UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06481
Franklin Municipal 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)
_Craig S. Tyle, 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: 5/31
Date of reporting period: 11/30/16
Item 1. Reports to Stockholders.
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| Contents | |
| |
| Semiannual Report | |
| Municipal Bond Market Overview | 3 |
| Franklin California High Yield Municipal Fund | 5 |
| Franklin Tennessee Municipal Bond Fund | 11 |
| Financial Highlights and Statements of Investments | 17 |
| FinancialStatements | 41 |
| Notes to Financial Statements | 44 |
| Shareholder Information | 53 |
Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.
2 Not part of the semiannual report
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Semiannual Report
Municipal Bond Market Overview
The municipal bond market underperformed the U.S. Treasury market and U.S. stock markets during the 6-month period ended November 30, 2016. Investment-grade municipal bonds, as measured by the Bloomberg Barclays Municipal Bond Index, had a -3.52% total return for the period, while U.S. Treasuries, as measured by the Bloomberg Barclays U.S. Treasury Index, had a -1.89% total return.1 U.S. equities, as represented by the Standard & Poor’s® 500 Index, outperformed municipals with a 6.01% total return for the reporting period.1
After raising its target range for the federal funds rate to 0.25%–0.50% last year, the Federal Reserve (Fed) maintained its target through period-end. The Fed noted at its September meeting that although the case for raising interest rates has strengthened, it would wait for further evidence of continued progress toward its objectives.
In June, Britain voted to leave the European Union in the much-publicized “Brexit” referendum. The outcome roiled financial markets in the short-run even as the long-term ramifications of a British exit from the European Union remained uncertain. Global equity markets sold off briefly, while both U.S. Treasuries and municipal bonds rallied sharply in the immediate aftermath of the Brexit vote.
Approximately $239 billion in bonds were issued over the past six months. More than $52 billion of municipal bonds were issued during the month of October, which is the highest monthly number in 30 years. The municipal market experienced a significant increase in new money as well as refunding issuance. New money municipal bond issuance has increased 11.5% during 2016 as compared to 2015, while refunding volume was up 7.1%. Municipal bond funds recorded $26 billion in inflows during the first five months of the reporting period, reflecting solid demand for tax-exempt debt. However, municipal bond funds experienced $10 billion in outflows in November due to the surprise election results, leading to net positive flows of $16 billion for the period. For the first five months of the period, the municipal bond market declined because of heavy new issue supply through October. Post-election, new supply diminished, but the market continued to suffer due to the sharp drop in November fund flows.
During the period under review, bonds with shorter maturities generally performed better than bonds with longer maturities.
High yield municipal bonds performed better than investment-grade municipals, reflective of the “risk on” sentiment seen during most of the period. High yield tax-exempt bonds, as measured by the Bloomberg Barclays High Yield Municipal Bond Index, had a -3.00% total return for the period.1
Donald Trump won a surprise U.S. presidential victory that drew Brexit comparisons, shook the political establishment and sent countervailing waves of optimism and uncertainty through global markets. The election also resulted in Republican control of both the White House and Congress, marking the country’s first unified government in six years. Many forecasters believe that the Trump presidency could usher in a new era of higher growth for the U.S. economy; the cornerstones of his plan will likely include lower corporate taxes, less regulation, rebuilding the military and the implementation of an infrastructure investment program. Most economists surveyed after the election reassessed their outlooks to cautious optimism, believing that the incoming administration’s proposals to reduce taxes, loosen regulation and invest in infrastructure will amount to a fiscal stimulus and higher inflation. However, many expected considerable volatility and rising risk premia as financial markets price in an evolving set of economic and geopolitical risks. Separately, the trade-weighted U.S. dollar has shown resurgent strength since the end of the third quarter and reached a 13-year high in November, while fixed income investors endured a broad-based bond market selloff for the second month in a row.1
Several developments affected Puerto Rico bonds over the reporting period. On June 30, 2016, President Obama signed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). The act, a bipartisan congressional effort, created an independent, seven-member oversight board appointed by the House of Representatives, Senate and President Obama, that will have fiscal oversight over Puerto Rico’s finances for an initial term of five years. The board has the power to approve or reject the general government’s proposed budgets until the board is satisfied that the budgets are structurally responsible and based on reasonable expectations and accounting standards. Additionally, PROMESA provides Puerto Rico with a path for restructuring its debts following a process based on Chapter 9 of the U.S. Bankruptcy Code, with some important protections and
1. Source: Morningstar. Treasuries, if held to maturity, offer a fixed rate of return and a fixed principal value; their interest payments and principal are guaranteed.
See www.franklintempletondatasources.com for additional data provider information.
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Semiannual Report 3
safeguards that are not available to creditors in a Chapter 9 proceeding. This is important as the U.S. Supreme Court affirmed in June 2016 that neither Puerto Rico nor its municipalities or agencies can file for bankruptcy under Chapter 9.
As part of the Puerto Rico Electric Power Authority (PREPA) forbearing creditor group (Ad Hoc Group), we have been participating in discussions related to the PREPA bonds we own. Currently, we are still working with Puerto Rico to finalize all outstanding issues necessary to implement our agreement with PREPA.
On July 1, 2016, Puerto Rico defaulted on $911 million in debt service out of $2.0 billion due across several different island entities. Puerto Rico defaulted on the entire $779 million due on its general obligation (GO) debt, making it the first state-level issuer to do so since the Great Depression. Consistent with previous months, Puerto Rico also defaulted on Puerto Rico Infrastructure Finance Authority Rum Bonds and the Public Finance Corporation debt. Of the $1.1 billion paid, some of it was reportedly paid from debt service reserves. While the government reported it was not paying any debt service on the Public Building Authority bonds guaranteed by the Commonwealth, it is our understanding that $151 million in funds available with the trustee were used to make a partial payment. The Franklin Municipal Bond Funds received approximately 85% of payments due on July 1.
COFINA, the Spanish name for debt secured by a dedicated portion of the sales tax, has to date made all principal and interest payments on time and in full. However, on November 22, certain Franklin Municipal Bond Funds that own COFINA subordinated bonds joined other bondholders in filing a Motion to Intervene in a lawsuit in Puerto Rico between a group of GO hedge fund bondholders (the “GO group”) and the government. Since the GO group is seeking to divert the stream of revenues used to make payments on the COFINA bonds, the Franklin Municipal Bond Funds felt compelled to file the motion in order to protect the interests of the Funds and their shareholders.
At period-end, we maintained our positive view of the municipal bond market. We believe municipal bonds continue to be an attractive asset class among fixed income securities, and we intend to follow our solid discipline of investing to maximize income, while seeking value in the municipal bond market.
The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2016, 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, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager 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.
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Franklin California High Yield Municipal Fund
This semiannual report for Franklin California High Yield Municipal Fund covers the period ended November 30, 2016.
Your Fund’s Goal and Main Investments
The Fund seeks to provide a high level of income exempt from federal and California personal income taxes by investing at least 80% of its net assets in municipal securities in any rating category, including higher yielding, lower rated securities, that pay interest free from such taxes.1 Its secondary goal is capital appreciation to the extent possible and consistent with its principal goal.
| | |
| Credit Quality Composition* | | |
| 11/30/16 | | |
| | % of Total | |
| Ratings | Investments | |
| AAA | 1.64 | % |
| AA | 24.10 | % |
| A | 20.57 | % |
| BBB | 12.23 | % |
| Below Investment Grade | 14.20 | % |
| Refunded | 7.17 | % |
| Not Rated | 20.09 | % |
*Securities, except for those labeled Not Rated, are assigned ratings by one or more Nationally Recognized Statistical Credit Rating Organizations (NRSROs), such as Standard & Poor’s, Moody’s and Fitch, that can be considered by the investment manager as part of its independent securities analysis. When ratings from multiple agencies are available, the highest is used, consistent with the portfolio investment process. Ratings reflect an NRSRO’s opinion of an issuer’s creditworthiness and typically range from AAA (highest) to D (lowest). The Below Investment Grade category consists of bonds rated below BBB-. The Refunded category generally consists of refunded bonds secured by U.S. government or other high-quality securities and not rerated by an NRSRO. The Not Rated category consists of ratable securities that have not been rated by an NRSRO. Cash and equivalents are excluded from this composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.10 on May 31, 2016, to $10.47 on November 30, 2016. The Fund’s Class A shares paid dividends totaling 19.23 cents per share for the reporting period.2 The Performance Summary beginning on page 8 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.47% based on an annualization of
November’s 3.16 cent per share dividend and the maximum offering price of $10.93 on November 30, 2016. An investor in the 2016 maximum combined effective federal and California personal income tax bracket of 50.83% (including 3.8% Medicare tax) would need to earn a distribution rate of 7.06% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by continued low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
| | | |
| Dividend Distributions* | | | |
| 6/1/16–11/30/16 | | | |
| | Dividend per Share (cents) |
| Month | Class A | Class C | Advisor Class |
| June | 3.30 | 2.79 | 3.39 |
| July | 3.25 | 2.74 | 3.34 |
| August | 3.20 | 2.69 | 3.29 |
| September | 3.16 | 2.63 | 3.25 |
| October | 3.16 | 2.63 | 3.25 |
| November | 3.16 | 2.63 | 3.25 |
| Total | 19.23 | 16.11 | 19.77 |
*The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income. 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.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
State Update
California’s large and diverse economy continued to expand during the past six months under review. Universities and innovative businesses supported the state’s expansion. Job growth in the state outpaced that of the nation, positioning its economy for faster overall economic growth and pushing revenues higher. However, unemployment rose slightly from
. The Fund may invest up to 100% of its assets in bonds whose interest payments are subject to federal alternative minimum tax. All or a significant portion of the income on
these obligations may be subject to such tax. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and
redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.
. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income. All Fund
distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
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 20.
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Semiannual Report 5
FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
5.2% in May 2016 to 5.3% at period-end, and thus remained above the 4.6% national rate.3 Sales of California homes declined during the period as housing prices generally increased.
The state experienced strong revenue trends aided by temporary tax increases and a multi-year bull market for equities. Its largest three revenue sources are personal income tax, sales tax and corporation tax. According to California’s 2016–2017 budget summary, revenues in the state’s general fund could benefit from the growing economy with high levels of capital gains and strong growth in wages. Capital gains-related tax revenues are volatile, however, and might be influenced by unpredictable financial markets. California paid down budgetary debts and continued to align recurring revenues and expenses during the period. As a result, the state entered fiscal year 2016 with a balanced budget, while increasing spending for education, health care and social services.
California’s net tax-supported debt was $2,323 per capita and 4.7% of personal income, compared with the $1,025 and 2.5% national medians, respectively.4 During the period under review, independent credit rating agency Standard & Poor’s (S&P) affirmed its rating of California’s general obligations bonds at AA- with a stable outlook.5 The rating reflected S&P’s view on the state’s expanding economy, increasing budgetary reserve levels, strong overall liquidity and declining debt ratios. In contrast, S&P cited several challenges to the state including high housing costs, a volatile revenue structure, retirement benefit liabilities and a large backlog of deferred maintenance and infrastructure. Nevertheless, the stable outlook reflected S&P’s view that California has brought its finances into structural alignment and generated modest operating surpluses that could translate to larger projected budget reserves.
Investment Strategy
We use a consistent, disciplined strategy in an effort to maximize tax-exempt income for our shareholders while balancing risk and return within the Fund’s range of allowable investments. We generally employ a buy-and-hold approach and invest in securities we believe should provide the most relative value in the market. We do not use leverage or derivatives, nor do we use hedging techniques that could add volatility and contribute to underperformance in adverse markets.
| | |
| Portfolio Composition | | |
| 11/30/16 | | |
| | % of Total | |
| | Investments* | |
| Tax-Supported | 24.4 | % |
| General Obligation | 14.4 | % |
| Transportation | 14.3 | % |
| Hospital & Health Care | 10.7 | % |
| Utilities | 9.2 | % |
| Refunded** | 8.6 | % |
| Other Revenue | 6.2 | % |
| Higher Education | 5.3 | % |
| Subject to Government Appropriations | 3.6 | % |
| Housing | 3.3 | % |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit
Quality Composition.
Manager’s Discussion
Consistent with our strategy, we sought to remain invested in bonds that maintain an average weighted maturity of 15 to 30 years with good call features. Based on the combination of our value-oriented philosophy of investing primarily for income and a positively sloping municipal yield curve, in which interest rates for longer term bonds are higher than those for shorter term bonds, we favored the use of longer term bonds. We believe our conservative, buy-and-hold investment strategy can help us achieve high, current, tax-free income for shareholders.
The Fund holds a small portion of its assets in Puerto Rico bonds, which increased in price over the period. However, Puerto Rico and its municipal issuers continued to experience significant financial difficulties, which we discussed in the Municipal Bond Market Overview on page 3. The Fund is not required to sell securities that have been downgraded to below investment grade, but it is prohibited from making further purchases of such securities as long as the securities are not rated investment grade by at least one U.S. nationally recognized rating service. We continue to closely monitor developments in Puerto Rico; however, the municipal bond market’s overall fundamentals, such as general creditwor-thiness and low default rates, remained stable.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Services, State Debt Medians 2016: Medians — Total Debt Remains Static in 2016, 5/6/16.
5. This does not indicate S&P’s rating of the Fund.
See www.franklintempletondatasources.com for additional data provider information.
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FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
Thank you for your continued participation in Franklin California High Yield Municipal Fund. We look forward to serving your future investment needs.
The foregoing information reflects our analysis, opinions and portfolio holdings as of November 30, 2016, 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, state, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager 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.
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FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
Performance Summary as of November 30, 2016
The performance tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. 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.
Performance as of 11/30/16
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.
| | | | | | | | |
| | Cumulative | | Average Annual | | | | | |
| Share Class | Total Return1 | | Total Return2 | | | | | |
| A | | | | | | | | |
| 6-Month | -4.04 | % | -8.09 | % | | | | |
| 1-Year | +1.17 | % | -3.16 | % | | | | |
| 5-Year | +35.27 | % | +5.32 | % | | | | |
| 10-Year | +59.74 | % | +4.34 | % | | | | |
| Advisor | | | | | | | | |
| 6-Month | -3.89 | % | -3.89 | % | | | | |
| 1-Year | +1.36 | % | +1.36 | % | | | | |
| 5-Year | +36.14 | % | +6.36 | % | | | | |
| 10-Year | +61.68 | % | +4.92 | % | | | | |
| |
| |
| | Distribution | | Taxable Equivalent | | 30 | -Day | Taxable Equivalent 30-Day | |
| Share Class | Rate3 | | Distribution Rate4 | | Standardized Yield5 | | Standardized Yield4 | |
| A | 3.47 | % | 7.06 | % | 2.61 | % | 5.31 | % |
| Advisor | 3.71 | % | 7.55 | % | 2.82 | % | 5.74 | % |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will
fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most
recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
See page 9 for Performance Summary footnotes.
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FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
PERFORMANCE SUMMARY
| | | | | | | |
| Net Asset Value | | | | | | | |
| Share Class (Symbol) | | 11/30/16 | | | 5/31/16 | | Change |
| A (FCAMX) | $ | 10.47 | | $ | 11.10 | -$ | 0.63 |
| C (FCAHX) | $ | 10.55 | | $ | 11.17 | -$ | 0.62 |
| Advisor (FVCAX) | $ | 10.50 | | $ | 11.12 | -$ | 0.62 |
| |
| Distributions6 (6/1/16–11/30/16) | | | | | | | |
| | | Dividend | | | | | |
| Share Class | | Income | | | | | |
| A | $ | 0.1923 | | | | | |
| C | $ | 0.1611 | | | | | |
| Advisor | $ | 0.1977 | | | | | |
| |
| Total Annual Operating Expenses7 | | | | | |
| Share Class | | | | | | | |
| A | | 0.65 | % | | | | |
| Advisor | | 0.55 | % | | | | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share
price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a
rise in interest rates, the Fund’s share price may decline. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic
and regulatory changes in that state than a geographically diversified fund. Investments in lower rated bonds include higher risk of default and loss of principal.
The Fund holds a small portion of its assets in Puerto Rico municipal bonds that have been impacted by recent adverse economic and market changes, which
may cause the Fund’s share price to decline. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or
guarantor, may affect the bond’s value. The Fund may invest a significant part of its assets in municipal securities that finance similar types of projects, such as
utilities, hospitals, higher education and transportation. A change that affects one project would likely affect all similar projects, thereby increasing market risk.
The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also
includes a description of the main investment risks.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
3. Distribution rate is based on an annualization of the respective class’s November dividend and the maximum offering price (NAV for Advisor Class) per share on 11/30/16.
4. Taxable equivalent distribution rate and yield assume the published rates as of 12/19/16 for the maximum combined effective federal and California state personal income tax
rate of 50.83%, based on the federal income tax rate of 39.60% plus 3.8% Medicare tax.
5. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
6. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income.
7. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
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FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | | | Actual | | Hypothetical | | |
| | | | | (actual return after expenses) | | (5% annual return before expenses) | | |
| |
| | | | | | | Expenses | | | | Expenses | | |
| | | Beginning | | Ending | | Paid During | | Ending | | Paid During | Annualized | |
| Share | | Account | | Account | | Period | | Account | | Period | Expense | |
| Class | | Value 6/1/16 | | Value 11/30/16 | | 6/1/16–11/30/161 | | Value 11/30/16 | | 6/1/16–11/30/161 | Ratio | |
| |
| A | $ | 1,000 | $ | 959.60 | $ | 3.05 | $ | 1,021.96 | $ | 3.14 | 0.62 | % |
| C | $ | 1,000 | $ | 958.10 | $ | 5.74 | $ | 1,019.20 | $ | 5.92 | 1.17 | % |
| Advisor | $ | 1,000 | $ | 961.10 | $ | 2.56 | $ | 1,022.46 | $ | 2.64 | 0.52 | % |
1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above–in the far right column–multiplied by the simple average account value
over the period indicated, and then multiplied by 183/365 to reflect the one-half year period.
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Franklin Tennessee Municipal Bond Fund
This semiannual report for Franklin Tennessee Municipal Bond Fund covers the period ended November 30, 2016.
Your Fund’s Goal and Main Investments
The Fund seeks to maximize income exempt from federal and Tennessee personal income taxes, consistent with prudent investing and the preservation of capital, by investing at least 80% of its net assets in investment grade municipal securities that pay interest free from such taxes.1
| | |
| Credit Quality Composition* | | |
| 11/30/16 | | |
| | % of Total | |
| Ratings | Investments | |
| AA | 55.49 | % |
| A | 15.58 | % |
| BBB | 4.60 | % |
| Below Investment Grade | 3.54 | % |
| Refunded | 18.60 | % |
| Not Rated | 2.19 | % |
*Securities, except for those labeled Not Rated, are assigned ratings by one or more Nationally Recognized Statistical Credit Rating Organizations (NRSROs), such as Standard & Poor’s, Moody’s and Fitch, that can be considered by the investment manager as part of its independent securities analysis. When ratings from multiple agencies are available, the highest is used, consistent with the portfolio investment process. Ratings reflect an NRSRO’s opinion of an issuer’s creditworthiness and typically range from AAA (highest) to D (lowest). The Below Investment Grade category consists of bonds rated below BBB-. The Refunded category generally consists of refunded bonds secured by U.S. government or other high-quality securities and not rerated by an NRSRO. The Not Rated category consists of ratable securities that have not been rated by an NRSRO. Cash and equivalents are excluded from this composition.
Performance Overview
The Fund’s Class A share price, as measured by net asset value, decreased from $11.44 on May 31, 2016, to $11.04 on November 30, 2016. The Fund’s Class A shares paid dividends totaling 18.70 cents per share for the reporting period.2 The Performance Summary beginning on page 14 shows that at the end of this reporting period the Fund’s Class A shares’ distribution rate was 3.23% based on an annualization of November’s 3.10 cent per share dividend and the maximum offering price of $11.53 on November 30, 2016. An investor in the 2016 maximum combined effective federal and Tennessee
personal income tax bracket of 46.42% (including 3.8% Medicare tax) would need to earn a distribution rate of 6.03% from a taxable investment to match the Fund’s Class A tax-free distribution rate. For other performance data, please see the Performance Summary. Dividend distributions were affected by continued low interest rates during the period. This and other factors resulted in reduced income for the portfolio and caused dividends to be lower at the end of the period.
| | |
| Dividend Distributions* | | |
| 6/1/16–11/30/16 | | |
| | Dividend per Share (cents) |
| Month | Class A | Advisor Class** |
| June | 3.20 | — |
| July | 3.10 | — |
| August | 3.10 | — |
| September | 3.10 | 1.59 |
| October | 3.10 | 3.19 |
| November | 3.10 | 3.19 |
| Total | 18.70 | 7.97 |
*The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income. 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.
**Effective 9/15/16, the Fund began offering Advisor Class shares. See the prospectus for details.
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
State Update
Over the six months under review, Tennessee’s diverse economy grew. The state is a distribution and manufacturing hub partly due to its access to the Mississippi River, transportation network and abundant supply of land. These factors contributed to its strong-yet-cyclical trade and manufacturing businesses. Tennessee’s unemployment rate rose
1. The Fund may invest up to 100% of its assets in bonds whose interest payments are subject to federal alternative minimum tax. All or a significant portion of the income on
these obligations may be subject to such tax. Distributions of capital gains are generally taxable. To avoid imposition of 28% backup withholding on all Fund distributions and
redemption proceeds, U.S. investors must be properly certified on Form W-9 and non-U.S. investors on Form W-8BEN.
2. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income. All Fund
distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.
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 37.
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Semiannual Report 11
FRANKLIN TENNESSEE MUNICIPAL BOND FUND
from 4.1% in May 2016 to 4.8% at period-end, slightly above the nation’s 4.6% average.3
Tennessee’s fiscal year 2016 budget ended the period with better-than-budgeted revenue performance and supported the enacted fiscal year 2017 budget surplus, which includes additional funding for K-12 education, teacher pay and rural development. The state’s enacted 2016 and 2017 budgets are structurally balanced and aim to continue building rainy day reserves.
Tennessee’s net tax-supported debt was relatively low at $298 per capita and 0.7% of personal income, compared with the $1,025 and 2.5% national medians, respectively.4 During the period under review, independent credit rating agency Standard & Poor’s (S&P) assigned the state’s general obligations bonds AAA with a stable outlook.5 In S&P’s view, the rating reflected the state’s strong growth, improving rainy day reserves, strong financial management practices and performance, long-standing funding of the state’s retirement obligations and low debt burden. The outlook also reflected S&P’s view of Tennessee’s excellent management of its long-term liabilities and S&P’s belief that the state could continue to exhibit economic growth, supported by its growing employment.
Investment Strategy
We use a consistent, disciplined strategy in an effort to maximize tax-exempt income for our shareholders while balancing risk and return within the Fund’s range of allowable investments. We generally employ a buy-and-hold approach and invest in securities we believe should provide the most relative value in the market. We do not use leverage or derivatives, nor do we use hedging techniques that could add volatility and contribute to underperformance in adverse markets.
Manager’s Discussion
Consistent with our strategy, we sought to remain invested in bonds that maintain an average weighted maturity of 15 to 30 years with good call features. Based on the combination of our value-oriented philosophy of investing primarily for income and a positively sloping municipal yield curve, in which interest rates for longer term bonds are higher than those for shorter term bonds, we favored the use of longer term bonds. We believe our conservative, buy-and-hold investment
| | |
| Portfolio Composition | | |
| 11/30/16 | | |
| | % of Total | |
| | Investments* | |
| Utilities | 28.2 | % |
| Refunded** | 23.0 | % |
| Hospital & Health Care | 16.3 | % |
| Higher Education | 8.4 | % |
| General Obligation | 8.1 | % |
| Transportation | 6.3 | % |
| Other Revenue | 4.2 | % |
| Housing | 2.9 | % |
| Tax-Supported | 2.1 | % |
| Subject to Government Appropriations | 0.5 | % |
*Does not include cash and cash equivalents.
**Includes all refunded bonds; the percentage may differ from that in the Credit Quality Composition.
strategy can help us achieve high, current, tax-free income for shareholders.
The Fund holds a small portion of its assets in Puerto Rico bonds, which increased in price over the period. However, Puerto Rico and its municipal issuers continued to experience significant financial difficulties, which we discussed in the Municipal Bond Market Overview on page 3. The Fund is not required to sell securities that have been downgraded to below investment grade, but it is prohibited from making further purchases of such securities as long as the securities are not rated investment grade by at least one U.S. nationally recognized rating service. We continue to closely monitor developments in Puerto Rico; however, the municipal bond market’s overall fundamentals, such as general creditwor-thiness and low default rates, remained stable.
Thank you for your continued participation in Franklin Tennessee Municipal Bond Fund. We look forward to serving your future investment needs.
3. Source: Bureau of Labor Statistics.
4. Source: Moody’s Investors Services, State Debt Medians 2016: Medians — Total Debt Remains Static in 2016, 5/6/16.
5. This does not indicate S&P’s rating of the Fund.
See www.franklintempletondatasources.com for additional data provider information.
12 Semiannual Report
franklintempleton.com
FRANKLIN TENNESSEE MUNICIPAL BOND FUND
The foregoing information reflects our analysis, opinions and portfolio
holdings as of November 30, 2016, 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,
state, industry, security or the Fund. Statements of fact are from
sources considered reliable, but the investment manager 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.
franklintempleton.com
Semiannual Report 13
FRANKLIN TENNESSEE MUNICIPAL BOND FUND
Performance Summary as of November 30, 2016
The performance tables do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses. 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.
Performance
Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% maximum initial sales charge; Advisor Class: no sales charges.
| | | | | | | | |
| | Cumulative | | Average Annual | | | | | |
| Share Class | Total Return1 | | Total Return2 | | | | | |
| A | | | | | | | | |
| 6-Month | -1.91 | % | -6.10 | % | | | | |
| 1-Year | +1.06 | % | -3.22 | % | | | | |
| 5-Year | +15.09 | % | +1.96 | % | | | | |
| 10-Year | +41.66 | % | +3.09 | % | | | | |
| Advisor3 | | | | | | | | |
| 6-Month | -1.89 | % | -1.89 | % | | | | |
| 1-Year | +1.08 | % | +1.08 | % | | | | |
| 5-Year | +15.11 | % | +2.85 | % | | | | |
| 10-Year | +41.69 | % | +3.55 | % | | | | |
| |
| |
| | Distribution | | Taxable Equivalent | | 30 | -Day | Taxable Equivalent 30-Day | |
| Share Class | Rate4 | | Distribution Rate5 | | Standardized Yield6 | | Standardized Yield5 | |
| A | 3.23 | % | 6.03 | % | 1.52 | % | 2.84 | % |
| Advisor3 | 3.47 | % | 6.48 | % | 1.64 | % | 3.06 | % |
Performance data represent past performance, which does not guarantee future results. Investment return and principal value will
fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most
recent month-end performance, go to franklintempleton.com or call (800) 342-5236.
14 Semiannual Report
franklintempleton.com
FRANKLIN TENNESSEE MUNICIPAL BOND FUND
PERFORMANCE SUMMARY
| | | | | | | | | |
| Net Asset Value | | | | | | | | | |
| Share Class (Symbol) | | 11/30/16 | | | 9/15/16 | | 5/31/16 | | Change |
| A (FRTIX) | $ | 11.04 | | | N/A | $ | 11.44 | -$ | 0.40 |
| Advisor (FTMZX)3 | $ | 11.04 | | $ | 11.50 | | N/A | -$ | 0.46 |
| |
| Distributions7 (6/1/16–11/30/16) | | | | | | | | | |
| | | Dividend | | | | | | | |
| Share Class | | Income | | | | | | | |
| A | $ | 0.1870 | | | | | | | |
| Advisor3 | $ | 0.0797 | | | | | | | |
| |
| Total Annual Operating Expenses8 | | | | | | | |
| Share Class | | | | | | | | | |
| A | | 0.72 | % | | | | | | |
| Advisor3 | | 0.62 | % | | | | | | |
Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.
All investments involve risks, including possible loss of principal. Because municipal bonds are sensitive to interest rate movements, the Fund’s yield and share
price will fluctuate with market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a
rise in interest rates, the Fund’s share price may decline. Because the Fund invests principally in a single state, it is subject to greater risk of adverse economic
and regulatory changes in that state than a geographically diversified fund. The Fund holds a small portion of its assets in Puerto Rico municipal bonds thathave
been impacted by recent adverse economic and market changes, which may cause the Fund’s share price to decline. Changes in the credit rating of a bond, or in
the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value. The Fund may invest a significant part of its assets in
municipal securities that finance similar types of projects, such as utilities, hospitals, higher education and transportation. A change that affects one project
would likely affect all similar projects, thereby increasing market risk. The Fund is actively managed but there is no guarantee that the manager’s investment
decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.
1. Cumulative total return represents the change in value of an investment over the periods indicated.
2. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, ifany,hasnotbeen
annualized.
3. Effective 9/15/16, 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 9/15/16, 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 9/15/16, actual Advisor class performance is used reflecting all
charges and fees applicable to that class. Since 9/15/16 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were -3.32% and
-3.32%.
4. Distribution rate is based on an annualization of the respective class’s November dividend and the maximum offering price (NAV for Advisor Class) per share on 11/30/16.
5. Taxable equivalent distribution rate and yield assume the published rates as of 12/19/16 for the maximum combined effective federal and Tennessee state personal income
tax rate of 46.42%, based on the federal income tax rate of 39.60% plus 3.8% Medicare tax.
6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal
the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.
7. The distribution amount is the sum of the dividend payments to shareholders for the period shown and includes only estimated tax-basis net investment income.
8. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this
report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.
franklintempleton.com
Semiannual Report 15
FRANKLIN TENNESSEE MUNICIPAL BOND FUND
Your Fund’s Expenses
As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.
Actual Fund Expenses
The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.
Hypothetical Example for Comparison with Other Funds
Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.
| | | | | | | | | | | | |
| | | | | Actual | | | | Hypothetical | | |
| | | | | (actual return after expenses) | | (5% annual return before expenses) | | |
| |
| | | | | | | | | | | Expenses | | |
| | | Beginning | | Ending | | Expenses | | Ending | | Paid During | Annualized | |
| Share | | Account | | Account | | Paid During | | Account | | Period | Expense | |
| Class | | Value1 | | Value 11/30/16 | | Period2,3 | | Value 11/30/16 | | 6/1/16–11/30/163 | Ratio | |
| |
| A | $ | 1,000 | $ | 980.90 | $ | 3.48 | $ | 1,021.56 | $ | 3.55 | 0.70 | % |
| Advisor | $ | 1,000 | $ | 966.80 | $ | 1.23 | $ | 1,009.16 | $ | 1.26 | 0.60 | % |
1. For Class A, 6/1/16 for Actual and Hypothetical. For Advisor Class, 9/15/16 for Actual and 6/1/16 for Hypothetical.
2. For Class A, 6/1/16-11/30/16. For Advisor Class, 9/15/16-11/30/16.
3. Expenses are equal to the annualized expense ratio for the six-month period as indicated above–in the far right column–multiplied by the simple average account value
over the period indicated, and then multiplied by 183/365 to reflect the one-half year period. The multiplier is 76/365 for Actual Advisor Class expenses to reflect the number
of days since inception.
16 Semiannual Report
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FRANKLIN MUNICIPAL SECURITIES TRUST
| | | | | | | | | | | | | | | | | | |
| Financial Highlights | | | | | | | | | | | | | | | | | | |
| Franklin California High Yield Municipal Fund | | | | | | | | | | | | | | | | |
| | | Six Months Ended | | | | | | | | | | | | | | | | |
| | | November 30, 2016 | | | | | | Year Ended May 31, | | | | |
| | | (unaudited) | | | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| Class A | | | | | | | | | | | | | | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | |
| (for a share outstanding throughout the | | | | | | | | | | | | | | | | | | |
| period) | | | | | | | | | | | | | | | | | | |
| Net asset value, beginning of period | $ | 11.10 | | $ | 10.65 | | $ | 10.42 | | $ | 10.59 | | $ | 10.40 | | $ | 9.07 | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | |
| Net investment incomeb | | 0.20 | | | 0.41 | | | 0.44 | | | 0.49 | | | 0.46 | | | 0.49 | |
| Net realized and unrealized gains (losses) | | (0.64 | ) | | 0.46 | | | 0.24 | | | (0.18 | ) | | 0.17 | | | 1.34 | |
| Total from investment operations | | (0.44 | ) | | 0.87 | | | 0.68 | | | 0.31 | | | 0.63 | | | 1.83 | |
| Less distributions from net investment income. | | (0.19 | ) | | (0.42 | ) | | (0.45 | ) | | (0.48 | ) | | (0.44 | ) | | (0.50 | ) |
| Net asset value, end of period | $ | 10.47 | | $ | 11.10 | | $ | 10.65 | | $ | 10.42 | | $ | 10.59 | | $ | 10.40 | |
| |
| Total returnc | | (4.04 | )% | | 8.37 | % | | 6.63 | % | | 3.22 | % | | 6.10 | % | | 20.65 | % |
| |
| Ratios to average net assetsd | | | | | | | | | | | | | | | | | | |
| Expenses | | 0.62 | % | | 0.65 | % | | 0.63 | % | | 0.63 | % | | 0.61 | % | | 0.62 | % |
| Net investment income | | 3.48 | % | | 3.83 | % | | 4.17 | % | | 4.95 | % | | 4.31 | % | | 5.05 | % |
| |
| Supplemental data | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000’s) | $ | 1,358,584 | | $ | 1,442,703 | | $ | 1,294,192 | | $ | 1,203,532 | | $ | 1,330,444 | | $ | 1,238,396 | |
| Portfolio turnover rate. | | 8.13 | % | | 12.23 | % | | 11.98 | % | | 22.26 | % | | 5.47 | % | | 6.67 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 17
| | | | | | | | | | | | | | | | | | |
| FRANKLIN MUNICIPAL SECURITIES TRUST | | | | | | | | | | | | | | | | |
| FINANCIAL HIGHLIGHTS | | | | | | | | | | | | | | | | | | |
| |
| |
| Franklin California High Yield Municipal Fund (continued) | | | | | | | | | | | | | | | | |
| | | Six Months Ended | | | | | | | | | | | | | | | | |
| | | November 30, 2016 | | | | | | Year Ended May 31, | | | | | | | |
| | | (unaudited) | | | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| Class C | | | | | | | | | | | | | | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | |
| (for a share outstanding throughout the | | | | | | | | | | | | | | | | | | |
| period) | | | | | | | | | | | | | | | | | | |
| Net asset value, beginning of period | $ | 11.17 | | $ | 10.72 | | $ | 10.49 | | $ | 10.65 | | $ | 10.46 | | $ | 9.13 | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | |
| Net investment incomeb | | 0.17 | | | 0.36 | | | 0.39 | | | 0.44 | | | 0.40 | | | 0.44 | |
| Net realized and unrealized gains (losses) | | (0.63 | ) | | 0.45 | | | 0.23 | | | (0.18 | ) | | 0.17 | | | 1.33 | |
| Total from investment operations | | (0.46 | ) | | 0.81 | | | 0.62 | | | 0.26 | | | 0.57 | | | 1.77 | |
| Less distributions from net investment income. | | (0.16 | ) | | (0.36 | ) | | (0.39 | ) | | (0.42 | ) | | (0.38 | ) | | (0.44 | ) |
| Net asset value, end of period | $ | 10.55 | | $ | 11.17 | | $ | 10.72 | | $ | 10.49 | | $ | 10.65 | | $ | 10.46 | |
| |
| Total returnc | | (4.19 | )% | | 7.73 | % | | 6.01 | % | | 2.74 | % | | 5.48 | % | | 19.86 | % |
| |
| Ratios to average net assetsd | | | | | | | | | | | | | | | | | | |
| Expenses | | 1.17 | % | | 1.20 | % | | 1.18 | % | | 1.18 | % | | 1.16 | % | | 1.17 | % |
| Net investment income | | 2.93 | % | | 3.28 | % | | 3.62 | % | | 4.40 | % | | 3.76 | % | | 4.50 | % |
| |
| Supplemental data | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000’s) | $ | 373,137 | | $ | 377,550 | | $ | 326,456 | | $ | 278,775 | | $ | 322,824 | | $ | 293,895 | |
| Portfolio turnover rate. | | 8.13 | % | | 12.23 | % | | 11.98 | % | | 22.26 | % | | 5.47 | % | | 6.67 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
18 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | FRANKLIN MUNICIPAL SECURITIES TRUST | |
| | | | | | | | | | | | FINANCIAL HIGHLIGHTS | |
| |
| |
| Franklin California High Yield Municipal Fund (continued) | | | | | | | | | | | | | | | | |
| | | Six Months Ended | | | | | | | | | | | | | | | | |
| | | November 30, 2016 | | | | | | Year Ended May 31, | | | | | | | |
| | | (unaudited) | | | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| Advisor Class | | | | | | | | | | | | | | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | |
| (for a share outstanding throughout the | | | | | | | | | | | | | | | | | | |
| period) | | | | | | | | | | | | | | | | | | |
| Net asset value, beginning of period | $ | 11.12 | | $ | 10.67 | | $ | 10.44 | | $ | 10.61 | | $ | 10.41 | | $ | 9.09 | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | |
| Net investment incomeb | | 0.20 | | | 0.43 | | | 0.45 | | | 0.50 | | | 0.47 | | | 0.50 | |
| Net realized and unrealized gains (losses) | | (0.62 | ) | | 0.45 | | | 0.24 | | | (0.18 | ) | | 0.18 | | | 1.33 | |
| Total from investment operations | | (0.42 | ) | | 0.88 | | | 0.69 | | | 0.32 | | | 0.65 | | | 1.83 | |
| Less distributions from net investment income. | | (0.20 | ) | | (0.43 | ) | | (0.46 | ) | | (0.49 | ) | | (0.45 | ) | | (0.51 | ) |
| Net asset value, end of period | $ | 10.50 | | $ | 11.12 | | $ | 10.67 | | $ | 10.44 | | $ | 10.61 | | $ | 10.41 | |
| |
| Total returnc | | (3.89 | )% | | 8.46 | % | | 6.73 | % | | 3.32 | % | | 6.30 | % | | 20.60 | % |
| |
| Ratios to average net assetsd | | | | | | | | | | | | | | | | | | |
| Expenses | | 0.52 | % | | 0.55 | % | | 0.53 | % | | 0.53 | % | | 0.51 | % | | 0.52 | % |
| Net investment income | | 3.58 | % | | 3.93 | % | | 4.27 | % | | 5.05 | % | | 4.41 | % | | 5.15 | % |
| |
| Supplemental data | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000’s) | $ | 610,425 | | $ | 635,463 | | $ | 474,392 | | $ | 315,131 | | $ | 303,904 | | $ | 241,123 | |
| Portfolio turnover rate. | | 8.13 | % | | 12.23 | % | | 11.98 | % | | 22.26 | % | | 5.47 | % | | 6.67 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 19
FRANKLIN MUNICIPAL SECURITIES TRUST
| | | | |
| Statement of Investments, November 30, 2016 (unaudited) | | | | |
| Franklin California High Yield Municipal Fund | | | | |
| | | Units | | Value |
| |
| Common Stocks and Other Equity Interests (Cost $611,327) 0.0%† | | | | |
| Consumer Discretionary 0.0%† | | | | |
| a,b 1155 Island Avenue LLC, LP | | 7,830,849 | $ | 611,323 |
| |
| |
| | | Principal | | |
| | | Amount | | |
| |
| Corporate Bonds (Cost $3,993,733) 0.2% | | | | |
| Consumer Discretionary 0.2% | | | | |
| b,c 1155 Island Avenue LLC, PIK, 10.00%, 12/11/24 | $ | 3,993,733 | | 3,995,211 |
| Municipal Bonds 95.0% | | | | |
| California 90.5% | | | | |
| ABAG Finance Authority for Nonprofit Corps. Revenue, Episcopal Senior Communities, Refunding, | | | | |
| 6.125%, 7/01/41 | | 7,500,000 | | 8,255,025 |
| Alameda Corridor Transportation Authority Revenue, | | | | |
| second sub. lien, Refunding, Series B, AGMC Insured, 4.00%, 10/01/35 | | 3,250,000 | | 3,329,560 |
| second sub. lien, Refunding, Series B, AGMC Insured, 5.00%, 10/01/35 | | 3,250,000 | | 3,634,897 |
| second sub. lien, Refunding, Series B, AGMC Insured, 5.00%, 10/01/36 | | 10,550,000 | | 11,743,943 |
| second sub. lien, Refunding, Series B, AGMC Insured, 4.00%, 10/01/37 | | 2,985,000 | | 3,038,342 |
| second sub. lien, Refunding, Series B, AGMC Insured, 5.00%, 10/01/37 | | 1,000,000 | | 1,107,930 |
| Alameda Special Tax, CFD No. 13-1, Alameda Landing Public Improvements, 5.00%, 9/01/46. | | 1,400,000 | | 1,495,606 |
| Artesia RDA Tax Allocation, | | | | |
| Artesia Redevelopment Project Area, 5.50%, 6/01/42 | | 6,355,000 | | 6,355,127 |
| Artesia Redevelopment Project Area, 5.70%, 6/01/42 | | 2,920,000 | | 2,920,555 |
| Housing Set-Aside, Artesia Redevelopment Project Area, 7.70%, 6/01/46 | | 3,215,000 | | 3,496,505 |
| Azusa Special Tax, | | | | |
| CFD No. 2005-1, Rosedale, Improvement Area No. 1, 5.00%, 9/01/27 | | 1,980,000 | | 1,984,970 |
| CFD No. 2005-1, Rosedale, Improvement Area No. 1, 5.00%, 9/01/37 | | 1,655,000 | | 1,657,019 |
| Baldwin Park USD, | | | | |
| GO, Los Angeles County, Capital Appreciation, Election of 2006, AGMC Insured, Pre-Refunded, | | | | |
| zero cpn., 8/01/31 | | 5,735,000 | | 2,588,033 |
| GO, Los Angeles County, Capital Appreciation, Election of 2006, Refunding, BAM Insured, zero | | | | |
| cpn., 8/01/42 | | 10,000,000 | | 2,233,000 |
| Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Subordinate, Series S-4, 5.25%, | | | | |
| 4/01/53 | | 15,000,000 | | 16,764,900 |
| Beaumont Financing Authority Local Agency Revenue, | | | | |
| Series C, 5.45%, 9/01/27 | | 6,435,000 | | 6,435,000 |
| Series C, 5.50%, 9/01/29 | | 855,000 | | 855,675 |
| Series C, 5.50%, 9/01/35 | | 1,035,000 | | 1,035,621 |
| Series C, 5.50%, 9/01/35 | | 3,995,000 | | 4,007,544 |
| Beaumont USD, GO, Election of 2008, Series C, AGMC Insured, 6.00%, 8/01/41 | | 1,925,000 | | 2,231,229 |
| Buena Park Community RDA Tax Allocation, Consolidated Redevelopment Project, 6.25%, 9/01/35 | | 5,000,000 | | 5,272,150 |
| California County Tobacco Securitization Agency Tobacco Settlement Revenue, Asset-Backed, Los | | | | |
| Angeles County Securitization Corp., 5.70%, 6/01/46 | | 3,000,000 | | 2,904,390 |
| California Municipal Finance Authority Revenue, | | | | |
| American Heritage Education Foundation Project, Refunding, Series A, 5.00%, 6/01/36 | | 1,000,000 | | 1,070,970 |
| American Heritage Education Foundation Project, Refunding, Series A, 5.00%, 6/01/46 | | 1,750,000 | | 1,840,440 |
| California School Finance Authority Charter School Revenue, | | | | |
| Aspire Public Schools-Obligated Group, Refunding, 5.00%, 8/01/36 | | 3,200,000 | | 3,456,320 |
| Aspire Public Schools-Obligated Group, Refunding, 5.00%, 8/01/46 | | 2,500,000 | | 2,632,625 |
| Aspire Public Schools-Obligated Group, Refunding, Series B, 5.00%, 8/01/35. | | 1,000,000 | | 1,083,160 |
| Aspire Public Schools-Obligated Group, Refunding, Series B, 5.00%, 8/01/45. | | 1,100,000 | | 1,159,169 |
20 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| California School Finance Authority School Facility Revenue, | | | | |
| Green Dot Public School Project, Series A, 5.00%, 8/01/35 | $ | 2,525,000 | $ | 2,620,041 |
| Green Dot Public School Project, Series A, 5.00%, 8/01/45 | | 3,500,000 | | 3,576,230 |
| Kipp LA Projects, Series A, 5.00%, 7/01/35 | | 1,200,000 | | 1,289,028 |
| Kipp LA Projects, Series A, 5.00%, 7/01/45 | | 1,675,000 | | 1,774,294 |
| California State Educational Facilities Authority Revenue, | | | | |
| Chapman University, 5.00%, 4/01/40 | | 5,000,000 | | 5,461,700 |
| College and University Financing Program, Pre-Refunded, 5.00%, 2/01/26 | | 250,000 | | 251,635 |
| College and University Financing Program, Pre-Refunded, 5.00%, 2/01/30 | | 615,000 | | 619,022 |
| Pepperdine University, Refunding, 5.00%, 10/01/41 | | 2,735,000 | | 3,105,374 |
| University of the Pacific, Refunding, 5.00%, 11/01/36. | | 3,000,000 | | 3,331,980 |
| University of San Francisco, 6.125%, 10/01/36 | | 2,000,000 | | 2,330,320 |
| California State GO, | | | | |
| Various Purpose, 6.00%, 11/01/39. | | 13,000,000 | | 14,589,770 |
| Various Purpose, FGIC Insured, 6.00%, 8/01/19 | | 30,000 | | 30,233 |
| Various Purpose, Refunding, 5.00%, 9/01/36 | | 12,050,000 | | 13,540,705 |
| Various Purpose, Refunding, 5.00%, 3/01/45 | | 5,000,000 | | 5,491,200 |
| California State Health Facilities Financing Authority Revenue, | | | | |
| Adventist Health System/West, Refunding, Series A, 4.00%, 3/01/39 | | 9,000,000 | | 8,448,300 |
| California Nevada Methodist Homes, Refunding, California Mortgage Insured, 5.00%, 7/01/45 | | 4,500,000 | | 4,974,975 |
| El Camino Hospital, Refunding, Series A, 5.00%, 2/01/40. | | 7,000,000 | | 7,624,960 |
| Lucile Salter Packard Children’s Hospital at Stanford, Series A, 5.00%, 8/15/43 | | 7,160,000 | | 7,909,151 |
| Providence Health and Services, Series C, Pre-Refunded, 6.50%, 10/01/33 | | 4,000,000 | | 4,383,200 |
| Sutter Health, Refunding, Series B, 4.00%, 11/15/38 | | 4,950,000 | | 4,801,945 |
| Sutter Health, Refunding, Series B, 5.00%, 11/15/46 | | 26,925,000 | | 29,115,618 |
| California State Infrastructure and Economic Development Bank Revenue, Goodwill Industries of | | | | |
| Sacramento Valley and Northern Nevada Project, Series A, 5.00%, 1/01/47. | | 10,360,000 | | 9,849,977 |
| California State Municipal Finance Authority Charter School Lease Revenue, | | | | |
| Santa Rosa Academy Project, 5.125%, 7/01/35 | | 450,000 | | 449,717 |
| Santa Rosa Academy Project, 5.375%, 7/01/45 | | 1,400,000 | | 1,380,820 |
| California State Municipal Finance Authority Charter School Revenue, | | | | |
| King Chavez Academy of Excellence Project, Refunding, Series A, 5.00%, 5/01/36. | | 2,675,000 | | 2,698,861 |
| King Chavez Academy of Excellence Project, Refunding, Series A, 5.00%, 5/01/46. | | 2,775,000 | | 2,728,685 |
| Palmdale Aerospace Academy Project, 5.00%, 7/01/31 | | 1,000,000 | | 1,037,720 |
| Palmdale Aerospace Academy Project, 5.00%, 7/01/36 | | 2,750,000 | | 2,812,920 |
| Palmdale Aerospace Academy Project, 5.00%, 7/01/41 | | 1,750,000 | | 1,771,193 |
| Palmdale Aerospace Academy Project, 5.00%, 7/01/46 | | 1,670,000 | | 1,685,114 |
| California State Municipal Finance Authority COP, | | | | |
| Community Hospitals of Central California, Pre-Refunded, 5.25%, 2/01/46. | | 1,895,000 | | 1,907,810 |
| Community Hospitals of Central California, Refunding, 5.25%, 2/01/46 | | 14,070,000 | | 14,128,250 |
| Community Hospitals of Central California Obligated Group, 5.25%, 2/01/24 | | 5,000,000 | | 5,310,500 |
| Community Hospitals of Central California Obligated Group, 5.375%, 2/01/29 | | 7,000,000 | | 7,448,420 |
| Community Hospitals of Central California Obligated Group, 5.50%, 2/01/39 | | 10,600,000 | | 11,212,468 |
| California State Municipal Finance Authority Mobile Home Park Revenue, | | | | |
| Caritas Affordable Housing Inc. Projects, Senior, Series A, 5.00%, 8/15/30. | | 1,000,000 | | 1,094,010 |
| Caritas Affordable Housing Inc. Projects, Senior, Series A, 5.25%, 8/15/39. | | 1,200,000 | | 1,329,588 |
| Caritas Affordable Housing Inc. Projects, Senior, Series A, 5.25%, 8/15/49. | | 3,500,000 | | 3,863,160 |
| Windsor Mobile Country Club, Refunding, Series A, 5.625%, 11/15/33. | | 1,000,000 | | 1,081,790 |
| Windsor Mobile Country Club, Refunding, Series A, 6.00%, 11/15/48 | | 4,000,000 | | 4,399,360 |
franklintempleton.com
Semiannual Report 21
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| California State Municipal Finance Authority Revenue, | | | | |
| Biola University, Refunding, Series A, 5.625%, 10/01/23. | $ | 6,000,000 | $ | 6,307,260 |
| Biola University, Refunding, Series A, 5.80%, 10/01/28 | | 7,500,000 | | 7,938,825 |
| Biola University, Refunding, Series A, 5.875%, 10/01/34. | | 6,000,000 | | 6,280,740 |
| California Baptist University, Series A, 5.00%, 11/01/36 | | 2,500,000 | | 2,344,025 |
| California Baptist University, Series A, 5.375%, 11/01/40 | | 5,000,000 | | 4,971,700 |
| California Baptist University, Series A, 5.50%, 11/01/45 | | 10,000,000 | | 10,060,600 |
| Community Medical Centers, Series A, 5.00%, 2/01/40 | | 5,000,000 | | 5,359,150 |
| The Creative Center of Los Altos Project Pinewood and Oakwood School, Refunding, Series B, | | | | |
| 4.00%, 11/01/36 | | 1,395,000 | | 1,210,790 |
| The Creative Center of Los Altos Project Pinewood and Oakwood School, Refunding, Series B, | | | | |
| 4.50%, 11/01/46 | | 1,600,000 | | 1,366,432 |
| Harbor Regional Center Project, Pre-Refunded, 8.50%, 11/01/39 | | 5,000,000 | | 5,981,850 |
| Harbor Regional Center Project, Refunding, 5.00%, 11/01/32 | | 3,020,000 | | 3,386,024 |
| Harbor Regional Center Project, Refunding, 5.00%, 11/01/39 | | 6,525,000 | | 7,111,663 |
| Inland Regional Center Project, Refunding, 5.00%, 6/15/37 | | 9,965,000 | | 10,813,819 |
| Kern Regional Center Project, Series A, 7.50%, 5/01/39 | | 9,000,000 | | 10,061,910 |
| NorthBay Healthcare Group, 5.00%, 11/01/35. | | 1,100,000 | | 1,190,156 |
| NorthBay Healthcare Group, 5.00%, 11/01/44. | | 1,050,000 | | 1,126,409 |
| South Central Los Angeles Regional Center Project, 5.50%, 12/01/33 | | 3,115,000 | | 3,395,443 |
| South Central Los Angeles Regional Center Project, 5.75%, 12/01/43 | | 7,000,000 | | 7,545,790 |
| Southwest Community Health Center, California Mortgage Insured, Pre-Refunded, 6.125%, 2/01/40 . | | 4,000,000 | | 4,308,600 |
| California State Municipal Finance Authority Student Housing Revenue, | | | | |
| Bowles Hall Foundation, Series A, 5.00%, 6/01/35. | | 600,000 | | 633,096 |
| Bowles Hall Foundation, Series A, 5.00%, 6/01/50. | | 3,250,000 | | 3,405,642 |
| California State Public Works Board Lease Revenue, | | | | |
| California State Prison Los Angeles, Various Buildings, Series C, 5.75%, 10/01/31 | | 4,640,000 | | 5,345,930 |
| Various Capital Projects, Series A, 5.125%, 10/01/31. | | 3,605,000 | | 4,035,725 |
| California State University Revenue, Systemwide, Refunding, Series A, 5.00%, 11/01/47 | | 14,980,000 | | 16,541,216 |
| California Statewide CDA Insured Senior Living Health Facility Revenue, Los Angeles Jewish Home for | | | | |
| the Aging, Fountainview at Gonda, Series A, California Mortgage Insured, 5.00%, 8/01/44 | | 2,450,000 | | 2,699,876 |
| California Statewide CDA Revenue, | | | | |
| Aldersly, Refunding, Series A, 5.00%, 5/15/32 | | 750,000 | | 790,088 |
| Aldersly, Refunding, Series A, 5.00%, 5/15/40 | | 1,010,000 | | 1,045,128 |
| American Baptist Homes of the West, Refunding, 6.25%, 10/01/39 | | 5,000,000 | | 5,466,150 |
| Bentley School, Refunding, Series A, 7.00%, 7/01/40 | | 8,675,000 | | 9,793,815 |
| California Baptist University, Refunding, 7.25%, 11/01/31 | | 1,250,000 | | 1,428,675 |
| California Baptist University, Refunding, 7.50%, 11/01/41 | | 2,750,000 | | 3,130,105 |
| California Baptist University, Refunding, Series A, 5.40%, 11/01/27 | | 7,440,000 | | 7,762,152 |
| California Baptist University, Refunding, Series A, 5.50%, 11/01/38 | | 4,500,000 | | 4,685,580 |
| California Baptist University, Series A, 5.125%, 11/01/23 | | 715,000 | | 756,163 |
| California Baptist University, Series A, 6.125%, 11/01/33 | | 1,565,000 | | 1,709,590 |
| California Baptist University, Series A, 6.375%, 11/01/43 | | 4,035,000 | | 4,397,141 |
| Catholic Healthcare West, Series C, 5.625%, 7/01/35 | | 5,000,000 | | 5,260,750 |
| Covenant Retirement Communities Inc., Series C, 5.625%, 12/01/36 | | 8,000,000 | | 8,899,120 |
| The Culinary Institute of America Project, Series B, 5.00%, 7/01/36 | | 410,000 | | 437,954 |
| The Culinary Institute of America Project, Series B, 5.00%, 7/01/46 | | 850,000 | | 899,139 |
| Eskaton Properties Inc. Obligated Group, Refunding, 5.25%, 11/15/34 | | 4,350,000 | | 4,599,690 |
| Henry Mayo Newhall Memorial Hospital, Series B, California Mortgage Insured, Pre-Refunded, | | | | |
| 5.20%, 10/01/37 | | 3,500,000 | | 3,746,925 |
| Huntington Memorial Hospital, Refunding, Series B, 5.00%, 7/01/44 | | 4,450,000 | | 4,735,111 |
22 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| California Statewide CDA Revenue, (continued) | | | | |
| Insured, Enloe Medical Center, Refunding, California Mortgage Insured, 5.00%, 8/15/38 | $ | 6,000,000 | $ | 6,652,260 |
| John Muir Health, Refunding, Series A, 4.00%, 8/15/51 | | 4,250,000 | | 3,963,082 |
| John Muir Health, Refunding, Series A, 5.00%, 8/15/51 | | 2,500,000 | | 2,717,975 |
| Lancer Educational Student Housing Project, Pre-Refunded, 5.625%, 6/01/33 | | 3,000,000 | | 3,129,630 |
| Lancer Educational Student Housing Project, Refunding, Series A, 5.00%, 6/01/46 | | 10,735,000 | | 9,446,371 |
| Loma Linda University Medical Center, Refunding, Series A, 5.25%, 12/01/44 | | 8,550,000 | | 8,785,638 |
| Loma Linda University Medical Center, Series A, 5.00%, 12/01/41 | | 5,500,000 | | 5,504,070 |
| Loma Linda University Medical Center, Series A, 5.00%, 12/01/46 | | 5,000,000 | | 5,003,700 |
| Loma Linda University Medical Center, Series A, 5.25%, 12/01/56 | | 6,500,000 | | 6,587,230 |
| Methodist Hospital of Southern California Project, FHA Insured, Pre-Refunded, 6.75%, 2/01/38 | | 8,980,000 | | 10,195,084 |
| Monterey Institute International, 5.50%, 7/01/31 | | 8,145,000 | | 8,619,935 |
| Statewide Community Infrastructure Program, Emerson Ranch Project, 5.00%, 9/02/35 | | 2,000,000 | | 2,085,440 |
| Statewide Community Infrastructure Program, Emerson Ranch Project, 5.00%, 9/02/45 | | 3,810,000 | | 3,933,634 |
| Statewide Community Infrastructure Program, Refunding, Series R1, 5.00%, 9/02/40 | | 2,745,000 | | 2,692,433 |
| Statewide Community Infrastructure Program, Series A, 5.00%, 9/02/36 | | 1,035,000 | | 1,072,902 |
| Statewide Community Infrastructure Program, Series A, 5.00%, 9/02/45 | | 2,255,000 | | 2,310,766 |
| California Statewide CDA Special Tax Revenue, | | | | |
| CFD No. 2015-01, Improvement Area No. 1, University District, Refunding, Series A, 5.00%, | | | | |
| 9/01/36 | | 1,000,000 | | 1,079,200 |
| CFD No. 2015-01, Improvement Area No. 1, University District, Refunding, Series A, 5.00%, | | | | |
| 9/01/45 | | 1,500,000 | | 1,594,830 |
| d CFD No. 2016-02, Delta Coves, Series A, 5.00%, 9/01/46 | | 11,155,000 | | 10,689,725 |
| California Statewide CDA Student Housing Revenue, | | | | |
| CHF-Irvine LLC, UCI East Campus Apartments, Phase II, Pre-Refunded, 5.75%, 5/15/32 | | 10,000,000 | | 10,657,000 |
| University of California Irvine, East Campus Apartments, CHF-Irvine LLC, Refunding, 5.00%, | | | | |
| 5/15/30 | | 2,000,000 | | 2,203,400 |
| University of California Irvine, East Campus Apartments, CHF-Irvine LLC, Refunding, 5.00%, | | | | |
| 5/15/32 | | 1,250,000 | | 1,368,950 |
| University of California Irvine, East Campus Apartments, CHF-Irvine LLC, Refunding, 5.00%, | | | | |
| 5/15/33 | | 2,625,000 | | 2,863,822 |
| University of California Irvine, East Campus Apartments, CHF-Irvine LLC, Refunding, 5.00%, | | | | |
| 5/15/34 | | 1,750,000 | | 1,901,183 |
| University of California Irvine, East Campus Apartments, CHF-Irvine LLC, Refunding, 5.00%, | | | | |
| 5/15/35 | | 2,205,000 | | 2,391,411 |
| University of California Irvine, East Campus Apartments, CHF-Irvine LLC, Refunding, 5.00%, | | | | |
| 5/15/40 | | 4,500,000 | | 4,745,835 |
| Capistrano USD, CFD No. 2005-1 Special Tax, 5.50%, 9/01/43 | | 4,955,000 | | 5,302,296 |
| Carson RDA, Tax Allocation Housing, Series A, 5.25%, 10/01/36 | | 1,965,000 | | 2,115,362 |
| Centinela Valley UHSD, | | | | |
| GO, County of Los Angeles, Capital Appreciation, Election of 2010, Refunding, Series B, AGMC | | | | |
| Insured, zero cpn., 8/01/45 | | 42,000,000 | | 9,379,860 |
| GO, County of Los Angeles, Election of 2008, Series C, 5.00%, 8/01/35 | | 4,195,000 | | 4,670,797 |
| Ceres USD, | | | | |
| GO, Capital Appreciation, Election of 2008, Series A, zero cpn., 8/01/39 | | 6,450,000 | | 1,507,817 |
| GO, Capital Appreciation, Election of 2008, Series A, zero cpn., 8/01/40 | | 6,730,000 | | 1,461,083 |
| Chatom USD, GO, Capital Appreciation, Election of 2006, Series C, XLCA Insured, zero cpn., 8/01/47 | | 9,450,000 | | 1,660,271 |
| Chino CFD Special Tax, No. 2003-3, Improvement Area No. 6, 5.00%, 9/01/45 | | 1,665,000 | | 1,677,771 |
franklintempleton.com
Semiannual Report 23
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| City of Fullerton Special Assessment, | | | | |
| Community Facilities District No. 2, Amerige Heights, 4.00%, 9/01/24 | $ | 110,000 | $ | 111,293 |
| Community Facilities District No. 2, Amerige Heights, 5.00%, 9/01/34 | | 1,075,000 | | 1,100,220 |
| Community Facilities District No. 2, Amerige Heights, 5.00%, 9/01/44 | | 2,450,000 | | 2,487,608 |
| City of Sacramento Special Tax, | | | | |
| North Natomas Central CFD No. 2006-02, 5.00%, 9/01/41 | | 2,000,000 | | 2,138,240 |
| North Natomas Central CFD No. 2006-02, 5.00%, 9/01/46 | | 2,315,000 | | 2,465,452 |
| Clovis USD, | | | | |
| GO, Capital Appreciation, Election of 2004, Series A, NATL Insured, zero cpn., 8/01/27 | | 7,500,000 | | 5,165,700 |
| GO, Capital Appreciation, Election of 2004, Series A, NATL Insured, zero cpn., 8/01/28 | | 3,000,000 | | 1,979,310 |
| Coachella Valley USD, | | | | |
| GO, Capital Appreciation, Election of 2005, Series D, AGMC Insured, zero cpn., 8/01/42 | | 8,500,000 | | 2,768,875 |
| GO, Capital Appreciation, Election of 2005, Series D, AGMC Insured, zero cpn., 8/01/43 | | 3,000,000 | | 930,570 |
| Coalinga PFAR, | | | | |
| Water and Wastewater Refinancing Projects, Refunding, 5.00%, 4/01/35 | | 1,000,000 | | 1,062,230 |
| Water and Wastewater Refinancing Projects, Refunding, 5.00%, 4/01/48 | | 6,350,000 | | 6,477,317 |
| Compton Community College District GO, | | | | |
| Election of 2002, Series B, Pre-Refunded, 6.625%, 8/01/27 | | 3,085,000 | | 3,496,755 |
| Election of 2002, Series B, Pre-Refunded, 6.75%, 8/01/34 | | 4,000,000 | | 4,546,840 |
| Compton CRDA Tax Allocation, | | | | |
| Redevelopment Project, second lien, Series B, 5.70%, 8/01/30 | | 2,255,000 | | 2,423,719 |
| Redevelopment Project, second lien, Series B, 6.00%, 8/01/42 | | 3,460,000 | | 3,692,962 |
| Compton USD, GO, Election of 2002, Series C, AMBAC Insured, 5.00%, 6/01/31. | | 3,270,000 | | 3,275,395 |
| Corona CFD No. 2001-2 Special Tax, Improvement Areas Nos. 1 and 2, Series A, 6.25%, 9/01/32 | | 1,825,000 | | 1,829,818 |
| Corona CFD No. 2003-2 Special Tax, Highlands Collection, 5.20%, 9/01/34 | | 755,000 | | 731,973 |
| Corona-Norco USD, | | | | |
| Special Tax, Refunding, CFD No. 5-1, 5.00%, 9/01/36 | | 1,000,000 | | 1,080,780 |
| Special Tax, Refunding, CFD No. 5-1, 4.00%, 9/01/45 | | 2,000,000 | | 1,891,980 |
| b Cotati South Sonoma Business Park AD Special Assessment, Limited Obligation Improvement, 6.50%, | | | | |
| 9/02/33 | | 4,545,000 | | 3,851,478 |
| Cotati-Rohnert Park USD, GO, Election of 2014, Series C, BAM Insured, 5.00%, 8/01/45 | | 4,000,000 | | 4,366,480 |
| CSD San Bernardino County GO, | | | | |
| Election of 2008, Series C, 5.00%, 8/01/44. | | 3,615,000 | | 3,977,042 |
| Election of 2014, Series A, 5.00%, 8/01/44. | | 7,375,000 | | 8,113,606 |
| Refunding, 5.00%, 8/01/47 | | 6,000,000 | | 6,617,940 |
| Cudahy Community Development Commission Tax Allocation, City-Wide Redevelopment Project, | | | | |
| Redevelopment Projects, Series B, 7.75%, 10/01/27 | | 3,795,000 | | 4,513,963 |
| Daly City Housing Development Finance Agency Mobile Home Park Revenue, Franciscan Mobile Home | | | | |
| Park Acquisition Project, sub. bond, Refunding, Series B, 5.85%, 12/15/47 | | 4,835,000 | | 5,006,111 |
| Dana Point CFD Special Tax No. 2006-1, | | | | |
| 5.00%, 9/01/38 | | 1,000,000 | | 1,055,480 |
| 5.00%, 9/01/45 | | 2,500,000 | | 2,626,650 |
| Del Mar Race Track Authority Revenue, Refunding, 5.00%, 10/01/35 | | 2,000,000 | | 2,101,240 |
| Del Paso Manor Water District Revenue COP, Phase I Improvement Project, 5.50%, 7/01/41 | | 3,050,000 | | 3,366,254 |
| Duarte RDA Tax Allocation, Capital Appreciation, Merged Redevelopment Project, ETM, zero cpn., | | | | |
| 12/01/28 | | 30,795,000 | | 17,121,404 |
| Eastern Municipal Water District Water and Wastewater Revenue, | | | | |
| Subordinate, Refunding, Series A, 5.00%, 7/01/37. | | 2,755,000 | | 3,090,972 |
| Subordinate, Refunding, Series A, 5.00%, 7/01/38. | | 1,930,000 | | 2,162,044 |
| Subordinate, Refunding, Series A, 5.00%, 7/01/39. | | 2,030,000 | | 2,270,555 |
| Subordinate, Refunding, Series A, 5.00%, 7/01/42. | | 5,000,000 | | 5,571,000 |
24 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| El Rancho USD, GO, Capital Appreciation, Election of 2003, NATL Insured, zero cpn., 8/01/29 | $ | 2,400,000 | $ | 1,453,896 |
| Elk Grove Finance Authority Special Tax Revenue, | | | | |
| Refunding, 5.00%, 9/01/41 | | 10,000,000 | | 10,446,300 |
| Refunding, 5.00%, 9/01/46 | | 10,000,000 | | 10,406,100 |
| Etiwanda School District Community Facilities District No. 9 Special Tax, Refunding, 5.00%, 9/01/35 | | 4,260,000 | | 4,675,350 |
| Fairfield Special Tax, | | | | |
| CFD No. 3, North Cordelia General Improvements, 6.00%, 9/01/32 | | 1,200,000 | | 1,277,112 |
| CFD No. 3, North Cordelia General Improvements, 6.00%, 9/01/37 | | 5,810,000 | | 6,162,841 |
| Fillmore Special Tax, | | | | |
| CFD No. 5 Improvement Area, Series A, 5.00%, 9/01/40 | | 1,500,000 | | 1,537,245 |
| CFD No. 5 Improvement Area, Series A, 5.00%, 9/01/45 | | 2,630,000 | | 2,682,048 |
| Foothill/Eastern Transportation Corridor Agency Toll Road Revenue, | | | | |
| Capital Appreciation, Refunding, Series A, zero cpn., 1/15/42 | | 75,000,000 | | 19,533,750 |
| Capital Appreciation, senior lien, Refunding, Series A, zero cpn., 1/15/33. | | 19,000,000 | | 8,335,300 |
| junior lien, Refunding, Series C, 6.50%, 1/15/43 | | 40,000,000 | | 44,871,600 |
| Fremont CFD No. 1 Special Tax, | | | | |
| Pacific Commons, Refunding, 5.00%, 9/01/40 | | 4,655,000 | | 4,876,159 |
| Pacific Commons, Refunding, 5.00%, 9/01/45 | | 3,255,000 | | 3,397,602 |
| Golden State Tobacco Securitization Corp. Enhanced Tobacco Settlement Revenue, | | | | |
| Asset-Backed, Refunding, Senior Series A-1, 5.00%, 6/01/33 | | 24,500,000 | | 22,051,960 |
| Asset-Backed, Series A, 5.00%, 6/01/45 | | 42,630,000 | | 46,311,953 |
| Capital Appreciation, Asset-Backed, second subordinate, Refunding, Series C, zero cpn., 6/01/47 | | 50,000,000 | | 2,582,000 |
| Goleta RDA Tax Allocation, Goleta Old Town Redevelopment Project, 8.00%, 6/01/44 | | 5,000,000 | | 5,018,350 |
| Hanford Joint UHSD, | | | | |
| GO, Capital Appreciation, Election of 2004, Series B, AGMC Insured, zero cpn., 8/01/32 | | 3,635,000 | | 1,958,356 |
| GO, Capital Appreciation, Election of 2004, Series B, AGMC Insured, zero cpn., 8/01/33 | | 3,705,000 | | 1,900,035 |
| GO, Capital Appreciation, Election of 2004, Series B, AGMC Insured, zero cpn., 8/01/35 | | 4,120,000 | | 1,914,729 |
| Hartnell Community College District GO, | | | | |
| Monterey and San Benito Counties, Capital Appreciation, Election of 2002, Series D, Pre-Refunded, | | | | |
| zero cpn., 8/01/44 | | 30,000,000 | | 4,460,400 |
| Monterey and San Benito Counties, Capital Appreciation, Election of 2002, Series D, zero cpn., | | | | |
| 8/01/49 | | 10,000,000 | | 2,460,800 |
| Hemet USD Financing Authority Special Tax Revenue, 5.00%, 9/01/39 | | 1,100,000 | | 1,158,333 |
| Imperial Community College District GO, Imperial County, Capital Appreciation, Election of 2010, Series | | | | |
| A, AGMC Insured, 6.75%, 8/01/40. | | 3,500,000 | | 4,408,530 |
| b Imperial County Special Tax, | | | | |
| CFD No. 98-1, 6.45%, 9/01/17 | | 270,000 | | 270,618 |
| CFD No. 98-1, 6.50%, 9/01/31 | | 5,705,000 | | 5,712,245 |
| Independent Cities Finance Authority Mobile Home Park Revenue, | | | | |
| Lamplighter Salinas MobileHome Park, Series A, 6.25%, 7/15/45 | | 2,465,000 | | 2,622,366 |
| Lamplighter Salinas MobileHome Park, Series A, 6.25%, 7/15/50 | | 2,000,000 | | 2,124,240 |
| Pillar Ridge, Series A, 5.25%, 5/15/44 | | 2,015,000 | | 2,159,657 |
| Pillar Ridge, Series A, 5.25%, 5/15/49 | | 4,800,000 | | 5,112,912 |
| San Juan Mobile Estates, Refunding, 5.00%, 8/15/45 | | 5,000,000 | | 5,405,800 |
| San Juan Mobile Estates, Refunding, 5.00%, 8/15/50 | | 4,900,000 | | 5,278,966 |
| Santa Rosa Leisure Mobile Home Park, Refunding, 5.00%, 8/15/46 | | 2,570,000 | | 2,778,992 |
| Indio CFD Special Tax Revenue, No. 2004-3, Terra Lago, Improvement Area No. 1, Refunding, 5.00%, | | | | |
| 9/01/35 | | 1,250,000 | | 1,285,563 |
| Inland Valley Development Agency Successor Agency Tax Allocation, | | | | |
| Refunding, Series A, 5.25%, 9/01/37 | | 7,500,000 | | 8,221,950 |
| Refunding, Series A, 5.00%, 9/01/44 | | 14,000,000 | | 14,898,660 |
franklintempleton.com
Semiannual Report 25
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| Irvine Special Tax Revenue, | | | | |
| CFD No. 2013-3, Great Park, Improvement Area No. 1, 5.00%, 9/01/39 | $ | 1,000,000 | $ | 1,041,570 |
| CFD No. 2013-3, Great Park, Improvement Area No. 1, 5.00%, 9/01/44 | | 1,500,000 | | 1,557,360 |
| CFD No. 2013-3, Great Park, Improvement Area No. 1, 5.00%, 9/01/49 | | 2,750,000 | | 2,851,558 |
| Irvine USD Special Tax, CFD No. 06-1, Portola Springs, 6.70%, 9/01/35 | | 2,565,000 | | 2,862,540 |
| Jurupa PFA Special Tax Revenue, | | | | |
| Refunding, Series A, 5.00%, 9/01/42 | | 2,220,000 | | 2,418,779 |
| Refunding, Series A, 5.00%, 9/01/43 | | 4,000,000 | | 4,335,280 |
| sub. lien, Series B, 5.00%, 9/01/40 | | 4,000,000 | | 4,067,680 |
| Kaweah Delta Health Care District Revenue, Series B, 5.00%, 6/01/40 | | 3,250,000 | | 3,501,355 |
| La Verne COP, Brethren Hillcrest Homes, 5.00%, 5/15/36 | | 1,430,000 | | 1,467,480 |
| La Verne Mobile Home Revenue, Copacbana Mobile HomePark, Refunding, 5.00%, 6/15/49 | | 1,765,000 | | 1,883,467 |
| Lake Elsinore PFA Local Agency Revenue, | | | | |
| AD No. 93-1, Refunding, Series B, 5.125%, 9/02/30. | | 4,980,000 | | 5,186,720 |
| Canyon Hills Improvement Area Development, Series A, 5.75%, 9/01/44 | | 3,240,000 | | 3,264,851 |
| CFD No. 98-1, Series C, 5.25%, 9/01/33 | | 8,000,000 | | 8,030,880 |
| Lake Tahoe USD, GO, Election of 2008, zero cpn. to 7/31/25, 5.30% thereafter, 8/01/40 | | 1,140,000 | | 834,628 |
| Lancaster RDA Tax Allocation, | | | | |
| Combined Redevelopment Project Areas, 6.875%, 8/01/34 | | 2,000,000 | | 2,234,880 |
| Combined Redevelopment Project Areas, 6.875%, 8/01/39 | | 830,000 | | 927,475 |
| Combined Redevelopment Project Areas, Pre-Refunded, 6.875%, 8/01/39 | | 1,170,000 | | 1,332,104 |
| Las Virgenes USD, GO, Election of 2006, Series C, zero cpn. to 8/01/26, 6.75% thereafter, 8/01/33 | | 8,050,000 | | 6,453,765 |
| Lathrop Financing Authority Revenue, | | | | |
| Mossdale Village, Refunding, Series A, 6.00%, 9/02/28 | | 1,010,000 | | 1,120,080 |
| Mossdale Village, Refunding, Series A, 6.00%, 9/02/29 | | 1,070,000 | | 1,178,027 |
| Mossdale Village, Refunding, Series A, 6.00%, 9/02/30 | | 1,075,000 | | 1,178,910 |
| Mossdale Village, Refunding, Series A, 5.50%, 9/02/35 | | 3,670,000 | | 3,782,082 |
| Lee Lake PFAR, | | | | |
| Special Tax, junior lien, Refunding, Series B, 5.25%, 9/01/32 | | 1,340,000 | | 1,456,138 |
| Special Tax, junior lien, Refunding, Series B, 5.375%, 9/01/35 | | 965,000 | | 1,046,793 |
| Lemon Grove CDA Successor Agency Tax Allocation, Lemon Grove Redevelopment Project Area, | | | | |
| Refunding, AGMC Insured, 4.00%, 8/01/34 | | 1,000,000 | | 1,005,890 |
| Lemon Grove School District GO, Capital Appreciation, Election of 2008, Series B, AGMC Insured, zero | | | | |
| cpn. to 8/01/28, 6.10% thereafter, 8/01/45 | | 6,500,000 | | 4,447,430 |
| Live Oak School District COP, School Financing Projects, Refunding, AGMC Insured, 5.00%, 8/01/39 | | 2,500,000 | | 2,774,600 |
| Long Beach Bond Finance Authority Natural Gas Purchase Revenue, Series A, 5.00%, 11/15/29 | | 4,630,000 | | 5,214,028 |
| Long Beach Marina Revenue, | | | | |
| Los Angeles County, Alamitos Bay Marina Project, 5.00%, 5/15/34 | | 1,300,000 | | 1,402,011 |
| Los Angeles County, Alamitos Bay Marina Project, 5.00%, 5/15/40 | | 3,500,000 | | 3,735,725 |
| Los Angeles County, Alamitos Bay Marina Project, 5.00%, 5/15/45 | | 2,500,000 | | 2,659,175 |
| Los Alamitos USD, | | | | |
| COP, Capital Appreciation, Capital Projects, zero cpn. to 7/31/24, 5.95% thereafter, 8/01/34 | | 1,500,000 | | 1,227,750 |
| COP, Capital Appreciation, Capital Projects, zero cpn. to 7/31/24, 5.95% thereafter, 8/01/42 | | 4,500,000 | | 3,607,560 |
| Los Angeles County Schools Regionalized Business Services Corp. COP, Pooled Financing Program, | | | | |
| Series C, 5.00%, 6/01/30 | | 2,200,000 | | 2,395,734 |
| Los Angeles Department of Airports Revenue, Los Angeles International Airport, Subordinate, | | | | |
| Refunding, Series C, 5.00%, 5/15/34 | | 2,135,000 | | 2,410,629 |
| Los Angeles Department of Water and Power Revenue, Power Systems, Refunding, Series A, 5.00%, | | | | |
| 7/01/40 | | 2,175,000 | | 2,430,258 |
26 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| Mendocino-Lake Community College District GO, | | | | |
| Capital Appreciation, Election of 2006, Series B, AGMC Insured, zero cpn. to 8/01/21, 6.55% | | | | |
| thereafter, 8/01/36 | $ | 5,150,000 | $ | 5,258,253 |
| Capital Appreciation, Election of 2006, Series B, AGMC Insured, zero cpn. to 8/01/26, 6.85% | | | | |
| thereafter, 8/01/40 | | 7,500,000 | | 6,308,850 |
| Merced RDA Tax Allocation, Merced Gateways Redevelopment Project, Series A, Pre-Refunded, 6.50%, | | | | |
| 9/01/39 | | 6,250,000 | | 7,078,062 |
| Merced UHSD, GO, Capital Appreciation, Election of 2008, Series C, Pre-Refunded, zero cpn., 8/01/41 | | 10,000,000 | | 2,226,800 |
| Monrovia Financing Authority Water and Sewer Revenue, AGMC Insured, 5.00%, 12/01/45 | | 3,000,000 | | 3,295,920 |
| Moreland School District GO, Election of 2010, Series B, 5.00%, 8/01/41 | | 4,045,000 | | 4,459,612 |
| M-S-R Energy Authority Gas Revenue, Series B, 6.50%, 11/01/39 | | 32,300,000 | | 41,693,163 |
| Napa Valley USD, | | | | |
| GO, Refunding, Series C, 5.00%, 8/01/41 | | 5,000,000 | | 5,601,100 |
| GO, Refunding, Series E, 5.00%, 8/01/44 | | 5,000,000 | | 5,588,050 |
| North Natomas CFD Special Tax, No. 4, Refunding, Series E, 5.25%, 9/01/33 | | 3,000,000 | | 3,328,350 |
| Northern California Transmission Agency Revenue, | | | | |
| California-Oregon Project, Refunding, Series A, 5.00%, 5/01/36 | | 2,500,000 | | 2,804,650 |
| California-Oregon Project, Refunding, Series A, 5.00%, 5/01/37 | | 3,610,000 | | 4,037,604 |
| California-Oregon Project, Refunding, Series A, 5.00%, 5/01/38 | | 1,750,000 | | 1,951,355 |
| California-Oregon Project, Refunding, Series A, 5.00%, 5/01/39 | | 1,885,000 | | 2,095,498 |
| Oak Park USD, GO, Capital Appreciation, Series A, zero cpn. to 8/01/21, 7.10% thereafter, 8/01/38 | | 6,600,000 | | 6,780,972 |
| Oakdale PFAR, Refunding, 5.00%, 9/01/35 | | 1,270,000 | | 1,316,304 |
| Oakland USD Alameda County GO, Election of 2012, 6.625%, 8/01/38. | | 5,000,000 | | 6,042,750 |
| Oakley PFAR, | | | | |
| Contra Costa County, Refunding, 5.30%, 9/02/34 | | 995,000 | | 1,080,898 |
| Contra Costa County, Refunding, BAM Insured, 5.00%, 9/02/36 | | 1,500,000 | | 1,666,395 |
| Ontario CFD No. 24 Special Tax, | | | | |
| Park Place Facilities Phase I, 5.00%, 9/01/34 | | 535,000 | | 576,874 |
| Park Place Facilities Phase I, 5.00%, 9/01/36 | | 580,000 | | 622,015 |
| Park Place Facilities Phase I, 5.00%, 9/01/41 | | 1,365,000 | | 1,459,349 |
| Park Place Facilities Phase I, 5.00%, 9/01/46 | | 2,000,000 | | 2,129,980 |
| Orange County 1915 Act Special Assessment, Limited Obligation, AD No. 01-1-GP1, 5.10%, 9/02/33 | | 1,745,000 | | 1,745,611 |
| Orange County CFD, | | | | |
| No. 2015-1, Esencia Village, Series A, 5.00%, 8/15/34 | | 1,530,000 | | 1,632,066 |
| No. 2015-1, Esencia Village, Series A, 5.25%, 8/15/45 | | 5,000,000 | | 5,363,700 |
| Orchard School District GO, Election of 2001, Series B, AGMC Insured, 6.00%, 8/01/36 | | 3,000,000 | | 3,416,340 |
| Oro Grande Elementary School District COP, | | | | |
| 5.875%, 9/15/37 | | 14,000,000 | | 15,468,880 |
| 6.125%, 9/15/40 | | 1,500,000 | | 1,668,990 |
| Pajaro Valley USD, GO, Election of 2012, Series C, 5.00%, 8/01/40 | | 3,310,000 | | 3,695,913 |
| Palomar Health Revenue, | | | | |
| Refunding, 5.00%, 11/01/36 | | 6,250,000 | | 6,604,812 |
| Refunding, 5.00%, 11/01/39 | | 5,000,000 | | 5,255,000 |
| Palomar Pomerado Health Care District COP, | | | | |
| 6.00%, 11/01/30 | | 10,000,000 | | 10,985,300 |
| Pre-Refunded, 6.75%, 11/01/39 | | 15,550,000 | | 17,833,517 |
| Paramount USD, GO, County of Los Angeles, Capital Appreciation, Election of 2006, BAM Insured, zero | | | | |
| cpn., 8/01/51 | | 25,000,000 | | 2,643,000 |
| Paso Robles Joint USD, GO, Capital Appreciation, Election of 2006, Series A, zero cpn., 9/01/45 | | 15,000,000 | | 3,787,950 |
franklintempleton.com
Semiannual Report 27
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| Perris CFD No. 2001-1 Special Tax, | | | | |
| Improvement Area No. 4, May Farms, Series A, 5.10%, 9/01/30 | $ | 865,000 | $ | 865,926 |
| Improvement Area No. 4, May Farms, Series A, 5.15%, 9/01/35 | | 1,075,000 | | 1,075,688 |
| Perris CFD No. 2001-2 Special Tax, Villages of Avalon, Refunding, Series A, 5.25%, 9/01/32 | | 4,500,000 | | 4,578,795 |
| Perris Joint Powers Authority Local Agency Revenue, | | | | |
| CFD No. 2001-1, Improvement Area Nos. 6 and 7, Refunding, Series E, 4.25%, 9/01/38 | | 4,250,000 | | 4,013,190 |
| May Farms Improvement Area Nos. 1, 2 and 3, Refunding, Series A, 5.375%, 9/01/33. | | 2,000,000 | | 2,043,440 |
| Willowbrook, Refunding, Series B, 5.25%, 9/01/33. | | 3,950,000 | | 3,976,386 |
| Perris PFAR Tax Allocation, Housing Loan, Series A, 6.125%, 10/01/40 | | 3,135,000 | | 3,592,302 |
| Pico Rivera Water Authority Revenue, Refunding, Series A, 6.25%, 12/01/32 | | 6,360,000 | | 6,443,888 |
| Pittsburg USD, | | | | |
| GO, Capital Appreciation, Election of 2010, Series C, zero cpn., 8/01/47 | | 9,000,000 | | 1,691,910 |
| GO, Capital Appreciation, Election of 2010, Series C, zero cpn., 8/01/52 | | 15,000,000 | | 2,024,400 |
| Porterville PFA Sewer Revenue, Series A, 5.625%, 10/01/36 | | 5,000,000 | | 5,752,100 |
| Poway RDA Successor Agency Tax Allocation, Paguay Redevelopment Project, Refunding, Series A, | | | | |
| 5.00%, 12/15/30 | | 3,500,000 | | 4,078,270 |
| Poway USD Special Tax, | | | | |
| CFD No. 15, Del Sur East, Improvement Area C, 5.00%, 9/01/41 | | 1,125,000 | | 1,166,636 |
| CFD No. 15, Del Sur East, Improvement Area C, 5.00%, 9/01/46 | | 2,000,000 | | 2,066,060 |
| Rancho Cordova CFD No. 2005-1 Special Tax, | | | | |
| Sunridge North Douglas, 5.00%, 9/01/40 | | 1,200,000 | | 1,252,572 |
| Sunridge North Douglas, 5.00%, 9/01/45 | | 1,250,000 | | 1,300,163 |
| Redondo Beach USD, GO, Election of 2008, Capital Appreciation, Series E, zero cpn. to 8/01/22, 6.20% | | | | |
| thereafter, 8/01/31 | | 2,750,000 | | 2,560,800 |
| Richland School District GO, Capital Appreciation, Election of 2008, Refunding, Series C, AGMC | | | | |
| Insured, zero cpn., 8/01/49 | | 22,000,000 | | 4,856,720 |
| Rio Elementary School District CFD No. 1 Special Tax, 5.50%, 9/01/39. | | 6,915,000 | | 7,500,700 |
| Rio Hondo Community College District GO, Capital Appreciation, Election of 2004, Series C, zero cpn. to | | | | |
| 8/01/24, 6.85% thereafter, 8/01/42. | | 13,000,000 | | 12,217,140 |
| Riverbank USD, | | | | |
| GO, Election of 2005, Series B, Assured Guaranty, zero cpn., 8/01/38 | | 6,690,000 | | 2,503,264 |
| GO, Election of 2005, Series B, Assured Guaranty, zero cpn., 8/01/43 | | 8,750,000 | | 2,545,375 |
| Riverside County RDA Tax Allocation, | | | | |
| Desert Communities Redevelopment Project Area, second lien, Series D, 7.00%, 12/01/31 | | 1,425,000 | | 1,735,964 |
| Desert Communities Redevelopment Project Area, second lien, Series D, 7.25%, 12/01/37 | | 2,505,000 | | 3,069,051 |
| Housing, Series A, 6.00%, 10/01/39. | | 3,000,000 | | 3,419,160 |
| Housing, Series A, 7.125%, 10/01/42 | | 1,750,000 | | 2,108,383 |
| Jurupa Valley Redevelopment Project Area, Series B, 6.75%, 10/01/30 | | 1,200,000 | | 1,440,552 |
| Riverside County Redevelopment Successor Agency Tax Allocation, Refunding, Series A, 4.00%, | | | | |
| 10/01/37 | | 6,000,000 | | 5,966,160 |
| Riverside County Special Tax, CFD No. 03-1, Newport Road, Refunding, 5.00%, 9/01/30 | | 1,500,000 | | 1,522,965 |
| Riverside County Transportation Commission Toll Revenue, | | | | |
| Capital Appreciation, senior lien, Series B, zero cpn., 6/01/43 | | 7,500,000 | | 1,745,550 |
| senior lien, Series A, 5.75%, 6/01/44 | | 5,000,000 | | 5,436,200 |
| Riverside PFA Local Measure Sales Tax Revenue, Payment Rehabilitation Project, AGMC Insured, | | | | |
| 5.00%, 6/01/33 | | 4,280,000 | | 4,751,998 |
| Road 17 Levee Area PFA Assessment Revenue, Road 17 Levee Improvement Project, 6.75%, 9/01/29 | | 2,630,000 | | 2,891,685 |
| The Romoland School District Special Tax, | | | | |
| CFD No. 2004-1, Heritage Lake, Improvement Area No. 3, Refunding, 5.00%, 9/01/36. | | 1,500,000 | | 1,573,290 |
| CFD No. 2004-1, Heritage Lake, Improvement Area Nos. 1 and 2, Refunding, 5.00%, 9/01/35 | | 4,690,000 | | 4,997,101 |
| CFD No. 2004-1, Heritage Lake, Improvement Area Nos. 1 and 2, Refunding, 5.00%, 9/01/38 | | 3,000,000 | | 3,178,350 |
28 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| Roseville Special Tax, | | | | |
| CFD No. 1, Fiddyment Ranch, 5.00%, 9/01/19 | $ | 980,000 | $ | 986,194 |
| CFD No. 1, Fiddyment Ranch, 5.125%, 9/01/21 | | 980,000 | | 982,881 |
| CFD No. 1, Fiddyment Ranch, 5.125%, 9/01/26 | | 4,945,000 | | 4,953,950 |
| CFD No. 1, Fiddyment Ranch, 5.25%, 9/01/36 | | 7,880,000 | | 7,889,614 |
| CFD No. 1, HP Campus Oaks, Public Facilities, 5.00%, 9/01/36 | | 800,000 | | 788,096 |
| CFD No. 1, HP Campus Oaks, Public Facilities, 5.50%, 9/01/46 | | 2,500,000 | | 2,573,850 |
| CFD No. 1, Public Facilities, 5.00%, 9/01/29 | | 500,000 | | 551,860 |
| CFD No. 1, Public Facilities, 5.00%, 9/01/34 | | 1,100,000 | | 1,185,426 |
| CFD No. 1, Public Facilities, 5.00%, 9/01/39 | | 1,885,000 | | 2,004,132 |
| CFD No. 1, Public Facilities, 5.00%, 9/01/44 | | 1,650,000 | | 1,743,044 |
| CFD No. 1, Stone Point, 6.375%, 9/01/24 | | 1,440,000 | | 1,442,390 |
| CFD No. 1, Stone Point, 6.375%, 9/01/28 | | 2,060,000 | | 2,062,616 |
| CFD No. 1, Westpark, Public Facilities, Refunding, 5.00%, 9/01/32 | | 1,120,000 | | 1,195,880 |
| CFD No. 1, Westpark, Public Facilities, Refunding, 5.00%, 9/01/33 | | 1,000,000 | | 1,060,200 |
| CFD No. 1, Westpark, Public Facilities, Refunding, 5.00%, 9/01/37 | | 1,250,000 | | 1,316,825 |
| Rowland USD, | | | | |
| GO, Capital Appreciation, Election of 2006, Series B, zero cpn., 8/01/34 | | 5,000,000 | | 2,430,150 |
| GO, Capital Appreciation, Election of 2006, Series B, zero cpn., 8/01/39 | | 15,000,000 | | 5,692,350 |
| GO, Capital Appreciation, Election of 2006, Series B, zero cpn., 8/01/42 | | 10,750,000 | | 3,380,875 |
| Sacramento Area Flood Control Agency Special Assessment, Natomas Basin Local Assessment, | | | | |
| Refunding, BAM Insured, 5.00%, 10/01/44 | | 2,000,000 | | 2,145,580 |
| Sacramento County Airport System Revenue, Senior, Series B, AGMC Insured, 5.25%, 7/01/39 | | 7,000,000 | | 7,304,780 |
| Sacramento County Special Tax, | | | | |
| CFD No. 2005-2, North Vineyard Station No. 1, Refunding, 5.00%, 9/01/40 | | 1,350,000 | | 1,433,295 |
| CFD No. 2005-2, North Vineyard Station No. 1, Refunding, 5.00%, 9/01/45 | | 1,650,000 | | 1,742,483 |
| San Bernardino Community College District GO, | | | | |
| Capital Appreciation, Election of 2008, Series A, zero cpn., 8/01/44 | | 12,495,000 | | 3,681,652 |
| Election of 2008, Series D, 5.00%, 8/01/45 | | 2,755,000 | | 3,050,336 |
| Election of 2008, Series D, 5.00%, 8/01/48 | | 3,760,000 | | 4,139,497 |
| San Bernardino County Special Tax, | | | | |
| CFD No. 2006-1, Improvement Area No. 1, Lytle Creek North, 5.00%, 9/01/40 | | 1,000,000 | | 1,027,720 |
| CFD No. 2006-1, Improvement Area No. 2, Lytle Creek North, 5.50%, 9/01/44 | | 1,965,000 | | 1,994,632 |
| CFD No. 2006-1, Improvement Area No. 2, Lytle Creek North, Refunding, 5.00%, 9/01/45 | | 1,000,000 | | 1,023,390 |
| San Buenaventura Revenue, | | | | |
| Community Memorial Health System, 8.00%, 12/01/31 | | 10,000,000 | | 11,952,500 |
| Community Memorial Health System, 7.50%, 12/01/41 | | 5,000,000 | | 5,781,900 |
| San Clemente Special Tax, | | | | |
| CFD No. 2006-1, 5.00%, 9/01/40 | | 1,795,000 | | 1,885,612 |
| CFD No. 2006-1, 5.00%, 9/01/46 | | 2,500,000 | | 2,611,300 |
| San Diego Public Facilities Financing Authority Water Revenue, | | | | |
| Series A, 5.00%, 8/01/41 | | 4,000,000 | | 4,449,680 |
| Series A, 5.00%, 8/01/45 | | 4,475,000 | | 4,962,685 |
| San Diego RDA Tax Allocation Revenue, | | | | |
| City Heights Redevelopment Project, Series A, 5.625%, 9/01/40 | | 2,315,000 | | 2,597,129 |
| Naval Training Center Redevelopment Project, Series A, 5.75%, 9/01/40 | | 3,000,000 | | 3,295,140 |
| San Diego Special Tax, CFD No. 4 Black Mountain Ranch Villages, Refunding, 5.00%, 9/01/37 | | 1,000,000 | | 1,096,010 |
franklintempleton.com
Semiannual Report 29
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| San Diego USD, | | | | |
| GO, Capital Appreciation, Election of 2008, Series A, Pre-Refunded, zero cpn. to 7/01/19, 6.00% | | | | |
| thereafter, 7/01/33 | $ | 10,000,000 | $ | 10,922,700 |
| GO, Capital Appreciation, Election of 2008, Series C, zero cpn. to 7/01/30, 6.625% thereafter, | | | | |
| 7/01/47 | | 26,025,000 | | 17,564,272 |
| GO, Dedicated Unlimited Ad Valorem Property Tax, Capital Appreciation, Election of 2008, Series | | | | |
| E, zero cpn. to 7/01/32, 5.25% thereafter, 7/01/42 | | 6,940,000 | | 3,881,056 |
| GO, Dedicated Unlimited Ad Valorem Property Tax, Capital Appreciation, Election of 2008, Series | | | | |
| E, zero cpn. to 7/01/32, 5.375% thereafter, 7/01/47 | | 13,500,000 | | 7,668,270 |
| San Francisco City and County Airport Commission International Airport Revenue, Second Series, | | | | |
| Series B, 5.00%, 5/01/46 | | 25,000,000 | | 26,619,750 |
| San Francisco City and County RDA Successor Agency CFD No. 6 Special Tax, Mission Bay South | | | | |
| Public Improvements, Capital Appreciation, Refunding, Series C, zero cpn., 8/01/43 | | 10,000,000 | | 2,266,400 |
| San Francisco City and County RDA Successor Agency Tax Allocation, | | | | |
| Mission Bay North Redevelopment Project, Refunding, Series A, 5.00%, 8/01/37 | | 1,700,000 | | 1,885,266 |
| Mission Bay South Redevelopment Project, Refunding, Series C, NATL Insured, 5.00%, 8/01/41 | | 2,500,000 | | 2,717,275 |
| Mission Bay South Redevelopment Project, Series A, 5.00%, 8/01/43 | | 2,500,000 | | 2,741,025 |
| Mission Bay South Redevelopment Project, Series B, NATL Insured, 5.00%, 8/01/43. | | 1,500,000 | | 1,627,845 |
| Mission Bay South Redevelopment Project, Subordinate, Series D, zero cpn., 8/01/23. | | 2,000,000 | | 1,392,000 |
| Mission Bay South Redevelopment Project, Subordinate, Series D, zero cpn., 8/01/26. | | 3,000,000 | | 1,745,220 |
| Mission Bay South Redevelopment Project, Subordinate, Series D, zero cpn., 8/01/31. | | 6,000,000 | | 2,604,900 |
| Mission Bay South Redevelopment Project, Subordinate, Series D, zero cpn., 8/01/43. | | 16,500,000 | | 3,502,290 |
| San Francisco City and County Redevelopment Financing Authority Tax Allocation, | | | | |
| Mission Bay North Redevelopment Project, Series C, Pre-Refunded, 6.75%, 8/01/41 | | 1,000,000 | | 1,192,440 |
| Mission Bay South Redevelopment Project, Series D, Pre-Refunded, 7.00%, 8/01/33 | | 1,000,000 | | 1,202,380 |
| Mission Bay South Redevelopment Project, Series D, Pre-Refunded, 6.625%, 8/01/39 | | 2,265,000 | | 2,564,139 |
| Mission Bay South Redevelopment Project, Series D, Pre-Refunded, 7.00%, 8/01/41 | | 1,500,000 | | 1,803,570 |
| San Francisco City and County Redevelopment Financing Authority Tax Allocation Revenue, San | | | | |
| Francisco Redevelopment Projects, Series B, 6.625%, 8/01/41 | | 2,500,000 | | 2,940,200 |
| San Gorgonio Memorial Healthcare District GO, Riverside County, Refunding, 5.00%, 8/01/39 | | 15,000,000 | | 16,446,150 |
| San Jacinto CFD Special Tax, | | | | |
| No. 2002-1, Refunding, 5.00%, 9/01/28 | | 1,080,000 | | 1,165,439 |
| No. 2002-1, Refunding, 5.00%, 9/01/29 | | 1,165,000 | | 1,252,293 |
| No. 2002-1, Refunding, 5.00%, 9/01/32 | | 1,000,000 | | 1,061,700 |
| San Joaquin County Public Facilities FICO Revenue COP, Wastewater Conveyance Project, 6.00%, | | | | |
| 8/01/37 | | 1,000,000 | | 1,000,350 |
| San Joaquin Delta Community College District GO, Capital Appreciation, Election of 2004, Series B, | | | | |
| AGMC Insured, zero cpn., 8/01/30 | | 3,900,000 | | 1,906,905 |
| San Joaquin Hills Transportation Corridor Agency Toll Road Revenue, | | | | |
| Capital Appreciation, junior lien, ETM, zero cpn., 1/01/28 | | 19,150,000 | | 13,666,779 |
| Capital Appreciation, Refunding, Series A, NATL Insured, zero cpn., 1/15/26 | | 19,475,000 | | 13,158,284 |
| Capital Appreciation, Refunding, Series A, NATL Insured, zero cpn., 1/15/32 | | 50,225,000 | | 24,095,946 |
| junior lien, Refunding, Series B, 5.25%, 1/15/44 | | 35,000,000 | | 37,205,700 |
| junior lien, Refunding, Series B, 5.25%, 1/15/49 | | 75,000,000 | | 79,253,250 |
| San Jose RDA Tax Allocation, | | | | |
| Merged Area Redevelopment Project, Series B, XLCA Insured, 5.00%, 8/01/28 | | 13,245,000 | | 13,348,046 |
| Merged Area Redevelopment Project, Series B, XLCA Insured, 4.25%, 8/01/36 | | 5,000,000 | | 4,958,950 |
| San Mateo Special Tax, | | | | |
| CFD No. 2008-1, Bay Meadows, 5.875%, 9/01/32 | | 1,500,000 | | 1,638,030 |
| CFD No. 2008-1, Bay Meadows, 5.375%, 9/01/38 | | 2,500,000 | | 2,656,100 |
| CFD No. 2008-1, Bay Meadows, 6.00%, 9/01/42 | | 5,000,000 | | 5,467,700 |
30 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| �� | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| San Mateo Special Tax, (continued) | | | | |
| CFD No. 2008-1, Bay Meadows, 5.50%, 9/01/44 | $ | 3,300,000 | $ | 3,514,797 |
| Santa Barbara Elementary School District GO, Capital Appreciation, Election of 2010, Series A, zero | | | | |
| cpn. to 8/01/23, 7.00% thereafter, 8/01/36 | | 8,000,000 | | 7,740,320 |
| Santa Cruz County RDA Tax Allocation, Pre-Refunded, 6.625%, 9/01/29 | | 2,650,000 | | 3,009,949 |
| Santa Margarita Water District Special Tax, | | | | |
| CFD No. 2013-1, Village of Sendero, 5.625%, 9/01/36 | | 3,000,000 | | 3,324,510 |
| CFD No. 2013-1, Village of Sendero, 5.625%, 9/01/43 | | 10,000,000 | | 11,037,900 |
| Santa Paula Utility Authority Wastewater Enterprise Revenue, Series A, 5.00%, 2/01/40 | | 7,105,000 | | 7,708,143 |
| Santee Community Development Commission Tax Allocation, | | | | |
| Santee Community Redevelopment Project, Series A, Pre-Refunded, 7.00%, 8/01/31 | | 1,800,000 | | 2,168,280 |
| Santee Community Redevelopment Project, Series A, Pre-Refunded, 7.00%, 8/01/41 | | 2,820,000 | | 3,396,972 |
| Saugus Castaic School Facilities Financing Authority Special Tax, | | | | |
| CFD No. 2006-1C, 5.875%, 9/01/33. | | 1,370,000 | | 1,507,589 |
| CFD No. 2006-1C, 6.00%, 9/01/43 | | 3,470,000 | | 3,822,344 |
| Saugus USD Special Tax, | | | | |
| CFD No. 2006-2, Improvement Area No. 2, 4.25%, 9/01/44 | | 2,000,000 | | 1,849,500 |
| Senior CFD No. 2006-1, 4.25%, 9/01/39. | | 1,150,000 | | 1,085,784 |
| Senior CFD No. 2006-1, 4.25%, 9/01/44. | | 2,500,000 | | 2,330,125 |
| Saugus/Hart School Facilities Financing Authority Special Tax, | | | | |
| CFD No. 2006-1 Saugus USD, Refunding, 5.00%, 9/01/41 | | 1,250,000 | | 1,334,725 |
| CFD No. 2006-1 Saugus USD, Refunding, 5.00%, 9/01/46 | | 1,250,000 | | 1,329,788 |
| Sierra View Local Health Care District Revenue, Pre-Refunded, 5.25%, 7/01/32. | | 3,000,000 | | 3,066,270 |
| Silicon Valley Clean Water Waste Water Revenue, | | | | |
| 5.00%, 8/01/40 | | 2,500,000 | | 2,819,625 |
| 5.00%, 8/01/45 | | 1,500,000 | | 1,684,560 |
| Simi Valley 1915 Act Special Assessment, AD No. 98-1, Madera, 7.30%, 9/02/24 | | 1,470,000 | | 1,476,556 |
| Siskiyou UHSD, GO, Capital Appreciation, Election of 2008, Series B, AGMC Insured, zero cpn., 8/01/49 . | | 15,015,000 | | 3,335,883 |
| Sonoma CDA Tax Allocation, Redevelopment Project, 7.00%, 12/01/30 | | 2,115,000 | | 2,605,680 |
| St. Helena USD, GO, Capital Appreciation, zero cpn. to 8/01/25, 6.45% thereafter, 6/01/36 | | 10,000,000 | | 9,179,800 |
| Susanville PFAR, | | | | |
| Utility Enterprises Project, Refunding, Sub Series B, 5.50%, 6/01/30 | | 1,185,000 | | 1,255,508 |
| Utility Enterprises Project, Refunding, Sub Series B, 5.875%, 6/01/35 | | 1,660,000 | | 1,781,014 |
| Utility Enterprises Project, Refunding, Sub Series B, 6.00%, 6/01/45 | | 6,180,000 | | 6,636,022 |
| Susanville School District GO, Capital Appreciation, Election of 2008, AGMC Insured, zero cpn., 8/01/49 . | | 17,505,000 | | 3,623,710 |
| Temecula RDA Tax Allocation Revenue, | | | | |
| Housing, Redevelopment Project No. 1, Series A, 7.00%, 8/01/39 | | 2,100,000 | | 2,538,480 |
| sub. lien, Escrow, Redevelopment Project No. 1, 5.625%, 12/15/38 | | 1,825,000 | | 1,846,882 |
| Tobacco Securitization Authority Northern California Tobacco Settlement Revenue, | | | | |
| Asset-Backed, Series A-1, 5.375%, 6/01/38 | | 5,000,000 | | 4,676,800 |
| Asset-Backed, Series A-1, 5.50%, 6/01/45 | | 800,000 | | 746,728 |
| Capital Appreciation, Asset-Backed, Series A-2, 5.40%, 6/01/27 | | 1,250,000 | | 1,259,588 |
| Tobacco Securitization Authority Southern California Tobacco Settlement Revenue, Second Sub. Capital | | | | |
| Appreciation, Refunding, Series C, zero cpn., 6/01/46 | | 25,000,000 | | 1,005,250 |
| Torrance USD, GO, Capital Appreciation, Election of 2008, Measure Z, Series B-1, zero cpn., 8/01/34 | | 5,640,000 | | 2,536,252 |
| Truckee-Donner PUD Special Tax, | | | | |
| CFD No. 04-1, 5.20%, 9/01/25 | | 3,000,000 | | 3,007,350 |
| CFD No. 04-1, 5.75%, 9/01/29 | | 2,975,000 | | 2,985,026 |
| CFD No. 04-1, 5.25%, 9/01/30 | | 5,050,000 | | 5,061,110 |
| CFD No. 04-1, 5.80%, 9/01/35 | | 4,515,000 | | 4,529,674 |
| Tulare RDA Tax Allocation, Merged Tulare Redevelopment Projects, Series A, 6.25%, 8/01/40. | | 3,540,000 | | 3,979,774 |
franklintempleton.com
Semiannual Report 31
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| Tulare Sewer Revenue, Pre-Refunded, 6.50%, 11/15/45 | $ | 10,000,000 | $ | 11,527,400 |
| Turlock PFA Tax Allocation Revenue, Pre-Refunded, 7.50%, 9/01/39 | | 3,750,000 | | 4,621,837 |
| Tustin CFD No. 06-1 Special Tax, Legacy/Columbus Villages, Series A, 5.00%, 9/01/37 | | 1,000,000 | | 1,097,040 |
| Tustin CFD No. 07-1 Special Tax, | | | | |
| Tustin Legacy/Retail Center, Pre-Refunded, 6.00%, 9/01/37 | | 2,100,000 | | 2,175,642 |
| Tustin Legacy/Retail Center, Refunding, Series A, 5.00%, 9/01/37 | | 2,330,000 | | 2,500,276 |
| Tustin CFD No. 14-1 Special Tax, | | | | |
| Legacy/Standard Pacific, Series A, 5.00%, 9/01/40 | | 750,000 | | 794,588 |
| Legacy/Standard Pacific, Series A, 5.00%, 9/01/45 | | 1,000,000 | | 1,053,160 |
| Tustin USD, | | | | |
| CFD No. 06-1 Special Tax, Pre-Refunded, 5.75%, 9/01/30 | | 1,000,000 | | 1,143,740 |
| CFD No. 06-1 Special Tax, Pre-Refunded, 6.00%, 9/01/40 | | 3,000,000 | | 3,458,220 |
| Union City CRDA Successor Agency Tax Allocation Revenue, | | | | |
| Community Redevelopment Project, Refunding, Series A, 5.00%, 10/01/35 | | 1,365,000 | | 1,529,087 |
| Community Redevelopment Project, Refunding, Series A, 5.00%, 10/01/36 | | 1,000,000 | | 1,115,370 |
| Union Elementary School District GO, Santa Clara County, Election of 2014, Series A, 5.00%, 9/01/49 | | 2,375,000 | | 2,643,494 |
| University of California Revenue, Refunding, Series AO, 5.00%, 5/15/40 | | 5,000,000 | | 5,602,350 |
| Val Verde USD Special Tax Revenue, | | | | |
| Refunding, 5.00%, 9/01/29 | | 3,200,000 | | 3,369,696 |
| Refunding, 5.00%, 9/01/37 | | 2,000,000 | | 2,076,440 |
| Vallejo RDA Tax Allocation, Housing Set-Aside, Refunding, Series A, 7.00%, 10/01/31 | | 3,435,000 | | 3,446,095 |
| Vernon Electric System Revenue, Series A, 5.50%, 8/01/41. | | 7,500,000 | | 8,283,450 |
| Victor Elementary School District GO, Election of 2008, Refunding, Series B, 5.00%, 8/01/42 | | 5,455,000 | | 5,982,280 |
| Victor Valley Community College District GO, Capital Appreciation, Election of 2002, Series C, zero cpn., | | | | |
| 6/01/49 | | 11,940,000 | | 2,708,947 |
| Washington Township Health Care District Revenue, Series A, 5.50%, 7/01/38 | | 2,890,000 | | 3,132,962 |
| West Hollywood Community Development Commission Tax Allocation, | | | | |
| East Side Redevelopment Project, Series A, 7.25%, 9/01/31 | | 1,000,000 | | 1,230,090 |
| East Side Redevelopment Project, Series A, 7.50%, 9/01/42 | | 5,000,000 | | 6,158,250 |
| Western Riverside Water and Wastewater Financing Authority Revenue, Local Agency, Refunding, Series | | | | |
| A, 5.00%, 9/01/44 | | 2,000,000 | | 2,212,600 |
| Woodland Davis Clean Water Agency Water Revenue, Subordinate, Refunding, Series A, AGMC Insured, | | | | |
| 5.00%, 3/01/39 | | 1,600,000 | | 1,775,968 |
| Woodland Finance Authority Water Revenue, | | | | |
| 6.00%, 3/01/36 | | 1,000,000 | | 1,152,080 |
| 6.00%, 3/01/41 | | 1,500,000 | | 1,724,835 |
| Woodland Special Tax, CFD No. 2004-1, Spring Lake, Capital Projects, Refunding, 4.00%, 9/01/41 | | 2,000,000 | | 1,845,960 |
| Yorba Linda RDA Tax Allocation, sub. lien, Redevelopment Project, Series A, 6.50%, 9/01/32 | | 2,750,000 | | 3,210,432 |
| Yucaipa Special Tax, | | | | |
| CFD No. 98-1 Chapman Heights, Refunding, 5.00%, 9/01/26 | | 1,000,000 | | 1,088,150 |
| CFD No. 98-1 Chapman Heights, Refunding, 5.375%, 9/01/30 | | 1,800,000 | | 1,977,426 |
| Yucca Valley RDA Tax Allocation, | | | | |
| Yucca Valley Redevelopment Project No. 1, 5.50%, 6/01/28 | | 2,110,000 | | 2,168,278 |
| Yucca Valley Redevelopment Project No. 1, 5.75%, 6/01/38 | | 5,485,000 | | 5,634,357 |
| | | | | 2,119,756,684 |
32 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| U.S. Territories 4.5% | | | | |
| Guam 1.5% | | | | |
| Government of Guam GO, | | | | |
| Series A, Pre-Refunded, 5.00%, 11/15/23 | $ | 6,745,000 | $ | 6,995,981 |
| Series A, Pre-Refunded, 5.25%, 11/15/37 | | 6,500,000 | | 6,757,075 |
| Series A, Pre-Refunded, 7.00%, 11/15/39 | | 5,000,000 | | 5,761,000 |
| Guam Government Waterworks Authority Water and Wastewater System Revenue, | | | | |
| 5.625%, 7/01/40 | | 4,000,000 | | 4,294,120 |
| 5.00%, 1/01/46 | | 10,000,000 | | 10,689,900 |
| | | | | 34,498,076 |
| Northern Mariana Islands 0.0%† | | | | |
| Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Senior Series A, 6.60%, | | | | |
| 3/15/28 | | 1,260,000 | | 1,257,946 |
| Puerto Rico 3.0% | | | | |
| e Puerto Rico Commonwealth GO, Public Improvement, Refunding, Series A, 5.50%, 7/01/39 | | 10,000,000 | | 6,600,000 |
| f Puerto Rico Electric Power Authority Power Revenue, | | | | |
| Refunding, Series A, 5.00%, 7/01/29 | | 10,000,000 | | 6,475,000 |
| Refunding, Series A, 5.00%, 7/01/42 | | 6,000,000 | | 3,885,000 |
| Series A, 7.00%, 7/01/33 | | 25,000,000 | | 16,312,500 |
| Series A, 6.75%, 7/01/36 | | 11,735,000 | | 7,598,412 |
| Series A, 7.00%, 7/01/43 | | 5,000,000 | | 3,262,500 |
| b Series A-4, zero cpn., 7/01/19 | | 1,601,766 | | 1,669,377 |
| b Series B, zero cpn., 7/01/19 | | 1,601,765 | | 1,669,376 |
| b Series E-1, zero cpn., 1/01/21 | | 1,768,493 | | 1,843,141 |
| b Series E-2, zero cpn., 7/01/21 | | 1,768,493 | | 1,843,141 |
| b Series E-3, zero cpn., 1/01/22 | | 600,000 | | 625,326 |
| b Series E-4, zero cpn., 7/01/22 | | 600,000 | | 625,326 |
| Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities Financing | | | | |
| Authority Revenue, Cogeneration Facility, AES Puerto Rico Project, 6.625%, 6/01/26 | | 5,500,000 | | 5,027,495 |
| e Puerto Rico PBA Guaranteed Revenue, Government Facilities, Refunding, Series U, 5.25%, 7/01/42 | | 20,000,000 | | 12,000,000 |
| | | | | 69,436,594 |
| Total U.S. Territories | | | | 105,192,616 |
| Total Municipal Bonds (Cost $2,112,637,491) | | | | 2,224,949,300 |
| |
| Total Investments before Short Term Investments (Cost $2,117,242,551) | | | | 2,229,555,834 |
| |
| Short Term Investments 4.7% | | | | |
| Municipal Bonds 4.7% | | | | |
| California 4.7% | | | | |
| g California State GO, | | | | |
| Kindergarten, Refunding, Series A2, Daily VRDN and Put, 0.45%, 5/01/34 | | 8,755,000 | | 8,755,000 |
| Kindergarten, Refunding, Series A3, Daily VRDN and Put, 0.45%, 5/01/34 | | 25,100,000 | | 25,100,000 |
| Series A, Sub Series A-2, Daily VRDN and Put, 0.48%, 5/01/33 | | 16,925,000 | | 16,925,000 |
| Series A-3, Daily VRDN and Put, 0.48%, 5/01/33 | | 35,655,000 | | 35,655,000 |
| g Irvine 1915 Act Special Assessment, Limited Obligation Improvement, AD No. 94-15, Refunding, Daily | | | | |
| VRDN and Put, 0.55%, 9/02/20. | | 853,000 | | 853,000 |
| g Los Angeles Department of Water and Power Revenue, | | | | |
| Power System, Refunding, Sub Series B-6, Daily VRDN and Put, 0.51%, 7/01/34 | | 8,400,000 | | 8,400,000 |
| Water System, Refunding, Series B, Subseries B-2, Daily VRDN and Put, 0.48%, 7/01/35 | | 12,000,000 | | 12,000,000 |
franklintempleton.com
Semiannual Report 33
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin California High Yield Municipal Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| Short Term Investments (continued) | | | | |
| Municipal Bonds (continued) | | | | |
| California (continued) | | | | |
| g The Metropolitan Water District of Southern California Water Revenue, Refunding, Series B-3, Daily | | | | |
| VRDN and Put, 0.48%, 7/01/35. | $ | 3,400,000 | $ | 3,400,000 |
| Total Short Term Investments (Cost $111,088,000) | | | | 111,088,000 |
| Total Investments (Cost $2,228,330,551) 99.9% | | | | 2,340,643,834 |
| Other Assets, less Liabilities 0.1% | | | | 1,501,906 |
| Net Assets 100.0% | | | $ | 2,342,145,740 |
See Abbreviations on page 52.
†Rounds to less than 0.1% of net assets.
aNon-income producing.
bSecurity has been deemed illiquid because it may not be able to be sold within seven days. At November 30, 2016, the aggregate value of these securities was $22,716,562,
representing 1.0% of net assets.
cIncome may be received in additional securities and/or cash.
dSecurity purchased on a when-issued basis. See Note 1(b).
eSee Note 6 regarding defaulted securities.
fAt November 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at period end.
gVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to
receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end.
34 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
| | | | | | | | | | | | | | | | | | |
| Financial Highlights | | | | | | | | | | | | | | | | | | |
| Franklin Tennessee Municipal Bond Fund | | | | | | | | | | | | | | | | |
| | | Six Months Ended | | | | | | | | | | | | | | | | |
| | | November 30, 2016 | | | | | | Year Ended May 31, | | | | | | | |
| | | (unaudited) | | | 2016 | | | 2015 | | | 2014 | | | 2013 | | | 2012 | |
| Class A | | | | | | | | | | | | | | | | | | |
| Per share operating performance | | | | | | | | | | | | | | | | | | |
| (for a share outstanding throughout the | | | | | | | | | | | | | | | | | | |
| period) | | | | | | | | | | | | | | | | | | |
| Net asset value, beginning of period | $ | 11.44 | | $ | 11.38 | | $ | 11.47 | | $ | 11.88 | | $ | 11.94 | | $ | 11.19 | |
| Income from investment operationsa: | | | | | | | | | | | | | | | | | | |
| Net investment incomeb | | 0.19 | | | 0.40 | | | 0.41 | | | 0.43 | | | 0.41 | | | 0.44 | |
| Net realized and unrealized gains (losses) | | (0.40 | ) | | 0.06 | | | (0.08 | ) | | (0.42 | ) | | (0.06 | ) | | 0.75 | |
| Total from investment operations | | (0.21 | ) | | 0.46 | | | 0.33 | | | 0.01 | | | 0.35 | | | 1.19 | |
| Less distributions from net investment income. | | (0.19 | ) | | (0.40 | ) | | (0.42 | ) | | (0.42 | ) | | (0.41 | ) | | (0.44 | ) |
| Net asset value, end of period | $ | 11.04 | | $ | 11.44 | | $ | 11.38 | | $ | 11.47 | | $ | 11.88 | | $ | 11.94 | |
| |
| Total returnc | | (1.91 | )% | | 4.12 | % | | 2.86 | % | | 0.20 | % | | 2.93 | % | | 10.84 | % |
| |
| Ratios to average net assetsd | | | | | | | | | | | | | | | | | | |
| Expenses before waiver and payments by | | | | | | | | | | | | | | | | | | |
| affiliates | | 0.70 | % | | 0.72 | % | | 0.72 | % | | 0.72 | % | | 0.70 | % | | 0.71 | % |
| Expenses net of waiver and payments by | | | | | | | | | | | | | | | | | | |
| affiliates | | 0.70 | % | | 0.72 | % | | 0.71 | % | | 0.70 | % | | 0.70 | % | | 0.70 | % |
| Net investment income | | 3.27 | % | | 3.55 | % | | 3.60 | % | | 3.82 | % | | 3.40 | % | | 3.82 | % |
| |
| Supplemental data | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000’s) | $ | 291,979 | | $ | 307,294 | | $ | 293,580 | | $ | 273,142 | | $ | 344,157 | | $ | 312,688 | |
| Portfolio turnover rate. | | 9.65 | % | | 4.50 | % | | 11.64 | % | | 7.86 | % | | 7.89 | % | | 5.71 | % |
aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
bBased on average daily shares outstanding.
cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
dRatios are annualized for periods less than one year.
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 35
| | | |
| FRANKLIN MUNICIPAL SECURITIES TRUST | | | |
| FINANCIAL HIGHLIGHTS | | | |
| |
| |
| Franklin Tennessee Municipal Bond Fund (continued) | | | |
| | | Period Ended | |
| | | November 30, 2016 | |
| | | (unaudited)a | |
| Advisor Class | | | |
| Per share operating performance | | | |
| (for a share outstanding throughout the period) | | | |
| Net asset value, beginning of period | $ | 11.50 | |
| Income from investment operationsb: | | | |
| Net investment incomec | | 0.08 | |
| Net realized and unrealized gains (losses) | | (0.46 | ) |
| Total from investment operations | | (0.38 | ) |
| Less distributions from net investment income. | | (0.08 | ) |
| Net asset value, end of period | $ | 11.04 | |
| |
| Total returnd | | (3.32 | )% |
| |
| Ratios to average net assetse | | | |
| Expenses | | 0.60 | % |
| Net investment income | | 3.37 | % |
| |
| Supplemental data | | | |
| Net assets, end of period (000’s) | $ | 9,036 | |
| Portfolio turnover rate. | | 9.65 | % |
aFor the period September 15, 2016 (effective date) to November 30, 2016.
bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
cBased on average daily shares outstanding.
dTotal return is not annualized for periods less than one year.
eRatios are annualized for periods less than one year.
36 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
| | | | |
| Statement of Investments, November 30, 2016 (unaudited) | | | | |
| Franklin Tennessee Municipal Bond Fund | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds 99.6% | | | | |
| Tennessee 94.5% | | | | |
| Anderson County Water Authority Water and Sewer Revenue, Pre-Refunded, 5.00%, 6/01/36. | $ | 1,000,000 | $ | 1,109,890 |
| a Blount County GO, Refunding, Series B, 5.00%, 6/01/37 | | 2,305,000 | | 2,632,103 |
| Blount County PBA Revenue, | | | | |
| Local Government Public Improvement, Refunding, Series B-15-A, Assured Guaranty, 5.00%, 6/01/28 . | | 220,000 | | 231,429 |
| Local Government Public Improvement, Refunding, Series B-15-A, Assured Guaranty, 5.00%, 6/01/32 . | | 1,590,000 | | 1,669,707 |
| Local Government Public Improvement, Series B-15-A, Assured Guaranty, Pre-Refunded, 5.00%, | | | | |
| 6/01/28 | | 880,000 | | 928,928 |
| Local Government Public Improvement, Series B-15-A, Assured Guaranty, Pre-Refunded, 5.00%, | | | | |
| 6/01/32 | | 975,000 | | 1,029,210 |
| Chattanooga Electric System Revenue, | | | | |
| The Electric Power Board of Chattanooga, Refunding, Series C, 5.00%, 9/01/40 | | 2,750,000 | | 3,091,165 |
| The Electric Power Board of Chattanooga, Series A, Pre-Refunded, 5.00%, 9/01/33. | | 7,500,000 | | 7,852,125 |
| Chattanooga Health Educational and Housing Facility Board Revenue, | | | | |
| Catholic Health Initiatives, Series D, 6.25%, 10/01/33 | | 500,000 | | 536,420 |
| Student Housing, CDFI Phase I LLC, University of Tennessee at Chattanooga Project, Refunding, | | | | |
| 5.00%, 10/01/35 | | 1,000,000 | | 1,066,010 |
| Chattanooga-Hamilton County Hospital Authority Hospital Revenue, | | | | |
| Erlanger Health System, AGMC Insured, Pre-Refunded, 5.00%, 10/01/22 | | 775,000 | | 844,045 |
| Erlanger Health System, Refunding, AGMC Insured, 5.00%, 10/01/22. | | 2,475,000 | | 2,679,113 |
| Clarksville Electric System Revenue, | | | | |
| Refunding, 5.00%, 9/01/31 | | 1,000,000 | | 1,135,690 |
| Series A, 5.00%, 9/01/34 | | 2,000,000 | | 2,205,180 |
| Series A, 5.00%, 9/01/35 | | 3,185,000 | | 3,508,118 |
| XLCA Insured, Pre-Refunded, 5.00%, 9/01/23 | | 2,325,000 | | 2,392,727 |
| XLCA Insured, Pre-Refunded, 5.00%, 9/01/32 | | 4,000,000 | | 4,116,520 |
| Clarksville Water Sewer and Gas Revenue, | | | | |
| Refunding, 5.00%, 2/01/38 | | 3,000,000 | | 3,347,340 |
| Refunding, 5.00%, 2/01/41 | | 6,000,000 | | 6,795,000 |
| Columbia Waterworks System Revenue, 5.00%, 12/01/32. | | 3,000,000 | | 3,354,180 |
| Franklin Special School District GO, Refunding and Improvement, 5.00%, 6/01/29 | | 1,000,000 | | 1,159,970 |
| Gallatin Water and Sewer Revenue, | | | | |
| Assured Guaranty, Pre-Refunded, 5.00%, 1/01/33 | | 2,215,000 | | 2,305,837 |
| Refunding and Improvement, 5.00%, 1/01/32 | | 1,500,000 | | 1,697,550 |
| Hallsdale-Powell Utility District of Knox County Waterworks and Sewer Revenue, Improvement, NATL | | | | |
| Insured, 5.00%, 4/01/31 | | 1,000,000 | | 1,011,840 |
| Harpeth Valley Utilities District of Davidson and Williamson Counties Revenue, | | | | |
| Utilities, 5.00%, 9/01/44 | | 4,400,000 | | 4,831,332 |
| Utilities, Improvement, NATL Insured, Pre-Refunded, 5.00%, 9/01/35 | | 3,700,000 | | 3,809,187 |
| Utilities, Refunding, 5.00%, 9/01/42 | | 3,000,000 | | 3,355,290 |
| Hawkins County First Utility District Waterworks Revenue, Series B, Assured Guaranty, Pre-Refunded, | | | | |
| 5.00%, 6/01/42 | | 1,250,000 | | 1,319,500 |
| Jackson Hospital Revenue, | | | | |
| Jackson-Madison County General Hospital, Improvement, Pre-Refunded, 5.50%, 4/01/33 | | 2,125,000 | | 2,238,985 |
| Jackson-Madison County General Hospital, Refunding, 5.00%, 4/01/36. | | 7,000,000 | | 7,511,490 |
| Jackson-Madison County General Hospital, Refunding and Improvement, 5.50%, 4/01/33 | | 875,000 | | 912,861 |
| Johnson City Electric System Revenue, Improvement, AGMC Insured, 5.00%, 5/01/29 | | 1,000,000 | | 1,048,630 |
| Johnson City Health and Educational Facilities Board Hospital Revenue, Johnson City Medical Center | | | | |
| Hospital, Improvement, Series C, NATL Insured, Pre-Refunded, 5.125%, 7/01/25 | | 155,000 | | 155,343 |
| Kingsport GO, Series B, Assured Guaranty, Pre-Refunded, 5.00%, 3/01/29 | | 1,030,000 | | 1,109,763 |
| Kingsport IDB, MFHR, Model City Apartments Project, GNMA Secured, 5.50%, 7/20/39 | | 2,995,000 | | 2,945,313 |
franklintempleton.com
Semiannual Report 37
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin Tennessee Municipal Bond Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| Tennessee (continued) | | | | |
| Knox County First Utility District Water and Sewer Revenue, | | | | |
| 5.00%, 12/01/32 | $ | 1,000,000 | $ | 1,149,040 |
| NATL Insured, Pre-Refunded, 5.00%, 12/01/24 | | 1,790,000 | | 1,790,000 |
| NATL Insured, Pre-Refunded, 5.00%, 12/01/25 | | 1,000,000 | | 1,000,000 |
| Refunding and Improvement, 5.00%, 12/01/26 | | 1,390,000 | | 1,527,388 |
| Knox County Health Educational and Housing Facility Board Hospital Revenue, | | | | |
| Covenant Health, Capital Appreciation, Refunding and Improvement, Series A, zero cpn., 1/01/36 | | 2,000,000 | | 779,140 |
| Covenant Health, Refunding, Series A, 5.00%, 1/01/42 | | 5,000,000 | | 5,346,800 |
| Knox County Health Educational and Housing Facility Board Revenue, | | | | |
| University Health System Inc., Refunding, 5.25%, 4/01/27 | | 2,500,000 | | 2,525,525 |
| University Health System Inc., Refunding, 5.25%, 4/01/36 | | 5,000,000 | | 5,048,300 |
| University Health System Inc., Refunding, 5.00%, 9/01/47 | | 5,000,000 | | 5,107,950 |
| Knox-Chapman Utility District of Knox County Water and Sewer Revenue, | | | | |
| 5.25%, 1/01/36 | | 1,500,000 | | 1,661,190 |
| Refunding and Improvement, 5.00%, 1/01/33 | | 1,470,000 | | 1,663,599 |
| Refunding and Improvement, 4.00%, 1/01/40 | | 4,000,000 | | 4,064,640 |
| Knoxville Wastewater System Revenue, Improvement, Refunding, Series A, 4.00%, 4/01/42 | | 5,000,000 | | 5,049,900 |
| Lawrenceburg PBA, GO, Electric System, Refunding, AMBAC Insured, 5.00%, 7/01/22 | | 2,425,000 | | 2,626,178 |
| Loudon Water and Sewer Revenue, | | | | |
| Exempt Facility, Series A, 4.00%, 3/01/28 | | 1,000,000 | | 1,021,780 |
| Exempt Facility, Series A, 5.00%, 3/01/32 | | 1,300,000 | | 1,406,769 |
| Manchester GO, Refunding, AGMC Insured, 5.00%, 6/01/38 | | 2,665,000 | | 2,912,392 |
| Maryville Water and Sewer Revenue, Series A, Assured Guaranty, 5.00%, 6/01/38 | | 5,500,000 | | 5,762,405 |
| Maury County GO, Public Improvement, Refunding, 4.00%, 4/01/34 | | 1,775,000 | | 1,833,344 |
| Memphis Electric System Revenue, 5.00%, 12/01/34 | | 1,000,000 | | 1,130,520 |
| Memphis Gas System Revenue, | | | | |
| 4.00%, 12/01/35 | | 1,000,000 | | 1,044,420 |
| 4.00%, 12/01/36 | | 2,000,000 | | 2,081,960 |
| Memphis GO, | | | | |
| General Improvement, Assured Guaranty, Pre-Refunded, 5.00%, 4/01/27 | | 1,975,000 | | 2,133,079 |
| General Improvement, Refunding, 5.00%, 5/01/36 | | 4,135,000 | | 4,578,189 |
| Memphis-Shelby County Airport Authority Airport Revenue, | | | | |
| Refunding, Series B, 5.75%, 7/01/25 | | 2,500,000 | | 2,767,825 |
| Refunding, Series D, 5.00%, 7/01/25 | | 3,000,000 | | 3,323,460 |
| Series A, AGMC Insured, 5.00%, 7/01/35 | | 5,000,000 | | 5,389,000 |
| Series A, AGMC Insured, 5.00%, 7/01/39 | | 2,565,000 | | 2,753,707 |
| Memphis-Shelby County Sports Authority Inc. Revenue, Memphis Arena Project, Refunding, Series B, | | | | |
| 5.375%, 11/01/29 | | 5,000,000 | | 5,517,200 |
| Metropolitan Government of Nashville and Davidson County Electric System Revenue, | | | | |
| Series A, 5.00%, 5/15/36 | | 3,500,000 | | 3,868,970 |
| Series A, 5.00%, 5/15/39 | | 4,000,000 | | 4,501,720 |
| Series A, Pre-Refunded, 5.00%, 5/15/33 | | 3,000,000 | | 3,162,750 |
| Metropolitan Government of Nashville and Davidson County GO, Refunding, 4.00%, 1/01/33 | | 5,000,000 | | 5,205,900 |
| Metropolitan Government of Nashville and Davidson County Health and Educational Facilities Board | | | | |
| Revenue, | | | | |
| Vanderbilt University, Series A, Pre-Refunded, 5.50%, 10/01/29 | | 3,500,000 | | 3,875,095 |
| Vanderbilt University, Series B, Pre-Refunded, 5.00%, 10/01/39 | | 9,000,000 | | 9,840,870 |
| Vanderbilt University Medical Center, Series A, 5.00%, 7/01/40 | | 5,000,000 | | 5,353,150 |
| Metropolitan Government of Nashville and Davidson County Sports Authority Revenue, | | | | |
| Public Improvement, Ballpark Project, Series A, 5.00%, 8/01/38 | | 3,000,000 | | 3,344,100 |
| Public Improvement, Ballpark Project, Series A, 5.00%, 8/01/43 | | 2,075,000 | | 2,293,290 |
38 Semiannual Report
franklintempleton.com
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | |
| Franklin Tennessee Municipal Bond Fund (continued) | | | | |
| | | Principal | | |
| | | Amount | | Value |
| |
| Municipal Bonds (continued) | | | | |
| Tennessee (continued) | | | | |
| Metropolitan Nashville Airport Authority Revenue, Improvement, Series A, 5.00%, 7/01/45 | $ | 4,000,000 | $ | 4,453,480 |
| Pigeon Forge IDB Revenue, Public Facility, 5.00%, 6/01/34 | | 1,250,000 | | 1,378,562 |
| Rutherford County Health and Educational Facilities Board Revenue, Ascension Health Senior Credit | | | | |
| Group, Series C, 5.00%, 11/15/40 | | 10,000,000 | | 10,752,500 |
| Shelby County Health Educational and Housing Facility Board Revenue, | | | | |
| Baptist Memorial Health Care, Series A, 5.00%, 9/01/19 | | 3,015,000 | | 3,254,813 |
| Educational Facilities, Rhodes College, 5.00%, 8/01/40 | | 750,000 | | 833,347 |
| Educational Facilities, Rhodes College, 5.50%, 8/01/40 | | 5,000,000 | | 5,641,100 |
| Educational Facilities, Rhodes College, 5.00%, 8/01/45 | | 1,700,000 | | 1,882,240 |
| Methodist Healthcare, Series B, AGMC Insured, Pre-Refunded, 5.25%, 9/01/27 | | 5,000,000 | | 5,250,100 |
| South Blount County Utility District Waterworks Revenue, | | | | |
| Improvement, AGMC Insured, Pre-Refunded, 5.00%, 12/01/33. | | 315,000 | | 346,428 |
| Improvement, AGMC Insured, Pre-Refunded, 5.25%, 12/01/39. | | 1,040,000 | | 1,151,322 |
| Refunding and Improvement, AGMC Insured, 5.00%, 12/01/33. | | 685,000 | | 745,787 |
| Refunding and Improvement, AGMC Insured, 5.25%, 12/01/39. | | 2,270,000 | | 2,484,379 |
| Tennessee HDA Residential Financing Program Revenue, Issue 1C, 4.00%, 7/01/43 | | 2,305,000 | | 2,312,353 |
| Tennessee HDA Revenue, | | | | |
| Homeownership Program, Series 1, 5.00%, 7/01/29 | | 935,000 | | 955,673 |
| Homeownership Program, Series 2C, 3.80%, 7/01/43 | | 1,530,000 | | 1,504,786 |
| Tennessee State School Bond Authority Revenue, | | | | |
| Higher Educational Facilities, Second Program, Refunding, Series B, 5.00%, 11/01/40 | | 10,000,000 | | 11,236,600 |
| Higher Educational Facilities, Second Program, Refunding, Series B, 5.00%, 11/01/45 | | 5,000,000 | | 5,593,800 |
| Higher Educational Facilities, Second Program, Series A, Pre-Refunded, 5.00%, 5/01/39 | | 3,000,000 | | 3,247,140 |
| Higher Educational Facilities, Second Program, Series B, Pre-Refunded, 5.50%, 5/01/38 | | 4,000,000 | | 4,238,960 |
| West Wilson Utility District of Wilson County Water Revenue, | | | | |
| 5.00%, 6/01/33 | | 3,000,000 | | 3,316,590 |
| Refunding & Improvement, 5.00%, 6/01/40 | | 1,545,000 | | 1,712,725 |
| White House Utility District of Robertson and Sumner Counties Water and Sewer Revenue, Refunding, | | | | |
| 4.00%, 1/01/32 | | 1,600,000 | | 1,711,370 |
| | | | | 284,383,391 |
| |
| |
| U.S. Territories 5.1% | | | | |
| Guam 1.6% | | | | |
| Guam Economic Development and Commerce Authority Revenue, Tobacco Settlement, Asset-Backed, | | | | |
| Refunding, 5.25%, 6/01/32 | | 1,330,000 | | 1,330,425 |
| Guam Government Limited Obligation Revenue, Section 30, Series A, Pre-Refunded, 5.625%, 12/01/29 | | 3,205,000 | | 3,576,043 |
| | | | | 4,906,468 |
| Puerto Rico 3.5% | | | | |
| b Puerto Rico Electric Power Authority Power Revenue, Series XX, 5.25%, 7/01/40 | | 5,000,000 | | 3,237,500 |
| c Puerto Rico PBA Guaranteed Revenue, Government Facilities, Series S, 6.00%, 7/01/41 | | 2,000,000 | | 1,222,500 |
| Puerto Rico Sales Tax FICO Sales Tax Revenue, | | | | |
| First Subordinate, Series A, 6.50%, 8/01/44 | | 7,500,000 | | 4,040,625 |
| First Subordinate, Series C, 5.50%, 8/01/40 | | 4,000,000 | | 2,095,000 |
| | | | | 10,595,625 |
| Total U.S. Territories | | | | 15,502,093 |
| Total Municipal Bonds before Short Term Investments (Cost $297,151,648) | | | | 299,885,484 |
franklintempleton.com
Semiannual Report 39
FRANKLIN MUNICIPAL SECURITIES TRUST
STATEMENT OF INVESTMENTS (UNAUDITED)
| | | | | |
| Franklin Tennessee Municipal Bond Fund (continued) | | | | | |
| | | Principal | | | |
| | | Amount | | Value | |
| Short Term Investments (Cost $2,200,000) 0.8% | | | | | |
| Municipal Bonds 0.8% | | | | | |
| Tennessee 0.8% | | | | | |
| d Shelby County Health Educational and Housing Facilities Board Revenue, Methodist Le Bonheur, | | | | | |
| Healthcare, Refunding, Series A, AGMC Insured, Daily VRDN and Put, 0.60%, 6/01/42 | $ | 2,200,000 | $ | 2,200,000 | |
| Total Investments (Cost $299,351,648) 100.4% | | | | 302,085,484 | |
| Other Assets, less Liabilities (0.4)%. | | | | (1,070,263 | ) |
| Net Assets 100.0%. | | | $ | 301,015,221 | |
See Abbreviations on page 52.
aSecurity purchased on a when-issued basis. See Note 1(b).
bAt November 30, 2016, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading this security at period end.
cSee Note 6 regarding defaulted securities.
dVariable rate demand notes (VRDNs) are tax-exempt obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to
receive payment of the principal balance plus accrued interest at specified dates. The coupon rate shown represents the rate at period end.
40 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
| FRANKLIN MUNICIPAL SECURITIES TRUST | | | | | | | |
| | | | | |
| |
| |
| |
| |
| Financial Statements | | | | | | | |
| |
| |
| Statements of Assets and Liabilities | | | | | | | |
| November 30, 2016 (unaudited) | | | | | | | |
| |
| | | | Franklin | | | Franklin | |
| | | | California | | | Tennessee | |
| | | | High Yield | | | Municipal | |
| | | | Municipal Fund | | | Bond Fund | |
| Assets: | | | | | | | |
| Investments in securities: | | | | | | | |
| Cost | $ | | 2,228,330,551 | | $ | 299,351,648 | |
| Value. | $ | | 2,340,643,834 | | $ | 302,085,484 | |
| Cash | | | — | | | 98,356 | |
| Receivables: | | | | | | | |
| Investment securities sold | | | 5,507,244 | | | 4,348,476 | |
| Capital shares sold | | | 2,513,029 | | | 335,371 | |
| Interest | | | 27,675,064 | | | 3,798,314 | |
| Other assets | | | 25,526 | | | 43 | |
| Total assets | | | 2,376,364,697 | | | 310,666,044 | |
| Liabilities: | | | | | | | |
| Payables: | | | | | | | |
| Investment securities purchased | | | 11,155,000 | | | 8,232,410 | |
| Capital shares redeemed | | | 20,203,986 | | | 1,156,898 | |
| Management fees | | | 932,324 | | | 134,595 | |
| Distribution fees | | | 322,980 | | | 24,491 | |
| Transfer agent fees | | | 155,733 | | | 24,764 | |
| Distributions to shareholders | | | 1,394,269 | | | 66,063 | |
| Funds advanced by custodian | | | 49,361 | | | — | |
| Accrued expenses and other liabilities. | | | 5,304 | | | 11,602 | |
| Total liabilities | | | 34,218,957 | | | 9,650,823 | |
| Net assets, at value | $ | | 2,342,145,740 | | $ | 301,015,221 | |
| Net assets consist of: | | | | | | | |
| Paid-in capital | $ | | 2,333,981,828 | | $ | 305,312,109 | |
| Undistributed net investment income | | | 3,980,525 | | | 534,696 | |
| Net unrealized appreciation (depreciation) | | | 112,313,283 | | | 2,733,836 | |
| Accumulated net realized gain (loss) | | | (108,129,896 | ) | | (7,565,420 | ) |
| Net assets, at value | $ | | 2,342,145,740 | | $ | 301,015,221 | |
| Class A: | | | | | | | |
| Net assets, at value | $ | | 1,358,583,665 | | $ | 291,978,740 | |
| Shares outstanding. | | | 129,712,299 | | | 26,451,902 | |
| Net asset value per sharea | | $ | 10.47 | | $ | 11.04 | |
| Maximum offering price per share (net asset value per share ÷ 95.75%) | | $ | 10.93 | | $ | 11.53 | |
| Class C: | | | | | | | |
| Net assets, at value | $ | | 373,137,431 | | | | |
| Shares outstanding. | | | 35,380,042 | | | | |
| Net asset value and maximum offering price per sharea | | $ | 10.55 | | | | |
| Advisor Class: | | | | | | | |
| Net assets, at value | $ | | 610,424,644 | | $ | 9,036,481 | |
| Shares outstanding. | | | 58,161,807 | | | 818,560 | |
| Net asset value and maximum offering price per share | | $ | 10.50 | | $ | 11.04 | |
| |
| |
| |
| aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable. | | | | | | | |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 41
| | | | | | |
| FRANKLIN MUNICIPAL SECURITIES TRUST | | | | | | |
| FINANCIAL STATEMENTS | | | | | | |
| |
| |
| Statements of Operations | | | | | | |
| for the six months ended November 30, 2016 (unaudited) | | | | | | |
| |
| | | Franklin | | | Franklin | |
| | | California | | | Tennessee | |
| | | High Yield | | | Municipal | |
| | | Municipal Fund | | | Bond Fund | |
| Investment income: | | | | | | |
| Interest | $ | 52,361,782 | | $ | 6,272,539 | |
| Expenses: | | | | | | |
| Management fees (Note 3a) | | 5,877,125 | | | 829,937 | |
| Distribution fees: (Note 3c) | | | | | | |
| Class A | | 744,695 | | | 155,368 | |
| Class C | | 1,293,348 | | | — | |
| Transfer agent fees: (Note 3e) | | | | | | |
| Class A | | 270,801 | | | 62,409 | |
| Class C | | 72,371 | | | — | |
| Advisor Class | | 121,296 | | | 347 | |
| Custodian fees | | 9,999 | | | 1,273 | |
| Reports to shareholders | | 33,739 | | | 7,223 | |
| Registration and filing fees | | 36,212 | | | 3,676 | |
| Professional fees | | 59,306 | | | 27,973 | |
| Trustees’ fees and expenses | | 28,649 | | | 3,827 | |
| Other | | 108,476 | | | 12,068 | |
| Total expenses | | 8,656,017 | | | 1,104,101 | |
| Net investment income | | 43,705,765 | | | 5,168,438 | |
| Realized and unrealized gains (losses): | | | | | | |
| Net realized gain (loss) from investments | | (8,033,418 | ) | | (150,032 | ) |
| Net change in unrealized appreciation (depreciation) on investments | | (136,171,762 | ) | | (11,052,757 | ) |
| Net realized and unrealized gain (loss) | | (144,205,180 | ) | | (11,202,789 | ) |
| Net increase (decrease) in net assets resulting from operations | $ | (100,499,415 | ) | $ | (6,034,351 | ) |
42 Semiannual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com
| | | | | | | | | | | | |
| | | | | | FRANKLIN MUNICIPAL SECURITIES TRUST | |
| | | | | | | | | FINANCIAL STATEMENTS | |
| |
| |
| Statements of Changes in Net Assets | | | | | | | | | | | | |
| |
| | | Franklin California | | | Franklin Tennessee | |
| | | High Yield Municipal Fund | | | Municipal Bond Fund | |
| | | Six Months Ended | | | | | | Six Months Ended | | | | |
| | | November 30, 2016 | | | Year Ended | | | November 30, 2016 | | | Year Ended | |
| | | (unaudited) | | | May 31, 2016 | | | (unaudited) | | | May 31, 2016 | |
| Increase (decrease) in net assets: | | | | | | | | | | | | |
| Operations: | | | | | | | | | | | | |
| Net investment income | $ | 43,705,765 | | $ | 84,120,399 | | $ | 5,168,438 | | $ | 10,441,637 | |
| Net realized gain (loss) | | (8,033,418 | ) | | (3,670,661 | ) | | (150,032 | ) | | (1,191,121 | ) |
| Net change in unrealized appreciation | | | | | | | | | | | | |
| (depreciation) | | (136,171,762 | ) | | 98,799,680 | | | (11,052,757 | ) | | 2,575,461 | |
| Net increase (decrease) in net assets | | | | | | | | | | | | |
| resulting from operations | | (100,499,415 | ) | | 179,249,418 | | | (6,034,351 | ) | | 11,825,977 | |
| Distributions to shareholders from: | | | | | | | | | | | | |
| Net investment income: | | | | | | | | | | | | |
| Class A | | (25,481,249 | ) | | (52,806,784 | ) | | (5,055,500 | ) | | (10,343,510 | ) |
| Class C | | (5,661,296 | ) | | (11,394,081 | ) | | — | | | — | |
| Advisor Class | | (11,709,625 | ) | | (21,295,565 | ) | | (28,551 | ) | | — | |
| Total distributions to shareholders | | (42,852,170 | ) | | (85,496,430 | ) | | (5,084,051 | ) | | (10,343,510 | ) |
| Capital share transactions: (Note 2) | | | | | | | | | | | | |
| Class A | | (945,464 | ) | | 92,169,914 | | | (4,457,442 | ) | | 12,230,945 | |
| Class C | | 18,324,512 | | | 36,708,855 | | | — | | | — | |
| Advisor Class | | 12,402,547 | | | 138,044,150 | | | 9,297,510 | | | — | |
| Total capital share transactions | | 29,781,595 | | | 266,922,919 | | | 4,840,068 | | | 12,230,945 | |
| Net increase (decrease) in net assets | | (113,569,990 | ) | | 360,675,907 | | | (6,278,334 | ) | | 13,713,412 | |
| Net assets: | | | | | | | | | | | | |
| Beginning of period | | 2,455,715,730 | | | 2,095,039,823 | | | 307,293,555 | | | 293,580,143 | |
| End of period | $ | 2,342,145,740 | | $ | 2,455,715,730 | | $ | 301,015,221 | | $ | 307,293,555 | |
| Undistributed net investment income included in net | | | | | | | | | | | | |
| assets: | | | | | | | | | | | | |
| End of period | $ | 3,980,525 | | $ | 3,126,930 | | $ | 534,696 | | $ | 450,309 | |
franklintempleton.com The accompanying notes are an integral part of these financial statements. | Semiannual Report 43
FRANKLIN MUNICIPAL SECURITIES TRUST
Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting Policies
Franklin Municipal Securities Trust (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of two separate funds (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The classes of shares offered within each of the Funds are indicated below. Effective September 15, 2016, Franklin Tennessee Municipal Bond Fund began offering a new class of shares, Advisor class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.
Class A & Advisor Class
Franklin Tennessee Municipal Bond Fund
Class A, Class C & Advisor Class
Franklin California High Yield Municipal Fund
The following summarizes the Funds’ significant accounting policies.
a. Financial Instrument Valuation
The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
b. Securities Purchased on a When-Issued Basis
Certain or all Funds purchase securities on a when-issued 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.
44 Semiannual Report
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FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
c. Income Taxes
It is each Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each Fund intends to distribute to shareholders substantially all of its income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.
Each Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of November 30, 2016, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.
d. Security Transactions, Investment Income, Expenses and Distributions
Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Dividends from net investment income are normally declared daily; these dividends may be reinvested or paid monthly to shareholders. Distributions to shareholders are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.
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 of the Trust. Fund specific expenses are charged directly to the Fund that incurred the expense.
Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.
e. Insurance
The scheduled payments of interest and principal for each insured municipal security in the Trust are insured by either a new issue insurance policy or a secondary insurance policy. Some municipal securities in the Funds are secured by collateral guaranteed by an agency of the U.S. government. Depending on the type of coverage, premiums for insurance are either added to the cost basis of the security or paid by a third party.
Insurance companies typically insure municipal bonds that tend to be of very high quality, with the majority of underlying municipal bonds rated A or better. However, an event involving an insurer could have an adverse effect on the value of the securities insured by that insurance company. There can be no assurance the insurer will be able to fulfill its obligations under the terms of the policy.
f. Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP 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.
g. Guarantees and Indemnifications
Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust, on behalf of the Funds, 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. Currently, the Trust expects the risk of loss to be remote.
franklintempleton.com
Semiannual Report 45
FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
| | | | | | | | | | | |
| 2. Shares of Beneficial Interest | | | | | | | | | | | |
| |
| At November 30, 2016, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares | |
| were as follows: | | | | | | | | | | | |
| |
| | Franklin California | | Franklin Tennessee | |
| | High Yield Municipal Fund | | Municipal Bond Fund | |
| | Shares | | | | Amount | | Shares | | | Amount | |
| Class A Shares: | | | | | | | | | | | |
| Six Months ended November 30, 2016 | | | | | | | | | | | |
| Shares sold | 14,137,321 | | $ | 158,994,169 | | 1,949,033 | | $ | 22,424,269 | |
| Shares issued in reinvestment of distributions | 1,963,356 | | | | 21,891,994 | | 406,153 | | | 4,650,862 | |
| Shares redeemed | (16,415,628 | ) | | (181,831,627 | ) | (2,761,657 | ) | | (31,532,573 | ) |
| Net increase (decrease) | (314,951 | ) | | $ | (945,464 | ) | (406,471 | ) | $ | (4,457,442 | ) |
| Year ended May 31, 2016 | | | | | | | | | | | |
| Shares sold | 30,832,731 | | $ | 332,124,577 | | 3,943,392 | | $ | 44,794,337 | |
| Shares issued in reinvestment of distributions | 4,080,352 | | | | 44,055,673 | | 817,838 | | | 9,280,939 | |
| Shares redeemed | (26,391,263 | ) | | (284,010,336 | ) | (3,691,266 | ) | | (41,844,331 | ) |
| Net increase (decrease) | 8,521,820 | | | $ | 92,169,914 | | 1,069,964 | | $ | 12,230,945 | |
| Class C Shares: | | | | | | | | | | | |
| Six Months ended November 30, 2016 | | | | | | | | | | | |
| Shares sold | 3,891,644 | | | $ | 44,152,218 | | | | | | |
| Shares issued in reinvestment of distributions | 397,113 | | | | 4,457,488 | | | | | | |
| Shares redeemed | (2,705,953 | ) | | | (30,285,194 | ) | | | | | |
| Net increase (decrease) | 1,582,804 | | | $ | 18,324,512 | | | | | | |
| Year ended May 31, 2016 | | | | | | | | | | | |
| Shares sold | 6,876,895 | | | $ | 74,909,800 | | | | | | |
| Shares issued in reinvestment of distributions | 808,943 | | | | 8,791,576 | | | | | | |
| Shares redeemed | (4,335,827 | ) | | | (46,992,521 | ) | | | | | |
| Net increase (decrease) | 3,350,011 | | | $ | 36,708,855 | | | | | | |
| Advisor Class Shares: | | | | | | | | | | | |
| Six Months ended November 30, 2016a | | | | | | | | | | | |
| Shares sold | 9,123,974 | | $ | 102,611,758 | | 906,929 | | $ | 10,298,058 | |
| Shares issued in reinvestment of distributions | 706,409 | | | | 7,891,775 | | 2,560 | | | 28,516 | |
| Shares redeemed | (8,827,010 | ) | | | (98,100,986 | ) | (90,929 | ) | | (1,029,064 | ) |
| Net increase (decrease) | 1,003,373 | | | $ | 12,402,547 | | 818,560 | | $ | 9,297,510 | |
| Year ended May 31, 2016 | | | | | | | | | | | |
| Shares sold | 20,333,235 | | $ | 220,443,000 | | | | | | |
| Shares issued in reinvestment of distributions | 1,270,053 | | | | 13,749,421 | | | | | | |
| Shares redeemed | (8,901,598 | ) | | | (96,148,271 | ) | | | | | |
| Net increase (decrease) | 12,701,690 | | $ | 138,044,150 | | | | | | |
| |
| |
| aFor the period September 15, 2016 (effective date) to November 30, 2016 for Franklin Tennessee Muncipal Bond Fund. | | | | | | |
46 Semiannual Report
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FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
3. Transactions with Affiliates
Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton Investments. Certain officers and trustees of the Funds are also officers and/or directors of the following subsidiaries:
| |
| Subsidiary | 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 |
| |
| a. Management Fees | |
| | |
| The Funds pay an investment management fee to Advisers based on the average daily net assets of each of the Funds as follows: |
| Annualized Fee Rate | | Net Assets |
| 0.625 | % | Up to and including $100 million |
| 0.500 | % | Over $100 million, up to and including $250 million |
| 0.450 | % | Over $250 million, up to and including $7.5 billion |
| 0.440 | % | Over $7.5 billion, up to and including $10 billion |
| 0.430 | % | Over $10 billion, up to and including $12.5 billion |
| 0.420 | % | Over $12.5 billion, up to and including $15 billion |
| 0.400 | % | Over $15 billion, up to and including $17.5 billion |
| 0.380 | % | Over $17.5 billion, up to and including $20 billion |
| 0.360 | % | In excess of $20 billion |
For the period ended November 30, 2016, each Fund’s annualized effective investment management fee rate based on average daily net assets was as follows:
| | | |
| Franklin | | Franklin | |
| California | | Tennessee | |
| High Yield | | Municipal | |
| Municipal Fund | | Bond Fund | |
| |
| 0.460 | % | 0.526 | % |
b. Administrative Fees
Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on each of the Funds’ average daily net assets, and is not an additional expense of the Funds.
c. Distribution Fees
The Board has adopted distribution plans for each share class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C compensation distribution plans, Franklin California High Yield Municipal Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.
franklintempleton.com
Semiannual Report 47
FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
| | | | |
| 3. Transactions with Affiliates (continued) | | | | |
| |
| c. Distribution Fees (continued) | | | | |
| The maximum annual plan rates, based on the average daily net assets, for each class, are as follows: | | | | |
| |
| | Franklin | | Franklin | |
| | California | | Tennessee | |
| | High Yield | | Municipal | |
| Municipal Fund | | Bond Fund | |
| Reimbursement Plans: | | | | |
| Class A | 0.15 | % | 0.15 | % |
| Compensation Plans: | | | | |
| Class C | 0.65 | % | —% | |
| Distributors has agreed to limit the current rate to 0.10% per year for each of the Funds for Class A. | | | | |
d. Sales Charges/Underwriting Agreements
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the period:
| | | | |
| | | Franklin | | Franklin |
| | | California | | Tennessee |
| | | High Yield | | Municipal |
| | | Municipal Fund | | Bond Fund |
| |
| Sales charges retained net of commissions paid to | | | | |
| unaffiliated brokers/dealers | $ | 176,680 | $ | 64,963 |
| CDSC retained | $ | 19,328 | $ | — |
e. Transfer Agent Fees
Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets.
For the period ended November 30, 2016, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:
| | | | |
| | | Franklin | | Franklin |
| | | California | | Tennessee |
| | | High Yield | | Municipal |
| | | Municipal Fund | | Bond Fund |
| |
| Transfer agent fees | $ | 130,900 | $ | 15,100 |
48 Semiannual Report
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FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
f. Interfund Transactions
Certain or all Funds engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. Purchases and sales for the period ended November 30, 2016, were as follows:
| | | | |
| | | Franklin | | Franklin |
| | | California | | Tennessee |
| | | High Yield | | Municipal |
| | | Municipal Fund | | Bond Fund |
| |
| Purchases | $ | 88,425,000 | $ | 2,300,000 |
| Sales | $ | 41,400,000 | $ | 2,300,000 |
4. Income Taxes
For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.
| | | | |
| At November 30, 2016, the capital loss carryforwards were as follows: | | |
| |
| | | Franklin | | Franklin |
| | | California | | Tennessee |
| | | High Yield | | Municipal |
| | | Municipal Fund | | Bond Fund |
| Capital loss carryforwards subject to expiration: | | | | |
| 2017 | $ | 5,767,799 | $ | 810,129 |
| 2018 | | 32,781,484 | | – |
| 2019 | | 21,604,912 | | – |
| Capital loss carryforwards not subject to expiration: | | | | |
| Short term | | 23,746,678 | | 3,538,963 |
| Long term | | 15,507,537 | | 3,066,296 |
| Total capital loss carryforwards | $ | 99,408,410 | $ | 7,415,388 |
At November 30, 2016, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
| | | | | | |
| | | Franklin | | | Franklin | |
| | | California | | | Tennessee | |
| | | High Yield | | | Municipal | |
| | | Municipal Fund | | | Bond Fund | |
| |
| Cost of investments | $ | 2,226,728,080 | | $ | 299,172,594 | |
| |
| Unrealized appreciation | $ | 182,940,065 | | $ | 13,008,694 | |
| Unrealized depreciation | | (69,024,311 | ) | | (10,095,804 | ) |
| Net unrealized appreciation (depreciation) | $ | 113,915,754 | | $ | 2,912,890 | |
Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of bond discounts and premiums.
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Semiannual Report 49
FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
5. Investment Transactions
Purchases and sales of investments (excluding short term securities) for the period ended November 30, 2016, were as follows:
| | | | |
| | | Franklin | | Franklin |
| | | California | | Tennessee |
| | | High Yield | | Municipal |
| | | Municipal Fund | | Bond Fund |
| |
| Purchases | $ | 326,344,744 | $ | 39,842,064 |
| Sales | $ | 190,403,328 | $ | 29,427,500 |
6. Credit Risk and Defaulted Securities
At November 30, 2016, Franklin California High Yield Municipal Fund had 28.5% of its portfolio invested in high yield securities, rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.
Certain or all Funds held defaulted securities and/or other securities for which the income has been deemed uncollectible. At November 30, 2016, the aggregate value of these securities for Franklin California High Yield Municipal Fund and Franklin Tennessee Municipal Bond Fund was $18,600,000 and $1,222,500, representing 0.8%, and 0.4%, respectively, of each Fund’s net assets. The Funds discontinue accruing income on securities for which income has been deemed uncollectible and provide an estimate for losses on interest receivable. The securities have been identified in the accompanying Statements of Investments.
7. Concentration of Risk
Certain or all Funds invest a large percentage of their total assets in obligations of issuers within their respective state and U.S. territories. Such concentration may subject the Funds to risks associated with industrial or regional matters, and economic, political or legal developments occurring within those states and U.S. territories. Investing in Puerto Rico securities may expose the Funds to heightened risks due to recent adverse economic and market changes, credit downgrades and ongoing restructuring discussions. In addition, investments in these securities are sensitive to interest rate changes and credit risk of the issuer and may subject the Funds to increased market volatility. The market for these investments may be limited, which may make them difficult to buy or sell.
8. Credit Facility
Certain or all Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 10, 2017. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.
Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the period ended November 30, 2016, the Funds did not use the Global Credit Facility.
50 Semiannual Report
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FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
9. Fair Value Measurements
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
- Level 1 – quoted prices in active markets for identical financial instruments
- Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
- Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.
A summary of inputs used as of November 30, 2016, in valuing the Funds’ assets carried at fair value, is as follows:
| | | | | | | | |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Franklin California High Yield Municipal Fund | | | | | | | | |
| Assets: | | | | | | | | |
| Investments in Securities: | | | | | | | | |
| Common Stocks and Other Equity Interests | $ | — | $ | — | $ | 611,323 | $ | 611,323 |
| Corporate Bonds | | — | | 3,995,211 | | — | | 3,995,211 |
| Municipal Bonds | | — | | 2,223,944,050 | | 1,005,250 | | 2,224,949,300 |
| Short Term Investments | | — | | 111,088,000 | | — | | 111,088,000 |
| Total Investments in Securities | $ | — | $ | 2,339,027,261 | $ | 1,616,573 | $ | 2,340,643,834 |
| |
| Franklin Tennessee Municipal Bond Fund | | | | | | | | |
| Assets: | | | | | | | | |
| Investments in Securities: | | | | | | | | |
| Municipal Bonds | $ | — | $ | 299,885,484 | $ | — | $ | 299,885,484 |
| Short Term Investments | | — | | 2,200,000 | | — | | 2,200,000 |
| Total Investments in Securities | $ | — | $ | 302,085,484 | $ | — | $ | 302,085,484 |
A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the period.
10. Subsequent Events
The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.
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Semiannual Report 51
FRANKLIN MUNICIPAL SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
| | | |
| Abbreviations | | |
| |
| Selected Portfolio | | |
| |
| 1915 Act | Improvement Bond Act of 1915 | GNMA | Government National Mortgage Association |
| ABAG | The Association of Bay Area Governments | GO | General Obligation |
| AD | Assessment District | HDA | Housing Development Authority/Agency |
| AGMC | Assured Guaranty Municipal Corp. | IDB | Industrial Development Bond/Board |
| AMBAC | American Municipal Bond Assurance Corp. | MFHR | Multi-Family Housing Revenue |
| BAM | Build America Mutual Assurance Co. | NATL | National Public Financial Guarantee Corp. |
| CDA | Community Development Authority/Agency | PBA | Public Building Authority |
| CFD | Community Facilities District | PFA | Public Financing Authority |
| COP | Certificate of Participation | PFAR | Public Financing Authority Revenue |
| CRDA | Community Redevelopment Authority/Agency | PIK | Payment-In-Kind |
| CSD | Central School District | PUD | Public Utility District |
| ETM | Escrow to Maturity | RDA | Redevelopment Agency/Authority |
| FGIC | Financial Guaranty Insurance Co. | UHSD | Unified/Union High School District |
| FHA | Federal Housing Authority/Agency | USD | Unified/Union School District |
| FICO | Financing Corp. | XLCA | XL Capital Assurance |
52 Semiannual Report
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FRANKLIN MUNICIPAL SECURITIES TRUST
Shareholder Information
Proxy Voting Policies and Procedures
The Trust’s investment manager has established Proxy Voting
Policies and Procedures (Policies) that the Trust uses to
determine how to vote proxies relating to portfolio securities.
Shareholders may view the Trust’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 (954) 527-7678 or by sending a written request
to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street,
Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of
the Trust’s proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and
Exchange Commission’s website at sec.gov and reflect the
most recent 12-month period ended June 30.
Quarterly Statement of Investments
The Trust files a complete statement of investments with the
U.S. Securities and Exchange Commission for the first and
third quarters for each fiscal year on Form N-Q. Shareholders
may view the filed Form N-Q by visiting the Commission’s
website at sec.gov. The filed form may also be viewed and
copied at the Commission’s Public Reference Room in
Washington, DC. Information regarding the operations of the
Public Reference Room may be obtained by calling (800)
SEC-0330.
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Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.
To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
| |
| © 2016-2017 Franklin Templeton Investments. All rights reserved. | MUN S 01/17 |
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.
(c) N/A
(d) N/A
(f) Pursuant to Item 12(a)(1), 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 John B. Wilson 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. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A
Item 10. 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 11. 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 changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.
Item 12. Exhibits.
(a)(1) Code of Ethics
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting 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 MUNICIPAL SECURITIES TRUST
By __/s/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date January 26, 2017
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/Laura F. Fergerson
Laura F. Fergerson
Chief Executive Officer - Finance and Administration
Date January 26, 2017
By __/s/Gaston Gardey
Gaston Gardey
Chief Financial Officer and Chief Accounting Officer
Date January 26, 2017
