UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-04986
---------

FRANKLIN INVESTORS SECURITIES TRUST
-----------------------------------
(Exact name of registrant as specified in charter)

ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
(Address of principal executive offices) (Zip code)

MURRAY L. SIMPSON, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
-----------------------------------------------------------------
(Name and address of agent for service)

Registrant's telephone number, including area
code: (650) 312-2000
--------------

Date of fiscal year end: 10/31
-----

Date of reporting period: 4/30/04
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

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APRIL 30, 2004
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Franklin Convertible
Securities Fund

Franklin Equity Income Fund

Franklin Short-Intermediate
U.S. Government Securities Fund

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SEMIANNUAL REPORT AND SHAREHOLDER LETTER
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
WANT TO RECEIVE
THIS DOCUMENT
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FRANKLIN
INVESTORS SECURITIES TRUST Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
- --------------------------------------------------------------------------------

[LOGO](R)
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS

Franklin o Templeton o Mutual Series

FRANKLIN TEMPLETON INVESTMENTS

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager
structure combines the specialized expertise
of three world-class investment management
groups--Franklin, Templeton and Mutual
Series.

SPECIALIZED EXPERTISE Each of our portfolio management groups
operates autonomously, relying on its own
research and staying true to the unique
investment disciplines that underlie its
success.

FRANKLIN. Founded in 1947, Franklin is a
leader in tax-free investing and a driving
force in fixed income investing around the
globe. They also bring expertise in growth-
and value-style U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton
pioneered international investing and, in
1954, launched what has become the industry's
oldest global fund. Today, with research
offices in over 25 countries, they offer
investors the broadest global reach in the
industry.

MUTUAL SERIES. Founded in 1949, Mutual Series
is dedicated to a unique style of value
investing, searching aggressively for
opportunity among undervalued stocks,
arbitrage situations and distressed
companies.

TRUE DIVERSIFICATION Because our management groups work
independently and adhere to distinctly
different investment approaches, Franklin,
Templeton and Mutual Series funds typically
have a low overlap of securities. That's why
our funds can be used to build truly
diversified portfolios covering every major
asset class.

RELIABILITY YOU CAN TRUST At Franklin Templeton Investments, we seek to
consistently provide investors with
exceptional risk-adjusted returns over the
long term, as well as the reliable account
services that have helped us become one of
the most trusted names in financial services.

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
- --------------------------------------------------------------------------------

[GRAPHIC OMITTED]

Not part of the semiannual report

CONTENTS

SHAREHOLDER LETTER ........................................................ 1

SEMIANNUAL REPORT

Franklin Convertible Securities Fund ...................................... 3

Franklin Equity Income Fund ............................................... 9

Franklin Short-Intermediate U.S. Government Securities Fund ............... 16

Financial Highlights and Statements of Investments ........................ 21

Financial Statements ...................................................... 38

Notes to Financial Statements ............................................. 43

Proxy Voting Policies and Procedures ...................................... 53

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SEMIANNUAL REPORT

FRANKLIN CONVERTIBLE SECURITIES FUND

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Convertible Securities Fund
seeks to maximize total return consistent with reasonable risk through a
portfolio of convertible securities.

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PORTFOLIO BREAKDOWN
Franklin Convertible Securities Fund
Based on Total Net Assets as of 4/30/04

[PIE CHART] Convertible Bonds ........................... 52.7%
Convertible Preferred Stocks ................ 44.0%
Short-Term Investments & Other Net Assets ... 3.3%

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We are pleased to bring you Franklin Convertible Securities Fund's semiannual
report for the period ended April 30, 2004.

PERFORMANCE OVERVIEW

Franklin Convertible Securities Fund - Class A delivered a +12.13% cumulative
total return for the six months ended April 30, 2004. The Fund outperformed its
benchmark, the Goldman Sachs/Bloomberg U.S. Convertible 100 Index, which had a
5.29% total return for the same period.(1) You can find the Fund's long-term
performance data in the Performance Summary beginning on page 7.

(1) Source: Standard & Poor's Micropal. The Goldman Sachs/Bloomberg U.S.
Convertible 100 Index comprises 100 convertible securities designed to
provide investors with an accurate, objective and reliable benchmark for
the U.S. convertible market. The index is unmanaged and includes
reinvested dividends. One cannot invest directly in an index, nor is an
index representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 23.

Semiannual Report | 3

ECONOMIC AND MARKET OVERVIEW

During the six months ended April 30, 2004, the U.S. economy strengthened.
Driven in part by massive fiscal and economic stimuli injected into the economy
last year, the second half of 2003 experienced the fastest advance in output of
U.S. made goods and services in nearly 20 years. Annualized gross domestic
product (GDP) rose 4.1% in fourth quarter 2003. The economy showed broad
fundamental improvement as first quarter 2004 GDP increased an annualized 4.4%
amid robust manufacturing activity, home buying and productivity growth. The
U.S. dollar's value declined against most major currencies, particularly versus
the euro, which benefited the competitive position of many products produced by
U.S. companies and contributed to corporate profit improvements. Business
sentiment rose in 2004 through period-end. Consumer spending, which had been
constrained by slow wage growth and heavy indebtedness, rebounded by March,
further supporting a solid economic recovery.

Productivity gains, shifting global manufacturing operations, raw materials
shortages, and rising fuel prices, as well as U.S. political uncertainty in an
election year, appeared to inhibit U.S. job growth for much of the reporting
period. Monthly unemployment figures for November 2003 through April 2004 were
below 6%, underscored by a significant and long-awaited rise in hiring since
February.(2) In light of positive economic developments, inflation experienced
an uptick by March, influenced by higher energy and commodity prices.

Domestic equity markets sustained a rally through year-end 2003, spurred by data
showing robust economic growth and improving corporate balance sheets, then
flattened in the first four months of 2004. Despite continued signs of improved
corporate fundamentals through period-end, investors appeared cautious due to
geopolitical uncertainty, escalating military activity in Iraq, and speculation
about when the Federal Reserve Board might act to constrain inflation by pushing
up historically low interest rates. The Standard & Poor's 500 Composite Index
(S&P 500) rose 6.27% for the six months under review.(3) As economic data
improved, some interest rates decreased in fall 2003. However, amid some
lingering concerns about the economic recovery's strength, for a time interest
rates moved within a narrow range before rising toward period-end.

INVESTMENT STRATEGY

We follow a strategy of maintaining a portfolio of BALANCED convertible
securities. Convertible securities are attractive for two reasons: the
opportunity to participate

(2) Source: Bureau of Labor Statistics.

(3) Source: Standard & Poor's Micropal. The S&P 500 consists of 500 stocks
chosen for market size, liquidity and industry group representation. Each
stock's weight in the index is proportionate to its market value. The S&P
500 is one of the most widely used benchmarks of U.S. equity performance.

4 | Semiannual Report

in common stocks' potential growth with relatively reduced volatility, and the
potential for current income with potential downside protection from bonds.
Typically we sell securities whose equity sensitivity becomes too high and no
longer offers appropriate downside protection. Likewise, as securities become
too bond-like -- reducing their ability to appreciate with increases in the
underlying common stock -- we attempt to redeploy those assets into more
balanced convertible securities and maintain the potential for the Fund's upside
participation. Our experienced team of analysts searches for investment
opportunities among all economic sectors, and considers a company's long-term
earnings, asset value and cash flow potential, to create a broadly diversified
portfolio.

MANAGER'S DISCUSSION

Investments in health care related companies contributed to the Fund's strong
return during the reporting period. In particular, positions in managed care
companies such as Anthem, Sierra Health Services and PacifiCare Health Systems
boosted Fund performance. In addition, the Fund benefited from exposure to
biotechnology companies Biogen Idec, which was created by the November 2003
merger of Biogen and IDEC Pharmaceuticals; and OSI Pharmaceuticals, whose recent
announcement of positive test results for its drug Tarceva gave the company's
securities a strong boost.

Improvements at some troubled companies contributed to the appreciation of those
companies' securities and also helped the Fund's performance during the six
months under review. For example, Reliant Energy Resources refinanced some of
its debt, leading to balance sheet improvements that gave the company greater
liquidity and flexibility. Meanwhile, continuing cost reductions at Ford Motor,
and revenue growth combined with improving profit margins at Tyco International,
contributed to earnings growth at both companies. At clothing retailer Gap,
continued improvements in product assortment and operational management led to
earnings and revenue growth.

The Fund benefited from relatively high natural gas prices during the period
through positions in natural gas producing companies such as Chesapeake Energy
and Devon Energy (Kerr-McGee bonds convertible into Devon common stock). The
Fund was also helped by the performance of securities issued by security
software maker Symantec and by Latin American wireless services provider NII
Holdings, which operates under the Nextel brand name.

TOP FIVE PREFERRED STOCKS
Franklin Convertible Securities Fund
4/30/04

TOP FIVE BONDS
Franklin Convertible Securities Fund
4/30/04

Semiannual Report | 5

Despite the Fund's solid return during the period, several Fund positions
hindered performance. Holdings in defensive, non-cyclical positions detracted
from performance, such as distribution companies Amerisource Health and
Performance Food Group, and hospital company Universal Health Services. In
addition, continued problems at Electronic Data Systems also detracted from Fund
performance, as these securities fell in value.

Thank you for your participation in Franklin Convertible Securities Fund. We
look forward to serving your future investment needs.

/s/ Alan E. Muschott
[PHOTO OMITTED]
Alan E. Muschott, CFA

/s/ Edward D. Perks
[PHOTO OMITTED]
Edward D. Perks, CFA

Portfolio Management Team
Franklin Convertible Securities Fund

THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
APRIL 30, 2004, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT OUR MAIN
INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE DEPENDING
ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY NOT BE
RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY. THE
INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, COUNTRY,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.

6 | Semiannual Report

PERFORMANCE SUMMARY AS OF 4/30/04

FRANKLIN CONVERTIBLE SECURITIES FUND

Your dividend income will vary depending on dividends or interest paid by
securities in the Fund's portfolio, adjusted for operating expenses of each
class. Capital gain distributions are net profits realized from the sale of
portfolio securities. The performance table does not reflect any taxes due on
Fund dividends, capital gain distributions, if any, or any realized gains on the
sale of Fund shares. Total return reflects the Fund's dividend income, capital
gain distributions, if any, and any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- -----------------------------------------------------------------------------------------------------------------
CLASS A CHANGE 4/30/04 10/31/03
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Net Asset Value (NAV) +$1.36 $15.26 $13.90
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DISTRIBUTIONS (11/1/03-4/30/04)
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Dividend Income $0.3088
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CLASS C CHANGE 4/30/04 10/31/03
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Net Asset Value (NAV) +$1.35 $15.16 $13.81
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DISTRIBUTIONS (11/1/03-4/30/04)
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Dividend Income $0.2581
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PERFORMANCE

CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED
SALES CHARGE IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES.
AVERAGE ANNUAL TOTAL RETURNS AND VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM
SALES CHARGES.

- -----------------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------------------

Cumulative Total Return(1) +12.13% +30.43% +66.32% +176.63%
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Average Annual Total Return(2) +5.67% +22.98% +9.40% +10.05%
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Value of $10,000 Investment(3) $10,567 $12,298 $15,672 $26,065
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Avg. Ann. Total Return (3/31/04)(4) +31.70% +10.42% +9.93%
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Distribution Rate(5) 3.70%
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30-Day Standardized Yield(6) 2.88%
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CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (10/2/95)
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Cumulative Total Return(1) +11.74% +29.58% +60.41% +111.60%
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Average Annual Total Return(2) +10.74% +28.58% +9.91% +9.12%
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Value of $10,000 Investment(3) $11,074 $12,858 $16,041 $21,160
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04)(4) +37.67% +10.91% +9.27%
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Distribution Rate(5) 3.33%
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30-Day Standardized Yield(6) 2.30%
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PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. ONGOING MARKET VOLATILITY
CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE RECENT RETURNS MAY DIFFER
FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS UP, INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS, AND YOU MAY HAVE A GAIN
OR LOSS WHEN YOU SELL YOUR SHARES.

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 7

PERFORMANCE SUMMARY (CONTINUED)

ENDNOTES

THE FUND MAY INVEST IN HIGH-YIELDING, FIXED INCOME SECURITIES; HIGH YIELDS
REFLECT THE HIGHER CREDIT RISK ASSOCIATED WITH THESE LOWER-RATED SECURITIES AND,
IN SOME CASES, THE LOWER MARKET PRICES FOR THESE INSTRUMENTS. INTEREST RATE
MOVEMENTS MAY AFFECT THE FUND'S SHARE PRICE AND YIELD. THE FUND MAY ALSO INVEST
IN FOREIGN SECURITIES, WHICH INVOLVE EXPOSURE TO CURRENCY VOLATILITY AND
POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. THE FUND'S PROSPECTUS ALSO
INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Prior to 8/3/98, these shares were offered at a lower initial sales
charge; thus actual total returns may differ. Effective 5/1/94, the
Fund implemented a Rule 12b-1 plan, which affects subsequent
performance.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares
have higher annual fees and expenses than Class A shares.

(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.

(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes any current,
applicable, maximum sales charge. Six-month return has not been
annualized.

(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include any current, applicable,
maximum sales charge.

(4) In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

(5) Distribution rate is based on the sum of the respective class's last four
quarterly dividends and the maximum offering price (NAV for Class C) per
share on 4/30/04.

(6) Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 4/30/04.

8 | Past performance does not guarantee future results. | Semiannual Report

FRANKLIN EQUITY INCOME FUND

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Equity Income Fund seeks to
maximize total return, emphasizing high, current income and capital
appreciation, consistent with reasonable risk, through a portfolio of primarily
equity securities with higher than average yield of the stocks in the Standard &
Poor's 500 Composite Index (S&P 500).(1)

We are pleased to bring you Franklin Equity Income Fund's semiannual report
covering the period ended April 30, 2004.

PERFORMANCE OVERVIEW

Franklin Equity Income Fund - Class A delivered a +8.42% cumulative total return
for the six months ended April 30, 2004. The Fund outperformed its benchmark,
the Russell 1000(R) Value Index, which returned 8.15%.(2) The Fund also
outperformed its peers, as measured by the Lipper Equity Income Funds Objective
Average, which returned 7.56% for the same period.(3) You can find the Fund's
long-term performance data in the Performance Summary beginning on page 13.

ECONOMIC AND MARKET OVERVIEW

(1) The S&P 500 consists of 500 stocks chosen for market size, liquidity and
industry group representation. Each stock's weight in the index is
proportionate to its market value. The S&P 500 is one of the most widely
used benchmarks of U.S. equity performance.

(2) Source: Standard & Poor's Micropal. The Russell 1000 Value Index is market
capitalization-weighted and measures performance of those Russell 1000
Index companies with lower price-to-book ratios and lower forecasted
growth values.

(3) Source: Lipper Inc. The Lipper Equity Income Funds Objective Average is an
equally weighted average calculation of performance figures for all funds
within the Lipper Equity Income Funds classification in the Lipper
Open-End underlying funds universe investing 60% or more of their
portfolios in equities. For the six-month period ended 4/30/04, there were
229 funds in this category. Lipper calculations do not include sales
charges. The Fund's performance relative to the average might have
differed if such charges had been considered. Past performance does not
guarantee future results.

The indexes are unmanaged and include reinvested dividends. One cannot
invest directly in an index, nor is an index representative of the Fund's
portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 31.

Semiannual Report | 9

PORFOLIO BREAKDOWN
Franklin Equity Income Fund
4/30/04

Finance* 26.9%
Energy Minerals 12.0%
Consumer Non-Durables 8.6%
Health Technology 8.1%
Producer Manufacturing 7.5%
Electronic Technology 6.3%
Communications 6.1%
Utilities 3.4%
Process Industries 3.1%
Consumer Durables 2.7%
Consumer Services 2.1%
Technology Services 2.1%
Other 5.7%
Short-Term Investments & Other Net Assets 5.4%

* Significant exposure to a single sector may result in greater volatility
for the Fund than a more broadly diversified portfolio.

Productivity gains, shifting global manufacturing operations, raw materials
shortages, and rising fuel prices, as well as U.S. political uncertainty in an
election year, appeared to inhibit U.S. job growth for much of the reporting
period. Monthly unemployment figures for November 2003 through April 2004 were
below 6%, underscored by a significant and long-awaited rise in hiring since
February.(4) In light of positive economic developments, inflation experienced
an uptick by March, influenced by higher energy and commodity prices.

Domestic equity markets sustained a rally through year-end 2003, spurred by data
showing robust economic growth and improving corporate balance sheets, then
flattened in the first four months of 2004. Despite continued signs of improved
corporate fundamentals through period-end, investors appeared cautious due to
geopolitical uncertainty, escalating military activity in Iraq, and speculation
about when the Federal Reserve Board might act to constrain inflation by pushing
up historically low interest rates. The S&P 500 rose 6.27% for the six months
under review.(5) As economic data improved, some interest rates decreased in
fall 2003. However, amid some lingering concerns about the economic recovery's
strength, for a time interest rates moved within a narrow range before rising
toward period-end.

INVESTMENT STRATEGY

We emphasize dividend yield in selecting stocks for the Fund because we believe
that over time dividend income can contribute significantly to return. We look
at the relative value of a company based on criteria such as revenues, book
value and earnings potential. Then we search for high-quality companies with
strong balance sheets and a distinct industry advantage. We target companies
that have long track records of paying dividends that are higher than the
average yield of the S&P 500, or of increasing dividends in recent years.

MANAGER'S DISCUSSION

During the six months under review, the Fund's performance benefited from
holdings in several consumer non-durables stocks. Notable contributors included
British American Tobacco, up 30% for the period, and Kimberly-Clark, up 25%. We
selectively reduced our investments in tobacco stocks as they met price targets
during the period. Our investment in retailer J.C. Penney also performed
strongly. From the beginning of the reporting period until we sold it in April,
the stock returned more than 53%.

The company's successful sale of its underperforming drug store operations and
improvement in its profitability contributed to the stock's strong performance
during the period.

(4) Source: Bureau of Labor Statistics.

(5) Source: Standard & Poor's Micropal. See footnote 1 for a description of
the S&P 500.

10 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
Franklin Equity Income Fund
11/1/03-4/30/04

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DIVIDEND PER SHARE
-------------------------------------------------------------
MONTH CLASS A CLASS B CLASS C CLASS R
- --------------------------------------------------------------------------------
November 3.24 cents 2.17 cents 2.13 cents 2.90 cents
- --------------------------------------------------------------------------------
December 3.74 cents** 2.60 cents** 2.60 cents** 3.36 cents**
- --------------------------------------------------------------------------------
January 3.24 cents 2.10 cents 2.10 cents 2.86 cents
- --------------------------------------------------------------------------------
February 3.24 cents 2.10 cents 2.10 cents 2.86 cents
- --------------------------------------------------------------------------------
March 3.24 cents 1.98 cents 1.98 cents 2.82 cents
- --------------------------------------------------------------------------------
April 3.24 cents 1.98 cents 1.98 cents 2.82 cents
- --------------------------------------------------------------------------------
TOTAL 19.94 CENTS 12.93 CENTS 12.89 CENTS 17.62 CENTS
- --------------------------------------------------------------------------------

* All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.

** Includes an additional 0.50 cent distribution to meet excise tax
requirements.

TOP 10 HOLDINGS
Franklin Equity Income Fund
4/30/04

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
Bank of America Corp. 3.6%
FINANCE
- --------------------------------------------------------------------------------
Citigroup Inc. 3.4%
FINANCE
- --------------------------------------------------------------------------------
ChevronTexaco Corp. 3.2%
ENERGY MINERALS
- --------------------------------------------------------------------------------
BP PLC, ADR (U.K.) 3.1%
ENERGY MINERALS
- --------------------------------------------------------------------------------
General Electric Co. 3.0%
PRODUCER MANUFACTURING
- --------------------------------------------------------------------------------
Fannie Mae 2.5%
FINANCE
- --------------------------------------------------------------------------------
Shell Transport & Trading Co. PLC, ADR (U.K.) 2.3%
ENERGY MINERALS
- --------------------------------------------------------------------------------
Washington Mutual Inc. 2.0%
FINANCE
- --------------------------------------------------------------------------------
Kimberly-Clark Corp. 2.0%
CONSUMER NON-DURABLES
- --------------------------------------------------------------------------------
Altria Group Inc. 1.9%
CONSUMER NON-DURABLES
- --------------------------------------------------------------------------------

Favorable stock selection and an overweighted position relative to the Russell
1000 Value Index (the Index) in energy minerals stocks also helped performance.
Strong performers from this group included PetroChina, which we sold by
period-end, ChevronTexaco and BP PLC. Consistent with our strategy, we
maintained significant investments in the energy sector due to our assessment of
its attractive dividend yields, reasonable valuations and strong fundamentals of
many of the world's leading companies.

Despite the Fund's solid performance during the period, some investments
hindered performance. Our communications sector holdings were the weakest
performers overall relative to the Index. Even with attractive free cash flow,
most telephone companies' earnings were under pressure. The Fund's AT&T
investment, which fell 5.5% in value during the reporting period, was especially
disappointing. The telephone industry suffered in the short term from intense
price competition and loss of lines. However, many stock valuations remained
compelling during the period, and some of the industry's leading companies
offered attractive dividend yields of 4% to 5%.

Our overweighted health technology exposure relative to the Index, specifically
pharmaceutical companies, also hurt results. Our Wyeth holding declined about
13% in value due largely to liability concerns associated with a previously
marketed diet drug therapy. Our research indicated that many companies were
selling at decade-low valuations, and their long-term growth prospects remained
favorable despite near-term pricing and patent expiration challenges. During the
period, we initiated a position in GlaxoSmithKline, the world's largest
pharmaceuticals company, which had many exciting potential new drugs in the
pipeline and offered a dividend yield in excess of 3%.

Semiannual Report | 11

Weak stock selection in the finance sector also detracted from relative
performance during the period. Our underweighted position compared with the
Index helped relative results; however, our investments among insurance
companies and savings banks lagged. Washington Mutual, the nation's largest
savings bank, fell 8% in value during the six months under review. We remained
underweighted in the sector largely due to our concerns about the potential
impact on profitability for many financial companies if interest rates rise
meaningfully.

At period-end, consistent with our investment strategy, our investment attention
was focused on stocks of companies we believed were selling at bargain prices
and offered attractive dividend yields and/or the prospects for increasing
dividends. These would include "fallen angel" growth companies that have
suffered short-term setbacks and sharp price declines, in sectors such as health
technology and cyclical companies within the process industries or producer
manufacturing sectors. Conversely, we were generally underweighted during the
reporting period in interest-rate sensitive sectors such as utilities and
finance.

Thank you for your participation in Franklin Equity Income Fund. We look forward
to serving your future investment needs.

/s/ Frank M. Felicelli
[PHOTO OMITTED]
Frank M. Felicelli, CFA

/s/ Derek M. Taner
[PHOTO OMITTED]
Derek M. Taner, CFA

Portfolio Management Team
Franklin Equity Income Fund

12 | Semiannual Report

PERFORMANCE SUMMARY AS OF 4/30/04

FRANKLIN EQUITY INCOME FUND

PRICE AND DISTRIBUTION INFORMATION

- -------------------------------------------------------------------------------------------------
CLASS A CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$1.31 $19.15 $17.84
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/03-4/30/04)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.1994
- -------------------------------------------------------------------------------------------------

CLASS B CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$1.31 $19.07 $17.76
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/03-4/30/04)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.1293
- -------------------------------------------------------------------------------------------------

CLASS C CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$1.31 $19.08 $17.77
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/03-4/30/04)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.1289
- -------------------------------------------------------------------------------------------------

CLASS R CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) +$1.31 $19.16 $17.85
- -------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/03-4/30/04)
- -------------------------------------------------------------------------------------------------
Dividend Income $0.1762
- -------------------------------------------------------------------------------------------------

Semiannual Report | Past performance does not guarantee future results. | 13

PERFORMANCE SUMMARY (CONTINUED)

PERFORMANCE

CLASS A: 5.75% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS AND
VALUE OF $10,000 INVESTMENT INCLUDE MAXIMUM SALES CHARGES.

Cumulative Total Return(1) +8.42% +26.06% +18.90% +150.11%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +2.18% +18.79% +2.31% +8.95%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $10,218 $11,879 $11,208 $23,571
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04)(4) +29.54% +4.16% +9.18%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate(5) 1.91%
- -----------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 2.03%
- -----------------------------------------------------------------------------------------------------------------

CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (1/1/99)
- -----------------------------------------------------------------------------------------------------------------

Cumulative Total Return(1) +8.06% +25.14% +14.39% +20.25%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +4.06% +21.14% +2.38% +3.36%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $10,406 $12,114 $11,250 $11,926
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04)(4) +32.48% +4.25% +3.69%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate(5) 1.25%
- -----------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 1.40%
- -----------------------------------------------------------------------------------------------------------------

CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (10/2/95)
- -----------------------------------------------------------------------------------------------------------------

Cumulative Total Return(1) +8.05% +25.10% +14.51% +92.00%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +7.05% +24.10% +2.75% +7.90%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $10,705 $12,410 $11,451 $19,200
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04)(4) +35.42% +4.61% +8.15%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate(5) 1.25%
- -----------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 1.40%
- -----------------------------------------------------------------------------------------------------------------

CLASS R 6-MONTH 1-YEAR INCEPTION (8/1/02)
- -----------------------------------------------------------------------------------------------------------------

Cumulative Total Return(1) +8.28% +25.68% +22.93%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +7.28% +24.68% +12.56%
- -----------------------------------------------------------------------------------------------------------------
Value of $10,000 Investment(3) $10,728 $12,468 $12,293
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04)(4) +36.16% +14.18%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate(5) 1.77%
- -----------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(6) 1.90%
- -----------------------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

14 | Past performance does not guarantee future results. | Semiannual Report

PERFORMANCE SUMMARY (CONTINUED)

ENDNOTES

CLASS B: These shares have higher annual fees and expenses than Class A
shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares
have higher annual fees and expenses than Class A shares.

CLASS R: Shares are available to certain eligible investors as described in
the prospectus. These shares have higher annual fees and expenses
than Class A shares.

(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.

(3) These figures represent the value of a hypothetical $10,000 investment in
the Fund over the periods indicated and include any current, applicable,
maximum sales charge.

(4) In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

(5) Distribution rate is based on an annualization of the respective class's
April dividend and the maximum offering price (NAV for Classes B, C and R)
per share on 4/30/04.

(6) Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 4/30/04.

Semiannual Report | Past performance does not guarantee future results. | 15

FRANKLIN SHORT-INTERMEDIATE
U.S. GOVERNMENT SECURITIES FUND

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Short-Intermediate U.S.
Government Securities Fund seeks to provide investors with a high level of
current income as is consistent with prudent investing, while seeking to
preserve shareholders' capital, by investing primarily in U.S. government and
government agency securities and striving to maintain a dollar-weighted average
maturity of approximately two to five years.(1)

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

PORTFOLIO BREAKDOWN
Franklin Short-Intermediate U.S. Government Securities Fund
Based on Total Net Assets as of 4/30/04

Agency Bonds ................................ 41.4%
[PIE CHART] Mortgage-Backed Securities .................. 39.3%
Treasury Note ............................... 17.8%
Short-Term Investments & Other Net Assets ... 1.5%

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

This semiannual report for Franklin Short-Intermediate U.S. Government
Securities Fund covers the period ended April 30, 2004.

PERFORMANCE OVERVIEW

Franklin Short-Intermediate U.S. Government Securities Fund - Class A delivered
a +0.58% cumulative total return for the six months ended April 30, 2004. The
Fund outperformed its benchmark, the Lehman Brothers Short U.S. Treasury 1-5
Year Index, which returned 0.54% over the same period.(2) You can find the
Fund's long-term performance data in the Performance Summary beginning on page
19.

(1) In determining a security's maturity for the purposes of calculating the
Fund's average maturity, an estimate of the average time for its principal
to be paid may be used.

(2) Source: Standard & Poor's Micropal. The Lehman Brothers Short U.S.
Treasury 1-5 Year Index includes U.S. Treasury securities. The index
excludes all U.S. Treasury bills, flower bonds, targeted investor notes
(TINs), and state and local government series (SLGs). All issues included
must have one to five years to final maturity and must be rated investment
grade (Baa3 or better) by Moody's Investors Service. They must also be
dollar-denominated and non-convertible. Total return includes price
appreciation/depreciation and income as a percentage of the original
investment. The total return index is rebalanced monthly by market
capitalization. The index is unmanaged. One cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 36.

16 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
Franklin Short-Intermediate U.S. Government Securities Fund
11/1/03-4/30/04

- --------------------------------------------------------------------------------
DIVIDEND PER SHARE
----------------------------
MONTH CLASS A ADVISOR CLASS
- --------------------------------------------------------------------------------
November 2.85 cents 2.94 cents
- --------------------------------------------------------------------------------
December 2.85 cents 2.93 cents
- --------------------------------------------------------------------------------
January 2.85 cents 2.93 cents
- --------------------------------------------------------------------------------
February 3.20 cents 3.28 cents
- --------------------------------------------------------------------------------
March 3.20 cents 3.29 cents
- --------------------------------------------------------------------------------
April 3.20 cents 3.29 cents
- --------------------------------------------------------------------------------
TOTAL 18.15 CENTS 18.66 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.
All Fund distributions will vary depending upon current market conditions,
and past distributions are not indicative of future trends.

ECONOMIC AND MARKET OVERVIEW

For much of the six-month reporting period, many market analysts discussed the
employment picture because job creation was slower than expected. However, job
growth rose during March and April, as nonfarm payrolls added 625,000 jobs.(3)
This important factor was one of many that helped lead to an interest rate rise
over the period, and 2-, 3-, 5- and 10-year Treasury yields were up 46, 50, 36
and 20 basis points (100 basis points equal one percent), respectively.

Still, interest rates remained historically low. Relatively lower interest rates
benefited consumers in the form of reduced mortgage refinancing and transaction
costs during the period. This, combined with personal income tax reductions,
helped improve consumers' net worths and spending ability, which supported
economic growth.

Increases in business spending also helped economic growth. After having been
largely absent since the end of 2000, business spending posted strong results
for the final quarter of 2003 and the first quarter of 2004. Nonresidential
investment spending rose at an annual rate of 5.8% in the first quarter of
2004.(4) Additionally, nonfarm productivity grew an annualized 3.8% in the first
quarter of 2004, which helped businesses generate more goods and services
without substantially raising inflation.(3)

Although higher energy prices contributed to inflation, the core Consumer Price
Index, which excludes food and energy, rose 1.8% for the year ended April 30,
2004. Expected inflation is a key determinant of interest rates, and the
inflation increase helped contribute somewhat to the overall interest rate rise
during the period.

(3) Source: Bureau of Labor Statistics.

(4) Source: Bureau of Economic Analysis.

Semiannual Report | 17

INVESTMENT STRATEGY

We seek to maintain the portfolio's weighted average life between two and five
years. We invest primarily in short- to intermediate-term securities guaranteed
by the U.S. government, its agencies and instrumentalities.(5) Our portfolio
emphasizes mortgage-backed bonds and agency debentures, while also diversifying
across components of the U.S. Treasury sector. We analyze securities using
proprietary and non-proprietary research to help identify attractive investment
opportunities.

MANAGER'S DISCUSSION

In the mortgage-backed securities sector, we used our research to uncover areas
of the markets where we thought mortgage risk may have offered value, looking
across the coupon spectrum. As always, we looked through the universe of
government and agency bonds to find valuations we considered attractive. During
the six months under review, we found investment opportunities outside the U.S.
Treasury sector, in agency mortgage-backed securities and agency debentures.
Favorable fundamentals and relatively strong historical risk-adjusted returns
for these sectors drove our allocation decisions.

Thank you for your participation in Franklin Short-Intermediate U.S. Government
Securities Fund. We look forward to serving your future investment needs.

/s/ Roger A. Bayston
[PHOTO OMITTED]
Roger A. Bayston
Portfolio Manager
Franklin Short-Intermediate U.S. Government Securities Fund

(5) U.S. government 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. Although U.S. government sponsored entities may be chartered
or sponsored by acts of Congress, their securities are neither insured nor
guaranteed by the U.S. Treasury. Please refer to the Fund's prospectus for
a detailed discussion regarding various levels of credit support. The
Fund's yield and share price are not guaranteed and will vary with market
conditions.

18 | Semiannual Report

PERFORMANCE SUMMARY AS OF 4/30/04

FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND

PRICE AND DISTRIBUTION INFORMATION

- ---------------------------------------------------------------------------------------------------------
CLASS A CHANGE 4/30/04 10/31/03
- ---------------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.12 $10.25 $10.37
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/03-4/30/04)
- ---------------------------------------------------------------------------------------------------------
Dividend Income $0.1815
- ---------------------------------------------------------------------------------------------------------

ADVISOR CLASS CHANGE 4/30/04 10/31/03
- ---------------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.12 $10.24 $10.36
- ---------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (11/1/03-4/30/04)
- ---------------------------------------------------------------------------------------------------------
Dividend Income $0.1866
- ---------------------------------------------------------------------------------------------------------

PERFORMANCE

CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE. CUMULATIVE TOTAL RETURN EXCLUDES
SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE MAXIMUM SALES CHARGES.

- ------------------------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------------------

Cumulative Total Return(1) +0.58% +0.46% +27.52% +67.92%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) -1.69% -1.77% +4.50% +5.08%
- ------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04)(3) +0.15% +4.88% +5.16%
- ------------------------------------------------------------------------------------------------------------------
Distribution Rate(4) 3.66%
- ------------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(5) 2.25%
- ------------------------------------------------------------------------------------------------------------------

ADVISOR CLASS(6) 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- ------------------------------------------------------------------------------------------------------------------

Cumulative Total Return(1) +0.63% +0.56% +28.15% +69.07%
- ------------------------------------------------------------------------------------------------------------------
Average Annual Total Return(2) +0.63% +0.56% +5.09% +5.39%
- ------------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (3/31/04)(3) +2.53% +5.47% +5.48%
- ------------------------------------------------------------------------------------------------------------------
Distribution Rate(4) 3.86%
- ------------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield(5) 2.40%
- ------------------------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 19

PERFORMANCE SUMMARY (CONTINUED)

ENDNOTES

THE FUND'S YIELD AND SHARE PRICE ARE NOT GUARANTEED AND WILL VARY WITH MARKET
CONDITIONS, INTEREST RATE MOVEMENTS AND UNSCHEDULED MORTGAGE PREPAYMENTS.
SECURITIES OWNED BY THE FUND, 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 FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE
MAIN INVESTMENT RISKS.

CLASS A: Effective 5/1/94, the Fund implemented a Rule 12b-1 plan,
which affects subsequent performance.

ADVISOR CLASS: Shares are available to certain eligible investors as
described in the prospectus.

(1) Cumulative total return represents the change in value of an investment
over the periods indicated and does not include a sales charge.

(2) Average annual total return represents the average annual change in value
of an investment over the periods indicated and includes any applicable
maximum sales charge. Six-month return has not been annualized.

(3) In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

(4) Distribution rate is based on an annualization of the respective class's
April dividend and the maximum offering price (NAV for Advisor Class) per
share on 4/30/04.

(5) Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 4/30/04.

(6) Effective 1/2/97, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for
this class reflect the following methods of calculation: (a) For periods
prior to 1/2/97, a restated figure is used based upon the Fund's Class A
performance, excluding the effect of Class A's maximum initial sales
charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b)
for periods after 1/1/97, actual Advisor Class performance is used
reflecting all charges and fees applicable to that class. Since 1/2/97
(commencement of sales), the cumulative and average annual total returns
of Advisor Class shares were +45.61% and +5.26%.

20 | Past performance does not guarantee future results. | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS

FRANKLIN CONVERTIBLE SECURITIES FUND

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ...... $ 13.90 $ 10.87 $ 13.07 $ 15.93 $ 12.75 $ 11.75
-----------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) ................. .26 .56 .69(d) .76 .75 .61

Net realized and unrealized gains (losses) 1.42 2.97 (2.14)(d) (2.12) 3.08 1.03
-----------------------------------------------------------------------------------

Total from investment operations .......... 1.68 3.53 (1.45) (1.36) 3.83 1.64
-----------------------------------------------------------------------------------

Less distributions from:

Net investment income .................... (.31) (.50) (.75) (.83) (.65) (.64)

Net realized gains ....................... -- -- -- (.67) -- --
-----------------------------------------------------------------------------------

Total distributions ....................... (.31) (.50) (.75) (1.50) (.65) (.64)
-----------------------------------------------------------------------------------

Net asset value, end of period ............ $ 15.27 $ 13.90 $ 10.87 $ 13.07 $ 15.93 $ 12.75
===================================================================================

Total return(b) ........................... 12.13% 33.10% (11.74)% (9.15)% 30.51% 14.25%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $365,337 $294,987 $168,040 $169,659 $159,130 $129,908

Ratios to average net assets:

Expenses ................................. .92%(c) .98% 1.00% 1.00% 1.05% 1.05%

Net investment income .................... 3.52%(c) 4.49% 5.45%(d) 5.26% 4.92% 4.92%

Portfolio turnover rate ................... 15.14% 49.90% 91.25% 163.07% 177.02% 147.75%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.

(d) Effective November 1, 2001, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began amortizing
all premium and discount on fixed-income securities, as required. The
effect of this change was as follows:

Net investment income per share ............................... $(.017)
Net realized and unrealized gains (losses) per share .......... .017
Ratio of net investment income to average net assets .......... (.14)%

Per share data and ratios for prior periods have not been restated to
reflect this change in accounting policy.

Semiannual Report | 21

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN CONVERTIBLE SECURITIES FUND (CONTINUED)

-----------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .......... $ 13.81 $ 10.82 $ 13.01 $ 15.86 $ 12.70 $ 11.70
----------------------------------------------------------------------------------
Income from investment operations:

Net investment income(a) ..................... .21 .46 .60(d) .66 .64 .51

Net realized and unrealized gains (losses) ... 1.40 2.96 (2.13)(d) (2.12) 3.06 1.04
----------------------------------------------------------------------------------

Total from investment operations .............. 1.61 3.42 (1.53) (1.46) 3.70 1.55
----------------------------------------------------------------------------------
Less distributions from:

Net investment income ........................ (.26) (.43) (.66) (.72) (.54) (.55)

Net realized gains ........................... -- -- -- (.67) -- --
----------------------------------------------------------------------------------

Total distributions ........................... (.26) (.43) (.66) (1.39) (.54) (.55)
-----------------------------------------------------------------------------------

Net asset value, end of period ................ $ 15.16 $ 13.81 $ 10.82 $ 13.01 $ 15.86 $ 12.70
==================================================================================

Total return(b) ............................... 11.74% 32.08% (12.35)% (9.82)% 29.54% 13.48%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............. $140,832 $106,719 $ 55,759 $ 46,861 $ 35,525 $ 29,148

Ratios to average net assets:

Expenses ..................................... 1.67%(c) 1.75% 1.72% 1.75% 1.77% 1.80%

Net investment income ........................ 2.77%(c) 3.72% 4.73%(d) 4.55% 4.21% 4.16%

Portfolio turnover rate ....................... 15.14% 49.90% 91.25% 163.07% 177.02% 147.75%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

Per share data and ratios for prior periods have not been restated to
reflect this change in accounting policy.

22 | See notes to financial statements. | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED)

- -------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CONVERTIBLE SECURITIES FUND SHARES VALUE
- -------------------------------------------------------------------------------------------------------------------------------

CONVERTIBLE PREFERRED STOCKS 44.0%
COMMERCIAL SERVICES .7%
Interpublic Group of Cos. Inc., 5.375%, cvt. pfd. ...................................... 65,000 $ 3,740,100
-----------

COMMUNICATIONS .9%
ALLTEL Corp., 7.75%, cvt. pfd. ......................................................... 90,000 4,486,500
-----------

CONSUMER DURABLES 4.3%
Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd. ...................................... 255,000 14,390,125
General Motors Corp., 6.25%, cvt. pfd. ................................................. 235,000 7,162,800
-----------
21,552,925
-----------

CONSUMER NON-DURABLES 1.2%
Constellation Brands Inc., 5.75%, cvt. pfd. ............................................ 191,800 5,921,825
-----------
CONSUMER SERVICES 2.3%
Cendant Corp., 7.75%, cvt. pfd. ........................................................ 120,000 5,976,000
Six Flags Inc., 7.25%, cvt. pfd. ....................................................... 250,000 5,800,000
-----------
11,776,000
-----------

DISTRIBUTION SERVICES .8%
McKesson Financing Trust, 5.00%, cvt. pfd. ............................................. 75,000 3,937,500
-----------

ELECTRONIC TECHNOLOGY 2.5%
Northrop Grumman, 7.00%, cvt. pfd., B .................................................. 40,000 5,090,000
Raytheon Co., 8.25%, cvt. pfd. ......................................................... 75,000 3,861,000
Solectron Corp., 7.25%, cvt. pfd. ...................................................... 273,000 3,944,850
-----------
12,895,850
-----------

ENERGY MINERALS 5.2%
Arch Coal Inc., 5.00%, cvt. pfd. ....................................................... 100,000 8,261,000
Chesapeake Energy Corp., 6.75%, cvt. pfd. .............................................. 20,000 1,827,500
Chesapeake Energy Corp., 6.75%, cvt. pfd., 144A ........................................ 80,000 7,310,000
Kerr-McGee Corp. into Devon Energy, 5.50%, cvt. pfd. ................................... 170,000 8,925,000
-----------
26,323,500
-----------

FINANCE 12.2%
Capital One Financial, 6.25%, cvt. pfd. ................................................ 100,000 4,962,500
Chubb Corp., 7.00%, cvt. pfd. .......................................................... 150,000 4,200,000
Commerce Capital Trust II, 5.95%, cvt. pfd. ............................................ 115,000 7,316,875
Hartford Financial Service Group Inc., 6.00%, cvt. pfd. ................................ 75,000 4,473,750
PMI Group Inc., 5.875%, cvt. pfd. ...................................................... 270,000 7,497,900
Prudential Financial Inc., 6.75%, cvt. pfd. ............................................ 120,700 8,150,871
Travelers Property Casualty Corp., junior sub. note, 4.50%, cvt. pfd. .................. 300,000 7,389,000
Unumprovident Corp., 8.25%, cvt. pfd. .................................................. 150,000 4,986,975
Washington Mutual Inc., 5.375%, cvt. pfd. .............................................. 20,000 1,110,000
Washington Mutual Capital Trust I, 5.375%, cvt. pfd., 144A ............................. 60,000 3,330,000
XL Capital Ltd., 6.50%, cvt. pfd. ...................................................... 320,000 8,130,560
-----------
61,548,431
-----------

HEALTH SERVICES 1.4%
Anthem Inc., 6.00%, cvt. pfd. .......................................................... 70,000 7,233,800
-----------

Semiannual Report | 23

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

-------------------------------------------------------------------------------------------------------------------------
FRANKLIN CONVERTIBLE SECURITIES FUND SHARES VALUE
-------------------------------------------------------------------------------------------------------------------------

CONVERTIBLE PREFERRED STOCKS (CONT.)
INDUSTRIAL SERVICES 2.0%
Allied Waste Industries Inc., 6.25%, cvt. pfd. ...................................... 107,500 $ 7,471,250
Williams Cos. Inc., 5.50%, cvt. pfd.., 144A .......................................... 41,000 2,741,875
------------
10,213,125
------------

PROCESS INDUSTRIES 2.3%
International Paper Co., 5.25%, cvt. pfd. ........................................... 75,000 3,815,625
Temple Inland Inc., 7.50%, cvt. pfd. ................................................ 140,000 7,854,000
------------
11,669,625
------------

REAL ESTATE INVESTMENT TRUSTS 2.7%
Citigroup Global Markets into Regency, 2.00%, cvt. pfd. ............................. 105,000 3,654,525
Glenborough Realty Trust Inc., 7.75%, cvt. pfd., A .................................. 96,327 2,388,910
Host Marriott Corp., 6.75%, cvt. pfd. ............................................... 152,800 7,668,115
------------
13,711,550
------------

RETAIL TRADE 1.3%
Toys R Us Inc., 6.25%, cvt. pfd. .................................................... 144,000 6,379,200
------------

TECHNOLOGY SERVICES .4%
Electronic Data Systems Corp., 7.625%, cvt. pfd. .................................... 120,000 2,025,600
------------

UTILITIES 3.8%
CMS Energy Corp., 4.50%, cvt. pfd., 144A ............................................ 100,000 5,500,000
DTE Energy Co., 8.75%, cvt. pfd. .................................................... 200,000 4,938,000
FPL Group Inc., 8.50%, cvt. pfd. .................................................... 85,000 4,746,400
PPL Capital Fund Trust I, 7.75%, cvt. pfd., E ....................................... 200,000 4,216,000
------------
19,400,400
------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $198,558,670) .............................. 222,815,931
------------

----------------
PRINCIPAL AMOUNT
----------------

CONVERTIBLE BONDS 52.7%
COMMERCIAL SERVICES 2.2%
Grey Global Group Inc., cvt., 144A, 5.00%, 10/15/33 ................................. $ 6,000,000 6,555,000
Interpublic Group of Cos. Inc., cvt., 144A, 4.50%, 3/15/23 .......................... 3,000,000 4,552,500
------------
11,107,500
------------

COMMUNICATIONS 1.8%
NII Holdings Inc., senior note, cvt., 144A, 3.50%, 9/15/33 .......................... 6,000,000 9,292,500
------------

CONSUMER DURABLES 1.1%
K2 Inc., cvt., 144A, 5.00%, 6/15/10 ................................................. 4,000,000 5,539,040
------------

CONSUMER SERVICES 4.1%
(b)Adelphia Communications Corp., junior sub. note, cvt., 6.00%, 2/15/06 ............... 11,250,000 6,328,125
Fairmont Hotels & Resorts Inc., senior note, cvt., 144A, 3.75%, 12/01/23 (Canada) ... 5,000,000 5,087,500
Liberty Media Corp. into Viacom, cvt., B, 3.25%, 3/15/31 ............................ 10,000,000 9,412,500
------------
20,828,125
------------

DISTRIBUTION SERVICES 2.9%
Amerisource Health Corp., cvt., 5.00%, 12/01/07 ..................................... 7,000,000 8,242,500
Performance Food Group Co., cvt., 5.50%, 10/16/08 ................................... 5,500,000 6,352,500
------------
14,595,000
------------

24 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

- ------------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CONVERTIBLE SECURITIES FUND PRINCIPAL AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------

CONVERTIBLE BONDS (CONT.)
ELECTRONIC TECHNOLOGY 2.8%
Advanced Energy Industries Inc., cvt., 5.00%, 9/01/06 ...................................... $ 2,000,000 $ 2,015,000
L-3 Communications Holdings Inc., cvt., 4.00%, 9/15/11 ..................................... 4,000,000 4,790,000
Liberty Media Corp. into Motorola, senior deb., cvt., 3.50%, 1/15/31 ....................... 8,000,000 7,340,000
-----------
14,145,000
-----------

FINANCE 4.9%
Countrywide Financial, cvt., zero cpn., 2/08/31 ............................................ 6,000,000 8,385,000
GATX Corp., cvt., 144A, 5.00%, 8/15/23 ..................................................... 3,000,000 3,690,000
Leucadia National Corp., cvt., 144A, 3.75%, 4/15/14 ........................................ 7,500,000 7,621,875
NCO Group Inc., cvt., 4.75%, 4/15/06 ....................................................... 5,000,000 5,118,750
-----------
24,815,625
-----------

HEALTH SERVICES 4.1%
LifePoint Hospitals Holding, cvt., 4.50%, 6/01/09 .......................................... 2,500,000 2,690,625
Pacificare Health Systems Inc., cvt., 3.00%, 10/15/32 ...................................... 2,000,000 3,717,500
Sierra Health Services Inc., senior deb., cvt., 2.25%, 3/15/23 ............................. 2,000,000 4,257,500
Sierra Health Services Inc., senior deb., cvt., 144A, 2.25%, 3/15/23 ....................... 2,000,000 4,257,500
Universal Health Services Inc., cvt., .426%, 6/23/20 ....................................... 10,000,000 5,987,500
-----------
20,910,625
-----------

HEALTH TECHNOLOGY 12.6%
Alpharma Inc., cvt., 3.00%, 6/01/06 ........................................................ 4,000,000 4,900,000
Alza Corp., cvt., zero cpn., 7/28/20 ....................................................... 10,000,000 7,575,000
Biogen Idec Inc., cvt., zero cpn., 2/16/19 ................................................. 4,000,000 9,565,000
Gilead Sciences Inc., senior note, cvt., 2.00%, 12/15/07 ................................... 6,000,000 8,377,500
InterMune Inc., senior note, cvt., .25%, 3/01/11 ........................................... 8,000,000 7,110,000
IVAX Corp., cvt., 4.50%, 5/15/08 ........................................................... 5,000,000 5,075,000
Medarex Inc., cvt., 144A, 2.25%, 5/15/11 ................................................... 5,000,000 4,937,500
NPS Pharmaceuticals Inc., senior note, cvt., 144A, 3.00%, 6/15/08 .......................... 7,000,000 7,218,750
OSI Pharmaceuticals Inc., cvt., 4.00%, 2/01/09 ............................................. 4,500,000 7,003,125
Valeant Pharmaceuticals International, sub. note, cvt., 144A, 3.00%, 8/16/10 ............... 2,000,000 2,060,000
-----------
63,821,875
-----------

PROCESS INDUSTRIES 2.0%
Bunge Ltd., senior note, cvt., 3.75%, 11/15/22 ............................................. 4,000,000 5,180,000
HMP Equity Holdings Corp., 144A, zero cpn., 5/15/08 ........................................ 6,500,000 5,135,000
-----------
10,315,000
-----------

PRODUCER MANUFACTURING 2.8%
Lennox International Inc., cvt., 6.25%, 6/01/09 ............................................ 5,500,000 6,723,750
Tyco International Group SA, cvt., 144A, 2.75%, 1/15/18 (Luxembourg) ....................... 5,500,000 7,225,625
-----------
13,949,375
-----------

RETAIL TRADE 5.0%
Casual Male Retail Group Inc., senior sub. note, cvt., 144A, 5.00%, 1/01/24 ................ 7,000,000 8,067,500
Gap Inc., senior note, cvt., 5.75%, 3/15/09 ................................................ 3,500,000 5,061,875
Gap Inc., senior note, cvt., 144A, 5.75%, 3/15/09 .......................................... 3,500,000 5,061,875
Lowe's Cos. Inc., senior note, cvt., zero cpn., 2/16/21 .................................... 8,000,000 6,880,240
-----------
25,071,490
-----------

Semiannual Report | 25

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

--------------------------------------------------------------------------------------------------------------------------------
FRANKLIN CONVERTIBLE SECURITIES FUND PRINCIPAL AMOUNT VALUE
--------------------------------------------------------------------------------------------------------------------------------

CONVERTIBLE BONDS (CONT.)
TECHNOLOGY SERVICES 2.4%
BISYS Group Inc., cvt., 4.00%, 3/15/06 ...................................................... $ 4,000,000 $ 4,000,000
Electronic Data Systems Corp., cvt., 144A, 3.875%, 7/15/23 .................................. 3,000,000 2,831,250
Symantec Corp., cvt., 3.00%, 11/01/06 ....................................................... 2,000,000 5,300,000
-------------
12,131,250
-------------

UTILITIES 4.0%
Dynegy Inc., cvt., 144A, 4.75%, 8/15/23 ..................................................... 5,000,000 6,450,000
Reliant Resources Inc., cvt., 144A, 5.00%, 8/15/10 .......................................... 5,000,000 6,088,350
Sierra Pacific Resources Co., cvt., 144A, 7.25%, 2/14/10 .................................... 4,000,000 7,405,000
-------------
19,943,350
-------------
TOTAL CONVERTIBLE BONDS (COST $227,729,774) ................................................. 266,465,755
-------------

--------------
SHARES
--------------

WARRANTS (COST $153,208)
ELECTRONIC TECHNOLOGY
(a)Xicor Inc., wts., 144A, 11/19/06 ............................................................ 40,107 201,096
-------------
TOTAL LONG TERM INVESTMENTS (COST $426,441,652) ............................................. 489,482,782
-------------

SHORT TERM INVESTMENT (COST $20,146,343) 4.0%
(c)Franklin Institutional Fiduciary Trust Money Market Portfolio ............................... 20,146,343 20,146,343
-------------
TOTAL INVESTMENTS (COST $446,587,995) 100.7% ................................................ 509,629,125
OTHER ASSETS, LESS LIABILITIES (.7)% ........................................................ (3,460,592)
-------------
NET ASSETS 100.0% ........................................................................... $ 506,168,533
=============

(a) Non-income producing.

(b) Defaulted security. See Note 8.

26 | See notes to financial statements. | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS

FRANKLIN EQUITY INCOME FUND

----------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
----------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .......... $ 17.84 $ 15.42 $ 17.76 $ 19.82 $ 19.20 $ 19.93
---------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) ..................... .21 .40 .42(d) .43 .53 .58

Net realized and unrealized gains (losses) ... 1.30 2.45 (2.21)(d) (1.60) 1.89 .36
---------------------------------------------------------------------------------

Total from investment operations .............. 1.51 2.85 (1.79) (1.17) 2.42 .94
---------------------------------------------------------------------------------

Less distributions from:

Net investment income ........................ (.20) (.43) (.40) (.46) (.52) (.60)

Net realized gains ........................... -- -- (.15) (.43) (1.28) (1.07)
---------------------------------------------------------------------------------

Total distributions ........................... (.20) (.43) (.55) (.89) (1.80) (1.67)
---------------------------------------------------------------------------------

Net asset value, end of period ................ $ 19.15 $ 17.84 $ 15.42 $ 17.76 $ 19.82 $ 19.20
=================================================================================

Total return(b) ............................... 8.42% 18.72% (10.43)% (6.22)% 14.05% 4.90%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............. $589,480 $501,658 $404,219 $373,232 $344,671 $385,968

Ratios to average net assets:

Expenses ..................................... .95%(c) 1.00% 1.00% .99% 1.04% .94%

Net investment income ........................ 2.17%(c) 2.46% 2.34%(d) 2.19% 2.94% 2.95%

Portfolio turnover rate ....................... 15.51% 54.07% 77.27% 114.13% 69.75% 50.20%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.

Net investment income per share ............................... $(.012)
Net realized and unrealized gains (losses) per share .......... .012
Ratio of net investment income to average net assets .......... (.07)%

Per share data and ratios for prior periods have not been restated to
reflect this change in accounting policy.

Semiannual Report | 27

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN EQUITY INCOME FUND (CONTINUED)

-----------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS B (UNAUDITED) 2003 2002 2001 2000 1999(e)
-----------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ...... $ 17.76 $ 15.37 $ 17.70 $ 19.76 $19.16 $19.37
----------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) ................. .14 .27 .28(d) .27 .39 .33

Net realized and unrealized gains (losses) 1.30 2.44 (2.19)(d) (1.59) 1.88 (.16)
----------------------------------------------------------------------------

Total from investment operations .......... 1.44 2.71 (1.91) (1.32) 2.27 .17
----------------------------------------------------------------------------
Less distributions from:

Net investment income .................... (.13) (.32) (.27) (.31) (.39) (.38)

Net realized gains ....................... -- -- (.15) (.43) (1.28) --
----------------------------------------------------------------------------

Total distributions ....................... (.13) (.32) (.42) (.74) (1.67) (.38)
----------------------------------------------------------------------------

Net asset value, end of period ............ $ 19.07 $ 17.76 $ 15.37 $ 17.70 $19.76 $19.16
============================================================================

Total return(b) ........................... 8.06% 17.85% (11.07)% (6.97)% 13.17% .86%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......... $52,474 $42,764 $ 21,341 $10,661 $4,509 $2,493

Ratios to average net assets:

Expenses ................................. 1.70%(c) 1.75% 1.75% 1.73% 1.78% 1.69%(c)

Net investment income .................... 1.42%(c) 1.71% 1.59%(d) 1.41% 2.18% 2.03%(c)

Portfolio turnover rate ................... 15.51% 54.07% 77.27% 114.13% 69.75% 50.20%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

Net investment income per share ................................ $(.012)
Net realized and unrealized gains (losses) per share ........... .012
Ratio of net investment income to average net assets ........... (.07)%

Per share data and ratios for prior periods have not been restated to
reflect this change in accounting policy.

(e) For the period January 1, 1999 (effective date) to October 31, 1999.

28 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN EQUITY INCOME FUND (CONTINUED)

----------------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
---------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .......... $ 17.77 $ 15.38 $ 17.70 $ 19.77 $ 19.14 $ 19.88
---------------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) ..................... .13 .27 .28(d) .28 .40 .43

Net realized and unrealized gains (losses) ... 1.31 2.43 (2.18)(d) (1.61) 1.89 .36
---------------------------------------------------------------------------------

Total from investment operations .............. 1.44 2.70 (1.90) (1.33) 2.29 .79
---------------------------------------------------------------------------------

Less distributions from:

Net investment income ........................ (.13) (.31) (.27) (.31) (.38) (.46)

Net realized gains ........................... -- -- (.15) (.43) (1.28) (1.07)
---------------------------------------------------------------------------------

Total distributions ........................... (.13) (.31) (.42) (.74) (1.66) (1.53)
---------------------------------------------------------------------------------

Net asset value, end of period ................ $ 19.08 $ 17.77 $ 15.38 $ 17.70 $ 19.77 $ 19.14
=================================================================================

Total return(b) ............................... 8.05% 17.82% (11.07)% (7.00)% 13.26% 4.11%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............. $168,079 $147,739 $96,701 $84,912 $73,387 $82,353

Ratios to average net assets:

Expenses ..................................... 1.70%(c) 1.76% 1.73% 1.74% 1.78% 1.69%

Net investment income ........................ 1.42%(c) 1.70% 1.61%(d) 1.44% 2.20% 2.20%

Portfolio turnover rate ....................... 15.51% 54.07% 77.27% 114.13% 69.75% 50.20%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

Per share data and ratios for prior periods have not been restated to
reflect this change in accounting policy.

Semiannual Report | 29

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN EQUITY INCOME FUND (CONTINUED)

--------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31,
CLASS R (UNAUDITED) 2003 2002(d)
-------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ........................ $ 17.85 $ 15.44 $16.20
-----------------------------------------------------

Income from investment operations:

Net investment income(a) ................................... .18 .34 .06

Net realized and unrealized gains (losses) ................. 1.31 2.46 (.73)
-----------------------------------------------------

Total from investment operations ............................ 1.49 2.80 (.67)
-----------------------------------------------------

Less distributions from net investment income ............... (.18) (.39) (.09)
-----------------------------------------------------

Net asset value, end of period .............................. $ 19.16 $ 17.85 $15.44
=====================================================

Total return(b) ............................................. 8.28% 18.46% (4.17)%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ........................... $17,980 $14,685 $2,842

Ratios to average net assets:

Expenses ................................................... 1.20%(c) 1.25% 1.25%(c)

Net investment income ...................................... 1.92%(c) 2.21% 2.09%(c)

Portfolio turnover rate ..................................... 15.51% 54.07% 77.27%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect the contingent deferred sales charge, and is
not annualized for periods less than one year.

(d) For the period August 1, 2002 (effective date) to October 31, 2002.

30 | See notes to financial statements. | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED)

- -----------------------------------------------------------------------------------------------------------------
FRANKLIN EQUITY INCOME FUND SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------

COMMON STOCKS 90.9%
COMMERCIAL SERVICES 1.6%
R.R. Donnelley & Sons Co. ..................................................... 453,100 $ 13,330,202
------------
COMMUNICATIONS 6.1%
Alltel Corp. .................................................................. 126,300 6,357,942
AT&T Corp. .................................................................... 372,000 6,379,800
BellSouth Corp. ............................................................... 442,700 11,426,087
SBC Communications Inc. ....................................................... 488,000 12,151,200
Verizon Communications Inc. ................................................... 376,950 14,226,093
------------
50,541,122
------------

CONSUMER DURABLES 1.9%
Mattel Inc. ................................................................... 312,100 5,293,216
Newell Rubbermaid Inc. ........................................................ 255,200 6,032,928
Stanley Works ................................................................. 109,200 4,642,092
------------
15,968,236
------------

CONSUMER NON-DURABLES 8.6%
Altria Group Inc. ............................................................. 290,900 16,110,042
British American Tobacco PLC (United Kingdom) ................................. 302,500 4,586,584
Colgate-Palmolive Co. ......................................................... 195,200 11,298,176
General Mills Inc. ............................................................ 89,500 4,363,125
Kimberly-Clark Corp. .......................................................... 251,600 16,467,220
Loews Corp. - Carolina Group .................................................. 157,900 4,143,296
Sara Lee Corp. ................................................................ 634,100 14,635,028
------------
71,603,471
------------

CONSUMER SERVICES 2.1%
Dow Jones & Co. Inc. .......................................................... 174,300 8,033,487
Mandalay Resort Group ......................................................... 96,800 5,561,160
The Walt Disney Co. ........................................................... 160,800 3,703,224
------------
17,297,871
------------

ELECTRONIC TECHNOLOGY 6.3%
Diebold Inc. .................................................................. 64,900 2,991,241
General Dynamics Corp. ........................................................ 86,900 8,135,578
Hewlett-Packard Co. ........................................................... 384,100 7,566,770
Nokia Corp., ADR (Finland) .................................................... 413,800 5,797,338
Raytheon Co. .................................................................. 425,100 13,713,726
Rockwell Automation Inc. ...................................................... 319,100 10,431,379
Seagate Technology ............................................................ 262,200 3,280,122
------------
51,916,154
------------

ENERGY MINERALS 12.0%
BP PLC, ADR (United Kingdom) .................................................. 480,000 25,392,000
ChevronTexaco Corp. ........................................................... 289,260 26,467,290
Exxon Mobil Corp. ............................................................. 373,034 15,872,597
Kerr-McGee Corp. .............................................................. 252,500 12,354,825
Shell Transport & Trading Co. PLC, ADR (United Kingdom) ....................... 450,600 18,956,742
------------
99,043,454
------------

Semiannual Report | 31

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

- ----------------------------------------------------------------------------------------------------------------
FRANKLIN EQUITY INCOME FUND SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------

COMMON STOCKS (CONT.)
FINANCE 25.5%
Arthur J. Gallagher & Co. ............................................. 318,600 $ 10,268,478
Bank of America Corp. ................................................. 366,353 29,487,753
Citigroup Inc. ........................................................ 590,500 28,397,145
Fannie Mae ............................................................ 300,900 20,677,848
JP Morgan Chase & Co. ................................................. 395,550 14,872,680
KeyCorp ............................................................... 128,200 3,807,540
Marsh & McLennan Cos. Inc. ............................................ 238,200 10,742,820
Morgan Stanley ........................................................ 272,100 13,983,219
National Commerce Financial Corp. ..................................... 422,400 11,231,616
Old Republic International Corp. ...................................... 345,100 8,013,222
St. Paul Travelers Cos. Inc. .......................................... 383,500 15,596,945
U.S. Bancorp .......................................................... 520,000 13,332,800
Washington Mutual Inc. ................................................ 430,000 16,937,700
-------------
Wells Fargo & Co. ..................................................... 249,300 14,075,478
-------------
211,425,244
-------------

HEALTH SERVICES 1.0%
CIGNA Corp. ........................................................... 123,000 7,934,730
-------------

HEALTH TECHNOLOGY 8.1%
Abbott Laboratories ................................................... 192,600 8,478,252
Bristol-Myers Squibb Co. .............................................. 257,200 6,455,720
GlaxoSmithKline PLC, ADR (United Kingdom) ............................. 149,300 6,270,600
Hospira Inc. .......................................................... 19,260 548,139
Johnson & Johnson Inc. ................................................ 162,700 8,790,681
Merck & Co. Inc. ...................................................... 205,000 9,635,000
Pall Corp. ............................................................ 345,500 8,215,990
Pfizer Inc. ........................................................... 296,800 10,613,568
Wyeth ................................................................. 223,700 8,516,259
-------------
67,524,209
-------------

NON-ENERGY MINERALS 1.0%
Alcoa Inc. ............................................................ 258,500 7,948,875
-------------
PROCESS INDUSTRIES 3.1%
Dow Chemical Co. ...................................................... 401,900 15,951,411
E.I. du Pont de Nemours & Co. ......................................... 223,200 9,586,440
-------------
25,537,851
-------------

PRODUCER MANUFACTURING 7.5%
Avery Dennison Corp. .................................................. 161,800 10,392,414
Delphi Corp. .......................................................... 385,500 3,932,100
General Electric Co. .................................................. 826,400 24,750,680
Honeywell International Inc. .......................................... 345,300 11,940,474
Pitney Bowes Inc. ..................................................... 249,400 10,911,250
-------------
61,926,918
-------------

REAL ESTATE INVESTMENT TRUST .5%
Vornado Realty Trust .................................................. 80,400 4,056,180
-------------

32 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

---------------------------------------------------------------------------------------------------------------------------------
FRANKLIN EQUITY INCOME FUND SHARES VALUE
---------------------------------------------------------------------------------------------------------------------------------

COMMON STOCKS (CONT.)
TECHNOLOGY SERVICES 2.1%
Automatic Data Processing Inc. ........................................................ 191,500 $ 8,389,615
Microsoft Corp. ....................................................................... 341,300 8,863,561
-------------
17,253,176
-------------
TRANSPORTATION .7%
Union Pacific Corp. ................................................................... 105,600 6,223,008
-------------
UTILITIES 2.8%
NiSource Inc. ......................................................................... 195,000 3,931,200
Pinnacle West Capital Corp. ........................................................... 172,000 6,718,320
PPL Corp. ............................................................................. 200,800 8,604,280
ScottishPower PLC (United Kingdom) .................................................... 587,400 3,992,215
-------------
23,246,015
-------------
TOTAL COMMON STOCKS (COST $650,092,323) ............................................... 752,776,716
-------------
CONVERTIBLE PREFERRED STOCKS 3.7%
CONSUMER DURABLES .8%
Ford Motor Co. Capital Trust II, 6.50%, cvt. pfd. ..................................... 117,700 6,641,811
-------------

FINANCE 1.4%
Capital One Financial, 6.25%, cvt. pfd. ............................................... 76,400 3,791,350
Prudential Financial Inc., 6.75%, cvt. pfd. ........................................... 111,600 7,536,348
-------------
11,327,698
-------------
RETAIL TRADE .9%
Toys R Us Inc., 6.25%, cvt. pfd. ...................................................... 169,700 7,517,710
-------------

UTILITIES .6%
Sierra Pacific Resources Co., 9.00%, cvt. pfd., P.I.E.S ............................... 136,600 4,958,580
-------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $27,602,861) ................................. 30,445,799
-------------
TOTAL LONG TERM INVESTMENTS (COST $677,695,184) ....................................... 783,222,515
-------------

SHORT TERM INVESTMENT (COST $40,346,949) 4.9%
(a)Franklin Institutional Fiduciary Trust Money Market Portfolio ......................... 40,346,949 40,346,949
-------------
TOTAL INVESTMENTS (COST $718,042,133) 99.5% ........................................... 823,569,464
OTHER ASSETS, LESS LIABILITIES .5% .................................................... 4,444,235
-------------
NET ASSETS 100.0% ..................................................................... $ 828,013,699
=============

(a) See Note 7 regarding investments in affiliated Money Market Portfolio.

Semiannual Report | See notes to financial statements. | 33

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS

FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND

-----------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............ $ 10.37 $ 10.57 $ 10.58 $ 10.09 $ 10.11 $ 10.46
-----------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) ....................... .14 .29 .44 .55(d) .57 .53

Net realized and unrealized gains (losses) ..... (.08) (.09) .06 .51(d) -- (.38)
-----------------------------------------------------------------------------

Total from investment operations ................ .06 .20 .50 1.06 .57 .15
-----------------------------------------------------------------------------

Less distributions from net investment income ... (.18) (.40) (.51) (.57) (.59) (.50)
-----------------------------------------------------------------------------

Net asset value, end of period .................. $ 10.25 $ 10.37 $ 10.57 $ 10.58 $ 10.09 $ 10.11
=============================================================================

Total return(b) ................................. .58% 1.92% 4.87% 10.81% 5.86% 1.51%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ............... $323,307 $338,839 $295,623 $193,236 $141,646 $176,114

Ratios to average net assets:

Expenses ....................................... .78%(c) .77% .80% .86% .85% .79%

Net investment income .......................... 2.76%(c) 2.80% 4.22% 5.33%(d) 5.66% 5.18%

Portfolio turnover rate ......................... 41.79% 92.69% 112.71% 53.64% 56.80% 64.26%

(a) Based on average daily shares outstanding.

(b) Total return does not reflect sales commissions or the contingent deferred
sales charge, and is not annualized for periods less than one year.

(d) Effective November 1, 2000, the Fund adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began recording
all paydown gains and losses as part of investment income and amortizing
all premium and discount on fixed-income securities, as required. The
effect of this change was as follows:

Per share data and ratios for prior periods have not been restated to
reflect this change in accounting policy.

34 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND (CONTINUED)

---------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2003 2002 2001 2000 1999
---------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .............. $ 10.36 $ 10.56 $ 10.57 $ 10.08 $ 10.10 $ 10.45
---------------------------------------------------------------------------

Income from investment operations:

Net investment income(a) ......................... .15 .29 .44 .55(d) .57 .54

Net realized and unrealized gains (losses) ....... (.08) (.08) .07 .52(d) .01 (.38)
---------------------------------------------------------------------------

Total from investment operations .................. .07 .21 .51 1.07 .58 .16
---------------------------------------------------------------------------

Less distributions from net investment income ... (.19) (.41) (.52) (.58) (.60) (.51)
---------------------------------------------------------------------------

Net asset value, end of period .................... $ 10.24 $ 10.36 $ 10.56 $ 10.57 $ 10.08 $ 10.10
===========================================================================

Total return(b) ................................... .63% 2.02% 4.97% 10.92% 5.97% 1.62%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................. $19,716 $16,753 $ 7,348 $ 1,184 $ 1,483 $ 1,367

Ratios to average net assets:

Expenses ......................................... .68%(c) .67% .70% .76% .75% .69%

Net investment income ............................ 2.86%(c) 2.90% 4.32% 5.35%(d) 5.76% 5.26%

Portfolio turnover rate ........................... 41.79% 92.69% 112.71% 53.64% 56.80% 64.26%

(a) Based on average daily shares outstanding.

(b) Total return is not annualized for periods less than one year.

Per share data and ratios for prior periods have not been restated to
reflect this change in accounting policy.

Semiannual Report | See notes to financial statements. | 35

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------
FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------

AGENCY BONDS 41.4%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) 19.5%
2.375%, 4/15/06 - 2/15/07 ................................................... $ 46,125,000 $ 45,705,688
2.75%, 8/15/06 .............................................................. 8,000,000 8,019,208
2.875%, 12/15/06 ............................................................ 2,000,000 2,001,682
3.625%, 9/15/08 ............................................................. 11,000,000 10,936,013
------------
66,662,591
------------

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) 21.9%
2.25%, 5/15/06 .............................................................. 25,000,000 24,853,550
3.875%, 3/15/05 ............................................................. 10,000,000 10,205,470
5.25%, 6/15/06 .............................................................. 28,536,215 29,099,094
6.625%, 10/15/07 ............................................................ 10,000,000 11,071,120
------------
75,229,234
------------
TOTAL AGENCY BONDS (COST $141,882,765) 141,891,825
------------

MORTGAGE-BACKED SECURITIES 39.3%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) 14.2%
FHLMC Gold, 5.00%, 3/01/34 .................................................. 9,975,743 9,681,926
FHLMC Gold, 6.00%, 11/01/32 - 4/01/33 ....................................... 7,443,711 7,620,701
FHLMC Gold, 8.50%, 12/01/22 - 7/01/31 ....................................... 6,954,444 7,605,817
FHLMC Gold, 9.50%, 3/01/21 .................................................. 332,679 365,792
FHLMC Gold 15 year, 4.50%, 1/01/19 - 2/01/19 ................................ 8,897,846 8,777,401
FHLMC Gold 15 year, 5.00%, 10/01/17 - 9/01/18 ............................... 4,577,732 4,615,884
FHLMC Gold 15 year, 5.50%, 9/01/18 .......................................... 8,545,556 8,778,540
FHLMC Gold 15 year, 7.00%, 3/01/07 - 9/01/13 ................................ 1,254,585 1,336,516
------------
48,782,577
------------

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) 18.5%
FNMA, 5.00%, 7/01/33 ........................................................ 878,535 852,085
FNMA, 5.50%, 5/01/33 ........................................................ 3,932,934 3,928,058
FNMA, 9.00%, 1/01/17 ........................................................ 604,055 674,012
FNMA, 9.25%, 1/01/17 ........................................................ 102,744 114,993
FNMA, 9.50%, 7/01/16 - 6/01/22 .............................................. 1,177,616 1,322,277
FNMA 15 year, 4.50%, 12/01/18 - 3/01/19 ..................................... 5,000,002 4,929,104
FNMA 15 year, 5.00%, 2/01/18 - 5/01/18 ...................................... 14,028,591 14,132,197
FNMA 15 year, 5.50%, 3/01/16 - 11/01/17 ..................................... 18,920,180 19,440,852
FNMA 15 year, 6.00%, 4/01/16 - 5/01/17 ...................................... 9,437,786 9,852,499
FNMA 15 year, 6.50%, 12/01/08 - 10/01/16 .................................... 4,240,163 4,495,712
FNMA 15 year, 7.00%, 7/01/12 - 7/01/14 ...................................... 1,620,603 1,730,829
FNMA 15 year, 7.50%, 12/01/14 - 1/01/15 ..................................... 634,289 680,015
FNMA 7 year balloon, 6.50%, 9/01/05 - 10/01/06 .............................. 1,161,769 1,175,733
------------
63,328,366
------------

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) 6.6%
GNMA, 5.50%, 4/15/33 - 5/15/33 .............................................. 1,825,449 1,828,379
GNMA, 6.00%, 3/15/33 ........................................................ 775,479 795,758
GNMA, 7.50%, 8/15/05 - 1/15/17 .............................................. 4,514,017 4,769,753
GNMA, 8.00%, 11/15/16 - 1/15/17 ............................................. 375,760 412,667
GNMA, 8.50%, 9/15/04 - 1/15/17 .............................................. 605,989 656,117

36 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

---------------------------------------------------------------------------------------------------------------
FRANKLIN SHORT-INTERMEDIATE U.S. GOVERNMENT SECURITIES FUND PRINCIPAL AMOUNT VALUE
---------------------------------------------------------------------------------------------------------------

MORTGAGE-BACKED SECURITIES (CONT.)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (CONT.)
GNMA, 9.00%, 6/15/16 - 9/15/17 .......................................... $ 1,827,363 $ 2,050,381
GNMA, 9.50%, 11/15/17 ................................................... 60,913 68,675
GNMA 15 year, 6.50%, 10/15/13 - 7/15/14 ................................. 2,441,033 2,599,748
GNMA 15 year, 7.50%, 10/15/14 - 12/15/14 ................................ 644,335 692,180
GNMA II, 5.00%, 9/20/33 ................................................. 4,854,143 4,718,786
GNMA II, 7.50%, 10/20/29 - 10/20/31 ..................................... 3,271,255 3,506,718
GNMA II, 8.50%, 1/20/17 ................................................. 123,349 136,801
GNMA II, 9.00%, 6/20/16 - 2/20/17 ....................................... 384,443 429,833
GNMA II, 9.50%, 6/20/16 ................................................. 88,973 99,565
-------------
22,765,361
-------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $133,972,253) .................... 134,876,304
-------------

TREASURY NOTES 17.8%
U.S. Treasury Note, 1.50%, 3/31/06 ...................................... 30,000,000 29,591,040
U.S. Treasury Note, 2.00%, 5/15/06 ...................................... 15,000,000 14,903,910
U.S. Treasury Note, 2.375%, 8/15/06 ..................................... 13,425,000 13,389,867
U.S. Treasury Note, 4.625%, 5/15/06 ..................................... 3,000,000 3,135,588
-------------
TOTAL TREASURY NOTES (COST $61,213,328) ................................. 61,020,405
-------------
TOTAL LONG TERM INVESTMENTS (COST $337,068,346) ......................... 337,788,534
-------------

SHORT TERM INVESTMENT (COST $3,909,521) 1.1%
(a)Franklin Institutional Fiduciary Trust Money Market Portfolio ........... 3,909,521 3,909,521
-------------
TOTAL INVESTMENTS (COST $340,977,867) 99.6% ............................. 341,698,055
OTHER ASSETS, LESS LIABILITIES .4% ...................................... 1,324,748
-------------
NET ASSETS 100.0% ....................................................... $ 343,022,803
=============

(a) See Note 7 regarding investments in affiliated Money Market Portfolio.

Semiannual Report | See notes to financial statements. | 37

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2004 (unaudited)

---------------------------------------------------------
FRANKLIN
FRANKLIN SHORT-INTERMEDIATE
CONVERTIBLE FRANKLIN EQUITY U.S. GOVERNMENT
SECURITIES FUND INCOME FUND SECURITIES FUND
---------------------------------------------------------

Assets:
Investments in securities:
Cost - Unaffiliated issuers ....................................... $ 426,441,652 $ 677,695,184 $ 337,068,346
Cost - Sweep money fund (Note 7) .................................. 20,146,343 40,346,949 3,909,521
---------------------------------------------------------
Value - Unaffiliated issuers ...................................... 489,482,782 783,222,515 337,788,534
Value - Sweep money fund (Note 7) ................................. 20,146,343 40,346,949 3,909,521
Receivables:
Investment securities sold ........................................ 2,165,190 12,150,298 --
Capital shares sold ............................................... 3,400,855 1,653,290 728,583
Dividends and interest ............................................ 2,739,378 2,320,827 2,147,958
---------------------------------------------------------
Total assets .................................................. 517,934,548 839,693,879 344,574,596
---------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ................................... 5,000,000 9,552,383 --
Funds advanced by custodian ....................................... 4,218,157 -- --
Capital shares redeemed ........................................... 1,847,797 562,400 763,871
Affiliates ........................................................ 532,220 1,030,486 213,385
Shareholders ...................................................... 75,955 353,425 342,938
Distributions to shareholders ...................................... -- -- 222,324
Other liabilities .................................................. 91,886 181,486 9,275
---------------------------------------------------------
Total liabilities ............................................. 11,766,015 11,680,180 1,551,793
---------------------------------------------------------
Net assets, at value ........................................ $ 506,168,533 $ 828,013,699 $ 343,022,803
---------------------------------------------------------
Net assets consist of:
Undistributed net investment income (distributions in excess of
net investment income) ............................................ $ (774,344) $ 360,051 $ (2,864,573)
Net unrealized appreciation (depreciation) ......................... 63,041,130 105,527,331 720,188
Accumulated net realized gain (loss) ............................... (13,284,295) (14,560,600) (4,013,649)
Capital shares ..................................................... 457,186,042 736,686,917 349,180,837
---------------------------------------------------------
Net assets, at value .......................................... $ 506,168,533 $ 828,013,699 $ 343,022,803
=========================================================

38 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
April 30, 2004 (unaudited)

----------------------------------------------------
FRANKLIN
FRANKLIN SHORT-INTERMEDIATE
CONVERTIBLE FRANKLIN EQUITY U.S. GOVERNMENT
SECURITIES FUND INCOME FUND SECURITIES FUND
----------------------------------------------------

CLASS A:
Net assets, at value ................................................... $365,336,521 $589,480,424 $323,306,702
===================================================
Shares outstanding ..................................................... 23,930,599 30,781,224 31,545,845
===================================================
Net asset value per share(a) ........................................... $ 15.27 $ 19.15 $ 10.25
===================================================
Maximum offering price per share (net asset value per share / 94.25%,
94.25%, 97.75%, respectively) ......................................... $ 16.20 $ 20.32 $ 10.49
===================================================
CLASS B:
Net assets, at value ................................................... -- $ 52,473,819 --
===================================================
Shares outstanding ..................................................... -- 2,751,552 --
===================================================
Net asset value and maximum offering price per share(a) ................ -- $ 19.07 --
===================================================
CLASS C:
Net assets, at value ................................................... $140,832,012 $168,078,973 --
===================================================
Shares outstanding ..................................................... 9,289,589 8,809,901 --
===================================================
Net asset value and maximum offering price per share(a) ................ $ 15.16 $ 19.08 --
===================================================
CLASS R:
Net assets, at value ................................................... -- $ 17,980,483 --
===================================================
Shares outstanding ..................................................... -- 938,423 --
===================================================
Net asset value and maximum offering price per share(a) ................ -- $ 19.16 --
===================================================
ADVISOR CLASS:
Net assets, at value ................................................... -- -- $ 19,716,101
===================================================
Shares outstanding ..................................................... -- -- 1,925,462
===================================================
Net asset value and maximum offering price per share ................... -- -- $ 10.24
===================================================

(a) Redemption price is equal to net asset value less any applicable
contingent deferred sales charge.

Semiannual Report | See notes to financial statements. | 39

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS
for the six months ended April 30, 2004 (unaudited)

Investment income:
Dividends
Unaffiliated issuers ............................................ $ 6,745,441 $ 12,157,508 $ --
Sweep money fund (Note 7) ....................................... 48,513 128,719 19,810
Interest ......................................................... 3,470,314 10,108 6,104,276
--------------------------------------------------------
Total investment income ..................................... 10,264,268 12,296,335 6,124,086
--------------------------------------------------------
Expenses:
Management fees (Note 3) ......................................... 1,157,820 1,864,979 895,461
Distribution fees (Note 3)
Class A ......................................................... 420,849 699,185 164,559
Class B ......................................................... -- 244,097 --
Class C ......................................................... 627,091 816,230 --
Class R ......................................................... -- 41,734 --
Transfer agent fees (Note 3) ..................................... 264,626 729,999 214,789
Custodian fees ................................................... 1,765 4,762 2,511
Reports to shareholders .......................................... 57,206 43,161 10,541
Registration and filing fees ..................................... 33,965 66,649 25,902
Professional fees ................................................ 22,595 19,332 8,158
Trustees' fees and expenses ...................................... 5,972 15,294 6,851
Other ............................................................ 12,520 19,759 9,287
--------------------------------------------------------
Total expenses .............................................. 2,604,409 4,565,181 1,338,059
Expenses paid indirectly (Note 4) ........................... (5) -- --
--------------------------------------------------------
Net expenses .............................................. 2,604,404 4,565,181 1,338,059
--------------------------------------------------------
Net investment income ................................... 7,659,864 7,731,154 4,786,027
--------------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ..................................................... 8,470,853 29,611,423 428,497
Foreign currency transactions ................................... -- (48,659) --
--------------------------------------------------------
Net realized gain (loss) ......................................... 8,470,853 29,562,764 428,497
--------------------------------------------------------
Net unrealized appreciation (depreciation) on investments ........ 33,656,929 22,455,889 (3,244,746)
--------------------------------------------------------
Net realized and unrealized gain (loss) ........................... 42,127,782 52,018,653 (2,816,249)
--------------------------------------------------------
Net increase (decrease) in net assets resulting from operations ... $ 49,787,646 $ 59,749,807 $ 1,969,778
========================================================

40 | See notes to financial statements. | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended April 30, 2004 (unaudited)
and the year ended October 31, 2003

-----------------------------------------------------------------------------
FRANKLIN CONVERTIBLE SECURITIES FUND FRANKLIN EQUITY INCOME FUND
-----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003 APRIL 30, 2004 OCTOBER 31, 2003
-----------------------------------------------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .......................... $ 7,659,864 $ 12,489,881 $ 7,731,154 $ 13,573,455
Net realized gain (loss) from investments
and foreign currency transactions ............ 8,470,853 4,871,224 29,562,764 (22,542,590)
Net unrealized appreciation (depreciation)
on investments ............................... 33,656,929 62,986,618 22,455,889 116,246,206
----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations .................... 49,787,646 80,347,723 59,749,807 107,277,071
Distributions to shareholders from:
Net investment income:
Class A ...................................... (6,994,956) (8,922,187) (5,852,944) (11,697,392)
Class B ...................................... -- -- (333,237) (570,443)
Class C ...................................... (2,168,620) (2,614,441) (1,108,311) (2,214,498)
Class R ...................................... -- -- (153,866) (217,044)
----------------------------------------------------------------------------
Total distributions to shareholders ............. (9,163,576) (11,536,628) (7,448,358) (14,699,377)
Capital share transactions: (Note 2)
Class A ...................................... 40,733,787 76,042,581 50,739,642 29,108,119
Class B ...................................... -- -- 6,544,541 16,524,096
Class C ...................................... 23,105,189 33,052,717 9,354,038 33,250,414
Class R ...................................... -- -- 2,229,322 10,281,063
----------------------------------------------------------------------------
Total capital share transactions ................ 63,838,976 109,095,298 68,867,543 89,163,692
Net increase (decrease) in net
assets ...................................... 104,463,046 177,906,393 121,168,992 181,741,386
Net assets:
Beginning of period ............................. 401,705,487 223,799,094 706,844,707 525,103,321
----------------------------------------------------------------------------
End of period ................................... $ 506,168,533 $ 401,705,487 $ 828,013,699 $ 706,844,707
============================================================================
Undistributed net investment income
(distributions in excess of net investment
income) included in net assets:
End of period .................................. $ (774,344) $ 729,368 $ 360,051 $ 77,255
============================================================================

Semiannual Report | 41

FRANKLIN INVESTORS SECURITIES TRUST

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
for the six months ended April 30, 2004 (unaudited)
and the year ended October 31, 2003

----------------------------------------
FRANKLIN SHORT-INTERMEDIATE
U.S. GOVERNMENT SECURITIES FUND
----------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
----------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ............................................................ $ 4,786,027 $ 9,597,432
Net realized gain (loss) from investments ........................................ 428,497 348,219
Net unrealized appreciation (depreciation) on investments ........................ (3,244,746) (3,757,205)
---------------------------------------
Net increase (decrease) in net assets resulting from operations ............... 1,969,778 6,188,446
Distributions to shareholders from:
Net investment income:
Class A ....................................................................... (5,755,313) (12,554,921)
Advisor Class ................................................................. (320,675) (438,650)
---------------------------------------
Total distributions to shareholders ............................................... (6,075,988) (12,993,571)
Capital share transactions: (Note 2)
Class A ....................................................................... (11,671,527) 49,767,205
Advisor Class ................................................................. 3,208,463 9,659,314
---------------------------------------
Total capital share transactions .................................................. (8,463,064) 59,426,519
Net increase (decrease) in net assets ........................................ (12,569,274) 52,621,394
Net assets:
Beginning of period ............................................................... 355,592,077 302,970,683
---------------------------------------
End of period ..................................................................... $ 343,022,803 $ 355,592,077
=======================================
Distributions in excess of net investment income included in net assets:
End of period ..................................................................... $ (2,864,573) $ (1,574,612)
=======================================

42 | See notes to financial statements. | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Investors Securities Trust (the Trust) is registered under the
Investment Company Act of 1940 as an open-end investment company, consisting of
six separate series. All funds included in this report (the Funds) are
diversified. The investment objectives of the Funds included in this report are:

- ---------------------------------------------------------------------------------------------------
GROWTH AND INCOME INCOME
- ---------------------------------------------------------------------------------------------------

Franklin Convertible Securities Fund Franklin Short-Intermediate U.S. Government Securities Fund
Franklin Equity Income Fund

The following summarizes the Funds' significant accounting policies.

A. SECURITY VALUATION

Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing price. Over-the-counter securities and listed securities
for which no sale is reported are valued within the range of the latest quoted
bid and asked prices. Debt securities are valued by independent pricing services
or market makers under procedures approved by the Board of Trustees. Foreign
securities are valued at the close of trading of the foreign exchange or the
NYSE, whichever is earlier. If events occur that materially affect the values of
securities after the prices or foreign exchange rates are determined but prior
to 4:00 p.m. Eastern time or the close of trading on the NYSE, whichever is
earlier, or if market quotations are deemed not readily available or reliable,
the securities will be valued at fair value as determined following procedures
approved by the Board of Trustees. Investments in open-end mutual funds are
valued at the closing net asset value.

B. FOREIGN CURRENCY TRANSLATION

Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the exchange rate of such
currencies against U.S. dollars on the date of valuation. Purchases and sales of
securities and income items denominated in foreign currencies are translated
into U.S. dollars at the exchange rate in effect on the transaction date.

The Funds do not separately report the effect of changes in foreign exchange
rates from changes in market prices on securities held. Such changes are
included in net realized and unrealized gain or loss from investments.

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.

Semiannual Report | 43

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. SECURITIES PURCHASED ON A WHEN-ISSUED, DELAYED DELIVERY, OR TBA BASIS

The Funds may purchase securities on a when-issued, delayed delivery, or
to-be-announced (TBA) 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. Sufficient assets have been segregated for these securities.

D. FOREIGN CURRENCY CONTRACTS

When the Funds purchase or sell foreign securities they may enter into foreign
exchange contracts to minimize foreign exchange risk from the trade date to the
settlement date of the transactions. A foreign exchange contract is an agreement
between two parties to exchange different currencies at an agreed upon exchange
rate on a specified date. Realized and unrealized gains and losses on these
contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparts to fulfill their obligations under the contracts.

E. INCOME TAXES

No provision has been made for income taxes because each fund's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.

F. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each fund to the combined net assets. Other expenses are
charged to each fund on a specific identification basis.

Realized and unrealized gains and 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.

44 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America 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. GUARANTEES AND INDEMNIFICATIONS

Under the Funds' organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Funds. Additionally, in the normal course of business, the Funds
enter into contracts with service providers that contain general indemnification
clauses. The Funds' maximum exposure under these arrangements is unknown as this
would involve future claims that may be made against the Funds that have not yet
occurred. However, based on experience, the Funds expect the risk of loss to be
remote.

2. SHARES OF BENEFICIAL INTEREST

The classes of shares offered within each of the Funds are indicated below. Each
class of shares differs by its initial sales load, contingent deferred sales
charges, distribution fees, voting rights on matters affecting a single class
and its exchange privilege.

- -----------------------------------------------------------------------------------------------------
CLASS A, CLASS B,
CLASS A & C CLASS C & CLASS R CLASS A & ADVISOR CLASS
- -----------------------------------------------------------------------------------------------------

Franklin Convertible Franklin Equity Income Fund Franklin Short-Intermediate
Securities Fund U.S. Government Securities Fund

At April 30, 2004, there were an unlimited number of shares authorized ($0.01
par value). Transactions in the Funds' shares were as follows:

----------------------------------------------------------------------
FRANKLIN FRANKLIN
CONVERTIBLE SECURITIES FUND EQUITY INCOME FUND
----------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------------------

CLASS A SHARES:
Six months ended April 30, 2004
Shares sold ............................... 8,007,204 $ 120,219,566 4,789,061 $ 91,623,355
Shares issued in reinvestment of
distributions ............................ 345,564 5,029,699 250,360 4,748,505
Shares redeemed ........................... (5,643,671) (84,515,478) (2,385,495) (45,632,218)
----------------------------------------------------------------------
Net increase (decrease) ................... 2,709,097 $ 40,733,787 2,653,926 $ 50,739,642
======================================================================

Semiannual Report | 45

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

-----------------------------------------------------------------------------
FRANKLIN FRANKLIN
CONVERTIBLE SECURITIES FUND EQUITY INCOME FUND
-----------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-----------------------------------------------------------------------------

CLASS A SHARES (CONTINUED)
Year ended October 31, 2003
Shares sold ............................... 11,256,863 $ 145,859,512 11,298,885 $ 180,284,751
Shares issued in reinvestment of
distributions ........................... 504,562 6,335,608 597,653 9,606,078
Shares redeemed ........................... (5,999,503) (76,152,539) (9,976,374) 160,782,710)
-----------------------------------------------------------------------------
Net increase (decrease) ................... 5,761,922 $ 76,042,581 1,920,164 $ 29,108,119
=============================================================================
CLASS B SHARES:
Six months ended April 30, 2004
Shares sold ............................... 547,696 $ 10,419,782
Shares issued in reinvestment of
distributions ........................... 14,943 282,131
Shares redeemed ........................... (218,833) (4,157,372)
--------------------------------
Net increase (decrease) ................... 343,806 $ 6,544,541
================================
Year ended October 31, 2003
Shares sold ............................... 1,345,074 $ 21,727,612
Shares issued in reinvestment of
distributions ........................... 30,616 492,323
Shares redeemed ........................... (356,548) (5,695,839)
--------------------------------
Net increase (decrease) ................... 1,019,142 $ 16,524,096
================================
CLASS C SHARES:

Six months ended April 30, 2004
Shares sold ............................... 2,229,736 $ 33,072,349 1,314,102 $ 24,949,834
Shares issued in reinvestment of
distributions ........................... 107,531 1,556,161 50,746 958,104
Shares redeemed ........................... (776,961) (11,523,321) (869,526) (16,553,900)
-----------------------------------------------------------------------------
Net increase (decrease) ................... 1,560,306 $ 23,105,189 495,322 $ 9,354,038
=============================================================================
Year ended October 31, 2003
Shares sold ............................... 3,399,887 $ 43,091,311 3,246,754 $ 52,596,093
Shares issued in reinvestment of
distributions ........................... 155,140 1,936,454 121,613 1,949,876
Shares redeemed ........................... (979,894) (11,975,048) (1,342,567) (21,295,555)
-----------------------------------------------------------------------------
Net increase (decrease) ................... 2,575,133 $ 33,052,717 2,025,800 $ 33,250,414
=============================================================================
CLASS R SHARES:
Six months ended April 30, 2004
Shares sold ............................... 196,884 $ 3,786,956
Shares issued in reinvestment of
distributions ........................... 8,077 153,334
Shares redeemed ........................... (89,423) (1,710,968)
--------------------------------
Net increase (decrease) ................... 115,538 $ 2,229,322
================================

46 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

----------------------------------
FRANKLIN
EQUITY INCOME FUND
----------------------------------
SHARES AMOUNT
----------------------------------

CLASS R SHARES (CONTINUED)
Year ended October 31, 2003
Shares sold ........................................................... 874,298 $ 14,091,414
Shares issued in reinvestment of distributions ........................ 13,290 216,695
Shares redeemed ....................................................... (248,834) (4,027,046)
----------------------------------
Net increase (decrease) ............................................... 638,754 $ 10,281,063
==================================

----------------------------------
FRANKLIN SHORT-INTERMEDIATE
U.S. GOVERNMENT
SECURITIES FUND
----------------------------------
SHARES AMOUNT
----------------------------------

CLASS A SHARES:
Six months ended April 30, 2004
Shares sold ........................................................... 5,569,577 $ 57,893,408
Shares issued in reinvestment of distributions ........................ 436,882 4,534,665
Shares redeemed ....................................................... (7,129,662) (74,099,600)
----------------------------------
Net increase (decrease) ............................................... (1,123,203) $ (11,671,527)
==================================
Year ended October 31, 2003
Shares sold ........................................................... 19,477,005 $ 205,048,231
Shares issued in reinvestment of distributions ........................ 926,126 9,732,587
Shares redeemed ....................................................... (15,707,474) (165,013,613)
----------------------------------
Net increase (decrease) ............................................... 4,695,657 $ 49,767,205
==================================
ADVISOR CLASS SHARES:
Six months ended April 30, 2004
Shares sold ........................................................... 468,926 $ 4,868,775
Shares issued in reinvestment of distributions ........................ 24,570 254,752
Shares redeemed ....................................................... (184,670) (1,915,064)
----------------------------------
Net increase (decrease) ............................................... 308,826 $ 3,208,463
==================================
Year ended October 31, 2003
Shares sold ........................................................... 1,128,128 $ 11,826,979
Shares issued in reinvestment of distributions ........................ 36,549 383,367
Shares redeemed ....................................................... (243,983) (2,551,032)
----------------------------------
Net increase (decrease) ............................................... 920,694 $ 9,659,314
==================================

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Funds are also officers and/or directors of
the following entities:

- ------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ------------------------------------------------------------------------------------------

Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter
Franklin/Templeton Investor Services LLC (Investor Services) Transfer agent

Semiannual Report | 47

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Funds pay an investment management fee to Advisers based on the month-end
net assets of the Funds as follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
.625% First $100 million
.500% Over $100 million, up to and including $250 million
.450% In excess of $250 million

Under an agreement with Advisers, FT Services provides administrative services
to the Funds. The fee is paid by Advisers based on average daily net assets, and
is not an additional expense of the Funds.

The Funds reimburse Distributors for costs incurred in marketing the Funds'
shares under a Rule 12b-1 plan up to a certain percentage per year of their
average daily net assets of each class as follows:

------------------------------------------------------------
FRANKLIN
FRANKLIN FRANKLIN SHORT-INTERMEDIATE
CONVERTIBLE EQUITY U.S. GOVERNMENT
SECURITIES FUND INCOME FUND SECURITIES FUND
------------------------------------------------------------

Class A ................................................... .25% .25% .10%
Class B ................................................... -- 1.00% --
Class C ................................................... 1.00% 1.00% --
Class R ................................................... -- .50% --

Distributors has advised the Funds it paid net commissions on sales of the
Funds' shares, and received contingent deferred sales charges for the period as
follows:

Net commissions paid ...................................... $207,305 $328,856 $23,954
Contingent deferred sales charges ......................... $ 11,399 $ 63,238 $ 6,610

The Funds paid transfer agent fees as noted in the Statement of Operations of
which the following amounts were paid to Investor Services:

Transfer agent fees ....................................... $146,143 $544,902 $164,913

48 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. EXPENSE OFFSET ARRANGEMENT

The Funds have entered into an arrangement with their custodian whereby credits
realized as a result of uninvested cash balances are used to reduce a portion of
the Funds' custodian expenses. During the period ended April 30, 2004, the
custodian fees were reduced as noted in the Statement of Operations.

5. INCOME TAXES

At October 31, 2003, the Funds had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:

--------------------------------------------------------
FRANKLIN
FRANKLIN FRANKLIN SHORT-INTERMEDIATE
CONVERTIBLE EQUITY U.S. GOVERNMENT
SECURITIES FUND INCOME FUND SECURITIES FUND
--------------------------------------------------------

Capital loss carryovers expiring in:
2004 $ -- $ -- $ 300,618
2007 -- -- 21,004
2008 -- -- 2,364,551
2009 -- -- --
2010 21,111,397 20,614,119 --
2011 -- 21,382,501 1,752,525
----------------------------------------------------
$21,111,397 $41,996,620 $4,438,698
====================================================

On October 31, 2003, the Franklin Short-Intermediate U.S. Government Securities
Fund had expired capital loss carryovers of $3,564,637, which were reclassified
to paid-in-capital.

Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of defaulted securities, foreign currency
transactions, paydown losses and bond discounts and premiums.

Net realized gains/losses differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, paydown losses and bond discounts and premiums.

Semiannual Report | 49

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. INCOME TAXES (CONTINUED)

At April 30, 2004, the net unrealized appreciation (depreciation) based on the
cost of investments for income tax purposes was as follows:

--------------------------------------------------------------
FRANKLIN
FRANKLIN FRANKLIN SHORT-INTERMEDIATE
CONVERTIBLE EQUITY U.S. GOVERNMENT
SECURITIES FUND INCOME FUND SECURITIES FUND
--------------------------------------------------------------

Investments at cost ..................................... $ 448,888,825 $ 720,180,074 $ 342,138,728
-------------------------------------------------------------
Unrealized appreciation ................................. 73,711,821 114,382,007 2,595,360
Unrealized depreciation ................................. (12,971,521) (10,992,617) (3,036,033)
-------------------------------------------------------------
Net unrealized appreciation (depreciation) .............. $ 60,740,300 $ 103,389,390 $ (440,673)
=============================================================

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended April 30, 2004, were as follows:

Purchases ............................................... $ 122,754,914 $ 169,265,050 $ 144,058,505
Sales ................................................... $ 67,310,132 $ 116,217,432 $ 149,499,498

7. INVESTMENTS IN AFFILIATED MONEY MARKET PORTFOLIO

The Funds may invest in the Franklin Institutional Fiduciary Trust Money Market
Portfolio (the Sweep Money Fund), an open-end investment company managed by
Advisers. Management fees paid by the Funds are reduced on assets invested in
the Sweep Money Fund, in an amount not to exceed the management fees paid by the
Sweep Money Fund.

8. CREDIT RISK AND DEFAULTED SECURITIES

The Franklin Convertible Securities Fund has 21.73% of its portfolio invested in
below investment grade and comparable quality unrated high yield securities,
which 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 yielding securities because such securities are
generally unsecured and are often subordinated to other creditors of the issuer.

The Franklin Convertible Securities Fund held defaulted securities and/or other
securities for which the income has been deemed uncollectible. At April 30,
2004, the value of these securities was $6,328,125, representing 1.25% of the
fund's net assets. The fund discontinues accruing income on securities for which
income has been deemed uncollectible and provides an estimate for losses on
interest receivable. For information as to specific securities, see the
accompanying Statement of Investments.

50 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING

On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 14, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.

GOVERNMENTAL INVESTIGATIONS

As part of ongoing investigations by the U.S. Securities and Exchange Commission
(SEC), the U.S. Attorney for the Northern District of California, the New York
Attorney General, the California Attorney General, the U.S. Attorney for the
District of Massachusetts, the Florida Department of Financial Services and the
Commissioner of Securities, the West Virginia Attorney General and the Vermont
Department of Banking, Insurance, Securities, and Health Care Administration,
relating to certain practices in the mutual fund industry, including late
trading, market timing and payments to securities dealers who sell Fund shares,
the Company and its subsidiaries, as well as certain current or former
executives and employees of the Company, have received requests for information
and/or subpoenas to testify or produce documents. The Company and its current
employees are providing documents and information in response to these requests
and subpoenas. In addition, the Company has responded to requests for similar
kinds of information from regulatory authorities in some of the foreign
countries where the Company conducts its global asset management business.

The staff of the SEC has informed the Company that it intends to recommend that
the SEC authorize a civil injunctive action against the Trust's investment
manager. The SEC's investigation is focused on the activities that are the
subject of the Mass. Proceeding described above and other instances of alleged
market timing by a limited number of third parties that ended in 2000. The
Company currently believes that the charges the SEC staff is contemplating are
unwarranted. There are discussions underway with the SEC staff in an effort to
resolve the issues raised in their investigation.

In response to requests for information and subpoenas from the SEC and the
California Attorney General, the Company has provided documents and testimony
has been taken relating to payments to security dealers who sell Fund shares.
Effective November 28, 2003, the Company determined not to direct any further
brokerage commissions where the allocation is based, not only on best execution,
but also on the sale of Fund shares.

Semiannual Report | 51

FRANKLIN INVESTORS SECURITIES TRUST

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS

The Trust, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York,
New Jersey, and Florida, alleging violations of various federal securities laws
and seeking, among other things, monetary damages and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain funds managed by Company
subsidiaries, resulting in alleged market timing activity. The majority of these
lawsuits duplicate, in whole or in part, the allegations asserted in the Mass.
Proceeding detailed above. The lawsuits are styled as class actions or
derivative actions.

In addition, the Company and its subsidiaries, as well as certain current and
former officers, employees, and directors have been named in multiple lawsuits
alleging violations of various securities laws and pendent state law claims
relating to the disclosure of directed brokerage payments and payment of
allegedly excessive commissions and advisory fees. These lawsuits are styled as
class actions and derivative actions.

Management strongly believes that the claims made in each of these lawsuits are
without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or class actions or other
lawsuits. The impact, if any, of these matters on the Trust is uncertain at this
time. If the Company determines that it bears responsibility for any unlawful or
inappropriate conduct that caused losses to the Trust, it is committed to making
the Trust or its shareholders whole, as appropriate.

52 | Semiannual Report

FRANKLIN INVESTORS SECURITIES TRUST

PROXY VOTING POLICIES AND PROCEDURES

The Fund has established Proxy Voting Policies and Procedures ("Policies") that
the Fund uses to determine how to vote proxies relating to portfolio securities.
Shareholders may view the Fund's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/847-2268 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group.

Semiannual Report | 53

This page intentionally left blank.

LITERATURE REQUEST

For a brochure and prospectus, which contains more complete information,
including charges, expenses and risks, call Franklin Templeton Investments at
1-800/DIAL BEN(R) (1-800/342-5236). Please read the prospectus carefully before
investing or sending money. To ensure the highest quality of service, we may
monitor, record and access telephone calls to or from our service departments.
These calls can be identified by the presence of a regular beeping tone.

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL

Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL

Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II(1)

VALUE

Franklin Balance Sheet Investment Fund(2)
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund(2)
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund(3)
Mutual Shares Fund

BLEND

Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund(4)

SECTOR

Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund

ASSET ALLOCATION

Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund

TARGET FUNDS

Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME

Franklin Adjustable U.S. Government Securities Fund(5)
Franklin's AGE High Income Fund
Franklin Federal Money Fund(5), (6)
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust(3)
Franklin Income Fund
Franklin Money Fund(5), (6)
Franklin Short-Intermediate U.S. Government Securities Fund(5)
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund(5)
Templeton Global Bond Fund

TAX-FREE INCOME(7)

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund(8)
Tax-Exempt Money Fund(5), (6)

LIMITED-TERM FUNDS

California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS

California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC(7)

Alabama
Arizona
California(9)
Colorado
Connecticut
Florida(9)
Georgia
Kentucky
Louisiana
Maryland
Massachusetts(8)
Michigan(8)
Minnesota(8)
Missouri
New Jersey
New York(9)
North Carolina
Ohio(8)
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance
Products Trust(10)

(1) The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

(2) The fund is only open to existing shareholders as well as select
retirement plans.

(3) The fund is a continuously offered, closed-end fund. Shares may be
purchased daily; there is no daily redemption. However, each quarter,
pending board approval, the fund will authorize the repurchase of 5%-25%
of the outstanding number of shares. Investors may tender all or a portion
of their shares during the tender period.

(4) Upon reaching approximately $350 million in assets, the fund intends to
close to all investors.

(5) An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

(6) No assurance exists that the fund's $1.00 per share price will be
maintained. It is possible to lose money by investing in the fund.

(7) For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are
generally taxable.

(8) Portfolio of insured municipal securities.

(9) These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA)
and limited-term, intermediate-term and money market portfolios (CA and
NY).

(10) The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

02/04 Not part of the semiannual report

[LOGO](R)
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?

Eligible shareholders can sign up for eDelivery at franklintempleton.com.
See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN INVESTORS
SECURITIES TRUST

INVESTMENT MANAGER

Franklin Advisers, Inc.

DISTRIBUTOR

Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES

1-800/632-2301

Authorized for distribution only when accompanied or preceded by a prospectus.
Investors should carefully consider a fund's investment goals, risks, charges
and expenses before investing. The prospectus contains this and other
information; please read it carefully before investing.

To ensure the highest quality of service, telephone calls to or from our service
departments may be monitored, recorded and accessed. These calls can be
identified by the presence of a regular beeping tone.

FIST1 S2004 06/04

APRIL 30, 2004

[GRAPHIC OMITTED]

Franklin Adjustable
U.S. Government Securities Fund

Franklin Floating Rate
Daily Access Fund

Franklin Total Return Fund

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN
INVESTORS SECURITIES TRUST

INCOME

Want to receive this document FASTER via email?

Eligible shareholders can sign up for eDelivery at franklintempleton.com. See
inside for details.

[GRAPHIC OMITTED]

[LOGO OMITTED]
FRANKLIN(R) TEMPLETON(R)
INVESTMENTS

FRANKLIN o Templeton o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

Franklin Templeton's distinct multi-manager structure combines the
specialized expertise of three world-class investment management
groups--Franklin, Templeton and Mutual Series.

SPECIALIZED EXPERTISE

Each of our portfolio management groups operates autonomously, relying on its
own research and staying true to the unique investment disciplines that underlie
its success.

FRANKLIN. Founded in 1947, Franklin is a leader in tax-free investing and a
driving force in fixed income investing around the globe. They also bring
expertise in growth- and value-style U.S. equity investing.

TEMPLETON. Founded in 1940, Templeton pioneered international investing and, in
1954, launched what has become the industry's oldest global fund. Today, with
research offices in over 25 countries, they offer investors the broadest global
reach in the industry.

MUTUAL SERIES. Founded in 1949, Mutual Series is dedicated to a unique style of
value investing, searching aggressively for opportunity among undervalued
stocks, arbitrage situations and distressed companies.

TRUE DIVERSIFICATION

Because our management groups work independently and adhere to distinctly
different investment approaches, Franklin, Templeton and Mutual Series funds
typically have a low overlap of securities. That's why our funds can be used to
build truly diversified portfolios covering every major asset class.

RELIABILITY YOU CAN TRUST

At Franklin Templeton Investments, we seek to consistently provide investors
with exceptional risk-adjusted returns over the long term, as well as the
reliable account services that have helped us become one of the most trusted
names in financial services.

MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS

[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

SHAREHOLDER LETTER ................................................. 1

SEMIANNUAL REPORT

Franklin Adjustable
U.S. Government
Securities Fund .................................................... 3

Franklin Floating Rate
Daily Access Fund .................................................. 9

Franklin Total
Return Fund ........................................................ 17

Financial Highlights and
Statements of Investments .......................................... 23

Financial Statements ............................................... 59

Notes to
Financial Statements ............................................... 64

Proxy Voting Policies
and Procedures ..................................................... 92

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

Semiannual Report

Franklin Adjustable
U.S. Government Securities Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Adjustable U.S. Government
Securities Fund seeks to provide a high level of current income consistent with
lower volatility of principal than a fund that invests in fixed-rate securities
by investing in a portfolio consisting primarily of adjustable-rate U.S.
government agency-issued or -guaranteed, mortgage-backed securities. 1

- --------------------------------------------------------------------------------
PORTFOLIO BREAKDOWN
Franklin Adjustable U.S. Government Securities Fund
Based on Total Assets as of 4/30/04

[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS:

FNMA .......................................................... 46.4%
FHLMC ......................................................... 23.0%
GNMA .......................................................... 21.2%
Short-Term Investments & Other Net Assets ..................... 9.4%
- --------------------------------------------------------------------------------

We are pleased to bring you Franklin Adjustable U.S. Government Securities
Fund's semiannual report covering the period ended April 30, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Adjustable U.S. Government Securities
Fund - Class A delivered a +0.93% cumulative total return. The Fund outperformed
its benchmark, the Lehman Brothers Short U.S. Government 1-2 Year Index, which

1. The Fund invests all of its assets in the U.S. Government Adjustable Rate
Mortgage Portfolio, a master portfolio whose investment goal is the same as the
Fund's. Securities owned by the portfolio, but not shares of the Fund, are
guaranteed by the U.S. government, its agencies or instrumentalities, as to the
timely payment of principal and interest. Although U.S. government-sponsored
entities may be chartered or sponsored by acts of Congress, their securities are
neither insured nor guaranteed by the U.S. Treasury. Please refer to the Fund's
prospectus for a detailed discussion regarding various levels of credit support
for government agency or instrumentality securities. The Fund's yield and share
price are not guaranteed and will fluctuate with market conditions.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 25.

Semiannual Report | 3

returned 0.54% for the same period. 2 You can find the Fund's long-term
performance data in the Performance Summary beginning on page 7.

ECONOMIC AND MARKET OVERVIEW

For much of the six-month reporting period, many market analysts discussed the
employment picture because job creation was slower than expected. However, job
growth rose during March and April, as nonfarm payrolls added 625,000 jobs. 3
This important factor was one of many that helped lead to an interest rate rise
over the period, and 2-, 3-, 5- and 10-year Treasury yields were up 46, 50, 36
and 20 basis points (100 basis points equal one percent), respectively.

Increases in business spending also helped economic growth. After having been
largely absent since the end of 2000, business spending posted strong results
for the final quarter of 2003 and the first quarter of 2004. Nonresidential
investment spending rose at an annual rate of 5.8% in the first quarter of
2004. 4 Additionally, nonfarm productivity grew an annualized 3.8% in the first
quarter of 2004, which helped businesses generate more goods and services
without substantially raising inflation. 3

2. Source: Standard & Poor's Micropal. The Lehman Brothers Short U.S. Government
1-2 Year Index includes fixed-rate debt issues rated investment grade or higher
by Moody's, S&P or Fitch, in that order. All issues have between one and two
years to maturity and an outstanding par value of at least $100 million for U.S.
government issues. All returns are market value-weighted inclusive of accrued
interest. The index includes issues of the U.S. government. Total return
includes price appreciation/depreciation and income as a percentage of the
original investment. The index is rebalanced monthly by market capitalization.
The index is unmanaged. One cannot invest directly in an index, nor is an index
representative of the Fund's portfolio.

3. Source: Bureau of Labor Statistics.

4. Source: Bureau of Economic Analysis.

4 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
Franklin Adjustable U.S. Government Securities Fund
11/1/03-4/30/04

- --------------------------------------------------------------------------------
DIVIDEND PER SHARE
-------------------------------
MONTH CLASS A CLASS C
- --------------------------------------------------------------------------------
November 2.2763 cents 1.9658 cents
December 2.5963 cents 2.2609 cents
January 2.4054 cents 2.0974 cents
February 2.3638 cents 2.0480 cents
March 2.5787 cents 2.2469 cents
April 2.2892 cents 1.9849 cents
- --------------------------------------------------------------------------------
TOTAL 14.5097 CENTS 12.6039 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. All Fund distributions
will vary depending upon current market conditions, and past distributions are
not indicative of future trends.

INVESTMENT STRATEGY

We employ a conservative strategy as we strive to produce consistent performance
in a variety of interest rate climates. We invest primarily in seasoned
adjustable-rate mortgage (ARM) securities, which tend to prepay at slower rates
than newer-production ARMs that have not been through previous refinancing
cycles. We choose securities using a value-oriented approach, emphasizing the
bonds' economic fundamentals in relation to comparable securities as well as
their historical prepayment performance.

MANAGER'S DISCUSSION

During the six months under review, income received on the Fund's underlying
bonds was a better source of returns than bond prices. The Fund's Class A
shares' 30-day standardized yield was 2.97% on April 30, 2004, compared with the
1.55% yield for a 1-year Treasury on the same date.

The Fund's Class A share price, as measured by net asset value, declined from
$9.16 on October 31, 2003, to $9.10 on April 30, 2004. The bulk of that decline
occurred in April as interest rates began to rise sharply. Surprisingly strong
readings in March payroll employment and consumer prices contributed to bond
price declines as many investors anticipated potential interest rate hikes by
the Federal Reserve Board.

Semiannual Report | 5

During this semiannual period, we maintained a larger-than-normal cash position
as a defensive measure during the bond sell-off.

Thank you for your continued participation in Franklin Adjustable U.S.
Government Securities Fund. We look forward to serving your future investment
needs.

[GRAPHIC OMITTED]

/s/ T. A. Coffey

T. Anthony Coffey, CFA

[GRAPHIC OMITTED]

/s/ Roger A. Bayston

Roger A. Bayston, CFA

[GRAPHIC OMITTED]

/s/ Paul W. Varunok

Paul W. Varunok

Portfolio Management Team
Franklin Adjustable U.S. Government Securities Fund

6 | Semiannual Report

Performance Summary as of 4/30/04

FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

PRICE AND DISTRIBUTION INFORMATION

Net Asset Value (NAV) -$0.06 $9.10 $9.16
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.145097

- -------------------------------------------------------------------------------------------------
CLASS C CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.06 $9.10 $9.16
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.126039
- -------------------------------------------------------------------------------------------------

PERFORMANCE

CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE; CLASS C: 1% CONTINGENT DEFERRED
SALES CHARGE IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES.
AVERAGE ANNUAL AND AGGREGATE TOTAL RETURNS INCLUDE MAXIMUM SALES CHARGES.

- -------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -------------------------------------------------------------------------------------------------

Cumulative Total Return 1 +0.93% +0.89% +22.41% +60.00%
Average Annual Total Return 2 -1.33% -1.34% +3.67% +4.57%
Avg. Ann. Total Return (3/31/04) 3 -0.76% +3.83% +4.55%
Distribution Rate 4 2.99%
30-Day Standardized Yield 5 2.97%

- -----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH INCEPTION (7/1/03)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 1 +0.72% +0.30%
Aggregate Total Return 6 -0.27% -0.68%
Aggregate Total Return (3/31/04) 4, 6 -0.35%
Distribution Rate 4 2.65%
30-Day Standardized Yield 5 2.64%
- -----------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 7

Performance Summary (CONTINUED)

ENDNOTES

THE FUND'S YIELD AND SHARE PRICE ARE NOT GUARANTEED AND WILL VARY WITH MARKET
CONDITIONS, INTEREST RATE MOVEMENTS AND UNSCHEDULED MORTGAGE PREPAYMENTS. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These shares
have higher annual fees and expenses than Class A shares.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

2. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge. Six-month return has not been annualized.

3. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class's
April dividend and the maximum offering price per share on 4/30/04.

5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 4/30/04.

6. Aggregate total return represents the change in value of an investment since
inception. Since these shares have existed for less than one year, average
annual total returns are not provided.

8 | Past performance does not guarantee future results. | Semiannual Report

Franklin Floating Rate Daily Access Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Floating Rate Daily Access
Fund seeks to provide a high level of current income and, secondarily,
preservation of capital by investing at least 80% of its net assets in senior
secured corporate loans and corporate debt securities with floating interest
rates.

This semiannual report for Franklin Floating Rate Daily Access Fund covers the
period ended April 30, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Floating Rate Daily Access Fund -
Class A delivered a +2.20% cumulative total return. The Fund underperformed its
benchmark, the Credit Suisse First Boston (CSFB) Leveraged Loan Index, which
returned 3.62% for the same period. 1 You can find the Fund's long-term
performance data in the Performance Summary beginning on page 14.

ECONOMIC AND MARKET OVERVIEW

For much of the six-month reporting period, many market analysts discussed the
employment picture because job creation was slower than expected. However, job
growth rose during March and April, as nonfarm payrolls added 625,000 jobs. 2
This important factor was one of many that helped lead to an interest rate rise
over the period, and 2-, 3-, 5- and 10-year Treasury yields were up 46, 50, 36
and 20 basis points (100 basis points equal one percent), respectively.

1. Source: Standard & Poor's Micropal. The CSFB Leveraged Loan Index is designed
to mirror the investable universe of the $US-denominated leveraged loan market.
The index is unmanaged and includes reinvested interest. One cannot invest
directly in an index, nor is an index representative of the Fund's portfolio.

2. Source: Bureau of Labor Statistics.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 30.

Semiannual Report | 9

- --------------------------------------------------------------------------------
WHAT ARE SYNDICATED
BANK LOANS?
- --------------------------------------------------------------------------------
Syndicated bank loans are typically insured, floating rate loans to corporate
borrowers made by a group, or syndicate, of banks and other lenders. A group
of lenders provides capital to companies for varied purposes, such as merger
and acquisition activity, leveraged buyouts or refinancings. Borrowing rates
are generally pegged to an index, such as LIBOR, the London InterBank Offered
Rate.
- --------------------------------------------------------------------------------

Increases in business spending also helped economic growth. After having been
largely absent since the end of 2000, business spending posted strong results
for the final quarter of 2003 and the first quarter of 2004. Nonresidential
investment spending rose at an annual rate of 5.8% in the first quarter of
2004. 3 Additionally, nonfarm productivity grew an annualized 3.8% in the first
quarter of 2004, which helped businesses generate more goods and services
without substantially raising inflation. 2

During the period under review, the syndicated bank loan market was strong, as
improving credit quality and low interest rates kept investor demand high. Much
of this robust performance occurred from November 2003 through January 2004,
with more modest returns during the final three months of the reporting period.
Due to the significant demand for loans, market prices for loans remained at
premiums.

The 3-month LIBOR rate remained relatively unchanged at historically low levels,
starting the period at 1.17% and ending at 1.18%. 4 The syndicated bank loan
market favored borrowers, as a result of the supply-demand imbalance. Strong
demand by lenders enabled borrowers to reduce interest coupons on their loans
and negotiate for more favorable borrowing terms in the credit agreements that
govern syndicated loans. Borrowers took advantage of a strong bank loan market
to refinance their existing debt at lower rates or to raise additional capital
for mergers, acquisitions and other general corporate purposes. Consequently,
overall yields in the leveraged loan asset class also remained at historical
lows, due to the low LIBOR rate as well as a lower average spread above LIBOR.
The average yield spread above LIBOR for loans declined during the period in
this market environment.

3. Source: Bureau of Economic Analysis.

4. Source: British Bankers' Association.

10 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
Franklin Floating Rate Daily Access Fund
11/1/03-4/30/04

- --------------------------------------------------------------------------------
DIVIDEND PER SHARE
------------------------------------------------------------
MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
- --------------------------------------------------------------------------------
November 2.6213 cents 2.1048 cents 2.3205 cents 2.8024 cents
December 2.8514 cents 2.1538 cents 2.4109 cents 3.1041 cents
January 2.4997 cents 1.9239 cents 2.1065 cents 2.7179 cents
February 2.2078 cents 1.6563 cents 1.8714 cents 2.3979 cents
March 2.4089 cents 1.7135 cents 2.0481 cents 2.6586 cents
April 2.3517 cents 1.7694 cents 2.0195 cents 2.5592 cents
- --------------------------------------------------------------------------------
TOTAL 14.9408 CENTS 11.3217 CENTS 12.7769 CENTS 16.2401 CENTS
- --------------------------------------------------------------------------------

*Assume 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. All Fund distributions
will vary depending upon current market conditions, and past distributions are
not indicative of future trends.

Much of the strong demand for loans was due to a favorable outlook for loans,
with loan default rates down to five-year lows during the reporting period. With
the federal funds target rate at its lowest level in more than four decades,
many investors anticipated rising rates as seen in the federal funds futures
market toward period-end.

Many loan investors were also taking comfort in the favorable loan outlook and a
positive outlook for credit fundamentals as most economic figures showed marked
improvement in the overall domestic economy as Standard & Poor's expected loan
default rates to continue to decline this year.

INVESTMENT STRATEGY

We use credit analysis to select corporate loan and corporate debt securities
that meet our criteria. We seek to invest in companies with the ability to
generate substantial free cash flow, that are in industries with strong barriers
to entry, and that possess significant asset coverage and collateral for our
debt. We also prefer companies with dominant market shares, strong management
teams and stable growth prospects, according to our analysis.

Semiannual Report | 11

TOP 10 HOLDINGS
Franklin Floating Rate Daily Access Fund
4/30/04

- --------------------------------------------------------------------------------
COMPANY % OF TOTAL
SECTOR/INDUSTRY NET ASSETS
- --------------------------------------------------------------------------------
Warner Music 1.0%
MOVIES & ENTERTAINMENT
Ionics Inc. 1.0%
INDUSTRIAL SPECIALTIES
Peabody Energy Corp. 1.0%
COAL
Yellow Corp. 0.9%
TRUCKING
Cinram International 0.9%
MOVIES & ENTERTAINMENT
Paxson Communications Corp. 0.9%
BROADCASTING
Adams Outdoor Advertising Inc. 0.9%
ADVERTISING & MARKETING SERVICES
Grapeclose Ltd. (Inmarsat) 0.9%
CABLE & SATELLITE TELEVISION
BRP Holdings LP 0.9%
RECREATIONAL PRODUCTS
Rainbow Media Holdings Inc. 0.9%
MOVIES & ENTERTAINMENT
- --------------------------------------------------------------------------------

MANAGER'S DISCUSSION

Due to the significant demand for loans, market prices for loans remained at
premiums, aiding the Fund's overall returns.

We continued to remain selective in our loan selection process, focusing on
companies that fit our investment strategy. Given the strength of the bank loan
secondary market, the primary syndicated market was the source of many of our
purchases. For example, we purchased the senior secured loan of VWR
International, which funded the acquisition of the company from Merck by Clayton
Dubilier & Rice. VWR is a leading global distributor of research laboratory
supplies to major companies as well as universities and research institutes. We
found the loan attractive due to the company's leading market position,
including its number one European market share and number two U.S. market share.
In addition, we like VWR's recurring, stable cash flows, which help it
effectively service its debt.

We also accrued a large position in the bank debt of Peabody Energy, the world's
largest private-sector coal producer. In 2002, Peabody fueled the generation of
more than 9% of all U.S. electricity. Recent performance was strong, as the
recovering worldwide economy increased coal demand for electricity generation
and steel production. With majority interests in 33 U.S. and Australian coal
operations, Peabody holds the largest market share in three of the four primary
U.S. coal producing regions.

We also purchased the loans of Yellow Roadway during the period under review.
Formed in late 2003 from the acquisition of Roadway by rival Yellow, the company
is the largest less-than-truckload (LTL) transportation company in the U.S. LTL
trucking involves consolidating freight from multiple customers into one
trailer, providing opportunities to maximize efficiency through logistics. The
company's fleet operates all across North America using a network of more than
700 terminals. Recent performance has been strong due to the rebounding economy,
which in turn increased demand for transportation services.

Finally, we bought the bank debt of Dobson Cellular, a leading provider of
wireless phone services to rural U.S. markets. During the period, Dobson
reported revenues and earnings that were below expectations due to lower roaming
revenues and customer losses amid competitive pressures. With the disappointing
earnings release, Dobson's bank debt experienced a slight price decline but
still remained close to its par value, as some investors remained favorable on
the credit. One of the main reasons for the Fund's underperformance over the
period was our underweighted position, relative to the CSFB Leveraged Loan
Index, in lower-rated and distressed securities, which experienced sharp
appreciation as the credit cycle improved.

12 | Semiannual Report

Thank you for your continued participation in Franklin Floating Rate Daily
Access Fund. We look forward to serving your future investment needs.

/s/ Richard S. Hsu

Richard S. Hsu, CFA

/s/ Madeline Lam

Madeline Lam

/s/ Matthew W. Gregory

Matthew W. Gregory, CFA

Portfolio Managers
Franklin Floating Rate Daily Access Fund

Semiannual Report | 13

Performance Summary as of 4/30/04

FRANKLIN FLOATING RATE DAILY ACCESS FUND

PRICE AND DISTRIBUTION INFORMATION

Net Asset Value (NAV) +$0.07 $10.10 $10.03
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.149408

CLASS B CHANGE 4/30/04 10/31/03

Net Asset Value (NAV) +$0.07 $10.09 $10.02
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.113217

CLASS C CHANGE 4/30/04 10/31/03

Net Asset Value (NAV) +$0.07 $10.10 $10.03
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.127769

ADVISOR CLASS CHANGE 4/30/04 10/31/03

Net Asset Value (NAV) +$0.07 $10.11 $10.04
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.162401

14 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE

CLASS A: 2.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 0% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY. CUMULATIVE TOTAL RETURN EXCLUDES SALES
CHARGES. AVERAGE ANNUAL TOTAL RETURNS INCLUDE MAXIMUM SALES CHARGES.

- -----------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR INCEPTION (5/1/01)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 1 +2.20% +5.77% +14.83%
Average Annual Total Return 2 -0.09% +3.36% +3.93%
Avg. Ann. Total Return (3/31/04) 3 +3.79% +3.92%
Distribution Rate 4 2.77%
30-Day Standardized Yield 5 2.39%

CLASS B 6-MONTH 1-YEAR INCEPTION (5/1/01)

Cumulative Total Return 1 +1.84% +4.93% +12.53%
Average Annual Total Return 2 -2.16% +0.93% +3.08%
Avg. Ann. Total Return (3/31/04) 3 +1.37% +3.07%
Distribution Rate 4 2.13%
30-Day Standardized Yield 5 1.75%

CLASS C 6-MONTH 1-YEAR INCEPTION (5/1/01)

Cumulative Total Return 1 +1.98% +5.32% +13.55%
Average Annual Total Return 2 +0.98% +4.32% +4.33%
Avg. Ann. Total Return (3/31/04) 3 +4.71% +4.35%
Distribution Rate 4 2.43%
30-Day Standardized Yield 5 2.05%

ADVISOR CLASS 6-MONTH 1-YEAR INCEPTION (5/1/01)

Cumulative Total Return 1 +2.23% +5.94% +15.68%
Average Annual Total Return 2 +2.23% +5.94% +4.98%
Avg. Ann. Total Return (3/31/04) 3 +6.38% +5.00%
Distribution Rate 4 3.08%
30-Day Standardized Yield 5 2.69%
- -----------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 15

Performance Summary (CONTINUED)

ENDNOTES

THE FUND IS NON-DIVERSIFIED, WHICH MEANS IT MAY BE MORE SUSCEPTIBLE TO ADVERSE
ECONOMIC, POLITICAL OR REGULATORY DEVELOPMENTS, WHICH ARE DESCRIBED IN THE
FUND'S PROSPECTUS. THE LOANS IN WHICH THE FUND INVESTS TEND TO BE RATED BELOW
INVESTMENT GRADE. THE RISKS ASSOCIATED WITH HIGHER-YIELDING, LOWER-RATED
SECURITIES INCLUDE A HIGHER RISK OF DEFAULT AND LOSS OF PRINCIPAL. THIS RISK MAY
BE HEIGHTENED BY A SLOWDOWN IN THE ECONOMY. THE FUND'S PROSPECTUS ALSO INCLUDES
A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A
shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial
sales charge; thus actual total returns would have differed.
These shares have higher annual fees and expenses than Class A
shares.

ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.

1. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

3. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

4. Distribution rate is based on an annualization of the respective class's
April dividend and the maximum offering price per share on 4/30/04.

5. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 4/30/04.

16 | Past performance does not guarantee future results. | Semiannual Report

Franklin Total Return Fund

YOUR FUND'S GOALS AND PRIMARY INVESTMENTS: Franklin Total Return Fund seeks to
provide investors with a high level of income consistent with preservation of
capital. Capital appreciation over the long term is a secondary goal. The Fund
invests at least 85% of net assets in investment-grade fixed income securities
and financial futures contracts, or options on such contracts, on U.S. Treasury
securities. The Fund focuses on government and corporate debt securities and
mortgage and asset-backed securities.

PORTFOLIO BREAKDOWN
Franklin Total Return Fund
Based on Total Investments
- --------------------------------------------------------------------------------
SECTOR 4/30/04 10/31/03
- --------------------------------------------------------------------------------
Mortgage-Backed
Securities 31.4% 34.9%

Corporate Bonds 29.6% 34.5%

U.S. Government and
Agency Securities 14.1% 8.5%

Asset-Backed Securities 7.3% 9.9%

Foreign Government
Securities 6.5% 6.0%

Municipal Bonds 1.9% 0.7%

Senior Floating Rate 1.6% 1.3%

Preferred Stocks 0.1% 0.1%

Short-Term Investments 7.5% 4.1%
- --------------------------------------------------------------------------------

We are pleased to bring you Franklin Total Return Fund's semiannual report
covering the period ended April 30, 2004.

PERFORMANCE OVERVIEW

For the six months under review, Franklin Total Return Fund - Class A delivered
a +2.17% cumulative total return. The Fund outperformed its benchmark, the
Lehman Brothers U.S. Universal Index, which returned 1.53% for the same period.
1 You can find the Fund's long-term performance data in the Performance Summary
beginning on page 20.

ECONOMIC AND MARKET OVERVIEW

For much of the six-month reporting period, many market analysts discussed the
employment picture because job creation was slower than expected. However, job
growth rose during March and April, as nonfarm payrolls added 625,000 jobs. 2
This important factor was one of many that helped lead to an interest rate rise
over the period, and 2-, 3-, 5- and 10-year Treasury yields were up 46, 50, 36
and 20 basis points (100 basis points equal one percent), respectively.

1. Source: Standard & Poor's Micropal. The Lehman Brothers U.S. Universal Index
is designed to capture the entire portfolio management choice set of fixed
income securities issued in U.S. dollars, including those found in the Lehman
Brothers U.S. Aggregate Index, as well as high yield corporate bonds and
dollar-denominated Eurobonds and emerging market debt. The index is unmanaged
and includes reinvested interest. One cannot invest directly in an index, nor is
an index representative of the Fund's portfolio.

2. Source: Bureau of Labor Statistics.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 47.

Semiannual Report | 17

DIVIDEND DISTRIBUTIONS*
Franklin Total Return Fund
11/1/03-4/30/04
- --------------------------------------------------------------------------------
DIVIDEND PER SHARE (CENTS)
--------------------------------------------------------
MONTH CLASS A CLASS B CLASS C CLASS R ADVISOR CLASS
- --------------------------------------------------------------------------------
November 4.0217 3.7140 3.7081 3.8392 4.2213
December 4.5854 4.2167 4.2241 4.3510 4.8233
January 4.0671 3.7315 3.7300 3.8630 4.2852
February 3.9459 3.6364 3.6180 3.7471 4.1477
March 4.3336 3.9580 3.9538 4.0965 4.5707
April 3.9679 3.6341 3.6325 3.7596 4.1819
- --------------------------------------------------------------------------------
TOTAL 24.9216 22.8907 22.8665 23.6564 26.2301
- --------------------------------------------------------------------------------

Increases in business spending also helped economic growth. After having been
largely absent since the end of 2000, business spending posted strong results
for the final quarter of 2003 and the first quarter of 2004. Nonresidential
investment spending rose at an annual rate of 5.8% in the first quarter of
2004. 3 Additionally, nonfarm productivity grew an annualized 3.8% in the first
quarter of 2004, which helped businesses generate more goods and services
without substantially raising inflation. 2

INVESTMENT STRATEGY

We seek to invest in a combination of fixed income securities, primarily from
across the investment-grade debt universe. We analyze securities using
proprietary and non-proprietary research to help us identify attractive
investment opportunities, across the entire fixed income opportunity set, on a
relative basis. The Fund may also invest up to 15% of its total assets in
non-investment grade debt securities.

3. Source: Bureau of Economic Analysis.

18 | Semiannual Report

MANAGER'S DISCUSSION

During the six months under review, our commitment to the Fund's investment
strategy helped provide attractive returns. We remained diligent in executing
our strategy to uncover value across the entire fixed income opportunity set.
Valuations across the corporate credit sector continued to be attractive,
although we examined purchases and holdings closely as yield spreads narrowed.
We held a substantial portion of the Fund's portfolio in the corporate credit
sectors, and looked to our allocations relative to the benchmark Lehman Brothers
U.S. Universal Index to decide where we would like to take incremental risk.

In line with the Fund's strategy, we also continued to invest in the
international and non-dollar bond sectors to add incremental risk, as we
believed appropriate. The Fund benefited from these allocations as global
currencies strengthened relative to the U.S. dollar over the reporting period.
We also continued to invest a portion of the Fund in agency mortgage-backed
securities and debentures, as their risk-adjusted returns remained attractive
compared to other asset classes. Additionally, we looked at some higher quality,
mortgage-related asset-backed securities, particularly in the home equity loan
sector. These securities helped support the Fund's overall yield as they
typically offer a yield premium over their government-guaranteed counterparts.

Thank you for your continued participation in Franklin Total Return Fund. We
look forward to serving your future investment needs.

[GRAPHIC OMITTED]

/s/ Roger A. Bayston
- --------------------
Roger A. Bayston, CFA
Portfolio Manager
Franklin Total Return Fund

Semiannual Report | 19

Performance Summary as of 4/30/04

FRANKLIN TOTAL RETURN FUND

PRICE AND DISTRIBUTION INFORMATION

Net Asset Value (NAV) -$0.04 $10.02 $10.06
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.249216
- -------------------------------------------------------------------------------------------------

CLASS B CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.04 $10.01 $10.05
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.228907
- -------------------------------------------------------------------------------------------------

CLASS C CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.04 $10.01 $10.05
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.228665
- -------------------------------------------------------------------------------------------------

CLASS R CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.04 $10.01 $10.05
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.236564
- -------------------------------------------------------------------------------------------------

ADVISOR CLASS CHANGE 4/30/04 10/31/03
- -------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.04 $10.03 $10.07
DISTRIBUTIONS (11/1/03-4/30/04)
Dividend Income $0.262301
- -------------------------------------------------------------------------------------------------

20 | Past performance does not guarantee future results. | Semiannual Report

Performance Summary (CONTINUED)

PERFORMANCE 1

CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE; CLASS B: CONTINGENT DEFERRED SALES
CHARGE (CDSC) DECLINING FROM 4% TO 0% OVER SIX YEARS, AND ELIMINATED THEREAFTER;
CLASS C: 1% CDSC IN FIRST YEAR ONLY; CLASS R: 1% CDSC FOR FIRST 18 MONTHS ONLY.
CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS
INCLUDE MAXIMUM SALES CHARGES.

- -----------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR INCEPTION (8/3/98)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 2 +2.17% +4.33% +37.39% +43.08%
Average Annual Total Return 3 -2.21% -0.12% +5.64% +5.64%
Avg. Ann. Total Return (3/31/04) 4 +3.97% +6.22% +6.18%
Distribution Rate 5 4.62%
30-Day Standardized Yield 6 3.07%
- -----------------------------------------------------------------------------------------------------

CLASS B 6-MONTH 1-YEAR INCEPTION (3/1/02)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 2 +1.96% +3.91% +15.01%
Average Annual Total Return 3 -2.02% -0.05% +5.38%
Avg. Ann. Total Return (3/31/04) 4 +4.12% +6.90%
Distribution Rate 5 4.41%
30-Day Standardized Yield 6 2.82%
- -----------------------------------------------------------------------------------------------------

CLASS C 6-MONTH 1-YEAR INCEPTION (3/1/02)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 2 +1.96% +3.90% +15.01%
Average Annual Total Return 3 +0.96% +2.91% +6.67%
Avg. Ann. Total Return (3/31/04) 4 +7.21% +8.28%
Distribution Rate 5 4.42%
30-Day Standardized Yield 6 2.81%
- -----------------------------------------------------------------------------------------------------

CLASS R 6-MONTH 1-YEAR INCEPTION (1/1/02)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 2 +1.94% +3.96% +16.43%
Average Annual Total Return 3 +0.94% +2.97% +6.77%
Avg. Ann. Total Return (3/31/04) 4 +7.28% +8.26%
Distribution Rate 5 4.57%
30-Day Standardized Yield 6 2.96%
- -----------------------------------------------------------------------------------------------------

ADVISOR CLASS 6-MONTH 1-YEAR 5-YEAR INCEPTION (8/3/98)
- -----------------------------------------------------------------------------------------------------

Cumulative Total Return 2 +2.29% +4.59% +39.08% +45.22%
Average Annual Total Return 3 +2.29% +4.59% +6.82% +6.71%
Avg. Ann. Total Return (3/31/04) 4 +8.93% +7.42% +7.28%
Distribution Rate 5 5.07%
30-Day Standardized Yield 6 3.45%
- -----------------------------------------------------------------------------------------------------

FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

Semiannual Report | Past performance does not guarantee future results. | 21

Performance Summary (CONTINUED)

ENDNOTES

INTEREST RATE MOVEMENTS MAY AFFECT THE FUND'S SHARE PRICE AND YIELD. BOND
PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. INVESTING IN DERIVATIVE SECURITIES SUCH AS
FINANCIAL FUTURES AND OPTION CONTRACTS INVOLVES SPECIAL RISKS. THE RISKS
ASSOCIATED WITH HIGHER-YIELDING, LOWER-RATED SECURITIES INCLUDE HIGHER RISK OF
DEFAULT AND LOSS OF PRINCIPAL. THE FUND MAY ALSO INVEST IN FOREIGN COMPANIES,
INCLUDING EMERGING MARKETS, WHICH CAN INVOLVE EXPOSURE TO CURRENCY VOLATILITY
AND POLITICAL, ECONOMIC AND REGULATORY UNCERTAINTY. THE FUND'S PROSPECTUS ALSO
INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS B: These shares have higher annual fees and expenses than Class A
shares.

CLASS C: Prior to 1/1/04, these shares were offered with an initial sales
charge; thus actual total returns would have differed. These
shares have higher annual fees and expenses than Class A shares.

CLASS R: Shares are available to certain eligible investors as described
in the prospectus. These shares have higher annual fees and
expenses than Class A shares.

ADVISOR CLASS: Shares are available to certain eligible investors as described
in the prospectus.

1. The Fund's manager and administrator have agreed in advance to waive all or a
portion of their fees and to make certain payments to reduce expenses. If the
manager and administrator had not taken this action, the Fund's distribution
rate and total return would have been lower and yield for the period would have
been 2.95%, 2.69%, 2.68%, 2.83% and 3.33% for Classes A, B, C, R and Advisor,
respectively. The fee waiver may be discontinued at any time, upon notice to the
Fund's Board of Trustees.

2. Cumulative total return represents the change in value of an investment over
the periods indicated and does not include a sales charge.

3. Average annual total return represents the average annual change in value of
an investment over the periods indicated and includes any current, applicable,
maximum sales charge. Six-month return has not been annualized.

4. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter.

5. Distribution rate is based on an annualization of the respective class's
April dividend and the maximum offering price per share on 4/30/04.

6. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 4/30/04.

22 | Past performance does not guarantee future results. | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS

FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND

-------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................ $9.16 $9.38 $9.46 $9.30 $9.30 $9.36
-------------------------------------------------------------------------
Income from investment operations:
Net investment income .............................. .145 .313 .390 f .550 f .500 f .450 f
Net realized and unrealized gains (losses) ......... (.060) (.220) (.070) .170 (.010) (.060)
-------------------------------------------------------------------------
Total from investment operations .................... .085 .093 .320 .720 .490 .390
Less distributions from net investment income ....... (.145) (.313) (.400) (.560) (.490) (.450)
-------------------------------------------------------------------------
Net asset value, end of period ...................... $9.10 $9.16 $9.38 $9.46 $9.30 $9.30
=========================================================================
Total return a ...................................... .93% 1.00% 3.45% 8.01% 5.44% 4.24%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $571,208 $651,701 $575,665 $270,175 $232,413 $282,685
Ratios to average net assets:
Expenses b ......................................... .88% e .88% .88% .95% 1.00% .96%
Net investment income .............................. 3.18% e 3.30% 4.14% 5.82% 5.38% 4.80%
Portfolio turnover rate c ........................... 15.19% 130.32% 85.05% 2.49% 12.68% 23.23%
Portfolio turnover rate excluding mortgage dollar
rolls c,d .......................................... 15.19% 96.52% 85.05% 2.49% 12.68% 23.23%

<FN>
a Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods less
than one year.

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

c Represents the Portfolio's rate of turnover.

d See Note 1(f) regarding mortgage dollar rolls.

e Annualized.

f Based on average daily shares outstanding.
</FN>

Semiannual Report | 23

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND (CONTINUED)

-----------------------------------
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 2004 OCTOBER 31,
CLASS C (UNAUDITED) 2003 f
-----------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ......................... $9.16 $9.28
-------------------------------
Income from investment operations:
Net investment income ....................................... .126 .081
Net realized and unrealized gains (losses) .................. (.060) (.120)
-------------------------------
Total from investment operations ............................. .066 (.039)
Less distributions from net investment income ................ (.126) (.081)
-------------------------------
Net asset value, end of period ............................... $9.10 $9.16
===============================

Total return a ............................................... .72% (.42)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............................ $28,955 $12,868
Ratios to average net assets:
Expenses b,c ................................................ 1.28% 1.26%
Net investment income c ..................................... 2.78% 2.92%
Portfolio turnover rate d .................................... 15.19% 130.32%
Portfolio turnover rate excluding mortgage dollar rolls d,e .. 15.19% 96.52%

<FN>
a Total return does not reflect contingent deferred sales charge, and is not annualized for
periods less than one year.

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

c Annualized.

d Represents the Portfolio's rate of turnover.

e See Note 1(f) regarding mortgage dollar rolls.

f For the period July 1, 2003 (effective date) to October 31, 2003.
</FN>

24 | See notes to financial statements. | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED)

- ------------------------------------------------------------------------------------------
FRANKLIN ADJUSTABLE U.S. GOVERNMENT SECURITIES FUND SHARES VALUE
- ------------------------------------------------------------------------------------------
MUTUAL FUNDS 101.3%

U.S. Government Adjustable Rate Mortgage Portfolio ......... 66,661,172 $607,949,891
-------------
TOTAL INVESTMENTS (COST $640,989,475) 101.3% ............... 607,949,891
OTHER ASSETS, LESS LIABILITIES (1.3)% ...................... (7,787,325)
-------------
NET ASSETS 100.0% .......................................... $600,162,566
=============

Semiannual Report | See notes to financial statements. | 25

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS

FRANKLIN FLOATING RATE DAILY ACCESS FUND

----------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS A (UNAUDITED) 2003 2002 2001 c
----------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................ $10.03 $ 9.69 $9.95 $10.00
---------------------------------------------------
Income from investment operations:
Net investment income .............................. .147 .388 .437 .291
Net realized and unrealized gains (losses) ......... .072 .341 (.248) (.046)
---------------------------------------------------
Total from investment operations .................... .219 .729 .189 .245
Less distributions from net investment income ....... (.149) (.389) (.449) (.295)
---------------------------------------------------
Net asset value, end of period ...................... $10.10 $10.03 $9.69 $ 9.95
====================================================
Total return a ...................................... 2.20% 7.65% 1.87% 2.45%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $257,461 $127,660 $49,389 $34,634
Ratios to average net assets:
Expenses ........................................... .97% b 1.05% 1.12% 1.25% b
Net investment income .............................. 2.94% b 3.83% 4.33% 5.47% b
Portfolio turnover rate ............................. 25.46% 85.54% 76.17% 37.08%

<FN>
a Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized
for periods less than one year.

b Annualized.

c For the period May 1, 2001 (effective date) to October 31, 2001.
</FN>

26 | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN FLOATING RATE DAILY ACCESS FUND (CONTINUED)

--------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS B (UNAUDITED) 2003 2002 2001 c
--------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................................. $10.02 $ 9.68 $9.95 $10.00
--------------------------------------------------
Income from investment operations:
Net investment income ............................................... .112 .328 .379 .252
Net realized and unrealized gains (losses) .......................... .071 .333 (.251) (.044)
--------------------------------------------------
Total from investment operations ..................................... .183 .661 .128 .208
Less distributions from net investment income ........................ (.113) (.321) (.398) (.258)
--------------------------------------------------
Net asset value, end of period ....................................... $10.09 $10.02 $9.68 $ 9.95
==================================================

Total return a ....................................................... 1.84% 6.92% 1.24% 2.08%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................................... $40,041 $28,637 $17,162 $9,838
Ratios to average net assets:
Expenses ............................................................ 1.70% b 1.74% 1.72% 2.00% b
Net investment income ............................................... 2.21% b 3.14% 3.73% 4.85% b
Portfolio turnover rate .............................................. 25.46% 85.54% 76.17% 37.08%

<FN>
a Total return does not reflect contingent deferred sales charge, and is not annualized for periods less than one year.

b Annualized.

c For the period May 1, 2001 (effective date) to October 31, 2001.
</FN>

Semiannual Report | 27

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN FLOATING RATE DAILY ACCESS FUND (CONTINUED)

-------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
CLASS C (UNAUDITED) 2003 2002 2001 c
-------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ..................................... $10.03 $ 9.69 $9.95 $10.00
-------------------------------------------------
Income from investment operations:
Net investment income ................................................... .126 .351 .405 .269
Net realized and unrealized gains (losses) .............................. .072 .337 (.245) (.045)
-------------------------------------------------
Total from investment operations ......................................... .198 .688 .160 .224
Less distributions from net investment income ............................ (.128) (.348) (.420) (.274)
-------------------------------------------------
Net asset value, end of period ........................................... $10.10 $10.03 $9.69 $ 9.95
=================================================

Total return a ........................................................... 1.98% 7.21% 1.57% 2.25%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ........................................ $152,260 $95,802 $54,585 $26,356
Ratios to average net assets:
Expenses ................................................................ 1.40% b 1.46% 1.42% 1.65% b
Net investment income ................................................... 2.51% b 3.42% 4.03% 5.06% b
Portfolio turnover rate .................................................. 25.46% 85.54% 76.17% 37.08%

<FN>
a Total return does not reflect contingent deferred sales charge, and is not annualized for periods less than one year.

b Annualized.

c For the period May 1, 2001 (effective date) to October 31, 2001.
</FN>

28 | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN FLOATING RATE DAILY ACCESS FUND (CONTINUED)

-------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2003 2002 2001 c
-------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .................................... $10.04 $ 9.70 $9.95 $10.00
-------------------------------------------------
Income from investment operations:
Net investment income .................................................. .160 .411 .464 .302
Net realized and unrealized gains (losses) ............................. .072 .343 (.241) (.045)
-------------------------------------------------
Total from investment operations ........................................ .232 .754 .223 .257
Less distributions from net investment income ........................... (.162) (.414) (.473) (.307)
-------------------------------------------------
Net asset value, end of period .......................................... $10.11 $10.04 $9.70 $ 9.95
==================================================

Total return a .......................................................... 2.23% 7.92% 2.21% 2.58%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ....................................... $11,404 $7,602 $5,874 $6,439
Ratios to average net assets:
Expenses ............................................................... .72% b .80% .87% 1.00% b
Net investment income .................................................. 3.19% b 4.08% 4.58% 5.92% b
Portfolio turnover rate ................................................. 25.46% 85.54% 76.17% 37.08%

<FN>
a Total return is not annualized for periods less than one year.

b Annualized.

c For the period May 1, 2001 (effective date) to October 31, 2001.
</FN>

Semiannual Report |See notes to financial statements. | 29

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED)

- --------------------------------------------------------------------------------------------------------------------------
FRANKLIN FLOATING RATE DAILY ACCESS FUND PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------

BONDS 1.4%
BROADCASTING .9%
Paxson Communications Corp., senior secured floating rate note, 144A, 3.89%, 1/15/10 .. $ 4,000,000 $ 4,060,000
-------------
STEEL .4%
Ispat Inland ULC, senior secured note, 144A, 7.86%, 4/01/10 ........................... 2,000,000 2,070,000
-------------
WIRELESS COMMUNICATIONS .1%
Arch Wireless Inc., senior sub. note, 12.00%, 5/15/09 ................................. 233,137 273,936
-------------
TOTAL BONDS (COST $6,229,133) ......................................................... 6,403,936
-------------
a SENIOR FLOATING RATE INTERESTS 84.3%
ADVERTISING/MARKETING SERVICES .9%
b Adams Outdoor Advertising Inc., Term Loan, 3.40%, 10/05/11 ............................ 4,000,000 4,056,252
-------------
AEROSPACE & DEFENSE 1.8%
ARINC Inc., Term Loan, 3.36%, 2/24/11 ................................................. 1,000,000 1,014,375
b CACI International Inc., Term Loan B, 3.10 - 3.18%, 4/23/11 ........................... 1,000,000 1,011,250
Communications & Power Industry, Term Loan B, 4.10 - 4.11%, 7/29/10 ................... 1,500,000 1,520,625
DRS Technologies Inc., Term Loan B, 2.86 - 3.09%, 10/22/10 ............................ 1,778,136 1,797,028
ILC Industries Inc.,
First Lien Term Loan, 4.11%, 8/04/10 ............................................... 997,500 1,009,969
Second Lien Term Loan, 6.86%, 2/05/11 .............................................. 500,000 506,250
Titan Corp., Term Loan B, 4.37%, 2/23/06 .............................................. 982,500 985,775
Vought Aircraft Industries, Term Loan X, 4.10%, 12/01/06 .............................. 339,055 342,021
-------------
8,187,293
-------------
AUTO PARTS: ORIGINAL EQUIPMENT MANUFACTURER 3.3%
Dayco Products LLC, Term Loan A, 3.10%, 3/14/07 ....................................... 1,597,924 1,592,598
Eagle Picher Industries Inc., DIP Term Loan B, 4.61%, 8/07/09 ......................... 956,953 965,028
Federal Mogul Corp., DIP Term Loan, 4.125 - 4.25%, 2/06/05 ............................ 1,000,000 1,002,580
GenCorp Inc., Term Loan B, 4.938%, 3/28/07 ............................................ 985,000 991,156
Hayes Lemmerz, Term Loan, 4.91 - 4.98%, 6/03/09 ....................................... 1,913,889 1,959,344
Hilite International Inc., Term Loan B, 5.60 - 5.76%, 3/31/09 ......................... 866,557 870,890
Key Plastics Inc.,
Term Loan B, 6.60 - 8.00%, 4/25/09 ................................................. 211,350 214,521
Term Loan C, 11.10 - 11.12%, 4/25/10 ............................................... 1,000,000 1,005,000
Plastech Engineered Products Inc., First Lien Term Loan, 3.85%, 3/11/10 ............... 1,000,000 1,016,250
Progressive Moulded Products, Term Loan C, 4.625%, 6/30/08 ............................ 900,000 906,750
Tenneco Automotive Inc.,
L/C Term Loan, 4.35%, 12/12/10 ..................................................... 931,034 949,073
Term Loan B, 4.36%, 12/12/10 ....................................................... 2,063,793 2,103,779
TRW Automotive Acquisition Corp., Term Loan D1, 3.438%, 2/28/11 ....................... 1,500,000 1,524,910
-------------
15,101,879
-------------
AUTOMOTIVE AFTERMARKET .2%
United Components Inc., Term Loan C, 5.75%, 6/20/10 ................................... 856,667 865,987
-------------
BEVERAGES: ALCOHOLIC .2%
Southern Wine & Spirits of America Inc., Term Loan B, 3.36%, 6/21/08 .................. 995,000 1,006,660
-------------

30 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
BEVERAGES: NON-ALCOHOLIC .2%
Dr. Pepper Bottling Co. of Texas, Term Loan, 3.61 - 3.65%, 12/18/10 ................... $ 970,103 $ 988,292
-------------
BROADCASTING .7%
Cumulus Media Inc., Term Loan D, 3.375%, 3/28/10 ...................................... 990,000 1,003,791
Emmis Operating Co., Term Loan B, 3.375%, 8/31/09 ..................................... 497,500 498,655
Radio One Inc., Term Loan A, 1.745%, 6/30/07 .......................................... 1,625,000 1,612,812
-------------
3,115,258
-------------
BUILDING PRODUCTS 1.3%
Associated Materials Inc., Term Loan, 3.86 - 4.03%, 8/27/09 ........................... 736,842 746,053
Builders Firstsource Inc., Term Loan, 4.59%, 3/17/10 .................................. 1,660,000 1,679,712
Building Materials Holding Corp., Term Loan B, 4.375%, 8/13/10 ........................ 992,500 996,222
Norcraft Cos. LP, Term Loan, 4.35%, 10/21/09 .......................................... 972,222 981,944
PGT Industries Inc., First Lien Term Loan, 4.17%, 2/05/10 ............................. 748,125 755,606
Tapco International,
Term Loan B, 3.86%, 7/23/07 ........................................................ 569,599 572,447
Term Loan C, 4.11%, 7/23/08 ........................................................ 407,324 409,361
-------------
6,141,345
-------------
CABLE/SATELLITE TELEVISION 5.2%
Atlantic Broadband Finance LLC, Term Loan B, 4.37%, 8/06/11 ........................... 1,250,000 1,266,211
Bresnan Broadband Holdings LLC,
Term Loan A, 6.75%, 3/31/10 ........................................................ 1,250,000 1,262,500
Term Loan B, 4.61 - 4.67%, 3/02/10 ................................................. 1,000,000 1,009,750
Century Cable (Adelphia), Term Loan, 6.00%, 3/18/08 ................................... 1,000,000 982,500
Charter Communications Operating LLC, Term Loan B, 4.42%, 4/23/11 ..................... 3,500,000 3,491,978
DirecTV Holdings, Term Loan, 3.35 - 3.95%, 3/06/10 .................................... 2,064,796 2,097,192
b Grapeclose Ltd. (Inmarsat),
Term Loan B, 4.111%, 10/10/10 ...................................................... 2,000,000 2,023,126
Term Loan C, 4.611%, 10/10/11 ...................................................... 2,000,000 2,023,126
Insight Midwest Holdings,
Additional Term, 3.938%, 12/31/09 .................................................. 997,500 1,006,353
Term Loan B, 3.938%, 12/31/09 ...................................................... 997,500 1,006,353
MCC Iowa (Broadband), Term Loan B1, 3.62%, 9/12/10 .................................. 1,000,000 1,014,688
PanAmSat Corp., Term Loan B1, 3.60%, 9/30/10 .......................................... 537,115 539,298
Pegasus Media & Communications, Term Loan D, 9.00%, 7/31/06 ........................... 1,990,000 2,039,750
b Persona Communications Inc., Term Loan, 6.00%, 4/12/11 ................................ 3,000,000 3,023,439
UCA-HHC (Adelphia), Term Loan, 5.25%, 3/31/08 ......................................... 997,500 958,099
-------------
23,744,363
-------------
CASINOS/GAMING 2.3%
Alliance Gaming Corp., Term Loan B, 3.788%, 8/22/09 ................................... 1,500,000 1,519,380
Global Cash Access LLC, Term Loan, 3.85%, 3/10/10 ..................................... 1,000,000 1,015,625
Greektown Casinos LLC, Term Loan D, 4.59 - 4.631%, 12/31/05 ........................... 1,861,737 1,891,410
Isle of Capri, Term Loan B, 3.35 - 3.44%, 3/26/08 ..................................... 830,000 839,930
Isle of Capri Black Hawk LLC, Term Loan C, 4.11 - 4.14%, 4/15/06 ...................... 1,492,381 1,500,619
Marina District Finance Co. Inc., Term Loan B, 5.16 - 5.22%, 12/31/07 ................. 995,000 1,010,049

Semiannual Report | 31

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
CASINOS/GAMING (CONT.)
Scientific Games Corp., Term Loan C, 3.85 - 5.75%, 12/31/09 ........................... $ 2,992,500 $ 3,039,880
-------------
10,816,893
-------------
CATALOG/SPECIALTY DISTRIBUTION .4%
Affinity Group Inc.,
Term Loan B1, 5.12%, 5/21/09 ....................................................... 231,837 234,155
Term Loan B2, 5.12 - 5.134%, 5/21/09 ............................................... 579,592 585,388
Oriental Trading Co. Inc., Term Loan B, 3.875%, 7/29/10 ............................... 987,215 994,002
-------------
1,813,545
-------------
CHEMICALS: MAJOR DIVERSIFIED 1.2%
Huntsman International LLC,
Term Loan B, 5.188 - 5.25%, 6/30/07 ................................................ 1,250,011 1,271,809
Term Loan C, 5.438%, 6/30/08 ....................................................... 1,249,989 1,271,082
b Invista B.V.,
Term Loan B1, 6.00%, 4/29/11 ....................................................... 2,082,353 2,100,140
Term Loan B2, 6.00%, 4/29/11 ....................................................... 917,647 925,486
-------------
5,568,517
-------------
CHEMICALS: SPECIALTY 2.7%
Brenntag, Term Loan B2, 3.881%, 12/09/11 .............................................. 1,500,000 1,520,625
FMC Corp., Term Loan B, 3.60%, 10/21/07 ............................................... 971,956 980,811
Ineos Group Ltd., Term Loan C, 4.661%, 6/30/09 ........................................ 881,914 893,121
Kraton Polymers LLC, Term Loan B, 3.75%, 12/24/10 ..................................... 997,222 1,014,050
Nalco Co., Term Loan B, 3.60 - 3.63%, 11/04/10 ........................................ 3,851,538 3,888,448
Noveon Inc., Term Loan B, 3.938%, 12/31/09 ............................................ 995,000 999,353
Rockwood Specialties Group Inc., Term Loan C, 3.93%, 7/23/10 .......................... 995,000 1,003,085
Sovereign Specialty Chemicals Inc., Term Loan B, 5.712%, 12/31/07 ..................... 987,500 978,859
Westlake Chemical Corp., Term Loan B, 4.86 - 1.951%, 7/31/10 .......................... 992,500 1,007,078
-------------
12,285,430
-------------
COAL 1.0%
Peabody Energy Corp., Term Loan B, 2.85 - 2.86%, 3/21/10 .............................. 4,488,665 4,529,346
-------------
COMMERCIAL PRINTING/FORMS .2%
American Reprographics, Term Loan B, 4.09%, 6/17/09 ................................... 997,500 1,013,709
-------------
CONSTRUCTION MATERIALS .3%
St. Marys Cement Inc., Term Loan B, 3.61%, 11/24/09 ................................... 1,496,250 1,518,694
-------------
CONSUMER SUNDRIES .9%
NBTY Inc., Term Loan C, 3.40%, 7/22/09 ................................................ 739,179 743,355
Rayovac Corp., Term Loan B, 3.60 - 3.64%, 10/01/09 .................................... 721,546 727,333
Scotts Co., Term Loan B, 3.125%, 9/30/10 .............................................. 1,498,500 1,521,328
b United Industries Corp., Term Loan B, 3.60 - 3.84%, 4/30/11 ........................... 1,000,000 1,013,125
-------------
4,005,141
-------------

32 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
CONTAINERS/PACKAGING 3.2%
ACI Operations Property Ltd., Term Loan A, 3.92%, 4/01/07 ............................. $ 1,000,000 $ 1,004,688
Berry Plastics, Term Loan C, 3.62 - 3.63%, 6/30/10 .................................... 995,000 1,009,303
Crown Cork & Seal Co. Inc., Term Loan B, 4.10%, 9/15/08 ............................... 950,000 967,813
Graham Packaging Co., Term Loan B, 3.875%, 2/20/10 .................................... 994,737 1,011,056
Graphic Packaging International Corp., Term Loan B, 3.86%, 8/08/10 .................... 1,990,000 2,023,581
b Greif Brothers Corp., Term Loan B, 2.92%, 8/15/09 ..................................... 1,006,667 1,014,594
Kerr Group Inc., Term Loan B, 4.61%, 8/11/10 .......................................... 3,443,512 3,469,876
Owens-Brockway Glass Container Inc.,
Term Loan B, 3.88%, 4/01/08 ........................................................ 1,000,000 1,008,036
cTerm Loan C, 4.13%, 4/01/08 ........................................................ 1,500,000 1,501,875
Stone Container Corp.,
Term Loan B, 3.688%, 7/25/09 ....................................................... 1,429,301 1,441,807
Term Loan C, 3.625 - 3.688%, 7/25/09 ............................................... 185,248 186,869
Tekni-Plex Inc., Term Loan B, 5.17%, 6/21/08 .......................................... 306,275 308,189
-------------
14,947,687
-------------
DATA PROCESSING SERVICES .4%
Infousa Inc., Term Loan B, 5.75%, 3/29/08 ............................................. 2,000,000 2,025,000
-------------
DRUG STORE CHAINS .2%
Rite Aid Corp., Term Loan B1, 4.10%, 4/30/08 .......................................... 1,000,000 1,025,500
-------------
ELECTRIC UTILITIES 3.4%
AES Corp., Term Loan B, 5.32%, 4/30/08 ................................................ 571,431 579,957
Calpine Corp., Second Lien Term Loan, 6.89%, 7/15/07 .................................. 1,985,000 1,875,454
Calpine Generating Co., First Priority Term Loan, 5.00%, 3/22/09 ...................... 1,000,000 1,001,719
Centerpoint Energy Inc., Term Loan B, 4.723%, 10/07/06 ................................ 2,983,784 3,053,482
b Cogentrix Energy Inc., Term Loan, 3.35%, 2/19/09 ...................................... 2,500,000 2,515,625
b Midwest Generation LLC, Term Loan, 4.38 - 4.57%, 4/27/11 .............................. 1,500,000 1,517,501
NRG Energy Inc., Term Loan B, 1.07 - 5.50%, 6/23/10 ................................... 578,966 597,565
Pike Electric Inc., Term Loan, 4.375%, 4/17/12 ........................................ 402,941 406,656
Quanta Services Inc., Term Loan B, 1.16 - 4.11%, 12/15/08 ............................. 2,000,000 2,028,750
Teton Power Funding LLC, Term Loan B, 4.36%, 2/20/11 .................................. 1,000,000 1,010,000
TNP Enterprises Inc., Term Loan, 6.225%, 12/31/06 ..................................... 992,500 1,008,628
-------------
15,595,337
-------------
ELECTRICAL PRODUCTS .3%
Enersys Capital Inc.,
Term Loan, 6.11%, 3/10/12 .......................................................... 500,000 508,334
Term Loan B, 3.59 - 3.66%, 3/09/11 ................................................. 1,000,000 1,016,042
-------------
1,524,376
-------------
ELECTRONICS/APPLIANCES .2%
Alliance Laundry Systems LLC, Term Loan, 4.652%, 7/31/09 .............................. 787,565 791,503
-------------
ELECTRONIC TECHNOLOGY: AEROSPACE & DEFENSE .2%
b Transdigm Inc., Term Loan B, 3.35%, 7/22/10 ........................................... 997,500 1,008,877
-------------

Semiannual Report | 33

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

Brand Services Inc., Term Loan B, 4.35 - 4.36%, 10/16/09 .............................. $ 795,386 $ 800,357
URS Corp., Term Loan B, 3.87%, 8/22/08 ................................................ 700,565 702,974
Washington Group, Synthetic Term Loan, .99%, 10/01/07 ................................. 3,000,000 3,014,100
-------------
4,517,431
-------------
ENVIRONMENTAL SERVICES 2.1%
Allied Waste North America Inc.,
Term Loan, 3.87%, 1/15/10 .......................................................... 214,286 217,751
Term Loan B, 3.85 - 3.88%, 1/15/10 ................................................. 1,269,643 1,291,634
Term Loan C, 3.86%, 1/15/10 ........................................................ 500,000 508,437
Duratek Inc., Term Loan B, 5.11 - 5.15%, 12/16/09 ..................................... 1,500,000 1,506,563
Envirosolutions Inc.,
c Delay Draw, 5.12%, 3/01/09 ............................................................ 864,545 864,545
Term Loan B, 5.12%, 3/01/09 ........................................................ 2,135,455 2,135,455
IESI Corp., Term Loan, 4.14 - 4.15%, 10/10/10 ......................................... 995,000 1,011,791
b Waste Connections Inc., Term Loan, 2.87 - 2.91%, 10/16/10 ............................. 2,000,000 2,016,876
-------------
9,553,052
-------------
FINANCE/RENTAL/LEASING .2%
United Rentals Inc.,
Term Loan, 3.36%, 2/11/11 .......................................................... 166,667 168,906
Term Loan B, 3.35 - 3.44%, 2/11/11 ................................................. 833,333 844,063
-------------
1,012,969
-------------
FOOD RETAIL .1%
Pathmark Stores Inc., Term Loan B2, 5.625%, 6/30/07 ................................... 364,721 368,995
-------------
FOOD: MAJOR DIVERSIFIED 1.1%
B&G Foods Inc., Term Loan, 4.25%, 9/03/09 ............................................. 995,000 1,002,629
Dole Food Inc., Term Loan C, 3.688 - 5.50%, 3/28/08 ................................... 252,619 255,373
c Luiginos Inc., Term Loan, 3.00 - 6.00%, 3/26/11 ....................................... 1,750,000 1,780,625
Pinnacle Foods Holding Corp., Term Loan B, 4.26%, 11/25/10 ............................ 2,000,000 2,030,416
-------------
5,069,043
-------------
FOOD: MEAT/FISH/DAIRY 1.2%
Dean Foods (Suiza Foods) Corp.,
Term Loan B, 3.11%, 7/15/08 ........................................................ 2,488,731 2,526,062
Term Loan C, 2.89%, 7/15/08 ........................................................ 1,000,000 1,011,042
Land O'Lakes Inc., Term Loan B, 4.73%, 10/11/08 ....................................... 1,146,264 1,157,726
Michael Foods Inc., Term Loan B, 3.60 - 3.964%, 11/21/10 .............................. 997,500 1,013,709
-------------
5,708,539
-------------
FOOD: SPECIALTY/CANDY 1.1%
Atkins Nutritionals Inc., First Lien Term Loan, 4.36%, 11/21/09 ....................... 982,500 984,956

34 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
FOOD: SPECIALTY/CANDY (CONT.)
Meow Mix Co.,
First Lien Term Loan, 4.61 - 4.73%, 8/21/09 ........................................ $ 987,500 $ 979,477
Second Lien Term Loan, 7.72%, 8/21/09 .............................................. 1,000,000 978,750
Nellson Neutraceuticals Inc.,
First Lien Term Loan, 4.11%, 10/04/09 .............................................. 1,490,506 1,497,959
Second Lien Term Loan, 6.61%, 4/04/10 .............................................. 500,000 501,250
-------------
4,942,392
-------------
FOREST PRODUCTS .7%
Roseburg Forest Products, Term Loan B, 3.13%, 2/20/10 ................................. 2,992,500 3,029,906
-------------
HOME FURNISHINGS 1.5%
Sealy Mattress Co., Term Loan B, 3.86%, 4/02/12 ....................................... 3,000,000 3,042,189
Simmons Holdings Inc.,
Term Loan, 5.125%, 6/02/12 ......................................................... 500,000 501,042
Term Loan B, 3.875 - 4.125%, 12/02/11 .............................................. 1,958,519 1,987,080
Springs Industries Inc., Term Loan B, 5.125%, 9/05/08 ................................. 324,317 326,865
Tempur World Inc., Term Loan B, 4.61%, 8/15/09 ........................................ 992,500 1,001,184
-------------
6,858,360
-------------
HOMEBUILDING .7%
Landsource Communities Development LLC, Term Loan B, 3.688%, 3/31/10 .................. 3,000,000 3,050,625
-------------
HOSPITAL/NURSING MANAGEMENT .8%
Beverly Enterprises Inc., Term Loan B, 4.36 - 4.57%, 10/22/08 ......................... 995,000 1,008,681
Iasis Healthcare Corp., Term Loan B, 3.85%, 2/07/09 ................................... 917,500 929,542
Triad Hospitals Inc., Term Loan B, 3.35%, 9/30/08 ..................................... 745,561 757,445
Vanguard Health Systems Inc., Term Loan B, 5.35%, 1/03/10 ............................. 987,500 996,450
-------------
3,692,118
-------------
HOTEL/RESORTS/CRUISELINES .4%
Extended Stay America Inc., Term Loan B, 4.85%, 7/01/07 ............................... 944,937 947,694
Wyndham International Inc., Term Loan B, 5.875%, 6/30/06 .............................. 946,891 921,295
-------------
1,868,989
-------------
HOUSEHOLD/PERSONAL CARE .6%
Prestige Brands Inc., Term Loan B, 4.075 - 5.75%, 4/08/11 ............................. 2,750,000 2,777,500
-------------
INDUSTRIAL CONGLOMERATES 1.3%
Invensys PLC, Term Loan B, 4.611%, 9/05/09 ............................................ 1,250,000 1,254,687
Roper Industries Inc., Term Loan, 3.11 - 3.17%, 12/19/08 .............................. 987,500 1,001,695
SPX Corp., Term Loan B, 3.125%, 9/30/09 ............................................... 1,629,280 1,651,853
Trimas Corp., Term Loan B, 4.60%, 12/06/09 ............................................ 2,226,315 2,239,998
-------------
6,148,233
-------------
INDUSTRIAL MACHINERY 2.0%
Colfax Corp., Term Loan B, 4.875%, 5/30/09 ........................................... 1,471,165 1,490,474
Dresser Inc., Term Loan, 4.61%, 3/01/10 ............................................... 1,250,000 1,271,875
Flowserve Corp., Term Loan C, 3.875%, 6/30/09 ......................................... 664,961 674,187

Semiannual Report | 35

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
INDUSTRIAL MACHINERY (CONT.)
b Itron Inc., Term Loan B, 5.25%, 11/24/10 .............................................. $ 1,500,000 $ 1,517,345
Rexnord Corp., Term Loan, 4.39%, 11/19/09 ............................................. 888,889 898,333
Sensus Metering Systems Inc., Term Loan, 4.17%, 12/16/10 ............................. 3,241,875 3,268,890
-------------
9,121,104
-------------
INDUSTRIAL SPECIALTIES 1.2%
b Ionics Inc., Term Loan B, 3.87%, 2/01/11 .............................................. 4,500,000 4,560,471
Unifrax Corp., Term Loan B, 4.875%, 8/27/09 ........................................... 965,889 977,662
-------------
5,538,133
-------------
INFORMATION TECHNOLOGY SERVICES 1.0%
The Relizon Co., Term Loan B, 4.12%, 2/20/11 .......................................... 1,214,583 1,222,174
Worldspan LP, Term Loan, 4.875%, 6/30/07 .............................................. 688,000 690,580
Xerox Corp., Term Loan, 2.86%, 9/30/08 ................................................ 2,500,000 2,508,125
-------------
4,420,879
-------------
LIFE/HEALTH INSURANCE .2%
Conseco Inc.,
Term Loan A, 7.25%, 9/01/09 ........................................................ 765,872 768,425
Term Loan B, 9.50%, 9/01/09 ........................................................ 229,762 230,527
-------------
998,952
-------------
MAJOR TELECOMMUNICATIONS 1.1%
Alec Holdings Inc., Term Loan B, 4.375%, 8/20/10 ...................................... 1,995,000 2,014,950
Cincinnati Bell Inc., Term Loan D, 3.62 - 3.63%, 6/30/08 .............................. 918,810 932,592
Consolidated Communications Inc., Term Loan B, 3.85%, 10/14/11 ........................ 1,000,000 1,010,000
Qwest Corp., Term Loan, 6.50%, 6/30/07 ................................................ 1,000,000 1,042,764
-------------
5,000,306
-------------
MANAGED HEALTH CARE .7%
Multiplan Inc., Term Loan, 3.86%, 3/04/09 ............................................. 2,250,000 2,278,125
Pacificare Health Systems Inc., Term Loan, 3.709%, 6/03/08 ............................ 992,500 1,004,080
-------------
3,282,205
-------------
MARINE SHIPPING .9%
Great Lakes Transportation LLC, Term Loan, 6.75%, 3/23/08 ............................. 765,000 766,912
Horizon Lines LLC, Term Loan B, 4.11 - 4.28%, 2/04/09 ................................. 941,429 952,020
Moran Transportation Co., Term Loan B, 4.11%, 8/07/09 ................................. 992,500 1,003,045
United States Shipping LLC, Term Loan, 3.38 - 3.463%, 4/08/10 ......................... 1,500,000 1,513,125
-------------
4,235,102
-------------
MEDIA CONGLOMERATES .3%
Canwest Media Inc., Term Loan D, 3.872%, 5/15/09 (Canada) ............................. 1,492,308 1,510,962
-------------
MEDICAL DISTRIBUTORS .8%
VWR International Inc., Term Loan B, 3.60%, 4/07/11 ................................... 3,500,000 3,555,125
-------------

36 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
MEDICAL SPECIALTIES .6%
Empi Inc., Term Loan B, 4.24%, 11/24/09 ............................................... $ 997,500 $ 1,008,722
Kinetic Concepts Inc., Term Loan B, 3.36%, 8/11/10 .................................... 1,336,250 1,347,341
PerkinElmer Inc., Term Loan B, 3.35%, 12/26/08 ........................................ 619,048 627,044
-------------
2,983,107
-------------
MEDICAL/NURSING SERVICES 2.6%
Alliance Imaging Inc., Term Loan C, 3.563 - 3.625%, 11/30/08 .......................... 876,712 873,151
AMN Healthcare Services Inc., Term Loan B, 4.11%, 10/02/08 ............................ 1,750,000 1,780,625
Cross Country Healthcare Inc., Term Loan, 4.35%, 6/05/09 .............................. 696,011 713,411
DaVita Inc., Term Loan B, 3.12 - 3.213%, 3/31/09 ...................................... 2,981,130 3,016,066
Insight Health Services, Term Loan B, 4.61%, 10/17/08 ................................. 2,390,122 2,399,085
MedQuest Inc., Term Loan B, 4.86%, 7/31/09 ............................................ 992,500 999,944
Sheridan Healthcare, Term Loan B, 3.84 - 3.87%, 3/31/10 ............................... 1,000,000 1,012,500
Team Health Inc., Term Loan B, 4.36%, 3/22/11 ......................................... 951,898 951,898
-------------
11,746,680
-------------
MISCELLANEOUS COMMERCIAL SERVICES 1.6%
Corrections Corp. of America, Term Loan C, 3.86 - 3.88%, 3/31/08 ...................... 984,773 998,622
DS Waters Enterprises LP, Term Loan, 3.938%, 11/07/09 ................................. 2,133,875 2,133,209
GEO, Term Loan B, 3.60 - 3.67%, 7/10/09 ............................................... 962,500 973,930
Global Imaging Systems Inc., Term Loan, 3.60 - 3.63%, 6/20/09 ......................... 992,500 1,007,387
Spectaguard Acquisition LLC, Term Loan, 7.50%, 4/25/10 ................................ 944,737 939,890
U.S. Investigations Services Inc., Term Loan C, 4.61%, 1/10/09 ........................ 1,369,815 1,368,959
-------------
7,421,997
-------------
MISCELLANEOUS MANUFACTURING .6%
Day International Group Inc., Term Loan B, 5.60 - 5.61%, 9/10/09 ...................... 955,957 964,720
Mueller Group, Term Loan, 4.35%, 4/14/11 .............................................. 1,000,000 1,010,000
Norcross Safety Products, Term Loan, 4.90%, 3/01/09 ................................... 759,231 767,772
-------------
2,742,492
-------------
MOVIES/ENTERTAINMENT 7.2%
24 Hour Fitness Inc., Term Loan, 4.75%, 7/01/09 ....................................... 997,500 999,994
Carmike Cinemas Inc., Term Loan 4.41%, 2/02/09 ........................................ 1,795,500 1,836,461
CH Operating LLC, Term Loan B, 5.625 - 5.688%, 6/21/07 ................................ 448,276 452,759
Cinram International,
Term Loan B, 4.84%, 10/15/09 ....................................................... 2,076,044 2,096,481
Term Loan C, 6.84%, 4/15/10 ........................................................ 1,965,395 1,980,442
Hollywood Entertainment Corp., Term Loan, 4.60%, 3/31/08 .............................. 625,000 629,167
Loews Cineplex Entertainment Corp., Term Loan A, 4.625%, 2/28/08 ...................... 1,404,306 1,408,694
b Metro-Goldwyn-Mayer Inc., Term Loan B, 5.50%, 4/30/11 ................................. 3,000,000 3,013,125
Mets II LLC, Term Loan, 4.35%, 8/23/05 ................................................ 1,000,000 1,003,750
Minnesota Hockey Ventures Group LP Holding Co., Term Loan, 5.66%, 12/23/08 ............ 1,250,000 1,246,875
Minnesota Wild Hockey Club LP Operating Co., 3.91%, Term Loan, 12/23/08 ............... 1,000,000 1,003,750
New Jersey Basketball LLC, Term Loan, 4.375%, 9/09/04 ................................. 3,000,000 3,009,870
c New Jersey Devils (NJSEA), Term Loan, 5.25%, 9/30/06 .................................. 1,500,000 1,503,435
c New Jersey Devils LLC, Term Loan, 6.75%, 9/30/06 ...................................... 2,000,000 2,004,440

Semiannual Report | 37

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

- -------------------------------------------------------------------------------------------------------------------------
FRANKLIN FLOATING RATE DAILY ACCESS FUND PRINCIPAL AMOUNT VALUE
- -------------------------------------------------------------------------------------------------------------------------

a SENIOR FLOATING RATE INTERESTS (CONT.)
MOVIES/ENTERTAINMENT (CONT.)
Rainbow Media Holdings Inc., Term Loan C, 3.38%, 12/31/09 ............................. $ 3,979,986 $ 4,017,796
Regal Cinemas Inc., Term Loan D, 3.375%, 6/30/09 ...................................... 961,290 978,353
Six Flags Theme Parks, Term Loan B, 3.59 - 3.63%, 6/30/09 ............................. 1,358,164 1,374,010
b Warner Music, Term Loan B, 3.85 - 4.025%, 2/28/11 ..................................... 4,500,000 4,565,812
------------
33,125,214
------------
OIL & GAS PIPELINES .8%
b BPL Acquisition LP, Term Loan, 5.25%, 5/04/10 ......................................... 1,500,000 1,514,063
Magellan Midstream Holdings LP, Term Loan A, 4.67%, 6/17/08 ........................... 713,675 727,948
b Vulcan Energy Corp., Term Loan B, 6.25%, 4/30/10 ...................................... 1,400,000 1,419,250
------------
3,661,261
------------
OIL & GAS PRODUCTION .2%
Williams Production RMT Co., Term Loan C, 3.60%, 5/30/07 .............................. 992,512 1,000,949
------------
OIL REFINING/MARKETING .7%
Citgo Petroleum Corp., Term Loan, 8.25%, 2/27/06 ...................................... 1,000,000 1,040,625
Pacific Energy Group LLC, Term Loan B, 3.42%, 7/26/09 ................................. 1,000,000 1,006,563
Tesoro Petroleum Corp., Term Loan, 6.61 - 6.64%, 4/15/08 .............................. 990,000 1,022,175
------------
3,069,363
------------
OTHER CONSUMER SERVICES .4%
Alderwoods Group Inc., Term Loan B, 3.86 - 5.75%, 9/12/08 ............................. 866,733 880,006
FTD Inc., Term Loan B, 3.86%, 2/13/11 ................................................. 1,000,000 1,014,375
------------
1,894,381
------------
OTHER CONSUMER SPECIALTIES .9%
Home Interiors & Gifts Inc., Term Loan, 5.36 - 5.41%, 4/02/11 ......................... 1,500,000 1,487,812
b Jarden Corp., Term Loan B, 3.86%, 4/24/08 ............................................. 2,492,500 2,521,321
Solo Cup Co., Term Loan B, 3.61%, 2/23/11 ............................................. 1,500,000 1,526,625
------------
5,535,758
------------
OTHER TRANSPORTATION 1.2%
Laidlaw International Inc., Term Loan B, 5.50%, 6/17/09 ............................... 2,919,184 2,975,136
Pacer International Inc., Term Loan B, 3.938 - 4.313%, 6/06/10 ........................ 760,784 769,819
Transcore Holdings Inc.,
Term Loan B, 4.38%, 10/31/06 ....................................................... 944,984 956,796
Term Loan C, 4.38%, 12/03/07 ....................................................... 995,000 1,004,522
------------
5,706,273
------------
PUBLISHING: BOOKS/MAGAZINES 2.8%
American Media Inc., Term Loan C, 3.86 - 3.87%, 4/01/07 ............................... 922,079 937,207
CBD Media LLC, Term Loan C, 3.34%, 12/31/09 ........................................... 918,750 927,506
DEX Media East LLC, Term Loan B, 3.60 - 3.63%, 6/30/09 ................................ 768,809 780,026
DEX Media West LLC, Term Loan B, 3.85 - 3.99%, 3/09/10 ................................ 2,785,823 2,834,823
Primedia Inc., Term Loan B, 3.875%, 6/30/09 ........................................... 2,368,564 2,347,839

38 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
PUBLISHING: BOOKS/MAGAZINES (CONT.)
Readers Digest Association Inc., Term Loan B, 4.188%, 5/20/08 ......................... $ 873,096 $ 881,486
R.H. Donnelley Corp., Term Loan B2, 3.36 - 3.39%, 6/30/10 ............................. 987,673 1,000,295
b Transwestern Publishing Co., Term Loan B, 3.375 - 3.938%, 2/25/11 ..................... 2,000,000 2,026,666
Weekly Reader, Second Lien Term Loan, 6.761%, 3/23/09 ................................. 1,000,000 1,004,688
------------
12,740,536
------------
PUBLISHING: NEWSPAPERS .4%
First DT Holdings Ltd. (Hollinger), Term Loan B, 4.625%, 6/30/09 ...................... 979,635 992,799
Medianews Group Inc., Term Loan B, 3.10%, 12/30/10 .................................... 997,500 1,009,969
------------
2,002,768
------------
PULP & PAPER .4%
MDCP Acquisitions I,
Term Loan B, 3.89%, 9/12/10 ........................................................ 1,000,000 1,003,125
Term Loan C, 4.39%, 9/12/11 ........................................................ 1,000,000 1,003,125
------------
2,006,250
------------
REAL ESTATE INVESTMENT TRUSTS .6%
Crescent Real Estate Funding XII, Term Loan, 3.34 - 3.35%, 1/12/06 .................... 1,000,000 1,012,188
Newkirk Master LP, Term Loan, 5.61 - 5.713%, 10/27/03 ................................. 1,927,015 1,947,490
------------
2,959,678
------------
RECREATIONAL PRODUCTS 2.6%
b Amscan Holdings Inc., Term Loan B, 5.75%, 4/30/12 ..................................... 1,000,000 1,009,375
BRP Holdings LP, Term Loan, 4.13%, 12/18/10 ........................................... 4,000,000 4,043,332
PlayPower Inc., Term Loan, 5.35%, 2/07/10 ............................................. 925,000 929,047
Pure Fishing Inc., Term Loan B, 4.11 - 4.14%, 9/12/11 ................................. 3,000,000 3,041,970
True Temper Sports Inc., Term Loan, 5.50%, 3/15/11 .................................... 3,000,000 3,030,000
------------
12,053,724
------------
RESTAURANTS 1.0%
Dominos Inc., Term Loan, 3.75%, 6/25/10 ............................................... 3,431,903 3,482,311
Jack In The Box Inc., Term Loan B, 3.85 - 4.09%, 12/19/10 ............................. 997,500 1,012,662
------------
4,494,973
------------
SEMICONDUCTORS .2%
Fairchild Semiconductor Corp., Term Loan, 3.75%, 6/19/08 .............................. 992,500 1,008,628
------------
SERVICES TO THE HEALTH INDUSTRY .2%
Quintiles Transnational Corp., Term Loan B, 5.36%, 9/25/09 ............................ 995,000 1,014,900
------------
SPECIALTY STORES .7%
Pantry Inc., Term Loan, 3.85%, 3/12/11 ................................................ 2,305,055 2,338,766
PETCO Animal Supplies Inc., Term Loan D, 3.61%, 10/02/08 .............................. 992,473 1,009,842
------------
3,348,608
------------

Semiannual Report | 39

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

a SENIOR FLOATING RATE INTERESTS (CONT.)
SPECIALTY TELECOMMUNICATIONS .9%
D&E Communications Inc., Term Loan B, 3.87%, 12/31/11 ................................. $ 1,695,750 $ 1,714,827
GCI Holdings Inc., Term Loan, 4.38%, 10/30/04 ......................................... 1,405,141 1,422,256
Valor Telecommunications, Term Loan A, 3.63%, 6/30/07 ................................. 887,111 889,883
------------
4,026,966
------------
TOBACCO .1%
Commonwealth Brands Inc., Term Loan, 5.188%, 8/22/07 .................................. 466,333 473,037
------------
TOOLS/HARDWARE .2%
Paint Sundry Brands LLC, Term Loan B, 4.625%, 6/27/10 ................................. 1,000,000 1,010,630
------------
TRUCKING 1.2%
Comcar Industries, Term Loan B, 6.10 - 8.00%, 12/31/09 ................................ 997,500 992,512
Flexi-Van Leasing Inc., Term Loan B, 3.10 - 3.13%, 9/20/07 ............................ 375,148 376,555
Yellow Corp.,
L/C Term Loan, 2.85%, 5/24/07 ...................................................... 3,315,508 3,339,340
Term Loan, 2.85%, 5/24/07 .......................................................... 779,221 784,822
------------
5,493,229
------------
WHOLESALE DISTRIBUTORS .7%
Interline Brands, Term Loan B, 4.61%, 11/30/09 ........................................ 962,500 967,914
National Waterworks Inc., Term Loan B, 3.86%, 11/22/09 ................................ 964,286 977,143
Nebraska Book Co., Term Loan B, 3.91%, 3/04/11 ........................................ 1,000,000 1,015,625
------------
2,960,682
------------
WIRELESS COMMUNICATIONS 3.5%
AAT Communications Corp., Term Loan A, 4.84 - 4.98%, 8/13/09 .......................... 1,000,000 1,002,500
American Tower Corp.,
Term Loan A, 3.36%, 6/30/07 ........................................................ 1,161,306 1,166,453
Term Loan C, 3.36 - 3.40%, 12/31/07 ................................................ 997,500 1,003,984
Crown Castle Operating Co., Term Loan B, 4.61%, 3/15/08 ............................... 2,980,025 3,033,108
Dobson Cellular Systems Inc., Term Loan, 4.35 - 4.38%, 3/31/10 ........................ 3,414,720 3,415,318
Nextel Finance Inc., Term Loan E, 3.375%, 12/15/10 .................................... 997,500 1,009,477
Nextel Partners Operating Co., Term Loan B, 4.188%, 11/30/10 .......................... 1,000,000 1,012,875
c SBA Communications Corp., Term Loan, .50 - 4.65%, 10/31/08 ............................ 2,750,000 2,771,054
Spectrasite Communications Inc., Term Loan C, 3.42%, 2/22/07 .......................... 477,887 483,550
b Telepak, Inc., Term Loan B, 3.60 - 3.63%, 4/29/11 ..................................... 1,250,000 1,250,000
------------
16,148,319
------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $384,739,708) .............................. 388,568,207
------------
TOTAL LONG TERM INVESTMENTS (COST $390,968,841) ....................................... 394,972,143
------------

40 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

SHORT TERM INVESTMENT (COST $86,267,404) 18.7%
d Franklin Institutional Fiduciary Trust Money Market Portfolio .......................... 86,267,404 $ 86,267,404
------------
TOTAL INVESTMENTS (COST $477,236,245) 104.4% ........................................... 481,239,547
OTHER ASSETS, LESS LIABILITIES (4.4)% .................................................. (20,072,788)
------------
NET ASSETS 100.0% ...................................................................... $461,166,759
============

<FN>
See glossary of terms on page 58.

a See Note 1(g) regarding senior floating rate interests.

b See Note 1(c) regarding securities purchased on a delayed delivery basis.

c See Note 1(l) regarding unfunded loan commitments.

d See Note 7 regarding investments in affiliated Money Market Portfolio.
</FN>

Semiannual Report | See notes to financial statements. | 41

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS

FRANKLIN TOTAL RETURN FUND

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ................ $10.06 $ 9.72 $9.94 $9.51 $9.61 $10.37
-------------------------------------------------------------------------
Income from investment operations:
Net investment income .............................. .211 .403 .488 d .610 d,e .670 d .630 d
Net realized and unrealized gains (losses) ......... (.002) .458 (.161) .490 e .020 (.710)
-------------------------------------------------------------------------
Total from investment operations .................... .209 .861 .327 1.100 .690 (.080)
-------------------------------------------------------------------------
Less distributions from:
Net investment income .............................. (.249) (.521) (.547) (.670) (.790) (.630)
-------------------------------------------------------------------------
Net realized gains ................................. -- -- -- -- -- (.050)
-------------------------------------------------------------------------
Total distributions ................................. (.249) (.521) (.547) (.670) (.790) (.680)
-------------------------------------------------------------------------
Net asset value, end of period ...................... $10.02 $10.06 $9.72 $9.94 $9.51 $ 9.61
=========================================================================

Total return a ...................................... 2.17% 8.88% 3.44% 11.87% 7.61% (.73)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................... $174,513 $149,231 $95,514 $68,288 $20,611 $7,870
Ratios to average net assets:
Expenses ........................................... .74% c .68% .68% .50% .50% .50%
Expenses excluding waiver and payments by affiliate 1.01% c 1.02% .97% .99% 1.17% 1.18%
Net investment income .............................. 4.01% c 3.88% 5.02% 6.21% e 7.14% 6.32%
Portfolio turnover rate ............................. 59.15% 195.15% 135.63% 181.85% 342.21% 282.10%
Portfolio turnover rate excluding mortgage dollar
rolls b ............................................ 29.36% 110.73% 95.02% 94.04% 39.64% 96.38%

<FN>
a Total return does not reflect sales commissions or the contingent deferred sales charge, and is not annualized for periods
less than one year.

b See Note 1(f) regarding mortgage dollar rolls.

c Annualized.

d Based on average daily shares outstanding.

e Effective November 1, 2000, the Fund adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began recording all paydown
gains and losses as part of investment income and amortizing all premium and
discount on fixed-income securities, as required. The effect of this change
was as follows:

Net investment income per share ............................ $(.006)
Net realized and unrealized gains per share ................ .006
Ratio of net investment income to average net assets ....... (.07)%
</FN>

Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.

42 | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TOTAL RETURN FUND (CONTINUED)

-------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31,
CLASS B (UNAUDITED) 2003 2002 e
-------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ......................... $10.05 $ 9.72 $9.71
-------------------------------------
Income from investment operations:
Net investment income ....................................... .188 .392 .295 f
Net realized and unrealized gains (losses) .................. .001 c .418 .087
-------------------------------------
Total from investment operations ............................. .189 .810 .382
Less distributions from net investment income ................ (.229) (.480) (.372)
-------------------------------------
Net asset value, end of period ............................... $10.01 $10.05 $9.72
=====================================

Total return a ............................................... 1.96% 8.44% 4.01%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............................ $16,889 $13,797 $4,084
Ratios to average net assets:
Expenses .................................................... 1.14% d 1.08% 1.07% d
Expenses excluding waiver and payments by affiliate ......... 1.41% d 1.42% 1.36% d
Net investment income ....................................... 3.61% d 3.48% 4.63% d
Portfolio turnover rate ...................................... 59.15% 195.15% 135.63%
Portfolio turnover rate excluding mortgage dollar rolls b .... 29.36% 110.73% 95.02%

<FN>
a Total return does not reflect contingent deferred sales charge, and is not annualized for periods less
than one year.

b See Note 1(f) regarding mortgage dollar rolls.

c The amount shown for a share outstanding throughout the period does not
correlate with the aggregate net gains on investments for that period, because
of the timing of sales and repurchase of the Fund shares in relation to
fluctuating market value of the investments of the Fund.

d Annualized.

e For the period March 1, 2002 (effective date) to October 31, 2002.

f Based on average daily shares outstanding.
</FN>

Semiannual Report | 43

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TOTAL RETURN FUND (CONTINUED)

-------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31,
CLASS C (UNAUDITED) 2003 2002 e
-------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ......................... $10.05 $ 9.71 $9.71
-------------------------------------
Income from investment operations:
Net investment income ....................................... .186 .392 .292 f
Net realized and unrealized gains (losses) .................. .003 c .430 .087
-------------------------------------
Total from investment operations ............................. .189 .822 .379
Less distributions from net investment income ................ (.229) (.482) (.379)
-------------------------------------
Net asset value, end of period ............................... $10.01 $10.05 $9.71
=====================================

Total return a ............................................... 1.96% 8.47% 3.98%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............................ $19,343 $15,807 $4,466
Ratios to average net assets:
Expenses .................................................... 1.14% d 1.08% 1.07% d
Expenses excluding waiver and payments by affiliate ......... 1.41% d 1.42% 1.36% d
Net investment income ....................................... 3.61% d 3.48% 4.63% d
Portfolio turnover rate ...................................... 59.15% 195.15% 135.63%
Portfolio turnover rate excluding mortgage dollar rolls b .... 29.36% 110.73% 95.02%

<FN>
a Total return does not reflect contingent deferred sales charge, and is not annualized for periods less
than one year.

b See Note 1(f) regarding mortgage dollar rolls.

d Annualized.

e For the period March 1, 2002 (effective date) to October 31, 2002.

f Based on average daily shares outstanding.
</FN>

44 | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TOTAL RETURN FUND (CONTINUED)

-------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31,
CLASS R (UNAUDITED) 2003 2002 e
-------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ......................... $10.05 $ 9.72 $9.66
-------------------------------------
Income from investment operations:
Net investment income ....................................... .194 .398 .385 f
Net realized and unrealized gains (losses) .................. .003 c .428 .104
-------------------------------------
Total from investment operations ............................. .197 .826 .489
Less distributions from net investment income ................ (.237) (.496) (.429)
-------------------------------------
Net asset value, end of period ............................... $10.01 $10.05 $9.72
=====================================

Total return a ............................................... 1.94 8.61% 5.16%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ............................ $8,248 $7,302 $1,869
Ratios to average net assets:
Expenses .................................................... .99% d .93% .93% d
Expenses excluding waiver and payments by affiliate ......... 1.26% d 1.27% 1.22% d
Net investment income ....................................... 3.76% d 3.63% 4.78% d
Portfolio turnover rate ...................................... 59.15% 195.15% 135.63%
Portfolio turnover rate excluding mortgage dollar rolls b .... 29.36% 110.73% 95.02%

<FN>
a Total return does not reflect sales commissions or the contingent deferred sales charge, and is not
annualized for periods less than one year.

b See Note 1(f) regarding mortgage dollar rolls.

c The amount shown for a share outstanding throughout the period does not correlate with the aggregate
net gains on investments for that period, because of the timing of sales and repurchase of the Fund
shares in relation to fluctuating market value of the investments of the Fund.

d Annualized.

e For the period January 2, 2002 (effective date) to October 31, 2002.

f Based on average daily shares outstanding.
</FN>

Semiannual Report | 45

Franklin Investors Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN TOTAL RETURN FUND (CONTINUED)

-------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
ADVISOR CLASS (UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............... $10.07 $ 9.73 $9.96 $9.52 $9.62 $10.38
-------------------------------------------------------------------------
Income from investment operations:
Net investment income ............................. .217 .417 .513 e .630 e,f .710 e .660 e
Net realized and unrealized gains (losses) ........ .005 c .470 (.170) .500 f .010 (.710)
-------------------------------------------------------------------------
Total from investment operations ................... .222 .887 .343 1.130 .720 (.050)
-------------------------------------------------------------------------
Less distributions from:
Net investment income ............................. (.262) (.547) (.573) (.690) (.820) (.660)
Net realized gains ................................ -- -- -- -- -- (.050)
-------------------------------------------------------------------------
Total distributions ................................ (.262) (.547) (.573) (.690) (.820) (.710)
-------------------------------------------------------------------------
Net asset value, end of period ..................... $10.03 $10.07 $9.73 $9.96 $9.52 $ 9.62
=========================================================================

Total return a ..................................... 2.29% 9.15% 3.61% 12.24% 7.87% (.46)%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) .................. $136,911 $133,432 $134,285 $23,324 $13,173 $12,099
Ratios to average net assets:
Expenses .......................................... .49% d .43% .43% .25% .25% .25%
Expenses excluding waiver and payments by
affiliate ......................................... .76% d .77% .72% .74% .92% .93%
Net investment income ............................. 4.26% d 4.13% 5.27% 6.50% e 7.53% 6.57%
Portfolio turnover rate ............................ 59.15% 195.15% 135.63% 181.85% 342.21% 282.10%
Portfolio turnover rate excluding mortgage dollar
rolls b ........................................... 29.36% 110.73% 95.02% 94.04% 39.64% 96.38%

<FN>
a Total return is not annualized for periods less than one year.

b See Note 1(f) regarding mortgage dollar rolls.

d Annualized.

e Based on average daily shares outstanding.

f Effective November 1, 2000, the Fund adopted the provisions of the AICPA Audit
and Accounting Guide for Investment Companies and began recording all paydown
gains and losses as part of investment income and amortizing all premium and
discount on fixed-income securities, as required. The effect of this change
was as follows:

Net investment income per share ............................. $(.006)
Net realized and unrealized gains per share ................. .006
Ratio of net investment income to average net assets ........ (.07)%

Per share data and ratios for prior periods have not been restated to reflect
this change in accounting policy.
</FN>

46 | See notes to financial statements. | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED)

- --------------------------------------------------------------------------------------------------------------------------
FRANKLIN TOTAL RETURN FUND COUNTRY PRINCIPAL AMOUNT a VALUE
- --------------------------------------------------------------------------------------------------------------------------

CORPORATE BONDS 32.3%
COMMERCIAL SERVICES .2%
Johnsondiversey Inc., senior sub. note, B, 9.625%, 5/15/12 ........ United States $ 300,000 $ 330,000
Lamar Media Corp., senior sub. note, 7.25%, 1/01/13 ............... United States 200,000 216,000
------------
546,000
------------
COMMUNICATIONS 2.3%
AT&T Wireless Services Inc., senior note, 8.125%, 5/01/12 ......... United States 400,000 467,257
Cablevision Systems Corp., senior note, 144A, 8.00%, 4/15/12 ...... United States 300,000 302,250
Centennial Communications Corp., senior note, 144A, 8.125%, 2/01/14 United States 300,000 279,000
Dobson Communications Corp., senior note, 10.875%, 7/01/10 ........ United States 100,000 88,750
Dobson Communications Corp., senior note, 8.875%, 10/01/13 ........ United States 200,000 157,500
France Telecom SA, 9.25%, 3/01/11 ................................. France 1,000,000 1,183,769
Inmarsat Finance PLC, senior note, 144A, 7.625%, 6/30/12 .......... United Kingdom 200,000 205,000
Intelsat Ltd., 6.50%, 11/01/13 .................................... Bahamas 1,000,000 918,659
MCI Inc., senior note, 5.908%, 5/01/07 ............................ United States 111,000 109,890
MCI Inc., senior note, 6.688%, 5/01/09 ............................ United States 111,000 105,450
MCI Inc., senior note, 7.735%, 5/01/14 ............................ United States 95,000 88,469
Millicom International Cellular SA, senior note, 144A,
10.00%, 12/01/13 ............................................... Luxembourg 200,000 210,500
Nextel Communications Inc., senior note, 7.375%, 8/01/15 .......... United States 300,000 313,125
NTL Cable PLC, senior note, 144A, 8.75%, 4/15/14 .................. United Kingdom 200,000 207,500
Qwest Communications Inc., senior note, 144A, 7.50%, 2/15/14 ...... United States 300,000 276,750
Sprint Capital Corp., 7.125%, 1/30/06 ............................. United States 500,000 536,587
Time Warner Telecom Inc., senior note, 10.125%, 2/01/11 ........... United States 200,000 168,000
Time Warner Telecom Inc., senior note, 144A, 9.25%, 2/15/14 ....... United States 100,000 93,500
Triton PCS Inc., senior note, 8.50%, 6/01/13 ...................... United States 300,000 313,500
Verizon New York Inc., A, 6.875%, 4/01/12 ......................... United States 1,000,000 1,095,445
Verizon VA Inc., 4.625%, 3/15/13 .................................. United States 1,000,000 948,222
------------
8,069,123
------------
CONSUMER DURABLES 1.8%
D.R. Horton Inc., senior note, 8.50%, 4/15/12 ..................... United States 300,000 338,250
Ford Motor Co., 7.45%, 7/16/31 .................................... United States 1,500,000 1,466,461
General Motors, 8.25%, 7/15/23 .................................... United States 3,500,000 3,754,895
Phelps Dodge Corp., senior note, 8.75%, 6/01/11 ................... United States 500,000 603,830
Simmons Co., senior sub. note, 144A, 7.875%, 1/15/14 .............. United States 100,000 99,500
True Temper Sports Inc., senior sub. note, 144A, 8.375%, 9/15/11 .. United States 200,000 206,000
------------
6,468,936
------------
CONSUMER NON-DURABLES .7%
Miller Brewing Co., 144A, 5.50%, 8/15/13 .......................... United States 1,000,000 1,014,055
Smithfield Foods Inc., senior note, 7.75%, 5/15/13 ................ United States 300,000 325,500
Tyson Foods Inc., 7.25%, 10/01/06 ................................. United States 1,000,000 1,082,756
------------
2,422,311
------------
CONSUMER SERVICES 3.7%
b Adelphia Communications Corp., senior note, 10.875%, 10/01/10 ..... United States 200,000 219,000
Advanstar Communications, senior secured note, 10.75%, 8/15/10 .... United States 200,000 219,500

Semiannual Report | 47

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

CORPORATE BONDS (CONT.)
CONSUMER SERVICES (CONT.)
Advanstar Communications, senior secured note, 144A,
10.75%, 8/15/10 ................................................. United States $ 100,000 $ 109,750
Block Financial Corp., 6.75%, 11/01/04 ............................ United States 1,000,000 1,025,510
Boyd Gaming Corp., senior sub. note, 144A, 6.75%, 4/15/14 ......... United States 300,000 297,000
CanWest Media Inc., senior sub. note, 10.625%, 5/15/11 ............ Canada 200,000 227,500
CanWest Media Inc., senior note, B, 7.625%, 4/15/13 ............... Canada 100,000 107,000
Cendant Corp., senior note, 7.375%, 4/15/13 ....................... United States 1,000,000 1,132,895
Charter Communications Holdings II, senior note, 144A,
10.25%, 9/15/10 ................................................. United States 300,000 310,500
Comcast Cable, senior note, 7.125%, 6/15/13 ....................... United States 1,000,000 1,110,157
Cox Enterprises, 144A, 4.375%, 5/01/08 ............................ United States 500,000 502,906
Dex Media East LLC, senior note, B, 12.125%, 11/15/12 ............. United States 100,000 116,500
Dex Media West LLC, senior sub. note, 144A, 9.875%, 8/15/13 ....... United States 200,000 220,000
DirecTV Holdings/Finance, senior note, 8.375%, 3/15/13 ............ United States 300,000 336,750
Emmis Operating Co., senior sub. note, 144A, 6.875%, 5/15/12 ...... United States 200,000 200,000
Gaylord Entertainment Co., senior note, 144A, 8.00%, 11/15/13 ..... United States 300,000 313,500
HMH Properties Inc., senior secured note, B, 7.875%, 8/01/08 ...... United States 34,000 35,275
Interactive Corp., senior note, 6.75%, 11/15/05 ................... United States 1,000,000 1,051,347
Liberty Media Corp., 3.50%, 9/25/06 ............................... United States 1,500,000 1,503,752
Lin Television Corp., 6.50%, 5/15/13 .............................. United States 300,000 297,000
News America Inc., 7.25%, 5/18/18 ................................. United States 1,000,000 1,112,610
Park Place Entertainment Corp., senior sub. note, 8.125%, 5/15/11 . United States 300,000 333,000
Paxson Communications Corp., senior secured note, FRN,
144A, 3.89%, 4/01/10 ............................................ United States 300,000 304,500
Pinnacle Entertainment Inc., senior sub. note, 8.75%, 10/01/13 .... United States 200,000 203,000
Pinnacle Entertainment Inc., senior sub. note, B, 9.25%, 2/15/07 .. United States 12,000 12,360
Royal Caribbean Cruises Ltd., senior deb., 7.25%, 3/15/18 ......... United States 300,000 300,750
Station Casinos Inc., senior sub. note, 144A, 6.875%, 3/01/16 ..... United States 300,000 300,000
AOL Time Warner Inc., senior note, 6.875%, 5/01/12 ................ United States 1,000,000 1,094,955
------------
12,997,017
------------
DISTRIBUTION SERVICES
Grand Metropolitan Investment, 7.125%, 9/15/04 .................... United States 200,000 204,169
------------
ELECTRONIC TECHNOLOGY .8%
Flextronics International Ltd., senior sub. note, 6.50%, 5/15/13 .. Singapore 300,000 305,250
Goodrich Corp., senior note, 7.50%, 4/15/08 ....................... United States 1,000,000 1,116,309
L-3 Communications Corp., senior sub. note, 144A, 6.125%, 1/15/14 . United States 300,000 300,000
Raytheon Co., 4.85%, 1/15/11 ...................................... United States 1,000,000 997,018
Xerox Corp., senior note, 7.125%, 6/15/10 ......................... United States 300,000 306,000
------------
3,024,577
------------
ENERGY MINERALS 1.1%
Amerada Hess Corp., 7.125%, 3/15/33 ............................... United States 1,000,000 1,003,539
Marathon Oil Corp., 5.375%, 6/01/07 ............................... United States 1,000,000 1,055,152
Peabody Energy Corp., senior note, B, 6.875%, 3/15/13 ............. United States 300,000 313,500
Ras Laffan Liquid Natural Gas Co. Inc., 144A, 3.437%, 9/15/09 ..... Qatar 800,000 780,479

48 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

CORPORATE BONDS (CONT.)
ENERGY MINERALS (CONT.)
Westport Resources Corp., senior sub. note, 8.25%, 11/01/11 ....... United States $ 200,000 $ 225,500
XTO Energy Inc., senior note, 6.25%, 4/15/13 ...................... United States 500,000 533,653
------------
3,911,823
------------
FINANCE 10.8%
AIG SunAmerica Financing VIII, 144A, 1.225%, 11/15/04 ............. United States 3,100,000 3,100,868
Bank of America Corp., 5.125%, 11/15/14 ........................... United States 1,000,000 982,032
Bank of America Corp., senior sub. note, 5.25%, 12/01/15 .......... United States 1,000,000 975,710
Boston Properties Inc., senior note, 5.00%, 6/01/15 ............... United States 2,000,000 1,884,268
Capital One Bank, 5.125%, 2/15/14 ................................. United States 1,000,000 958,364
Charles Schwab, senior note, 8.05%, 3/01/10 ....................... United States 750,000 859,805
CIT Group Inc., 5.50%, 11/30/07 ................................... United States 1,000,000 1,057,466
Citigroup Inc., sub. note, 5.625%, 8/27/12 ........................ United States 1,000,000 1,044,481
CNA Financial Corp., 6.75%, 11/15/06 .............................. United States 375,000 400,661
CNA Financial Corp., 6.45%, 1/15/08 ............................... United States 500,000 531,733
Credit Suisse First Boston USA, 6.50%, 1/15/12 .................... United States 1,000,000 1,093,937
Ford Motor Credit Co., senior sub. note, 7.25%, 10/25/11 .......... United States 1,000,000 1,062,644
Ford Motor Credit Co., 7.00%, 10/01/13 ............................ United States 1,000,000 1,030,195
Forest City Enterprises Inc., senior note, 7.625%, 6/01/15 ........ United States 300,000 316,500
General Electric Capital Corp., 5.45%, 1/15/13 .................... United States 1,000,000 1,025,635
General Motors Acceptance Corp., 6.875%, 9/15/11 .................. United States 1,000,000 1,051,125
Glencore Funding LLC, 144A, 6.00%, 4/15/14 ........................ United States 700,000 662,733
Goldman Sachs Group Inc., senior note, 6.60%, 1/15/12 ............. United States 1,450,000 1,590,176
Hertz Corp., 4.70%, 10/02/06 ...................................... United States 2,000,000 2,026,426
Highmark Inc., 144A, 6.80%, 8/15/13 ............................... United States 1,000,000 1,072,025
Household Finance Corp., 6.375%, 10/15/11 ......................... United States 2,000,000 2,173,216
International Lease Finance Corp., 5.75%, 2/15/07 ................. United States 1,200,000 1,281,054
JP Morgan Chase & Co., sub. note, 5.75%, 1/02/13 .................. United States 1,000,000 1,037,212
Morgan Stanley, sub. note, 4.75%, 4/01/14 ......................... United States 1,000,000 936,095
National Rural Utility Finance, 7.25%, 3/01/12 .................... United States 250,000 286,616
Nationwide Mutual Insurance, 144A, 8.25%, 12/01/31 ................ United States 1,200,000 1,436,725
Paine Webber Group Inc., senior note, 6.55%, 4/15/08 .............. United States 150,000 164,798
Societe Generale-New York, sub. note, 7.40%, 6/01/06 .............. United States 300,000 327,280
Standard Chartered Bank, 144A, 8.00%, 5/30/31 ..................... United Kingdom 1,000,000 1,194,940
Washington Mutual Financial, 6.875%, 5/15/11 ...................... United States 2,155,000 2,464,346
Wells Fargo & Co., 3.125%, 4/01/09 ................................ United States 900,000 860,784
Whole Auto Loan Trust, 6.00%, 4/15/09 ............................. United States 3,646,510 3,649,281
------------
38,539,131
------------
HEALTH SERVICES .2%
Tenet Healthcare Corp., senior note, 6.375%, 12/01/11 ............. United States 300,000 263,250
United Surgical Partners, senior sub. note, 10.00%, 12/15/11 ...... United States 300,000 342,000
------------
605,250
------------
HEALTH TECHNOLOGY .6%
Alliance Imaging Inc., senior sub. note, 10.375%, 4/15/11 ......... United States 200,000 201,000
Wyeth, senior sub. note 5.50%, 2/01/14 ............................ United States 1,000,000 998,699
Wyeth, senior notes, 6.50%, 2/01/34 ............................... United States 1,000,000 997,786
------------
2,197,485
------------

Semiannual Report | 49

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

CORPORATE BONDS (CONT.)
INDUSTRIAL SERVICES .6%
Allied Waste North America Inc., senior secured note, 144A, 6.50%,
11/15/10 ........................................................ United States $ 300,000 $ 301,500
Grant Prideco Escrow, senior note, 9.00%, 12/15/09 ................ United States 300,000 335,250
Hanover Equipment Trust 01, senior secured note, B, 8.75%, 9/01/11 United States 300,000 324,000
URS Corp., senior note, 11.50%, 9/15/09 ........................... United States 500,000 577,500
Waste Management Inc., 6.50%, 11/15/08 ............................ United States 500,000 545,565
------------
2,083,815
------------
NON-ENERGY MINERALS .5%
Century Aluminum Co., first mortgage, senior secured note,
11.75%, 4/15/08 ................................................. United States 300,000 336,750
Ispat Inland ULC, senior secured note, FRN, 144A, 7.86%, 4/01/10 .. United States 300,000 310,500
Weyerhaeuser Co., 6.75%, 3/15/12 .................................. United States 1,000,000 1,097,944
------------
1,745,194
------------
PERSONAL PRODUCTS .1%
Revlon Consumer Products, senior secured note, 12.00%, 12/01/05 ... United States 300,000 339,000
------------
PROCESS INDUSTRIES 1.2%
Bunge Ltd., senior note, 5.875%, 5/15/13 .......................... United States 1,000,000 1,019,499
Georgia-Pacific Corp., senior note, 9.375%, 2/01/13 ............... United States 300,000 350,250
Graham Packaging Co., senior sub. note, B, 8.75%, 1/15/08 ......... United States 300,000 303,750
IMC Global Inc., senior note, 10.875%, 8/01/13 .................... United States 200,000 246,500
Jefferson Smurfit Corp., senior note, 7.50%, 6/01/13 .............. United States 300,000 312,000
Lyondell Chemical Co., senior secured note, B, 9.875%, 5/01/07 .... United States 100,000 105,500
Lyondell Chemical Co., senior secured note, 10.50%, 6/01/13 ....... United States 200,000 220,000
Nalco Co., senior sub. note, 144A, 8.875%, 11/15/13 ............... United States 300,000 318,000
Owens-Illinois Inc., senior note, 7.80%, 5/15/18 .................. United States 300,000 279,000
RPM International Inc., 144A, 6.25%, 12/15/13 ..................... United States 1,000,000 1,018,339
------------
4,172,838
------------
PRODUCER MANUFACTURING 2.0%
Case New Holland Inc., senior note, 144A, 9.25%, 8/01/11 .......... United States 500,000 560,000
Cleveland Electric Illum, 144A, 5.65%, 12/15/13 ................... United States 1,000,000 988,562
Cooper Industries Ltd., 5.25%, 7/01/07 ............................ United States 1,000,000 1,054,698
Cummins Inc., senior note, 9.50%, 12/01/10 ........................ United States 300,000 349,500
Hubbell Inc., 6.375%, 5/15/12 ..................................... United States 1,000,000 1,064,490
Hutchison Whampoa International Ltd., senior note, 144A, 6.25%,
1/24/14 ......................................................... Hong Kong 1,000,000 983,348
Hutchison Whampoa International Ltd., senior note, 144A, 7.45%,
11/24/33 ........................................................ Hong Kong 1,000,000 965,427
Invensys PLC, senior note, 144A, 9.875%, 3/15/11 .................. United Kingdom 300,000 318,000
Fimep SA, senior note, 10.50%, 2/15/13 ............................ France 300,000 351,000
TRW Automotive Inc., senior note, 9.375%, 2/15/13 ................. United States 284,000 326,600
------------
6,961,625
------------

50 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

CORPORATE BONDS (CONT.)
REAL ESTATE .4%
Host Marriott LP, 9.25%, 10/01/07 ................................. United States $ 300,000 $ 337,500
Vornado Realty LP, 4.75%, 12/01/10 ................................ United States 1,000,000 983,781
------------
1,321,281
------------
RETAIL TRADE .9%
Delhaize America Inc., 8.125%, 4/15/11 ............................ United States 300,000 336,087
Kroger Co., senior note, 7.65%, 4/15/07 ........................... United States 500,000 559,864
Limited Brands, 6.125%, 12/01/12 .................................. United States 500,000 531,462
May Department Stores Co., 8.375%, 8/01/24 ........................ United States 251,000 265,681
Office Depot Inc., senior note, 6.25%, 8/15/13 .................... United States 1,000,000 1,046,801
Rite Aid Corp., senior secured note, 8.125%, 5/01/10 .............. United States 300,000 325,500
Toys R Us, 7.625%, 8/01/11 ........................................ United States 300,000 309,000
------------
3,374,395
------------
TRANSPORTATION 1.3%
CP Ships Ltd., senior note, 10.375%, 7/15/12 ...................... Canada 300,000 349,500
CSX Corp., 7.45%, 5/06/07 ......................................... United States 1,000,000 1,111,009
Delta Air Lines, G-1, 6.718%, 1/02/23 ............................. United States 887,539 916,366
Laidlaw International Inc., senior note, 144A, 10.75%, 6/15/11 .... United States 400,000 451,000
Union Pacific Corp., 3.625%, 6/01/10 .............................. United States 1,500,000 1,412,731
United Air Lines Inc., senior secured note, 7.186%, 4/01/11, S00-2 United States 490,788 437,457
------------
4,678,063
------------
UTILITIES 3.1%
AES Corp., senior secured note, 144A, 9.00%, 5/15/15 .............. United States 300,000 328,500
Allegheny Energy Supply Co. LLC, 144A, 8.25%, 4/15/12 ............. United States 300,000 302,250
Utilicorp United Inc., senior note, 8.27%, 11/15/21 ............... United States 300,000 268,500
Calpine Corp., senior secured note, 144A, 8.75%, 7/15/13 .......... United States 300,000 267,000
Centerpoint Energy Inc., senior note, 6.85%, 6/01/15 .............. United States 1,000,000 1,017,311
Consumers Energy Co., 4.80%, 2/17/09 .............................. United States 1,000,000 1,011,044
DPL Inc., senior note, 6.875%, 9/01/11 ............................ United States 1,500,000 1,485,000
Dynegy Holdings Inc., senior note, 8.75%, 2/15/12 ................. United States 300,000 282,750
East Coast Power LLC, 6.737%, 3/31/08 ............................. United States 53,462 53,859
Firstenergy Corp., senior note, 7.375%, 11/15/31 .................. United States 1,000,000 1,053,445
Midamerican Energy Holding Co., senior note, 3.50%, 5/15/08 ....... United States 1,000,000 975,782
Midwest Generation LLC, 144A, 8.75%, 5/01/34 ...................... United States 300,000 300,000
Northeast Generation Co., senior note, 8.812%, 10/15/26 ........... United States 400,000 432,114
Pacific Gas & Electric Co., 4.20%, 3/01/11 ........................ United States 1,600,000 1,537,413
Pacific Gas & Electric Co., 6.05%, 3/01/34 ........................ United States 500,000 474,429
Texas New Mexico Power, senior note, 6.125%, 6/01/08 .............. United States 1,000,000 1,020,391
Williams Cos. Inc., senior note, 8.625%, 6/01/10 .................. United States 300,000 331,500
------------
11,141,288
------------
TOTAL CORPORATE BONDS (COST $111,360,777) ......................... 114,803,321
------------

Semiannual Report | 51

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

ASSET-BACKED SECURITIES 8.1%
AFC Home Equity Loan Trust, 1997-4, 2A2, Margin .24% + 1 Month
LIBOR, Resets Monthly 1.34%, 12/22/27 ........................... United States $ 997,333 $ 998,804
Ameriquest Mortgage Securities Inc., 2002-3, AF5, 5.47%, 8/25/32 .. United States 2,000,000 2,021,778
Chase Funding Mortgage Loan Asset Backed Certificates, 2003-1,
1A4, 4.119%, 2/25/29 ............................................ United States 1,000,000 1,014,504
Chase Funding Mortgage Loan Asset-Backed Certificates, 2003-6,
1A4, 4.499%, 8/25/30 ............................................ United States 3,900,000 3,874,387
Citifinancial Mortgage Securities Inc., 2003-1, AF3, 4.001%,
1/25/33 ........................................................ United States 2,000,000 2,034,172
Countrywide Asset-Backed Certificates, 1999-2, AF4, 6.78%,
11/25/27 ....................................................... United States 108,437 111,849
Equity One ABS Inc., 2001-3, AF3, 5.191%, 5/25/32 ................. United States 1,050,000 1,074,726
Green Tree Financial Corp., 1999-2, M1, 6.80%, 12/01/30 ........... United States 400,000 135,250
Keystone Owner Trust, 1997-P3, M2, 144A, 7.98%, 12/25/24 .......... United States 1,154,651 1,163,414
Morgan Stanley Auto Loan Trust, 2003-HB1, D, 144A, 5.50%, 4/15/11 United States 1,584,000 1,568,160
Morgan Stanley Capital I, 2002-NC4, A2, Margin .40% + 1 Month
LIBOR, Resets Monthly, 1.5%, 9/25/32 ........................... United States 1,273,719 1,277,733
Residential Asset Securities Corp., 2004-KS1, AI4, 4.213%, 4/25/32 United States 2,000,000 1,955,265
Residential Asset Securities Corp., Margin .25% + 1 Month LIBOR,
Resets Monthly, 1.35%, 3/25/30 .................................. United States 3,570,817 3,576,033
Residential Asset Securities Corp., Margin .27% + 1 Month LIBOR,
Resets Monthly, 1.37%, 4/25/32 .................................. United States 609,664 611,321
Residential Funding Mortgage Securities I , 5.68%, 10/25/16 ....... United States 1,332,929 1,337,305
Residential Funding Mortgage Securities II, 2002-HI5, A4, 4.04%,
7/25/15 ......................................................... United States 2,000,000 2,031,740
Residential Funding Mortgage Securities II, 2004-HS1, AI4, 3.77%,
1/25/22 ......................................................... United States 1,000,000 955,469
Saxon Asset Security Trust, 1998-4, AF5, 6.93%, 1/25/30 ........... United States 94,684 95,122
Securitized Asset Backed Receivables LLC, 2004-OP1, M1,
Margin .50% + 1 Month LIBOR, Resets Monthly, 12.95%, 3/25/34 .... United States 1,000,000 998,539
Structured Asset Securities Corp., 2002-1A, 2A1, 2.578%, 2/25/32 .. United States 1,294,090 1,285,579
Vanderbilt Mortgage Finance, 2000-D, M1, 8.29%, 12/07/30 .......... United States 500,000 519,958
------------
TOTAL ASSET-BACKED SECURITIES (COST $28,869,212) .................. 28,641,108
------------

MORTGAGE-BACKED SECURITIES 34.4%
15 - YEAR MORTGAGE-BACKED SECURITIES 5.6%
FHLMC, 4.50%, 10/01/18 - 1/01/19 .................................. United States 7,136,287 7,042,276
FHLMC, 5.00%, 10/01/17 - 9/01/18 .................................. United States 1,759,812 1,774,808
FHLMC, 6.00%, 2/01/17 ............................................. United States 268,046 280,136
FNMA, 4.50%, 5/01/19 .............................................. United States 2,850,000 2,805,469
FNMA, 5.00%, 6/01/18 - 7/01/18 .................................... United States 3,200,084 3,853,111
FNMA, 5.50%, 1/01/14 - 2/01/18 .................................... United States 2,344,631 2,409,700
FNMA, 6.00%, 8/01/16 - 6/01/17 .................................... United States 1,474,495 1,539,207
FNMA, 6.50%, 4/01/16 - 9/01/16 .................................... United States 209,331 221,847
GNMA, SF, 7.00%, 2/15/09 .......................................... United States 151,798 162,895
------------
20,089,449
------------

52 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

MORTGAGE-BACKED SECURITIES (CONT.)
30 - YEAR MORTGAGE-BACKED SECURITIES 27.0%
c FHLMC, 5.00%, 5/01/33 - 8/01/33 ................................... United States $16,977,081 $16,467,226
c FHLMC, 5.50%, 5/01/33 ............................................. United States 7,170,662 7,161,699
FHLMC, 6.00%, 11/01/32 - 12/01/33 ................................. United States 8,680,038 8,886,432
FHLMC, 6.50%, 4/01/28 - 7/01/32 ................................... United States 2,096,727 2,184,898
FHLMC, 7.00%, 4/01/26 - 7/01/32 ................................... United States 2,611,965 2,760,404
FHLMC, 7.50%, 3/01/32 ............................................ United States 320,153 344,018
FHLMC, 8.50%, 5/01/12 - 8/01/30 ................................... United States 168,320 180,651
FHLMC, 9.00%, 1/01/22 ............................................. United States 628,157 698,466
FHLMC, 10.00%, 10/01/30 ........................................... United States 1,256,566 1,418,465
FNMA, 3.475%, 3/01/33 ............................................. United States 1,297,344 1,315,128
FNMA, 3.479%, 6/01/33 ............................................. United States 930,429 943,191
FNMA, 3.566%, 12/01/27 ............................................ United States 893,386 906,554
FNMA, 5.35%, 6/01/32 .............................................. United States 1,113,402 1,151,041
c FNMA, 5.50%, 5/01/33 - 11/01/33 ................................... United States 12,085,124 12,065,899
FNMA, 6.00%, 5/01/32 .............................................. United States 1,568,803 1,605,082
FNMA, 6.50%, 5/01/28 - 8/01/32 .................................... United States 6,501,076 6,771,993
FNMA, 7.00%, 8/01/29 - 10/01/32 ................................... United States 2,149,486 2,272,953
FNMA, 7.50%, 1/01/30 ............................................. United States 277,487 297,159
FNMA, 8.00%, 12/01/30 ............................................ United States 67,302 72,835
FNMA, 8.50%, 5/01/32 ............................................. United States 1,069,958 1,158,196
FNMA, 9.00%, 11/01/26 - 5/01/27 .................................. United States 2,632,910 2,941,175
c GNMA, 5.00%, 1/20/34 - 5/01/34 .................................... United States 10,204,667 9,918,873
GNMA, 5.50%, 5/15/33 - 9/15/33 .................................... United States 2,240,732 2,244,327
GNMA, 6.00%, 5/20/31 - 9/15/32 .................................... United States 1,445,342 1,483,055
GNMA, 6.50%, 4/20/31 - 9/15/32 .................................... United States 2,378,326 2,485,595
GNMA, 7.00%, 5/20/27 - 12/20/30 ................................... United States 2,790,067 2,964,652
GNMA, 7.50%, 5/15/05 - 1/20/33 .................................... United States 3,641,464 3,900,354
GNMA, 8.00%, 8/15/16 - 7/20/27 .................................... United States 936,523 1,023,307
GNMA, 8.25%, 9/20/17 ............................................. United States 52,424 58,003
GNMA, 9.00%, 11/15/16 - 3/15/31 ................................... United States 224,076 246,402
GNMA II, 6.50%, 3/20/28 .......................................... United States 58,218 60,752
GNMA, SF, 7.00%, 10/15/27 - 4/15/28 ............................... United States 154,144 164,248
GNMA, SF, 7.50%, 2/15/17 - 3/15/22 ................................ United States 39,728 43,012
-----------
96,196,045
-----------
ADJUSTABLE RATE MORTGAGE SECURITIES 1.8%
FHLMC, Cap 11.435%, Margin 2.198% + CMT,
Resets Annually, 3.388%, 9/01/27 ................................ United States 372,823 384,133
FHLMC, Cap 12.59%, Margin 2.39% + CMT,
Resets Annually, 3.693%, 4/01/30 ................................ United States 2,366,370 2,434,699
FHLMC, Cap 12.77%, Margin 2.44% + 3CMT,
Resets Every 3 Years, 5.933%, 3/01/25 ........................... United States 388,020 395,944
FNMA, Cap 10.216%, Margin 2.305% + 3CMT,
Resets Every 3 Years, 6.176% 12/01/24 ........................... United States 127,798 130,368
FNMA, Cap 11.873%, Margin 1.75% + 6 Month DR,
Resets Monthly, 3.202%, 1/01/17 ................................. United States 890,441 915,502
FNMA, Cap 12.06%, Margin 2.125% + 6 Month DR,
Resets Annually, 5.232%, 6/01/17 ................................ United States 225,755 234,326

Semiannual Report | 53

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

MORTGAGE-BACKED SECURITIES (CONT.)
ADJUSTABLE RATE MORTGAGE SECURITIES (CONT.)
FNMA, Cap 12.185%, Margin 2.05% + CMT,
Resets Annually, 4.777%, 9/01/19 ................................ United States $ 76,786 $ 78,957
FNMA, Cap 12.57%, Margin 2.23% + CMT,
Resets Annually, 3.445%, 5/01/25 ................................ United States 347,905 359,369
FNMA, Cap 14.625%, Margin 1.75% + CMT,
Resets Annually, 3.00% 6/01/15 .................................. United States 220,270 225,510
FNMA, Cap 14.744%, Margin 3.678% + 6 ML,
Resets Every 6 Months, 8.295%, 6/01/30 .......................... United States 28,311 29,872
FNMA, Cap 14.781%, Margin 2.06% + CMT,
Resets Annually, 3.32%, 12/01/22 ................................ United States 512,824 526,623
GNMA, Cap 11.00%, Margin 1.50% + CMT,
Resets Annually, 4.625%, 10/20/26 ............................... United States 247,815 253,246
GNMA, Cap 11.50%, Margin 1.50% + CMT,
Resets Annually, 3.375%, 1/20/23 ................................ United States 166,412 168,193
GNMA, Cap 11.50%, Margin 1.50% + CMT,
Resets Annually, 4.625%, 10/20/26 ............................... United States 124,817 127,863
------------
6,264,605
------------
TOTAL MORTGAGE-BACKED SECURITIES (COST $123,052,447) .............. 122,550,099
------------
U.S. GOVERNMENT AND AGENCY SECURITIES 2.2%
U.S. Treasury Bond, 7.25%, 8/15/22 ............................... United States 830,000 1,021,614
U.S. Treasury Bond, 5.25%, 2/15/29 ............................... United States 6,870,000 6,758,369
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $7,367,178) ..... 7,779,983
------------
AGENCY BONDS 13.3%
FHLMC, 2.625%, 7/15/08 ............................................ United States 5,000,000 4,799,230
FHLMC, 2.875%, 12/15/06 ........................................... United States 10,000,000 10,008,410
FHLMC, 4.875%, 11/15/13 ........................................... United States 5,000,000 4,963,710
FHLMC, 5.25%, 1/15/06 ............................................. United States 5,000,000 5,245,010
FHLMC, 5.50%, 7/15/06 ............................................. United States 7,180,000 7,623,875
FNMA, 3.50%, 9/15/04 .............................................. United States 1,500,000 1,513,536
FNMA, 6.625%, 10/15/07 - 11/15/30 ................................. United States 12,000,000 13,304,217
------------
TOTAL AGENCY BONDS (COST $47,545,817) ............................. 47,457,988
------------
FOREIGN GOVERNMENT AND AGENCY SECURITIES 7.1%
Federal Republic of Germany, 96, 6.00%, 1/05/06 ................... Germany 280,000 EUR 355,186
Federation of Russia, 3.00%, 5/14/06 .............................. Russia 20,000 19,300
Federation of Russia, Reg S, 10.00%, 6/26/07 ...................... Russia 26,000 29,641
Government of France, 4.00%, 4/25/13 .............................. France 600,000 EUR 713,225
Government of Hungary, 8.50%, 10/12/05 ............................ Hungary 128,000,000 HUF 595,351
Government of New Zealand, 7.00%, 7/15/09 ......................... New Zealand 11,922,000 NZD 7,776,757
Indonesia Recapital Bond, 13.15%, 3/15/10 ......................... Indonesia 9,320,000,000 IDR 1,188,613
Indonesia Recapital Bond, 14.00%, 6/15/09 ......................... Indonesia 2,825,000,000 IDR 368,968
Indonesia Recapital Bond, 14.275%, 12/15/13 ....................... Indonesia 500,000,000 IDR 68,222
Kingdom of Norway, 6.75%, 1/15/07 ................................. Norway 5,900,000 NOK 937,230
Kingdom of Sweden, 3.50%, 4/20/06 ................................. Sweden 3,600,000 SEK 476,605
Kingdom of Sweden, 5.50%, 10/08/12 ................................ Sweden 2,880,000 SEK 403,651

54 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

FOREIGN GOVERNMENT AND AGENCY SECURITIES (CONT.)
Kingdom of Sweden, 8.00%, 8/15/07 .............................. Sweden 1,110,000 SEK $ 165,573
Kingdom of Thailand, 4.125%, 2/12/08 ........................... Thailand 19,000,000 THB 505,126
Kingdom of Thailand, 6.00%, 3/05/05 ............................ Thailand 20,000,000 THB 519,600
Kingdom of Thailand, 8.00%, 12/08/06 ........................... Thailand 10,700,000 THB 311,253
Kingdom of Thailand, 8.50%, 10/14/05 ........................... Thailand 29,600,000 THB 815,861
Kingdom of Thailand, 8.50%, 12/08/08 ........................... Thailand 15,000,000 THB 481,998
Korea Treasury Bond, 4.75%, 3/12/08 ............................ South Korea 1,100,000,000 KRW 945,968
New South Wales Treasury Corp., 6.50%, 5/01/06 ................. Australia 400,000 AUD 293,271
Republic of Austria, 5.875%, 7/15/06 ........................... Austria 780,000 EUR 999,685
Republic of Colombia, 10.00%, 1/23/12 .......................... Colombia 74,000 79,296
Republic of Colombia, 10.75%, 1/15/13 .......................... Colombia 100,000 110,500
Republic of Peru, 9.875%, 2/06/15 .............................. Peru 100,000 107,750
Republic of Peru, 5.00%, 3/07/17 .............................. Peru 104,650 92,669
Republic of Philippines, 10.625%, 3/16/25 ...................... Philippines 474,000 510,143
Republic of Poland, 8.50%, 11/12/06 ............................ Poland 1,150,000 PLN 294,465
Republic of Ukraine, 144A, 7.65%, 6/11/13 ...................... Ukraine 250,000 239,389
Republic of Vietnam, 4.00%, 3/12/16 ............................ Vietnam 270,000 245,700
Russian Federation, 5.00%, Reg S, 3/31/30 ...................... Russia 4,204,000 3,865,578
United Mexican States, 8.125%, 12/30/19 ........................ Mexico 1,019,000 1,109,436
United Mexican States, 9.875%, 2/01/10 ......................... Mexico 450,000 551,954
Venezuela Front Load Interest, 2.0625%,
Reduction Bond, A, 3/31/07 ................................... Venezuela 83,331 78,435
------------
TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $22,376,542) 25,256,399
------------
ZERO COUPON/STEP-UP BONDS .2%
PROCESS INDUSTRIES .1%
Huntsman ICI Holdings LLC, senior disc. note, zero cpn., 12/31/09 United States 400,000 203,000
Quebecor Media Inc., senior disc. note, zero cpn. to 7/15/06,
13.75% thereafter, 7/15/11 ................................... Canada 300,000 277,500
------------
480,500
------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT .1%
SCG Holding Corp., zero cpn., 144A, 8/04/11 .................... United States 200,000 281,000
------------
TOTAL ZERO COUPON/STEP-UP BONDS (COST $593,031) ................ 761,500
------------
MUNICIPAL BONDS 2.1%
California State GO, 5.25%, 11/01/25 ........................... United States 2,500,000 2,484,050
California State GO, 5.50%, 11/01/33 ........................... United States 4,850,000 4,932,402
------------
TOTAL MUNICIPAL BONDS (COST $7,442,451) ........................ 7,416,452
------------
d SENIOR FLOATING RATE INTERESTS 1.7%
COMMERCIAL SERVICES .1%
DS Waters Enterprises LP, Term Loan, 3.94%, 11/07/09 ........... United States 297,750 297,657
------------

Semiannual Report | 55

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

d SENIOR FLOATING RATE INTERESTS (CONT.)
COMMUNICATIONS .3%
Cincinnati Bell Inc., Term Loan D, 3.62 - 3.63%, 6/30/08 ....... United States $ 275,643 $ 279,778
Crown Castle Operating Co., Term Loan B, 4.61%, 3/15/08 ........ United States 298,500 303,817
Dobson Cellular Systems Inc., Term Loan, 4.35 - 4.38%, 3/31/10 . United States 298,500 298,552
Spectrasite Communications Inc., Term Loan C, 3.42%, 2/22/07 ... United States 310,279 313,956
------------
1,196,103
------------
CONSUMER NON-DURABLES .2%
Dean Foods Inc., Term Loan B, 3.11%, 7/15/08 ................... United States 297,750 302,216
Michael Foods Inc., Term Loan B, 3.6 - 3.964%, 11/21/10 ........ United States 299,250 304,113
Southern Wine & Spirits of America Inc, Term Loan B, 3.36%
6/21/08 ...................................................... United States 298,500 301,998
------------
908,327
------------
CONSUMER SERVICES .2%
Cinram International, Term Loan B, 4.84%, 10/15/09 ............. United States 296,578 299,498
Readers Digest Association Inc., Term Loan B, 4.188 - 4.25%,
5/20/08 ...................................................... United States 85,172 85,990
Scientific Games Corp., Term Loan C, 3.85 - 5.75%, 12/31/09 .... United States 299,250 303,988
------------
689,476
------------
ELECTRONIC TECHNOLOGY .1%
AMI Semiconductor Inc., Term Loan 3.60%, 9/26/08 ............... United States 298,500 301,796
------------
FINANCE .1%
Newkirk Master LP, Term Loan, 5.71%, 11/24/06 .................. United States 289,052 292,123
------------
HEALTH SERVICES .2%
DaVita Inc., Term Loan B, 3.12 - 3.213%, 3/31/09 ............... United States 298,379 301,876
Quintiles Transnational Corp., Term Loan B, 5.36%, 9/25/09 ..... United States 298,500 304,470
------------
606,346
------------
INDUSTRIAL SERVICES .1%
Washington Group, Term Loan 0.99%, 10/01/07 .................... United States 300,000 301,410
------------
PROCESS INDUSTRIES .2%
Berry Plastics, Term Loan C, 3.63%, 6/30/10 .................... United States 298,500 302,791
Nalco Company, Term Loan B, 3.63%, 11/04/10 .................... United States 288,866 291,633
Tekni-Plex Inc., Term Loan B, 5.17%, 6/21/08 ................... United States 114,495 115,211
------------
709,635
------------
PRODUCER MANUFACTURING .1%
Sensus Metering Systems, Term Loan, Inc., 4.17%, 12/16/10 ...... United States 249,375 251,453
Trimas Corp., Term Loan B, 4.60%, 12/06/09 ..................... United States 298,519 300,354
------------
551,807
------------
TECHNOLOGY SERVICES .1%
Worldspan, LP Term Loan, 4.88%, 6/30/07 ........................ United States 206,400 207,174
------------
TOTAL SENIOR FLOATING RATE INTERESTS (COST $6,023,505) ......... 6,061,854
------------

56 | Semiannual Report

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

- --------------------------------------------------------------------------------------------------------------------------
FRANKLIN TOTAL RETURN FUND COUNTRY SHARES VALUE
- --------------------------------------------------------------------------------------------------------------------------

PREFERRED STOCKS .1%
COMMUNICATIONS
PTV Inc., 10.00%, pfd., A ...................................... Switzerland 2 $ 15
------------
HEALTH SERVICES .1%
Fresenius Medical Care, Capital Trust II, 7.875%, 2/01/08 ...... Germany 3,000 326,625
------------
TOTAL PREFERRED STOCKS (COST $286,100) ......................... 326,640
------------
TOTAL LONG TERM INVESTMENTS (COST $354,917,060) ................ 361,055,344
------------
SHORT TERM INVESTMENTS 8.2%
MONEY FUND 8.1%
e Franklin Institutional Fiduciary Trust Money Market Portfolio .. United States 28,866,119 28,866,119
------------

PRINCIPAL AMOUNT a

U.S. GOVERNMENT AND AGENCY SECURITIES .1%
U.S. Treasury Bill, .897%, 5/13/04 ............................. United States $ 400,000 399,916
------------
TOTAL SHORT TERM INVESTMENTS (COST $29,266,019) ................ 29,266,035
------------
TOTAL INVESTMENTS (COST $384,183,079) 109.7% ................... 390,321,379
OTHER ASSETS, LESS LIABILITIES (9.7)% .......................... (34,418,540)
------------
NET ASSETS 100.0% .............................................. $355,902,839
============

See glossary of terms on page 58.

a The principal amount is stated in U.S. dollars unless otherwise indicated.

b Defaulted security. See Note 9.

c See Note 1(c) regarding securities purchased on a when-issued, delayed delivery, or TBA basis.

d Senior secured corporate loans pay interest at rates, which are periodically reset by reference to a base lending rate
plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London
InterBank Offered Rate (LIBOR).

e See Note 7 regarding investments in affiliated Money Market Portfolio.
</FN>

Semiannual Report | See notes to financial statements. | 57

Franklin Investors Securities Trust

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

GLOSSARY OF TERMS

3CMT - 3 Year Constant Maturity Treasury Index
6ML - 6 Month Libor
CMT - 1 Year Constant Maturity Treasury Index
DIP - Debtor in Possession
DR - Discount Rate
FHLMC - Federal Home Loan Mortgage Corporation
FNMA - Federal National Mortgage Association
FRN - Floating Rate Note Index
GNMA - Government National Mortgage Association
GO - Government Obligation
L/C - Line of Credit
LLC - Limited Liability Corporation
LP - Limited Partnership
SF - Single Family

58 | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
April 30, 2004 (unaudited)

--------------------------------------------------
FRANKLIN
ADJUSTABLE FRANKLIN FRANKLIN
U.S. GOVERNMENT FLOATING RATE TOTAL RETURN
SECURITIES FUND DAILY ACCESS FUND FUND
--------------------------------------------------

Assets:
Investments in securities:
Cost-Unaffiliated issuers ....................................... $ -- $390,968,841 $355,316,960
Cost-Sweep money fund (Note 7) .................................. -- 86,267,404 28,866,119
Cost-Portfolio (Note 1) ......................................... 640,989,475 -- --
--------------------------------------------------
Value-Unaffiliated issuers ...................................... -- 394,972,143 361,455,260
Value-Sweep money fund (Note 7) ................................. -- 86,267,404 28,866,119
Value-Portfolio (Note 1) ........................................ 607,949,891 -- --
Cash ............................................................. -- 1,300,989 8,892
Receivables: .....................................................
Investment securities sold ...................................... 294,496 3,006,169 3,546,047
Capital shares sold ............................................. 2,679,423 12,241,213 816,667
Interest ........................................................ -- 1,172,767 3,853,694
Other assets ..................................................... -- 17,342 --
--------------------------------------------------
Total assets ................................................ 610,923,810 498,978,027 398,546,679
--------------------------------------------------
Liabilities:
Payables:
Investment securities purchased ................................. -- 31,636,028 39,761,482
Capital shares redeemed ......................................... 10,331,372 1,480,708 1,827,513
Affiliates ...................................................... 233,989 428,269 236,768
Shareholders .................................................... 142,103 53,420 64,783
Variation margin [Note 1(d)] .................................... -- -- 7,068
Distributions to shareholders .................................... -- 266,114 733,785
Unfunded loan commitments [Note 1(m)] ............................ -- 3,941,259 --
Other liabilities ................................................ 53,780 5,470 12,441
--------------------------------------------------
Total liabilities ........................................... 10,761,244 37,811,268 42,643,840
--------------------------------------------------
Net assets, at value ....................................... $600,162,566 $461,166,759 $355,902,839
==================================================
Net assets consist of:
Undistributed net investment income (distributions in excess of
net investment income) .......................................... $ -- $ 41,588 $ (2,346,354)
Net unrealized appreciation (depreciation) ....................... (33,039,584) 4,003,302 6,174,350
Accumulated net realized gain (loss) ............................. (24,100,310) (877,299) 1,926,674
Capital shares ................................................... 657,302,460 457,999,168 350,148,169
--------------------------------------------------
Net assets, at value ....................................... $600,162,566 $461,166,759 $355,902,839
==================================================

Semiannual Report | 59

Franklin Investors Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
April 30, 2004 (unaudited)

CLASS A:
Net assets, at value ................................................ $571,207,775 $257,461,479 $174,513,238
--------------------------------------------------
Shares outstanding .................................................. 62,735,640 25,485,017 17,424,699
--------------------------------------------------
Net asset value per share a ......................................... $9.10 $10.10 $10.02
Maximum offering price per share (net asset value per share / 97.75%,
97.75%, and 95.75%, respectively) ................................. $9.31 $10.33 $10.46
--------------------------------------------------
CLASS B:
Net assets, at value ................................................ -- $ 40,041,075 $ 16,888,771
--------------------------------------------------
Shares outstanding .................................................. -- 3,966,496 1,686,414
--------------------------------------------------
Net asset value and maximum offering price per share a .............. -- $10.09 $10.01
--------------------------------------------------
CLASS C:
Net assets, at value ................................................ $ 28,954,791 $152,260,267 $ 19,342,506
--------------------------------------------------
Shares outstanding .................................................. 3,181,722 15,071,625 1,932,325
--------------------------------------------------
Net asset value and maximum offering price per share a .............. $9.10 $10.10 $10.01
--------------------------------------------------
CLASS R:
Net assets, at value ................................................ -- -- $ 8,247,821
--------------------------------------------------
Shares outstanding .................................................. -- -- 823,620
--------------------------------------------------
Net asset value and maximum offering price per share a .............. -- -- $10.01
--------------------------------------------------
ADVISOR CLASS:
Net assets, at value ................................................ -- $ 11,403,938 $136,910,503
--------------------------------------------------
Shares outstanding .................................................. -- 1,128,191 13,650,630
--------------------------------------------------
Net asset value and maximum offering price per share ................ -- $10.11 $10.03
==================================================

<FN>
a Redemption price is equal to net asset value less any applicable contingent deferred sales charge.
</FN>

60 |See notes to financial statements. | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS
for the six months ended April 30, 2004 (unaudited)

------------------------------------------------
FRANKLIN
ADJUSTABLE FRANKLIN FRANKLIN
U.S. GOVERNMENT FLOATING RATE TOTAL RETURN
SECURITIES FUND DAILY ACCESS FUND FUND
------------------------------------------------

Investment income:
Dividends:
Unaffiliated issuers ............................................... $ -- $ -- $ 25,594
Sweep money fund (Note 7) .......................................... -- 212,869 47,682
Portfolio (Note 1) ................................................. 11,285,043 -- --
Interest -- 6,376,210 8,294,671
------------------------------------------------
Total investment income ........................................ 11,285,043 6,589,079 8,367,947
------------------------------------------------
Expenses:
Management fees (Note 3) ............................................ -- 658,794 724,609
Administrative fees (Note 3) ........................................ 309,057 335,592 351,137
Distribution fees: (Note 3)
Class A ............................................................ 748,138 225,014 206,837
Class B ............................................................ -- 159,760 49,255
Class C ............................................................ 65,065 399,057 59,745
Class R ............................................................ -- -- 20,069
Transfer agent fees (Note 3) ........................................ 262,085 103,932 168,653
Custodian fees ...................................................... -- 1,007 7,718
Reports to shareholders ............................................. 22,861 7,520 7,662
Registration and filing fees ........................................ 38,665 36,962 42,915
Professional fees ................................................... 9,822 19,383 12,090
Trustees' fees and expenses ......................................... 10,966 5,066 7,507
Other ............................................................... 15,367 45,757 16,029
------------------------------------------------
Total expenses ................................................. 1,482,026 1,997,844 1,674,226
Expenses paid indirectly (Note 4) .............................. -- (787) --
Expenses waived/paid by affiliate (Note 3) ..................... -- -- (471,821)
------------------------------------------------
Net expenses .................................................. 1,482,026 1,997,057 1,202,405
Net investment income ........................................ 9,803,017 4,592,022 7,165,542
------------------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments ........................................................ (1,085,383) 708,208 3,943,654
Financial futures contracts ........................................ -- -- (565,743)
Foreign currency transactions ...................................... -- -- (848)
------------------------------------------------
Net realized gain (loss) ............................................. (1,085,383) 708,208 3,377,063
Net unrealized appreciation (depreciation) on:
Investments ........................................................ (2,922,669) 1,711,822 (3,678,053)
Translation of assets and liabilities denominated in foreign currencies -- -- (44,526)
------------------------------------------------
Net unrealized appreciation (depreciation) ..................... (2,922,669) 1,711,822 (3,722,579)
------------------------------------------------
Net realized and unrealized gain (loss) .............................. (4,008,052) 2,420,030 (345,516)
------------------------------------------------
Net increase (decrease) in net assets resulting from operations ...... $ 5,794,965 $7,012,052 $ 6,820,026
================================================

Semiannual Report | See notes to financial statements. | 61

Franklin Investors Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended April 30, 2004 (unaudited)
and the year ended October 31, 2003

----------------------------------------------------------------------------
FRANKLIN ADJUSTABLE FRANKLIN
U.S. GOVERNMENT FLOATING RATE
SECURITIES FUND DAILY ACCESS FUND
----------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003 APRIL 30, 2004 OCTOBER 31, 2003
----------------------------------------------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ...................... $ 9,803,017 $ 21,164,438 $ 4,592,022 $ 5,735,858
Net realized gain (loss) from investments .. (1,085,383) (853,355) 708,208 (1,330,217)
Net unrealized appreciation (depreciation)
on investments ........................... (2,922,669) (14,364,712) 1,711,822 6,577,026
----------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............ 5,794,965 5,946,371 7,012,052 10,982,667
Distributions to shareholders from:
Net investment income:
Class A ................................... (9,529,339) (21,244,713) (2,604,702) (2,525,421)
Class B ................................... -- -- (368,342) (651,847)
Class C ................................... (273,678) (58,840) (1,475,945) (2,245,533)
Advisor Class ............................. -- -- (146,245) (272,311)
----------------------------------------------------------------------------
Total distributions to shareholders ......... (9,803,017) (21,303,553) (4,595,234) (5,695,112)
Capital share transactions: (Note 2)
Class A ................................... (76,639,655) 91,340,305 128,522,251 76,080,570
Class B ................................... -- -- 11,169,991 10,784,619
Class C ................................... 16,241,720 12,920,452 55,620,831 39,030,685
Advisor Class ............................. -- -- 3,736,536 1,506,528
----------------------------------------------------------------------------
Total capital share transactions ............ (60,397,935) 104,260,757 199,049,609 127,402,402
Net increase (decrease) in net
assets ............................... (64,405,987) 88,903,575 201,466,427 132,689,957
Net assets:
Beginning of period ......................... 664,568,553 575,664,978 259,700,332 127,010,375
----------------------------------------------------------------------------
End of period ............................... $ 600,162,566 $ 664,568,553 $ 461,166,759 $ 259,700,332
----------------------------------------------------------------------------
Undistributed net investment income included
in net assets:
End of period .............................. $ -- $ -- $ 41,588 $ 44,800
============================================================================

62 | Semiannual Report

Franklin Investors Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
for the six months ended April 30, 2004 (unaudited)
and the year ended October 31, 2003

---------------------------------
FRANKLIN TOTAL RETURN FUND
---------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
---------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .............................................................. $ 7,165,542 $ 11,534,059
Net realized gain (loss) from investments, financial futures contracts
and foreign currency transactions ................................................ 3,377,063 3,464,280
Net unrealized appreciation (depreciation) on investments, and translation
of assets and liabilities denominated in foreign currencies ...................... (3,722,579) 8,707,441
--------------------------------
Net increase (decrease) in net assets resulting from operations ................ 6,820,026 23,705,780
Distributions to shareholders from:
Net investment income:
Class A ........................................................................... (4,043,632) (6,459,326)
Class B ........................................................................... (340,991) (455,601)
Class C ........................................................................... (410,890) (521,445)
Class R ........................................................................... (186,459) (266,874)
Advisor Class ..................................................................... (3,727,623) (7,639,259)
--------------------------------
Total distributions to shareholders ................................................. (8,709,595) (15,342,505)
Capital share transactions: (Note 2)
Class A ........................................................................... 26,394,831 50,453,557
Class B ........................................................................... 3,214,169 9,523,958
Class C ........................................................................... 3,668,537 11,171,429
Class R ........................................................................... 976,390 5,344,283
Advisor Class ..................................................................... 3,968,452 (5,505,098)
--------------------------------
Total capital share transactions .................................................... 38,222,379 70,988,129
Net increase (decrease) in net assets .......................................... 36,332,810 79,351,404
Net assets:
Beginning of period ................................................................. 319,570,029 240,218,625
--------------------------------
End of period ....................................................................... $355,902,839 $319,570,029
================================
Distributions in excess of net investment income included in net assets:
End of period ....................................................................... $ (2,346,354) $ (802,301)
================================

Semiannual Report | See notes to financial statements. | 63

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Investors Securities Trust (the Trust) is registered under the
Investment Company Act of 1940 as an open-end investment company, consisting of
six separate series. All funds included in this report (the Funds) are
diversified except the Franklin Floating Rate Daily Access Fund. The Funds'
investment objective is to provide high level current income.

The Franklin Adjustable U.S. Government Securities Fund invests substantially
all of its assets in the U.S. Government Adjustable Rate Mortgage Portfolio (the
Portfolio). The Portfolio is registered under the Investment Company Act of 1940
as a diversified, open-end investment company having the same investment
objective as the fund. The financial statements of the Portfolio, including the
Statement of Investments, are included elsewhere in this report and should be
read in conjunction with the fund's financial statements.

The following summarizes the Funds' significant accounting policies.

a. SECURITY VALUATION

Securities listed or traded on a recognized national exchange are valued at the
last reported sales price. Securities listed or traded on NASDAQ are valued at
their official closing price. Over-the-counter securities and listed securities
for which no sale is reported are valued within the range of the latest quoted
bid and asked prices. Debt securities are valued by independent pricing services
or market makers under procedures approved by the Board of Trustees. Foreign
securities are valued at the close of trading of the foreign exchange or the
NYSE, whichever is earlier. The Franklin Floating Rate Daily Access Fund and the
Franklin Total Return Fund invest in senior secured corporate loans and senior
secured debt that meet credit standards established by Franklin Advisers Inc.
The funds value their securities based on quotations provided by banks,
broker/dealers or pricing services experienced in such matters. If events occur
that materially affect the values of securities after the prices or foreign
exchange rates are determined, but prior to 4:00 p.m. Eastern time or the close
of trading on the NYSE, whichever is earlier, or if market quotations are deemed
not readily available or reliable, the securities will be valued at fair value
as determined following procedures approved by the Board of Trustees.
Investments in open-end mutual funds are valued at the closing net asset value.

The Franklin Adjustable U.S. Government Securities Fund holds Portfolio shares
that are valued at its proportionate interest in the net asset value of the
Portfolio. As of April 30, 2004, the Franklin Adjustable U.S. Government
Securities Fund owns 100% of the Portfolio. (See Note 1 of the Portfolio's
Financial Statements.)

64 | Semiannual Report

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

b. FOREIGN CURRENCY TRANSLATION

The Franklin Total Return Fund does not separately report the effect of changes
in foreign exchange rates from changes in market prices on securities held. Such
changes are included in net realized and unrealized gain or loss from
investments.

Realized foreign exchange gains or losses arise from sales of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions and the difference between the recorded amounts
of dividends, interest, and foreign withholding taxes and the U.S. dollars
equivalent of the amounts actually received or paid. Net unrealized foreign
exchange gains and losses arise from changes in foreign exchange rates on
foreign denominated assets and liabilities other than investments in securities
held at the end of the reporting period.

c. SECURITIES PURCHASED ON A WHEN-ISSUE, DELAYED DELIVERY, OR TBA BASIS

d. FUTURES CONTRACTS

The Franklin Total Return Fund may purchase financial futures contracts to gain
exposure to market changes. A financial futures contract is an agreement between
two parties to buy or sell a security for a set price on a future date. Required
initial margin deposits of cash or securities are maintained by the fund's
custodian in segregated accounts as disclosed in the Statement of Investments.
Subsequent payments, known as variation margin, are made or received by the fund
depending on the fluctuations in the value of the underlying securities. Such
variation margin is accounted for as unrealized gains or losses until the
contract is closed, at which time the gains or losses are reclassified to
realized. Realized and unrealized gains and losses are included in the Statement
of Operations.

The risks of these contracts include the possibility there may be an illiquid
secondary market and/or a change in the value of the contract may not correlate
with the changes in the value of the underlying securities.

Semiannual Report | 65

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

e. FOREIGN CURRENCY CONTRACTS

When the Franklin Total Return Fund purchases or sells foreign securities it may
enter into foreign exchange contracts to minimize foreign exchange risk from the
trade date to the settlement date of the transactions. A foreign exchange
contract is an agreement between two parties to exchange different currencies at
an agreed upon exchange rate on a specified date. Realized and unrealized gains,
and losses on these contracts are included in the Statement of Operations.

The risks of these contracts include movement in the values of the foreign
currencies relative to the U.S. dollar and the possible inability of the
counterparties to fulfill their obligations under the contracts.

f. MORTGAGE DOLLAR ROLLS

The Franklin Total Return Fund enters into mortgage dollar rolls, typically on a
TBA basis. Dollar rolls are agreements between the fund and a financial
institution to simultaneously sell and repurchase a mortgage-backed security at
a future date. Gains or losses are realized at the time of the sale and the
difference between the repurchase price and sale price is recorded as an
unrealized gain to the fund. The risks of mortgage dollar roll transactions
include the potential inability of the counterparty to fulfill their
obligations.

g. SENIOR FLOATING RATE INTERESTS

Senior secured corporate loans pay interest at rates which are periodically
reset by reference to a base lending rate plus a spread. These base lending
rates are generally the prime rate offered by a designated U.S. bank or the
London InterBank Offered Rate (LIBOR).

h. INCOME TAXES

i. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Dividend income and distributions to shareholders are recorded on
the ex- dividend date. Dividends from net investment income are normally
declared daily and distributed monthly to shareholders. For the Franklin
Floating Rate Daily Access Fund and the Franklin Total Return Fund, facility
fees are recognized as income over the expected term of the loan.

66 | Semiannual Report

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

i. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
(CONTINUED)

Net investment income, other than class specific expenses, is allocated daily to
each class of shares based upon the relative value of the settled shares of each
class. Realized and unrealized gains and losses are allocated daily based upon
the relative proportion of net assets of each class.

j. ACCOUNTING ESTIMATES

k. GUARANTEES AND INDEMNIFICATIONS

Under the Trust's organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. Additionally, in the normal course of business, the Trust
enters into contracts with service providers that contain general
indemnification clauses. The Trust's maximum exposure under these arrangements
is unknown as this would involve future claims that may be made against the
Trust that have not yet occurred. However, based on experience, the Trust
expects the risk of loss to be remote.

l. UNFUNDED LOAN COMMITMENTS

The Franklin Floating Rate Daily Access Fund may enter into certain credit
agreements, all or a portion of which may be unfunded. The fund is obligated to
fund these loan commitments at the borrowers' discretion. These commitments are
disclosed in the accompanying Statement of Investments and Statement of Assets
and Liabilities.

2. SHARES OF BENEFICIAL INTEREST

The classes of shares offered within each of the funds are indicated below. Each
class of shares differs by its initial sales load, contingent deferred sales
charges, distribution fees, voting rights on matters affecting a single class
and its exchange privilege.

Semiannual Report | 67

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

- ----------------------------------------------------------------------------------------------------------
CLASS A, CLASS B, CLASS A, CLASS B,
CLASS A & CLASS C CLASS C & ADVISOR CLASS CLASS C, CLASS R & ADVISOR CLASS
- ----------------------------------------------------------------------------------------------------------

Franklin Adjustable Franklin Floating Rate Franklin Total Return Fund
U.S. Government Securities Fund Daily Access Fund

At April 30, 2004, there were an unlimited number of shares authorized ($.01 par
value). Transactions in the Funds' shares were as follows:

-------------------------------
FRANKLIN ADJUSTABLE
U.S. GOVERNMENT
SECURITIES FUND
-------------------------------
SHARES AMOUNT
-------------------------------
CLASS A SHARES:
Six months ended April 30, 2004
Shares sold .............................. 10,589,750 $ 96,771,137
Shares issued in reinvestment of
distributions ........................... 652,440 5,965,699
Shares redeemed .......................... (19,618,965) (179,376,491)
-------------------------------
Net increase (decrease) .................... (8,376,775) $ (76,639,655)
===============================
Year ended October 31, 2003
Shares sold .............................. 63,077,072 $ 586,012,829
Shares issued in reinvestment of
distributions ........................... 1,386,405 12,860,704
Shares redeemed .......................... (54,744,443) (507,533,228)
-------------------------------
Net increase (decrease) .................... 9,719,034 $ 91,340,305
===============================
CLASS C SHARES:
Six months ended April 30, 2004
Shares sold .............................. 2,410,978 $ 22,033,593
Shares issued in reinvestment of
distributions ........................... 20,448 186,787
Shares redeemed .......................... (654,444) (5,978,660)
-------------------------------
Net increase (decrease) .................. 1,776,982 $ 16,241,720
===============================
Year ended October 31, 2003 a
Shares sold .............................. 1,538,830 $ 14,153,058
Shares issued in reinvestment of
distributions ........................... 4,641 42,603
Shares redeemed .......................... (138,731) (1,275,209)
-------------------------------
Net increase (decrease) .................. 1,404,740 $ 12,920,452
===============================

68 | Semiannual Report

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

----------------------------------------------------------
FRANKLIN FRANKLIN
FLOATING RATE TOTAL RETURN
DAILY ACCESS FUND FUND
----------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
----------------------------------------------------------

CLASS A SHARES:
Six months ended April 30, 2004
Shares sold ......................... 17,502,493 $176,333,403 4,881,929 $ 49,852,926
Shares issued in reinvestment of
distributions .................... 192,553 1,939,812 227,861 2,321,477
Shares redeemed ..................... (4,938,352) (49,750,964) (2,526,496) (25,779,572)
----------------------------------------------------------
Net increase (decrease) ............. 12,756,694 $128,522,251 2,583,294 $ 26,394,831
==========================================================
Year ended October 31, 2003
Shares sold ......................... 11,293,107 $112,327,333 9,090,245 $ 91,142,815
Shares issued in reinvestment of
distributions .................... 182,250 1,805,799 375,199 3,761,167
Shares redeemed ..................... (3,844,752) (38,052,562) (4,450,839) (44,450,425)
----------------------------------------------------------
Net increase (decrease) ............. 7,630,605 $ 76,080,570 5,014,605 $ 50,453,557
==========================================================
CLASS B SHARES:
Six months ended April 30, 2004
Shares sold ......................... 1,458,839 $ 14,689,918 497,362 $ 5,082,159
Shares issued in reinvestment of
distributions .................... 22,129 222,687 25,135 255,996
Shares redeemed ..................... (371,713) (3,742,614) (208,290) (2,123,986)
----------------------------------------------------------
Net increase (decrease) ............. 1,109,255 $ 11,169,991 314,207 $ 3,214,169
==========================================================
Year ended October 31, 2003
Shares sold ......................... 1,612,594 $ 16,010,473 1,275,083 $ 12,745,195
Shares issued in reinvestment of
distributions .................... 33,622 332,642 34,570 346,979
Shares redeemed ..................... (561,292) (5,558,496) (357,713) (3,568,216)
----------------------------------------------------------
Net increase (decrease) ............. 1,084,924 $ 10,784,619 951,940 $ 9,523,958
==========================================================
CLASS C SHARES:
Six months ended April 30, 2004
Shares sold ......................... 7,534,567 $ 75,912,842 697,888 $ 7,122,016
Shares issued in reinvestment of
distributions .................... 99,510 1,002,407 30,110 306,552
Shares redeemed ..................... (2,114,231) (21,294,418) (368,519) (3,760,031)
----------------------------------------------------------
Net increase (decrease) ............... 5,519,846 $ 55,620,831 359,479 $ 3,668,537
==========================================================
Year ended October 31, 2003
Shares sold ......................... 6,499,404 $ 64,586,616 1,620,102 $ 16,236,120
Shares issued in reinvestment of
distributions .................... 149,098 1,475,081 40,666 407,973
Shares redeemed ..................... (2,729,909) (27,031,012) (547,613) (5,472,664)
----------------------------------------------------------
Net increase (decrease) 3,918,593 $ 39,030,685 1,113,155 $ 11,171,429
==========================================================

Semiannual Report | 69

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

CLASS R SHARES:
Six months ended April 30, 2004
Shares sold ......................... 275,390 $ 2,797,897
Shares issued in reinvestment of
distributions ..................... 16,375 166,742
Shares redeemed ..................... (194,463) (1,988,249)
-----------------------------
Net increase (decrease) ............... 97,302 $ 976,390
=============================
Year ended October 31, 2003
Shares sold ......................... 764,360 $ 7,650,084
Shares issued in reinvestment of
distributions ..................... 25,794 259,062
Shares redeemed ..................... (256,167) (2,564,863)
-----------------------------
Net increase (decrease) ............... 533,987 $ 5,344,283
=============================
ADVISOR CLASS SHARES:
Six months ended April 30, 2004
Shares sold ......................... 466,520 $ 4,702,066 2,419,670 $ 24,736,188
Shares issued in reinvestment of
distributions ..................... 4,776 48,143 91,620 934,854
Shares redeemed ..................... (100,609) (1,013,673) (2,111,620) (21,702,590)
------------------------------------------------------------
Net increase (decrease) ............... 370,687 $ 3,736,536 399,670 $ 3,968,452
============================================================
Year ended October 31, 2003
Shares sold ......................... 308,837 $ 3,071,582 2,093,469 21,000,974
Shares issued in reinvestment of
distributions ..................... 5,459 54,135 150,843 1,512,747
Shares redeemed ..................... (162,571) (1,619,189) (2,788,420) (28,018,819)
------------------------------------------------------------
Net increase (decrease) ............... 151,725 $ 1,506,528 (544,108) $ (5,505,098)
============================================================
<FN>
a For the period July 1, 2003 (effective date) to October 31, 2003.
</FN>

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Funds are also officers and/or directors of
the following entities:

- ------------------------------------------------------------------------------------------------------------------
ENTITY AFFILIATION
- ------------------------------------------------------------------------------------------------------------------

Franklin Advisers Inc. (Advisers) Investment manager
Franklin Templeton Services LLC (FT Services) Administrative manager
Franklin/Templeton Investor Services LLC (Investor Services) Transfer agent
Franklin/Templeton Distributors Inc. (Distributors) Principal underwriter
The U.S. Government Adjustable Rate Mortgage Portfolio The fund in which the Franklin Adjustable U.S.
Government Securities Fund invests

The Franklin Floating Rate Daily Access Fund pays an investment management fee
to Advisers of .450% of the first $500 million of the fund's average daily net
assets. Fees are further reduced on net assets over $500 million.

70 | Semiannual Report

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

The Franklin Total Return Fund pays an investment management fee to Advisers of
..425% of the first $500 million of the fund's average daily net assets. Fees are
further reduced on net assets over $500 million.

The Franklin Floating Rate Daily Access Fund and the Franklin Total Return Fund
pay an administrative fee to FT Services of .20% per year of the funds' average
daily net assets.

The Franklin Adjustable U.S. Government Securities Fund pays an administrative
fee to Advisers of .10% of the first $5 billion of the fund's average daily net
assets. Fees are further reduced on net assets over $5 billion.

Advisers agreed in advance to voluntarily waive administrative and management
fees for the Franklin Total Return Fund, as noted in the Statement of
Operations. Total expenses waived by Advisers are not subject to reimbursement
by the fund.

-------------------------------------------
FRANKLIN FRANKLIN
ADJUSTABLE FLOATING FRANKLIN
U.S. GOVERNMENT RATE DAILY TOTAL RETURN
SECURITIES FUND ACCESS FUND FUND
-------------------------------------------
Class A ....................... .25% .25% .25%
Class B ....................... -- 1.00% .65%
Class C ....................... .65% .65% .65%
Class R ....................... -- -- .50%

Distributors has advised the Funds it received (paid) net commissions from (on)
sales of the Funds' shares, and received contingent deferred sales charges for
the period as follows:

-------------------------------------------
FRANKLIN FRANKLIN
ADJUSTABLE FLOATING FRANKLIN
U.S. GOVERNMENT RATE DAILY TOTAL RETURN
SECURITIES FUND ACCESS FUND FUND
-------------------------------------------
Net commissions received (paid) $(208,765) $(726,075) $(106,372)
Contingent deferred sales charges $ 108,057 $ 90,250 $ 21,594

The Funds paid transfer agent fees as noted in the Statement of Operations of
which the following amounts were paid to Investor Services:

At April 30, 2004, Advisers or investment companies managed by Advisers owned
19.59% of the Franklin Total Return Fund.

Semiannual Report | 71

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. EXPENSE OFFSET ARRANGEMENT

The Franklin Floating Rate Daily Access Fund has entered into an arrangement
with its custodian whereby credits realized as a result of uninvested cash
balances are used to reduce a portion of the fund's custodian expenses. During
the period ended April 30, 2004, the custodian fees were reduced as noted in the
Statement of Operations.

5. INCOME TAXES

At October 31, 2003, the Funds had tax basis capital losses which may be carried
over to offset future capital gains. Such losses expire as follows:

-----------------------------------------------
FRANKLIN FRANKLIN
ADJUSTABLE FLOATING FRANKLIN
U.S. GOVERNMENT RATE DAILY TOTAL RETURN
SECURITIES FUND ACCESS FUND FUND
-----------------------------------------------

Capital loss carryovers expiring in:
2004 ............................................ $ 8,807,294 $ -- $ --
2005 ............................................ 4,580,551 -- --
2006 ............................................ 2,585,375 -- --
2007 ............................................ 1,456,300 -- 1,011,941
2008 ............................................ 3,438,157 -- 142,129
2009 ............................................ 1,279,054 17,020 3,351,247
2010 ............................................ -- 232,627 550,214
2011 ............................................ 600,077 1,335,860 --
-----------------------------------------------
$ 22,746,808 $ 1,585,507 $ 5,055,531
===============================================

On October 31, 2003, the Franklin Adjustable U.S. Government Securities Fund had
expired capital loss carryovers of $18,463,010, which were reclassified to
paid-in capital.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of wash sales, foreign currency
transactions, mortgage dollar roll transactions, financial futures transactions,
paydown losses, and bond discounts and premiums.

Distributions of income to shareholders may not equal net investment income due
to differing treatments of dividend distributions for book and tax purposes.

At April 30, 2004, the unrealized appreciation (depreciation) based on the cost
of investments for income tax purposes was as follows:

72 | Semiannual Report

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

5. INCOME TAXES (CONTINUED)

------------------------------------------------
FRANKLIN FRANKLIN
ADJUSTABLE FLOATING FRANKLIN
U.S. GOVERNMENT RATE DAILY TOTAL RETURN
SECURITIES FUND ACCESS FUND FUND
------------------------------------------------

Cost of investments ............................. $641,302,450 $477,249,843 $385,283,689
------------------------------------------------
Unrealized appreciation ......................... $ -- $ 4,214,531 $ 8,896,320
Unrealized depreciation ......................... (33,352,559) (224,827) (3,858,630)
------------------------------------------------
Net unrealized appreciation (depreciation) ...... $(33,352,559) $ 3,989,704 $ 5,037,690
================================================

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended April 30, 2004 were as follows:

Purchases ..................................... $ 51,824,382 $237,209,560 $233,248,662
Sales ......................................... $101,358,022 $ 76,590,405 $210,268,735

7. INVESTMENTS IN AFFILIATED MONEY MARKET PORTFOLIO

Certain funds (in the Trust) may invest in the Franklin Institutional Fiduciary
Trust Money Market Portfolio (the Sweep Money Fund), an open-end investment
company managed by Advisers. Management fees paid by the funds are reduced on
assets invested in the Sweep Money Fund, in an amount not to exceed the
management fees paid by the Sweep Money Fund.

8. FINANCIAL FUTURES CONTRACTS

As of April 30, 2004, the Franklin Total Return Fund had the following financial
futures contracts outstanding.

- -----------------------------------------------------------------------------------------
NUMBER OF DELIVERY CONTRACT UNREALIZED
CONTRACTS TO BUY CONTRACTS DATES FACE VALUE GAIN (LOSS)
- -----------------------------------------------------------------------------------------

U.S. Treasury 2 Year Note .......... 104 06/01/04 $20,800,000 $(187,945)

- -----------------------------------------------------------------------------------------
NUMBER OF DELIVERY CONTRACT UNREALIZED
CONTRACTS TO SELL CONTRACTS DATES FACE VALUE GAIN (LOSS)
- -----------------------------------------------------------------------------------------

U.S. Treasury 10 Year Note ......... 69 06/01/04 $ 6,900,000 $235,945

Semiannual Report | 73

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

9. CREDIT RISK AND DEFAULTED SECURITIES

The Franklin Floating Rate Daily Access Fund has 96.73% of its portfolio
invested in below investment grade and comparable quality unrated high yield
securities, which tend to be more sensitive to economic conditions than higher
rated securities.

The Franklin Total Return Fund held defaulted securities and/or other securities
for which the income has been deemed uncollectible. At April 30, 2004, the value
of these securities was $219,000, representing .06% of the fund's net assets.
The fund discontinues accruing income on securities for which income has been
deemed uncollectible and provides an estimate for losses on interest receivable.
For information as to specific securities, see the accompanying Statement of
Investments.

10. REVOLVING CREDIT FACILITY

The Franklin Floating Rate Daily Access Fund participates in a $200 million
senior unsecured revolving credit facility to fund shareholder redemptions or
meet unfunded loan commitments. The facility agreement ends on December 17,
2004. Interest is charged at the Federal Funds Rate plus .50%. Facility fees
paid are amortized on a straight line basis over the term of the commitment.
Annual commitment fees of .09% are charged on the unused portion of the facility
and allocated among the participating funds based on net assets.

During the period ended April 30, 2004, the fund did not utilize the facility.

11. RECENT LITIGATION

On July 6, 2003, Adelphia Communications Corp. ("Adelphia") and related parties,
along with its Official Committee of Unsecured Creditors, filed an adversary
proceeding in the Adelphia bankruptcy case in the U.S. Bankruptcy Court (SDNY)
against more than 360 banks, financial services companies, insurance companies,
investment banks, mutual funds and other parties that had arranged for the sale
of, or purchased the bank debt of, Adelphia or its related parties. Named
defendants included Franklin Advisers Inc., Franklin CLOs I-III, Franklin
Floating Rate Daily Access Fund, Franklin Floating Rate Master Series, and
Franklin Floating Rate Trust. The Complaint alleges that the purchasers of this
bank debt knew, or should have known, that the loan proceeds would not benefit
Adelphia, but instead be used to enrich Adelphia insiders. It seeks avoidance of
the loans and recovery of intentionally fraudulent transfers.

Although it is not possible to predict the outcome of these matters at this
early stage of the proceedings, the fund's management does not expect that the
result will have a material adverse effect on the financial condition of the
fund.

74 | Semiannual Report

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

12. REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING
On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 14, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.

GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the U.S. Securities and Exchange Commission
(SEC), the U.S. Attorney for the Northern District of California, the New York
Attorney General, the California Attorney General, the U.S. Attorney for the
District of Massachusetts, the Florida Department of Financial Services and the
Commissioner of Securities, the West Virginia Attorney General and the Vermont
Department of Banking, Insurance, Securities, and Health Care Administration,
relating to certain practices in the mutual fund industry, including late
trading, market timing and payments to securities dealers who sell Fund shares,
the Company and its subsidiaries, as well as certain current or former
executives and employees of the Company, have received requests for information
and/or subpoenas to testify or produce documents. The Company and its current
employees are providing documents and information in response to these requests
and subpoenas. In addition, the Company has responded to requests for similar
kinds of information from regulatory authorities in some of the foreign
countries where the Company conducts its global asset management business.

Semiannual Report | 75

Franklin Investors Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

12. REGULATORY MATTERS (CONTINUED)

OTHER LEGAL PROCEEDINGS
The Trust, in addition to other entities within Franklin Templeton Investments,
including the Company and certain of its subsidiaries, other funds, and current
and former officers, employees, and directors have been named in multiple
lawsuits in different federal courts in Nevada, California, Illinois, New York,
New Jersey, and Florida, alleging violations of various federal securities laws
and seeking, among other things, monetary damages and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain funds managed by Company
subsidiaries, resulting in alleged market timing activity. The majority of these
lawsuits duplicate, in whole or in part, the allegations asserted in the Mass.
Proceeding detailed above. The lawsuits are styled as class actions or
derivative actions.

Management strongly believes that the claims made in each of these lawsuits are
without merit and intends to vigorously defend against them.

76 | Semiannual Report

Adjustable Rate Securities Portfolios

FINANCIAL HIGHLIGHTS

U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO

-------------------------------------------------------------------------
SIX MONTHS ENDED
APRIL 30, 2004 YEAR ENDED OCTOBER 31,
(UNAUDITED) 2003 2002 2001 2000 1999
-------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .............. $9.18 $9.39 $9.47 $9.30 $9.31 $9.37
-------------------------------------------------------------------------
Income from investment operations:

Net investment income ............................ .109 .209 .354 .552 .555 .496

Net realized and unrealized gains (losses) ....... (.003) (.064) .012 .213 (.010) (.060)
-------------------------------------------------------------------------
Total from investment operations .................. .106 .145 .366 .765 .545 .436
Less distributions from net investment income ..... (.166) (.355) (.446) (.600) (.555) (.496)
-------------------------------------------------------------------------
Net asset value, end of period .................... $9.12 $9.18 $9.39 $9.47 $9.30 $9.31
=========================================================================

Total return a .................................... 1.17% 1.56% 4.08% 8.52% 6.03% 4.77%

RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) ................. $608,030 $661,213 $572,510 $253,547 $232,949 $281,974
Ratios to average net assets:
Expenses ......................................... .41% c .41% .41% .42% .43% .43%
Net investment income ............................ 2.43% c 2.15% 3.77% 5.88% 5.96% 5.32%
Portfolio turnover rate ........................... 15.19% 130.32% 85.05% 2.49% 12.68% 23.23%
Portfolio turnover rate excluding mortgage dollar
rolls b .......................................... 15.19% 96.52% 85.05% 2.49% 12.68% 23.23%

<FN>
a Total return is not annualized for periods less than one year.

b See Note 1(d) regarding mortgage dollar rolls.

c Annualized.
</FN>

Semiannual Report | See notes to financial statements. | 77

Adjustable Rate Securities Portfolios

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED)

- --------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------

U.S. GOVERNMENT AND AGENCY SECURITIES 90.6%
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) 23.0%
Cap 10.885%, Margin 2.32% + CMT, Resets Annually, 5.54%, 5/01/32 ..................... $ 7,899,703 $ 8,110,203
Cap 10.98%, Margin 2.25% + CMT, Resets Annually, 5.972%, 9/01/31 ..................... 2,502,826 2,565,057
Cap 11.00%, Margin 1.91% + 12ML, Resets Annually, 6.06%, 8/01/31 ..................... 1,000,440 1,024,202
Cap 11.18%, Margin 2.23% + CMT, Resets Annually, 6.175%, 9/01/31 ..................... 2,161,518 2,198,529
Cap 11.21%, Margin 1.91% + 12ML, Resets Annually, 6.18%, 8/01/31 ..................... 857,465 877,859
Cap 11.21%, Margin 2.20% + CMT, Resets Annually, 3.405%, 10/01/24 .................... 2,856,142 2,957,218
Cap 11.253%, Margin 1.75% + CMT, Resets Annually, 3.00%, 11/01/16 .................... 977,559 999,476
Cap 11.434%, Margin 2.365% + CMT, Resets Annually, 3.537%, 4/01/30 ................... 1,067,327 1,090,217
Cap 11.435%, Margin 2.198% + CMT, Resets Annually, 3.388%, 9/01/27 ................... 766,860 790,124
Cap 11.46%, Margin 2.25% + CMT, Resets Annually, 3.51%, 10/01/25 ..................... 1,675,317 1,707,179
Cap 11.633%, Margin 2.076% + CMT, Resets Annually, 7.024%, 7/01/27 ................... 1,120,308 1,140,636
Cap 11.65%, Margin 2.26% + CMT, Resets Annually, 3.497%, 11/01/29 .................... 9,763,854 10,062,986
Cap 11.963%, Margin 2.24% + CMT, Resets Annually, 5.432%, 8/01/32 .................... 10,290,481 10,635,669
Cap 11.98%, Margin 2.50% + 5CMT, Resets Every 5 Years, 6.114%, 8/01/29 ............... 6,785,368 6,956,999
Cap 11.989%, Margin 2.478% + 3CMT, Resets Every 3 Years, 6.227%, 11/01/35 ............ 1,339,495 1,370,433
Cap 12.00%, Margin 2.41% + CMT, Resets Annually, 3.599%, 11/01/25 .................... 2,206,493 2,276,319
Cap 12.012%, Margin 2.297% + 5CMT, Resets Every 5 Years, 6.892%, 5/01/26 ............. 746,769 767,919
Cap 12.069%, Margin 2.23% + 3CMT, Resets every 3 Years, 5.355%, 6/01/26 .............. 826,449 841,507
Cap 12.07%, Margin 2.39% + CMT, Resets Annually, 6.05%, 7/01/29 ...................... 1,298,202 1,344,181
Cap 12.20%, Margin 2.426% + CMT, Resets Annually, 4.073%, 11/01/29 ................... 2,731,651 2,823,271
Cap 12.22%, Margin 2.23% + CMT, Resets Annually, 5.114%, 3/01/32 ..................... 1,450,082 1,462,429
Cap 12.364%, Margin 2.051% + COFI, Resets Annually, 4.16%, 11/01/25 .................. 10,250,459 10,432,556
Cap 12.427%, Margin 2.225% + 5CMT, Resets Every 5 Years, 7.751%, 12/01/27 ............ 136,841 141,167
Cap 12.52%, Margin 2.48% + CMT, Resets Annually, 3.704%, 12/01/30 .................... 3,747,751 3,872,054
Cap 12.54%, Margin 2.34% + CMT, Resets Annually, 5.22%, 4/01/25 ...................... 2,914,659 2,968,331
Cap 12.59%, Margin 2.71% + CMT, Resets Annually, 3.907%, 12/01/28 .................... 1,626,133 1,679,070
Cap 12.732%, Margin 2.44% + CMT, Resets Annually, 6.029%, 5/01/32 .................... 2,234,577 2,320,191
Cap 12.744%, Margin 2.00% + CMT, Resets Annually, 3.291%, 7/01/18 .................... 476,101 489,629
Cap 12.79%, Margin 2.24% + CMT, Resets Annually, 3.447%, 8/01/30 ..................... 7,315,814 7,505,573
Cap 12.806%, Margin 2.230% + CMT, Resets Annually, 3.473%, 4/01/18 ................... 1,590,417 1,637,881
Cap 12.89%, Margin 1.80% + COFI, Resets Semi-Annually, 3.795%, 12/01/19 .............. 4,859,907 4,958,324
Cap 12.90%, Margin 2.31% + CMT, Resets Annually, 3.527%, 8/01/27 ..................... 3,971,240 4,135,670
Cap 13.006%, Margin 2.00% + CMT, Resets Annually, 3.196%, 9/01/19 .................... 1,105,769 1,136,247
Cap 13.022%, Margin 1.749% + 6 Month TB, Resets Semi-Annually, 2.994%, 10/01/29 ...... 382,330 393,937
Cap 13.156%, Margin 1.915% + CMT, Resets Annually, 3.165%, 12/01/16 .................. 690,973 705,936
Cap 13.175%, Margin 2.233% + CMT, Resets Annually, 3.453%, 5/01/25 ................... 841,700 868,151
Cap 13.191%, Margin 1.841% + CMT, Resets Annually, 4.596%, 1/01/23 ................... 1,223,240 1,237,111
Cap 13.23%, Margin 2.06% + CMT, Resets Annually, 3.281%, 4/01/29 ..................... 3,492,894 3,584,149
Cap 13.246%, Margin 2.175% + CMT, Resets Annually, 3.267%, 10/01/18 .................. 285,392 293,388
Cap 13.27%, Margin 1.963% + CMT, Resets Annually, 3.19%, 5/01/20 ..................... 3,786,853 3,882,405
Cap 13.292%, Margin 2.115% + CMT, Resets Annually, 3.419%, 3/01/19 ................... 162,879 167,200
Cap 13.366%, Margin 2.102% + CMT, Resets Annually, 3.402%, 3/01/18 ................... 537,119 553,566
Cap 13.37%, Margin 2.04% + CMT, Resets Annually, 3.256%, 4/01/19 ..................... 1,931,588 1,985,228
Cap 13.547%, Margin 2.405% + CMT, Resets Annually, 7.61%, 8/01/30 .................... 1,085,318 1,120,925
Cap 13.64%, Margin 2.29% + CMT, Resets Annually, 3.481%, 1/01/23 ..................... 9,908,348 10,347,172
Cap 13.65%, Margin 2.249% + CMT, Resets Annually, 3.495%, 7/01/20 .................... 465,700 476,565
Cap 13.793%, Margin 2.214% + CMT, Resets Annually, 3.55%, 11/01/19 ................... 127,526 130,977
Cap 13.883%, Margin 2.462% + CMT, Resets Annually, 3.697%, 6/01/26 ................... 8,291,433 8,528,624

78 | Semiannual Report

Adjustable Rate Securities Portfolios

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT AND AGENCY SECURITIES (CONT.)
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) (CONT.)
Cap 14.244%, Margin 2.10% + CMT, Resets Annually, 3.279%, 9/01/18 .................... $ 1,974,612 $ 2,030,216
Cap 14.307%, Margin 1.957% + 3CMT, Resets Every 3 Years, 7.015%, 12/01/21 ............ 210,158 207,627
Cap 14.90%, Margin 2.546% + CMT, Resets Annually, 3.856%, 2/01/19 .................... 354,902 358,448
------------
140,150,731
------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) 46.4%
Cap 10.06%, Margin 2.30% + CMT, Resets Annually, 5.062%, 9/01/32 ..................... 7,242,847 7,478,883
Cap 10.50%, Margin 2.31% + CMT, Resets Annually, 5.495%, 8/01/32 ..................... 2,131,502 2,179,075
Cap 10.64%, Margin 2.176% + CMT, Resets Annually, 5.383%, 6/01/32 .................... 8,431,625 8,625,562
Cap 10.71%, Margin 2.00% + CMT, Resets Annually, 5.053%, 10/01/32 .................... 1,385,184 1,414,752
Cap 10.73%, Margin 2.25% + CMT, Resets Annually, 5.649%, 2/01/32 ..................... 2,065,450 2,125,457
Cap 10.81%, Margin 2.26% + CMT, Resets Annually, 4.871%, 11/01/17 .................... 4,239,779 4,348,679
Cap 10.82%, Margin 2.02% + CMT, Resets Annually, 5.769%, 2/01/31 ..................... 1,028,139 1,058,208
Cap 10.895%, Margin 2.259% + CMT, Resets Annually, 5.814%, 11/01/31 .................. 1,815,283 1,876,363
Cap 11.006%, Margin 2.12% + CMT, Resets Annually, 5.798%, 8/01/29 .................... 2,091,536 2,153,266
Cap 11.06%, Margin 1.98% + CMT, Resets Annually, 3.226%, 3/01/22 ..................... 101,181 103,997
Cap 11.13%, Margin 2.147% + CMT, Resets Annually, 7.05%, 8/01/29 ..................... 457,876 477,053
Cap 11.135%, Margin 2.34% + CMT, Resets Annually, 6.089%, 5/01/31 .................... 598,542 620,229
Cap 11.16%, Margin 2.24% + CMT, Resets Annually, 3.493%, 11/01/30 .................... 11,795,084 12,217,047
Cap 11.24%, Margin 2.106% + CMT, Resets Annually, 3.345%, 11/01/27 ................... 944,406 976,012
Cap 11.26%, Margin 2.31% + CMT, Resets Annually, 6.323%, 7/01/31 ..................... 1,420,226 1,459,569
Cap 11.329%, Margin 2.215% + CMT, Resets Annually, 5.306%, 5/01/32 ................... 3,174,847 3,276,489
Cap 11.40%, Margin 1.88% + CMT, Resets Annually, 5.774%, 7/01/32 ..................... 2,801,502 2,874,872
Cap 11.475%, Margin 2.09% + CMT, Resets Annually, 5.521%, 4/01/32 .................... 4,668,446 4,772,556
Cap 11.49%, Margin 1.65 + 12ML, Resets Annually, 5.421%, 10/01/31 .................... 2,856,237 2,904,473
Cap 11.53%, Margin 2.35% + CMT, Resets Annually, 6.483%, 4/01/30 ..................... 2,434,016 2,509,972
Cap 11.531%, Margin 2.231% + CMT, Resets Annually, 4.709%, 12/01/32 .................. 4,520,936 4,680,024
Cap 11.581%, Margin 2.18% + CMT, Resets Annually, 5.389%, 8/01/31 .................... 2,764,271 2,820,007
Cap 11.61%, Margin 2.26% + CMT, Resets Annually, 4.042%, 9/01/39 ..................... 2,828,066 2,896,098
Cap 11.635%, Margin 2.436% + CMT, Resets Annually, 5.555%, 6/01/32 ................... 2,973,298 3,103,241
Cap 11.662%, Margin 2.47% + CMT, Resets Annually, 3.909%, 8/01/28 .................... 7,353,656 7,638,322
Cap 11.684%, Margin 1.25% + COFI, Resets Semi-Annually, 3.249%, 5/01/19 .............. 1,819,663 1,840,633
Cap 11.705%, Margin 2.19% + CMT, Resets Annually, 3.551%, 11/01/36 ................... 2,887,147 2,947,830
Cap 11.73%, Margin 2.33% + CMT, Resets Annually, 4.633%, 2/01/29 ..................... 692,588 711,992
Cap 11.836%, Margin 2.12% + CMT, Resets Annually, 5.775%, 6/01/31 .................... 2,211,937 2,280,477
Cap 11.869%, Margin 2.12% + CMT, Resets Annually, 4.933%, 2/01/30 .................... 800,263 825,464
Cap 11.884%, Margin 2.211% + CMT, Resets Annually, 3.309%, 2/01/25 ................... 151,372 154,830
Cap 11.895%, Margin 2.11% + CMT, Resets Annually, 5.928%, 3/01/32 .................... 16,842,116 17,273,281
Cap 11.901%, Margin 2.373% + CMT, Resets Annually, 3.607%, 5/01/29 ................... 1,153,597 1,181,864
Cap 11.93%, Margin 2.00% + CMT, Resets Semi-Annually, 5.247%, 6/01/32 ................ 1,112,312 1,139,384
Cap 11.93%, Margin 2.13% + CMT, Resets Annually, 5.92%, 7/01/31 ...................... 1,940,099 1,994,613
Cap 11.94%, Margin 2.352% + CMT, Resets Annually, 7.076%, 9/01/29 .................... 517,910 533,129
Cap 11.96%, Margin 2.15% + CMT, Resets Annually, 5.945%, 6/01/31 ..................... 3,228,536 3,321,874
Cap 11.966%, Margin 1.25% + COFI, Resets Semi-Annually, 3.158%, 4/01/22 .............. 2,222,081 2,258,053
Cap 11.97%, Margin 2.14% + CMT, Resets Annually, 5.98%, 9/01/31 ...................... 2,681,140 2,758,514
Cap 12.008%, Margin 2.176% + CMT, Resets Annually, 6.036%, 2/01/32 ................... 3,072,381 3,187,922
Cap 12.06%, Margin 1.67% + CMT, Resets Annually, 5.89%, 7/01/31 ...................... 623,093 636,663
Cap 12.066%, Margin 2.05% + 3CMT, Resets Every 3 Years, 6.09%, 6/01/29 ............... 2,533,985 2,591,406
Cap 12.119%, Margin 2.235% + CMT, Reset Annually, 7.13%, 1/01/31 ..................... 265,937 279,276

Semiannual Report | 79

Adjustable Rate Securities Portfolios

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT AND AGENCY SECURITIES (CONT.)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (CONT.)
Cap 12.13%, Margin 2.598% + CMT, Resets Annually, 3.661%, 9/01/25 .................... $ 1,749,041 $ 1,809,139
Cap 12.181%, Margin 2.628% + CMT, Resets Annually, 3.873%, 6/01/28 ................... 6,093,591 6,335,653
Cap 12.233%, Margin 1.702% + COFI, Resets Semi-Annually, 5.333%, 1/01/19 ............. 1,662,473 1,701,955
Cap 12.31%, Margin 1.62% + COFI, Resets Semi-Annually, 3.514%, 4/01/19 ............... 2,079,452 2,107,931
Cap 12.312%, Margin 1.90% + COFI, Resets Semi-Annually, 3.787%, 10/01/22 ............. 1,863,336 1,890,320
Cap 12.353%, Margin 2.30% + CMT, Resets Annually, 6.381%, 11/01/31 ................... 1,890,482 1,943,686
Cap 12.368%, Margin 2.123% + 6 Month TB, Resets Semi-Annually, 3.242%, 1/01/29 ....... 1,774,945 1,828,343
Cap 12.391%, Margin 1.57% + CMT, Resets Annually, 6.363%, 11/01/31 ................... 4,224,803 4,316,711
Cap 12.435%, Margin 2.146% + CMT, Resets Annually, 6.54%, 8/01/29 .................... 382,563 391,027
Cap 12.494%, Margin 2.27% + CMT, Resets Annually, 6.45%, 4/01/31 ..................... 8,937,160 9,268,594
Cap 12.527% Margin 2.25% + CMT, Resets Annually, 3.456%, 12/01/27 .................... 2,593,694 2,680,154
Cap 12.563%, Margin 2.12% + CMT, Resets Annually, 3.347%, 10/01/24 ................... 16,760,848 17,251,873
Cap 12.57%, Margin 1.77% + COFI, Resets Monthly, 3.581%, 1/01/19 ..................... 3,177,352 3,221,051
Cap 12.57%, Margin 2.23% + CMT, Resets Annually, 3.446%, 5/01/25 ..................... 2,009,570 2,075,792
Cap 12.605%, Margin 2.536% + 6 Month DR, Resets Annually, 5.351%, 11/01/18 ........... 281,585 293,289
Cap 12.61%, Margin 2.508% + CMT, Resets Annually, 4.047%, 1/01/29 .................... 2,506,536 2,585,154
Cap 12.637%, Margin 2.00% + NCI, Resets Annually, 4.496%, 11/01/17 ................... 4,178,750 4,277,969
Cap 12.64%, Margin 2.00% + CMT, Resets Annually, 3.181%, 3/01/19 ..................... 821,798 847,480
Cap 12.65%, Margin 1.75% + NCI, Resets Monthly, 4.00%, 10/01/28 ...................... 145,519 148,306
Cap 12.66%, Margin 1.75% + 6 Month DR, Resets Semi-Annually, 2.75%, 1/01/19 .......... 1,476,272 1,526,383
Cap 12.662%, Margin 1.25% + COFI, Resets Monthly, 7.00%, 1/01/19 ..................... 64,070 65,442
Cap 12.70%, Margin 2.23% + CMT, Resets Annually, 3.432%, 3/01/30 ..................... 519,521 532,947
Cap 12.705%, Margin 1.25% + COFI, Resets Monthly, 3.328%, 9/01/18 .................... 7,070,540 7,157,937
Cap 12.76%, Margin 1.25% + COFI, Resets Annually, 3.07%, 5/01/18 ..................... 7,789,649 7,902,577
Cap 12.763%, Margin 1.25% + COFI, Resets Monthly, 3.14%, 6/01/20 ..................... 2,614,516 2,655,090
Cap 12.77%, Margin 2.00% + CMT, Resets Annually, 3.18%, 4/01/27 ...................... 7,040,897 7,234,545
Cap 12.788%, Margin 2.11% + CMT, Resets Annually, 3.308%, 11/01/20 ................... 454,338 468,532
Cap 12.804%, Margin 1.75% + CMT, Resets Annually, 2.967%, 5/01/19 .................... 962,124 985,485
Cap 12.808%, Margin 1.25% + COFI, Resets Monthly, 3.704%, 5/01/36 .................... 4,366,619 4,427,888
Cap 12.81%, Margin 2.25% + CMT, Resets Annually, 6.635%, 9/01/30 ..................... 1,834,582 1,954,368
Cap 12.84%, Margin 2.762% + 6 Month DR, Resets Semi-Annually, 5.656%, 6/01/17 ........ 194,029 196,023
Cap 12.848%, Margin 1.968% + CMT, Resets Annually, 3.246%, 12/01/17 .................. 236,246 242,307
Cap 12.85%, Margin 2.078% + 5CMT, Resets Every 5 Years, 6.087%, 10/01/17 ............. 459,899 467,337
Cap 12.85%, Margin 2.27% + CMT, Resets Annually, 6.777%, 8/01/30 ..................... 2,603,482 2,741,693
Cap 12.85%, Margin 2.27% + CMT, Resets Annually, 6.842%, 9/01/30 ..................... 2,027,218 2,149,757
Cap 12.89%, Margin 2.125% + 6 Month DR, Resets Semi-Annually, 5.082%, 7/01/17 ........ 1,912,128 1,979,965
Cap 12.938%, Margin 1.25% + COFI, Resets Monthly, 3.061%, 2/01/19 .................... 18,744 18,949
Cap 12.953%, Margin 2.125% + 6 Month TB, Resets Semi-Annually, 3.08%, 4/01/18 ........ 419,991 433,003
Cap 12.993%, Margin 2.092% + CMT, Resets Annually, 3.362%, 12/01/19 .................. 675,412 696,704
Cap 13.01%, Margin 2.10% + CMT, Resets Annually, 3.346%, 6/01/19 ..................... 583,435 604,350
Cap 13.03%, Margin 1.25% + COFI, Resets Monthly, 6.852%, 2/01/20 ..................... 1,829,816 1,868,889
Cap 13.03%, Margin 1.75% + 6 Month TB, Resets Semi-Annually, 2.75%, 12/01/20 ......... 607,714 623,150
Cap 13.04%, Margin 2.24% + CMT, Resets Annually, 3.482%, 6/01/27 ..................... 2,107,559 2,168,382
Cap 13.063%, Margin 2.175% + CMT, Resets Annually, 3.459%, 4/01/19 ................... 1,456,578 1,501,435
Cap 13.083%, Margin 2.005% + CMT, Resets Annually, 3.28%, 6/01/19 .................... 921,937 943,596
Cap 13.128%, Margin 2.02% + COFI, Resets Semi-Annually, 3.98%, 6/01/19 ............... 758,899 769,532
Cap 13.13%, Margin 2.19% + CMT, Resets Annually, 6.289%, 1/01/31 ..................... 1,711,447 1,782,814
Cap 13.202%, Margin 2.478% + 6 Month DR, Resets Semi-Annually, 5.653%, 11/01/26 ...... 307,114 319,115
Cap 13.245%, Margin 2.178% + 3CMT, Resets Every 3 Years, 6.004%, 1/01/26 ............. 1,226,617 1,263,778

80 | Semiannual Report

Adjustable Rate Securities Portfolios

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT AND AGENCY SECURITIES (CONT.)
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) (CONT.)
Cap 13.249%, Margin 2.00% + CMT, Resets Annually, 3.209%, 6/01/19 .................... $ 649,065 $ 666,327
Cap 13.281%, Margin 2.00% + CMT, Resets Annually, 3.128%, 10/01/19 ................... 1,051,923 1,080,916
Cap 13.452%, Margin 2.148% + CMT, Resets Annually, 3.344%, 9/01/22 ................... 2,330,053 2,397,057
Cap 13.46%, Margin 2.25% + CMT, Resets Annually, 7.54%, 10/01/30 ..................... 1,660,752 1,757,357
Cap 13.54%, Margin 1.25% + COFI, Resets Monthly, 3.533%, 8/01/26 ..................... 304,669 309,118
Cap 13.662%, Margin 2.177% + CMT, Resets Annually, 3.417%, 3/01/21 ................... 552,390 568,045
Cap 13.688%, Margin 2.179% + 3CMT, Resets Every 3 Years, 6.094%, 3/01/26 ............. 1,704,138 1,758,815
Cap 13.791%, Margin 2.143% + CMT, Resets Annually, 3.373%, 12/01/20 .................. 1,403,950 1,446,035
Cap 13.797%, Margin 2.20% + CMT, Resets Annually, 3.461%, 3/01/19 .................... 328,000 338,368
Cap 13.80%, Margin 0.94% + 6 Month DR, Resets Semi-Annually, 6.603%, 7/01/24 ......... 982,713 1,007,317
Cap 13.85%, Margin 2.13% + 3CMT, Resets Every 3 Years, 4.668%, 3/01/22 ............... 65,244 65,280
Cap 13.86%, Margin 1.842% + CMT, Resets Annually, 3.381%, 8/01/16 .................... 50,825 51,922
Cap 13.875%, Margin 1.975% + CMT, Resets Annually, 3.225%, 3/01/18 ................... 470,535 482,671
Cap 13.887%, Margin 2.25% + CMT, Resets Annually, 3.606%, 2/01/19 .................... 385,289 394,137
Cap 13.896%, Margin 2.25% + CMT, Resets Annually, 3.50%, 12/01/18 .................... 466,934 481,357
Cap 14.069%, Margin 2.089% + CMT, Resets Annually, 3.624%, 1/01/19 ................... 1,123,841 1,144,378
Cap 14.083%, Margin 1.74% + CMT, Resets Annually, 2.957%, 3/01/20 .................... 6,557,229 6,733,880
Cap 14.354%, Margin 2.07% + 5CMT, Resets Every 5 Years, 5.763%, 5/01/21 .............. 933,514 959,326
Cap 14.42%, Margin 2.099% + CMT, Resets Annually, 3.34%, 3/01/20 ..................... 394,074 404,684
Cap 14.437%, Margin 1.845% + CMT, Resets Annually, 4.383%, 10/01/14 .................. 251,488 254,883
Cap 14.561%, Margin 2.199% + 3CMT, Resets Every 3 Years, 5.999%, 12/01/24 ............ 1,376,658 1,417,518
Cap 14.68%, Margin 2.125% + 3CMT, Resets Every 3 Years, 6.322%, 8/01/22 .............. 366,911 375,948
Cap 14.725%, Margin 2.42% + CMT, Resets Annually, 3.702%, 6/01/19 .................... 1,012,212 1,040,314
Cap 14.769%, Margin 2.265% + 6 Month DR, Resets Semi-Annually, 7.538%, 3/01/25 ....... 432,036 442,920
Cap 14.77%, Margin 2.61% + 3CMT, Resets Every 3 Years, 6.118%, 3/01/20 ............... 493,699 511,043
Cap 14.784%, Margin 1.87% + 3CMT, Resets Every 3 Years, 5.544%, 5/01/21 .............. 1,707,259 1,738,428
Cap 14.804%, Margin 2.186% + 3CMT, Resets Every 3 Years, 6.35%, 12/01/17 ............. 380,741 387,988
Cap 14.887%, Margin 1.72% + CMT, Resets Annually, 2.928%, 1/01/16 .................... 1,975,288 2,017,005
Cap 14.952%, Margin 2.523% + CMT, Resets Annually, 3.954%, 5/01/19 ................... 684,013 711,672
------------
282,108,520
------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) 21.2%
a Cap 8.50%, Margin 1.50% + CMT, Resets Annually, 3.50%, 6/01/33 ....................... 25,000,000 25,039,088
Cap 9.50%, Margin 1.50% + CMT, Resets Annually, 3.50%, 4/20/32 ....................... 11,568,389 11,648,440
Cap 10.00%, Margin 1.50% + CMT, Resets Annually, 3.375%, 3/20/24 ..................... 3,762,577 3,788,945
Cap 10.00%, Margin 1.50% + CMT, Resets Annually, 4.625%, 10/20/23 .................... 4,368,668 4,465,734
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 3.25%, 4/20/30 ...................... 2,313,058 2,309,936
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 3.375%, 1/20/27 ..................... 4,468,189 4,510,635
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 3.375%, 2/20/28 ..................... 1,758,901 1,776,440
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 3.50%, 7/20/29 ...................... 3,640,804 3,687,928
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 3.50%, 6/20/31 ...................... 1,766,581 1,779,469
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.375%, 4/20/22 ..................... 2,432,692 2,456,741
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.375%, 4/20/28 ..................... 2,887,634 2,919,584
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.625%, 11/20/23 .................... 4,957,654 5,077,450
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.625%, 10/20/24 .................... 724,865 742,484
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.625%, 10/20/26 .................... 758,341 775,665
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.625%, 10/20/27 .................... 14,263,110 14,536,507
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.75%, 9/20/22 ...................... 1,036,067 1,065,749
Cap 10.50%, Margin 1.50% + CMT, Resets Annually, 4.75%, 9/20/27 ...................... 1,008,219 1,029,413

Semiannual Report | 81

Adjustable Rate Securities Portfolios

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT AND AGENCY SECURITIES (CONT.)
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) (CONT.)
Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 3.00%, 7/20/30 ...................... $ 2,517,821 $ 2,510,455
Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 3.375%, 2/20/23 ..................... 2,217,345 2,236,875
Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 4.00%, 7/20/29 ...................... 1,480,564 1,492,424
Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 4.375%, 5/20/24 ..................... 1,903,395 1,922,523
Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 4.625%, 10/20/23 .................... 7,906,937 8,097,890
Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 4.75%, 7/20/23 ...................... 1,056,060 1,083,216
Cap 11.00%, Margin 1.50% + CMT, Resets Annually, 4.75%, 7/20/24 ...................... 5,173,319 5,323,409
Cap 11.00%, Margin 2.50% + CMT, Resets Annually, 5.75%, 7/20/25 ...................... 90,917 93,644
Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 3.375%, 1/20/23 ..................... 3,229,950 3,264,529
Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 3.375%, 2/20/23 ..................... 1,715,855 1,734,224
Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 3.50%, 7/20/30 ...................... 3,740,877 3,804,485
Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 3.50%, 8/20/30 ...................... 2,236,720 2,274,482
Cap 11.50%, Margin 1.50% + CMT, Resets Annually, 4.75%, 7/20/21 ...................... 1,187,803 1,223,739
Cap 12.00%, Margin 1.50% + CMT, Resets Annually, 4.625%, 12/20/24 .................... 1,240,688 1,272,344
Cap 12.00%, Margin 1.50% + CMT, Resets Annually, 4.75%, 9/20/22 ...................... 1,209,772 1,245,851
Cap 12.00%, Margin 1.50% + CMT, Resets Annually, 4.75%, 7/20/25 ...................... 3,574,295 3,672,316
------------
128,862,614
------------
TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $554,403,545) ...................... 551,121,865
------------
MISCELLANEOUS MORTGAGE-BACKED SECURITES (COST $161,081)
Travelers Mortgage Services Inc., Cap 13.95%, Margin 2.25% + CMT, Resets Annually,
4.119%, 12/25/18 ................................................................... 158,359 160,283
------------
TOTAL INVESTMENTS BEFORE REPURCHASE AGREEMENT (COST $554,564,626) .................... 551,282,148
------------

82 | Semiannual Report

Adjustable Rate Securities Portfolios

STATEMENT OF INVESTMENTS, APRIL 30, 2004 (UNAUDITED) (CONTINUED)

REPURCHASE AGREEMENT (COST $75,828,560) 12.5%
b Joint Repurchase Agreement, .971%, 05/03/04 (Maturity Value $75,834,696) ............. $75,828,560 $ 75,828,560
ABN AMRO Bank, N.V., New York Branch (Maturity Value $7,293,023)
Banc of America Securities LLC (Maturity Value $7,293,023)
Barclays Capital Inc. (Maturity Value $7,293,023)
Bear, Stearns & Co. Inc. (Maturity Value $3,646,889)
BNP Paribas Securities Corp. (Maturity Value $7,293,023)
Deutsche Bank Securities Inc. (Maturity Value $7,293,023)
Dresdner Kleinwort Wasserstein Securities LLC (Maturity Value $7,293,023)
Goldman, Sachs & Co. (Maturity Value $7,293,023)
Lehman Brothers Inc. (Maturity Value $6,550,600)
Morgan Stanley & Co. Inc. (Maturity Value $7,293,023)
UBS Securities LLC (Maturity Value $7,293,023)
Collateralized by U.S. Treasury Bills, Notes, and Bonds, and U.S.
Government Agency Securities
------------
TOTAL INVESTMENTS (COST $630,393,186) 103.1% ......................................... 627,110,708
OTHER ASSETS, LESS LIABILITIES (3.1)% ................................................ (19,081,010)
------------
NET ASSETS 100.0% .................................................................... $608,029,698
============

a See Note 1(c) regarding securities purchased on a to-be-announced basis.

b See Note 1(b) regarding joint repurchase agreement.
</FN>

Semiannual Report | See notes to financial statements. | 83

Adjustable Rate Securities Portfolios

FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
April 30, 2004 (unaudited)

------------------
U.S. GOVERNMENT
ADJUSTABLE RATE
MORTGAGE PORTFOLIO
------------------
Assets:
Investments in securities:
Cost ................................................... $ 554,564,626
----------------
Value .................................................. 551,282,148
Repurchase agreements, at value and cost ................ 75,828,560
Receivables:
Investment securities sold ............................. 4,368,765
Interest ............................................... 2,351,397
----------------
Total assets ....................................... 633,830,870
----------------
Liabilities:
Payables:
Investment securities purchased ........................ 25,296,875
Capital shares redeemed ................................ 294,496
Affiliates ............................................. 195,817
Other liabilities ....................................... 13,984
----------------
Total liabilities .................................. 25,801,172
----------------
Net assets, at value .............................. $ 608,029,698
================
Net assets consist of:
Distribution in excess of net investment income ......... $ (3,768,455)
Net unrealized appreciation (depreciation) .............. (3,282,478)
Accumulated net realized gain (loss) .................... (13,558,646)
Capital shares .......................................... 628,639,277
----------------
Net assets, at value ..................................... $ 608,029,698
================
Shares outstanding ....................................... 66,661,172
================
Net asset value and maximum offering price per share ..... $9.12
================

84 | See notes to financial statements. | Semiannual Report

Adjustable Rate Securities Portfolios

FINANCIAL STATEMENTS (CONTINUED)

STATEMENT OF OPERATIONS
for the six months ended April 30, 2004 (unaudited)

------------------
U.S. GOVERNMENT
ADJUSTABLE RATE
MORTGAGE PORTFOLIO
------------------

Investment income:
Interest ...................................................... $ 8,796,242
------------------
Expenses:
Management fees (Note 3) ...................................... 1,237,346
Custodian fees ................................................ 3,646
Reports to shareholders ....................................... 911
Professional fees ............................................. 9,926
Trustees' fees and expenses ................................... 19,073
Other ......................................................... 9,450
------------------
Total expenses ........................................... 1,280,352
Net investment income ................................... 7,515,890
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ..................... (15,625)
Net unrealized appreciation (depreciation) on investments ..... 134,912
------------------
Net realized and unrealized gain (loss) ........................ 119,287
------------------
Net increase (decrease) in net assets resulting from operations $ 7,635,177
==================

Semiannual Report | See notes to financial statements. | 85

Adjustable Rate Securities Portfolios

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS
for the six months ended April 30, 2004 (unaudited)
and the year ended October 31, 2003

----------------------------------
U.S. GOVERNMENT ADJUSTABLE RATE
MORTGAGE PORTFOLIO
----------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
----------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income .......................................................... $ 7,515,890 $ 13,650,553
Net realized gain (loss) from investments ...................................... (15,625) 1,598,371
Net unrealized appreciation (depreciation) on investments ...................... 134,912 (6,584,707)
----------------------------------
Net increase (decrease) in net assets resulting from operations ............ 7,635,177 8,664,217
Distributions to shareholders from net investment income ........................ (11,285,043) (24,152,220)
Capital share transactions (Note 2) ............................................. (49,533,640) 104,191,546
----------------------------------
Net increase (decrease) in net assets ...................................... (53,183,506) 88,703,543
Net assets:
Beginning of period ............................................................. 661,213,204 572,509,661
----------------------------------
End of period ................................................................... $608,029,698 $661,213,204
==================================
Undistributed net investment income (distributions in excess of net
investment income included in net assets):
End of period .................................................................. $ (3,768,455) $ 698
==================================

86 | See notes to financial statements. | Semiannual Report

Adjustable Rate Securities Portfolios

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Adjustable Rate Securities Portfolios (the Trust) is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company,
consisting of one portfolio, the U.S. Government Adjustable Rate Mortgage
Portfolio (the Portfolio). The shares of the Trust are issued in private
placements and are exempt from registration under the Securities Act of 1933.
The investment objective of the Portfolio is to seek current income.

The following summarizes the Portfolio's significant accounting policies:

a. SECURITY VALUATION

b. JOINT REPURCHASE AGREEMENT

The Fund may enter into a joint repurchase agreement whereby its uninvested cash
balance is deposited into a joint cash account to be used to invest in one or
more repurchase agreements. The value and face amount of the joint repurchase
agreement are allocated to the Fund based on its pro-rata interest. A repurchase
agreement is accounted for as a loan by the Fund to the seller, collateralized
by 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 Funds, with the value of the
underlying securities marked to market daily to maintain coverage of at least
100%. At April 30, 2004, all repurchase agreements had been entered into on that
date.

c. SECURITIES PURCHASED ON A TBA BASIS

The Fund may purchase securities on a to be announced (TBA) 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 Fund will
generally purchase these securities with the intention of holding the
securities, it may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.

Semiannual Report | 87

Adjustable Rate Securities Portfolios

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

d. MORTGAGE DOLLAR ROLLS

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Dollar
rolls are agreements between the Fund and a financial institution to
simultaneously sell and repurchase a mortgage-backed security at a future date.
Gains or losses are realized at the time of the sale and the difference between
the repurchase price and sale price is recorded as an unrealized gain to the
Fund. The risks of mortgage dollar roll transactions include the potential
inability of the counterparty to fulfill their obligations.

e. INCOME TAXES

No provision has been made for income taxes because the Portfolio's policy is to
qualify as a regulated investment company under the Internal Revenue Code and to
distribute substantially all of its taxable income.

f. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Dividends from net
investment income are normally declared daily. Such distributions are reinvested
in additional shares of the Fund.

g. ACCOUNTING ESTIMATES

h. GUARANTEES AND INDEMNIFICATIONS

Under the Trusts' organizational documents, its officers and trustees are
indemnified against certain liability arising out of the performance of their
duties to the Trust. Additionally, in the normal course of business, the Trust
enters into contracts with service providers that contain general
indemnification clauses. The Trust's maximum exposure under these arrangements
is unknown as this would involve future claims that may be made against the
Trust that have not yet occurred. However, based on experience, the Trust
expects the risk of loss to be remote.

88 | Semiannual Report

Adjustable Rate Securities Portfolios

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO

2. SHARES OF BENEFICIAL INTEREST

At April 30, 2004, there was an unlimited number of shares authorized ($0.01 par
value). Transactions in the Portfolio's shares were as follows:

-------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2004 OCTOBER 31, 2003
-------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------

Shares sold .......................... 4,430,657 $ 40,539,339 39,039,368 $ 363,442,959
Shares issued in reinvestment of
distributions ....................... 1,232,373 11,285,043 2,599,534 24,152,220
Shares redeemed ...................... (11,059,764) (101,358,022) (30,552,039) (283,403,633)
-------------------------------------------------------------
Net increase(decrease) ............... (5,396,734) $ (49,533,640) 11,086,863 $ 104,191,546
=============================================================

3. TRANSACTIONS WITH AFFILIATES

Certain officers and trustees of the Trust are also officers and/or directors of
Franklin Advisers, LLC (Advisers), the Portfolio's investment manager and
trustees of Franklin Investors Securities Trust.

The Portfolio pays an investment management fee to Advisers of .400% of the
first $5 billion of the portfolio's month end net assets. Fees are further
reduced on net assets over $5 billion.

At April 30, 2004, all shares of the Portfolio were owned by the Franklin
Adjustable U.S. Government Securities Fund.

4. INCOME TAXES

At April 30, 2004, net unrealized appreciation (depreciation) based on the cost
of investments for income tax purposes of $630,393,186 was as follows:

Unrealized appreciation ...................... $ 749,137
Unrealized depreciation ...................... (4,031,615)
------------
Net unrealized appreciation .................. $(3,282,478)
============

At October 31, 2003, the Portfolio had tax basis capital losses, which may be
carried over to offset future capital gains. Such losses expire as follows:

Capital loss carryovers expiring in:
2004 ....................................... $ 419,303
2007 ....................................... 140,123
2008 ....................................... 210,331
2009 ....................................... 1,202,281
2010 ....................................... 2,667,031
2011 ....................................... 8,903,952
-----------
$13,543,021
===========

Semiannual Report | 89

Adjustable Rate Securities Portfolios

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO

4. INCOME TAXES (CONTINUED)

At October 31, 2003, the Portfolio had expired capital loss carryovers of
$7,677,608, which were reclassified to paid-in-capital.

Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatments of mortgage dollar roll and paydown
losses.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatment of mortgage dollar roll and paydown losses.

5. INVESTMENT TRANSACTIONS

Purchases and sales of securities (excluding short-term securities) for the
period ended April 30, 2004 aggregated $87,571,788 and $141,310,897,
respectively.

6. REGULATORY MATTERS

GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by the U.S. Securities and Exchange Commission
(SEC), the U.S. Attorney for the Northern District of California, the New York
Attorney General, the California Attorney General, the U.S. Attorney for the
District of Massachusetts, the Florida Department of Financial Services and the
Commissioner of Securities, the West Virginia Attorney General and the Vermont
Department of Banking, Insurance, Securities, and Health Care Administration,
relating to certain practices in the mutual fund industry, including late
trading, market timing and sales compensation arrangements, the Company as well
as certain current or former executives and employees of the Company, have
received requests for information and/or subpoenas to testify or produce
documents. The Company and its current employees are providing documents and
information in response to these requests and subpoenas. In addition, the
Company has responded to requests for similar kinds of information from
regulatory authorities in some of the foreign countries where the Company
conducts its global asset management business.

90 | Semiannual Report

Adjustable Rate Securities Portfolios

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

U.S. GOVERNMENT ADJUSTABLE RATE MORTGAGE PORTFOLIO

6. REGULATORY MATTERS (CONTINUED)

GOVERNMENTAL INVESTIGATIONS (CONTINUED)
The staff of the SEC has informed the Company that it intends to recommend that
the SEC authorize a civil injunctive action against the Trust's investment
manager. The SEC's investigation is focused on the activities that are the
subject of the Mass. Proceeding described above and other instances of alleged
market timing by a limited number of third parties that ended in 2000. The
Company currently believes that the charges the SEC Staff is contemplating are
unwarranted. There are discussions underway with the SEC Staff in an effort to
resolve the issues raised in their investigation.

In response to requests for information and subpoenas from the SEC and the
California Attorney General, the Company has provided documents and testimony
has been taken relating to revenue sharing and directed brokerage arrangements
with brokers who sell fund shares. Effective November 28, 2003, the Company
determined not to direct any further brokerage where the allocation is based,
not only on best execution, but in addition on the sale of fund shares.

OTHER LEGAL PROCEEDINGS
The Company, in addition to other entities within Franklin Templeton
Investments, including certain of its subsidiaries, other funds, and current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York, New
Jersey, and Florida, alleging violations of various federal securities laws and
seeking, among other things, monetary damages and costs. Specifically, the
lawsuits claim breach of duty with respect to alleged arrangements to permit
market timing and/or late trading activity, or breach of duty with respect to
the valuation of the portfolio securities of certain funds managed by the
Company, resulting in alleged market timing activity. The majority of these
lawsuits duplicate, in whole or in part, the allegations asserted in the Mass.
Proceeding detailed above. The lawsuits are styled as class actions or
derivative actions.

Management strongly believes that the claims made in each of these lawsuits are
without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or class actions or other
lawsuits. The impact, if any, of these matters on the Trust is uncertain at this
time. If it is determined that the Company bears responsibility for any unlawful
or inappropriate conduct that caused losses to the Trust, it is committed to
making the Trust or its shareholders whole, as appropriate.

Semiannual Report | 91

Franklin Investors Securities Trust

PROXY VOTING POLICIES AND PROCEDURES

92 |Semiannual Report

Literature Request

FRANKLIN TEMPLETON INVESTMENTS

INTERNATIONAL
Mutual European Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund
Templeton International (Ex EM) Fund

GLOBAL
Franklin Global Aggressive Growth Fund
Franklin Global Growth Fund
Mutual Discovery Fund
Templeton Capital Accumulator Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund
Templeton Growth Fund
Templeton World Fund

GROWTH
Franklin Aggressive Growth Fund
Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Small-Mid Cap Growth Fund
Franklin Small Cap Growth Fund II 1

VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 2
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 3
Mutual Shares Fund

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 4

SECTOR
Franklin Biotechnology Discovery Fund
Franklin DynaTech Fund
Franklin Global Communications Fund
Franklin Global Health Care Fund
Franklin Gold and Precious Metals Fund
Franklin Natural Resources Fund
Franklin Real Estate Securities Fund
Franklin Utilities Fund
Franklin Technology Fund
Mutual Financial Services Fund

ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government Securities Fund 5
Franklin's AGE High Income Fund
Franklin Federal Money Fund 5, 6
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 3
Franklin Income Fund
Franklin Money Fund 5, 6
Franklin Short-Intermediate U.S. Government Securities Fund 5
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund

TAX-FREE INCOME 7
NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 8
Tax-Exempt Money Fund 5, 6

LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC 7
Alabama Michigan 8
Arizona Minnesota 8
California 9 Missouri
Colorado New Jersey
Connecticut New York 9
Florida 9 North Carolina
Georgia Ohio 8
Kentucky Oregon
Louisiana Pennsylvania
Maryland Tennessee
Massachusetts 8 Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 10

1. The fund is closed to new investors. Existing shareholders can continue
adding to their accounts.

2. The fund is only open to existing shareholders as well as select retirement
plans.

3. The fund is a continuously offered, closed-end fund. Shares may be purchased
daily; there is no daily redemption. However, each quarter, pending board
approval, the fund will authorize the repurchase of 5%-25% of the outstanding
number of shares. Investors may tender all or a portion of their shares during
the tender period.

4. Upon reaching approximately $350 million in assets, the fund intends to
close to all investors.

5. An investment in the fund is neither insured nor guaranteed by the U.S.
government or by any other entity or institution.

6. No assurance exists that the fund's $1.00 per share price will be
maintained. It is possible to lose money by investing in the fund.

7. For investors subject to the alternative minimum tax, a small portion of
fund dividends may be taxable. Distributions of capital gains are generally
taxable.

8. Portfolio of insured municipal securities.

9. These funds are available in two or more variations, including long-term
portfolios, portfolios of insured securities, a high-yield portfolio (CA) and
limited-term, intermediate-term and money market portfolios (CA and NY).

10. The funds of the Franklin Templeton Variable Insurance Products Trust are
generally available only through insurance company variable contracts.

02/04 Not part of the semiannual report

[GRAPHIC OMITTED]
FRANKLIN(R) TEMPLETON(R) One Franklin Parkway
INVESTMENTS San Mateo, CA 94403-1906

[ ] WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery
at franklintempleton.com. See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

Franklin Investors
Securities Trust

INVESTMENT MANAGER

Franklin Advisers, Inc.

DISTRIBUTOR

Franklin Templeton Distributors, Inc.
1-800/DIAL BEN(R)
franklintempleton.com

SHAREHOLDER SERVICES

1-800/632-2301

FIST2 S2004 06/04

ITEM 2. CODE OF ETHICS.

(a) The Registrant has adopted a code of ethics that applies to its principal
executive officers and principal financial and accounting officer.

(d) N/A

(f) Pursuant to Item 11(A), the Registrant is attaching as an exhibit a copy of
its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial expert is Frank W. T. LaHaye, and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.

ITEM 10. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 11. EXHIBITS.

(A) Code of Ethics

(B) (1) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(B) (2) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN INVESTORS SECURITIES TRUST

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date June 30, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date June 30, 2004

By /s/Galen G. Vetter
Chief Financial Officer
Date June 30, 2004