<PAGE> PAGE 1
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008 D04AA01 1585
010 A00AA01 DELETE
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<PAGE> PAGE 2
013 A00AA01 COOPERS & LYBRAND L.L.P.
013 B01AA01 SAN FRANCISCO
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013 B04AA01 2119
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 5
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<PAGE> PAGE 6
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 9
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<PAGE> PAGE 10
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<PAGE> PAGE 11
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SIGNATURE LAURA FERGERSON
TITLE ASST. TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ADJUSTABLE RATE SECURITIES PORTFOLIOS OCTOBER 31, 1997 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 330,058,485
<INVESTMENTS-AT-VALUE> 333,124,720
<RECEIVABLES> 30,574,869
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 363,699,589
<PAYABLE-FOR-SECURITIES> 19,129,729
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,028,770
<TOTAL-LIABILITIES> 21,158,499
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 476,601,736
<SHARES-COMMON-STOCK> 36,140,971
<SHARES-COMMON-PRIOR> 43,397,073
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 342,541,090
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,396,969
<OTHER-INCOME> 0
<EXPENSES-NET> (932,545)
<NET-INVESTMENT-INCOME> 23,464,424
<REALIZED-GAINS-CURRENT> 693,708
<APPREC-INCREASE-CURRENT> 3,675,679
<NET-CHANGE-FROM-OPS> 27,833,811
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23,464,424)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,468,647
<NUMBER-OF-SHARES-REDEEMED> (24,217,403)
<SHARES-REINVESTED> 2,492,654
<NET-CHANGE-IN-ASSETS> (63,889,907)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (137,820,589)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,487,256
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,589,203
<AVERAGE-NET-ASSETS> 371,722,372
<PER-SHARE-NAV-BEGIN> 9.370
<PER-SHARE-NII> .593
<PER-SHARE-GAIN-APPREC> .110
<PER-SHARE-DIVIDEND> (.593)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 9.480
<EXPENSE-RATIO> .250
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMAY FINANCIAL INFORMATION EXTRACTED FROM THE
ADJUSTABLE RATE SECURITIES PORTFOLIOS OCTOBER 31, 1997 ANNUAL REPORT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 02
<NAME> ADJUSTABLE RATE SECURITIES PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 22,096,464
<INVESTMENTS-AT-VALUE> 21,952,919
<RECEIVABLES> 1,683,204
<ASSETS-OTHER> 7,274
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23,643,397
<PAYABLE-FOR-SECURITIES> 999,924
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 103,611
<TOTAL-LIABILITIES> 1,103,535
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 25,412,654
<SHARES-COMMON-STOCK> 2,265,903
<SHARES-COMMON-PRIOR> 2,083,336
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,729,247)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (143,545)
<NET-ASSETS> 22,539,862
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,562,033
<OTHER-INCOME> 0
<EXPENSES-NET> (61,422)
<NET-INVESTMENT-INCOME> 1,500,611
<REALIZED-GAINS-CURRENT> 14,469
<APPREC-INCREASE-CURRENT> 260,606
<NET-CHANGE-FROM-OPS> 1,775,686
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,500,611)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,195,631
<NUMBER-OF-SHARES-REDEEMED> (2,164,571)
<SHARES-REINVESTED> 151,507
<NET-CHANGE-IN-ASSETS> 2,005,615
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,743,716)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 96,727
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 106,696
<AVERAGE-NET-ASSETS> 24,198,429
<PER-SHARE-NAV-BEGIN> 9.860
<PER-SHARE-NII> .616
<PER-SHARE-GAIN-APPREC> .090
<PER-SHARE-DIVIDEND> (.616)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 9.950
<EXPENSE-RATIO> .250
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of Franklin
Adjustable Rate Securities Portfolios:
In planning and performing our audit of the financial
statements and financial highlights of the funds
comprising the Franklin Adjustable Rate Securities Portfolios
for the year ended October 31, 1997, we considered its internal
control structure, including procedures for
safeguarding securities, in order to determine our
auditing procedures for the purpose of expressing our
opinion on the financial statements and financial
highlights and to comply with the requirements of Form
N-SAR, not to provide assurance on the internal control
structure.
The management of the Franklin Adjustable Rate Securities
Portfolios is responsible for establishing and maintaining an
internal control structure. In fulfilling this
responsibility, estimates and judgments by management
are required to assess the expected benefits and
related costs of internal control structure policies
and procedures. Two of the objectives of an internal
control structure are to provide management with
reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or
disposition and that transactions are executed in
accordance with management's authorization and recorded
properly to permit preparation of financial statements
in conformity with generally accepted accounting
principles.
Because of inherent limitations in any internal control
structure, errors or irregularities may occur and not
be detected. Also, projection of any evaluation of the
structure to future periods is subject to the risk that
it may become inadequate because of changes in
conditions or that the effectiveness of the design and
operation may deteriorate.
Our consideration of the internal control structure
would not necessarily disclose all matters in the
internal control structure that might be material
weaknesses under standards established by the American
Institute of Certified Public Accountants. A material
weakness is a condition in which the design or
operation of the specific internal control structure
elements does not reduce to a relatively low level the
risk that errors or irregularities in amounts that
would be material in relation to the financial
statements and financial highlights being audited may
occur and not be detected within a timely period by
employees in the normal course of performing their
assigned functions. However, we noted no matters
involving the internal control structure, including
procedures for safeguarding securities, that we
consider to be material weaknesses, as defined above,
as of October 31, 1997.
This report is intended solely for the information and
use of management of the Franklin Adjustable Rate Securities Portfolios
and the Securities and Exchange Commission.
S\Coopers & Lybrand L.L.P.
San Francisco, California
December 5, 1997
