FRANKLIN INVESTORS SECURITIES TRUST, N-30D, 1996-07-03

FRANKLIN INVESTORS SECURITIES TRUST
N-30D, 1996-07-03

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Table of Contents Page

Letter to Shareholders 1

Fund Reports

Franklin Global Government
Income Fund 2

Franklin Short-Intermediate U.S.
Government Securities Fund 9

Franklin Convertible
Securities Fund 13

Franklin Adjustable U.S.
Government Securities Fund 20

Franklin Equity Income Fund 25

Franklin Adjustable Rate
Securities Fund 32

Financial Statements 37

Notes to Financial Statements 59

LETTER TO SHAREHOLDERS

June 17, 1996

Dear Shareholder:

It is a pleasure to bring you the Franklin Investors Securities Trust
semi-annual report for the period ended April 30, 1996.

During the reporting period, economic stability, low interest rates and moderate
inflation contributed to strong performances for most financial markets. With a
keen eye on inflation during the six-month period, the Federal Reserve Board
(the "Fed") continued its effort to promote growth by lowering the federal funds
rate -- the interest rate banks charge each other for overnight loans. By the
end of April, the federal funds rate had been reduced to 5.25% -- 75 basis
points below its cyclical high of 6% in the second quarter of 1995.

A stronger-than-expected employment report, released in March, drove up interest
rates and caused temporary weakness in the financial markets. While inflation
remained in check, hopes for additional rate reductions dimmed as the economy
began to show signs of improvement. Long bond yields, which had fallen to a low
of 5.95% at year end, ended the period at 6.67%, and the Dow Jones Industrial
Average(R) was up 17% to 5569.08 on April 30, 1996, from 4755.48 on October 31,
1995.

Should inflation remain subdued, the Fed may be prompted to ease monetary policy
further, which may benefit equity and fixed-income markets.

The following pages contain specific information about each fund's performance.
While the funds have distinct investment objectives, the fundamental operating
principles remain the same: careful investment selection and constant
professional supervision.

As always, we appreciate your trust and support, and look forward to serving
your investment needs in the years ahead.

Sincerely,

Charles B. Johnson
Chairman
Franklin Investors Securities Trust

FRANKLIN GLOBAL GOVERNMENT INCOME FUND

You Fund's Objective:

Seeks a high level of current income consistent with preservation of capital,
with capital appreciation as a secondary consideration, through a portfolio of
domestic and foreign debt securities.*

During the reporting period, most of the global economies in which your fund
concentrated its investments boasted strong bond markets. Debt securities of
dollar-bloc countries, such as New Zealand and Australia, rallied along with the
U.S. markets when domestic interest rates declined in late 1995 and early 1996.
Among European countries, the Spanish, Italian and Swedish bond markets
exhibited the strongest performance.

The fund's investments in bonds issued by New Zealand and Australia recorded
positive total returns over the six-month reporting period, despite negative
repercussions from the recent upward spike in U.S. interest rates. Bond markets
in these countries responded to the U.S. sell-off, when investors were pressured
to sell in the face of rising U.S. interest rates. Although returns on these
countries' bonds were negative, based on local currencies, their net returns to
the fund were positive. This was a result of the favorable exchange rate
available with a strong U.S. dollar. In fact, currency returns relative to the
U.S. dollar for the six months ended April 30, 1996, were +4.24% in New Zealand
and +3.81% in Australia.

GRAPHIC MATERIAL 1 OMITTED - SEE APPENDIX AT END OF DOCUMENT

*The risks of investing in a global fund, such as currency fluctuation and
increased susceptibility to adverse economic, political or regulatory
developments, are described in the fund's prospectus.

We continued our conservative management of the fund during the reporting period
by shortening the fund's average maturity, purchasing bonds maturing in fewer
than five years. As bond markets continued to rally, we sold longer-maturity
bonds, and focused on shorter-maturity bonds in order to reduce interest-rate
risk. We also took advantage of market conditions to increase our holdings in
the Spanish, Swedish and Italian markets. These traditionally volatile markets
actually offered the least volatile investment opportunities in Europe over the
reporting period.

Our investments in Sweden and Spain responded positively to the economic and
political climates of those countries. Spain experienced a brief bond sell-off
following its elections in March, during which we took advantage of lower bond
prices to increase our holdings. The Spanish market recovered quickly, reaching
new highs in the equity and fixed-income markets. As a result, bond prices
rebounded, aiding the performance of our Spanish position.

Franklin Global Government Income Fund
Geographic Distribution
As a percentage of Total Net Assets

Country 10/31/95 4/30/96

Argentina 6.1% 11.1%

Australia 11.3% 11.6%

Canada 14.9% 13.9%

Denmark 6.3% 4.7%

France 4.7% 0.0%

Germany 12.7% 0.0%

India 0.5% 0.0%

Irish Republic 0.0% 1.1%

Italy 3.1% 11.4%

Mexico 3.2% 4.2%

New Zealand 2.0% 0.0%

South Africa 1.5% 1.3%

Spain 4.9% 9.5%

Sweden 0.0% 4.8%

Thailand 0.8% 0.9%

United Kingdom 0.0% 8.7%

United States 28.0% 15.5%

For a complete list of portfolio holdings, please see page 37 of this report.
Performance Summary

In Sweden, renewed hopes of continued fiscal responsibility restored confidence
in that country's markets, following the reelection of the Social Democratic
Party. The results of this election suggested that Sweden's government would
continue its disciplined fiscal management, attempting to keep the country's
economy stable, and the bond market rallied in response.

This discussion reflects the strategies we employed for the fund during the past
six months, and includes our opinions for that period. Since economic and market
conditions are constantly changing, our strategies, and our evaluations,
conclusions and decisions regarding portfolio holdings will change as new
circumstances arise. Although past performance of a specific investment or
sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase for the fund.

We intend to maintain our current emphasis on dollar-bloc and major European
countries, and we anticipate continued strength in these areas. While the
sell-off of U.S. bonds negatively affected some of these markets, we view that
phenomenon as a temporary aberration, and we believe rates should stabilize.
Furthermore, we feel rates will continue to drop in Germany, helping to
strengthen the other European bond markets.

Class I
(Class II Performance Summary starts on page 7.)

The Franklin Global Government Income Fund's Class I share price, as measured by
net asset value, increased $0.01, from $8.31 on October 31, 1995, to $8.32 on
April 30, 1996.

At the end of the reporting period, the distribution rate of the fund's Class I
shares was 6.90%, based on an annualization of the current monthly dividend of
five cents ($0.05) per share and the maximum offering price of $8.69 per share
on April 30, 1996.

The Franklin Global Government Income Fund's Class I shares recorded a
cumulative total return of +3.77% for the six months ended April 30, 1996.
Cumulative total return measures the change in value of an investment over the
period indicated, assuming reinvestment of dividends and any capital gains. It
excludes the maximum initial sales charge, and past performance is not
predictive of future results.

Franklin Global Government Income Fund
Class I
Dividend Distributions 11/01/95 - 4/30/96*

Dividend
Month per Share

November 5.0 cents

December 5.0 cents

January 5.0 cents

February 5.0 cents

March 5.0 cents

April 5.0 cents

Total 30.0 cents

*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all accrued income earned by
the fund during the reporting period.

Franklin Global Government Income Fund

Class I
Periods ended April 30, 1996

Since
Inception
1-Year 5-Year (3/15/88)

Cumulative Total Return1 12.09% 41.94% 80.85%
Average Annual Total Return2 7.33% 6.34% 6.99%

Distribution Rate3 6.90%
30-Day Standardized Yield4 7.89%

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the current maximum 4.25% initial
sales charge. See Note below.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the current, maximum 4.25%
initial sales. See Note below.

3. Distribution rate is based on an annualization of the current 5.0 cent per
share monthly dividend and the maximum offering price of $8.69 on April 30,
1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.

Past expense reductions by the fund's manager increased the fund's total
returns.

Performance Summary

Class II

The Franklin Global Government Income Fund's Class II share price, as measured
by net asset value, was $8.31 on October 31, 1995, and finished the six-month
period unchanged at $8.31 on April 30, 1996.

At the end of the reporting period, the distribution rate of the fund's Class II
shares was 6.54%, based on an annualization of the current monthly dividend of
4.57 cents ($0.0457) per share and the maximum offering price of $8.39 per share
on April 30, 1996.

The Franklin Global Government Income Fund's Class II shares recorded a
cumulative total return of +3.37% for the six months ended April 30, 1996.
Cumulative total return measures the change in value of an investment over the
period indicated, assuming reinvestment of dividends and any capital gains. It
excludes any sales charges, and past performance is not predictive of future
results.

Franklin Global Government Income Fund
Class II
Dividend Distributions 11/01/95 - 4/30/96**

Dividend
Month per Share

November 4.70 cents

December 4.70 cents

January 4.60 cents

February 4.57 cents

March 4.57 cents

April 4.57 cents

Total 27.71 cents

**The Class II shares dividend change in January reflects the reconciliation of
the 12b-1 differential between Class I and Class II shares.

Franklin Global Government Income Fund

Class II
Period ended April 30, 1996

Since
Inception
(5/01/95)

Cumulative Total Return1 11.39%
Average Annual Total Return2 9.17%

Distribution Rate3 6.54%
30-Day Standardized Yield4 7.58%

1. Cumulative total return measures the change in value of an investment over
the period indicated and does not include the 1.0% initial sales charge and the
1.0% Contingent Deferred Sales Charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.

2. Average annual total return measures the change in value of an investment
since inception and includes the 1.0% initial sales charge and the 1.0% CDSC
applicable to shares redeemed within the first 18 months of investment.

3. Distribution rate is based on an annualization of the current 4.57 cent per
share monthly dividend and the offering price of $8.39 on April 30, 1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND

Your Fund's Objective:

Seeks to provide investors with a high level of current income, while seeking to
preserve shareholders' capital, by investing primarily in U.S. government
securities with maturities between two and five years.

Interest-rate fluctuations during the last six months directly affected the
government debt securities in which your fund invests. The cautious investment
strategies we employed in our management of this conservative fund enabled us to
pay out consistently high income, while assuming low risk, despite sharp swings
in interest rates.

When the Federal Reserve Board lowered the federal funds rate (the interest rate
banks charge each other for overnight loans) in December 1995 and February 1996,
yields on 1-year Treasury securities declined to 4.90% in January 1996, from
5.36% in November 1995. Five-year Treasury yields declined to 5.25% from 5.53%
during the same period.* This drop in yields served to raise the value of
T-Bills and T-Notes issued with the higher yields available earlier in the
period. As you may know, when interest rates drop, the values of debt securities
rise, so this was generally good news for the fund.

When the Commerce Department released stronger-than-expected employment reports
in March and April, however, fear of inflation, along with the lack of a
balanced federal budget, doused hopes of further interest rate decreases. As a
result, yields on 1-year T-Bills and 5-year T-Notes reversed their earlier
trends, finishing the reporting period at 5.62% and 6.40%, respectively.*

*Source: Micropal

In response to the jump in Treasury yields, we purchased securities with longer
maturities, increasing the fund's average maturity to 2 years and 4 months on
April 30, 1996, from 2 years on October 31, 1995. Lengthening the average
maturity allowed us to lock in the higher yields.

The conservative, "plain vanilla" investment strategy we employ in the
management of this fund involves investing solely in U.S. Treasury securities.
These bonds are backed by the full faith and credit of the U.S. government
regarding timely payment of principal and interest, which offers a high degree
of credit safety.+ The fund maintained its "AAAf" rating, the highest mutual
fund rating possible, from Standard & Poor's.++

+Individual securities owned by the fund, but not shares of the fund, are
guaranteed by the U.S. government as to timely payment of principal and
interest.

++The rating reflects Standard & Poor's assessment of the overall credit rating
of the fund's portfolio, based primarily on the fund's stated objectives and
policies. It considers, for example, the credit quality of portfolio investments
and management. The rating does not reflect the yield or market price of the
fund's shares or approval by Standard & Poor's, and is subject to change.

We will continue to manage the fund conservatively for high current income and
preservation of capital. We feel the rate of economic growth is the most
important factor currently affecting interest rates. The recent interest rate
increases should serve to slow consumer activity, and we anticipate rates will
stabilize at or near current levels as a result. A moderate-growth, stable
interest-rate environment should benefit U.S. Treasury securities and the fund
by providing attractive yields relative to price. Should rates decline,
Treasuries will appreciate in value, which could result in an increased share
price for the fund.

Performance Summary

The Franklin Short-Intermediate U.S. Government Securities Fund's share price,
as measured by net asset value, decreased $0.12, from $10.35 on October 31,
1995, to $10.23 on April 30, 1996.

At the end of the reporting period, your fund's distribution rate was 5.39%,
based on an annualization of the current monthly dividend of 4.7 cents per share
and the maximum offering price of $10.47 on April 30, 1996.

At the end of the six-month reporting period, your fund recorded a cumulative
total return of +1.56%. Cumulative total return measures the change in value of
an investment over the period indicated, assuming reinvestment of dividends and
capital gains, if any, and excludes the maximum initial sales charge. Past
performance is not predictive of future results.

Franklin Short-Intermediate
U.S. Government Bond Fund
Dividend Distributions 11/01/95 - 4/30/96*

Dividend
Month per Share

November 4.7 cents

December 4.7 cents

January 4.7 cents

February 4.7 cents

March 4.7 cents

April 4.7 cents

Total 28.2 cents

Franklin Short-Intermediate U.S. Government Securities Fund

Periods ended April 30, 1996

Since
Inception
1-Year 5-Year (4/15/87)

Cumulative Total Return1 6.33% 35.94% 86.25%
Average Annual Total Return2 3.98% 5.85% 6.84%

Distribution Rate3 5.39%
30-Day Standardized Yield4 5.05%

1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 2.25% initial
sales charge. See Note below.

2. Average annual total returns represent the average annual change in value of
an investment over the specified periods. The figures include the current,
maximum 2.25% initial sales charge. See Note below.

3. Distribution rate is based on an annualization of the fund's current 4.7 cent
per share monthly dividend and the maximum offering price of $10.47 on April 30,
1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

Note: Prior to May 1, 1994, the fund reinvested dividends at the offering price.
Thus, actual total returns for purchasers of shares during that period would
have been somewhat different than noted above. Effective May 1, 1994, the fund
eliminated the sales charge on reinvested dividends and implemented a plan of
distribution under Rule 12b-1, which will affect future performance.

Past expense reductions by the fund's manager increased the fund's total
returns.

FRANKLIN CONVERTIBLE SECURITIES FUND

Your Fund's Objective:

Seeks to maximize total return consistent with reasonable risk through a
portfolio of convertible securities.

Despite a volatile interest rate environment in the last six months, we worked
to maximize gains and generate a strong total return. Class I shares posted a
cumulative total return of +11.79% for the six-month period ended April 30,
1996, as discussed in the Performance Summary on page 16.

While we generally choose securities based on their perceived value and not on
economic factors (a "bottom-up" approach), we strengthened the fund by reducing
interest-rate risk in the portfolio during the reporting period. For example, we
reduced our exposure to the most interest-rate sensitive issues as well as those
in interest-rate sensitive sectors, such as housing and domestic financial
services. We sold Beazer Homes USA (housing), and eliminated our holdings in
Mutual Risk Management and Allstate Corp., both in the financial services
sector.

GRAPHIC MATERIAL 2 OMITTED - SEE APPENDIX AT END OF DOCUMENT

On the other hand, we found good value in some of the more economically
sensitive sectors. We initiated positions in Cooper Industries (industrial),
Whirlpool Corp. (home appliance), Youth Services International (commercial
services), and U.S. Office Products (retail). The pricing of these securities
allowed us to capture significant equity upside potential (upward price
movement) while reducing downside risk (the estimate that a security will
decline in value, and the extent of the decline). The Whirlpool convertible bond
was particularly attractive. This issue included a provision that basically
allows us to sell the security back to Whirlpool at roughly our purchase price.
Should its stock value drop, our losses are minimized. And if the stock
appreciates as we expect, we participate in nearly all of the gain.

This attractive structure exemplifies the favorable risk/reward profile of the
fund's securities. Strategically, we attempt to strike a balance between an
issue's potential reward and its possible downside risk. If an issue's price
dramatically rises, for instance, we may find that the security no longer meets
our risk/reward criteria. In that case, we'll move to sell the security.

Franklin Convertible Securities Fund
Top Five Holdings on 4/30/96
Based on Total Net Assets

Company % of Total
Industry Net Assets

Dovatron International Inc. 3.92%
Electronics

Triathalon Broadcasting 2.95%
Broadcast/Media

All American Communications 2.52%
Broadcast/Media

Liberty Property Trust 2.38%
REIT

HFS, Inc. 2.10%
Lodging

For a complete list of portfolio holdings, please see page 41 of this report.
Performance Summary

Youth Services International and U.S. Office Products together provided the
largest gains in the portfolio during the last part of the reporting period. We
purchased U.S. Office Products in February and, by April 30, had gained 28% in
capital appreciation. Similarly, Youth Services climbed 72%, excluding dividend
income, to close at $188 on April 30. Our per share cost in February for this
issue was roughly $109.

In addition to increasing our weighting in economically sensitive issues, we
increased our weighting in international securities. We added to our positions
in Compania de Telefono de Chile (long distance/ telecommunications), Mitsubishi
Bank (financial services), and Peregrine Investment Finance (financial
services).

Not all of our securities performed up to our expectations during the reporting
period, particularly our holdings in real estate investment trusts (REITs) and
technology. REITs (6.8% of total net assets) underperformed primarily as a
result of the low-inflation environment that characterized the period under
review. Still, these companies provided significant income advantages for the
fund. Technology securities were hit hard and during the fourth quarter of 1995
the sector lost some of the gains made earlier in the year. Altera Corp., for
example, was up significantly, but experienced a slow down in orders and the
stock sold off -- having little effect on the fund's overall performance.

Convertible securities participate in the growth potential of their underlying
common stock, provide downside protection when the stock is declining, and
current income when the stock's movement is flat. We believe that convertible
securities will continue to be attractive investments as they generally offer a
less volatile means of participating in the stock market.

Class I

(Class II Performance Summary starts on page 18.)

Your fund's Class I share price, as measured by net asset value, increased
$0.45, from $12.73 on October 31, 1995, to $13.18 on April 30, 1996.

In addition to dividend income, Class I shares paid out 57.7 cents ($0.577) per
share in short-term capital gains, and 10.2 cents ($0.102) per share in
long-term capital gains. Based on the current monthly dividend of 5.0 cents
($0.05) per share and the maximum offering price of $13.80 on April 30, 1996,
the fund's distribution rate was 4.35%. Distributions will vary depending on
income earned by the fund and any profits realized from the sale of securities
in the portfolio. Past performance is not predictive of future results.

For the six-month period ended April 30, 1996, your fund's Class I shares
reported a cumulative total return of +11.79%. Cumulative total return measures
the change in value of an investment over the periods indicated, and does not
include the maximum 4.5% initial sales charge.

Franklin Convertible Securities Fund
Class I
Dividend Distributions 11/01/95 - 4/30/96

Dividend
Month per Share

November 5 cents

December 5 cents

January 5 cents

February 5 cents

March 5 cents

April 5 cents

Total 30 cents

Franklin Convertible Securities Fund

Class I
Period ended April 30, 1996

Since
Inception
1-Year 5-Year (04/15/87)

Cumulative Total Return1 24.02% 109.03% 167.35%
Average Annual Total Return2 18.48% 14.84% 10.90%

Distribution Rate3 4.35%
30-Day Standardized Yield4 3.18%

1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.5% initial sales charge.
See Note below.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.5% initial
sales charge. See Note below.

3. Distribution rate is based on an annualization of the current 5.0 cent per
share monthly dividend and the maximum offering price of $13.80 on April 30,
1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

Note: Prior to July 1, 1994, shares were offered at a lower initial sales
charge, with dividends reinvested at the offering price. Thus, actual total
returns for purchasers of shares during that period would have been somewhat
different than noted above. Effective May 1, 1994, the fund eliminated the sales
charge on reinvested dividends and implemented a plan of distribution under Rule
12b-1, which affects subsequent performance. All total return calculations
assume reinvestment of dividends and capital gains at net asset value and
reflect 12b-1 fees from the date of the plan's implementation. Your investment
return and principal value will fluctuate with market conditions, and you may
have a gain or loss when you sell your shares. Past performance is not
predictive of future results.

Past expense reductions by the fund's manager increased the fund's total
returns.

The Franklin Convertible Securities Fund Class I made per share distributions
derived from net long-term capital gain of $0.102 per share on December 29,
1995. The fund hereby designates such distributions as capital gain dividends
per Section 852 (b)(3) of the Internal Revenue Code.

Performance Summary

Class II

Your fund's Class II share price, as measured by net asset value, increased
$0.44, from $12.72 on October 31, 1995, to $13.16 on April 30, 1996.

In addition to the dividend income, Class II shares paid out 57.7 cents ($0.577)
per share in short-term capital gains, and 10.2 cents ($0.102) per share in
long-term capital gains. Based on the current monthly dividend of 4.53 cents
($0.0453) per share and the offering price of $13.29 on April 30,1996, the
distribution rate was 4.09%. Distributions will vary depending on income earned
by the fund and any profits realized from the sale of securities in the fund's
portfolio. Past performance is not predictive of future results.

For the six-month period ended April 30, 1996, your fund's Class II shares
reported a cumulative total return of +11.47%. Cumulative total return measures
the change in value of an investment over the periods indicated and does not
include sales charges.

Franklin Convertible Securities Fund
Class II
Dividend Distributions 11/01/95 - 4/30/96

Dividend
Month per Share

November 4.50 cents

December 4.50 cents

January 4.50 cents

February 4.56 cents

March 4.55 cents

April 4.53 cents

Total 27.14 cents

Franklin Convertible Securities Fund

Class II
Period ended April 30, 1996

Since
Inception
(10/01/95)

Cumulative Total Return1 9.30%
Aggregate Total Return2 7.23%

Distribution Rate3 4.09%
30-Day Standardized Yield4 2.56%

1. Cumulative total return measures the change in value of an investment over
the period indicated and does not include the 1.0% initial sales charge or the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.

2. Aggregate total return measures the change in value of an investment since
the inception date and includes the 1.0% initial sales charge and 1.0% CDSC,
applicable to shares redeemed within the first 18 months of investment. Since
Class II shares have existed for less than one year, average annual total
returns are not provided.

3. Distribution rate is based on an annualization of the current 4.53 cent per
share monthly dividend and the offering price of $13.29 on April 30, 1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Your investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.

The Franklin Convertible Securities Fund Class II made per share distributions
derived from net long-term capital gain of $0.102 per share on December 29,
1995. The fund hereby designates such distributions as capital gain dividends
per Section 852 (b)(3) of the Internal Revenue Code.

FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

Your Fund's Objective:

Seeks to provide a high level of current income consistent with lower volatility
of principal, by investing in a portfolio consisting primarily of
adjustable-rate, U.S. government agency-guaranteed, mortgage-backed securities.*

*Individual securities in the underlying portfolio, but not shares of the fund,
are guaranteed by the U.S. government, its agencies or instrumentalities, as to
timely payment of principal and interest. The Franklin Adjustable U.S.
Government Securities Fund enjoyed strong performance over the six-month period
ended April 30, 1996. The fund, as shown in the chart to the right, generated a
distribution rate of 6.05%, surpassing the 5.62% yield of the one-year U.S.
Treasury bill.

A combination of slow economic growth and low inflation prompted the Federal
Reserve Board (the "Fed") to lower the federal funds rate -- the interest rate
banks charge each other for overnight loans -- twice during the reporting period
in an effort to spur economic activity. This action triggered declines in other
interest rates, including long-term rates.

GRAPHIC MATERIAL 3 OMITTED - SEE APPENDIX AT END OF DOCUMENT

Recently, however, some market indicators, such as stronger-than-expected
employment reports, point to a strengthening economy and have convinced many
market participants that the Fed has finished its rate-easing for the present.
Interest rates rose slightly and bond prices were pushed down in March and
April.

Prices of adjustable rate mortgage-backed securities (ARMs) moved modestly over
the reporting period. ARMs have adjustable interest payments (also known as
"coupons") that adjust periodically within preset limits to reflect current
rates. These coupons, which can often adjust to higher rates and compensate for
the negative effects these rates have on the value of most bonds, usually enable
ARMs to have greater price stability than fixed-rate securities. Future interest
rate changes in the nearterm will likely occur within the preset limits of ARMs,
and the securities should continue to adjust accordingly.

Of some concern in a low or declining interest rate environment is prepayment
risk. As interest rates drop, it is likely that homeowners will try to replace
their adjustable-rate mortgages -- prepaying them -- with competitive,
fixed-rate loans. For investors in ARMs, such prepayment brings the risk of
reducing anticipated future income streams. In an effort to reduce this risk, we
have maintained an overweighting in seasoned, nonconvertible ARMs, which are
less likely to experience high levels of prepayment.

Your fund invests in an underlying portfolio consisting primarily of ARMs or
other securities collateralized by, or representing an interest in, mortgages
issued or guaranteed by the U.S. government, its agencies or
instrumentalities.** These include obligations of the Federal National Mortgage
Association (FNMA, or Fannie Mae), the Federal Home Loan Mortgage Corporation
(FHLMC, or Freddie Mac), and the Government National Mortgage Association (GNMA,
or Ginnie Mae). These securities retain a high credit quality and have earned
the fund a "AAAf" rating -- the highest mutual fund rating possible -- from
Standard & Poor's Corporation.+

**The fund invests a substantial amount of its assets in the U.S. Government
Adjustable Rate Portfolio, whose investment objective is the same as that of the
fund. Individual securities in the underlying portfolio, but not shares of the
fund, are guaranteed by the U.S. government, its agencies or instrumentalities.

+The rating reflects Standard & Poor's assessment of the overall credit quality
of the fund's portfolio, based primarily on the fund's state objectives and
policies. It considers, for example, the credit quality of portfolio investments
and management. The rating does not reflect the yield or market price of the
fund's shares or approval by Standard & Poor's and is subject to change.

Going forward, we anticipate slow growth and low inflation. This should lead to
stable, or slightly lower, interest rates and subdued interest rate volatility
- -- both of which should benefit ARMs securities in general. Our efforts continue
to focus on stability of principal while maintaining a yield that is competitive
with short-term investment alternatives. As such, we are actively positioning
the fund to perform well under these circumstances.

Performance Summary

The Franklin Adjustable U.S. Government Securities Fund's share price, as
measured by net asset value, declined $0.03, from $9.34 on October 31, 1995, to
$9.31 on April 30, 1996.

At the end of the reporting period, your fund's distribution rate was 6.05%,
based on the annualization of the current monthly dividend of 4.8 cents ($0.048)
per share and the maximum offering price of $9.52 on April 30, 1996. Dividends
will vary based on the earnings of the fund's portfolio, and past distributions
are not predictive of future results.

The Franklin Adjustable U.S. Government Securities Fund produced a cumulative
total return of +2.71% for the six-month period ended April 30, 1996. Total
return measures the change in value of an investment, assuming reinvestment of
dividends, and does not include the maximum initial sales charge. Past
performance is not predictive of future results.

Franklin Adjustable
U.S. Government Securities Fund
Dividend Distributions 11/01/95 - 4/30/96

Dividend
Month per Share

November 4.8 cents

December 4.6 cents

January 4.6 cents

February 4.6 cents

March 4.6 cents

April 4.8 cents

Total 28.0 cents

We continue to emphasize a long-term investment approach and encourage
shareholders to do the same. While the fund may experience some occasional
short-term volatility, its managers anticipate rewarding performance over the
long term.

Franklin Adjustable U.S. Government Securities Fund

Periods ended April 30, 1996

Since
Inception
1-Year 5-Year (04/15/87)

Cumulative Total Return1 7.02% 20.50% 60.94%
Average Annual Total Return2 4.64% 3.33% 5.45%

Distribution Rate3 6.05%
30-Day Standardized Yield4 5.87%

1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 2.25% initial sales charge.
See Note below.

2. Average annual total return measures the average annual change in value of an
investment over the specified periods and includes the maximum 2.25% initial
sales charge. See Note below.

3. Based on an annualization of the fund's current 4.8 cent per share monthly
dividend and the maximum offering price of $9.52 on April 30, 1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

Note: All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.

Franklin Advisers, Inc., the fund's underlying administrator and the manager of
the fund's underlying portfolio, is voluntarily waiving a portion of its fees,
which reduces expenses and increases yield, total return and distribution rate
to shareholders. Without these reductions, the fund's total return and
distribution rate would have been lower, and yield for the period would have
been 5.38%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.

FRANKLIN EQUITY INCOME FUND

Your Fund's Objective:

Seeks to maximize total return, emphasizing high current income and capital
appreciation, consistent with reasonable risk, through a portfolio of common
stocks with above-average yields.

Surprising economic and corporate developments unfolded during the six-month
period ended April 30, 1996. The last three months of the period can be
considered, in many respects, a direct opposite of the first three months.
Interest rates continued their downward trend into late 1995 amid signs of
moderating corporate earnings and generally weak economic conditions worldwide.
This slide came to an abrupt halt when stronger-than-expected leading economic
indicators, such as U.S. employment figures and rising prices of certain
commodities -- such as gold, oil, and grains -- drove interest rates upward in
February, and continued through the end of the reporting period.

Franklin Equity Income Fund
Portfolio Breakdown
Based on Total Net Assets

10/31/95 4/30/96

Common Stocks 68.3% 78.6%

Convertible Securities 9.6% 8.5%

Cash & Equivalents 22.1% 12.9%

This volatile period provided us the opportunity to employ new investment ideas
and make adjustments to existing positions. Our strategy has always been to buy
stocks when they are out of favor and represent bargains based on their
longer-term prospects. We took advantage of market volatility and added to our
common stock positions, which now comprise over 78% of total net assets, up from
68% six months ago. Convertible securities remain relatively unchanged at
approximately 8% of total net assets, while we reduced our cash position by
investing, lowering it to 12.9% on April 30, 1996, from slightly more than 22%
on October 31, 1995.

One area that drew our interest earlier this year was the basic materials
sector, most notably forest/paper products and steel companies. Although
fundamentals are weak in the near term for these industries, the stock prices of
many industry leaders have been extremely depressed and their long-term growth
potential is excellent in our opinion. Recent new investments in this area
include Union Camp, Weyerhaeuser and British Steel. Investments in the basic
materials sector comprised 14.1% of the fund's total net assets on April 30,
1996, up from 11.1% six months ago.

We continued to find excellent values in the electric utilities group. These
stocks performed well for the fund in late 1995, but their performance has been
adversely affected thus far in 1996 due to their sensitivity to higher interest
rates. The fund took advantage of specific weaknesses in these stocks to add to
existing holdings in Oklahoma Gas & Electric and Central & Southwest.

Franklin Equity Income Fund
Top 10 Holdings on 4/30/96
Based on Total Net Assets

Company % of total
Industry net assets

Atlantic Richfield Co. 2.31%
Oil

Philip Morris Cos., Inc. 2.13%
Tobacco

Texaco, Inc. 2.09%
Oil

Southern New England
Telecommunications Corp. 2.04%
Utilities -- Telephone

Dow Chemical Co. 1.98%
Chemicals

Central & Southwest Corp. 1.98%
Utilities -- Electric

Dominion Resources, Inc. 1.97%
Utilities -- Electric

Dun & Bradstreet Corp. 1.96%
Publishing

YPF Sociedad Anonima, ADR 1.95%
Oil

NYNEX Corp. 1.91%
Utilities -- Telephone

For a complete list of portfolio holdings, please see page 48 of this report.
Performance Summary

We also initiated new positions in Pacific Gas & Electric and Public Service
Enterprises, the largest electric utility in New Jersey. With these purchases,
17.1% of the portfolio's total net assets were in electric utilities at the end
of the reporting period, compared with 13.8% on October 31, 1995.

The energy sector remained the fund's largest investment group, representing
over 15% of total net assets on April 30, 1996. During the period, we initiated
positions in Amoco and Royal Dutch, and added to industry leaders such as
Chevron, Atlantic Richfield, and YPF Sociedad Anonima. We believe these
well-managed, financially strong companies will benefit from a worldwide boost
in energy product consumption in the years ahead.

We maintain a long-term perspective when managing the fund and will continue to
take advantage of investment opportunities as they arise in the months ahead.

This discussion reflects the strategies we employed for the fund and includes
our opinions as of the close of the reporting period. Since economic and market
conditions are constantly changing, our strategies, evaluations, conclusions and
decisions regarding portfolio holdings may change in light of new circumstances.
Although past performance of a specific investment or sector cannot guarantee
future performance, such information can be useful in analyzing securities we
purchase for the fund.

Class I
(Class II Performance Summary begins on page 30.)

Your fund's Class I share price, as measured by net asset value, increased
$0.78, from $15.19 on October 31, 1995, to $15.97 on April 30, 1996.

In addition to the dividend income, your fund's Class I shares paid out 2.51
cents ($0.0251) per share in a special year-end income distribution, a
short-term capital gain of 13.3 cents ($0.133) per share, and a long-term
capital gain of 26.6 cents ($0.266) per share. Based on the current monthly
dividend of 5.2 cents per share and the maximum offering price of $16.72 on
April 30, 1996, the fund's distribution rate was 3.73%. Distributions will vary
depending on income earned by the fund and any profits realized from the sale of
securities in the fund's portfolio. Past performance is not predictive of future
results.

Franklin Equity Income Fund
Class I
Dividend Distributions 11/01/95 - 4/30/96

Dividend
Month per Share

November 5.2 cents

December 5.2 cents

January 5.2 cents

February 5.2 cents

March 5.2 cents

April 5.2 cents

Total 31.2 cents

For the six-month period ended April 30, 1996, your fund's Class I shares
reported a cumulative total return of +10.06%. Cumulative total return measures
the change in value of an investment over the periods indicated, and does not
include the maximum 4.5% initial sales charge.

Franklin Equity Income Fund

Class I
Periods ended April 30, 1996

Since
Inception
1-Year 5-Year (03/15/88)

Cumulative Total Return1 18.54% 95.65% 169.90%
Average Annual Total Return2 13.19% 13.31% 12.35%

Distribution Rate3 3.73%
30-Day Standardized Yield4 3.54%

1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 4.5% initial sales charge.
See Note below.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods and reflects the maximum 4.5% initial
sales charge. See Note below.

3. Distribution rate is based on an annualization of the current 5.2 cent per
share monthly dividend and the maximum offering price of $16.72 on April 30,
1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

Note: Prior to July 1, 1994, shares were offered at a lower initial sales
charge, with dividends reinvested at the public offering price. Thus, actual
total returns for purchasers of shares during that period would have been
somewhat different than noted above. Effective May 1, 1994, the fund eliminated
the sales charge on reinvested dividends and implemented a plan of distribution
under Rule 12b-1, which affects subsequent performance. All total return
calculations assume reinvestment of dividends and capital gains at net asset
value and reflect 12b-1 fees from the date of the plan's implementation. Your
investment return and principal value will fluctuate with market conditions, and
you may have a gain or loss when you sell your shares. Past performance is not
predictive of future results.

Past expense reductions by the fund's manager increased the fund's total
returns.

The Franklin Equity Income Fund Class I made per share distributions derived
from net long-term capital gain of $0.266 per share on December 29, 1995. The
fund hereby designates such distributions as capital gain dividends per Section
852(b)(3) of the Internal Revenue Code.

Performance Summary

Class II

Your fund's Class II share price, as measured by net asset value, increased
$0.77, from $15.19 on October 31, 1995, to $15.96 on April 30, 1996.

In addition to the dividend income, your fund's Class II shares paid out 2.05
cents ($0.0205) per share in a special year-end income distribution, a
short-term capital gain of 13.3 cents ($0.133) per share, and a long-term
capital gain of 26.6 cents ($0.266) per share. Based on the current monthly
dividend of 4.66 cents per share and the offering price of $16.12 on April 30,
1996, the distribution rate was 3.47%. Distributions will vary depending on
income earned by the fund and any profits realized from the sale of securities
in the fund's portfolio. Past performance is not predictive of future results.

Franklin Equity Income Fund
Class II
Dividend Distributions 11/01/95 - 4/30/96

Dividend
Month per Share

November 4.60 cents

December 4.60 cents

January 4.60 cents

February 4.65 cents

March 4.64 cents

April 4.66 cents

Total 27.75 cents

For the six-month period ended April 30, 1996, your fund's Class II shares
reported a cumulative total return of +9.73%. Cumulative total return measures
the change in value of an investment over the periods indicated and does not
include sales charges.

Franklin Equity Income Fund

Class II
Period ended April 30, 1996

Since
Inception
(10/01/95)

Cumulative Total Return1 9.06%
Aggregate Total Return2 7.01%

Distribution Rate3 3.47%
30-Day Standardized Yield4 2.94%

1. Cumulative total return measures the change in value of an investment over
the period indicated and do not include the 1.0% initial sales charge or the
1.0% contingent deferred sales charge (CDSC), applicable to shares redeemed
within the first 18 months of investment.

2. Aggregate total return represents the change in value of an investment since
the inception date and includes the 1.0% initial sales charge and the 1.0% CDSC,
applicable to shares redeemed within the first 18 months of investment. Since
Class II shares have existed for less than one year, average annual total
returns are not provided.

3. Distribution rate is based on an annualization of the current 4.66 cent per
share monthly dividend and the offering price of $16.12 on April 30, 1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

The Franklin Equity Income Fund Class II made per share distributions derived
from net long-term capital gain of $0.266 per share on December 29, 1995. The
fund hereby designates such distributions as capital gain dividends per Section
852(b)(3) of the Internal Revenue Code.

FRANKLIN ADJUSTABLE RATE SECURITIES FUND

Your Fund's Objective:

Seeks a high level of current income with lower volatility of principal than a
fund that invests in fixed-rate securities, by investing in a portfolio of
adjustable-rate securities.

The Franklin Adjustable Rate Securities Fund enjoyed strong performance over the
six-month period ended April 30, 1996. The fund, as shown in the chart to the
right, generated a distribution rate of 5.62%, competitive with the 5.62% yield
of the one-year U.S. Treasury bill.

A combination of slow economic growth and low inflation prompted the Federal
Reserve Board (the "Fed") to lower the federal funds rate -the interest rate
banks charge each other for overnight loans -- twice during the reporting
period in an effort to spur economic activity. This action triggered declines in
other interest rates, including long-term rates.

GRAPHIC MATERIAL 4 OMITTED - SEE APPENDIX AT END OF DOCUMENT

Recently, however, some market indicators, such as stronger-than-expected
employment reports, point to a strengthening economy and have convinced market
participants that the Fed has finished its rate-easing for the present. Interest
rates rose slightly and bond prices were pushed down in March and April.

Prices of adjustable rate mortgage-backed securities (ARMs) moved modestly over
the reporting period. ARMs have adjustable interest payments (also known as
"coupons") that adjust periodically within preset limits to reflect current
rates. These coupons, which can often adjust to higher rates and compensate for
the negative effects these rates have on the value of most bonds, usually enable
ARMs to have greater price stability than fixed-rate securities. Future
interest-rate changes in the near-term will likely occur within the preset
limits of ARMs, and the securities should continue to adjust accordingly.

Of some concern in a low or declining interest-rate environment is prepayment
risk. As interest rates drop, it is likely that homeowners will try to replace
their adjustable-rate mortgages -- prepaying them -- with competitive,
fixed-rate loans. For investors in ARMs, such prepayment brings the risk of
reducing anticipated future income streams. In an effort to reduce this risk, we
have maintained an overweighting in seasoned, nonconvertible ARMs, which are
less likely to experience high levels of prepayment.

We concentrated the portfolio's holdings in securities that are tied to one-year
Constant Maturity Treasury (CMT) ARMs. These securities tend to be less price
sensitive in times of changing interest rates. In addition, we remain
underweighted in ARMs tied to the 11th District Cost
of Funds Index (COFI), which tends to lag market movements.

Your fund invests in an underlying portfolio consisting primarily of high
quality, AA-rated adjustable-rate mortgage securities.* At the end of the
reporting period, 77.96% of the fund's portfolio was invested in securities
rated AAA by outside ratings agencies, and 22.04% in AA-rated securities. These
ratings, while not guaranteeing the fund's market value or signifying approval
of the shares by national ratings agencies, reflect the quality of the bonds as
described in the fund's prospectus and are subject to change.

*The fund invests a substantial amount of its assets in the Adjustable Rate
Mortgage Portfolio, whose investment objective is the same as that of the fund.
Individual securities in the underlying portfolio, but not shares of the fund,
are guaranteed by the U.S. government, its agencies or instrumentalities.

Going forward, we anticipate slow growth and low inflation. This should lead to
stable, or slightly lower, interest rates and subdued interest-rate volatility
- -- both of which should benefit ARMs securities in general. Our efforts continue
to focus on stability of principal while maintaining a yield that is competitive
with short-term investment alternatives. As such, we are actively positioning
the fund to perform well under these circumstances.

Performance Summary

The Franklin Adjustable Rate Securities Fund's share price, as measured by net
asset value, declined $0.02, from $9.82 on October 31, 1995, to $9.80 on April
30, 1996.

At the end of the reporting period, your fund's distribution rate was 5.62%,
based on the annualization of the current monthly dividend of 4.7 cents ($0.047)
per share and the maximum offering price of $10.03 on April 30, 1996. Dividends
will vary based on the earnings of the fund's portfolio, and past distributions
are not predictive of future results.

The Franklin Adjustable Rate Securities Fund produced a cumulative total return
of +2.61% for the six-month period ended April 30, 1996. Total return measures
the change in value of an investment, assuming reinvestment of dividends, and
does not include the maximum initial sales charge. Past performance is not
predictive of future results.

Franklin Adjustable Rate Securities Fund
Dividend Distributions 11/01/95 - 4/30/96

Dividend
Month per Share

November 3.7 cents

December 4.5 cents

January 5.2 cents

February 4.8 cents

March 4.5 cents

April 4.7 cents

Total 27.4 cents

Franklin Adjustable Rate Securities Fund

Periods ended April 30, 1996

Since
Inception
1-Year 3-Year (12/26/91)

Cumulative Total Return1 6.86% 13.62% 23.23%
Average Annual Total Return2 4.50% 3.57% 4.37%

Distribution Rate3 5.62%
30-Day Standardized Yield4 5.39%

1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the maximum 2.25% initial sales charge.
See Note below.

2. Average annual total return measures the average annual change in value of an
investment over the specified periods and includes the maximum 2.25% initial
sales charge. See Note below.

3. Based on an annualization of the fund's current 4.7 cent per share monthly
dividend and the maximum offering price of $10.03 on April 30, 1996.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended April 30, 1996.

Franklin Advisers, Inc., the fund's underlying administrator and the manager of
the fund's underlying portfolio, is voluntarily waiving a portion of its fees,
which reduces expenses and increases yield, total return and distribution rate
to shareholders. Without these reductions, the fund's total return and
distribution rate would have been lower, and yield for the period would have
been 5.19%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.

FRANKLIN INVESTORS SECURITIES TRUST
<TABLE>
<CAPTION>

Statement of Investments in Securities and Net Assets, April 30, 1996 (unaudited)

Face Value
Country Amount* Franklin Global Government Income Fund (Note 1)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bonds, Notes, Bills & Debentures 95.9%
Argentina 11.1%
US 2,500,000 bHidroelectrica Alicura, SA, 8.375%, 03/15/99 .................... $ 2,393,750
US 1,965,000 Republic of Argentina, 10.95%, 11/01/99 ......................... 2,053,425
US 2,455,000 Republic of Argentina, 8.375%, 12/20/03 ......................... 2,166,538
US 17,255,000 Republic of Argentina, L, 5.25%, VRN, 03/31/23 .................. 9,414,759
-------------
16,028,472
-------------
Australia 11.6%
AU 6,350,000 Government of Australia, Series 302, 9.75%, 03/15/02 ............ 5,269,671
AU 6,100,000 New South Wales Treasury Corp., 7.00%, 04/01/04 ................. 4,290,237
AU 6,400,000 Queensland Treasury Corp., 8.00%, 08/14/01 ...................... 4,905,944
AU 3,000,000 Queensland Treasury Corp., 8.00%, 05/14/03 ...................... 2,259,211
-------------
16,725,063
-------------
Brazil 1.3%
US 3,600,000 Government of Brazil, 4.25%, 04/15/24 ........................... 1,892,250
-------------
Canada 13.9%
CA 16,000,000 Canadian Strip, 0.00%, 12/01/08 ................................. 4,097,081
CA 15,000,000 Government of Canada, 9.50%, 10/01/98 ........................... 11,779,144
CA 5,000,000 Government of Canada, 9.50%, 06/01/10 ........................... 4,095,098
-------------
19,971,323
-------------
Denmark 4.7%
DK 9,689,000 Government of Denmark, 8.00%, 05/15/03 .......................... 1,754,756
DK 27,000,000 Kingdom of Denmark, 8.00%, 11/15/01 ............................. 4,940,698
-------------
6,695,454
-------------
Irish Republic 1.1%
IE 1,070,000 Republic of Ireland, 6.25%, 10/18/04 ............................ 1,557,841
-------------
Italy 11.4%
IT 3,250,000,000 Buoni Poliennali del Tes, 8.50%, 08/1/99......................... 2,057,759
IT 2,095,000,000 Buoni Poliennali del Tes, 10.50%, 09/01/05 ...................... 1,413,709
IT 16,415,000,000 Government of Italy, 10.50%, 07/15/00 ........................... 11,026,907
GB 1,200,000 Government of Italy, 10.50%, 04/28/14 ........................... 1,997,560
-------------
16,495,935
-------------
Mexico 4.2%
US 6,170,000 United Mexican States, 9.75%, 02/06/01 .......................... 6,100,587
-------------
South Africa 1.3%
ZA 11,350,000 ESCOM, E168, 11.00%, 06/01/08 ................................... 1,926,610
-------------
Spain 9.5%
ES 365,000,000 Government of Spain, 11.60%, 01/15/97 ........................... $ 2,946,112
ES 523,990,000 Government of Spain, 12.25%, 03/25/00 ........................... 4,638,465
ES 307,900,000 Government of Spain, 11.30%, 01/15/02 ........................... 2,691,704
ES 407,840,000 Government of Spain, 10.00%, 02/28/05 ........................... 3,377,826
-------------
13,654,107
-------------
Sweden 4.8%
SE 26,400,000 Kingdom of Sweden, 13.00%, 06/15/01 ............................. 4,737,060
SE 13,500,000 Kingdom of Sweden, 10.25%, 05/05/03 ............................. 2,241,579
-------------
6,978,639
-------------
United Kingdom 8.7%
GB 1,910,000 United Kingdom, 12.00%, 11/20/98 ................................ 3,211,819
GB 1,950,000 United Kingdom, 9.50%, 01/15/99 ................................. 3,113,385
GB 4,440,000 United Kingdom, 6.75%, 11/26/04 ................................. 6,168,283
-------------
12,493,487
-------------
United States 12.3%
US 3,620,000 U.S. Treasury Note, 6.375%, 08/15/02 ............................ 3,591,149
US 7,050,000 U.S. Treasury Note, 6.125%, 07/31/00 ............................ 7,010,309
US 7,250,000 U.S. Treasury Note, 6.25%, 08/31/00 ............................. 7,179,747
-------------
17,781,205
-------------
Total Long Term Investments (Cost $142,091,018)............ 138,300,973
-------------
Short Term Investments .9%
Certificates of Deposit
TH 10,000,000 Bangkok Bank, 11.50%, 05/16/96 .................................. 396,330
TH 10,000,000 Thailand Military Bank, 11.125%, 06/03/96 ....................... 396,126
TH 14,000,000 Thailand Military Bank, 11.00%, 06/05/96 ........................ 547,367
-------------
Total Certificates of Deposit (Cost $1,380,998)............ 1,339,823
-------------
Total Investments before Repurchase Agreements
(Cost $143,472,015) 139,640,796
-------------
cReceivables from Repurchase Agreements .5%
US 670,000 Bank of America, 5.30%, 05/01/96 (Maturity Value $674,099)
(Cost $674,000)
Collateral: U.S. Treasury Notes, 6.50%, 05/15/97 ............... 674,000
-------------
Total Investments (Cost $144,146,015) 97.3%........... 140,314,796
Other Assets and Liabilities, Net 2.7%................ 3,943,651
-------------
Net Assets 100.0% .................................... $144,258,447
=============

At April 30, 1996, the net unrealized depreciation based on the cost of
investments for income tax purposes of $144,146,015 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost.............................. $ 1,518,169
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ............................. (5,349,388)
-------------
Net unrealized depreciation ............................................. $(3,831,219)
=============
</TABLE>

PORTFOLIO ABBREVIATIONS:
VRN - Variable Rate Notes

COUNTRY LEGEND:
AU - Australia
CA - Canada
DK - Denmark
ES - Spain
GB - United Kingdom
IE - Ireland
IT - Italy
SE - Sweden
TH - Thailand
US - United States of America
ZA - South Africa

*Face amount is stated in the currency of country indicated, and the value is
stated in U.S. dollars.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount for repurchase agreements is for the underlying collateral.

FRANKLIN INVESTORS SECURITIES TRUST
<TABLE>
<CAPTION>

Statement of Investments in Securities and Net Assets, April 30, 1996 (unaudited)

Face Franklin Short-Intermediate Value
Amount U.S. Government Securities Fund (Note 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Government Securities 98.1%
$ 25,000,000 U.S. Treasury Notes, 7.50%, 11/15/01 .......................................... $ 26,179,672
11,000,000 U.S. Treasury Notes, 6.50%, 04/30/99 .......................................... 11,082,500
31,000,000 U.S. Treasury Notes, 5.875%, 03/31/99 ......................................... 30,728,750
22,000,000 U.S. Treasury Notes, 6.375%, 01/15/99 ......................................... 22,103,112
26,000,000 U.S. Treasury Notes, 5.50%, 11/15/98 .......................................... 25,593,750
8,000,000 U.S. Treasury Notes, 5.375%, 11/30/97 ......................................... 7,932,495
70,000,000 U.S. Treasury Notes, 6.875%, 02/28/97 ......................................... 70,721,832
6,500,000 U.S. Treasury Notes, 6.75%, 02/28/97 .......................................... 6,560,938
-------------
Total U.S. Government Securities (Cost $200,036,579)..................... 200,903,049
-------------
c,dReceivables from Repurchase Agreements .7%
1,324,993 Joint Repurchase Agreement, 5.326%, 05/01/96 (Maturity Value $1,329,508)
(Cost $1,329,311)
Bear Stearns & Co., Inc., (Maturity Value $266,402)
Collateral: U.S. Treasury Notes, 5.625% - 8.75%, 04/30/97 - 10/31/00
B.T. Securities Corp., (Maturity Value $266,402)
Collateral: U.S. Treasury Notes, 6.125% - 7.25%, 11/30/96 - 05/15/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $266,402)
Collateral: U.S. Treasury Notes, 5.625% - 8.875%, 02/28/97 - 11/15/99
Fuji Securities, Inc.,(Maturity Value $266,402)
Collateral: U.S. Treasury Bills, 09/26/96 - 01/09/97
U.S. Treasury Notes, 6.25% - 9.125%, 05/15/99 - 08/31/00
SBC Capital Markets, Inc., (Maturity Value $263,900)
Collateral: U.S. Treasury Notes, 6.875% - 8.25%, 07/15/98 - 07/31/99 ........ 1,329,311
-------------
Total Investments (Cost $201,365,890) 98.8%......................... 202,232,360
Other Assets and Liabilities, Net 1.2% ............................. 2,522,802
-------------
Net Assets 100.0% .................................................. $204,755,162
=============
At April 30, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $201,365,890 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................... $ 1,678,039
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................... (811,569)
-------------
Net unrealized appreciation ...................................................... $ 866,470
=============
</TABLE>

cFace amount for repurchase agreements is for the underlying collateral.
dSee Note 1(h) regarding joint repurchase agreement.

FRANKLIN INVESTORS SECURITIES TRUST
<TABLE>
<CAPTION>

Statement of Investments in Securities and Net Assets, April 30, 1996 (unaudited)

Value
Shares Franklin Convertible Securities Fund (Note 1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks .7%
Conglomerates .5%
40,000 Hanson, Plc., Sponsored ADR .................................................. $ 605,000
-------------
Semiconductors .2%
10,000 a VLSI Technology, Inc.......................................................... 174,375
-------------
Total Common Stocks (Cost $813,773) .................................... 779,375
-------------
Convertible Preferred Stocks 26.8%
Cablesystems 1.4%
61,900 Cablevision Systems Corp., 8.50% cvt. pfd., Series I.......................... 1,601,663
-------------
Computers 1.0%
20,000 b Wang Laboratories, Inc., 6.50% cvt. pfd., Series B............................ 1,087,500
-------------
Conglomerates 1.1%
75,000 b Westinghouse Electric Co., $1.30 cvt. pfd., Series C.......................... 1,284,375
-------------
Energy 1.5%
25,000 a,b Calenergy, Inc., 6.25% cvt. pfd............................................... 1,356,250
15,000 Enron Corp., 6.25%, cvt. pfd.................................................. 384,375
-------------
1,740,625
-------------
Entertainment .8%
20,000 Salomon, Inc., 6.125% cvt. pfd................................................ 960,000
-------------
Health Care .6%
25,000 FHP International Corp., $1.25 cvt. pfd., Class A ............................ 684,375
-------------
Media & Broadcasting 3.0%
315,000 Triathlon Broadcasting, 9.00% cvt. pfd........................................ 3,386,250
-------------
Metals & Mining 3.1%
19,100 Armco, Inc., $3.625 cvt. pfd., Series A ...................................... 964,550
18,000 b Bethlehem Steel Corp., $3.50 cvt. pfd......................................... 792,000
7,500 b Cyprus Amax Minerals Co., $4.00 cvt. pfd., Series A........................... 449,063
30,000 WHX Corp., 6.50% cvt. pfd., Series A ......................................... 1,368,750
-------------
3,574,363
-------------
Oil & Gas 2.7%
3,700 Gerrity Oil & Gas, $1.50 cvt. pfd. ........................................... 46,713
42,000 b Parker & Parsley Petroleum Co., 6.25% cvt. pfd. .............................. 2,142,000
49,500 Snyder Oil Corp., $1.50 cvt. pfd.............................................. 903,375
-------------
3,092,088
-------------
Real Estate 1.4%
30,000 b Catellus Development Corp., $3.625 cvt. pfd., Series A ....................... 1,560,000
-------------

Real Estate Investment Trusts 1.4%
20,000 Oasis Residential, Inc., $2.25 cvt. pfd., Series A............................ $ 525,000
43,600 Security Capital Pacific Trust, $1.75 cvt. pfd., Series A .................... 1,117,250
-------------
1,642,250
-------------
Restaurants .2%
15,000 Flagstar Cos., Inc., $2.25 cvt. pfd., Series A ............................... 202,500
-------------
Savings & Loans 1.1%
17,900 Roosevelt Financial Group, $3.25 cvt. pfd. ................................... 1,311,175
-------------
Telecommunications 3.9%
40,600 b CoIntel , 7.00% cvt. pfd...................................................... 2,324,350
47,600 a Nortel Inversora, SA, 10.00% cvt. pfd., MEDS.................................. 2,130,100
-------------
4,454,450
-------------
Tobacco 2.0%
375,000 RJR Nabisco Holdings Corp., $0.6012 cvt. pfd. ................................ 2,250,000
-------------
Utilities 1.6%
40,000 Citizens Utility Co., 5.00% cvt. pfd.......................................... 1,880,000
-------------
Total Convertible Preferred Stocks (Cost $29,844,528) .................. 30,711,614
-------------
Face
Amount
- -----------
Convertible Bonds 64.5%
Advertising .9%
$ 1,000,000 Interpublic Group of Cos., Inc., cvt. sub. notes, 3.75%, 04/01/02 ............ 1,050,000
-------------
Commercial Services 3.0%
20,000 b Danka Business Systems, cvt, sub. notes, 6.75%, 04/01/02 ..................... 34,325
1,000,000 b,e Quintiles Transnational Corp., cvt. sub. notes, 4.25%, 05/31/00 .............. 1,090,000
750,000 b,e Thermo TerraTech, Inc., cvt. sub. notes, 4.625%, 05/01/03 .................... 791,250
500,000 b U.S. Filter Corp., cvt. sub. notes, 6.00%, 09/15/05 .......................... 637,500
500,000 b Youth Services International, Inc., cvt. sub. deb., 7.00%, 02/01/06 .......... 940,000
-------------
3,493,075
-------------
Conglomerates 1.1%
1,000,000 b Thermo Electron Corp., cvt. sub. deb., 4.25%, 01/01/03 ....................... 1,225,000
-------------
Electronics 8.8%
$ 150,000 b Altera Corp., cvt. sub. notes, 5.75%, 06/15/02 ............................... $ 182,625
250,000 Analog Devices, cvt. sub. notes, 3.50%, 12/01/00 ............................. 282,500
1,900,000 b Bay Networks, Inc., cvt. sub. deb., 5.25%, 05/15/03 .......................... 1,866,750
1,000,000 Conner Peripherals, Inc., cvt. deb., 6.75%, 03/01/01 ......................... 1,070,000
750,000 b Diagnostic Retrieval Systems, cvt. senior sub. notes, 9.00%, 10/01/03 ........ 780,000
4,000,000 b Dovatron International, Inc., cvt. sub notes, 6.00%, 10/15/02 ................ 4,500,000
1,250,000 b Quantum Corp., cvt. sub. notes, 5.00%, 03/01/03 .............................. 1,387,500
-------------
10,069,375
-------------
Entertainment 1.3%
1,500,000 b Imax Corp., cvt. deb., 5.75%, 04/01/03 ....................................... 1,509,375
-------------
Financial Services 4.4%
2,000,000 Mitsubishi Bank, Ltd., cvt. co. guaranteed, 3.00%, 11/30/02 .................. 2,337,500
600,000 b Peregrine Investment Finance, cvt. co. guaranteed, 4.50%, 12/01/00 ........... 499,500
1,500,000 PIV Investment Finance, cvt. co. guaranteed, 4.50%, 12/01/00 ................. 1,248,750
1,000,000 b Sappi BVI Finance, Ltd., cvt. co. guaranteed, 7.50%, 08/01/02 ................ 952,500
-------------
5,038,250
-------------
Grocery/Food 2.2%
1,000,000 Chock Full O'Nuts, cvt. deb., 7.00%, 04/01/12 ................................ 845,000
1,500,000 b Grand Metropolitan, Plc., cvt. unsub. notes, 6.50%, 01/31/00 ................. 1,659,375
-------------
2,504,375
-------------
Health Care 5.1%
500,000 Integrated Health Services, Inc., cvt. senior sub. deb., 5.75%, 01/01/01 ..... 519,375
750,000 b Nabi, Inc., cvt. sub. notes, 6.50%, 02/01/03 ................................. 825,000
2,000,000 b Sandoz Capital BVI, Ltd., cvt. guaranteed, 2.00%, 10/06/02 ................... 2,137,500
700,000 Sun Healthcare Group, Inc., cvt. sub. notes, 6.00%, 03/01/04 ................. 645,750
1,700,000 b U.S. Diagnostic Labs, Inc., cvt. sub. deb., 9.00%, 03/31/03 .................. 1,785,000
-------------
5,912,625
-------------
Home Appliance 1.3%
3,500,000 Whirlpool Corp., cvt. deb., LYONs, (original accretion rate 7.00%), 0.00%, 05/14/11
1,535,625
-------------
Industrial Services 6.7%
2,000,000 Cooper Industries, Inc., cvt. sub. notes, 7.05%, 01/01/15 .................... 2,140,000
1,750,000 Mercury Air Group, Inc., cvt. sub. deb., 7.75%, 02/01/06 ..................... 2,003,750
1,650,000 Raymond Corp., cvt. sub. deb., 6.50%, 12/15/03 ............................... 1,924,313
1,500,000 Sanifill, Inc., cvt. sub. deb., 5.00%, 03/01/06 .............................. 1,621,875
-------------
7,689,938
-------------
Insurance .4%
$ 500,000 b Pioneer Financial Services, cvt. sub. notes, 6.50%, 04/01/03 ................. $ 497,500
-------------
Lodging 3.2%
2,300,000 HFS, Inc., cvt. senior notes, 4.75%, 03/01/03 ................................ 2,409,250
900,000 b Prime Hospitality Corp., cvt. sub. notes, 7.00%, 04/15/02 .................... 1,252,125
-------------
3,661,375
-------------
Long Distance/Telecommunications 2.6%
1,650,000 Compania de Telefono de Chile, cvt. sub. deb., 4.50%, 01/15/03 ............... 1,914,000
3,000,000 U.S. Cellular Corp., cvt., notes, (original accretion rate 6.00%), 0.00%, 06/15/15 1,050,000
-------------
2,964,000
-------------
Media & Broadcasting 2.5%
3,015,000 b All American Communications, Inc., cvt. deb., 6.50%, 10/01/03 ................ 2,894,400
-------------
Metals & Mining .9%
1,000,000 Ashanti Capital, Ltd., cvt. notes, 5.50%, 03/15/03 ........................... 995,000
-------------
Oil & Gas 1.2%
1,250,000 Pennzoil Co., cvt. co. guaranteed, 4.75%, 10/01/03 ........................... 1,315,624
-------------
Real Estate .6%
750,000 b Paliburg International Finance, cvt. co. guaranteed, 3.50%, 02/06/01 ......... 712,500
-------------
Real Estate Investment Trusts 5.4%
1,500,000 b Health Care Properties Investment, Inc., cvt. sub. notes, 6.00%, 11/08/00 .... 1,485,000
2,605,000 Liberty Property Trust, cvt. sub. deb., 8.00%, 07/01/01 ...................... 2,735,250
2,000,000 OMEGA Healthcare Investors, Inc., cvt. sub. deb., 8.50%, 02/01/01 ............ 2,030,000
-------------
6,250,250
-------------
Retail 5.1%
1,500,000 Federated Dept Stores, Inc., cvt. notes, 5.00%, 10/01/03 ..................... 1,698,750
600,000 Lowe's Cos., cvt. sub. notes., 3.00%, 07/22/03 ............................... 743,250
1,000,000 Men's Wearhouse, Inc., cvt. sub. notes, 5.25%, 03/01/03 ...................... 1,210,000
500,000 Proffitt's, Inc., cvt. sub. deb., 4.75%, 11/01/03 ............................ 470,000
1,250,000 U.S. Office Products Co., cvt. sub. notes, 5.50%, 02/01/01 ................... 1,700,000
-------------
5,822,000
-------------
Semiconductors 3.6%
1,900,000 Motorola, Inc. cvt. sub. deb., (original accretion rate 6.00%), 0.00%, 09/07/09 2,166,000
2,000,000 Xilinx, Inc., cvt. sub. notes, 5.25%, 11/01/02 ............................... 1,980,000
-------------
4,146,000
-------------
Technology 2.5%
$ 1,750,000 EMC, Corp., cvt. sub. notes, 4.25%, 01/01/01 ................................. $ 2,030,000
1,500,000 b Silicon Graphics, Inc., cvt. sub. deb., (original accretion rate 4.15%), 0.00%,
11/02/13 841,874
-------------
2,871,874
-------------
Telecommunications 1.7%
1,000,000 Network Equipment Technologies, Inc., cvt. deb., 7.25%, 05/15/14 ............. 995,000
1,000,000 Tele Communications International, cvt. sub. deb., 4.50%, 02/15/06 ........... 945,000
-------------
1,940,000
-------------
Total Convertible Bonds (Cost $69,087,785).............................. 74,098,161
-------------
Total Long Term Investments (Cost $99,746,086).......................... 105,589,150
-------------
c,d Receivables from Repurchase Agreements 8.8%
10,070,244 Joint Repurchase Agreement, 5.326%, 05/01/96, (Maturity Value $10,106,216)
(Cost $10,104,721)
Bear Stearns & Co., Inc., (Maturity Value $2,025,046)
Collateral: U.S. Treasury Notes, 5.625% - 8.75%, 04/30/97 - 10/31/00
B.T. Securities Corp., (Maturity Value $2,025,046)
Collateral: U.S. Treasury Notes, 6.125% - 7.25%, 11/30/96 - 05/15/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $2,025,046)
Collateral: U.S. Treasury Notes, 5.625% - 8.875%, 02/28/97 - 11/15/99
Fuji Securities, Inc., (Maturity Value $2,025,046)
Collateral: U.S. Treasury Bills, 09/26/96 - 01/09/97
U.S. Treasury Notes, 6.25% - 9.125%, 05/15/99 - 08/31/00
SBC Capital Markets, Inc., (Maturity Value $2,006,032)
Collateral: U.S. Treasury Notes, 6.875% - 8.25%, 07/15/98 - 07/31/99 ........ 10,104,721
-------------
Total Investments (Cost $109,850,807) 100.8%....................... 115,693,871
Liabilities in Excess of Other Assets ( .8) % ..................... (872,131)
-------------
Net Assets 100.0% ................................................. $114,821,740
=============

At April 30, 1996, the net unrealized appreciation based on the cost of investment
for income tax purposes of $109,886,995 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 7,038,857
Aggregate gross unrealized depreciation for all investments in which there was an
excess tax cost over value ..................................................... (1,231,981)
-------------
Net unrealized appreciation ..................................................... $ 5,806,876
=============

</TABLE>

PORTFOLIO ABBREVIATIONS:
LYONs - Liquid Yield Option Notes
MEDS - Mandatorially Exchangeable Debt Security

aNon-income producing.
bPurchased in a private placement transaction; resale may only be to qualified
institutional buyers.
cFace amount for repurchase agreements is for the underlying collateral.
dSee Note 1(h) regarding joint repurchase agreement.
eSee Note 1(i) regarding securities purchased on a when-issued basis.

FRANKLIN INVESTORS SECURITIES TRUST
<TABLE>
<CAPTION>

Statement of Investments in Securities and Net Assets, April 30, 1996 (unaudited)

Value
Shares Franklin Adjustable U.S. Government Securities Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mutual Funds 100.1%
49,437,222 U.S. Government ARM Portfolio (Note 1) ........................................... $459,766,166
-------------
Total Investments (Cost $497,181,672) 100.1% .......................... 459,766,166
Liabilities in Excess of Other Assets (.1)% ........................... (295,497)
-------------
Net Assets 100.0% ..................................................... $459,470,669
=============
At April 30, 1996, the net unrealized depreciation based on the cost of investments
for income tax purposes of $497,327,030 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ..................................................... $--
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ..................................................... (37,560,864)
-------------
Net unrealized depreciation .................................................... $ (37,560,864)
=============

FRANKLIN INVESTORS SECURITIES TRUST

Statement of Investments in Securities and Net Assets, April 30, 1996 (unaudited)

Value
Shares Franklin Equity Income Fund (Note 1)
- ---------------------------------------------------------------------------------------------------------------------------
Common Stocks 78.6%
Chemicals 4.1%
68,000 Chemed Corp. .................................................................. $ 2,558,500
50,600 Dow Chemical Co. .............................................................. 4,497,075
54,200 Goodrich (B.F.) Co. ........................................................... 2,154,450
-------------
9,210,025
-------------
Conglomerates 2.9%
276,500 Hanson, Plc., Sponsored ADR.................................................... 4,182,063
119,400 Ogden Corp. ................................................................... 2,417,850
-------------
6,599,913
-------------
Finance 4.0%
48,300 bChristiana Bank Og Kreditkasse, ADR............................................ 1,051,032
150,000 e,fChristiana Bank Og Kreditkasse (Norway) ....................................... 326,407
60,000 Great Western Financial Corp. ................................................. 1,380,000
24,500 Morgan (J.P.) & Co., Inc. ..................................................... 2,061,063
37,800 bNordbanken AB, Sponsored ADR................................................... 1,292,775
40,200 fNordbanken AB (Sweden) ........................................................ 687,428
75,300 PNC Bank Corp. ................................................................ 2,277,825
-------------
9,076,530
-------------
Insurance 1.2%
58,000 Lincoln National Corp. ........................................................ 2,798,500
-------------
Machine-Diversified .9%
49,200 Cooper Industries, Inc. ....................................................... 2,091,000
-------------
Oil-Integrated-International 15.4%
54,000 Amoco Corp. ................................................................... 3,942,000
44,500 Atlantic Richfield Co. ........................................................ 5,239,875
69,900 Chevron Corp. ................................................................. 4,045,463
44,700 Exxon Corp. ................................................................... 3,799,500
19,800 Mobil Corp. ................................................................... 2,277,000
50,400 Occidental Petroleum Corp. .................................................... 1,297,800
15,200 Royal Dutch Petroleum Co., ADR................................................. 2,177,400
55,500 Texaco, Inc. .................................................................. 4,745,250
95,900 Ultramar Corp. ................................................................ 3,008,863
202,200 YPF, SA, ADR................................................................... 4,423,125
-------------
34,956,276
-------------
Paper & Forest Products 4.2%
245,000 bPortucel Industrial, SA........................................................ 1,483,328
94,000 Potlatch Corp. ................................................................ 4,006,750
41,000 Union Camp Corp. .............................................................. $ 2,229,375
36,000 Weyerhaeuser Co. .............................................................. 1,782,000
-------------
9,501,453
-------------
Pharmaceuticals 3.5%
30,000 American Home Products Corp. .................................................. 3,165,000
48,000 Bristol-Myers Squibb Co. ...................................................... 3,948,000
24,505 Pharmacia & Upjohn, Inc. ...................................................... 937,316
-------------
8,050,316
-------------
Publishing 2.0%
72,900 Dun & Bradstreet Corp. ........................................................ 4,437,788
-------------
Real Estate Investment Trusts 4.0%
117,000 Equity Residential Properties Trust ........................................... 3,773,250
90,000 Felcor Suite Hotels, Inc. ..................................................... 2,621,250
120,000 Oasis Residential, Inc. ....................................................... 2,700,000
-------------
9,094,500
-------------
Retail Stores 1.9%
85,000 Penney (J.C.) Co., Inc. ....................................................... 4,207,500
-------------
Steel 2.3%
75,000 British Steel, Plc., Sponsored ADR............................................. 2,268,750
76,400 Carpenter Technology Corp. .................................................... 2,874,550
-------------
5,143,300
-------------
Tobacco 3.7%
83,500 American Brands, Inc. ......................................................... 3,475,688
53,700 Philip Morris Cos., Inc. ...................................................... 4,839,713
-------------
8,315,401
-------------
Utilities - Electric 17.1%
47,900 American Electric Power Co. ................................................... 1,945,938
164,800 Central & South West Corp. .................................................... 4,490,800
110,800 CINergy Corp. ................................................................. 3,213,200
116,000 Dominion Resources, Inc. ...................................................... 4,466,000
130,000 Enova Corp. ................................................................... 2,795,000
92,500 New England Electric System ................................................... 3,260,625
84,900 Oklahoma Gas and Electric Co. ................................................. 3,204,975
139,000 Pacific Gas & Electric Co. .................................................... 3,162,250
148,000 PacifiCorp .................................................................... 2,960,000
83,100 PECO Energy Co. ............................................................... 2,067,113
73,000 Public Service Co. of Colorado ................................................ $ 2,418,125
110,000 Public Service Enterprise Group, Inc. ......................................... 2,873,750
50,500 Texas Utilities Co. ........................................................... 2,032,625
-------------
38,890,401
-------------
Utilities - Natural Gas 3.4%
55,300 Consolidated Natural Gas Co. .................................................. 2,585,274
67,000 National Fuel Gas Co. ......................................................... 2,353,374
106,700 Pacific Enterprises ........................................................... 2,747,524
-------------
7,686,172
-------------
Utilities - Telephone 8.0%
44,400 BellSouth Corp. ............................................................... 1,776,000
92,500 GTE Corp. ..................................................................... 4,012,187
88,100 NYNEX Corp. ................................................................... 4,327,912
103,800 Southern New England Telecommunications Corp. ................................. 4,619,100
101,600 U.S. West Communications Group ................................................ 3,327,400
-------------
18,062,599
-------------
Total Common Stocks (Cost $157,694,872).................................. 178,121,674
-------------
Convertible Preferred Stocks 8.5%
36,300 Battle Mountain Gold Co., $3.25 cvt. pfd. ..................................... 1,833,149
31,000 bBethlehem Steel Corp., $3.50 cvt. pfd. ........................................ 1,364,000
80,000 Cablevision Systems Corp., 8.50% cvt. pfd., Series I........................... 2,070,000
46,200 bCatellus Development Corp., $3.625 cvt. pfd., Series B......................... 2,402,400
71,900 aNortel Inversora, SA, cvt. pfd., MEDS.......................................... 3,217,524
9,200 bOccidental Petroleum Corp., $3.875 cvt. pfd. .................................. 572,700
380,000 RJR Nabisco Holdings Corp., $.601, cvt. pfd., Series C......................... 2,280,000
28,500 Roosevelt Financial Group, $3.25 cvt. pfd. .................................... 2,087,624
17,100 Travelers Corp., $2.75 cvt. pfd. .............................................. 1,444,950
118,000 bWestinghouse Electric Co., $1.30 cvt. pfd., Series C........................... 2,020,750
-------------
Total Convertible Preferred Stocks (Cost $18,102,560).................... 19,293,097
-------------
Total Long Term Investments (Cost $175,797,432).......................... 197,414,771
-------------
c,dReceivables from Repurchase Agreements 12.7%
$28,818,593 Joint Repurchase Agreement, 5.326%, 05/01/96 (Maturity Value $28,920,711)
(Cost $28,916,433)
Bear Stearns & Co. Inc., (Maturity Value $5,795,024)
Collateral: U.S. Treasury Notes, 5.625% - 8.75%, 04/30/97 - 10/31/00
B.T. Securities Corp., (Maturity Value $5,795,024)
Collateral: U.S. Treasury Notes, 6.125% - 7.25%, 11/30/96 - 05/15/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $5,795,024)
Collateral: U.S. Treasury Notes, 5.625% - 8.875%, 02/28/97 - 11/15/99
Fuji Securities, Inc., (Maturity Value $5,795,024)
Collateral: U.S. Treasury Bills, 09/26/96 - 01/09/97
Collateral: U.S. Treasury Notes, 6.25% - 9.125%, 05/15/99 - 08/31/00
SBC Capital Markets, Inc., (Maturity Value $5,740,615)
Collateral: U.S. Treasury Notes, 6.875% - 8.25%, 07/15/98 - 07/31/99 ........ 28,916,433
-------------
Total Investments (Cost $204,713,865) 99.8%......................... 226,331,204
Other Assets & Liabilities, Net .2%................................. 380,161
-------------
Net Assets 100.0%................................................... $226,711,365
=============
At April 30, 1996, the net unrealized appreciation based on the cost of investments
for income tax purposes of $204,741,234 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost.................................................... $ 24,650,817
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value.................................................... (3,060,847)
-------------
Net unrealized appreciation....................................................... $ 21,589,970
=============
</TABLE>

PORTFOLIO ABBREVIATIONS:
MEDS - Mandatorially Exchangeable Debt Security

FRANKLIN INVESTORS SECURITIES TRUST
<TABLE>
<CAPTION>

Statement of Investments in Securities and Net Assets, April 30, 1996 (unaudited)

Value
Shares Franklin Adjustable Rate Securities Fund (Note 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mutual Funds 100.3%
1,492,226 Adjustable Rate Securities Portfolio (Note 1) ...................................... $14,608,896
-------------
Total Investments (Cost $14,963,844) 100.3% ............................. 14,608,896
Liabilities in Excess of Other Assets (.3%) ............................. (49,385)
-------------
Net Assets 100.0% ....................................................... 14,559,511
=============
At April 30, 1996, the net unrealized depreciation based on the cost of investments
for income tax purposes of $15,008,704 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ...................................................... $ --
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ...................................................... (399,808)
-------------
Net unrealized depreciation ......................................................... $ (399,808)
=============
</TABLE>

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

FRANKLIN INVESTORS SECURITIES TRUST

Financial Statements

Statements of Assets and Liabilities
April 30, 1996 (unaudited)

Franklin
Franklin Global Short-Intermediate Franklin
Government U.S. Government Convertible
Income Fund Securities Fund Securities Fund
--------- ------------ ----------
<S> <C> <C> <C>

Assets:
Investments in securities:
At identified cost .......................................... $143,472,015 $200,036,579 $ 99,746,036
========= ============ ==========
At value .................................................... 139,640,796 200,903,049 105,589,150
Receivables from repurchase agreements, at value and cost .... 674,000 1,329,311 10,104,721
Cash ......................................................... 651 -- 196,899
Receivables:
Dividends and interest ...................................... 3,903,059 3,122,978 902,823
Investment securities sold .................................. 2,023,446 -- 898,688
Capital shares sold ......................................... 209,510 19,845 378,839
Prepaid expenses ............................................. -- -- 10,371
Unrealized gains on forward currency contracts (Note 2) ...... 251,676 -- --
--------- ------------ ----------
Total assets ............................................ 146,703,138 205,375,183 118,081,491
--------- ------------ ----------
Liabilities:
Payables:
Investment securities purchased :
Regular delivery ........................................... 2,025,748 -- 1,339,696
When-issued basis (Note 1) ................................. -- -- 1,750,000
Capital shares repurchased .................................. 188,550 480,862 30,538
Management fees ............................................. 74,043 95,543 58,235
Distribution fees ........................................... 9,024 33,297 81,282
Shareholder servicing costs ................................. 7,700 8,163 --
Accrued expenses and other liabilities ....................... 139,626 2,156 --
--------- ------------ ----------
Total liabilities ....................................... 2,444,691 620,021 3,259,751
--------- ------------ ----------
Net assets, at value .......................................... $144,258,447 $204,755,162 $114,821,740
========= ============ ==========
Net assets consist of:
Undistributed net investment income .......................... $ 494,977 $ 710,390 $ 108,878
Net unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign
currencies .................................................. (3,622,799) 866,470 5,843,064
Undistributed net realized gain (loss) from investments and
foreign currency (4,521,438) (5,694,582) 5,106,064
Class I capital shares ....................................... 149,472,993 208,872,884 100,052,935
Class II capital shares ...................................... 2,434,714 -- 3,710,799
--------- ------------ ----------
Net assets, at value .......................................... $144,258,447 $204,755,162 $114,821,740
========= ============ ==========
Class I shares:
Net Assets, at value ......................................... $141,817,207 $204,755,162 $111,008,993
========= ============ ==========
Shares outstanding ........................................... 17,054,156 20,011,521 8,421,274
========= ============ ==========
Net asset value per share* ................................... $8.32 $10.23 $13.18
========= ============ ==========
Class II shares:
Net Assets, at value ......................................... $ 2,441,240 $ 3,812,747
========= ==========
Shares outstanding ........................................... 293,642 289,720
========= ==========
Net asset value per share* ................................... $8.31 $13.16
========= ==========

*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.

Franklin
Adjustable Franklin
U.S. Government Franklin Equity Adjustable Rate
Securities Fund Income Fund Securities Fund
----------- ---------- ----------
<S> <C> <C> <C>
Assets:
Investments in securities:
At identified cost ........................................... $497,181,672 $175,797,432 $14,963,844
=========== ========== ==========
At value ..................................................... 459,766,166 197,414,771 14,608,896
Receivables from repurchase agreements, at value and cost ..... -- 28,916,433 --
Cash .......................................................... 43,889 335,920 1,594
Foreign currencies (Cost $331,425) ............................ -- 330,570 --
Receivables:
Dividend and interest ........................................ -- 616,785 --
Capital shares sold .......................................... 130,104 446,941 --
Prepaid expenses .............................................. -- 43,948 --
----------- ---------- ----------
Total assets ............................................. 459,940,159 228,105,368 14,610,490
----------- ---------- ----------
Liabilities:
Payables:
Investment securities purchased .............................. -- 1,153,468 --
Capital shares repurchased ................................... 77,148 5,044 23,030
Administrative fees .......................................... 38,791 -- 1,218
Management fees .............................................. -- 104,782 --
Distribution fees ............................................ 323,081 130,709 9,616
Shareholder servicing costs .................................. 11,027 -- 1,142
Accrued expenses and other liabilities ........................ 19,443 -- 15,973
----------- ---------- ----------
Total liabilities ........................................ 469,490 1,394,003 50,979
----------- ---------- ----------
Net assets, at value ........................................... $459,470,669 $226,711,365 $14,559,511
=========== ========== ==========
Net assets consist of:
Undistributed net investment income ........................... $ 1,268,220 $ 178,613 $--
Net unrealized appreciation (depreciation) on investments and
translation of assets and liabilities denominated in foreign
currencies ................................................... (37,415,506) 21,617,343 (354,948)
Undistributed net realized gain (loss) from investments and
foreign currency.............................................. (73,464,332) 1,485,648 (785,753)
Class I capital shares ........................................ 569,082,287 196,806,995 15,700,212
Class II capital shares ....................................... -- 6,622,766 --
----------- ---------- ----------
Net assets, at value ........................................... $459,470,669 $226,711,365 $14,559,511
=========== ========== ==========
Class I shares:
Net Assets, at value .......................................... $459,470,669 $220,049,015 $14,559,511
=========== ========== ==========
Shares outstanding ............................................ 49,344,373 13,778,945 1,485,537
=========== ========== ==========
Net asset value per share* .................................... $9.31 $15.97 $9.80
=========== ========== ==========
Class II shares:
Net Assets, at value .......................................... $ 6,662,350
==========
Shares outstanding ............................................ 417,455
==========
Net asset value per share* .................................... $15.96
==========

*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.
Statements of Operations
for the six months ended April 30, 1996 (unaudited)

Franklin
Franklin GlobalShort-Intermediate Franklin
Government U.S. Government Convertible
Income Fund Securities Fund Securities Fund
---------- ------------ ----------
Investment income:
<S> <C> <C> <C>
Dividends..................................................... $ -- $ -- $ 861,867
Interest (Note 1) (net of foreign taxes withheld of $41,267 in the
Global Fund) ................................................. 6,601,584 6,561,238 1,852,918
---------- ------------ ----------
Total income ............................................ 6,601,584 6,561,238 2,714,785
---------- ------------ ----------
Expenses:
Management fees (Note 6) ..................................... 449,350 584,712 309,036
Distribution fees- Class I (Note 6) .......................... 53,654 77,481 110,771
Distribution fees- Class II (Note 6) ......................... 5,860 -- 8,296
Shareholder servicing costs (Note 6) ......................... 61,000 43,086 34,752
Professional fees ............................................ 17,000 10,913 2,950
Registration and filing fees ................................. 16,500 8,663 13,088
Reports to shareholders ...................................... 15,000 24,366 13,967
Trustees' fees and expenses .................................. 11,500 13,035 4,435
Custodian fees ............................................... 10,000 5,481 3,656
Other ........................................................ 19,280 1,873 114
---------- ------------ ----------
Total expenses .......................................... 659,144 769,610 501,065
---------- ------------ ----------
Net investment income .................................. 5,942,440 5,791,628 2,213,720
---------- ------------ ----------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) from:
Investments ................................................ 341,777 305,691 5,120,528
Foreign currency transactions .............................. (269,348) -- --
Net unrealized appreciation (depreciation) on:
Investments ................................................ (736,822) (2,793,505) 3,456,657
Translation of assets and liabilities denominated in foreign
currency ..................................................... 451,222 -- --
---------- ------------ ----------
Net realized and unrealized gain (loss) on investments and foreign
currency ..................................................... (213,171) (2,487,814) 8,577,185
---------- ------------ ----------
Net increase in net assets resulting from operations .......... $5,729,269 $3,303,814 $10,790,905
========== ============ ==========

Franklin
Adjustable Franklin
U.S. Government Franklin Equity Adjustable Rate
Securities Fund Income Fund Securities Fund
----------- ---------- ----------
Investment income:
<S> <C> <C> <C>
Dividends ..................................................... $15,577,514 $ 4,023,891 $481,299
Interest (Note 1) ............................................. -- 902,790 --
----------- ---------- ----------
Total income ............................................. 15,577,514 4,926,681 481,299
----------- ---------- ----------
Expenses:
Management fees (Note 6) ...................................... -- 573,546 --
Administration fees (Note 6) .................................. 243,393 -- 7,785
Distribution fees- Class I (Note 6) ........................... 590,254 230,428 18,171
Distribution fees- Class II (Note 6) .......................... -- 15,133 --
Shareholder servicing costs (Note 6) .......................... 134,005 59,169 5,926
Reports to shareholders ....................................... 85,274 21,292 5,226
Trustees' fees and expenses ................................... 29,462 9,057 638
Registration and filing fees .................................. 11,778 13,512 8,007
Professional fees ............................................. 4,655 3,744 3,512
Custodian fees ................................................ -- 4,132 --
Other ......................................................... 4,180 3,200 1,272
----------- ---------- ----------
Total expenses ........................................... 1,108,001 933,213 50,537
----------- ---------- ----------
Net investment income ................................... 14,469,513 3,993,468 430,762
----------- ---------- ----------
Realized and unrealized gain (loss) from investments and foreign
currency:
Net realized gain (loss) from:
Investments ................................................. (3,211,663) 1,534,548 (67,814)
Foreign currency transactions ............................... -- 1,218 --
Net unrealized appreciation (depreciation) on:
Investments ................................................. 1,825,739 12,435,048 51,198
Translation of assets and liabilities denominated in foreign
currency ................................................... -- 4 --
----------- ---------- ----------
Net realized and unrealized gain on investments and foreign
currency ...................................................... (1,385,924) 13,970,818 (16,616)
----------- ---------- ----------
Net increase in net assets resulting from operations ........... $13,083,589 $17,964,286 $414,146
=========== ========== ==========
</TABLE>

Statements of Changes in Net Assets for the six months ended April 30, 1996
(unaudited) and the year ended October 31, 1995

Franklin Global Franklin Short-Intermediate Franklin Convertible
Government Income Fund U.S. Government Securities Fund Securities Fund
-------------------- -------------------- -------------------
Six Months Year Ended Six Months Year Ended Six Months Year Ended
Ended 4/30/96 10/31/95 Ended 4/30/96 10/31/95 Ended 4/30/96 10/31/95
---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>

Increase (decrease) in net assets:
Operations:
Net investment income ......... $ 5,942,440 $ 14,174,118 $ 5,791,628 $ 11,582,237 $ 2,213,720 $ 3,474,158
Net realized gain (loss) from
investments and foreign currency
transactions ................. 72,429 (4,205,563) 305,691 (3,564,637) 5,120,528 4,651,306
Net unrealized appreciation (de-
preciation) on investments and
translation of assets and liabilities
denominated in foreign currency (285,600) 9,792,417 (2,793,505) 10,082,805 3,456,657 2,080,220
---------- ---------- ---------- ---------- --------- ---------
Net increase in net assets
resulting from operations .. 5,729,269 19,760,972 3,303,814 18,100,405 10,790,905 10,205,684
Distributions to shareholders:
From undistributed net investment
income:
Class I ...................... (5,488,863) (13,730,112) (5,694,327) (11,517,255) (2,223,219) (3,522,594)
Class II ..................... (59,598) (18,628) -- -- (34,570) (593)
From net realized capital gains:
Class I ....................... -- -- -- -- (4,634,096) (3,804,886)
Class II ...................... -- -- -- -- (30,571) --
Return of capital distribution for tax
purposes:
Class I ...................... -- (1,386,320) -- -- -- --
Class II ..................... -- (1,753) -- -- -- --
Increase (decrease) in net assets from
capital share transactions (22,085,268) (25,665,095) (911,765) (23,877,441) 27,220,473 13,986,181
(Note 3) ---------- ---------- ---------- ---------- --------- ---------

Net increase (decrease) in net
assets ................... (21,904,460) (21,040,936) (3,302,278) (17,294,291) 31,088,922 16,863,792
Net assets:
Beginning of period ............ $166,162,907 $187,203,843 $208,057,440 $225,351,731 $83,732,818 $66,869,026
---------- ---------- ---------- ---------- --------- ---------
End of period .................. $144,258,447 $166,162,907 $204,755,162 $208,057,440$114,821,740 $83,732,818
========== ========== ========== ========== ========= =========
Undistributed net investment income
included in net assets:
Beginning of period ........... $ 100,998 $ 16,291,164 $ 613,089 $ 548,107 $ 152,947 $ 201,976
========== ========== ========== ========== ========= =========
End of period ................. $ 494,977 $ 100,998 $ 710,390 $ 613,089 $ 108,878 $ 152,947
========== ========== ========== ========== ========= =========

Franklin Adjustable U.S. Franklin Adjustable Rate
Government Securities Fund Franklin Equity Income Fund Securities Fund
--------------------- ------------------- ------------------
Six Months Year Ended Six Months Year Ended Six Months Year Ended
Ended 4/30/96 10/31/95 Ended 4/30/96 10/31/95 Ended 4/30/96 10/31/95
---------- ----------- ---------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income ...... $ 14,469,513 $ 33,692,413 $ 3,993,468 $ 5,478,624 $ 430,762 $ 1,186,226
Net realized gain (loss) from
investments and foreign
currency transactions ....... (3,211,663) (18,757,683) 1,535,766 4,616,219 (67,814) (298,102)
Net unrealized appreciation on
investments and translation of
assets and liabilities denomi-
nated in foreign currency ... 1,825,739 26,814,593 12,435,052 6,569,952 51,198 508,371
---------- ----------- ---------- --------- --------- ---------
Net increase in net assets
resulting from operations .13,083,589 41,749,323 17,964,286 16,664,795 414,146 1,396,495
Distributions to shareholders:
From undistributed net investment
income:
Class I ................... (14,553,998) (33,597,566) (4,160,652) (5,162,293) (430,762) (1,186,226)
Class II .................. -- -- (55,107) (644) -- --
From net realized capital gains:
Class I .................... -- -- (4,623,232) (1,652,725) -- --
Class II.................... -- -- (30,854) -- -- --
Increase (decrease) in net assets
from capital share transactions
(Note 3) .................... (48,429,504) (199,397,997) 48,333,088 66,671,939 (2,437,629) (7,760,753)
---------- ----------- ---------- --------- --------- ---------
Net increase (decrease) in
net assets ............ (49,899,913) (191,246,240) 57,427,529 76,521,072 (2,454,245) (7,550,484)
Net assets:
Beginning of period ......... $509,370,582 $700,616,822 $169,283,836 $ 92,762,764 $17,013,756 $24,564,240
---------- ----------- ---------- --------- --------- ---------
End of period ............... $459,470,669 $509,370,582 $226,711,365 $169,283,836 $14,559,511 $17,013,756
========== =========== ========== ========= ========= =========
Undistributed net investment
income included in net assets:
Beginning of period ........ $ 1,352,705 $ 1,257,858 $ 399,686 $ 83,999 $ -- $ --
========== =========== ========== ========= ========= =========
End of period .............. $ 1,268,220 $ 1,352,705 $ 178,613 $ 399,686 $ -- $ --
========== =========== ========== ========= ========= =========

</TABLE>

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

FRANKLIN INVESTORS SECURITIES TRUST

Notes to Financial Statements (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

Franklin Investors Securities Trust (the Trust) is an open-end management
investment company (mutual fund), registered under the Investment Company Act of
1940, as amended. The Trust currently has six separate funds (the Funds) in
operation consisting of five separate diversified Funds: Franklin
Short-Intermediate U.S. Government Securities Fund (the Short-Intermediate
Fund), Franklin Convertible Securities Fund (the Convertible Fund), Franklin
Adjustable U.S. Government Securities Fund (the Adjustable U.S. Government
Fund), Franklin Equity Income Fund (the Equity Income Fund), and Franklin
Adjustable Rate Securities Fund (the Adjustable Rate Fund), and one
non-diversified Fund: Franklin Global Government Income Fund (the Global Fund).
Each of the Funds issues a separate series of the Trust's shares and maintains a
totally separate investment portfolio. The investment objectives of the Funds
are as follows:
<TABLE>
<CAPTION>

Growth and Income Current income
- ------------------------- ------------------------------------------
<S> <C>
Franklin Convertible Securities Fund Franklin Global Government Income Fund
Franklin Equity Income Fund Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Adjustable U.S. Government Securities Fund
Franklin Adjustable Rate Securities Fund
</TABLE>

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

On June 15, 1993, the Board of Trustees (the Board) authorized a change in the
fiscal year end of the Trust from January 31 of each year to October 31.

The Global Fund, the Convertible Fund and the Equity Income Fund offer two
classes of shares, Class I and Class II. Class I shares are sold with a higher
front-end sales charge than Class II shares. Each class of shares may be subject
to a contingent deferred sales charge and has the same rights, except with
respect to the effect of the respective sales charges, the distribution fees
borne by each class, voting rights on matters affecting a single class and the
exchange privilege of each class.

The offering of Class II shares in the Global Fund began May 1, 1995; the
offering of Class II shares in the Convertible Fund and the Equity Income Fund
began October 1, 1995, at which time all previously outstanding shares became
Class I shares. Realized and unrealized gains or losses and net investment
income, other than class specific expenses, are allocated daily to each class of
shares based upon the relative proportion of net assets of each class.

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

a. Security Valuation:

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

The value of a foreign security is determined as of the earlier of the close of
trading on the foreign exchange on which it is traded or the close of trading on
the New York Stock Exchange (Exchange). That value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in effect at noon, New York
time, on the day the value of the foreign security is determined. If no sale is
reported at that time, the mean between the current bid and asked prices is
used. Occasionally, events which affect the values of foreign securities and
foreign exchange rates may occur between the times at which they are determined
and the close of the Exchange and will, therefore, not be reflected in the
computation of the Fund's net asset value, unless material. If events which
materially affect the value of these foreign securities occur during such
period, these securities will be valued in accordance with procedures
established by the Board.

The Adjustable Rate Fund and the Adjustable U.S. Government Fund hold Portfolio
shares that are valued at their proportionate interest in the net assets of the
Securities Portfolio and the Mortgage Portfolio (the Portfolios), respectively.
At April 30, 1996, the Adjustable Rate Fund owns 61% of the Securities Portfolio
and the Adjustable U.S. Government Fund owns 98% of the Mortgage Portfolio. The
Portfolios' shares held by the Funds are valued at the net asset value of the
Portfolios.

b. Income Taxes:

The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to shareholders which will be sufficient to relieve the
Funds from income and excise taxes. Each Fund is treated as a separate entity in
the determination of compliance with the Internal Revenue Code.

c. Security Transactions:

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

d. Investment Income, Expenses and Distributions:

Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Bond
discount and premium are amortized as required by the Internal Revenue Code.

The Short-Intermediate Fund and the Adjustable Rate Fund normally declare
dividends from their net investment income daily and distribute monthly. Daily
allocations of net investment income commence on the date following the receipt
of an investor's funds for the Short-Intermediate Fund, and the date of receipt
of an investor's funds for the Adjustable Rate Fund. Dividends declared by the
Short-Intermediate Fund equal an amount set from time to time by the Board of
Trustees. Dividends declared by the Adjustable Rate Fund equal its net
investment income.

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

Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatment of wash sale and foreign currency
transactions.

A portion of the distributions received by the Convertible Fund and the Equity
Income Fund from investments in Real Estate Investment Trust (REIT) securities
may be characterized as tax basis return of capital (ROC) distributions, which
are not recorded as dividend income, but reduce the cost basis of the REIT
securities. ROC distributions exceeding the cost basis of the REIT security are
recognized by the Funds as capital gain.

e. Expense Allocation:

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

f. Foreign Currency Translation:

The accounting records of the Funds are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of the currencies against U.S. dollars on the
valuation date. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the day that the transactions are
recorded. Differences between income and expense amounts recorded and collected
or paid are recognized when reported by the custodian.

The Funds do not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.

Realized foreign exchange gains or losses arise from sales and maturities of
short-term securities, sales of foreign currencies, gains or losses realized
between the trade and settlement dates on security transactions, the difference
between the amounts of dividends and interest, and foreign withholding taxes
recorded on the Funds' books and the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized appreciation or depreciation on
translation of assets and liabilities denominated in foreign currencies arises
from changes in the value of assets and liabilities other than investments in
securities at the end of the reporting period, resulting from changes in
exchange rates.

g. 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 expenses during the reporting
period. Actual results could differ from those estimates.

h. Joint Repurchase Agreements

The Funds may enter into a joint repurchase agreement whereby their uninvested
cash balances are deposited into a joint cash account to be used to invest in
one or more repurchase agreements with government securities dealers recognized
by the Federal Reserve Board and/or member banks of the Federal Reserve System.
The value and face amount of the joint repurchase agreement are allocated to the
Funds based on their pro-rata interest.

A repurchase agreement is accounted for as a loan by the Fund to the seller,
collateralized by underlying U.S. government securities, which are delivered to
the Fund's 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 Fund, with the value of the underlying securities marked to
market daily to maintain coverage of at least 100%. At April 30, 1996, all
outstanding repurchase agreements held by the Funds had been entered into on
that date.

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

The Funds may purchase securities on a when issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Funds have set aside sufficient investment
securities as collateral for these purchase commitments.

2. FORWARD FOREIGN CURRENCY CONTRACTS

A forward currency contract, which is individually negotiated and privately
traded by currency traders and their customers, is a commitment to purchase or
sell a specific currency for an agreed-upon price at a future date.

The Global Fund may enter into forward contracts with the objective of
minimizing the risk to the Fund from adverse changes in the relationship between
currencies or to enhance fund value. The Fund may also enter into a forward
contract in relation to a security denominated in a foreign currency or when it
anticipates receipt in a foreign currency of dividends or interest payments in
order to "lock in" the U.S. dollar price of a security or the U.S. dollar
equivalent of such dividend or interest payments.

Any gain or loss realized from a forward currency contract is recorded as a
realized gain or loss from investments.

The Fund segregates sufficient cash, cash equivalents or readily marketable debt
securities as collateral for commitments created by open forward contracts. The
Fund could be exposed to risk if counterparties to the contracts are unable to
meet the terms of their contracts or if the value of the foreign currency
changes unfavorably.

As of April 30, 1996, the Global Fund had the following forward foreign currency
contracts outstanding:
<TABLE>
<CAPTION>

In Unrealized
Contracts to Sell Exchange for Settlement Date Gain (Loss)
------------------------------- --------- ---------- --------
<C> <S> <C> <C> <C>
2,800,000,000 Italian Lira.......... U.S. $1,789,343 5/9/96 U.S. $ (2,903)
2,800,000,000 Italian Lira.......... 1,779,789 5/15/96 (11,345)
3,661,000 German Deutschemarks.. 2,412,123 5/9/96 18,837
3,661,000 German Deutschemarks.. 2,409,504 5/9/96 16,218
--------- --------
U.S. $8,390,759 $ 20,807
--------- --------

Unrealized gain on offsetting forward exchange contracts $230,869
--------
Net unrealized gain on forward exchange contracts U.S. $251,676
========

</TABLE>

3. TRUST SHARES

At April 30, 1996, there was an unlimited number of shares of beneficial
interest authorized with a par value of $0.01 per share. Transactions in each of
the Trust's shares were as follows:
<TABLE>
<CAPTION>

Franklin Global Franklin Short-Intermediate Franklin Convertible
Government Income FundU.S. Government Securities Fund Securities Fund
------------------- ------------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- -------- ---------- -------- ----------
Six months ended April 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................... 2,490,136 $20,888,604 3,862,493 $40,020,577 2,063,816 $26,475,087
Shares issued in reinvestment
of distributions ............... 327,131 2,730,196 332,237 3,439,044 394,549 4,926,819
Shares redeemed ................ (5,612,773) (46,965,405) (4,284,740) (44,371,386) (598,467) (7,673,284)
-------- ---------- -------- ---------- -------- ----------
Net increase (decrease) ......... (2,795,506) $(23,346,605) (90,010) $ (911,765) 1,859,898 $23,728,622
======== ========== ======== ========== ======== ==========
Year Ended October 31, 1995
Shares sold .................... 5,432,041 $43,664,912 4,024,376 $40,822,597 2,010,356 $24,397,204
Shares issued in reinvestment
of distributions ............... 914,639 7,301,870 687,236 6,990,998 438,817 5,039,171
Shares redeemed ................ (9,709,607) (77,805,254) (7,081,035) (71,691,036) (1,305,974) (15,669,142)
-------- ---------- -------- ---------- -------- ----------
Net increase (decrease).......... (3,362,927) $(26,838,472) (2,369,423) $(23,877,441) 1,143,199 $13,767,233
======== ========== ======== ========== ======== ==========

Franklin Adjustable Franklin Franklin Adjustable
U.S. Government Securities Fund Equity Income Fund Rate Securities Fund
--------------------- ------------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
--------- ----------- -------- ---------- -------- ----------
Six months ended April 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold .................. 8,147,767 $ 76,273,637 3,710,228 $58,882,461 310,337 $ 3,050,506
Shares issued in reinvestment
of distributions ............. 869,127 8,111,771 448,973 7,039,914 32,614 320,852
Shares redeemed .............. (14,190,398) (132,814,912) (1,501,870) (23,821,688) (589,704) (5,808,987)
--------- ----------- -------- ---------- -------- ----------
Net increase (decrease)........ (5,173,504) $ (48,429,504) 2,657,331 $42,100,687 (246,753) $ (2,437,629)
========= =========== ======== ========== ======== ==========
Year Ended October 31, 1995
Shares sold .................. 14,029,557 $129,980,548 6,072,743 $88,034,511 1,190,439 $11,515,704
Shares issues in reinvestment
of distributions ............. 2,216,085 20,454,537 366,679 5,193,976 92,210 897,246
Shares redeemed .............. (37,854,275) (349,833,082) (1,878,096) (26,946,913) (2,082,373) (20,173,703)
--------- ----------- -------- ---------- -------- ----------
Net increase (decrease)........ (21,608,633) $(199,397,997) 4,561,326 $66,281,574 (799,724) $(7,760,753)
========= =========== ======== ========== ======== ==========
Franklin
Global Government Franklin Convertible Franklin
Income Fund Securities Fund Equity Income Fund
--------------- --------------- ---------------
Class II Shares: Shares Amount Shares Amount Shares Amount
------ -------- ------ -------- ------ ---------
Six months ended April 30, 1996
<S> <C> <C> <C> <C> <C> <C>
Shares sold ................................. 171,233 $1,438,860 273,983 $3,501,824 396,247 $6,300,331
Shares issued in reinvestment of distributions 4,422 36,854 4,374 54,929 5,078 79,966
Shares redeemed ............................. (25,570) (214,377) (5,108) (64,902) (9,314) (147,896)
------ -------- ------ -------- ------ ---------
Net increase ................................. 150,085 $1,261,337 273,249 $3,491,851 392,011 $6,232,401
====== ======== ====== ======== ====== =========
Period Ended October 31, 1995*
Shares sold ................................. 145,023 $1,185,498 47,208 $ 608,063 25,828 $ 396,234
Shares issues in reinvestment of distributions 1,742 14,236 46 593 41 629
Shares redeemed ............................. (3,208) (26,357) (30,783) (389,708) (425) (6,498)
------ -------- ------ -------- ------ ---------
Net increase ................................. 143,557 $1,173,377 16,471 $ 218,948 25,444 $ 390,365
====== ======== ====== ======== ====== =========

</TABLE>

*For the period May 1, 1995 to October 31, 1995 with respect to the Global Fund
and the period October 1, 1995 to October 31, 1995 with respect to the
Convertible Fund and the Equity Income Fund.

4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At October 31, 1995, for tax purposes, the Funds had accumulated net realized
gains or capital loss carryovers as follows:
<TABLE>
<CAPTION>

Franklin Franklin Franklin
Global Short-Intermediate Franklin Adjustable Franklin Franklin
Government U.S. Government Convertible U.S. Government Equity Adjustable Rate
Income Fund Securities Fund Securities FundSecurities FundIncome Fund Securities Fund
-------- ------------ ---------- ----------- -------- ----------
Accumulated net realized
<S> <C> <C> <C> <C> <C> <C>
gains.................... -- -- $4,662,218 -- $4,648,680 --
======== ============ ========== =========== ======== ==========
Capital loss carryovers
Expiring in:
2000.................... -- -- -- $ 1,925,614 -- --
2001.................... -- -- -- 7,701,615 -- --
2002.................... $ 548,256 $2,434,010 -- 41,867,757 -- $414,821
2003.................... 4,045,611 3,564,637 -- 18,176,270 -- 286,740
-------- ------------ ---------- ----------- -------- ----------
$4,593,867 $5,998,647 -- $69,671,256 -- $701,561
======== ============ ========== =========== ======== ==========
</TABLE>

For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower or unrealized depreciation is higher) than for financial
reporting purposes at April 30, 1996, by $36,188 in the Convertible Fund,
$145,358 in the Adjustable U.S. Government Securities Fund, $27,369 in the
Equity Income Fund, and $44,860 in the Adjustable Rate Fund.

5. PURCHASES AND SALES OF SECURITIES

Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the six months ended April 30, 1996, were as follows:
<TABLE>
<CAPTION>

Franklin Franklin Franklin
Global Short-Intermediate Franklin Adjustable U.S. Franklin Franklin
Government U.S. Government Convertible Government Equity Adjustable Rate
Income Fund Securities Fund Securities FundSecurities Fund Income Fund Securities Fund
---------- ----------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Purchases............... $114,258,157 $88,170,783 $78,899,815 $ 56,324,381 $72,144,054 $2,914,336

Sales................... $131,194,919 $90,063,598 $59,765,437 $104,925,139 $20,651,761 $5,326,628

</TABLE>

6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. Management/Administration Agreement:

Under the terms of a management agreement, Franklin Advisers, Inc. (Advisers)
provides investment advice, administrative services, office space and facilities
to each Fund, and receives fees computed monthly based on the net assets of each
Fund on the last day of the month, except for the Adjustable U.S. Government
Fund and the Adjustable Rate Fund, as follows:

Annualized Fee RateMonth End Net Assets
------------- ----------------------------------
0.625% First $100 million
0.50% Over $100 million, up to and including $250 million
0.45% Over 250 million

Under the terms of a separate administration agreement with the Adjustable U.S.
Government Fund and the Adjustable Rate Fund, Advisers provides various
administrative, statistical, and other services, and receives fees computed
monthly based on the average daily net assets as follows:

Annualized Fee RateAverage Daily Net Assets
------------- ----------------------------------
0.10% First $5 billion
0.09% Over $5 billion, up to and including $10 billion
0.08% Over $10 billion

The terms of the management/administration agreement provide that aggregate
annual expenses of each Fund be limited to the extent necessary to comply with
the limitations set forth in the laws, regulations and administrative
interpretations of the states in which the Fund's shares are registered. For the
six months ended April 30, 1996, the Funds' expenses did not exceed these
limitations.

b. Shareholders Services Agreement:

Under the terms of a shareholder services agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred by the Funds for
the six months ended April 30, 1996, aggregated $337,938 all of which was paid
to Investor Services.

c. Distribution Plans and Underwriting Agreement:

Under the terms of distribution plans pursuant to Rule 12b-1 of the Investment
Company Act of 1940 (the Plans), the Short-Intermediate Fund, the Adjustable
U.S. Government Fund and the Adjustable Rate Fund reimburse Franklin/Templeton
Distributors, Inc. (Distributors), in an amount up to 0.10%, 0.25%, 0.25%,
respectively, per annum of each fund's average daily net assets for costs
incurred in the promotion, offering and marketing of the funds' shares. The
Plans do not permit nor require payments of excess costs after termination. Fees
incurred by the funds under the Plans aggregated $685,906 for the six months
ended April 30, 1996.

Under the terms of the Plans, the Global Fund will reimburse Distributors in an
amount up to a maximum of 0.15% per annum for Class I and 0.65% per annum for
Class II, of the average daily net assets of such class, for costs incurred in
the promotion, offering and marketing of the fund's shares. Fees incurred by the
Fund under the Plans aggregated $59,514 for the six months ended April 30, 1996.

Under the terms of the Plans, the Convertible Fund and Equity Income Fund will
reimburse Distributors in an amount up to a maximum of 0.25% per annum for Class
I and 1.00% per annum for Class II of the average daily net assets of such class
for costs incurred in the promotion, offering and marketing of the fund's
shares. Fees incurred by the Fund under the Plan aggregated $364,628 for the six
months ended April 30, 1996.

In its capacity as underwriter for the shares of the Funds, Distributors
receives commissions on sales of the Funds' shares of beneficial interest.
Commissions are deducted from the gross proceeds received from the sale of the
shares of the Funds, and as such are not expenses of the Funds. Distributors may
also make payments, out of its own resources, to the dealers for certain sales
of the Funds' shares. Commissions received by Distributors, the amounts paid to
other dealers, and any applicable contingent deferred sales charges for the six
months ended April 30,1996, were as follows:
<TABLE>
<CAPTION>

Franklin Franklin Franklin
Global Short-Intermediate Franklin Adjustable U.S. Franklin Franklin
Government U.S. Government Convertible Government Equity Adjustable Rate
Class I Income Fund Securities Fund Securities Fund Securities Fund Income Fund Securities Fund
-------- ----------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Total commissions
received .................. $119,095 $129,839 $532,749 $ 73,998 $916,148 $ 12,991

Paid to other dealers ...... 114,802 142,220 478,434 72,174 848,208 13,486

Class II
Total commissions
received .................. 10,940 31,807 58,838

Paid to other dealers ...... 23,084 65,695 115,222

Contingent deferred
sales charge .............. 205 568 230

</TABLE>

d. Other Affiliated Parties and Transactions

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

7. CREDIT RISKS

Although each of the Funds has a diversified investment portfolio, there are
certain credit risks, foreign currency exchange risk, or event risks due to the
manner in which certain Funds are invested, which may subject the Funds more
significantly to economic changes occurring in certain industries, or sectors as
follows:

Although the Convertible Fund has a diversified portfolio, 71.08% of its
portfolio is invested in lower rated and comparable quality unrated high yield
securities. Investments in high yield securities are accompanied by a greater
degree of credit risk and such lower quality securities tend to be more
sensitive to economic conditions than higher rated securities. The risk of loss
due to default by the issuer may be significantly greater for the holders of
high yield securities, because such securities are generally unsecured and are
often subordinated to other creditors of the issuer.

The Global Fund has investments in excess of 10% of its total net assets in debt
securities denominated in Australian and Canadian dollars.

8. FINANCIAL HIGHLIGHTS

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

Per Share Operating Performance Ratios/Supplemental Data
-------------------------------------------------- ----------------------------
Net Distri- Ratio
Net Realized Total butions Distri- Distri- of Net
Asset & Un- From From butions butions Net Ratio of Invest-
Value at Net realized Invest-Net From From Asset Net Expenses ment Average
Period Begin- Invest-Gain ment Invest- RealizedReturn Total Value at Assets to Aver- Income toPortfolio Com-
Ended ning of ment (Loss)on Oper- ment Capital of Distri- End of Total at End age Net Average Turnover mission
Oct.31 Period Income Securities ations Income Gains Capital butions Period Return**of Period Assets***Net AssetsRate Rate5
- ------------------------------------------------------------------------------------------------------------------------------------

Franklin Global Government Income Fund
Class I Shares:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19922 $ 9.34 $0.86 $0.246 $1.106 $(0.900) $(0.156)$ -- $(1.056) $ 9.39 12.15% $ 78,911 0.50% 7.87% 155.40% --
19932 9.39 0.83 (0.698) 0.132 (0.713) (0.075) (0.124) (0.912) 8.61 1.08 153,899 0.72 7.08 49.20 --
19933 8.61 0.58 0.716 1.296 (0.576) -- -- (0.576) 9.33 15.14 195,627 0.77* 6.74* 67.36 --
1994 9.33 1.30 (1.806) (0.506) (0.078) (0.083) (0.603) (0.764) 8.06 (5.72) 187,204 0.89 8.54 80.69 --
1995 8.06 0.67 0.290 0.960 (0.645) -- (0.065) (0.710) 8.31 12.65 164,970 0.96 8.29 103.49 --
19966 8.31 0.32 (0.010) 0.310 (0.300) -- -- (0.300) 8.32 3.77 141,817 0.85* 7.69* 78.06 --
Class II Shares:+++
1995+ 8.03 0.31 0.301 0.611 (0.301) -- (0.030) (0.331) 8.31 7.09 1,193 1.54* 7.41* 103.49 --
19966 8.31 0.30 (0.023) 0.277 (0.277) -- -- (0.277) 8.31 3.37 2,441 1.43* 7.22* 78.06 --
Franklin Short-Intermediate U.S. Government Securities Fund
Class I Shares:
19922 10.30 0.58 0.374 0.954 (0.786) (0.078) -- (0.864) 10.39 9.44 163,690 0.71 5.90 102.05 --
19932 10.39 0.57 0.432 1.002 (0.565) (0.257) -- (0.822) 10.57 10.01 235,382 0.56 5.40 78.96 --
19933 10.57 0.38 0.245 0.625 (0.390) (0.005) -- (0.395) 10.80 5.90 273,678 0.55* 4.75* 31.71 --
1994 10.80 0.49 (0.696) (0.206) (0.472) (0.092) -- (0.564) 10.03 (1.99) 225,352 0.65 4.75 99.09 --
1995 10.03 0.56 0.309 0.869 (0.549) -- -- (0.549) 10.35 8.90 208,057 0.73 5.42 56.34 --
19966 10.35 0.29 (0.128) 0.162 (0.282) -- -- (0.282) 10.23 1.56 204,755 0.74* 5.55* 42.95 --
Franklin Convertible Securities Fund
Class I Shares:
19922 8.53 0.44 2.194 2.634 (0.684) -- -- (0.684) 10.48 31.50 20,282 0.26 6.84 64.90 --
19932 10.48 0.61 1.034 1.644 (0.684) -- -- (0.684) 11.44 16.12 28,307 0.25 6.01 60.00 --
19933 11.44 0.45 1.413 1.863 (0.513) -- -- (0.513) 12.79 16.50 47,440 0.25* 5.25* 31.05 --
1994 12.79 0.59 (0.327) 0.263 (0.594) (0.119) -- (0.713) 12.34 2.07 66,869 0.84 4.84 68.39 --
1995 12.34 0.58 1.099 1.679 (0.592) (0.697) -- (1.289) 12.73 15.18 83,523 1.03 4.82 108.64 --
19966 12.73 0.29 1.139 1.429 (0.300) (0.679) -- (0.979) 13.18 11.79 111,009 1.02* 4.59* 66.47 0.0502
Class II Shares:+++
1995++ 13.06 0.07 (0.373) (0.303) (0.047) -- -- (0.047) 12.71 (2.33) 209 1.60* 3.64* 108.64 --
19966 12.71 0.24 1.160 1.400 (0.271) (0.679) -- (0.950) 13.16 11.47 3,813 1.79 3.85 66.47 --
Franklin Adjustable U.S. Government Securities Fund
Class I Shares:
19922 $ 9.99 $0.74 $0.027 $0.767 $(0.777) $ -- $-- $(0.777) $ 9.98 7.96% $3,513,415 0.68%4 7.10% 30.89% --
19932 9.98 0.51 (0.105) 0.405 (0.522) (0.003) -- (0.525) 9.86 4.16 2,971,424 0.66 4 5.10 30.36 --
19933 9.86 0.28 (0.086) 0.194 (0.284) -- -- (0.284) 9.77 1.99 1,813,504 0.65 4* 3.92* 6.97 --
1994 9.77 0.35 (0.606) (0.256) (0.314) -- -- (0.314) 9.2 (2.65) 700,617 0.42 4 3.67 5.99 --
1995 9.20 0.54 0.136 0.676 (0.536) -- -- (0.536) 9.34 7.57 509,371 0.61 4 5.76 17.81 --
19966 9.34 0.28 (0.030) 0.250 (0.280) -- -- (0.280) 9.31 2.71 459,471 0.71 4* 5.94* 11.60 --
Franklin Equity Income Fund
Class I Shares:
19922 10.64 0.42 1.967 2.387 (0.660) (0.057) -- (0.717) 12.31 22.76 16,144 0.25 5.77 40.59 --
19932 12.31 0.66 1.307 1.967 (0.682) (0.135) -- (0.817) 13.46 16.23 26,092 0.25 5.18 31.05 --
19933 13.46 0.60 1.435 2.035 (0.495) (0.090) -- (0.585) 14.91 15.27 42,177 0.25* 5.86* 19.33 --
1994 14.91 0.62 (0.358) 0.262 (0.725) (0.307) -- (1.032) 14.14 1.83 92,763 0.77 4.53 39.51 --
1995 14.14 0.63 1.272 1.902 (0.609) (0.243) -- (0.852) 15.19 14.10 168,897 1.00 4.44 27.86 --
19966 15.19 0.31 1.206 1.516 (0.337) (0.399) -- (0.736) 15.97 10.35 226,711 0.92* 4.02* 12.47 0.0535
Class II Shares:+++
1995++ 15.38 0.05 (.193) (.143) (0.047) -- -- (0.047) 15.19 (0.93) 386 1.99* 3.57 27.86 --
19966 15.19 0.27 1.197 1.467 (0.298) (0.399) -- (0.697) 15.96 10.02 6,662 1.66* 3.27* 12.47 --
Franklin Adjustable Rate Securities Fund
Class I Shares:
19921 10.00 -- -- -- -- -- -- -- 10.00 -- -- -- -- -- --
19932 10.00 0.60 0.031 0.631 (0.601) -- -- (0.601) 10.03 6.48 12,521 -- 5.84 48.95 --
19933 10.03 0.37 0.009 0.379 (0.369) -- -- (0.369) 10.04 3.83 37,809 0.114* 4.69* 49.11 --
1994 10.04 0.45 (0.341) 0.109 (0.449) -- -- (0.449) 9.70 1.11 24,564 0.454 4.45 84.67 --
1995 9.70 0.58 0.120 0.700 (0.580) -- -- (0.580) 9.82 7.57 17,014 0.704 5.82 53.30 --
19966 9.82 0.27 (0.016) 0.254 (0.274) -- -- (0.274) 9.80 2.61 14,560 0.904* 5.53* 18.75 --

</TABLE>

1For the period December 26, 1991 (effective date of registration) to January
31, 1992.

2For the year ended January 31.

3For the nine months ended October 31, 1993.

4Includes the Funds' share of the Portfolios' allocated expenses.

5Represents the average broker commission rate per share paid by the Fund in
connection with the execution of the Fund's portfolio transactions in equity
securities.

6For the six months ended April 30, 1996.

+For the period ended May 1, 1995 to October 31, 1995.

++For the period ended October 1, 1995 to October 31, 1995.

+++Ratios have been calculated using daily average net assets during the period.

*Annualized

**Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or contingent deferred sales charge, and assumes reinvestment of
dividends and capital gains at net asset value. Prior to May 1, 1994, dividends
were reinvested at the maximum offering price, and capital gains at net asset
value. Effective May 1, 1994, with the implementation of the Rule 12b-1
distribution plan for Class I shares, the sales charge on reinvested dividends
was eliminated. The total return may differ from that reported in the Manager's
Discussion due to differences between the net asset values quoted and the net
asset values calculated for financial reporting purposes.

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

Ratio of expense to
average net assets

Franklin Global Government Income Fund
Class I
19922 ................................. 0.80%
19933 ................................. 0.73
Franklin Short-Intermediate
U.S. Government Securities Fund
19932 ................................. 0.65
19933 ................................. 0.63*
1994 .................................. 0.68
Franklin Convertible Securities Fund
Class I
19922 ................................. 0.94
19932 ................................. 0.81
19933.................................. 0.86*
1994 .................................. 0.92
Franklin Adjustable
U.S. Government Securities Fund
19922 ................................. 0.89%4
19932 ................................. 0.804
19933 ................................. 0.794
1994 .................................. 0.824
1995 .................................. 0.864
1996 .................................. 0.974*
Franklin Equity Income Fund
Class I
19922 ................................. 0.84
19932 ................................. 0.81
19933 ................................. 0.87*
1994 .................................. 0.95
1995 .................................. 1.02
Franklin Adjustable Rate Securities Fund
19921 ................................. --
19932 ................................. 1.914
19933 ................................. 1.014*
1994 .................................. 0.854
1995 .................................. 0.994
19966 ................................. 1.164*

ADJUSTABLE RATE SECURITIES PORTFOLIOS
<TABLE>
<CAPTION>

Statement of Investments in Securities and Net Assets, April 30, 1996
(unaudited)

Face Value
Amount U.S. Government Adjustable Rate Mortgage Portfolio (Note 1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Adjustable Rate Mortgage Securities 99.4%
Federal Home Loan Mortgage Corp. (FHLMC) 25.2%
$ 5,983,688 FHLMC, Cap 11.253%, Margin 1.75% + CMT, Resets Annually, 7.375%, 11/01/16 ..... $ 6,104,586
2,309,211 FHLMC, Cap 11.939%, Margin 2.127% + CMT, Resets Annually, 7.822%, 07/01/20 .... 2,379,826
1,070,905 FHLMC, Cap 12.176%, Margin 2.015% + CMT, Resets Annually, 7.420%, 04/01/20 .... 1,098,299
3,965,440 FHLMC, Cap 12.177%, Margin 2.265% + CMT, Resets Annually, 7.610%, 07/01/20 .... 4,102,802
900,004 FHLMC, Cap 12.68%, Margin 2.195% + CMT, Resets Annually, 7.951%, 02/01/19 ..... 923,854
2,586,216 FHLMC, Cap 12.723%, Margin 2.189% + CMT, Resets Annually, 7.885%, 04/01/19 .... 2,680,613
5,474,724 FHLMC, Cap 12.744%, Margin 2.00% + CMT, Resets Annually, 7.931%, 07/01/18 ..... 5,616,464
912,088 FHLMC, Cap 12.80%, Margin 2.05% + CMT, Resets Annually, 7.752%, 11/01/18 ...... 930,557
8,115,252 FHLMC, Cap 12.806%, Margin 2.23% + CMT, Resets Annually, 7.860%, 04/01/18 ..... 8,414,055
6,685,478 FHLMC, Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 7.663%, 9/01/19 ...... 6,838,723
7,015,936 FHLMC, Cap 13.065%, Margin 1.25% + COFI, Resets Monthly, 6.283%, 06/01/30 ..... 7,006,815
3,572,707 FHLMC, Cap 13.156%, Margin 1.915% + CMT, Resets Annually, 7.581%, 12/01/16 .... 3,648,654
2,270,345 FHLMC, Cap 13.16%, Margin 2.115% + CMT, Resets Annually, 7.797%, 07/01/19 ..... 2,324,460
3,562,621 FHLMC, Cap 13.246%, Margin 2.175% + CMT, Resets Monthly, 7.867%, 10/01/18 ..... 3,652,177
1,431,201 FHLMC, Cap 13.269%, Margin 2.249% + CMT, Resets Annually, 7.901%, 05/01/19 .... 1,486,574
424,354 FHLMC, Cap 13.286%, Margin 2.164% + CMT, Resets Annually, 7.741%, 10/01/19 .... 433,215
2,544,395 FHLMC, Cap 13.292%, Margin 2.115% + CMT, Resets Annually, 7.748%, 03/01/19 .... 2,603,663
815,989 FHLMC, Cap 13.302%, Margin 2.04% + CMT, Resets Annually, 7.601%, 04/01/18 ..... 834,132
1,737,035 FHLMC, Cap 13.306%, Margin 2.057% + CMT, Resets Annually, 7.732%, 12/01/18 .... 1,777,416
2,459,198 FHLMC, Cap 13.36%, Margin 2.242% + CMT, Resets Annually, 8.088%, 07/01/20 ..... 2,554,344
5,190,453 FHLMC, Cap 13.364%, Margin 2.225% + CMT, Resets Annually, 7.884%, 07/01/19 .... 5,324,498
5,278,129 FHLMC, Cap 13.366%, Margin 2.102% + CMT, Resets Annually, 7.559%, 03/01/18 .... 5,396,422
10,554,078 FHLMC, Cap 13.37%, Margin 2.04% + CMT, Resets Annually, 7.664%, 04/01/19 ...... 10,840,515
7,885,634 FHLMC, Cap 13.65%, Margin 2.249% + CMT, Resets Annually, 8.082%, 07/01/20 ..... 8,190,728
680,056 FHLMC, Cap 13.77%, Margin 2.057% + CMT, Resets Annually, 7.715%, 02/01/19 ..... 692,344
4,024,191 FHLMC, Cap 13.793%, Margin 2.214% + CMT, Resets Annually, 8.011%, 11/01/19 .... 4,174,856
9,321,090 FHLMC, Cap 13.879%, Margin 2.089% + CMT, Resets Annually, 7.789%, 04/01/18 .... 9,614,704
2,743,734 FHLMC, Cap 14.307%, Margin 1.957% + 3CMT, Resets Every 3 Years, 8.602%,
12/01/21...................................................................... 2,813,919
1,626,453 FHLMC, Cap 14.451%, Margin 2.00% + CMT, Resets Annually, 7.704%, 12/01/18 ..... 1,669,066
3,933,392 FHLMC, Cap 14.90%, Margin 2.546% + CMT, Resets Annually, 7.968%, 02/01/19 ..... 4,115,075
-------------
Total Federal Home Loan Mortgage Corp. (Cost $173,675,905)............... 118,243,356
-------------
Federal National Mortgage Association (FNMA) 64.3%
3,021,944 FNMA, Cap 12.605%, Margin 2.536% + 6 Month TB, Resets Semi-Annually, 7.970%,
11/01/18...................................................................... 3,130,401
17,950,619 FNMA, Cap 12.637%, Margin 2.00% + NCI, Resets Monthly, 6.924%, 11/01/17 ....... 18,056,168
5,121,852 FNMA, Cap 12.64%, Margin 2.00% + CMT, Resets Annually, 7.744%, 03/01/19 ....... 5,268,849
13,391,864 FNMA, Cap 12.66%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 6.981%,
01/01/19...................................................................... 13,600,374
$ 3,876,345 FNMA, Cap 12.662%, Margin 1.25% + COFI, Resets Monthly, 6.885%, 01/01/19 ...... $ 3,856,770
11,576,449 FNMA, Cap 12.705%, Margin 1.25% + COFI, Resets Semi-Annually, 6.309%,
09/01/18...................................................................... 11,564,987
4,797,294 FNMA, Cap 12.787%, Margin 1.25% + COFI, Resets Monthly, 7.486%, 01/01/19 ...... 4,776,041
4,644,614 FNMA, Cap 12.788%, Margin 2.111% + CMT, Resets Annually, 7.936%, 11/01/20 ..... 4,812,749
7,023,529 FNMA, Cap 12.804%, Margin 1.75% + CMT, Resets Annually, 7.430%, 05/01/19 ...... 7,213,019
3,785,207 FNMA, Cap 12.84%, Margin 2.762% + 6 Month DR, Resets Semi-Annually, 8.263%,
06/01/17...................................................................... 3,948,274
6,863,491 FNMA, Cap 12.85%, Margin 2.078% + CMT, Resets Annually, 7.983%, 10/01/17 ...... 7,026,086
8,446,783 FNMA, Cap 12.89%, Margin 2.125% + 6 Month TB, Resets Monthly, 7.501%,
07/01/17...................................................................... 8,610,060
2,339,784 FNMA, Cap 12.911%, Margin 2.00% + 6 Month DR, Resets Semi-Annually, 7.200%,
02/01/18...................................................................... 2,380,613
10,481,711 FNMA, Cap 12.938%, Margin 1.25% + COFI, Resets Monthly, 6.309%, 02/01/19 ...... 10,474,582
4,390,296 FNMA, Cap 12.993%, Margin 2.092% + CMT, Resets Annually, 7.830%, 12/01/19 ..... 4,516,248
6,500,995 FNMA, Cap 13.005%, Margin 1.97% + 3CMT, Resets Every 3 Years, 8.099%,
11/01/17...................................................................... 6,663,195
6,325,263 FNMA, Cap 13.01%, Margin 2.10% + CMT, Resets Annually, 7.697%, 06/01/19 ....... 6,498,807
10,594,003 FNMA, Cap 13.03%, Margin 1.25% + COFI, Resets Monthly, 6.885%, 02/01/20 ....... 10,527,260
6,624,507 FNMA, Cap 13.03%, Margin 1.75% + COFI, Resets Semi-Annually, 7.278%,
12/01/20...................................................................... 6,727,650
7,122,676 FNMA, Cap 13.063%, Margin 2.175% + CMT, Resets Monthly, 7.726%, 04/01/19 ...... 7,371,613
6,907,794 FNMA, Cap 13.083%, Margin 2.005% + CMT, Resets Annually, 7.520%, 06/01/19 ..... 7,097,575
6,927,704 FNMA, Cap 13.099%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.299%,
07/01/20...................................................................... 7,037,716
5,383,755 FNMA, Cap 13.147%, Margin 1.895% + CMT, Resets Annually, 7.672%, 04/01/19 ..... 5,531,713
3,507,497 FNMA, Cap 13.202%, Margin 2.478% + 6 Month TB, Resets Semi-Annually, 7.619%,
11/01/26...................................................................... 3,632,293
3,432,242 FNMA, Cap 13.249%, Margin 2.00% + CMT, Resets Annually, 7.787%, 06/01/19 ...... 3,529,683
9,004,410 FNMA, Cap 13.281%, Margin 2.00% + CMT, Resets Annually, 7.623%, 10/01/19 ...... 9,252,898
8,421,056 FNMA, Cap 13.32%, Margin 1.25% + COFI, Resets Semi-Annually, 7.425%,
04/01/03...................................................................... 8,386,361
14,482,795 FNMA, Cap 13.452%, Margin 2.148% + CMT, Resets Annually, 7.881%, 09/01/22 ..... 14,961,740
14,496,077 FNMA, Cap 13.644%, Margin 2.011% + CMT, Resets Annually, 7.773%, 01/01/18 ..... 14,891,870
7,098,919 FNMA, Cap 13.662%, Margin 2.177% + CMT, Resets Annually, 7.938%, 03/01/21 ..... 7,321,122
9,850,876 FNMA, Cap 13.791%, Margin 2.143% + CMT, Resets Annually, 8.039%, 12/01/20 ..... 10,195,164
4,275,519 FNMA, Cap 13.797%, Margin 2.20% + CMT, Resets Annually, 7.521%, 03/01/19 ...... 4,424,948
5,626,986 FNMA, Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.803%,
07/01/24...................................................................... 5,605,603
5,109,118 FNMA, Cap 13.887%, Margin 2.25% + CMT, Resets Annually, 7.753%, 02/01/19 ...... 5,303,673
$ 3,820,851 FNMA, Cap 13.896%, Margin 2.25% + CMT, Resets Annually, 7.889%, 12/01/18 ...... $ 3,932,184
7,526,451 FNMA, Cap 14.069%, Margin 2.089% + CMT, Resets Annually, 7.758%, 01/01/19 ..... 7,731,923
2,274,831 FNMA, Cap 14.142%, Margin 2.118% + CMT, Resets Annually, 7.741%, 03/01/21 ..... 2,345,805
13,133,318 FNMA, Cap 14.354%, Margin 2.07% + CMT, Resets Annually, 8.060%, 05/01/21 ...... 13,423,826
3,722,540 FNMA, Cap 14.42%, Margin 2.099% + CMT, Resets Annually, 7.880%, 03/01/20 ...... 3,843,336
10,205,109 FNMA, Cap 14.887%, Margin 1.72% + CMT, Resets Annually, 7.607%, 01/01/16 ...... 10,418,088
3,817,419 FNMA, Cap 14.952%, Margin 2.523% + CMT, Resets Annually, 8.955%, 05/01/19 ..... 3,975,879
2,077,598 FNMA, Cap 15.381%, Margin 2.168% + CMT, Resets Annually, 8.045%, 02/01/20 ..... 2,144,262
-------------
Total Federal National Mortgage Association (Cost $249,686,384).......... 302,011,408
-------------
Government National Mortgage Association (GNMA) 9.9%
8,568,320 GNMA, Cap 10.00%, Margin 1.50% + CMT, Resets Annually, 6.00%, 01/20/24 ........ 8,508,856
10,120,624 fGNMA, Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 6.00%, 12/20/25 ........ 10,053,928
8,015,773 GNMA, Cap 11.00%, Margin 2.50% + CMT, Resets Annually, 6.00%, 07/20/25 ........ 8,150,599
20,000,000 eGNMA Cap 11.50% Margin 1.50% + CMT, Resets Annually, 6.50%, 04/01/26 .......... 20,118,750
-------------
Total Government National Mortgage Association (Cost $46,986,906)........ 46,832,133
-------------
Total Long Term Investments (Cost $470,349,195).......................... 467,086,897
-------------
c,dReceivables from Repurchase Agreements 3.9%
18,258,938 Joint Repurchase Agreement, 5.326%, 05/01/96 (Maturity Value $18,323,123)
(Cost $18,320,412)
Bear Stearns & Co., Inc., (Maturity Value $ 3,671,519)
Collateral: U.S. Treasury Notes, 5.625% - 8.75%, 04/30/97 - 10/31/00
B.T. Securities Corp., (Maturity Value $3,671,519)
Collateral: U.S. Treasury Notes, 6.125% - 7.25%, 11/30/96 - 05/15/98
Donaldson, Lufkin, & Jenrette Securities Corp., (Maturity Value $3,671,519)
Collateral: U.S. Treasury Notes, 5.625% - 8.875%, 02/28/97 - 11/15/99
Fuji Securities, Inc., (Maturity Value $3,671,519)
Collateral: U.S. Treasury Bills, 09/26/96 - 01/09/97
U.S. Treasury Notes, 6.25% - 9.125%, 05/15/99 - 08/31/00
SBC Capital Markets, Inc., (Maturity Value $3,637,047)
Collateral: U.S. Treasury Notes, 6.875% - 8.25%, 07/15/98 - 07/31/99 ....... 18,320,412
-------------
Total Investments (Cost $488,669,607) 103.3%...................... 485,407,309
Liabilities in Excess of Other Assets (3.3)% ..................... (15,529,837)
-------------
Net Assets 100.0% ............................................... $469,877,472
=============

At April 30, 1996, the net unrealized depreciation based on the cost of investments
for income tax purposes of $488,669,607 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost .......................................... $ 937,164
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value .......................................... (4,199,462)
-------------
Net unrealized depreciation ................................................ $ (3,262,298)
=============

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

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

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Statement of Investments in Securities and Net Assets, April 30, 1996 (unaudited)

Face Value
Amount Adjustable Rate Securities Portfolio (Note 1)
- ---------------------------------------------------------------------------------------------------------------------------
Adjustable Rate Mortgage Securities 73.5%
<C> <C> <C>
$ 868,861 FNMA, Cap 12.65%, Margin 1.75% + NCI, Resets Monthly, 6.75%, 10/01/28 ............ $ 866,368
471,580 FNMA, Cap 13.86%, Margin 1.84% + NCI, Resets Monthly, 7.617%, 08/01/16 ........... 484,091
1,000,000 fGNMA, Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 6.00%, 04/01/25 ........... 994,688
1,194,254 Homeowners Federal Savings, Cap 13.00%, Margin 1.75% + CMT, Resets Annually,
7.481%, 01/25/18 ................................................................ 1,206,943
1,584,068 PHMS, Cap 11.67%, Margin 2.67% + CMT, Resets Annually, 8.739%, 07/25/22 .......... 1,590,009
983,070 PHMS, Cap 12.02%, Margin 2.55% + CMT, Resets Annually, 8.111%, 04/25/22 .......... 997,816
2,092,763 RFC, Cap 11.46%, Margin 2.25% + CMT, Resets Annually, 7.978%, 11/25/22 ........... 2,113,691
1,459,678 RTC, Cap 12.66%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 7.25%,
04/26/21 1,404,713
2,095,756 RTC, Cap 14.69%, Margin 1.55% + 3CMT, Resets Every 3 Years, 7.571%, 06/25/22 ..... 2,090,517
1,469,497 RTC, Cap 16.48%, Margin NACR - 0.15%, Resets Annually, 7.603%, 07/25/20 .......... 1,414,621
1,068,265 Ryland Mortgage Securities Corp., Cap 11.00%, Margin 1.00% + COFI, Resets Monthly,
6.033%, 04/25/21 ................................................................ 1,062,924
2,370,381 Salomon Brothers Mortgage Securities, Cap 14.00%, Margin 0.96% + NACR,
Resets Annually, 8.24%, 10/25/16 ................................................ 2,330,752
954,523 Saxon Mortgage Securities Corp., Cap 10.78%, Margin 2.78% + 6 Month LIBOR, Resets
Semi-Annually, 8.345%, 05/25/24 ................................................. 967,648
-------------
Total Adjustable Rate Mortgage Securities (Cost $18,074,341)................ 17,524,781
-------------
Fixed Rate Mortgage Securities 5.0%
1,246,608 Countrywide Mortgage-Backed Securities, Inc., Series 1994-I, Class A8, 6.25%, 07/25/09
(Cost $1,212,326)................................................................ 1,201,182
-------------
Asset-Backed Securities 3.3%
795,866 General Motors Acceptance Corp., Series 1992-F, Class A, 4.50%, 09/15/97
(Cost $793,130).................................................................. 793,765
-------------
Other Adjustable Rate Securities 5.4%
1,192,723 SBA, Cap 13.625%, Margin -0.125% + Prime, Resets Quarterly, 8.125%, 08/25/20
(Cost $1,285,905)................................................................ 1,286,278
-------------
U.S. Government Securities 9.9%
1,200,000 U.S. Treasury Notes, 5.25%, 12/31/97 ............................................. 1,186,500
1,200,000 U.S. Treasury Notes, 5.125%, 03/31/98 ............................................ 1,180,874
-------------
Total U.S. Government Securities (Cost $2,376,731).......................... 2,367,374
-------------
Total Long Term Investments (Cost $23,742,433).............................. 23,173,380
-------------
d,eReceivables from Repurchase Agreements 6.5%......................................
$ 1,541,349 Joint Repurchase Agreement, 5.326%, 05/01/96 (Maturity Value $1,546,467)
(Cost $1,546,238)
Bear Stearns & Co., Inc., (Maturity Value $309,875)
Collateral: U.S. Treasury Notes, 5.625 - 8.75%, 04/30/97 - 10/31/00
B.T. Securities Corp., (Maturity Value $309,875)
Collateral: U.S. Treasury Notes, 6.125 - 7.25%, 11/30/96 - 05/15/98
Donaldson, Lufkin & Jenrette Securities Corp., (Maturity Value $309,875)
Collateral: U.S. Treasury Notes, 5.625% - 8.875%, 02/28/97 - 11/15/99
Fuji Securities, Inc., (Maturity Value $309,875)
Collateral: U.S. Treasury Bills, 09/26/96 - 01/09/97
U.S. Treasury Notes, 6.25% - 9.125%, 05/15/99 - 08/31/00
SBC Capital Markets, Inc., (Maturity Value $306,967)
Collateral: U.S. Treasury Notes, 6.875% - 8.25%, 07/15/98 - 7/31/99 ........... $ 1,546,238
-------------
Total Investments (Cost $25,288,671) 103.6%........................... 24,719,618
Liabilities in Excess of Other Assets (3.6)%........................... (863,975)
-------------
Net Assets 100.0% ..................................................... $23,855,643
=============

At April 30, 1996, the net unrealized depreciation based on the cost of investments
for income tax purposes of $25,288,671 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................ $ 8,367
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................ (577,420)
-------------
Net unrealized depreciation .................................................... $ (569,053)
=============

PORTFOLIO ABBREVIATIONS :
3CMT - 3 Year Constant Maturity Treasury Index
CMT - 1 Year Constant Maturity Treasury Index
COFI - Eleventh District Cost of Funds Index
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
LIBOR - London Interbank Offered Rate
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 Authority
TB - Treasury Bill Rate

dFace amount for repurchase agreements is for the underlying collateral. See Note 1(h) regarding joint repurchase agreement.
eSee Note 1(g) regarding joint repurchase agreement.
fSee note 1(h) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.

ADJUSTABLE RATE SECURITIES PORTFOLIOS

Financial Statements

Statements of Assets and Liabilities
April 30, 1996 (unaudited)

U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
----------- ------------
Assets:
Investments in securities:
<S> <C> <C>
At identified cost....................................................... $470,349,195 $23,742,433
=========== ============
At value................................................................. 467,086,897 23,173,380
Receivables from repurchase agreements, at value and cost................. 18,320,412 1,546,238
Cash...................................................................... -- --
Receivables:
Interest................................................................. 5,391,567 49,460
Investment securities sold............................................... 5,943,506 100,901
Unamortized organization costs (Note 2)................................... -- 1,647
Prepaid Expenses.......................................................... 577 --
----------- ------------
Total assets......................................................... 496,742,959 24,871,626
----------- ------------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis....................................................... 20,602,229 1,001,000
Capital shares repurchased............................................... 6,136,751 --
Distributions payable to shareholders.................................... 623 --
Management fees.......................................................... 93,978 3,562
Accrued expenses and other liabilities.................................... 31,906 11,421
----------- ------------
Total liabilities.................................................... 26,865,487 1,015,983
----------- ------------
Net assets, at value....................................................... $469,877,472 $23,855,643
=========== ============
Net assets consist of:
Undistributed net investment income....................................... $ 1,608 $--
Net unrealized depreciation on investments................................ (3,262,298) (569,053)
Net realized loss from investments........................................ (138,082,440) (2,715,774)
Capital shares............................................................ 611,220,602 27,140,470
----------- ------------
Net assets, at value....................................................... $469,877,472 $23,855,643
=========== ============
Shares outstanding......................................................... 50,515,724 2,437,481
=========== ============
Net asset value per share.................................................. $9.30 $9.79
=========== ============
Statements of Operations
for the six months ended April 30, 1996 (unaudited)
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
----------- ------------
Investment income:
<S> <C> <C>
Interest (Note 1)......................................................... $16,565,570 $824,529
----------- ------------
Expenses:
Management fees (Note 6).................................................. 996,755 49,832
Professional fees......................................................... 20,211 2,055
Custodian fees............................................................ 9,579 624
Trustees' fees and expenses............................................... 3,098 165
Reports to shareholders................................................... 285 519
Amortization of organization costs (Note 2)............................... -- 1,098
Other..................................................................... 10,690 9,040
Payments from manager (Note 6)............................................ (419,739) (32,185)
----------- ------------
Total expenses....................................................... 620,879 31,148
----------- ------------
Net investment income............................................... 15,944,691 793,381
----------- ------------
Realized and unrealized loss on investments:
Net realized loss......................................................... (681,154) (9,886)
Net unrealized depreciation on investments................................ (641,571) (25,040)
----------- ------------
Net realized and unrealized loss on investments............................ (1,322,725) (34,926)
----------- ------------
Net increase in net assets resulting from operations....................... $14,621,966 $758,455
=========== ============
Statements of Changes in Net Assets for the six months ended April 30, 1996
(unaudited) and the year ended October 31,1995

U.S. Government Adjustable Rate
Adjustable Rate Mortgage Portfolio Securities Portfolio
----------------------- ---------------------
Six months Year ended Six months Year ended
ended 04/30/96 10/31/95 ended 04/30/96 10/31/95
---------- ---------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income.......................... $ 15,944,691 $ 37,919,267 $ 793,381 $ 1,896,437
Net realized loss from investments............. (681,154) (7,672,691) (9,886) (602,782)
Net unrealized appreciation (depreciation) on
investments................................... (641,571) 16,342,196 (25,040) 913,301
---------- ---------- --------- ---------
Net increase in net assets resulting from
operations................................ 14,621,966 46,588,772 758,455 2,206,956
Distributions to shareholders from undistributed net
investment income (Note 1)...................... (15,943,083) (37,919,267) (793,381) (1,896,437)
Decrease in net assets from capital share
transactions (Note 4)........................... (51,603,368) (233,338,662) (3,188,331) (14,850,372)
---------- ---------- --------- ---------
Net decrease in net assets................. (52,924,485) (224,669,157) (3,223,257) (14,539,853)
Net assets:
Beginning of period............................. 522,801,957 747,471,114 27,078,900 41,618,753
---------- ---------- --------- ---------
End of period................................... $469,877,472 $522,801,957 $23,855,643 $27,078,900
========== ========== ========= =========
Undistributed net investment income included in net assets:
Beginning of period............................ $-- $-- $-- $--
---------- ---------- --------- ---------
End of period.................................. $ 1,608 $-- $-- $--
========== ========== ========= =========

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

</TABLE>

ADJUSTABLE RATE SECURITIES PORTFOLIOS
Notes to Financial Statements (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

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

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

a. Security Valuation:

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

b. Income Taxes:

The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
the Funds from income and excise taxes. Each Portfolio is treated as a separate
entity in the determination of compliance with the Internal Revenue Code.

c. Security Transactions:

d. Investment Income, Expenses and Distributions:

Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and premium are
amortized as required by the Internal Revenue Code. The Funds normally declare
dividends from their net investment income daily and distribute monthly. Daily
allocations of net investment income will commence on the date following receipt
of an investor's funds. Dividends declared by the Funds equal their net
investment income.

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.

f. Expense Allocation:

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

g. Joint Repurchase Agreements:

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

The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding
them, they may sell the securities before the settlement date. These securities
are identified on the accompanying Statement of Investments in Securities and
Net Assets. The Funds have set aside sufficient investment securities as
collateral for these purchase commitments.

2. ORGANIZATION COSTS

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

3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At October 31, 1995, for tax purposes, the Portfolios had accumulated capital
loss carryovers as follows:
U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
----------- ------------
Capital loss carryovers
Expiring in:2000.............. $ 45,439,616 $ 57,701
2001.............. 17,182,002 50,908
2002.............. 67,102,060 1,987,888
2003.............. 7,677,608 609,391
------------- ------------
$137,401,286 $2,705,888
============= ============

For tax purposes, the aggregate cost of securities and unrealized depreciation
of the Trust are the same as for financial statement purposes at April 30, 1996.

4. TRUST SHARES

At April 30, 1996, there was an unlimited number of $.01 par value shares of
beneficial interest authorized. Transactions in each of the Portfolio's shares
were as follows:
<TABLE>
<CAPTION>

U.S. Government Adjustable Adjustable Rate
Rate Mortgage Portfolio Securities Portfolio
---------------------- --------------------
Shares Amount Shares Amount
--------- ----------- -------- ----------
Six months ended April 30, 1996
<S> <C> <C> <C> <C>
Shares sold ...................................... 4,358,728 $ 40,761,193 370,584 $ 3,639,164
Shares issued in reinvestment of distributions ... 1,708,255 15,961,869 78,322 769,602
Shares redeemed .................................. (11,586,903) (108,326,430) (772,396) (7,597,097)
--------- ----------- -------- ----------
Net decrease ................................ (5,519,920) $ (51,603,368) (323,490) $ (3,188,331)
========= =========== ========== ==========
Year Ended October 31, 1995
Shares sold ...................................... 8,454,626 $ 78,435,001 1,241,431 $ 12,019,117
Shares issued in reinvestment of distributions ... 4,106,743 37,916,533 196,161 1,906,803
Shares redeemed .................................. (37,893,534) (349,690,196) (2,973,631) (28,776,292)
----------- ----------- ---------- ----------
Net decrease ................................ (25,332,165) $(233,338,662) (1,536,039) $(14,850,372)
=========== =========== ========== ==========
</TABLE>

5. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the period ended April 30, 1996, were as follows:

U.S. Government
Adjustable Rate Adjustable Rate
Mortgage Portfolio Securities Portfolio
----------- ------------
Purchases............................. $ 64,628,247 $ 7,174,134

Sales................................. $100,415,400 $10,156,059

6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

a. Management Agreement:

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

Annualized Fee Rate Average Daily Net Assets
- ------------------- ------------------------------------------------
0.40% First $5 billion
0.35% Over $5 billion, up to and including $10 billion
0.33% Over $10 billion, up to and including $15 billion

Fees are further reduced on net assets over $15 billion. The terms of the
management agreement provide that aggregate annual expenses of each Portfolio be
limited to the extent necessary to comply with the limitations set forth in the
laws, regulations and administrative interpretations of the states in which each
Portfolio's shares are registered. For the period ended April 30, 1996, the
Portfolio's expenses did not exceed these limitations. However, Advisers agreed
in advance to waive management fees for the Mortgage Portfolio and Securities
Portfolio aggregating $419,739 and $32,185, respectively, in an effort to
minimize expenses.

b. Other Affiliated Parties and Transactions

As of April 30, 1996, 49,437,222 shares of the Mortgage Portfolio were owned by
the Franklin Adjustable U.S. Government Securities Fund, and 1,078,502 shares
were owned by the Franklin Institutional Adjustable U.S. Government Securities
Fund. This represents 98% and 2%, respectively, of the outstanding shares of the
Mortgage Portfolio,

As of April 30, 1996, 1,492,226 shares of the Securities Portfolio were owned by
the Franklin Adjustable Rate Securities Fund and 943,873 shares were owned by
the Franklin Institutional Adjustable Securities Fund. This represents 61% and
39%, respectively, of the outstanding shares of the Securities Portfolio. The
remaining 1,382 shares of the Securities Portfolio were owned by Resources.

Certain officers and trustees of the Trust are also officers and/or directors of
Advisers (a wholly-owned subsidiary of Resources) and of the Franklin Adjustable
U.S. Government Securities Fund and the Franklin Adjustable Rate Securities
Fund.

7. FINANCIAL HIGHLIGHTS

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

Per Share Operating Performance Ratios/Supplemental Data
---------------------------------------------- -----------------------
Net Distri- Ratio of
Realized & Distri- butions Net Net Ratio of Net
Net Asset Net Unrealized butions From Asset Assets Expenses Investment
Value at Invest- Gain Total From From Net Realized Value at End of to Aver- Income to Portfolio
Period Beginning ment (Loss) on Investment Investment Capital Total at End of Total Period age Net Average Turnover
Ended of Period Income Securities Operations Income Gains Distributions Period Return+(in 000's) Assets+++Net Assets Rate
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

U.S. Government Adjustable Rate Mortgage Portfolio:
19921 $10.00 $.493 $.013 $.506 $(.493) $(.003) $(.496) $10.01 5.13% $4,315,658 .31%* 7.25%* 48.96%
19933 10.01 .544 (.100) .444 (.544) -- (.544) 9.91 4.53 4,201,411 .30 5.49 66.44
19934 9.91 .313 (.090) .223 (.313) -- (.313) 9.82 2.28 2,130,229 .27* 4.15* 76.55
1994 9.82 .415 (.630) (.215) (.415) -- (.415) 9.19 (2.22) 747,471 .02 4.01 56.43
1995 9.19 .572 .140 .712 (.572) -- (.572) 9.33 7.99 522,802 .18 6.17 20.16
1996++ 9.33 .300 (.031) .269 (.299) -- (.299) 9.30 2.92 469,877 .25* 6.42* 13.42
Adjustable Rate Securities Portfolio:
19922 10.00 -- -- -- -- -- -- 10.00 -- -- -- -- --
19933 10.00 .599 .020 .619 (.599) -- (.599) 10.02 6.36 44,656 -- 5.80 88.92
19934 10.02 .368 .010 .378 (.368) -- (.368) 10.03 3.83 124,309 .11* 4.76* 158.70
1994 10.03 .469 (.340) .129 (.469) -- (.469) 9.69 1.32 41,619 .25 4.55 192.06
1995 9.69 .625 .120 .745 (.625) -- (.625) 9.81 7.94 27,079 .25 6.36 50.29
1996++ 9.81 .300 (.016) .284 (.304) -- (.304) 9.79 9.76 23,856 .25* 6.37* 29.81

</TABLE>

*Annualized
1For the period May 20, 1991 (effective date) to January 31, 1992 2For the
period December 26, 1991 (effective date) to January 31, 1992.
3For the year ended January 31, 1993.
4For the nine months ended October 31, 1993
+Total return measures the change in value of an investment over the period
indicated. It is not annualized. It assumes reinvestment of dividends and of
capital gains, if any, at net asset value. Prior to May 1, 1994, dividends were
reinvested at the maximum offering price. ++For the six months ended April 30,
1996 +++During the periods indicated below, Advisers agreed to waive in advance
a portion of its management fees and made payments of other expenses incurred by
the Portfolios. Had such action not been taken, the ratios of expenses to
average net assets would have been as follows:

Ratio of Expenses
to average net assets
---------------------
U.S. Government Adjustable
Rate Mortgage Portfolio+++
19921................................. .41%
19933................................. .42
19934................................. .41*
1994.................................. .42
1995.................................. .43
1996++................................ .42*

Ratio of Expenses
to average net assets
Adjustable Rate Securities Portfolio+++
19922................................. -- %
19933................................. .64
19934................................. .47*
1994.................................. .43
1995.................................. .47
1996++................................ .51*

Franklin Investors Securities Trust Semi-Annual Report dated 4/30/96

APPENDIX

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

GRAPHIC MATERIAL (1)

This chart shows in pie format the geographic distribution of the fund's
securities based on total net assets.

Geographic Distribution on 4/30/96

Europe 40.2%
North America 29.4%
Latin America 16.6%
Australia/New Zealand 11.6%
Mid-East/Africa 1.3%
Asia 0.9%

GRAPHIC MATERIAL (2)

This chart shows in pie format the portfolio breakdown of the fund on 4/30/96,
based on total net assets.

Portfolio Breakdown on 4/30/96

Convertible Bonds 64.5%
Convertible Preferred Stock 26.8%
Cash and Equivalents 8.0%
Common Stocks 0.7%

GRAPHIC MATERIAL (3)

This line graph shows the comparison between the fund's distribution rate vs.
the one-year U.S. Treasury Bill.

Period Ending 1-Year T-Bill Fund

May-95 5.80% 5.62%
Jun-95 5.33% 5.92%
Jul-95 5.67% 6.04%
Aug-95 5.65% 6.02%
Sep-95 5.65% 6.02%
Oct-95 5.30% 6.03%
Nov-95 5.36% 6.00%
Dec-95 5.18% 5.76%
Jan-96 4.90% 5.75%
Feb-96 5.23% 5.78%
Mar-96 5.41% 5.77%
Apr-96 5.62% 6.05%

GRAPHIC MATERIAL (4)

This line graph shows the comparison between the fund's distribution rate vs.
the one-year U.S. Treasury Bill.

Period Ending 1-Year T-Bill Fund

May-95 5.80% 5.78%
Jun-95 5.33% 6.48%
Jul-95 5.67% 5.58%
Aug-95 5.65% 5.73%
Sep-95 5.65% 5.85%
Oct-95 5.30% 5.66%
Nov-95 5.36% 4.50%
Dec-95 5.18% 5.61%
Jan-96 4.90% 5.55%
Feb-96 5.23% 6.04%
Mar-96 5.41% 5.52%
Apr-96 5.62% 5.62%