32,791 52,694 349,896
-------------------------------------------------------
Net investment income.............................. 5,593,718 3,504,032 1,310,413 3,948,836
-------------------------------------------------------
Net realized gain (loss) from investments.......... -- -- 3,469 (2,005)
-------------------------------------------------------
Net increase in net assets resulting from operations $5,593,718 $3,504,032 $1,313,882 $3,946,831
=======================================================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended December 31, 1997 (unaudited)
and the year ended June 30, 1997
<TABLE>
<CAPTION>
Franklin U.S. Government Securities
Money Market Portfolio Money Market Portfolio
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, 1997June 30, 1997 December 31, 1997June 30, 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income....................... $ 5,593,718 $ 15,886,152 $ 3,504,032 $ 7,237,031
Distributions to shareholders from
net investment income..................... (5,593,718) (15,886,152) (3,504,032) (7,237,031)
Capital share transactions (Note 2)......... 7,684,717 (156,206,396) (19,213,432) (15,468,445)
Net increase (decrease) in net assets....... 7,684,717 (156,206,396) (19,213,432) (15,468,445)
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period....................... 185,088,159 341,294,555 136,704,663 152,173,108
-------------------------------------------------------------
End of period............................. $192,772,876 $185,088,159 $117,491,231 $136,704,663
=============================================================
Franklin U.S. Treasury Franklin U.S. Government Agency
Money Market Portfolio Money Market Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
December 31, 1997 June 30, 1997 December 31, 1997 June 30, 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income....................... $ 1,310,413 $ 3,294,750 $ 3,948,836 $ 5,338,637
Net realized gain (loss) from investments... 3,469 1,688 (2,005) (890)
--------------------------------------------------------------
Net increase in net assets resulting
from operations............................ 1,313,882 3,296,438 3,946,831 5,337,747
Distributions to shareholders from
net investment income..................... (1,313,882)+ (3,296,438)+ (3,946,831)++ (5,337,747)++
Capital share transactions (Note 2)......... (10,401,262) (54,342,256) 20,962,629 62,667,765
-------------------------------------------------------------
Net increase (decrease) in net assets....... (10,401,262) (54,342,256) 20,962,629 62,667,765
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period....................... 68,815,101 123,157,357 134,361,712 71,693,947
-------------------------------------------------------------
End of period............................. $58,413,839 $ 68,815,101 $155,324,341 $134,361,712
=============================================================
</TABLE>
+Distributions were increased by net realized gains from security transactions
of $3,469 for the six months ended December 31, 1997 and $1,688 for the year
ended June 30, 1997.
++Distributions were decreased by net realized losses from security transactions
of $2,005 for the six months ended December 31, 1997 and $890 for the year ended
June 30, 1997.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements (unaudited)
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 policies of the Funds included in this report are high 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 values of the Money Market Fund and the U.S. Government Fund reflect their
proportionate interest in the net assets of the Portfolios, respectively. At
December 31, 1997, the Money Market Fund owns 9.88% of the Money Market
Portfolio and the U.S. Government Fund owns 48.17% of the U.S. Government
Securities Money Market 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
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 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 December 31, 1997, there were an unlimited number of shares authorized (no
par value). Transactions in the Funds' shares were as follows:
<TABLE>
<CAPTION>
Franklin
U.S. Government Franklin Franklin
Securities U.S. TreasuryU.S. Government
Money Market Money Market Money Market Agency Money
Portfolio Portfolio Portfolio Market Fund
<S> <C> <C> <C> <C>
Six months ended December 31, 1997
Shares sold......................................$1,022,172,778 $ 638,586,119 $116,982,145 $219,565,264
Shares issued on reinvestment of distributions... 3,526,324 2,057,812 627,074 3,180,822
Shares redeemed..................................(1,018,014,385) (659,857,363)(128,010,481) (201,783,457)
Net increase (decrease)......................... $ 7,684,717 $ (19,213,432)$ (10,401,262)$ 20,962,629
Year ended June 30, 1997
Shares sold......................................$3,719,946,335 $1,332,259,122 $332,213,814 $296,873,544
Shares issued on reinvestment of distributions... 9,370,014 3,715,845 1,563,133 4,185,797
Shares redeemed..................................(3,885,522,745)(1,351,443,412)(388,119,203) (238,391,576)
Net increase (decrease).........................$ (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 Money Market Portfolio and The U.S. Government
Securities Money Market Portfolio.
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.
4. INCOME TAXES
At June 30, 1997, the Franklin U.S. Government Agency Money Market Fund had tax
basis capital losses of $3,435 which may be carried over to offset future
capital gains.
Capital loss carryovers expiring in: 2004 .$2,545
2005 890
$3,435
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The Money Market Portfolio
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period.... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------------------------------------------------------------------
Income from investment operations
- net investment income................ .028 .056 .055 .053 .033 .027
Less distributions from net
investment income (.028) (.056) (.055) (.053) (.033) (.027)
------------------------------------------------------------------
Net asset value, end of period.......... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
==================================================================
Total return**.......................... 2.81% 5.47% 5.66% 5.46% 3.33% 2.92%***
Ratios/supplemental data
Net assets, end of period (000's)...... $1,952,039 $1,773,546 $1,550,085 $1,305,574 $219,189
$222,358
Ratios to average net assets:
Expenses............................... .15%*** .15% .15% .15% .15% .15%***
Expenses excluding waiver
and payments by affiliate............. .16%*** .16% .16% .16% .17% .17%***
Net investment income.................. 5.55%*** 5.34% 5.50% 5.42% 3.25% 3.18%***
</TABLE>
*For the period July 28, 1992 (effective date) to June 30, 1993.
**Total return is not annualized.
***Annualized
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
The Money Market Portfolio AMOUNT VALUE
Certificates of Deposit 41.5%
<S> <C> <C>
ABN-AMRO Bank NV, Chicago Branch, 5.77% - 6.14%, 5/01/98 - 6/17/98 ...............$ 50,000,000 $ 50,013,179
Australia & NZ Banking Group, New York Branch, 5.67%, 3/10/98 ......................25,000,000 25,000,000
Bank of Montreal, Chicago Branch, 5.675% - 5.76%, 1/27/98 - 5/13/98 ................75,000,000 75,001,261
Bank of Nova Scotia, Portland Branch, 5.75%, 6/22/98 ...............................25,000,000 25,000,000
Barclays Bank, Plc., New York Branch, 5.79%, 3/03/98 - 3/04/98 .....................50,000,000 50,000,842
Bayerische Landesbank, New York Branch, 5.755%, 6/16/98 - 6/18/98 ..................50,000,000 50,001,128
Bayerische Vereinsbank, New York Branch, 5.75% - 5.85%, 5/14/98 - 6/15/98 ..........75,000,000 75,000,000
Commerzbank AG, New York Branch, 5.625% - 6.075%, 1/09/98 - 5/27/98 ................75,000,000 75,017,989
Credit Agricole, New York Branch, 5.70%, 5/11/98 ...................................25,000,000 25,000,000
Deutsche Bank AG, New York Branch, 5.64%, 1/16/98 ..................................25,000,000 25,000,000
Generale Bank, New York Branch, 5.76%, 2/25/98 .....................................25,000,000 25,000,376
Morgan Guaranty & Trust, New York Branch, 5.94%, 3/20/98 ...........................25,000,000 25,000,000
Rabobank Nederland NV, New York Branch, 5.70%, 5/12/98 .............................25,000,000 25,001,768
Royal Bank of Canada, New York Branch, 5.80% - 6.04%, 6/05/98 - 6/15/98 ............30,000,000 29,996,573
Societe Generale, New York Branch, 5.69% - 5.80%, 1/09/98 - 3/19/98 ................55,000,000 54,993,402
Svenska Handelsbanken, New York Branch, 5.75% - 5.78%, 2/23/98 - 3/02/98 ...........75,000,000 75,000,801
Swiss Bank Corp., New York Branch, 5.74% - 5.76%, 2/11/98 - 5/08/98 ................75,000,000 75,000,000
Westdeutsch Landesbank, New York Branch, 5.68%, 1/26/98 ............................25,000,000 25,000,000
-------------
Total Certificates of Deposit (Cost $810,027,319)................................... 810,027,319
-------------
a Commercial Paper 37.6%
Abbey National North America, 5.55% - 5.60%, 1/21/98 - 4/27/98 .....................75,000,000 74,389,583
ABN AMRO North America Finance, 5.54%, 4/30/98 .....................................25,000,000 24,542,181
Associates Corp. of North America, 5.55% - 5.60%, 1/14/98 - 2/10/98 ................75,000,000 74,685,972
AT&T Corp., 5.53%, 2/03/98 .........................................................25,000,000 24,873,271
BIL North America, Inc., 5.53%, 1/07/98 ............................................25,000,000 24,976,958
CIESCO, L.P., 5.60%, 2/05/98 .......................................................25,000,000 24,863,889
Commonwealth Bank of Australia, 5.495% - 5.54%, 2/18/98 - 5/07/98 ..................55,000,000 54,295,450
Credit Agricole U.S.A., Inc., 5.55%, 1/30/98 .......................................25,000,000 24,888,229
Den Danske Corp., Inc., 5.595%, 1/22/98 ............................................25,000,000 24,918,406
Deutsche Bank Financial, Inc., 5.55%, 1/06/98 ......................................25,000,000 24,980,729
General Electric Capital Corp., 5.55% - 5.69%, 1/08/98 - 2/12/98 ...................75,000,000 74,699,985
Generale Bank, Inc., 5.51% - 5.54%, 2/13/98 - 2/19/98 ..............................50,000,000 49,647,076
Halifax Building Society, 5.53%, 1/05/98 ...........................................25,000,000 24,984,639
Merrill Lynch & Co., Inc., 5.60%, 1/28/98 ..........................................15,000,000 14,937,000
Metlife Funding, Inc., 5.68% - 5.72%, 2/06/98 - 2/26/98 ............................50,000,000 49,636,111
Morgan Stanley Group, Inc., 5.60%, 2/09/98 .........................................25,000,000 24,848,333
National Australian Funding (DE), Inc., 5.595%, 1/20/98 ............................25,000,000 24,926,177
National Rural Utilities Cooperative Finance Corp., 5.54%, 1/15/98 .................25,000,000 24,946,139
Siemens Capital Corp., 5.59%, 6/25/98 ..............................................25,000,000 24,320,660
Toyota Motor Credit Corp., 5.61% - 5.70%, 2/27/98 - 6/19/98 ........................30,000,000 29,296,479
Wool International, Inc., 5.49%, 2/12/98 ...........................................15,000,000 14,903,926
-------------
Total Commercial Paper (Cost $734,561,193) ......................................... 734,561,193
-------------
Total Investments before Repurchase Agreements (Cost $1,544,588,512) ............... 1,544,588,512
-------------
a,dRepurchase Agreements 20.7%
BancAmerica Robertson Stephens, 5.40%, 1/02/98 (Maturity Value $65,019,500)
Collateralized by U.S. Treasury Notes .............................................$ 65,000,000$ 65,000,000
Chase Securities, Inc., 5.40%, 1/02/98 (Maturity Value $65,019,500)
Collateralized by U.S. Treasury Notes.............................................. 65,000,000 65,000,000
Dresdner Kleinwort Benson North America, L.L.C., 5.25%, 1/02/98
(Maturity Value $65,018,958)
Collateralized by U.S. Treasury Notes.............................................. 65,000,000 65,000,000
J.P. Morgan Securities, Inc., 6.25%, 1/02/98 (Maturity Value $104,431,248)
Collateralized by U.S. Treasury Notes.............................................. 104,395,000 104,395,000
Morgan Stanley & Co., Inc., 6.20%, 1/02/98 (Maturity Value $104,430,958)
Collateralized by U.S. Treasury Notes.............................................. 104,395,000 104,395,000
-------------
Total Repurchase Agreements (Cost $403,790,000)..................................... 403,790,000
-------------
Total Investments (Cost $1,948,378,512) 99.8%....................................... 1,948,378,512
Other Assets, less Liabilities .2%.................................................. 3,660,401
-------------
Net Assets 100.0% .................................................................. $1,952,038,913
=============
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Portfolio.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The U.S. Government Securities Money Market Portfolio
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------
Income from investment operations
- net investment income............. .027 .052 .054 .052 .032 .021
Less distributions from net
investment income (.027) (.052) (.054) (.052) (.032) (.021)
--------------------------------------------------------------------
Net asset value, end of period....... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====================================================================
Total return**....................... 2.76% 5.34% 5.55% 5.32% 3.25% 2.27%***
Ratios/supplemental data
Net assets, end of period (000's).... $243,983 $258,629 $285,701 $474,654 $218,548 $310,319
Ratios to average net assets:
Expenses............................ .15%*** .15% .15% .15% .15% .15%***
Expenses excluding waiver and
payments by affiliate.............. .17%*** .16% .17% .16% .17% .18%***
Net investment income............... 5.44%*** 5.20% 5.45% 5.25% 3.20% 3.05%***
</TABLE>
*For the period July 28, 1992 (effective date) to June 30, 1993.
**Total return is not annualized.
***Annualized
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
The U.S. Government Securities Money Market Portfolio AMOUNT VALUE
aGovernment Securities 20.3%
<S> <C> <C>
U.S. Treasury Bills, 5.65%, 1/08/98 ........................................ $10,000,000 $ 9,989,014
U.S. Treasury Bills, 5.40%, 4/30/98 ........................................ 10,000,000 9,821,500
U.S. Treasury Notes, 5.25%, 7/31/98 ........................................ 10,000,000 9,979,308
U.S. Treasury Notes, 4.75%, 9/30/98 ........................................ 20,000,000 19,866,959
-------------
Total Government Securities (Cost $49,656,781).............................. 49,656,781
-------------
Repurchase Agreements 79.6%
BancAmerica Robertson Stephens, 6.40%, 1/02/98 (Maturity Value $10,003,556)
Collateralized by U.S. Treasury Notes...................................... 10,000,000 10,000,000
Barclays Capital Group, Inc., 6.50%, 1/02/98 (Maturity Value $10,003,611)
Collateralized by U.S. Treasury Notes...................................... 10,000,000 10,000,000
BT Alex Brown, Inc., 5.75%, 1/02/98 (Maturity Value $10,003,194)
Collateralized by U.S. Treasury Bills...................................... 10,000,000 10,000,000
Chase Securities, Inc., 6.10%, 1/02/98 (Maturity Value $10,003,389)
Collateralized by U.S. Treasury Notes...................................... 10,000,000 10,000,000
CIBC Wood Gundy Securities Corp., 6.45%, 1/02/98 (Maturity Value $10,003,583)
Collateralized by U.S. Treasury Notes...................................... 10,000,000 10,000,000
Deutsche Morgan Grenfell/C.J. Lawrence, Inc., 6.40%,
1/02/98 (Maturity Value $10,003,556)
Collateralized by U.S. Treasury Notes...................................... 10,000,000 10,000,000
J.P. Morgan Securities, Inc., 6.15%, 1/02/98 (Maturity Value $22,072,539)
Collateralized by U.S. Treasury Bills and U.S. Treasury Notes.............. 22,065,000 22,065,000
J.P. Morgan Securities, Inc., 6.25%, 1/02/98 (Maturity Value $30,010,417)
Collateralized by U.S. Treasury Bills and U.S. Treasury Notes ............. 30,000,000 30,000,000
Merrill Lynch Government Securities, Inc.,
6.00%, 1/02/98 (Maturity Value $10,003,333)
Collateralized by U.S. Treasury Notes ..................................... 10,000,000 10,000,000
Morgan Stanley & Co., Inc., 6.20%, 1/02/98 (Maturity Value $52,082,933)
Collateralized by U.S. Treasury Bills ..................................... 52,065,000 52,065,000
SBC Warburg Dillon Read, Inc.,
6.50%, 1/02/98 (Maturity Value $10,003,611)
Collateralized by U.S. Treasury Notes ..................................... 10,000,000 10,000,000
UBS Securities, L.L.C., 6.45%, 1/02/98 (Maturity Value $10,003,583)
Collateralized by U.S. Treasury Notes...................................... 10,000,000 10,000,000
-------------
Total Repurchase Agreements (Cost $194,130,000) ............................ 194,130,000
-------------
Total Investments (Cost $243,786,781) 99.9%................................. 243,786,781
Other Assets, less Liabilities .1% ......................................... 196,109
-------------
Net Assets 100.0% .......................................................... $243,982,890
=============
</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 Statements
Statements of Assets and Liabilities
December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
<S> <C> <C>
Assets:
Investments in securities, at value and cost............................... $1,544,588,512 $ 49,656,781
Repurchase agreements, at value and cost................................... 403,790,000 194,130,000
Cash....................................................................... 1,679 3,930
Receivables:
Capital shares sold....................................................... 80,234 --
Interest.................................................................. 8,993,889 496,074
----------------------------
Total assets................................................................ 1,957,454,314 244,286,785
============================
Liabilities:
Payables:
Capital shares redeemed................................................... 5,165,275 257,698
Affiliates................................................................ 232,119 28,311
Distributions to shareholders.............................................. 3,711 --
Other liabilities.......................................................... 14,296 17,886
----------------------------
Total liabilities........................................................... 5,415,401 303,895
----------------------------
Net assets, at value........................................................ $1,952,038,913 $243,982,890
============================
Shares outstanding.......................................................... 1,952,038,913 243,982,890
============================
Net asset value per share................................................... $1.00 $1.00
============================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
Statements of Operations
for the six months ended December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
<S> <C> <C>
Investment income:
Interest...................................................................... $53,164,949 $7,232,180
----------------------------
Expenses:
Management fees (Note 3)...................................................... 1,410,043 195,260
Custodian fees................................................................ 9,612 5,461
Reports to shareholders....................................................... 21,824 4,192
Professional fees............................................................. 21,259 4,596
Trustees' fees and expenses................................................... 3,800 579
Other......................................................................... 29,506 10,841
----------------------------
Total expenses............................................................... 1,496,044 220,929
Expenses waived/paid by affiliate (Note 3)................................... (85,712) (25,457)
----------------------------
Net expenses................................................................... 1,410,332 195,472
----------------------------
Net investment income......................................................... 51,754,617 7,036,708
----------------------------
Net increase in net assets resulting from operations........................... $51,754,617 $7,036,708
===========================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended December 31, 1997 (unaudited)
and the year ended June 30, 1997
<TABLE>
<CAPTION>
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
Six Months Ended Year Ended Six Months Ended Year Ended
December 31, 1997June 30, 1997 December 31, 1997June 30, 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 51,754,617 $ 90,724,056 $ 7,036,708 $ 14,032,778
Net realized gain (loss)
from investments ........................ -- (931) -- 3,978
-------------------------------------------------------------
Net increase in net assets
resulting from operations ................. 51,754,617 90,723,125 7,036,708 14,036,756
Distributions to shareholders from
net investment income .................... (51,754,617) (90,723,125)a (7,036,708) (14,036,756)b
Capital share transactions (Note 2) ....... 178,492,924 223,460,742 (14,646,287) (27,071,927)
--------------------------------------------------------------
Net increase (decrease) in net assets ...... 178,492,924 223,460,742 (14,646,287) (27,071,927)
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period ....................... 1,773,545,989 1,550,085,247 258,629,177 285,701,104
-------------------------------------------------------------
End of period ............................. $1,952,038,913 $1,773,545,989 $243,982,890 $258,629,177
=============================================================
</TABLE>
aDistributions were decreased by a net realized loss from investments of $931.
bDistributions 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 (unaudited)
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 high 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
December 31, 1997, 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
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 December 31, 1997, 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
Six months ended
December 31, 1997
Shares sold .................... $2,732,924,579 $616,546,090
Shares issued in reinvestment
of distributions .............. 51,752,178 7,036,446
Shares redeemed ................ (2,606,183,833) (638,228,823)
Net increase (decrease) ......... $ 178,492,924 $ (14,646,287)
Year ended June 30, 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.
3. TRANSACTIONS WITH AFFILIATES (cont.)
At December 31, 1997, the shares of The Money Market Portfolio were owned by the
following funds:
Percentage of
Outstanding
Shares Shares
Franklin Money Fund ................ 1,625,839,866 83.29%
Institutional Fiduciary Trust-
Money Market Portfolio ............ 192,790,791 9.88%
Institutional Fiduciary Trust-
Franklin Cash Reserves Fund ....... 101,329,704 5.19%
Franklin Templeton Money Fund Trust-
Franklin Templeton Money Fund II 32,078,552 1.64%
At December 31, 1997, 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 .. 117,534,517 48.17%
Franklin Federal Money Fund ......... 126,448,373 51.83%
4. INCOME TAXES
At June 30, 1997, The Money Market Portfolio had tax basis capital losses of
$3,560, which may be carried over to offset future capital gains. Such losses
expire in 2002.
At June 30, 1997, The Money Market Portfolio had deferred capital losses
occurring subsequent to October 31, 1996 of $1,161. For tax purposes, such
losses will be reflected in the year ending June 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 12/31/97
Certificates of Deposit 41.6%
Commercial Paper 37.7%
Repurchase Agreements 20.7%
GRAPHIC MATERIAL (2)
This bar chart shows the comparison between Franklin's IFT Money Market
Portfolio's total returns of 5.49%, 17.81%, 26.61%, and 77.25% for the one-,
three-, five- and ten-year periods ended 12/31/97 and the Lipper
Institutional Money Market Funds Index's total returns of 5.33%, 17.13%,
25.46%, and 75.44% for the one-, three-, five- and ten-year periods ended
12/31/97.
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 12/31/97
Repurchase Agreements 79.6%
Treasuries 20.4%
GRAPHIC MATERIAL (4)
This bar chart shows the comparison between Franklin U.S. Government
Securities Money Market Portfolio's total returns of 5.41%, 17.43%, and
25.99% for the one-, three- and five-year periods ended 12/31/97 and the
Lipper Institutional Treasury Money Market Funds Index's total returns of
5.11%, 16.55%, and 24.41% for the one-, three- and five-year periods ended
12/31/97.
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 12/31/97
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 5.07%, 16.63%, and 25.02% for the one-,
three- and five-year periods ended 12/31/97 and the Lipper Institutional U.S.
Treasury Money Market Funds Index's total returns of 5.11%, 16.55%, and
24.41% for the one-, three- and five-year periods ended 12/31/97.
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 12/31/97
Federal Home Loan Bank 90.0%
Federal Farm Credit Bank 9.7%
Treasuries 0.3%
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between Franklin U.S. Government Agency
Money Market Portfolio's total returns of 5.07% and 17.81% for the one- and
three-year periods ended 12/31/97 and the Lipper Institutional Treasury Money
Market Funds Index's total returns of 5.11% and 16.92% for the one- and
three-year periods ended 12/31/97.
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
SHAREHOLDER LETTER
Dear Shareholder,
We are pleased to bring you this semi-annual report for Franklin's
Institutional Fiduciary Trust adjustable rate securities funds, covering the
period ended December 31, 1997.
Franklin's Institutional Fiduciary Trust (the Trust) was developed
specifically to meet the needs of institutional investors. Part of the $226
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 (the Funds). Each Fund
is managed to maintain a relatively short average duration, and the objective
for both Funds is to seek a high level of current income, with lower
volatility of principal than funds that invest in fixed-rate securities.
In the second half of 1997, the economy continued to grow at a strong pace.
Even with the October market correction, instigated by the Asian economic
crisis, U.S. markets showed little sign of weakness. One indication of
economic strength was the rate of unemployment, which declined to 4.6% during
the period, its lowest level in twenty-four years. However, because of the
recent volatility within international markets, along with subdued
inflationary fears, the Federal Reserve was allowed to leave monetary policy
and interest rates unchanged through the end of the year.
Maintaining a long-term investment approach, the Funds' managers have focused
on principal stability, while pursuing current income. This strategy has
generally proved favorable for the Funds despite the occasional short-term
market volatility. Our managers will continue to adhere to this approach, as
we believe it best serves our shareholders.
Thank you for your continued support of Franklin's Institutional Fiduciary
Trust. We look forward to serving your investment needs in the months and
years to come.
Sincerely,
Charles B. Johnson
Chairman of the Board
Franklin's Institutional Fiduciary Trust
OVERVIEW OF THE ECONOMY
Strong economic growth coupled with mild inflation characterized most of the
period under review. Annualized real GDP growth through the last two quarters
of 1997 was 3.9%, a figure which is considerably higher than the Federal
Reserve Board's targeted long-term annualized growth rate of 2.5%.
Furthermore, as a direct result of the country's economic strength, the rate
of unemployment declined to 4.6%, reaching its lowest level in twenty-four
years. However, the Federal Reserve declined to alter its monetary policy in
the face of such blistering growth for a couple of reasons. The first reason
is that consumer prices, as measured by the Consumer Price Index, increased
by only 1.7% in 1997, their lowest increase in eleven years. Secondly, the
Asian financial crisis in October prevented the Federal Reserve from taking
any steps which might have induced further volatility in the international
financial markets.
Looking forward, we believe the direction of the economy could hinge on the
outcome of the current Asian economic crisis. The fear is that the strong
U.S. dollar could strain sales of domestic goods as lower priced imports from
Asia flood the U.S. Also, corporate earnings could be affected by a reduction
of sales to Asia, as well as by a possible cap on domestic prices brought on
in an attempt to compete with inexpensive foreign goods. However, with
continued low unemployment and increased productivity, U.S. economic
fundamentals remain strong. This being the case, we believe the Federal
Reserve will continue to wait on the sidelines and hold off on tightening or
loosening its monetary policy in order to assess the impact of these
variables on economic growth and inflation.
T. Anthony Coffey, CFA
Portfolio Manager
Tony Coffey is a portfolio manager for the Franklin Institutional Adjustable
U.S. Government Securities Fund, 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
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
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 that 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 helping to keep the Fund's net asset value stable.
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.
During the second half of 1997, we witnessed continued economic growth and a
steady drop in interest rates. One consequence of this decline in interest
rates that impacted Fund performance was the flattening of the yield curve,
where the difference between short-term and long-term interest rates
narrowed. The flattening of the yield curve over the last six months has had
important implications for ARM securities, a primary holding of the Fund. In
general, a flatter yield curve may lead to higher prepayments on ARM
securities. This is a result of most ARMs being tied to short-term interest
rates such as the one-year Constant Maturity Treasury (CMTs), the six-month
Treasury-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, ARM borrowers have an increased
economic incentive to refinance into a FRM.
If the yield curve remains flat as we move into 1998, or even inverts (where
long-term rates are lower than short-term rates), ARM prepayments could very
well remain at high levels. This could result in a reduction of income and
limit price appreciation on ARM securities. In this case, our emphasis on
seasoned CMT ARMs, with their slow and stable prepayment histories, should
prove most beneficial to shareholders, because such securities are less
affected by a flat yield curve environment.
Going forward, we believe the direction of interest rates in 1998 will be
determined by one of two likely economic scenarios. 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. This would most likely keep inflation subdued, or
possibly even lead to deflation, thus pushing long-term interest rates even
lower and forcing the Federal Reserve Board to ease monetary policy. On the
other hand, there is an argument that U.S. demand will remain strong and the
Asian situation will prove to have less impact than previously feared.
Meanwhile, inflation, led by higher wage costs, could ultimately force the
Federal Reserve to tighten the money supply, resulting in higher overall
interest rate levels. In the near-term, we believe that neither scenario will
develop fully, and that the 30-year Treasury trading range will fluctuate
between 5.75-6.25%.
PERFORMANCE SUMMARY
The Franklin Institutional Adjustable U.S. Government Securities Fund's share
price, as measured by net asset value, rose from $9.36 on June 30, 1997, to
$9.39 on December 31, 1997.
The Fund continued to pursue its investment objective of providing high
current income to its shareholders. For the six-month period ended
December 31, 1997, the Fund paid monthly income distributions totaling $0.28
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 5.75%,
based on an annualization of the dividends distributed during the last 30
days of the period ($0.04589 per share) and the net asset value of $9.39 on
December 31, 1997.
The Fund provided a cumulative total return of 3.33% for the six-month
period. Cumulative total return reflects the change in value of an
investment, assuming reinvestment of dividends and capital gains, if any.
Past performance is not indicative of future results.
As illustrated by the chart, your Fund's performance exceeded the six-month
Certificate of Deposit 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
Performance Figures3
Periods Ended December 31, 1997
Since
Inception
1-Year 5-Year (12/2/91)
Cumulative Total Return:4 7.21% 25.27% 31.40%
Average Annual Total Return:5 7.21% 4.61% 4.59%
30-Day Standardized Yield:6 5.74%
Distribution Rate: 7 5.75%
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.
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.
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
($0.04589 per share) and the net asset value of $9.39 per share on December
31, 1997.
Investment return and principal value fluctuate, so that your shares, when
redeemed, may be worth more or less than their original cost.
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 that 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 helping to keep the Fund's net
asset value stable.
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.
During the second half of 1997, we witnessed continued economic growth and a
steady drop in interest rates. One consequence of this decline in interest
rates that impacted Fund performance was the flattening of the yield curve,
where the difference between short-term and long-term interest rates
narrowed. The flattening of the yield curve over the last six months has had
important implications for ARM securities, a primary holding of the Fund. In
general, a flatter yield curve may lead to higher prepayments on ARM
securities. This is a result of most ARMs being tied to short-term interest
rates such as the one-year Constant Maturity Treasury (CMT), the six-month
Treasury-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, ARM borrowers have an increased
economic incentive to refinance into a FRM.
If the yield curve remains flat as we move into 1998, or even inverts (where
long-term rates are lower than short-term rates), ARM prepayments could very
well remain at high levels. This could result in a reduction of income and
limit price appreciation on ARM securities. In this case, our emphasis on
seasoned CMT ARMs, with their slow and stable prepayment histories, should
prove most beneficial to shareholders, because such securities are less
affected by a flat yield curve environment.
Going forward, we believe the direction of interest rates in 1998 will be
determined by one of two likely economic scenarios. 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. This would most likely keep inflation subdued, or
possibly even lead to deflation, thus pushing long-term interest rates even
lower and forcing the Federal Reserve Board to ease monetary policy. On the
other hand, there is an argument that U.S. demand will remain strong and the
Asian situation will prove to have less impact than previously feared.
Meanwhile, inflation, led by higher wage costs, could ultimately force the
Federal Reserve to tighten the money supply, resulting in higher overall
interest rate levels. In the near-term, we believe that neither scenario will
develop fully, and that the 30-year Treasury trading range will fluctuate
between 5.75-6.25%.
Adjustable Rate
Securities Portfolio
Top Five Issuers on
December 31, 1997
Percent
of Total
Issuer Net Assets
1. Resolution Trust Co. 23.0%
2. FNMA 15.4%
3. U.S. Treasury 9.7%
4. Residential Funding Corp. 9.2%
5. PHMS 7.9%
PERFORMANCE SUMMARY
The Franklin Institutional Adjustable Rate Securities Fund's share price, as
measured by net asset value on June 30, 1997 was unchanged at its close on
December 31, 1997.
The Fund continues to pursue its investment objective of providing a high
level of current income by investing in an underlying portfolio of
adjustable-rate securities. For the six-month period ended December 31, 1997,
the Fund paid monthly income distributions totaling $0.32 per share. Of
course, dividends will vary based on the earnings of the underlying
portfolio, and past distributions are not predictive of future trends.
At the end of the reporting period, the Fund's distribution rate was 6.39%
based on the annualization of the dividends distributed over the last 30 days
of the period ($0.053905 per share) and the net asset value of $9.93 per
share on December 31, 1997.
The Fund posted a cumulative total return of 3.25% for the six-month period
ended December 31, 1997. 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 Deposit 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
Performance Figures3
Periods Ended December 31, 1997
Since
Inception
1-Year 5-Year (1/3/92)
Cumulative Total Return:4 7.26% 31.65% 39.15%
Average Annual Total Return:5 7.26% 5.65% 5.67%
30-Day Standardized Yield:6 6.38%
Distribution Rate:7 6.39%
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.
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.
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 under-lying 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
($0.053905 per share) and the net asset value of $9.93 per share on December
31, 1997.
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 predictive of future results.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
Franklin Institutional Adjustable U.S. Government Securities Fund
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $9.36 $9.28 $9.25 $9.40 $9.86 $9.99
------------------------------------------------------------------
Income from investment operations:
Net investment income.................... .278 .570 .600 .551 .360 .480
Net realized and unrealized gains (losses) .030 .090 .028 (.155) (.467) (.130)
------------------------------------------------------------------
Total from investment operations.......... .308 .660 .628 .396 (.107) .350
Less distributions from net investment income (.278) (.580) (.598) (.546) (.353) (.480)
------------------------------------------------------------------
Net asset value, end of period............ $9.39 $9.36 $9.28 $9.25 $9.40 $9.86
==================================================================
Total return*............................. 3.33% 7.37% 6.98% 4.41% (1.11)% 4.01%
Ratios/supplemental data
Net assets, end of period (000's)......... $5,198 $7,471 $9,448 $25,020 $51,738 $861,311
Ratios to average net assets:
Expenses1,2.............................. .54%** .43% .38% .23% .07% .35%
Expenses excluding
waiver and payments by affiliate1,2...... .72%** .61% .55% .54% .45% .46%
Net investment income.................... 5.92%** 6.12% 5.90% 5.81% 3.49% 4.89%
Portfolio turnover rate................... 4.86% 6.78% 102.66% 14.86% 29.47% 66.55%
</TABLE>
*Total return is not annualized
**Annualized
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
2During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees incurred by the Portfolio.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Franklin Institutional Adjustable U.S. Government Securities Fund SHARES VALUE
<S> <C> <C>
Mutual Funds 100.0%
U.S. Government Adjustable Rate Mortgage Portfolio (Note 1).......................... 549,797 $5,201,077
-------------
Total Investments (Cost $5,277,643) 100.0%........................................... 5,201,077
Other Assets, less Liabilities ...................................................... (2,809)
-------------
Net Assets 100.0%.................................................................... $5,198,268
=============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Highlights
<TABLE>
<CAPTION>
Franklin Institutional Adjustable Rate Securities Fund
Six Months Ended
December 31, 1997 Year Ended June 30,
(UNAUDITED) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period...... $9.93 $9.79 $9.78 $9.77 $10.04 $10.04
-----------------------------------------------------------------
Income from investment operations:
Net investment income.................... .319 .590 .600 .589 .437 .559
Net realized and unrealized gains (losses) -- .140 .011 .010 (.270) --
-----------------------------------------------------------------
Total from investment operations.......... .319 .730 .611 .599 .167 .559
Less distributions from net investment income (.319) (.590) (.601) (.589) (.437) (.559)
-----------------------------------------------------------------
Net asset value, end of period............ $9.93 $9.93 $9.79 $9.78 $9.77 $10.04
=================================================================
Total return*............................. 3.25% 7.66% 6.41% 6.35% 1.65% 5.72%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's)......... $1,296 $4,754 $4,453 $8,596 $31,198 $44,734
Ratios to average net assets:
Expenses1,2.............................. .37%** .42% .36% .31% .25% --
Expenses excluding waiver and payments
by affiliate1,2.......................... .56%** .62% .61% .59% .50% .60%
Net investment income.................... 6.32%** 6.03% 6.16% 5.84% 4.32% 5.56%
Portfolio turnover rate................... 7.43% 18.02% 45.98% 12.44% 197.22% 74.77%
</TABLE>
*Total return is not annualized
**Annualized
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
2During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees incurred by the Portfolio.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Franklin Institutional Adjustable Rate Securities Fund SHARES VALUE
Mutual Funds 100.4%
<S> <C> <C>
Adjustable Rate Securities Portfolio (Note 1)........................................ 130,844 $1,300,606
-------------
Total Investments (Cost $1,297,708) 100.4%........................................... 1,300,606
Other Assets, less Liabilities (.4%)................................................. (5,001)
-------------
Net Assets 100.0%.................................................................... $1,295,605
=============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements
Statements of Assets and Liabilities
December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Franklin
Institutional Franklin
Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
<S> <C> <C>
Assets:
Investments in securities:
Cost........................................................................ $ 5,277,643 $1,297,708
=============================
Value....................................................................... 5,201,077 1,300,606
Cash......................................................................... 560 64
Other assets................................................................. 2,000 --
-----------------------------
Total assets............................................................ 5,203,637 1,300,670
-----------------------------
Liabilities:
Payables:
Affiliates.................................................................. 560 68
Shareholders................................................................ 2,582 77
Other liabilities............................................................ 2,227 4,920
-----------------------------
Total liabilities....................................................... 5,369 5,065
-----------------------------
Net assets, at value................................................... $ 5,198,268 $1,295,605
=============================
Net assets consist of:
Net unrealized appreciation (depreciation)................................... (76,566) 2,898
Accumulated net realized loss................................................ (30,493,578) (2,042,001)
Capital shares............................................................... 35,768,412 3,334,708
-----------------------------
Net assets, at value.......................................................... $ 5,198,268 $1,295,605
=============================
Shares outstanding............................................................ 553,645 130,445
=============================
Net asset value and maximum offering price per share
(net asset value / shares outstanding)....................................... $9.39 $9.93
=============================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
Statements of Operations
for the six months ended December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
Franklin
Institutional Franklin
Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
<S> <C> <C>
Investment income:
Dividends.................................................................... $198,225 $80,096
-----------------------------
Expenses:
Administrative fees (Note 3)................................................. 1,609 627
Transfer agent fees (Note 3)................................................. 555 55
Reports to shareholders...................................................... 823 94
Registration and filing fees................................................. 1,786 --
Professional fees............................................................ 1,067 662
Other........................................................................ 3,466 161
-----------------------------
Total expenses................................................................ 9,306 1,599
-----------------------------
Net investment income.................................................. 188,919 78,497
-----------------------------
Realized and unrealized gains (losses):
Net realized loss from investments........................................... (158,175) (33,943)
Net unrealized appreciation on investments................................... 180,575 47,403
-----------------------------
Net realized and unrealized gain.............................................. 22,400 13,460
-----------------------------
Net increase in net assets resulting from operations.......................... $211,319 $91,957
=============================
See notes to financial statements.
</TABLE>
INSTITUTIONAL FIDUCIARY TRUST
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended December 31, 1997 (unaudited)
and the year ended June 30, 1997
<TABLE>
<CAPTION>
Franklin Institutional Franklin Institutional
Adjustable U.S. Government Adjustable Rate
Securities Fund Securities Fund
Six Months Year Six Months Year
Ended 12/31/97Ended 6/30/97 Ended 12/31/97Ended 6/30/97
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income..................... $ 188,919 $ 529,826 $ 78,497 $ 285,372
Net realized loss from investments........ (158,175) (142,155) (33,943) (10,103)
Net unrealized appreciation
on investments............................. 180,575 218,167 47,403 78,349
---------------------------------------------------------
Net increase in net assets
resulting from operations.................. 211,319 605,838 91,957 353,618
Distributions to shareholders from:
Net investment income:.................... (188,919) (544,447) (78,497) (285,372)
Capital share transactions: (Note 2)....... (2,295,615) (2,037,654) (3,471,795) 232,562
---------------------------------------------------------
Net increase (decrease) in net assets..... (2,273,215) (1,976,263) (3,458,335) 300,808
Net assets (there is no
undistributed net investment
income at beginning or end of period):
Beginning of period....................... 7,471,483 9,447,746 4,753,940 4,453,132
---------------------------------------------------------
End of period............................. $5,198,268 $7,471,483 $1,295,605 $4,753,940
=========================================================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
Notes to Financial Statements (unaudited)
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 policy of the Funds included in this report is 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 a
diversified, open end investment company having the same investment objectives
as the Funds. The 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 values of the Adjustable U.S. Government Fund and the Adjustable Rate
Securities Fund reflect their proportionate interest in the net assets of the
Mortgage Portfolio and the Securities Portfolio, respectively. At December 31,
1997, the Adjustable U.S. Government Fund owns 2% of the Mortgage Portfolio and
the Adjustable Rate Securities Fund owns 6% 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
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.
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 December 31, 1997, there was an unlimited number of no par value shares
authorized. Transactions in each of 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>
Six months ended December 31, 1997
Shares sold................................................ 1,362 $ 12,798 9,502 $ 94,539
Shares issued on reinvestment of distributions............. 2,908 27,273 3,081 30,649
Shares redeemed............................................ (248,899) (2,335,686) (360,980)(3,596,983)
------------------------------------------------
Net decrease.............................................. (244,629)$(2,295,615) (348,397)$(3,471,795)
================================================
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 Funds are also officers and/or trustees of
Franklin Advisers, Inc. (Advisers) and Franklin/Templeton Investor Services,
Inc. (Investor Services), the Funds' investment manager 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 average
daily net assets of each Fund.
4. INCOME TAXES
At June 30, 1997, the Funds had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:
Franklin
Institutional Franklin
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
----------------------------
$29,993,519 $1,998,443
============================
4. INCOME TAXES (cont.)
At June 30, 1997, the Adjustable U.S. Government Fund and the Adjustable Rate
Securities Fund have deferred capital losses occurring subsequent to October 31,
1996 of $120,933 and $3,211, respectively. For tax purposes, such losses will be
reflected in the year ending June 30, 1998.
At December 31, 1997, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes were as follows:
Franklin
Institutional Franklin
Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
Investments at cost .. $5,514,925 $1,304,718
===========================
Unrealized depreciation (313,848) (4,112)
---------------------------
Net unrealized depreciation$(313,848) $ (4,112)
---------------------------
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 December 31, 1997 were as follows:
Franklin
Institutional Franklin
Adjustable Institutional
U.S. Government Adjustable Rate
Securities Fund Securities Fund
Purchases............. $ 310,557 $ 188,688
Sales................. 2,603,104 3,680,740
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Highlights
<TABLE>
<CAPTION>
U.S. Government Adjustable Rate Mortgage Portfolio
Two Months Ended
December 31, 1997 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.................. .098 .593 .589 .572 .415 .313
Net realized and unrealized gain (loss) (.020) .110 .040 .140 (.630) (.090)
----------------------------------------------------------------------
Total from investment operations........ .078 .703 .629 .712 (.215) .223
Less distributions from net investment income (.098) (.593) (.589) (.572) (.415) (.313)
----------------------------------------------------------------------
Net asset value, end of period.......... $9.46 $9.48 $9.37 $9.33 $9.19 $9.82
======================================================================
Total return*........................... .83% 7.74% 6.95% 7.99% (2.22)% 2.28%
Ratios/supplemental data
Net assets, end of period (000's)....... $328,071 $342,541 $406,431 $522,802 $747,471 $2,130,229
Ratio to average net assets:
Expenses............................... .25%** .25% .25% .18% .02% .27%**
Expenses excluding waiver
and payments by affiliate.............. .43%** .43% .42% .43% .42% .41%**
Net investment income.................. 6.22%** 6.31% 6.31% 6.17% 4.01% 4.15%**
Portfolio turnover rate................. 5.83% 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, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
U.S. Government Adjustable Rate Mortgage Portfolio AMOUNT VALUE
<S> <C> <C>
Adjustable Rate Mortgage Securities 98.5%
Federal Home Loan Mortgage Corp. (FHLMC) 19.9%
FHLMC, Cap 11.253%, Margin 1.75% + CMT, Resets Annually, 7.375%, 11/01/16 ............. $ 4,564,136 $ 4,778,422
FHLMC, Cap 12.723%, Margin 2.189% + CMT, Resets Annually, 7.851%, 4/01/19 ............. 2,003,624 2,091,924
FHLMC, Cap 12.744%, Margin 2.00% + CMT, Resets Annually, 7.683%, 7/01/18............... 4,255,357 4,384,771
FHLMC, Cap 12.806%, Margin 2.23% + CMT, Resets Annually, 7.812%, 4/01/18 ............ 6,515,619 6,841,446
FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.62%, 9/01/19................ 5,355,337 5,613,251
FHLMC, Cap 13.156%, Margin 1.915% + CMT, Resets Annually, 7.494%, 12/01/16 ............ 2,612,882 2,737,909
FHLMC, Cap 13.246%, Margin 2.175% + CMT, Resets Annually, 7.792%, 10/01/18 ............ 2,447,423 2,566,515
FHLMC, Cap 13.292%, Margin 2.115% + CMT, Resets Annually, 7.686%, 3/01/19.............. 2,156,994 2,261,479
FHLMC, Cap 13.366%, Margin 2.102% + CMT, Resets Annually, 7.609%, 3/01/18 ............. 4,054,821 4,231,891
FHLMC, Cap 13.37%, Margin 2.04% + CMT, Resets Annually, 7.623%, 4/01/19................ 8,342,060 8,701,453
FHLMC, Cap 13.65%, Margin 2.249% + CMT, Resets Annually, 7.959%, 7/01/20 .............. 5,398,043 5,648,626
FHLMC, Cap 13.793%, Margin 2.214% + CMT, Resets Annually, 7.933%, 11/01/19 ............ 2,596,259 2,714,327
FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.728%, 4/01/18.............. 7,660,637 8,003,015
FHLMC, Cap 14.307%, Margin 1.957% + 3CMT, Resets Every 3 Years, 8.705%, 12/01/21 ...... 1,732,614 1,808,330
FHLMC, Cap 14.90%, Margin 2.546% + CMT, Resets Annually, 8.096%, 2/01/19 .............. 2,698,253 2,865,413
-------------
Total Federal Home Loan Mortgage Corp. (Cost $64,480,809) ............................. 65,248,772
-------------
Federal National Mortgage Association (FNMA) 69.0%
FNMA, Cap 12.00%, Margin 1.25% + COFI, Resets Monthly, 6.149%, 11/01/35 ............... 9,109,012 9,108,375
FNMA, Cap 12.605%, Margin 2.536% + 6 Month DR, Resets Semi-Annually, 7.712%, 11/01/18.. 2,159,504 2,272,363
FNMA, Cap 12.637%, Margin 2.00% + NCI, Resets Annually, 6.961%, 11/01/17............... 14,981,346 15,383,296
FNMA, Cap 12.64%, Margin 2.00% + CMT, Resets Annually, 7.642%, 3/01/19................. 3,926,279 4,083,272
FNMA, Cap 12.66%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 6.949%, 1/01/19 .... 9,978,485 10,182,405
FNMA, Cap 12.662%, Margin 1.25% + COFI, Resets Monthly, 6.888%, 1/01/19 ............... 2,958,600 2,978,808
FNMA, Cap 12.705%, Margin 1.25% + COFI, Resets Monthly, 6.154%, 9/01/18................ 11,174,807 11,121,839
FNMA, Cap 12.787%, Margin 1.25% + COFI, Resets Monthly, 7.477%, 1/01/19 ............... 2,895,106 2,939,285
FNMA, Cap 12.788%, Margin 2.11% + CMT, Resets Annually, 7.811%, 11/01/20 .............. 3,725,366 3,919,108
FNMA, Cap 12.804%, Margin 1.75% + CMT, Resets Annually, 7.392%, 5/01/19 ............... 4,750,197 4,966,093
FNMA, Cap 12.84%, Margin 2.762% + 6 Month DR, Resets Semi-Annually, 7.895%, 6/01/17.... 2,841,366 3,011,195
FNMA, Cap 12.85%, Margin 2.078% + 5CMT, Resets Every 5 Years, 8.26%, 10/01/17 ......... 4,558,938 4,822,536
FNMA, Cap 12.89%, Margin 2.125% + 6 Month DR, Resets Semi-Annually, 7.312%, 7/01/17 ... 6,562,335 6,806,146
FNMA, Cap 12.938%, Margin 1.25% + COFI, Resets Monthly, 6.154%, 2/01/19 ............... 7,034,722 7,001,378
FNMA, Cap 12.993%, Margin 2.092% + CMT, Resets Annually, 7.723%, 12/01/19 ............. 3,260,676 3,431,471
FNMA, Cap 13.005%, Margin 1.97% + 3CMT, Resets Every 3 Years, 8.173%, 11/01/17 ........ 4,754,432 5,016,164
FNMA, Cap 13.01%, Margin 2.10% + CMT, Resets Annually, 7.677%, 6/01/19 ................ 4,746,985 4,994,494
FNMA, Cap 13.03%, Margin 1.25% + COFI, Resets Monthly, 6.922%, 2/01/20 ................ 8,446,219 8,506,526
FNMA, Cap 13.03%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.166%, 12/01/20 ... 5,187,829 5,361,767
FNMA, Cap 13.063%, Margin 2.175% + CMT, Resets Annually, 7.716%, 4/01/19............... 5,307,693 5,589,542
FNMA, Cap 13.083%, Margin 2.005% + CMT, Resets Annually, 7.611%, 6/01/19............... 4,559,741 4,796,209
FNMA, Cap 13.147%, Margin 1.895% + CMT, Resets Annually, 7.575%, 4/01/19............... 4,345,259 4,569,779
FNMA, Cap 13.202%, Margin 2.478% + 6 Month DR, Resets Semi-Annually, 7.612%, 11/01/26.. 2,517,683 2,653,641
FNMA, Cap 13.249%, Margin 2.00% + CMT, Resets Annually, 7.636%, 6/01/19 ............... 2,553,032 2,657,748
FNMA, Cap 13.281%, Margin 2.00% + CMT, Resets Annually, 7.568%, 10/01/19 .............. 7,056,857 7,421,132
FNMA, Cap 13.32%, Margin 1.25% + COFI, Resets Monthly, 7.434%, 4/01/03 ................ 6,351,921 6,403,245
FNMA, Cap 13.452%, Margin 2.148% + CMT, Resets Annually, 7.813%, 9/01/22............... 11,068,308 11,581,104
FNMA, Cap 13.457%, Margin 1.903% + CMT, Resets Annually, 7.549%, 6/01/18............... 5,372,575 5,649,263
FNMA, Cap 13.662%, Margin 2.177% + CMT, Resets Annually, 7.848%, 3/01/21............... 4,667,894 4,904,837
Federal National Mortgage Association (FNMA) (cont.)
FNMA, Cap 13.791%, Margin 2.143% + CMT, Resets Annually, 7.884%, 12/01/20.............. $ 7,512,377 $ 7,911,345
FNMA, Cap 13.797%, Margin 2.20% + CMT, Resets Annually, 7.749%, 3/01/19 ............... 2,347,690 2,459,499
FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.788%, 7/01/24 .... 5,065,325 5,147,115
FNMA, Cap 13.887%, Margin 2.25% + CMT, Resets Annually, 7.773%, 2/01/19 ............... 3,454,491 3,624,038
FNMA, Cap 13.896%, Margin 2.25% + CMT, Resets Annually, 7.86%, 12/01/18................ 2,753,542 2,899,508
FNMA, Cap 14.069%, Margin 2.089% + CMT, Resets Annually, 7.723%, 1/01/19............... 5,943,085 6,254,384
FNMA, Cap 14.142%, Margin 2.118% + CMT, Resets Annually, 7.687%, 3/01/21 .............. 1,898,638 1,982,344
FNMA, Cap 14.354%, Margin 2.07% + 5CMT, Resets Every 5 Years, 8.164%, 5/01/21 ......... 9,591,342 10,101,890
FNMA, Cap 14.42%, Margin 2.099% + CMT, Resets Annually, 7.792%, 3/01/20................ 2,907,004 3,053,983
FNMA, Cap 14.887%, Margin 1.72% + CMT, Resets Annually, 7.391%, 1/01/16................ 7,829,700 8,084,667
FNMA, Cap 14.952%, Margin 2.523% + CMT, Resets Annually, 8.377%, 5/01/19............... 2,695,728 2,880,022
-------------
Total Federal National Mortgage Association (Cost $225,304,408) ....................... 226,531,816
-------------
Government National Mortgage Association (GNMA) 9.6%
GNMA, Cap 10.00%, Margin 1.50% + CMT, Resets Annually, 7.00%, 1/20/24 ................. 6,533,547 6,704,531
GNMA, Cap 11.00%, Margin 2.50% + CMT, Resets Annually, 8.00%, 7/20/25 ................. 5,119,689 5,356,219
bGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 2/01/28 ................ 9,000,000 9,140,625
bGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 2/01/28 ................ 10,000,000 10,156,250
-------------
Total Government National Mortgage Association (Cost $31,012,618) ..................... 31,357,625
-------------
aRepurchase Agreement 6.4%
Joint Repurchase Agreement, 5.671%, 1/02/98, (Maturity Value $21,082,165)
(Cost $21,074,780)..................................................................... 21,074,780 21,074,780
-------------
BancAmerica Robertson Stephens
Barclays Capital Group, Inc.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Deutsche Morgan Grenfell/C.J. Lawrence, Inc.
Donaldson, Lufkins & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
UBS Securities, L.L.C.
Collateralized by U.S. Treasury Bills & Notes
Total Investments (Cost $341,872,615) 104.9%........................................... 344,212,993
-------------
Other Assets, less Liabilities (4.9)%.................................................. (16,141,673)
-------------
Net Assets 100.0%...................................................................... $328,071,320
=============
</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 December 31, 1997, all repurchase agreements held
by the Portfolio 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
Two Months Ended
December 31, 1997 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.................. .106 .616 .607 .625 .469 .368
Net realized and unrealized gain (loss) (.010) .090 .050 .120 (.340) .010
----------------------------------------------------------------
Total from investment operations........ .096 .706 .657 .745 .129 .378
Less distributions from net investment income (.106) (.616) (.607) (.625) (.469) (.368)
----------------------------------------------------------------
Net asset value, end of period.......... $9.94 $9.95 $9.86 $9.81 $9.69 $10.03
================================================================
Total return*........................... .97% 7.38% 6.91% 7.94% 1.32% 3.83%
Ratios/supplemental data
Net assets, end of period (000's)....... $21,019 $22,540 $20,534 $27,079 $41,619 $124,309
Ratio to average net assets:
Expenses............................... .25%** .25% .25% .25% .25% .11%**
Expenses excluding waiver
and payments by affiliate.............. .45%** .44% .47% .47% .43% .47%**
Net investment income.................. 6.44%** 6.20% 6.19% 6.36% 4.55% 4.76%**
Portfolio turnover rate................. 4.82% 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, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
Adjustable Rate Securities Portfolio AMOUNT VALUE
<S> <C> <C>
Adjustable Rate Mortgage Securities 77.2%
FNMA, Cap 12.65%, Margin 1.75% + NCI, Resets Monthly, 6.75%, 10/01/28 ................. $ 833,704 $ 847,219
FNMA, Cap 13.86%, Margin 1.84% + CMT, Resets Annually, 7.446%, 8/01/16 ................ 373,896 390,770
FNMA, Cap 14.68%, Margin 2.125% + 3CMT, Resets Every 3 Years, 8.606%, 8/01/22.......... 1,836,768 1,936,873
bGNMA, Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 6.50%, 2/01/28................. 1,000,000 1,015,625
Homeowners Federal Savings, Cap 13.00%,
Margin 1.75% + CMT, Resets Annually, 7.379%, 1/25/18................................... 861,588 874,512
PHMS, Cap 11.67%, Margin 2.67% + CMT, Resets Annually, 8.360%, 7/25/22 ................ 1,088,639 1,110,413
PHMS, Cap 12.02%, Margin 2.55% + CMT, Resets Annually, 8.118%, 4/25/22 ................ 510,008 512,240
RFC, Cap 10.00%, Margin 0.85% + COFI, Resets Monthly, 5.737%, 2/25/22.................. 803,843 802,461
RFC, Cap 11.46%, Margin 2.25% + CMT, Resets Annually, 7.755%, 11/25/22 ................ 1,070,569 1,093,654
RTC, Cap 12.39%, Margin 1.61% + 6 Month DR, Resets Semi-Annually, 6.886%, 1/25/25...... 1,123,854 1,123,854
RTC, Cap 13.82%, Margin 0.92% + 3CMT, Resets Every 3 Years, 7.075%, 4/25/22............ 1,199,500 1,199,876
RTC, Cap 14.69%, Margin 1.55% + 3CMT, Resets Every 3 Years, 7.567%, 6/25/22 ........... 1,428,116 1,414,728
RTC, Cap 16.48%, Margin NACR - 0.15%, Resets Annually, 7.523%, 7/25/20 ................ 1,015,048 1,018,221
Salomon Brothers Mortgage Securities, Cap 14.00%, Margin 0.96% + NACR,
Resets Annually, 8.06%, 10/25/16....................................................... 1,367,894 1,366,612
Saxon Mortgage Securities Corp., Cap 10.78%, Margin 2.78% + 6 Month
LIBOR, Resets Semi-Annually, 8.763%, 5/25/24 ......................................... 458,794 473,347
Travelers Mortgage Services, Inc., Cap 13.95%, Margin 2.25% + CMT,
Resets Annually, 7.799%, 12/25/18...................................................... 744,592 743,196
Western Federal Savings and Loan Association, Cap 13.00%,
Margin 1.80% + COFI, Resets Monthly, 6.664%, 3/25/19................................... 297,968 297,313
-------------
Total Adjustable Rate Mortgage Securities (Cost $16,377,982) .......................... 16,220,914
-------------
Fixed Rate Mortgage Securities 4.3%
Countrywide Mortgage-Backed Securities, Inc., Series 1994-I,
Class A8, 6.25%, 7/25/09 (Cost $887,211) .............................................. 912,299 900,522
-------------
Other Adjustable Rate Securities 4.6%
SBA, Cap 12.625%, Margin -0.125% + Prime, Resets Quarterly,
8.375%, 8/25/20 (Cost $973,493) ....................................................... 902,950 969,543
-------------
U.S. Government Securities 9.5%
U.S. Treasury Notes, 5.75%, 9/30/99 (Cost $1,999,160) ................................. 2,000,000 2,003,126
-------------
aRepurchase Agreement 8.6%
Joint Repurchase Agreement, 6.285%, 1/02/98, (Maturity Value $1,811,345)
(Cost $1,810,713)..................................................................... 1,810,713 1,810,713
-------------
BancAmerica Robertson Stephens
Barclays Capital Group, Inc.
BT Alex Brown, Inc.
Chase Securities, Inc.
CIBC Wood Gundy Securities Corp.
Deutsche Morgan Grenfell / C.J. Lawrence, Inc.
Donaldson, Lufkin & Jenrette Securities Corp.
Dresdner Kleinwort Benson, North America, L.L.C.
Greenwich Capital Markets, Inc.
Paribas Corp.
SBC Warburg Dillon Read, Inc.
UBS Securities, L.L.C.
Collateralized by U.S. Treasury Bills and Notes
Total Investments (Cost $22,048,559) 104.2% ........................................... 21,904,818
Other Assets, less Liabilities (4.2%).................................................. (885,556)
-------------
Net Assets 100.0%...................................................................... $21,019,262
=============
</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 December 31, 1997, all repurchase agreements held
by the Portfolio had been entered into on that date.
bSufficient collateral has been segregated for securities traded on a
when-issued or delayed basis.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Statements
Statements of Assets and Liabilities
December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
Assets:
Investments in securities:
<S> <C> <C>
Cost...................................................................... $341,872,615 $22,048,559
===============================
Value..................................................................... 344,212,993 21,904,818
Receivables:
Investment securities sold................................................ 1,406,077 1,120
Interest.................................................................. 2,315,128 151,204
-------------------------------
Total assets.............................................................. 347,934,198 22,057,142
-------------------------------
Liabilities:
Payables:
Investment securities purchased........................................... 19,335,465 1,016,340
Capital shares redeemed................................................... 441,547 10,066
Affiliates................................................................ 66,178 3,882
Other liabilities........................................................ 19,688 7,592
-------------------------------
Total liabilities......................................................... 19,862,878 1,037,880
-------------------------------
Net assets, at value..................................................... $328,071,320 $21,019,262
===============================
Net assets consist of:
Net unrealized appreciation (depreciation)............................... $2,340,378 $(143,741)
Accumulated net realized loss............................................ (137,121,151) (2,739,816)
Capital shares........................................................... 462,852,093 23,902,819
-------------------------------
Net assets, at value...................................................... $328,071,320 $21,019,262
===============================
Shares outstanding........................................................ 34,685,166 2,114,008
===============================
Net asset value and maximum offering price per share...................... $9.46 $9.94
===============================
(net asset value / shares outstanding)
</TABLE>
See notes to financial statements.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Statements (continued)
Statements of Operations
for the two months ended December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
<S> <C> <C>
Investment income:
Interest................................................................. $3,656,974 $242,851
===============================
Expenses:
Management fees (Note 3)................................................. 225,460 14,528
Professional fees........................................................ 10,340 601
Other.................................................................... 5,353 1,206
-------------------------------
Total expenses............................................................ 241,153 16,335
Expenses waived/paid by affiliate (Note 3)................................ (99,811) (7,217)
--------------------------------
Net expenses............................................................. 141,342 9,118
-------------------------------
Net investment income..................................................... 3,515,632 233,733
-------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments................................ 5,730 (10,569)
Net unrealized depreciation on investments............................... (725,857) (196)
--------------------------------
Net realized and unrealized loss.......................................... (720,127) (10,765)
--------------------------------
Net increase in net assets resulting from operations...................... $2,795,505 $222,968
===============================
</TABLE>
See notes to financial statements.
ADJUSTABLE RATE SECURITIES PORTFOLIOS
Financial Statements (continued)
Statements of Changes in Net Assets
for the two months ended December 31, 1997 (unaudited)
and the year ended October 31, 1997
<TABLE>
<CAPTION>
U.S. Government Adjustable Rate
Adjustable Rate Mortgage Portfolio Securities Portfolio
Two Months Year Two Months Year
Ended 12/31/97Ended 10/31/97 Ended 12/31/97Ended 10/31/97
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income......................... $ 3,515,632 $ 23,464,424 $ 233,733 $ 1,500,611
Net realized gain (loss) from investments..... 5,730 693,708 (10,569) 14,469
Net unrealized appreciation (depreciation)
on investments............................... (725,857) 3,675,679 (196) 260,606
-----------------------------------------------------------
Net increase in net assets resulting
from operations.............................. 2,795,505 27,833,811 222,968 1,775,686
Distributions to shareholders from:
Net investment income......................... (3,515,632) (23,464,424) (233,733) (1,500,611)
Capital share transactions (Note 2).......... (13,749,643) (68,259,294) (1,509,835) 1,730,540
-----------------------------------------------------------
Net increase (decrease) in net assets......... (14,469,770) (63,889,907) (1,520,600) 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................................. $328,071,320 $342,541,090 $21,019,262 $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 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 December 31, 1997, 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>
Two months ended December 31, 1997
Shares sold........................................ 1,906,505 $ 18,029,241 164,840 $ 1,638,115
Shares issued in reinvestment of distributions..... 372,032 3,515,634 23,526 233,735
Shares redeemed.................................... (3,734,342) (35,294,518) (340,261) (3,381,685)
------------------------------------------------------
Net decrease........................................ (1,455,805)$ (13,749,643) (151,895)$ (1,509,835)
=======================================================
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 trustees of the Trust are also officers 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 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
Advisers agreed in advance to waive management fees as noted in the Statement of
Operations.
At December 31, 1997, the shares of the Mortgage Portfolio were owned by the
following:
Percentage of
Shares Outstanding
NAME OWNED SHARES
Franklin Adjustable
U.S. Government Securities Fund..... 34,135,369 98%
Franklin Institutional Adjustable
U.S. Government Securities Fund..... 549,797 2%
3. TRANSACTIONS WITH AFFILIATES (cont.)
At December 31, 1997, the shares of the Securities Portfolio were owned by the
following:
PERCENTAGE OF
SHARES OUTSTANDING
NAME OWNED SHARES
- -------------------------------------------------------------------
Franklin Adjustable Rate Securities Fund 1,981,631 94%
Franklin Institutional Adjustable
Securities Fund...................... 130,844 6%
Franklin Resources, Inc............... 1,533 --
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 RATE ADJUSTABLE RATE
MORTGAGE PORTFOLIO SECURITIES 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
The cost of securities for income tax purposes is the same as that shown in the
investment portfolio.
At December 31, 1997, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes were as follows:
U.S. GOVERNMENT
ADJUSTABLE RATE ADJUSTABLE RATE
MORTGAGE PORTFOLIO SECURITIES PORTFOLIO
Investments at cost................. $341,872,615 $22,048,559
---------------------------
Unrealized appreciation............. $ 3,587,187 $ 76,356
Unrealized depreciation............. (1,246,809) (220,097)
--------------------------
Net unrealized appreciation
(depreciation)..................... $ 2,340,378 $ (143,741)
--------------------------
5. INVESTMENT TRANSACTIONS
Purchases and sales of securities (excluding short-term securities) for the
period ended December 31, 1997 were as follows:
U.S. GOVERNMENT
ADJUSTABLE RATE ADJUSTABLE RATE
MORTGAGE PORTFOLIO SECURITIES PORTFOLIO
Purchases.................. $19,106,314 $1,002,222
Sales...................... $28,112,209 $2,835,308
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 12/31/97
FNMA 69.0%
FHLMC 19.9%
GNMA 9.6%
Cash & Equivalents 1.5%
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 12/31/97.
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
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 6/30/97.
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
12/31/97 $ 1,383,266 $ 1,298,958 $ 1,390,823.69
CONTENTS
Shareholder Letter 1
Overview of the Economy 3
Franklin
Cash Reserves Fund 6
Performance Summary 8
Financial Highlights &
Statement of Investments 10
Financial Statements 12
Notes to
Financial Statements 15
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 semi-annual report for the Franklin Cash
Reserves Fund (the Fund) for the period ended December 31, 1997.
The Fund is a series of Franklin's Institutional Fiduciary Trust, which is
offered exclusively to qualified retirement plans and other institutional
investors, including corporations, banks, savings and loan associations, and
government entities.
While the economy during this period experienced strong growth coupled with
declining unemployment rates, the threat of inflation was mitigated by
increased productivity and the recent Asian economic crisis. Factors such as
these eliminated the need for policy actions by the Federal Reserve Board, as
the federal funds target rate remained unchanged during the period. Within
this environment, our managers adhered to a disciplined investment strategy,
enabling them to seek out attractive opportunities through a variety of
market conditions. We believe this approach benefits our shareholders in the
long run, and we will continue to make every effort to employ this strategy
going forward.
Thank you for your investment in the Franklin Cash Reserves Fund. We look
forward to serving your investment needs in the months and years ahead.
Sincerely,
Charles B. Johnson
Chairman of the Board
OVERVIEW OF THE ECONOMY
Strong economic growth coupled with mild inflation characterized most of the
period under review. Annualized real GDP growth through the last two quarters
of 1997 was 3.9%, a figure which is considerably higher than the Federal
Reserve Board's targeted long-term annualized growth rate of 2.5%.
Furthermore, as a direct result of the country's economic strength, the rate
of unemployment declined to 4.6%, reaching its lowest level in twenty-four
years. However, the Federal Reserve declined to alter its monetary policy in
the face of such blistering growth for a couple of reasons. The first is that
consumer prices, as measured by the Consumer Price Index, increased by only
1.7% in 1997, their lowest increase in eleven years. Secondly, the Asian
financial crisis in October prevented the Federal Reserve from taking any
steps which might have induced further volatility in the international
financial markets.
Looking forward, we believe the economy is in the later stages of the current
business cycle. Continued growth should be stimulated by higher private
consumption and increased capital spending, which could ultimately lead to
further wage inflation. However, we believe that any impact wages may have on
overall consumer prices should be mitigated by continued improvements in
manufacturing productivity, as well as by lower exports to Asia as a result
of the crisis in Asia. This being the case, we believe the Federal Reserve
will continue to wait on the sidelines and hold off on tightening its
monetary policy in order to assess the impact of these variables on economic
growth and inflation.
GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT
We will continue to invest the Portfolio's assets in securities that are
among the highest quality available to money market portfolios. Since the
Fund's objective is to provide shareholders with a high quality, conservative
investment, we do not invest in leveraged derivatives or other potentially
volatile securities that we believe involve undue risk.
Thomas J. Runkel, CFA
Portfolio Manager
Tom Runkel is a portfolio manager for Franklin's taxable money market funds.
He joined Franklin in 1983 and served as an equity and money market trader
from 1985 to 1989.
Mr. Runkel received a Bachelor of Science degree in political science from
the University of California at Davis and a Master of Business Administration
degree from Santa Clara University. He is a Chartered Financial Analyst (CFA).
GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT
FRANKLIN CASH RESERVES FUND
The Franklin Cash Reserves Fund's investment objective is to provide high
current income, consistent with capital preservation and liquidity. It seeks
to achieve this by investing all of its assets in The Money Market Portfolio,
whose investment objective is the same as the Fund's. The Portfolio, in turn,
invests in various money market instruments such as:
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 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.
The chart to the left illustrates the Portfolio's composition on December 31,
1997.
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.
Security Selection Criteria
Portfolio managers employ specific guidelines for determining buy-and-sell
opportunities. For corporate paper, the selection process generally includes
the following criteria:
o Issuer should have a long-term debt rating of "A" or higher from at least
two major credit rating agencies
o Cash flow from operations to short-term debt should be 100% or higher
o Short-term debt-to-capital ratio should be 15% or lower
o Issuer's standard deviation of cash flow growth should be 8.5 or lower
o Profitability ratios should be positive and trending higher
o Total debt-to-capital ratio should be 35% or lower
Through investing in a portfolio of high quality, short-term securities, the
Franklin Cash Reserves Fund is designed to provide a high level of credit
safety combined with a stable net asset value.2 As a result, investors often
use the Fund for qualified retirement assets, as well as monies held in
fiduciary, advisory, and custodial capacities. Its competitive yield has also
made it an attractive alternative cash management tool for corporations,
banks, savings and loan associations, and trust companies.3
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.
GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT
PERFORMANCE SUMMARY
During the second half of 1997, the Federal Reserve's target for the federal
funds rate remained unchanged, producing stable interest rates through the
reporting period. The relatively flat interest rate environment over the last
six months was reflected in the Fund's seven-day yield, which began the
period at 5.15% on June 30, 1997 and finished at 5.24%, as of December 31,
1997.4 This stable interest rate environment also allowed us to increase the
Fund's average weighted maturity, which rose from 39 days on June 30, 1997,
to 57 days on December 31, 1997.
Weekly seven-day yields for the reporting period are shown to the right.5 Of
course, past performance cannot guarantee future results.
4. Annualized and effective yields are for the seven-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 seven-day yields for the period
would have been 5.04% and 5.17%, 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 December 31, 1997, there were 188 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.
Performance Figures
Period Ended December 31, 1997
Seven-Day Current Yield6 5.24%
Seven-Day Effective Yield6 5.37%
Average Weighted Maturity 57 days
6. Annualized and effective yields are for the seven-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 seven-day yields for the period
would have been 5.04% and 5.17%, 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.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995
<S> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period......................... $1.00 $1.00 $1.00 $1.00
-----------------------------------------------
Income from investment operations - net investment income.... .026 .050 .052 .052
Less distributions from net investment income................ (.026) (.050) (.052) (.052)
------------------------------------------------
Net asset value, end of period............................... $1.00 $1.00 $1.00 $1.00
===============================================
Total return**............................................... 2.63% 5.11% 5.35% 5.34%
Ratios/supplemental data
Net assets, end of period (000's)............................ $101,170 $76,510 $30,381 $14,545
Ratios to average net assets:
Expenses1,2................................................. .50%*** .50% .49% .40%
Expenses excluding waiver and payments by affiliate1,2...... .76%*** .69% .73% .79%
Net investment income....................................... 5.20%*** 5.00% 5.10% 5.69%
</TABLE>
**Total return is not annualized.
***Annualized
1The expense ratio includes the Fund's share of the Portfolio's allocated
expenses.
2During the periods indicated, Advisers agreed in advance to waive a portion of
its management fees incurred by the Portfolio, and a portion of its
administration fees incurred by the Fund.
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
Mutual Funds 100.2%
The Money Market Portfolio (Note 1).............................................. 101,329,704$101,329,704
-------------
Total Investments (Cost $101,329,704) 100.2%..................................... 101,329,704
Other Assets, less Liabilities (.2)%............................................. (159,266)
-------------
Net Assets 100.0%................................................................ $101,170,438
=============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1997 (unaudited)
<S> <C>
Assets:
Investments in securities, at value and cost.................................... $101,329,704
Receivables for capital shares sold............................................. 96,927
-------------
Total assets..................................................................... 101,426,631
-------------
Liabilities:
Payables:
Investment securities purchased.................................................. 80,234
Affiliates....................................................................... 12,404
Shareholders..................................................................... 131,316
Other liabilities............................................................... 32,239
-------------
Total liabilities................................................................ 256,193
-------------
Net assets, at value (equivalent to $1.00 per share based on.................... $101,170,438
101,170,438 shares outstanding) =============
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements (continued)
Statement of Operations
for the six months ended December 31, 1997 (unaudited)
Investment income:
Dividends......................................................................... $2,710,084
Expenses:
Administrative fees (Note 3)...................................................... $122,987
Distribution fees (Note 3)........................................................ 127,092
Other............................................................................. 45,299
-------------
Total expenses..................................................................... 295,378
Expenses waived/paid by affiliate (Note 3)......................................... (122,987)
-------------
Net expenses...................................................................... 172,391
-------------
Net investment income.............................................................. 2,537,693
-------------
Net increase in net assets resulting from operations............................... $2,537,693
=============
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended December 31, 1997 (unaudited)
and the year ended June 30, 1997
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
December 31, 1997June 30, 1997
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income........................................................ $ 2,537,693 $ 2,961,172
Distributions to shareholders from net investment income.................... (2,537,693) (2,961,172)
Capital share transactions (Note 2)......................................... 24,660,221 46,129,160
----------------------------
Net increase in net assets................................................... 24,660,221 46,129,160
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period......................................................... 76,510,217 30,381,057
----------------------------
End of period............................................................... $101,170,438 $76,510,217
============================
</TABLE>
See notes to financial statements.
INSTITUTIONAL FIDUCIARY TRUST
FRANKLIN CASH RESERVES FUND
Notes to Financial Statements (unaudited)
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 seeks high
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 December 31, 1997, the Fund owns 5.19%
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
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 December 31, 1997, there were an unlimited number of shares authorized (no
par value). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
December 31, 1997 June 30, 1997
<S> <C> <C>
Shares sold........... $160,894,341 $222,797,987
Shares issued on reinvestment
of distributions..... 2,518,361 2,916,349
Shares redeemed....... (138,752,481) (179,585,176)
-----------------------------
Net increase ......... $ 24,660,221 $ 46,129,160
============================
</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 Fund's investment manager, principal underwriter, and transfer
agent, respectively, and of The Money Market Portfolio.
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 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 MONEY MARKET PORTFOLIOS
Financial Highlights
<TABLE>
<CAPTION>
The Money Market Portfolio
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------------------------------
Income from investment operations
- net investment income........... .028 .056 .055 .053 .033 .027
Less distributions from net investment income (.028) (.056) (.055) (.053) (.033) (.027)
--------------------------------------------------------------------
Net asset value, end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
====================================================================
Total return**..................... 2.81% 5.47% 5.66% 5.46% 3.33% 2.92%***
Ratios/supplemental data
Net assets, end of period (000's) $1,952,039 $1,773,546 $1,550,085 $1,305,574 $219,189 $222,358
Ratios to average net assets:
Expenses.......................... .15%*** .15% .15% .15% .15% .15%***
Expenses excluding waiver
and payments by affiliate........ .16%*** .16% .16% .16% .17% .17%***
Net investment income............. 5.55%*** 5.34% 5.50% 5.42% 3.25% 3.18%***
</TABLE>
*For the period July 28, 1992 (effective date) to June 30, 1993.
**Total return is not annualized.
***Annualized
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
The Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
Certificates of Deposit 41.5%
ABN-AMRO Bank NV, Chicago Branch, 5.77% - 6.14%, 5/01/98 - 6/17/98 ....... $ 50,000,000 $ 50,013,179
Australia & NZ Banking Group, New York Branch, 5.67%, 3/10/98 ............ 25,000,000 25,000,000
Bank of Montreal, Chicago Branch, 5.675% - 5.76%, 1/27/98 - 5/13/98 ...... 75,000,000 75,001,261
Bank of Nova Scotia, Portland Branch, 5.75%, 6/22/98 ..................... 25,000,000 25,000,000
Barclays Bank, Plc., New York Branch, 5.79%, 3/03/98 - 3/04/98 ........... 50,000,000 50,000,842
Bayerische Landesbank, New York Branch, 5.755%, 6/16/98 - 6/18/98 ........ 50,000,000 50,001,128
Bayerische Vereinsbank, New York Branch, 5.75% - 5.85%, 5/14/98 - 6/15/98 75,000,000 75,000,000
Commerzbank AG, New York Branch, 5.625% - 6.075%, 1/09/98 - 5/27/98 ...... 75,000,000 75,017,989
Credit Agricole, New York Branch, 5.70%, 5/11/98 ......................... 25,000,000 25,000,000
Deutsche Bank AG, New York Branch, 5.64%, 1/16/98 ........................ 25,000,000 25,000,000
Generale Bank, New York Branch, 5.76%, 2/25/98 ........................... 25,000,000 25,000,376
Morgan Guaranty & Trust, New York Branch, 5.94%, 3/20/98 ................. 25,000,000 25,000,000
Rabobank Nederland NV, New York Branch, 5.70%, 5/12/98 ................... 25,000,000 25,001,768
Royal Bank of Canada, New York Branch, 5.80% - 6.04%, 6/05/98 - 6/15/98 .. 30,000,000 29,996,573
Societe Generale, New York Branch, 5.69% - 5.80%, 1/09/98 - 3/19/98 ...... 55,000,000 54,993,402
Svenska Handelsbanken, New York Branch, 5.75% - 5.78%, 2/23/98 - 3/02/98 . 75,000,000 75,000,801
Swiss Bank Corp., New York Branch, 5.74% - 5.76%, 2/11/98 - 5/08/98 ...... 75,000,000 75,000,000
Westdeutsch Landesbank, New York Branch, 5.68%, 1/26/98 .................. 25,000,000 25,000,000
-------------
Total Certificates of Deposit (Cost $810,027,319)......................... 810,027,319
-------------
a Commercial Paper 37.6%
Abbey National North America, 5.55% - 5.60%, 1/21/98 - 4/27/98 ........... 75,000,000 74,389,583
ABN AMRO North America Finance, 5.54%, 4/30/98 ........................... 25,000,000 24,542,181
Associates Corp. of North America, 5.55% - 5.60%, 1/14/98 - 2/10/98 ...... 75,000,000 74,685,972
AT&T Corp., 5.53%, 2/03/98 ............................................... 25,000,000 24,873,271
BIL North America, Inc., 5.53%, 1/07/98 .................................. 25,000,000 24,976,958
CIESCO, L.P., 5.60%, 2/05/98 ............................................. 25,000,000 24,863,889
Commonwealth Bank of Australia, 5.495% - 5.54%, 2/18/98 - 5/07/98 ........ 55,000,000 54,295,450
Credit Agricole U.S.A., Inc., 5.55%, 1/30/98 ............................. 25,000,000 24,888,229
Den Danske Corp., Inc., 5.595%, 1/22/98 .................................. 25,000,000 24,918,406
Deutsche Bank Financial, Inc., 5.55%, 1/06/98 ............................ 25,000,000 24,980,729
General Electric Capital Corp., 5.55% - 5.69%, 1/08/98 - 2/12/98 ......... 75,000,000 74,699,985
Generale Bank, Inc., 5.51% - 5.54%, 2/13/98 - 2/19/98 .................... 50,000,000 49,647,076
Halifax Building Society, 5.53%, 1/05/98 ................................. 25,000,000 24,984,639
Merrill Lynch & Co., Inc., 5.60%, 1/28/98 ................................ 15,000,000 14,937,000
Metlife Funding, Inc., 5.68% - 5.72%, 2/06/98 - 2/26/98 .................. 50,000,000 49,636,111
Morgan Stanley Group, Inc., 5.60%, 2/09/98 ............................... 25,000,000 24,848,333
National Australian Funding (DE), Inc., 5.595%, 1/20/98 .................. 25,000,000 24,926,177
National Rural Utilities Cooperative Finance Corp., 5.54%, 1/15/98 ....... 25,000,000 24,946,139
Siemens Capital Corp., 5.59%, 6/25/98 .................................... 25,000,000 24,320,660
Toyota Motor Credit Corp., 5.61% - 5.70%, 2/27/98 - 6/19/98 .............. 30,000,000 29,296,479
Wool International, Inc., 5.49%, 2/12/98 ................................. 15,000,000 14,903,926
-------------
Total Commercial Paper (Cost $734,561,193) ............................... 734,561,193
-------------
Total Investments before Repurchase Agreements (Cost $1,544,588,512) ..... 1,544,588,512
-------------
a,dRepurchase Agreements 20.7%
BancAmerica Robertson Stephens, 5.40%, 1/02/98 (Maturity Value $65,019,500)
Collateralized by U.S. Treasury Notes ................................... $ 65,000,000 $ 65,000,000
Chase Securities, Inc., 5.40%, 1/02/98 (Maturity Value $65,019,500)
Collateralized by U.S. Treasury Notes.................................... 65,000,000 65,000,000
Dresdner Kleinwort Benson North America, L.L.C., 5.25%, 1/02/98
(Maturity Value $65,018,958)
Collateralized by U.S. Treasury Notes..................................... 65,000,000 65,000,000
J.P. Morgan Securities, Inc., 6.25%, 1/02/98 (Maturity Value $104,431,248)
Collateralized by U.S. Treasury Notes.................................... 104,395,000 104,395,000
Morgan Stanley & Co., Inc., 6.20%, 1/02/98 (Maturity Value $104,430,958)
Collateralized by U.S. Treasury Notes.................................... 104,395,000 104,395,000
-------------
Total Repurchase Agreements (Cost $403,790,000)........................... 403,790,000
-------------
Total Investments (Cost $1,948,378,512) 99.8%............................. 1,948,378,512
Other Assets, less Liabilities .2%........................................ 3,660,401
-------------
Net Assets 100.0% ........................................................ $1,952,038,913
=============
</TABLE>
aSecurities are traded on a discount basis; the rates shown are the discount
rates at the time of purchase by the Portfolio.
THE MONEY MARKET PORTFOLIOS
Financial Highlights
The U.S. Government Securities Money Market Portfolio
<TABLE>
<CAPTION>
Six Months Ended
December 31, 1997 Year Ended June 30,
(unaudited) 1997 1996 1995 1994 1993*
<S> <C> <C> <C> <C> <C> <C>
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------------------------------
Income from investment operations
- net investment income........... .027 .052 .054 .052 .032 .021
Less distributions from net investment income (.027) (.052) (.054) (.052) (.032) (.021)
---------------------------------------------------------------------
Net asset value, end of period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=====================================================================
Total return**..................... 2.76% 5.34% 5.55% 5.32% 3.25% 2.27%***
Ratios/supplemental data
Net assets, end of period (000's) $243,983 $258,629 $285,701 $474,654 $218,548 $310,319
Ratios to average net assets:
Expenses.......................... .15%*** .15% .15% .15% .15% .15%***
Expenses excluding waiver and
payments by affiliate............ .17%*** .16% .17% .16% .17% .18%***
Net investment income............. 5.44%*** 5.20% 5.45% 5.25% 3.20% 3.05%***
</TABLE>
*For the period July 28, 1992 (effective date) to June 30, 1993.
**Total return is not annualized.
***Annualized
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Statement of Investments, December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
The U.S. Government Securities Money Market Portfolio AMOUNT VALUE
<S> <C> <C>
a Government Securities 20.3%
U.S. Treasury Bills, 5.65%, 1/08/98 ...................................... $10,000,000 $ 9,989,014
U.S. Treasury Bills, 5.40%, 4/30/98 ...................................... 10,000,000 9,821,500
U.S. Treasury Notes, 5.25%, 7/31/98 ...................................... 10,000,000 9,979,308
U.S. Treasury Notes, 4.75%, 9/30/98 ...................................... 20,000,000 19,866,959
-------------
Total Government Securities (Cost $49,656,781)............................ 49,656,781
-------------
Repurchase Agreements 79.6%
BancAmerica Robertson Stephens, 6.40%, 1/02/98 (Maturity Value $10,003,556)
Collateralized by U.S. Treasury Notes.................................... 10,000,000 10,000,000
Barclays Capital Group, Inc., 6.50%, 1/02/98 (Maturity Value $10,003,611)
Collateralized by U.S. Treasury Notes.................................... 10,000,000 10,000,000
BT Alex Brown, Inc., 5.75%, 1/02/98 (Maturity Value $10,003,194)
Collateralized by U.S. Treasury Bills.................................... 10,000,000 10,000,000
Chase Securities, Inc., 6.10%, 1/02/98 (Maturity Value $10,003,389)
Collateralized by U.S. Treasury Notes.................................... 10,000,000 10,000,000
CIBC Wood Gundy Securities Corp., 6.45%, 1/02/98 (Maturity Value $10,003,583)
Collateralized by U.S. Treasury Notes.................................... 10,000,000 10,000,000
Deutsche Morgan Grenfell/C.J. Lawrence, Inc., 6.40%, 1/02/98 (Maturity Value $10,003,556)
Collateralized by U.S. Treasury Notes.................................... 10,000,000 10,000,000
J.P. Morgan Securities, Inc., 6.15%, 1/02/98 (Maturity Value $22,072,539)
Collateralized by U.S. Treasury Bills and U.S. Treasury Notes............ 22,065,000 22,065,000
J.P. Morgan Securities, Inc., 6.25%, 1/02/98 (Maturity Value $30,010,417)
Collateralized by U.S. Treasury Bills and U.S. Treasury Notes ........... 30,000,000 30,000,000
Merrill Lynch Government Securities, Inc., 6.00%, 1/02/98 (Maturity Value $10,003,333)
Collateralized by U.S. Treasury Notes ................................... 10,000,000 10,000,000
Morgan Stanley & Co., Inc., 6.20%, 1/02/98 (Maturity Value $52,082,933)
Collateralized by U.S. Treasury Bills ................................... 52,065,000 52,065,000
SBC Warburg Dillon Read, Inc., 6.50%, 1/02/98 (Maturity Value $10,003,611)
Collateralized by U.S. Treasury Notes ................................... 10,000,000 10,000,000
UBS Securities, L.L.C., 6.45%, 1/02/98 (Maturity Value $10,003,583)
Collateralized by U.S. Treasury Notes.................................... 10,000,000 10,000,000
-------------
Total Repurchase Agreements (Cost $194,130,000) .......................... 194,130,000
-------------
Total Investments (Cost $243,786,781) 99.9%............................... 243,786,781
Other Assets, less Liabilities .1% ....................................... 196,109
-------------
Net Assets 100.0% ........................................................ $243,982,890
=============
</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 Statements
Statements of Assets and Liabilities
December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
<S> <C> <C>
Assets:
Investments in securities, at value and cost $1,544,588,512 $ 49,656,781
Repurchase agreements, at value and cost........................ 403,790,000 194,130,000
Cash............................................................ 1,679 3,930
Receivables:
Capital shares sold............................................ 80,234 --
Interest....................................................... 8,993,889 496,074
------------------------------
Total assets..................................................... 1,957,454,314 244,286,785
==============================
Liabilities:
Payables:
Capital shares redeemed........................................ 5,165,275 257,698
Affiliates..................................................... 232,119 28,311
Distributions to shareholders................................... 3,711 --
Other liabilities............................................... 14,296 17,886
------------------------------
Total liabilities................................................ 5,415,401 303,895
------------------------------
Net assets, at value............................................. $1,952,038,913 $243,982,890
==============================
Shares outstanding............................................... 1,952,038,913 243,982,890
==============================
Net asset value per share........................................ $1.00 $1.00
==============================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
Statements of Operations
for the six months ended December 31, 1997 (unaudited)
<TABLE>
<CAPTION>
The U.S.
Government
Securities
The Money Money Market
Market Portfolio Portfolio
<S> <C> <C>
Investment income:
Interest...................................................................... $53,164,949 $7,232,180
--------------------------
Expenses:
Management fees (Note 3)...................................................... 1,410,043 195,260
Custodian fees................................................................ 9,612 5,461
Reports to shareholders....................................................... 21,824 4,192
Professional fees............................................................. 21,259 4,596
Trustees' fees and expenses................................................... 3,800 579
Other......................................................................... 29,506 10,841
--------------------------
Total expenses............................................................... 1,496,044 220,929
Expenses waived/paid by affiliate (Note 3)................................... (85,712) (25,457)
---------------------------
Net expenses................................................................... 1,410,332 195,472
--------------------------
Net investment income......................................................... 51,754,617 7,036,708
--------------------------
Net increase in net assets resulting from operations........................... $51,754,617 $7,036,708
==========================
</TABLE>
See notes to financial statements.
THE MONEY MARKET PORTFOLIOS
Financial Statements (continued)
Statements of Changes in Net Assets
for the six months ended December 31, 1997 (unaudited)
and the year ended June 30, 1997
<TABLE>
<CAPTION>
The U.S. Government Securities
The Money Market Portfolio Money Market Portfolio
Six Months Ended Year Ended Six Months Ended Year Ended
December 31, 1997June 30, 1997 December 31, 1997June 30, 1997
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................... $ 51,754,617 $ 90,724,056 $ 7,036,708 $ 14,032,778
Net realized gain (loss)
from investments ........................ -- (931) -- 3,978
-------------------------------------------------------------
Net increase in net assets
resulting from operations ................. 51,754,617 90,723,125 7,036,708 14,036,756
Distributions to shareholders from
net investment income .................... (51,754,617) (90,723,125)a (7,036,708) (14,036,756)b
Capital share transactions (Note 2) ....... 178,492,924 223,460,742 (14,646,287) (27,071,927)
--------------------------------------------------------------
Net increase (decrease) in net assets ...... 178,492,924 223,460,742 (14,646,287) (27,071,927)
Net assets (there is no undistributed net investment
income at beginning or end of period):
Beginning of period ....................... 1,773,545,989 1,550,085,247 258,629,177 285,701,104
-------------------------------------------------------------
End of period ............................. $1,952,038,913 $1,773,545,989 $243,982,890 $258,629,177
=============================================================
</TABLE>
aDistributions were decreased by a net realized loss from investments of $931.
bDistributions 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 (unaudited)
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 high 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
December 31, 1997, 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
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 December 31, 1997, 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
Six months ended
December 31, 1997
Shares sold ........ $2,732,924,579 $616,546,090
Shares issued in reinvestment
of distributions .. 51,752,178 7,036,446
Shares redeemed .... (2,606,183,833) (638,228,823)
------------------------------
Net increase (decrease) $ 178,492,924 $ (14,646,287)
===============================
Year ended June 30, 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.
3. TRANSACTIONS WITH AFFILIATES (cont.)
At December 31, 1997, the shares of The Money Market Portfolio were owned by the
following funds:
Percentage of
Outstanding
Shares Shares
Franklin Money Fund ........ 1,625,839,866 83.29%
Institutional Fiduciary Trust-
Money Market Portfolio .... 192,790,791 9.88%
Institutional Fiduciary Trust-
Franklin Cash Reserves Fund 101,329,704 5.19%
Franklin Templeton Money Fund Trust-
Franklin Templeton Money Fund II 32,078,552 1.64%
At December 31, 1997, 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 117,534,517 48.17%
Franklin Federal Money Fund 126,448,373 51.83%
4. INCOME TAXES
At June 30, 1997, The Money Market Portfolio had tax basis capital losses of
$3,560, which may be carried over to offset future capital gains. Such losses
expire in 2002.
At June 30, 1997, The Money Market Portfolio had deferred capital losses
occurring subsequent to October 31, 1996 of $1,161. For tax purposes, such
losses will be reflected in the year ending June 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
6/30/97-12/31/97.
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%
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 12/31/97
Certificates of Deposit 41.6%
Commercial Paper 37.7%
Repurchase Agreements 20.7%
GRAPHIC MATERIAL (3)
The bar chart shows the comparison between the Franklin Cash Reserves Fund's
total return of 5.19% and 16.87% for the one- and three-year periods ended
12/31/97 and the Lipper Institutional Money Market Funds Index's total return
of 5.33% and 17.83% for one- and three-year periods ended 12/31/97.
