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

FORM N-CSRS

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-6481
--------

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)

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

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

Date of fiscal year end: 05/31
-----

Date of reporting period: 11/30/03
--------

ITEM 1. REPORTS TO STOCKHOLDERS.

NOVEMBER 30, 2003
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[PHOTO OMITTED]

Franklin California
High Yield Municipal Fund

Franklin Tennessee
Municipal Bond Fund

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SEMIANNUAL REPORT AND SHAREHOLDER LETTER | TAX-FREE INCOME
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FRANKLIN
MUNICIPAL SECURITIES TRUST

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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.

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

FRANKLIN o Templeton o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE

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

SPECIALIZED EXPERTISE

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

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

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

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

TRUE DIVERSIFICATION

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

RELIABILITY YOU CAN TRUST

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

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MUTUAL FUNDS | RETIREMENT PLANS | 529 COLLEGE SAVINGS PLANS | SEPARATE ACCOUNTS
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[PHOTO OMITTED]

Not part of the semiannual report

Contents

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

SPECIAL FEATURE:
Understanding Your
Tax-Free Income Fund ............. 4

SEMIANNUAL REPORT

Franklin California High Yield
Municipal Fund ................... 8

Franklin Tennessee Municipal
Bond Fund ........................ 16

Financial Highlights and
Statements of Investments ........ 22

Financial Statements ............. 35

Notes to Financial Statements .... 38

Proxy Voting Policies and
Procedures ....................... 44

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Semiannual Report

Franklin California
High Yield Municipal Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin California High Yield
Municipal Fund seeks to provide high, current income exempt from regular federal
and California state personal income taxes through a portfolio consisting mainly
of high-yielding, medium-, lower- and non-rated California municipal bonds.1

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CREDIT QUALITY BREAKDOWN*
Franklin California High Yield Municipal Fund
Based on Total Long-Term Investments as of 11/30/03

[PIE CHART]

AAA..................................5.8%
AA...................................0.6%
A....................................5.6%
BBB..................................36.8%
Below Investment Grade...............51.2%

*Quality breakdown may include internal ratings for bonds not rated by an
independent rating agency.
- --------------------------------------------------------------------------------

This semiannual report for Franklin California High Yield Municipal Fund covers
the period ended November 30, 2003.

PERFORMANCE OVERVIEW

1. For investors subject to alternative minimum tax, a small portion of this
income may be taxable. Distributions of capital gains are generally taxable. In
general, an investor is paid a higher yield to assume a greater degree of risk.

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

8 | Semiannual Report

for the same period.2 The Performance Summary beginning on page 13 shows that at
the end of this reporting period the Fund's Class A shares' distribution rate
was 5.26%. An investor in the 2003 maximum combined federal and California state
personal income tax bracket of 41.05% would need to earn a distribution rate of
8.93% from a taxable investment to match the Fund's Class A tax-free
distribution rate.

STATE UPDATE

The state's recall election occurred in October and Governor Schwarzenegger was
inaugurated in mid-November. Although the administrative transition came at a
sensitive time for the state's finances, it was not in itself viewed as a
significant credit event. The governor immediately reduced the state's motor
vehicle license fee (MVLF) and stated his intention to provide replacement state
revenues to compensate for the resulting loss in revenue to local governments.
Governor Schwarzenegger proposed a $15 billion deficit bond issue to cover past
operating deficits and the MVLF reduction for fiscal year 2004.3 The additional
debt would leave the state with a still-moderate debt level relative to its
overall budget.

During the six months under review, the state's large and diverse economy
performed fairly close to that of the nation. Despite a sharp downturn in the
high-technology sector, overall private-sector employment statewide declined by
a moderate 2.4% from its mid-2001 peak, similar to the 2.3% private-sector job
loss nationally.4 However, California's revenue declines in the recent recession
were more severe than employment declines. The state experienced volatile
financial operations largely due to wide revenue swings, persistent expenditure
pressures from population growth and education spending policies, and a limited
willingness to maintain reserves. The General Fund faced large operating
shortfalls in the past two fiscal years, and state income tax revenues fell
sharply due to a dramatic decline of stock market-related sources of income such
as capital gains and stock option exercises, which had risen dramatically in
prior years. Budgetary responses in fiscal years 2003 and 2004 relied heavily on
temporary measures and were limited by the state legislature's rejection of deep
expenditure reductions.

A broadly diversified and high-wealth economy and wide legal powers to raise
revenues were California's most significant fundamental credit strengths.
Per-capita income was about 106% of the U.S. average, with a greater proportion
of high-income taxpayers than the nation.4 Several of the state's largest
metropolitan regions

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

3. Source: Standard & Poor's, "S&PCORRECT: California's Credit Rating Unchanged
as Governor Reduces Motor Vehicle License Fee," RATINGSDIRECT, 11/18/03.

4. Source: Moody's Investors Service, "New Issue: California (State of),"
10/24/03. This does not indicate Moody's rating of the Fund.

Semiannual Report | 9

outperformed the U.S. economy throughout the recent business cycle. However,
California faces a weak liquidity position and exposure to market refinancing
risk as the state implements a strategy to replace short-term debt maturing in
June 2004 with proposed longer-term deficit financing. For fiscal year 2004, the
state budget anticipates modest employment growth and a 3.1% increase in overall
tax revenues; however, uncertainties remain regarding the U.S. economy and when
it will begin to produce overall employment growth.4

California's general obligation bond rating was downgraded to A3 in August 2003,
reflecting the state's delayed and weak response to its budget imbalance,
weakened liquidity position and exposure to refinancing risk stemming from its
funding of deficits with large levels of short-term debt.4 On the positive side,
preliminary economic indicators show a state manufacturing uptick the past few
months, particularly in the high-technology sector. In addition, personal income
growth has begun to match the nation's recently.

ECONOMIC AND MARKET OVERVIEW

The municipal bond market, like other bond markets, was volatile over the
six-month period ended November 30, 2003. The market struggled with geopolitical
events, an accommodative Federal Reserve Board (Fed), mixed economic releases, a
strong equity market, and a record level of new bond issuance. Through mid-June,
the municipal bond market generally performed well as yields decreased to
historically low levels; the Municipal Market Data AAA 10-year yield fell from
3.10% at the beginning of the period to 2.85% on June 13, and the 30-year yield
declined from 4.34% to 4.20% over the same period.5 Market strength was driven
by perceptions that inflation would stay low and the Fed would remain
accommodative as economic indicators seemed to show little growth. Early in the
period, the employment outlook was declining and consumer confidence remained
low.

The Municipal Market Data AAA 10-year yield increased from 2.85% on June 13 to
3.55% on November 30, and the 30-year yield rose from 4.20% to 4.72% for the
same period.5 The yield increase was attributed to rising consumer confidence
driven by several factors that were perceived to put the economy in a stronger
posture toward growth. The Fed reduced the federal funds target rate by 25 basis
points (0.25%) rather than the widely expected 50 basis points (0.50%) at its
June meeting, bringing the yield to 1.00%. Furthermore, the Fed left the federal
funds target rate unchanged at its August, September and October meetings,
citing indications of a strengthening economy amid higher-than-expected gross
domestic product. With signs of economic and job growth, historically low
interest rates, passage of the president's tax plan, and diminishing concerns
around pending geopolitical risks, the market drove yields generally higher
through most of the reporting period.

5. Source: Thomson Financial.

10 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
Franklin California High Yield Municipal Fund
6/1/03-11/30/03

- --------------------------------------------------------------------------------
DIVIDEND PER SHARE
--------------------------------------
MONTH CLASS A CLASS B CLASS C
- --------------------------------------------------------------------------------
June 4.55 cents 4.09 cents 4.09 cents
- --------------------------------------------------------------------------------
July 4.55 cents 4.09 cents 4.09 cents
- --------------------------------------------------------------------------------
August 4.55 cents 4.08 cents 4.09 cents
- --------------------------------------------------------------------------------
September 4.55 cents 4.08 cents 4.09 cents
- --------------------------------------------------------------------------------
October 4.55 cents 4.08 cents 4.09 cents
- --------------------------------------------------------------------------------
November 4.55 cents 4.08 cents 4.09 cents
- --------------------------------------------------------------------------------
TOTAL 27.30 CENTS 24.50 CENTS 24.54 CENTS
- --------------------------------------------------------------------------------
*Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month.

PORTFOLIO BREAKDOWN
Franklin California High Yield Municipal Fund
11/30/03

- --------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS
- --------------------------------------
Tax-Supported 50.0%
- --------------------------------------
Transportation 11.8%
- --------------------------------------
Other Revenue 9.4%
- --------------------------------------
Hospital & Health Care 7.2%
- --------------------------------------
Utilities 5.4%
- --------------------------------------
Prerefunded 5.1%
- --------------------------------------
Higher Education 5.1%
- --------------------------------------
Subject to Government
Appropriations 4.9%
- --------------------------------------
Corporate-Backed 0.8%
- --------------------------------------
Housing 0.3%
- --------------------------------------

INVESTMENT STRATEGY

We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain our exposure to higher coupon securities. We
generally employ a buy-and-hold approach and invest in securities that we
believe should provide the most relative value in the market. As we invest
throughout different interest rate environments, our portfolios become well
diversified with a broad range of coupons, calls and maturities. This broad
diversification helps stabilize Fund share price. We generally stay fully
invested to support income distribution.

MANAGER'S DISCUSSION

During the reporting period, we followed our value-oriented strategy, investing
primarily for income. We looked to remain fully invested in bonds ranging from
20 to 30 years in maturity with good call options. As interest rates began to
rise in June and July, we focused more on executing tax losses, which entailed
selling bonds purchased in a lower interest rate environment, and purchasing
similarly structured bonds. This strategy enabled the Fund to book tax losses
that may be used to offset future capital gains, and allowed it to increase the
portfolio's book yield or distributable yield.

Semiannual Report | 11

being called when interest rates decline. On the other hand, many of the higher
coupon bonds that we continue to hold have recently traded at a premium, which
generally makes them less price sensitive to interest rate fluctuations and thus
behave defensively through an increasing interest rate cycle. Furthermore, our
higher coupon bonds allowed us to distribute an attractive tax-free distribution
yield, which we expect ultimately to drive our intermediate- and long-term
performance.

Thank you for your participation in Franklin California High Yield Municipal
Fund. We look forward to serving your investment needs in the years ahead.

THIS DISCUSSION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS AS OF
NOVEMBER 30, 2003, 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 ADVISOR MAKES NO REPRESENTATION OR WARRANTY AS TO THEIR
COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT MANAGEMENT
PHILOSOPHY.

12 | Semiannual Report

Performance Summary as of 11/30/03

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND

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

PRICE AND DISTRIBUTION INFORMATION
- --------------------------------------------------------------------------------------------------
CLASS A CHANGE 11/30/03 5/31/03
- --------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.17 $10.04 $10.21
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/03-11/30/03)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.2730
- --------------------------------------------------------------------------------------------------
CLASS B CHANGE 11/30/03 5/31/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.17 $10.09 $10.26
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/03-11/30/03)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.2450
- --------------------------------------------------------------------------------------------------
CLASS C CHANGE 11/30/03 5/31/03
- --------------------------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.16 $10.08 $10.24
- --------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/03-11/30/03)
- --------------------------------------------------------------------------------------------------
Dividend Income $0.2454
- --------------------------------------------------------------------------------------------------

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

Performance Summary (CONTINUED)

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

Cumulative Total Return 1 +1.03% +6.52% +22.40% +77.15%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -3.24% +2.01% +3.23% +5.42%
- -----------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/03) 3 +1.26% +3.40% +5.33%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 5.26%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 5 8.93%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 6 5.09%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 5 8.63%
- -----------------------------------------------------------------------------------------------------
CLASS B 6-MONTH 1-YEAR 3-YEAR INCEPTION (2/1/00)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +0.75% +5.90% +17.91% +30.93%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -3.19% +1.90% +4.74% +6.64%
- -----------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/03) 3 +1.28% +4.54% +6.75%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 4.96%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 5 8.41%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 6 4.77%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 5 8.09%
- -----------------------------------------------------------------------------------------------------
CLASS C 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/1/96)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 1 +0.85% +5.92% +19.16% +51.67%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -1.10% +3.88% +3.36% +5.50%
- -----------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/03) 3 +3.27% +3.55% +5.57%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 4 4.89%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 5 8.30%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 6 4.73%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 5 8.02%
- -----------------------------------------------------------------------------------------------------

ONGOING MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE; MORE
RECENT RETURNS MAY DIFFER FROM THOSE SHOWN. SINCE MARKETS CAN GO DOWN AS WELL AS
UP, INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE WITH MARKET CONDITIONS,
AND YOU MAY HAVE A GAIN OR LOSS WHEN YOU SELL YOUR SHARES.

FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

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

Performance Summary (CONTINUED)

ENDNOTES

BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO
INTEREST RATE MOVEMENTS; THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL
FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS IN
A SINGLE STATE, IT IS SUBJECT TO GREATER RISK OF ADVERSE ECONOMIC AND REGULATORY
CHANGES IN THAT STATE THAN A GEOGRAPHICALLY DIVERSIFIED FUND. HIGHER YIELDS
REFLECT HIGHER CREDIT RISKS ASSOCIATED WITH THE FUND'S PORTFOLIO HOLDINGS. THE
FUND'S PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Subject to the current, maximum 4.25% initial sales charge. Prior to
7/1/94, Fund shares were offered at a higher initial sales charge; thus actual
total returns may be lower.

CLASS B: Subject to no initial sales charge, but subject to a contingent
deferred sales charge (CDSC) declining from 4% to 0% over six years. These
shares have higher annual fees and expenses than Class A shares.

CLASS C: Subject to 1% initial sales charge and 1% CDSC for shares redeemed
within 18 months of investment. These shares have higher annual fees and
expenses than Class A shares.

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

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

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

4. Distribution rate is based on an annualization of the respective class's
current monthly dividend and the maximum offering price (NAV for Class B) per
share on 11/30/03.

5. Taxable equivalent distribution rate and yield assume the published rates as
of 6/18/03 for the maximum combined federal and California state personal income
tax bracket of 41.05%, based on the federal income tax rate of 35.00%.

6. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 11/30/03.

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

Franklin Tennessee Municipal Bond Fund

YOUR FUND'S GOAL AND PRIMARY INVESTMENTS: Franklin Tennessee Municipal Bond Fund
seeks to provide high, current income exempt from regular federal and Tennessee
state personal income taxes while seeking preservation of capital through a
portfolio consisting mainly of Tennessee municipal securities.1

- --------------------------------------------------------------------------------
CREDIT QUALITY BREAKDOWN*
Franklin Tennessee Municipal Bond Fund
Based on Total Long-Term Investments as of 11/30/03

[PIE CHART]

AAA....................69.6%
AA.....................23.5%
A......................3.2%
BBB....................3.7%

*Quality breakdown may include internal ratings for bonds not rated by an
independent rating agency.
- --------------------------------------------------------------------------------

This semiannual report for Franklin Tennessee Municipal Bond Fund covers the
period ended November 30, 2003.

PERFORMANCE OVERVIEW

Because bond yield and price move in opposite directions, as yields rose bond
prices fell for the six-month reporting period. The Fund's Class A share price,
as measured by net asset value, declined from $11.59 on May 31, 2003, to $11.31
on November 30, 2003. The Fund's Class A shares paid dividends totaling 24.50
cents per share for the same period.2 The Fund reduced its dividend during the
period under review as shown in the dividend distributions table. The decrease
mainly resulted from

1. For investors subject to alternative minimum tax, a small portion of this
income may be taxable. Distributions of capital gains are generally taxable.

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

16 | Semiannual Report

investing new cash flows during a historically low interest rate environment.
The Performance Summary beginning on page 20 shows that at the end of this
reporting period the Fund's Class A shares' distribution rate was 4.12%. An
investor in the 2003 maximum combined federal and Tennessee state personal
income tax bracket of 38.90% would need to earn a distribution rate of 6.74%
from a taxable investment to match the Fund's Class A tax-free distribution
rate.

STATE UPDATE

Tennessee's economy has begun to show some signs of recovery as job growth in
government, tourism and various other services sectors have offset some of the
losses in manufacturing. Thus, unemployment remained low at 5.7% in November
2003, less than the 5.9% national average.3

However, despite strong revenue collections, the state experienced a $250
million budget shortfall in fiscal year 2003 due to a weak national economy and
Tennessee's greater-than-expected expenditure growth. Approximately $194 million
of the deficit was attributed to TennCare cost overruns. TennCare is the state's
health care program serving its Medicaid-eligible, uninsured or uninsurable
citizens. To balance the budget, Tennessee passed a one-cent sales tax increase
and tapped several non-recurring revenues, including $67.2 million from the
state's rainy day fund and a portion of a $96 million federal flexible grant.4,
5

Independent credit rating agencies Standard & Poor's and Moody's Investors
Service assigned AA and Aa2 ratings to Tennessee's general obligation bonds.6
These investment-grade ratings reflect the state's historically modest debt
ratios, increasing economic diversification and recent strides toward long-term
fiscal stability. However, both rating agencies hold negative credit outlooks
for Tennessee because of the state's thin reserve position and continued health
care spending pressures.

ECONOMIC AND MARKET OVERVIEW

3. Source: Bureau of Labor Statistics.

4. Source: Moody's Investors Service, "New Issue: Tennessee (State of),"
8/25/03.

5. Source: Standard & Poor's, "Tennessee: Tax Secured, General Obligation,"
RATINGSDIRECT, 8/25/03.

6. These do not indicate ratings of the Fund.

Semiannual Report | 17

PORTFOLIO BREAKDOWN
Franklin Tennessee Municipal Bond Fund
11/30/03

- -----------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS
- -----------------------------------------
General Obligation 28.6%
- -----------------------------------------
Utilities 25.5%*
- -----------------------------------------
Prerefunded 12.5%
- -----------------------------------------
Hospital & Health Care 10.1%
- -----------------------------------------
Other Revenue 6.8%
- -----------------------------------------
Transportation 5.6%
- -----------------------------------------
Housing 4.1%
- -----------------------------------------
Subject to Government
Appropriations 3.7%
- -----------------------------------------
Corporate-Backed 2.2%
- -----------------------------------------
Tax-Supported 0.9%
- -----------------------------------------
*The Fund may invest more than 25% in municipal securities that finance similar
types of projects such as utilities. A change that affects one project may
affect all similar projects, thereby increasing market risk.

at the beginning of the period to 2.85% on June 13, and the 30-year yield
declined from 4.34% to 4.20% over the same period. 7 Market strength was driven
by perceptions that inflation would stay low and the Fed would remain
accommodative as economic indicators seemed to show little growth. Early in the
period, the employment outlook was declining and consumer confidence remained
low.

The Municipal Market Data AAA 10-year yield increased from 2.85% on June 13 to
3.55% on November 30, and the 30-year yield rose from 4.20% to 4.72% for the
same period.7 The yield increase was attributed to rising consumer confidence
driven by several factors that were perceived to put the economy in a stronger
posture toward growth. The Fed reduced the federal funds target rate by 25 basis
points (0.25%) rather than the widely expected 50 basis points (0.50%) at its
June meeting, bringing the yield to 1.00%. Furthermore, the Fed left the federal
funds target rate unchanged at its August, September and October meetings,
citing indications of a strengthening economy amid higher-than-expected gross
domestic product. With signs of economic and job growth, historically low
interest rates, passage of the president's tax plan, and diminishing concerns
around pending geopolitical risks, the market drove yields generally higher
through most of the reporting period.

INVESTMENT STRATEGY

MANAGER'S DISCUSSION

Early in the reporting period, we followed our value-oriented strategy,
investing primarily for income. We looked to remain fully invested in bonds
ranging from 15 to 30 years in maturity with good call options. We changed our
general investment focus in July, however, when municipal bond market yields
began to increase significantly. As a result, we focused more on executing tax
losses, which entailed selling bonds purchased in a lower interest rate
environment, and purchasing similarly structured bonds. This strategy enabled
the Fund to book losses that may be used to offset future capital gains, and
allowed it to increase the portfolio's book yield or distributable yield.

7. Source: Thomson Financial.

18 | Semiannual Report

Consistent with our income-oriented investment philosophy, we generally invest
in bonds that we believe should provide the most relative value from an income
perspective, and we are comfortable holding them unless we find an opportunity
to enhance the portfolio's structure or increase its future income-earning
potential. As a result of our strategy, the Fund is generally more weighted in
higher coupon bonds purchased in a more favorable yield environment. Such bonds
are susceptible to being called when interest rates decline. On the other hand,
many of the higher coupon bonds that we continue to hold have recently traded at
a premium, which generally makes them less price sensitive to interest rate
fluctuations and thus behave defensively through an increasing interest rate
cycle. Furthermore, our higher coupon bonds allowed us to distribute an
attractive tax-free distribution yield, which we expect ultimately to drive our
intermediate- and long-term performance.

Thank you for your participation in Franklin Tennessee Municipal Bond Fund. We
look forward to serving your future investment needs.

DIVIDEND DISTRIBUTIONS*
Franklin Tennessee Municipal Bond Fund-
Class A
6/1/03-11/30/03

- --------------------------------------
MONTH DIVIDEND PER SHARE
- --------------------------------------
June 4.15 cents
- --------------------------------------
July 4.15 cents
- --------------------------------------
August 4.05 cents
- --------------------------------------
September 4.05 cents
- --------------------------------------
October 4.05 cents
- --------------------------------------
November 4.05 cents
- --------------------------------------
TOTAL 24.50 CENTS
- --------------------------------------

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

Semiannual Report | 19

Performance Summary as of 11/30/03

FRANKLIN TENNESSEE MUNICIPAL BOND FUND

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

PRICE AND DISTRIBUTION INFORMATION
- -----------------------------------------------------------------------------------------------------
CLASS A CHANGE 11/30/03 5/31/03
- -----------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.28 $11.31 $11.59
- -----------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/03-11/30/03)
- -----------------------------------------------------------------------------------------------------
Dividend Income $0.245
- -----------------------------------------------------------------------------------------------------

PERFORMANCE 1
- -----------------------------------------------------------------------------------------------------
CLASS A 6-MONTH 1-YEAR 5-YEAR INCEPTION (5/10/94)
- -----------------------------------------------------------------------------------------------------
Cumulative Total Return 2 -0.29% +7.04% +26.78% +82.92%
- -----------------------------------------------------------------------------------------------------
Average Annual Total Return 3 -4.49% +2.49% +3.95% +6.04%
- -----------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/03) 4 +1.01% +4.05% +6.07%
- -----------------------------------------------------------------------------------------------------
Distribution Rate 5 4.12%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 6 6.74%
- -----------------------------------------------------------------------------------------------------
30-Day Standardized Yield 7 3.57%
- -----------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 6 5.84%
- -----------------------------------------------------------------------------------------------------

FOR MORE CURRENT PERFORMANCE, SEE "FUNDS AND PERFORMANCE" AT
FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

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

Performance Summary (CONTINUED)

ENDNOTES

BOND PRICES, AND THUS THE FUND'S SHARE PRICE, GENERALLY MOVE IN THE OPPOSITE
DIRECTION FROM INTEREST RATES. MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO
INTEREST RATE MOVEMENTS; THEREFORE, THE FUND'S YIELD AND SHARE PRICE WILL
FLUCTUATE WITH MARKET CONDITIONS. SINCE THE FUND CONCENTRATES ITS INVESTMENTS 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'S
PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

CLASS A: Subject to the maximum 4.25% initial sales charge.

1. The Fund's manager agreed in advance to waive a portion of its management
fees and to make certain payments to reduce expenses. If the manager had not
taken this action, the Fund's distribution rate and total return would have been
lower, and yield for the period would have been 3.38%. The fee waiver may be
discontinued at any time upon notice to the Fund's Board of Trustees.

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

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

4. In accordance with SEC rules, we provide standardized average annual total
return information through the latest calendar quarter. 5. Distribution rate is
based on an annualization of the current 4.05 cent per share monthly dividend
and the maximum offering price of $11.81 per share on 11/30/03.

6. Taxable equivalent distribution rate and yield assume the published rates as
of 6/18/03 for the maximum combined federal and Tennessee state personal income
tax bracket of 38.90%, based on the federal income tax rate of 35.00%.

7. Yield, calculated as required by the SEC, is based on the earnings of the
Fund's portfolio for the 30 days ended 11/30/03.

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

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND

--------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2003 YEAR ENDED MAY 31,
CLASS A (UNAUDITED) 2003 2002 2001 2000 1999
--------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period .............. $10.21 $ 9.97 $9.95 $9.52 $10.60 $10.65
--------------------------------------------------------------------------

Income from investment operations:

Net investment income a .......................... .28 .54 .57d .60 .56 .57

Net realized and unrealized gains (losses) ....... (.18) .25 .02d .39 (1.08) (.04)
--------------------------------------------------------------------------

Total from investment operations .................. .10 .79 .59 .99 (.52) .53
--------------------------------------------------------------------------

Less distributions from net investment income ..... (.27) (.55) (.57) (.56) (.56) (.58)
--------------------------------------------------------------------------

Net asset value, end of period .................... $10.04 $10.21 $9.97 $9.95 $ 9.52 $10.60
--------------------------------------------------------------------------

Total return b .................................... 1.03% 8.15% 5.99% 10.61% (4.88)% 5.07%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................. $531,968 $537,770 $503,337 $483,666 $464,423 $583,752

Ratios to average net assets:

Expenses ......................................... .65%c .65% .61% .50% .49% .44%

Expenses excluding waiver and payments by
affiliate ....................................... .65%c .65% .65% .65% .66% .71%

Net investment income ............................ 5.63%c 5.36% 5.66%d 6.02% 5.70% 5.22%

Portfolio turnover rate ........................... 5.49% 10.13% 21.77% 29.01% 47.45% 14.31%

<FN>
a Based on average daily shares outstanding effective year ended May 31, 2000.

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

c Annualized.

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

Net investment income per share ........................... $.01
Net realized and unrealized gains (losses) per share ...... (.01)
Ratio of net investment income to average net assets ...... .08%

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

22 | Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND (CONTINUED)

----------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2003 YEAR ENDED MAY 31,
CLASS B (UNAUDITED) 2003 2002 2001 2000 E
----------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ...................... $10.25 $10.02 $ 9.98 $9.54 $9.34
----------------------------------------------------------------

Income from investment operations:

Net investment income a .................................. .26 .49 .52d .53 .17

Net realized and unrealized gains (losses) ............... (.18) .24 .03d .42 .20
----------------------------------------------------------------

Total from investment operations .......................... .08 .73 .55 .95 .37
----------------------------------------------------------------

Less distributions from net investment income ............. (.24) (.50) (.51) (.51) (.17)
----------------------------------------------------------------

Net asset value, end of period ............................ $10.09 $10.25 $10.02 $9.98 $9.54
----------------------------------------------------------------

Total return b ............................................ .75% 7.52% 5.58% 10.08% 4.00%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ......................... $29,297 $29,268 $23,029 $11,598 $808

Ratios to average net assets:

Expenses ................................................. 1.19%c 1.20% 1.16% 1.05% 1.02%c

Expenses excluding waiver and payments by affiliate ...... 1.19%c 1.20% 1.20% 1.20% 1.19%c

Net investment income .................................... 5.09%c 4.81% 5.13%d 5.32% 5.33%c

Portfolio turnover rate ................................... 5.49% 10.13% 21.77% 29.01% 47.45%

<FN>
a Based on average daily shares outstanding.

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

c Annualized.

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

Net investment income per share .......................... $.01
Net realized and unrealized gains (losses) per share ..... (.01)
Ratio of net investment income to average net assets ..... .08%

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

e For the period February 1, 2000 (effective date) to May 31, 2000.
</FN>

Semiannual Report | 23

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND (CONTINUED)

-----------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2003 YEAR ENDED MAY 31,
CLASS C (UNAUDITED) 2003 2002 2001 2000 1999
-----------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............. $10.24 $10.01 $ 9.98 $9.55 $10.63 $10.68
-----------------------------------------------------------------------------

Income from investment operations:

Net investment income a ......................... .27 .48 .52d .54 .51 .51

Net realized and unrealized gains (losses) ...... (.19) .25 .02d .40 (1.08) (.04)
-----------------------------------------------------------------------------

Total from investment operations ................. .08 .73 .54 .94 (.57) .47
-----------------------------------------------------------------------------

Less distributions from net investment income .... (.24) (.50) (.51) (.51) (.51) (.52)
-----------------------------------------------------------------------------

Net asset value, end of period ................... $10.08 $10.24 $10.01 $9.98 $ 9.55 $10.63
-----------------------------------------------------------------------------

Total return b ................................... .85% 7.43% 5.49% 9.98% (5.39)% 4.48%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) ................ $74,999 $77,748 $74,611 $67,735 $64,890 $78,338

Ratios to average net assets:

Expenses ........................................ 1.20%c 1.20% 1.16% 1.05% 1.04% .99%

Expenses excluding waiver and payments by
affiliate ...................................... 1.20%c 1.20% 1.20% 1.20% 1.21% 1.26%

Net investment income ........................... 5.08%c 4.81% 5.12%d 5.48% 5.15% 4.66%

Portfolio turnover rate .......................... 5.49% 10.13% 21.77% 29.01% 47.45% 14.31%

<FN>
a Based on average daily shares outstanding effective year ended May 31, 2000.

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

c Annualized.

Net investment income per share ........................... $.01
Net realized and unrealized gains (losses) per share ...... (.01)
Ratio of net investment income to average net assets ...... .08%

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

24 | See notes to financial statements. | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS 98.3%
BONDS 85.8%
ABAG 1915 Act,
Revenue, Windemere Ranch AD 1, 7.30%, 9/02/17 ......................................... $ 9,895,000 $ 10,458,520
Revenue, Windemere Ranch AD 1, 7.35%, 9/02/20 ......................................... 7,845,000 8,282,202
Special Assessment, Windemere Ranch AD 1, 7.45%, 9/02/30 .............................. 4,835,000 5,137,574
Special Assessment, Windmere Ranch AD 99-1, 6.20%, 9/02/20 ............................ 1,950,000 2,001,987
Special Assessment, Windmere Ranch AD 99-1, 6.30%, 9/02/25 ............................ 2,935,000 2,996,341
ABAG Finance Authority for Nonprofit Corps. COP, 6.15%, 1/01/22 .......................... 1,335,000 1,451,078
Adelanto Water Authority Revenue,
Parity Water Systems Acquisition Project, Series A, Pre-Refunded, 7.50%, 9/01/28 ...... 3,250,000 3,998,572
Water Systems Acquisition Project, sub. lien, Series A, Pre-Refunded, 7.50%, 9/01/28 .. 2,000,000 2,524,820
Alameda CFD No. 2 Special Tax, 6.125%, 9/01/16 ........................................... 1,240,000 1,271,856
Alameda PFA, Local Agency Revenue, Special Tax, Community Facility No. 1-A,
6.70%, 8/01/12 ........................................................................ 3,400,000 3,630,010
7.00%, 8/01/19 ........................................................................ 4,015,000 4,220,086
Avenal PFAR, Refunding,
7.00%, 9/02/10 ........................................................................ 1,040,000 1,104,303
7.25%, 9/02/27 ........................................................................ 3,665,000 3,851,805
Calexico Special Financing Authority Sales Tax Revenue,
ETM, 7.40%, 1/01/04 ................................................................... 235,000 236,154
ETM, 7.40%, 1/01/05 ................................................................... 285,000 303,861
ETM, 7.40%, 1/01/06 ................................................................... 340,000 381,103
Pre-Refunded, 7.40%, 1/01/18 .......................................................... 7,680,000 8,608,435
California City RDA, Tax Allocation Revenue, Refunding, Series A-1, 7.75%, 9/01/34 ....... 9,670,000 10,257,646
California Educational Facilities Authority Revenue,
Keck Graduate Institute, 6.75%, 6/01/30 ............................................... 2,500,000 2,680,650
Pooled College and University, Series B, 6.625%, 6/01/20 .............................. 1,000,000 1,082,560
Pooled College and University, Series B, 6.30%, 4/01/21 ............................... 1,000,000 1,073,190
California Health Facilities Financing Authority Revenue,
Kaiser Permanente, Series A, 5.40%, 5/01/28 ........................................... 2,500,000 2,544,150
Kaiser Permanente, Series B, 5.25%, 10/01/16 .......................................... 3,250,000 3,390,790
Thessalonika Family, Series A, 6.20%, 12/01/15 ........................................ 990,000 1,079,882
California PCFA,
PCR, Southern California Edison Co., Series B, 6.40%, 12/01/24 ........................ 2,000,000 2,002,640
Solid Waste Disposal Revenue, Browning-Ferris Industries Inc., 6.75%, 9/01/19 ......... 7,000,000 6,820,590
Solid Waste Disposal Revenue, Keller Canyon Landfill Co. Project, 6.875%, 11/01/27 .... 9,100,000 9,109,100
California Special Districts Association Finance Corp. COP, Series V, 7.50%, 5/01/13 ..... 45,000 46,527
California State GO, FGIC Insured, 6.00%, 8/01/19 ........................................ 30,000 31,476
California State HFAR, Home Mortgage, Series L, MBIA Insured, 6.40%, 8/01/27 ............. 455,000 473,678
California Statewide CDA Revenue,
Bentley School, Refunding, 6.75%, 7/01/32 ............................................. 8,250,000 8,382,990
COP, Familiesfirst Inc., CHFCLP Insured, Pre-Refunded, 7.25%, 12/01/22 ................ 1,800,000 1,942,902
Elder Care Alliance, Series A, 8.00%, 11/15/22 ........................................ 3,000,000 3,088,380
Elder Care Alliance, Series A, 8.25%, 11/15/32 ........................................ 4,000,000 4,116,400
Eskaton Village Grass Valley, 8.25%, 11/15/31 ......................................... 10,000,000 10,842,400
Monterey Institute International, 7.75%, 7/01/31 ...................................... 10,000,000 8,741,600
Presidio Hill School, 6.875%, 8/01/32 ................................................. 6,195,000 6,299,510

Semiannual Report | 25

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
California Statewide CDA Revenue, (cont.)
Prospect Sierra School, 6.75%, 9/01/32 ................................................ $ 5,000,000 $ 5,132,050
Seven Hills School, 6.50%, 8/01/31 .................................................... 5,600,000 5,690,384
Sonoma County Day School, 6.75%, 1/01/32 .............................................. 6,000,000 6,223,020
Thomas Jefferson School of Law Project, 7.75%, 10/01/31 ............................... 5,000,000 5,367,000
Turning Point, 6.50%, 11/01/31 ........................................................ 6,130,000 6,289,012
California Statewide CDA,
COP, Catholic Healthcare West, 6.50%, 7/01/20 ......................................... 12,060,000 12,974,510
COP, International School of Peninsula Project, 7.50%, 11/01/29 ....................... 10,705,000 11,130,631
COP, Windward School, 6.90%, 9/01/23 .................................................. 2,000,000 2,080,640
Lease Revenue, Special Facilities, United Airlines, Series A, 5.70%, 10/01/33 ......... 3,320,000 1,427,633
California Statewide Communities Development Revenue, John F. Kennedy University, 6.75%,
10/01/33 ............................................................................... 5,000,000 4,807,500
California University Fresno Association Inc. Revenue, Senior Auxiliary Organization Event
Center, 6.00%, 7/01/22 ................................................................. 3,500,000 3,647,315
Campbell RDA, Tax Allocation, Central Campbell Redevelopment Project, Series A, 6.55%,
10/01/32 ............................................................................... 5,300,000 5,692,253
Children's Trust Fund Tobacco Settlement Revenue, Asset Backed Bonds, Refunding, 5.625%,
5/15/43 ................................................................................ 700,000 650,559
Chula Vista Special Tax, CFD No. 2000-1, 6.60%, 9/01/30 .................................. 1,500,000 1,543,200
Corona CFD No. 01-02, Special Tax, Improvement Nos. 1 and 2, 6.25%, 9/01/32 .............. 1,890,000 1,892,060
Corona-Norco USD, Special Tax, CFD No. 99-1, 7.00%, 9/01/29 .............................. 2,120,000 2,243,956
Cotati South Sonoma Business Park AD, Special Assessment, Improvement, 6.50%,
9/02/33 ................................................................................ 5,875,000 5,886,339
Duarte RDA, Tax Allocation,
Davis Addition Project Area, Refunding, 6.70%, 9/01/14 ................................ 2,615,000 2,874,303
Davis Addition Project Area, Refunding, 6.90%, 9/01/18 ................................ 4,120,000 4,478,934
Rancho Duarte Phase I Project Area, Pre-Refunded, 6.80%, 9/01/16 ...................... 670,000 799,223
El Dorado County Public Financing Revenue, 6.375%, 2/15/25 ............................... 1,885,000 2,042,982
El Dorado County Special Tax, CFD No. 1992-1, 6.125%, 9/01/16 ............................ 4,755,000 4,926,893
Elk Grove Special Tax, East Franklin Community No. 1-A, 6.00%, 8/01/33 ................... 1,750,000 1,781,920
Elsinore Valley Municipal Water District Special Tax, CFD No. 99-1, 7.00%, 9/01/29 ....... 3,500,000 3,678,535
Escondido Revenue COP, Refunding, Series A, FGIC Insured, 6.00%, 9/01/31 ................. 1,815,000 2,042,637
Fontana Special Tax CFD No. 12,
6.60%, 9/01/19 ........................................................................ 3,295,000 3,460,376
6.625%, 9/01/30 ....................................................................... 7,675,000 8,031,120
Garden Grove Housing Authority MFHR, Set-Aside Tax Increment, Series C, 6.70%, 7/01/24 ... 6,375,000 6,463,039
Gateway Improvement Authority Revenue, Marin City CFD, Series A, Pre-Refunded, 7.75%,
9/01/25 ............................................................................... 2,490,000 2,794,029
Golden State Tobacco Securitization Corp.,
California Settlement Revenue, Asset Backed, Series A-3, 7.875%, 6/01/42 .............. 6,400,000 6,774,592
Tobacco Settlement Revenue, 5.625%, 6/01/38 ........................................... 14,000,000 14,005,040
Tobacco Settlement Revenue, Series A-2, 7.90%, 6/01/42 ................................ 750,000 795,180
Half Moon Bay COP, Sea Crest School, 6.75%, 7/01/30 ...................................... 3,815,000 3,957,567
Hawaiian Gardens RDA, Tax Allocation, Project No. 1, Refunding, 6.35%, 12/01/33 .......... 4,000,000 4,136,040
Hercules RDA, Tax Allocation, Hercules Merged Project, 6.40%, 9/01/21 .................... 5,000,000 5,038,800

26 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Hesperia PFAR, Series B, 7.375%, 10/01/23 ................................................ $ 1,930,000 $ 1,959,992
Huntington Beach CFD Special Tax Revenue, Grand Coast Resort, 6.45%, 9/01/31 ............. 5,000,000 5,159,900
Imperial County Special Tax, CFD No. 98-1,
6.45%, 9/01/17 ........................................................................ 2,120,000 1,958,074
6.50%, 9/01/31 ........................................................................ 5,705,000 5,133,473
Indio 1915 Act, GO,
AD No. 2001-1, 6.50%, 9/02/26 ......................................................... 4,710,000 4,780,650
AD No. 99-1, 7.125%, 9/02/20 .......................................................... 2,315,000 2,420,263
John C. Fremont Hospital District Health Facilities Revenue, 6.75%, 6/01/13 .............. 1,500,000 1,565,895
Lafayette RDA, Tax Allocation, 5.75%, 8/01/32 ............................................ 1,000,000 1,007,040
Lake Elsinore 1915 Act, AD No. 93-1, Limited Obligation, Refunding, 7.00%, 9/02/30 ....... 8,805,000 9,255,728
Lake Elsinore USD, CFD, Special Tax, No. 2001-1, 6.30%, 9/01/33 .......................... 4,525,000 4,600,205
Lancaster RDA, Tax Allocation,
7.00%, 12/01/29 ....................................................................... 1,780,000 1,803,994
Residential Redevelopment Project, sub. lien, Refunding, 6.65%, 9/01/27 ............... 2,500,000 2,630,500
Lee Lake Water CFD No. 1 Special Tax, Sycamore Creek, 6.50%, 9/01/24 ..................... 1,000,000 1,054,550
Los Angeles Harbor Department Revenue, Series B, 6.00%, 8/01/14 .......................... 3,500,000 3,851,820
Los Angeles MFR, Refunding, Series J-2C, 8.50%, 1/01/24 .................................. 1,150,000 1,153,277
Lynwood PFA,
Lease Revenue, 6.25%, 9/01/22 ......................................................... 1,080,000 1,160,309
Lease Revenue, 6.30%, 9/01/29 ......................................................... 2,680,000 2,848,572
Tax Allocation, Alameda Project Area, 6.30%, 9/01/24 .................................. 1,000,000 1,057,800
Water System Improvement Project, 6.50%, 6/01/21 ...................................... 1,175,000 1,238,826
Modesto PFA, Lease Revenue, John Thurman Field Renovation Project, 6.125%, 11/01/16 ...... 1,395,000 1,493,710
Murrieta CFD Special Tax Revenue, No. 1 Bluestone Improvement, Area A, 6.20%, 9/01/25 .... 2,105,000 2,121,587
Murrieta CFD, 1915 Act, No. 2000-1, Special Tax, 6.375%, 9/01/30 ......................... 4,100,000 4,205,657
Norco California Special Tax CFD, No. 02-1, 6.50%, 3/01/33 ............................... 1,500,000 1,482,390
Norco Special Tax CFD, GO, No. 97-1, 7.10%, 10/01/30 ..................................... 2,640,000 2,843,254
North Natomas CFD, Special Tax No. 4, Series B, 6.375%, 9/01/31 .......................... 4,300,000 4,447,920
Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.60%,
3/15/28 ................................................................................ 1,890,000 1,959,798
Oakland Revenue, YMCA East Bay Project, Refunding, 7.10%, 6/01/10 ........................ 2,225,000 2,320,898
Perris CFD, Special Tax No. 2002-1, Series A,
6.375%, 9/01/23 ....................................................................... 1,475,000 1,465,000
6.50%, 9/01/29 ........................................................................ 2,045,000 2,046,391
6.50%, 9/01/33 ........................................................................ 2,120,000 2,121,442
Perris PFA, Local Agency Revenue, Series A, 6.25%, 9/01/33 ............................... 3,000,000 3,014,520
Pico Rivera Water Authority Revenue, Refunding, Series A, 6.25%, 12/01/32 ................ 7,250,000 7,384,705
Rancho Water District Special Tax, Community Facilities 99-1,
Area A, Series A, 6.70%, 9/01/30 ...................................................... 2,140,000 2,234,823
Area B, Series A, 6.70%, 9/01/30 ...................................................... 2,500,000 2,610,775
Richmond 1915 Act, Limited Obligation, ID No. 99-01, 7.20%, 9/02/30 ...................... 7,885,000 8,144,101
Richmond Revenue, YMCA East Bay Project, Refunding, 7.25%, 6/01/17 ....................... 2,445,000 2,554,414
Riverside County CFD,
Special Tax No. 89-1, Mountain Cove, Refunding, 6.50%, 9/01/25 ........................ 3,390,000 3,480,716
Special Tax, senior lien, No. 87-5, Refunding, Series A, 7.00%, 9/01/13 ............... 7,335,000 7,888,793

Semiannual Report | 27

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
BONDS (CONT.)
Roseville Special Tax,
Highland CFD No. 1, 6.30%, 9/01/25 .................................................... $ 8,960,000 $ 9,202,189
Stone Point CFD No. 1, 6.375%, 9/01/24 ................................................ 1,750,000 1,783,845
Stone Point CFD No. 1, 6.375%, 9/01/28 ................................................ 2,500,000 2,542,075
Stoneridge CFD No. 1, 6.20%, 9/01/21 .................................................. 1,250,000 1,291,388
Stoneridge CFD No. 1, 6.30%, 9/01/31 .................................................. 1,500,000 1,553,820
Woodcreek West CFD No. 1, 6.70%, 9/01/25 .............................................. 3,000,000 3,133,860
Sacramento County Special Tax, CFD No. 1, Refunding, 6.30%, 9/01/21 ...................... 1,575,000 1,611,288
a San Bernardino Associated Communities Financing Authority COP, Granada Hills Health Care,
Refunding and Improvement, Series A, 6.90%, 5/01/27 .................................... 3,000,000 1,050,000
San Diego County Educational Facilities Authority No. 1 Lease Revenue, 6.50%, 8/15/15 .... 850,000 898,459
San Diego Special Tax, CFD No. 1, Series B, Pre-Refunded, 7.10%, 9/01/20 ................. 3,500,000 3,908,870
San Francisco City and County Airport Commission International Airport Revenue, Issue 8A,
Second Series, FGIC Insured, 6.25%, 5/01/20 ............................................ 1,570,000 1,611,715
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Refunding, Series A, 5.50%, 1/15/28 ................................................... 2,820,000 2,682,610
senior lien, 5.00%, 1/01/33 ........................................................... 9,500,000 8,585,340
a San Luis Obispo COP, Vista Hospital System Inc., 6.45%, 7/01/29 .......................... 6,660,000 2,664,000
San Marcos PFA, Special Tax Revenue,
Series A, 6.70%, 9/01/32 .............................................................. 3,500,000 3,601,885
Series A, 6.30%, 9/01/33 .............................................................. 1,000,000 1,007,650
Series B, 6.50%, 9/01/33 .............................................................. 6,670,000 6,717,691
San Marcos Public Facilities Authority Special Tax Revenue, Series A,
6.45%, 9/01/34 ........................................................................ 3,200,000 3,225,504
6.375%, 9/01/35 ....................................................................... 3,535,000 3,547,019
San Marcos RDA, Tax Allocation, Affordable Housing Project, Series A, 5.65%, 10/01/28 .... 2,000,000 2,048,620
San Mateo RDA, Tax Allocation, Merged Area, Series A, 5.50%, 8/01/22 ..................... 1,000,000 1,055,210
San Ramon PFA, Tax Allocation Revenue, Refunding, 6.90%, 2/01/24 ......................... 800,000 832,288
Simi Valley 1915 Act, AD No. 98-1, Madera, 7.30%, 9/02/24 ................................ 4,000,000 4,261,800
Southern California Public Power Authority Transmission Project Revenue, Southern
Transmission Project, 6.125%, 7/01/18 .................................................. 50,000 50,701
Stockton CFD, Supplemental Tax, Spanos Park West, 6.25%, 9/01/25 ......................... 3,500,000 3,565,380
Stockton Improvement Bond Revenue, 1915 Act, Limited Obligation, Mosher AD 02,
6.20%, 9/02/23 ........................................................................ 2,955,000 2,996,075
6.30%, 9/02/33 ........................................................................ 3,390,000 3,452,579
Vallejo COP, Marine World Foundation Project, Refunding, 7.40%, 2/01/28 .................. 9,345,000 9,457,420
Vallejo Hiddenbrooke ID No. 1 Revenue, 6.50%, 9/01/31 .................................... 14,545,000 14,868,626
Vallejo RDA, Tax Allocation, Housing Set-Aside, Series A, 7.00%, 10/01/31 ................ 5,285,000 5,310,738
West Sacramento Special Tax,
CFD No. 10, 6.75%, 9/01/26 ............................................................ 3,235,000 3,372,585
CFD No. 16, 5.90%, 9/01/23 ............................................................ 2,715,000 2,686,628
Western Placer Waste Management Authority Revenue, Refunding, 6.75%, 7/01/14 ............. 7,400,000 7,706,952
------------
TOTAL BONDS (COST $533,075,159) .......................................................... 545,971,612
------------

28 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED) (CONTINUED)

ZERO COUPON BONDS 12.5%
Duarte RDA Tax Allocation, Capital Appreciation, Merged Redevelopment Project, 12/01/28 .. $30,795,000 $ 7,305,190
Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding,
1/15/26 ............................................................................... 38,720,000 10,603,085
1/15/30 ............................................................................... 4,000,000 867,400
1/15/31 ............................................................................... 85,780,000 17,156,858
San Diego RDA, Tax Allocation, Capital Appreciation, Series B,
9/01/10 ............................................................................... 3,600,000 2,689,560
9/01/15 ............................................................................... 6,810,000 3,692,586
9/01/16 ............................................................................... 1,500,000 757,800
9/01/19 ............................................................................... 1,800,000 730,188
9/01/20 ............................................................................... 1,800,000 683,766
9/01/21 ............................................................................... 1,800,000 638,370
9/01/22 ............................................................................... 1,900,000 626,164
9/01/23 ............................................................................... 1,900,000 587,442
9/01/24 ............................................................................... 1,900,000 553,318
9/01/25 ............................................................................... 1,900,000 517,085
9/01/26 ............................................................................... 1,900,000 486,153
9/01/27 ............................................................................... 1,900,000 455,867
9/01/28 ............................................................................... 1,900,000 427,462
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
junior lien, ETM, 1/01/28 ............................................................. 19,150,000 5,498,731
Refunding, Series A, 1/15/21 .......................................................... 24,750,000 19,056,510
senior lien, Refunding, Series A, 1/15/16 ............................................. 4,500,000 3,575,115
senior lien, Refunding, Series A, 1/15/19 ............................................. 3,000,000 2,335,560
------------
TOTAL ZERO COUPON BONDS (COST $68,009,340) ............................................... 79,244,210
------------
TOTAL LONG TERM INVESTMENTS (COST $601,084,499) .......................................... 625,215,822
------------
SHORT TERM INVESTMENTS .3%
b Metropolitan Water District Southern California Waterworks Revenue, Refunding, Series B-3,
Daily VRDN and Put, 1.05%, 7/01/35 ..................................................... 1,500,000 1,500,000
b Orange County Sanitation Districts COP, Refunding, Series A, Daily VRDN and Put, 1.07%,
8/01/29 ................................................................................ 500,000 500,000
b Puerto Rico Commonwealth Government Development Bank Revenue, Refunding,
MBIA Insured, Weekly VRDN and Put, 1.01%, 12/01/15 ..................................... 200,000 200,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $2,200,000) ........................................... 2,200,000
------------
TOTAL INVESTMENTS (COST $603,284,499) 98.6% .............................................. 627,415,822
OTHER ASSETS, LESS LIABILITIES 1.4% ...................................................... 8,848,203
------------
NET ASSETS 100.0% ........................................................................ $636,264,025
------------

<FN>
See glossary of terms on page 34.

a The fund discontinues accruing income on defaulted securities. See Note 6.

b Variable 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.
</FN>

Semiannual Report | See notes to financial statements. | 29

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS

FRANKLIN TENNESSEE MUNICIPAL BOND FUND

----------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2003 YEAR ENDED MAY 31,
(UNAUDITED) 2003 2002 2001 2000 1999
----------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)

Net asset value, beginning of period ............... $11.59 $10.95 $10.82 $10.02 $11.16 $11.27
----------------------------------------------------------------------------

Income from investment operations:

Net investment income a ........................... .24 .50 .52 .55 .56 .55

Net realized and unrealized gains (losses) ........ (.28) .65 .15 .81 (1.15) (.08)
----------------------------------------------------------------------------

Total from investment operations ................... (.04) 1.15 .67 1.36 (.59) .47
----------------------------------------------------------------------------

Less distributions from:

Net investment income ............................. (.24) (.51) (.54) (.56) (.55) (.55)

Net realized gains ................................ -- -- -- -- -- (.03)
----------------------------------------------------------------------------

Total distributions ................................ (.24) (.51) (.54) (.56) (.55) (.58)
----------------------------------------------------------------------------

Net asset value, end of period ..................... $11.31 $11.59 $10.95 $10.82 $10.02 $11.16
----------------------------------------------------------------------------

Total return b ..................................... (.29)% 10.64% 6.38% 13.74% (5.30)% 4.19%

RATIOS/SUPPLEMENTAL DATA

Net assets, end of period (000's) .................. $115,450 $115,514 $99,208 $85,455 $63,742 $77,117

Ratios to average net assets:

Expenses .......................................... .60%c .60% .56% .40% .40% .40%

Expenses excluding waiver and payments by
affiliate ........................................ .80%c .80% .80% .82% .81% .81%

Net investment income ............................. 4.33%c 4.49% 4.76% 5.13% 5.36% 4.88%

Portfolio turnover rate ............................ 3.90% 8.24% 22.99% 9.89% 29.94% 13.39%

<FN>
a Based on average daily shares outstanding effective year ended May 31, 2000.

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

c Annualized.
</FN>

30 | See notes to financial statements. | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED)

- ---------------------------------------------------------------------------------------------------------------------------
FRANKLIN TENNESSEE MUNICIPAL BOND FUND PRINCIPAL AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS 97.1%
Chattanooga GO, 5.00%, 3/01/22 ......................................................... $ 2,215,000 $ 2,292,016
Clarksville Water Sewer and Gas Revenue, Refunding and Improvement, FSA Insured, 5.00%,
2/01/22 .............................................................................. 2,000,000 2,064,220
Cleveland Public Improvement GO, FGIC Insured, 5.25%, 6/01/24 .......................... 3,000,000 3,154,620
Fayetteville and Lincoln IDBR, Hospital Facility Lease, AMBAC Insured, 5.30%, 5/01/28 .. 3,000,000 3,115,590
Franklin GO, Sewer and Water, Series B, 5.00%, 4/01/19 ................................. 1,000,000 1,059,570
Franklin IDB, MFHR, Landings Apartment Project, Refunding, Series A, FSA Insured, 6.00%,
10/01/26 ............................................................................. 1,000,000 1,044,960
Franklin Special School District GO, 5.00%, 6/01/22 .................................... 1,455,000 1,506,696
Hollow Rock-Bruceton Special School District GO, FSA Insured, Pre-Refunded, 5.75%,
4/01/24 .............................................................................. 500,000 557,220
Humphreys County IDB, Solid Waste Disposal Revenue, Dupont Denemours and Co. Project,
6.70%, 5/01/24 ....................................................................... 800,000 833,696
Jackson Natural Gas Revenue, AMBAC Insured, 5.00%, 4/15/18 ............................. 2,000,000 2,092,480
Johnson City GO,
Public Improvement, FSA Insured, Pre-Refunded, 5.90%, 6/01/12 ....................... 500,000 516,900
Solid Waste, AMBAC Insured, 5.80%, 5/01/09 .......................................... 100,000 103,690
Johnson City Health and Educational Facilities Board Hospital Revenue,
First Mortgage Mountain States Health, Refunding, Series A, MBIA Insured, 6.00%,
7/01/21 ............................................................................ 2,970,000 3,396,314
Series 2000 A, MBIA Insured, Pre-Refunded, 5.125%, 7/01/25 .......................... 3,000,000 3,108,090
Johnson City Health and Educational Facilities Board Revenue,
Pine Oaks Assisted Project,
Series A, GNMA Secured, 5.90%, 6/20/37 ............................................... 1,390,000 1,466,519
Johnson County Public Improvement GO, Series B, AMBAC Insured, Pre-Refunded, 6.70%,
5/01/20 .............................................................................. 100,000 112,089
Knox County First Utility District Water and Sewer Revenue, Refunding and Improvement,
Series A, MBIA Insured, 5.625%, 12/01/19 ............................................. 1,000,000 1,103,020
Knox County Health, Educational and Housing Board Hospital Facilities Revenue,
Fort Sanders Alliance, Refunding, MBIA Insured,
5.75%, 1/01/14 ....................................................................... 1,250,000 1,446,787
Knox County IDB, MFR, Waterford Apartments, Refunding, Series A, FHA Insured, 5.95%,
3/01/28 .............................................................................. 250,000 258,512
Knox-Chapman Utility District, Knox County Water and Sewer Revenue, Refunding,
MBIA Insured, 6.10%, 1/01/19 ......................................................... 100,000 102,397
Knoxville Electric Revenue, System Series U, 5.125%, 7/01/21 ........................... 2,340,000 2,450,869
Lawrenceburg Electric Revenue, MBIA Insured, Pre-Refunded, 5.50%, 7/01/26 .............. 1,000,000 1,154,140
Lawrenceburg PBA, GO, Electric Systems, Public Works, AMBAC Insured, 5.00%, 7/01/22 .... 2,500,000 2,685,650
Lenoir City Electric System Revenue, Refunding and Improvement, FSA Insured, 5.00%,
6/01/21 .............................................................................. 2,000,000 2,075,900
Loudon County IDB, Solid Waste Disposal Revenue, Kimberly-Clark Corp. Project, 6.20%,
2/01/23 .............................................................................. 1,305,000 1,321,182
Macon County GO, FGIC Insured, Pre-Refunded, 5.90%, 9/01/13 ............................ 150,000 158,355
McKenzie High School District GO, FSA Insured, Pre-Refunded, 5.75%, 4/01/22 ............ 500,000 557,220
Memphis GO, 5.00%, 4/01/17 ............................................................. 2,000,000 2,126,660
Memphis Health, Educational and Housing Facility Board Mortgage Revenue,
MF River Trace II,
Refunding, Series A, FNMA Secured, 6.45%, 4/01/26 .................................... 100,000 103,039
Memphis-Shelby County Airport Authority Airport Revenue, Series D, AMBAC Insured, 6.00%,
3/01/24 .............................................................................. 4,780,000 5,246,146

Semiannual Report | 31

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED) (CONTINUED)

- --------------------------------------------------------------------------------------------------------------------------
FRANKLIN TENNESSEE MUNICIPAL BOND FUND PRINCIPAL AMOUNT VALUE
- --------------------------------------------------------------------------------------------------------------------------

LONG TERM INVESTMENTS (CONT.)
Memphis-Shelby County Sports Authority Revenue, Memphis Arena Project, Series A,
AMBAC Insured, 5.25%, 11/01/23 ....................................................... $ 7,145,000 $ 7,604,709
Metropolitan Government of Nashville and Davidson County,
Health and Education Facilities Board Revenue, Ascension Health Credit, Refunding,
Series A, AMBAC Insured, 5.875%, 11/15/28 ........................................... 2,500,000 2,967,000
Series A, AMBAC Insured, 5.00%, 10/01/33 ............................................ 5,000,000 5,099,800
Metropolitan Government of Nashville and Davidson County Electric Revenue, Series A,
5.20%, 5/15/23 ....................................................................... 800,000 831,480
Metropolitan Government of Nashville and Davidson County GO,
Public Improvements, 5.875%, 5/15/26 ................................................ 1,000,000 1,084,630
Refunding, 5.125%, 5/15/25 .......................................................... 2,600,000 2,658,786
Metropolitan Government of Nashville and Davidson County Health and Educational
Facilities Board Revenue,
Meharry Medical College Project, AMBAC Insured, Pre-Refunded, 6.875%, 12/01/24 ...... 150,000 161,511
Mortgage, Dandridge Towers, Refunding, Series A, 6.375%, 1/01/11 .................... 500,000 549,120
Metropolitan Government of Nashville and Davidson County Sports Authority Revenue,
Stadium Public Improvement Project, AMBAC Insured, 5.875%, 7/01/21 ................... 1,775,000 1,948,222
Metropolitan Government of Nashville and Davidson County Water and Sewer Revenue,
Refunding, 5.50%, 1/01/16 ............................................................ 620,000 622,195
Milan Special School District GO, AMBAC Insured, Pre-Refunded, 6.625%, 4/01/11 ......... 180,000 186,921
Montgomery County Health Educational and Housing Facility Board Hospital Revenue,
Clarksville Regional Health System, Refunding and Improvement, 5.375%, 1/01/28 ....... 3,000,000 2,791,440
Oak Ridge Utility District Gas System Revenue, AMBAC Insured, 5.50%, 4/01/25 ........... 750,000 802,350
Pigeon Forge Public Improvement, MBIA Insured, 5.90%, 6/01/09 .......................... 100,000 100,296
Puerto Rico Commonwealth GO,
Pre-Refunded, 6.50%, 7/01/23 ........................................................ 100,000 104,621
Public Improvement, Series A, FGIC Insured, 5.00%, 7/01/32 .......................... 3,250,000 3,336,515
Puerto Rico Commonwealth Highway and Transportation Authority Revenue,
5.00%, 7/01/28 ...................................................................... 1,000,000 1,009,050
Series Y, Pre-Refunded, 6.00%, 7/01/22 .............................................. 500,000 563,620
Puerto Rico Industrial Tourist Educational Medical and Environmental Control Facilities
Financing Authority Hospital Revenue, Hospital Auxilio Mutuo Obligation, Series A,
MBIA Insured, 6.25%, 7/01/24 ........................................................ 200,000 213,176
Puerto Rico PBA Revenue, Government Facilities, Series D, 5.375%, 7/01/33 .............. 2,500,000 2,596,450
Shelby County GO, Public Improvement and School, Refunding, Series B, 5.00%, 6/01/24 ... 2,000,000 2,048,200
Shelby County Health Educational and Housing Facilities Board Revenue, Ave Maria
Assisted Living Project, Series A, 5.50%, 12/01/31 ................................... 2,010,000 2,067,506
South Blount County Utility District Waterworks Revenue, FGIC Insured, 4.50%, 12/01/22 . 3,000,000 2,981,040
South Fulton IDBR, Tyson Foods Inc. Project, 6.40%, 10/01/20 ........................... 300,000 312,222
Sullivan County IDBR, Brandymill, Refunding, Series I-A, 6.35%, 7/20/27 ................ 350,000 364,644
Tennessee HDA Homeownership Program, Issue 4A, 6.375%, 7/01/22 ......................... 320,000 333,920
Tennessee HDA Homeownership Project, Series 3C, 6.00%, 1/01/20 ......................... 1,205,000 1,258,514
Tennessee HDA Mortgage Finance, Series B, MBIA Insured, 6.20%, 7/01/18 ................. 555,000 575,652
Tennessee HDA Revenue, Homeownership Program, 5.375%, 7/01/23 .......................... 645,000 662,389
Tennessee State Local Development Authority Revenue, Community Provider Pooled Loan
Program, Pre-Refunded, 6.55%, 10/01/23 ............................................... 100,000 106,502
Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 1,000,000 1,042,120

32 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONT.)
West Carroll Special School GO, MBIA Insured, 5.375%, 6/01/29 .......................... $ 1,055,000 $ 1,104,195
West Wilson Utility District Waterworks Revenue, Refunding, AMBAC Insured, 5.25%,
6/01/23 .............................................................................. 4,500,000 4,750,740
White House Utility District Revenue, 5.125%, 1/01/26 .................................. 2,500,000 2,570,825
White House Utility District Robertson and Sumner Counties Water and Sewer Revenue, FSA
Insured, 6.00%, 1/01/26 .............................................................. 1,000,000 1,172,790
White House Utility District Robertson and Sumner Counties Waterworks System Revenue,
Refunding, Series B, FGIC Insured, 5.375%, 1/01/19 ................................... 1,000,000 1,055,130
Williams County GO, Public Improvement, 5.375%, 3/01/19 ................................ 1,480,000 1,689,598
Williamson County GO, Public Improvement,
5.00%, 4/01/20 ...................................................................... 2,000,000 2,088,460
Refunding, 5.00%, 3/01/20 ........................................................... 2,000,000 2,139,080
Wilson County COP,
Educational Facilities, Pre-Refunded, 6.125%, 6/30/10 ............................... 220,000 230,690
FSA Insured, 5.25%, 3/30/18 ......................................................... 1,000,000 1,087,680
------------
TOTAL LONG TERM INVESTMENTS (COST $105,476,045) ........................................ 112,088,336
------------
SHORT TERM INVESTMENTS 1.5%
a Clarksville PBA Revenue, Pooled Financing, Daily VRDN and Put, 1.11%,
7/01/31 ............................................................................. 600,000 600,000
1/01/33 ............................................................................. 800,000 800,000
a Montgomery County PBA, Pooled Financing Revenue, Tennessee County Loan Pool, Daily VRDN
and Put, 1.11%, 4/01/32 .............................................................. 400,000 400,000
------------
TOTAL SHORT TERM INVESTMENTS (COST $1,800,000) ......................................... 1,800,000
------------
TOTAL INVESTMENTS (COST $107,276,045) 98.6% ............................................ 113,888,336
OTHER ASSETS, LESS LIABILITIES 1.4% .................................................... 1,562,019
------------
NET ASSETS 100.0% ...................................................................... $115,450,355
------------

<FN>
See glossary of terms on page 34.

a Variable 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.
</FN>

Semiannual Report | See notes to financial statements. | 33

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2003 (UNAUDITED) (CONTINUED)

GLOSSARY OF TERMS

1915 ACT - Improvement Bond Act of 1915
ABAG - The Association of Bay Area Governments
AD - Assessment District
AMBAC - American Municipal Bond Assurance Corp.
CDA - Community Development Authority/Agency
CFD - Community Facilities District
CHFCLP - California Health Facilities Construction Loan Program
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
FNMA - Federal National Mortgage Association
FSA - Financial Security Assistance
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency
HFA - Housing Finance Authority/Agency
HFAR - Housing Finance Authority/Agency Revenue
ID - Improvement District
IDB - Industrial Development Bond/Board
IDBR - Industrial Development Bond Insurance Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
MFH - Multi-Family Housing
MFHR - Multi-Family Housing Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
PFA - Public Financing Authority
PFAR - Public Financing Authority Revenue
RAN - Revenue Anticipation Notes
RDA - Redevelopment Agency/Authority
TRAN - Tax and Revenue Anticipation Notes
USD - Unified/Union School District
VA - Veterans Administration
VRDN - Variable Rate Demand Note

34 | Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
November 30, 2003 (unaudited)

----------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL
MUNICIPAL FUND BOND FUND
----------------------------------------
Assets:
Investments in securities:

Cost ...................................................................... $ 603,284,499 $ 107,276,045
----------------------------------
Value ..................................................................... 627,415,822 113,888,336
Cash ....................................................................... 208,483 52,593
Receivables:
Capital shares sold ....................................................... 1,338,386 74,014
Interest .................................................................. 9,599,913 1,763,943
----------------------------------
Total assets .......................................................... 638,562,604 115,778,886
----------------------------------
Liabilities:
Payables:
Capital shares redeemed ................................................... 941,204 113,437
Affiliates ................................................................ 358,747 50,818
Shareholders .............................................................. 236,739 18,333
Distributions to shareholders .............................................. 714,894 124,180
Other liabilities .......................................................... 46,995 21,763
----------------------------------
Total liabilities ..................................................... 2,298,579 328,531
----------------------------------
Net assets, at value ................................................. $ 636,264,025 $ 115,450,355
----------------------------------
Net assets consist of:
Undistributed net investment income ........................................ $ 1,216,672 $ (80,492)
Net unrealized appreciation (depreciation) ................................. 24,131,323 6,612,291
Accumulated net realized gain (loss) ....................................... (52,105,187) (3,778,693)
Capital shares ............................................................. 663,021,217 112,697,249
----------------------------------
Net assets, at value ................................................. $ 636,264,025 $ 115,450,355
----------------------------------
CLASS A:
Net assets, at value ....................................................... $ 531,968,021 $ 115,450,355
----------------------------------
Shares outstanding ......................................................... 52,968,783 10,210,471
----------------------------------
Net asset value per share a ................................................ $10.04 $11.31
----------------------------------
Maximum offering price per share (net asset value per share / 95.75%) ...... $10.49 $11.81
----------------------------------
CLASS B:
Net assets, at value ....................................................... $ 29,296,518
-------------
Shares outstanding ......................................................... 2,903,333
-------------
Net asset value and maximum offering price per share a ..................... $10.09
-------------
CLASS C:
Net assets, at value ....................................................... $ 74,999,486
-------------
Shares outstanding ......................................................... 7,442,276
-------------
Net asset value per share a ................................................ $10.08
-------------
Maximum offering price per share (net asset value per share / 99%) ......... $10.18
-------------

<FN>
a Redemption price is equal to net asset value less any applicable contingent
deferred sales charge.
</FN>

Semiannual Report | See notes to financial statements. | 35

Franklin Municipal Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS
for the six months ended November 30, 2003 (unaudited)

----------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL
MUNICIPAL FUND BOND FUND
----------------------------------------
Investment income:

Interest ................................................................ $ 19,860,664 $ 2,817,325
----------------------------------------
Expenses:
Management fees (Note 3) ................................................ 1,546,913 348,224
Distribution fees (Note 3)
Class A ................................................................ 264,354 57,411
Class B ................................................................ 93,856 --
Class C ................................................................ 241,936 --
Transfer agent fees (Note 3) ............................................ 105,091 18,665
Custodian fees .......................................................... 3,156 571
Reports to shareholders ................................................. 17,356 7,360
Registration and filing fees ............................................ 8,156 2,362
Professional fees ....................................................... 13,513 7,747
Trustees' fees and expenses ............................................. 24,480 2,851
Other ................................................................... 27,528 10,479
----------------------------------------
Total expenses ..................................................... 2,346,339 455,670
Expenses waived/paid by affiliate (Note 3) ......................... -- (112,721)
----------------------------------------
Net expenses ...................................................... 2,346,339 342,949
----------------------------------------
Net investment income ............................................ 17,514,325 2,474,376
----------------------------------------
Realized and unrealized gains (losses):
Net realized gain (loss) from investments ............................... (529,125) (564,950)
Net unrealized appreciation (depreciation) on investments ............... (10,871,573) (2,283,663)
----------------------------------------
Net realized and unrealized gain (loss) .................................. (11,400,698) (2,848,613)
----------------------------------------
Net increase (decrease) in net assets resulting from operations .......... $ 6,113,627 $ (374,237)
----------------------------------------

36 | See notes to financial statements. | Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

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

--------------------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL FUND MUNICIPAL BOND FUND
--------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 2003 MAY 31, 2003 NOVEMBER 30, 2003 MAY 31, 2003
--------------------------------------------------------------------------
Increase (decrease) in net assets:
Operations:

Net investment income ........................ $ 17,514,325 $ 32,868,773 $ 2,474,376 $ 4,753,123
Net realized gain (loss) from investments .... (529,125) (6,606,419) (564,950) (401,249)
Net unrealized appreciation (depreciation)
on investments .............................. (10,871,573) 21,722,256 (2,283,663) 6,478,718
--------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ............... 6,113,627 47,984,610 (374,237) 10,830,592
Distributions to shareholders from:
Net investment income:
Class A ..................................... (14,246,879) (28,463,163) (2,452,843) (4,799,954)
Class B ..................................... (700,575) (1,318,610) -- --
Class C ..................................... (1,797,002) (3,774,811) -- --
--------------------------------------------------------------------------
Total distributions to shareholders ........... (16,744,456) (33,556,584) (2,452,843) (4,799,954)
Capital share transactions: (Note 2)
Class A ..................................... 3,087,929 22,414,933 2,763,084 10,275,244
Class B ..................................... 492,542 5,615,590 -- --
Class C ..................................... (1,472,334) 1,351,394 -- --
--------------------------------------------------------------------------
Total capital share transactions .............. 2,108,137 29,381,917 2,763,084 10,275,244
Net increase (decrease) in net
assets ................................. (8,522,692) 43,809,943 (63,996) 16,305,882
Net assets:
Beginning of period ........................... 644,786,717 600,976,774 115,514,351 99,208,469
--------------------------------------------------------------------------
End of period ................................. $636,264,025 $644,786,717 $115,450,355 $115,514,351
--------------------------------------------------------------------------
Undistributed net investment income included
in net assets:
End of period ................................. $ 1,216,672 $ 446,803 $ (80,492) $ (102,025)
--------------------------------------------------------------------------

Semiannual Report | See notes to financial statements. | 37

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Municipal Securities Trust (the Trust) is registered under the
Investment Company Act of 1940 as a non-diversified, open-end investment
company, consisting of two series (the Funds). The Funds' investment objectives
are to provide tax-free income.

The following summarizes the Funds' significant accounting policies.

A. SECURITY VALUATION

Tax-free bonds generally trade in the over-the-counter market and are valued
within the range of the latest quoted bid and asked prices. In the absence of a
sale or reported bid and asked prices, information with respect to bond and note
transactions, quotations from bond dealers, market transactions in comparable
securities, and various relationships between securities are used to determine
the value of the security. The Trust may utilize a pricing service, bank or
broker/dealer experienced in such matters to perform any of the pricing
functions under procedures approved by the Board of Trustees. Securities for
which market quotations are not readily available are valued at fair value as
determined by management in accordance with procedures established by the Board
of Trustees.

B. INCOME TAXES

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

C. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security Transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Discounts and premiums
on securities purchased are amortized over the lives of the respective
securities. Dividends from net investment income are normally declared daily and
distributed monthly to shareholders.

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

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class.

D. ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the amounts of income
and expenses during the reporting period. Actual results could differ from those
estimates.

38 | Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

E. GUARANTEES AND INDEMNIFICATIONS

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

2. SHARES OF BENEFICIAL INTEREST

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

- --------------------------------------------------------------------------------
CLASS A CLASS A, CLASS B & CLASS C
- --------------------------------------------------------------------------------
Franklin Tennessee Municipal Bond Fund Franklin California High
Yield Municipal Fund

At November 30, 2003, there were an unlimited number of shares authorized ($.01
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, 2003

Shares sold ........................... 5,647,249 $ 56,422,421 921,367 $ 10,338,093
Shares issued in reinvestment of
distributions ......................... 632,085 6,304,716 127,057 1,430,217
Shares redeemed ....................... (5,989,064) (59,639,208) (803,925) (9,005,226)
-----------------------------------------------------------
Net increase (decrease) ............... 290,270 $ 3,087,929 244,499 $ 2,763,084
-----------------------------------------------------------
Year ended May 31, 2003
Shares sold ........................... 9,339,944 $ 94,007,699 2,307,300 $ 25,939,853
Shares issued in reinvestment of
distributions ......................... 1,257,822 12,649,173 244,334 2,740,047
Shares redeemed ....................... (8,383,534) (84,241,939) (1,642,742) (18,404,656)
-----------------------------------------------------------
Net increase (decrease) ............... 2,214,232 $ 22,414,933 908,892 $ 10,275,244
-----------------------------------------------------------

Semiannual Report | 39

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

2. SHARES OF BENEFICIAL INTEREST (CONTINUED)

--------------------------
FRANKLIN CALIFORNIA
HIGH YIELD MUNICIPAL FUND
--------------------------
SHARES AMOUNT
--------------------------
CLASS B SHARES:
Six months ended November 30, 2003
Shares sold .......................... 273,120 $ 2,739,578
Shares issued in reinvestment of
distributions ........................ 34,319 343,854
Shares redeemed ...................... (258,159) (2,590,890)
--------------------------
Net increase (decrease) .............. 49,280 $ 492,542
--------------------------
Year ended May 31, 2003
Shares sold .......................... 804,439 $ 8,132,671
Shares issued in reinvestment of
distributions ........................ 62,112 627,393
Shares redeemed ...................... (311,675) (3,144,474)
--------------------------
Net increase (decrease) .............. 554,876 $ 5,615,590
--------------------------
CLASS C SHARES:
Six months ended November 30, 2003
Shares sold .......................... 981,639 $ 9,824,546
Shares issued in reinvestment of
distributions ........................ 90,802 909,003
Shares redeemed ...................... (1,220,480) (12,205,883)
--------------------------
Net increase (decrease) .............. (148,039) $ (1,472,334)
--------------------------
Year ended May 31, 2003
Shares sold .......................... 1,432,953 $ 14,470,666
Shares issued in reinvestment of
distributions ........................ 195,086 1,968,443
Shares redeemed ...................... (1,494,287) (15,087,715)
--------------------------
Net increase (decrease) .............. 133,752 $ 1,351,394
--------------------------

3. TRANSACTIONS WITH AFFILIATES

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

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

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

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

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

40 | Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

For the Franklin Tennessee Municipal Bond Fund, Advisers agreed in advance to
waive management fees, as noted in the Statement of Operations.

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

The Franklin Tennessee Municipal Bond Fund reimburses Distributors up to .15%
per year of its average daily net assets, and the Franklin California High Yield
Municipal Fund reimburses Distributors up to .15%, .65% and .65% per year of the
average daily net assets of Class A, Class B, and Class C, respectively, for
costs incurred in marketing the Funds' Shares.

Distributors received (paid) net commissions from (on) sales of the Funds'
shares, and received contingent deferred sales charges for the period as
follows:

---------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL
MUNICIPAL FUND BOND FUND
---------------------------------------

Net commissions received (paid) ........... $(180,289) $9,280
Contingent deferred sales charges ......... $ 59,562 $ --

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

---------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL
MUNICIPAL FUND BOND FUND
---------------------------------------
Transfer agent fees .................... $70,620 $11,960

4. INCOME TAXES

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

2004 ..................................... $ 4,508 $ --
2005 ..................................... 390,400 --
2008 ..................................... 8,364,686 543,762
2009 ..................................... 31,858,136 1,676,320
2010 ..................................... 4,003,472 480,932
2011 ..................................... -- 95,080
---------------------------------------
$44,621,202 $2,796,094
---------------------------------------

Semiannual Report | 41

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES (CONTINUED)

At May 31, 2003, the Franklin California High Yield Municipal Fund and the
Franklin Tennessee Municipal Bond Fund had deferred capital losses occurring
subsequent to October 31, 2002 of $6,924,612 and $417,649, respectively. For tax
purposes, such losses will be reflected in the year ending May 31, 2004.

Distributions of income to shareholders may not equal net investment income due
to differing treatments of dividend distributions for book and tax purposes.

Net investment income (loss) differs for financial statement and tax purposes
primarily due to differing treatment of bond discounts.

Net realized gains (losses) differ for financial statement and tax purposes
primarily due to differing treatments of bond workout expenditures and bond
discounts.

At November 30, 2003, the net unrealized appreciation (depreciation) based on
the cost of investments for income tax purposes were as follows:

---------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL
MUNICIPAL FUND BOND FUND
---------------------------------------

Cost of investments .............................. $602,454,357 $107,258,109
---------------------------------------
Unrealized appreciation .......................... 34,276,224 6,881,750
Unrealized depreciation .......................... (9,314,759) (251,523)
---------------------------------------
Net unrealized appreciation (depreciation) ....... $ 24,961,465 $ 6,630,227
---------------------------------------

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term securities) for the
period ended November 30, 2003 were as follows:

---------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL
MUNICIPAL FUND BOND FUND
---------------------------------------

Purchases ........................................ $41,187,677 $6,268,070
Sales ............................................ $34,022,029 $4,372,796

42 | Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. CREDIT RISK AND DEFAULTED SECURITIES

The Franklin California High Yield Municipal Fund has 51.2% of its portfolio
invested in below investment grade and comparable quality unrated high yield
securities, which tend to be more sensitive to economic conditions than higher
rated securities. The risk of loss due to default by the issuer may be
significantly greater for the holders of high yielding securities because such
securities are generally unsecured and are often subordinated to other creditors
of the issuer.

The fund held defaulted and/or other securities for which the income has been
deemed uncollectible. The fund discontinues accruing income on these securities
and provides an estimate for losses on interest receivable. At November 30,
2003, the value of these securities was $3,714,000 representing .6% of the
fund's net assets. For information as to specific securities, see the
accompanying Statement of Investments.

Semiannual Report | 43

Franklin Municipal Securities Trust

PROXY VOTING POLICIES AND PROCEDURES

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

44 | Semiannual Report

Literature Request

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

FRANKLIN TEMPLETON INVESTMENTS

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

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

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

VALUE
Franklin Balance Sheet Investment Fund 2
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 3
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 4
Mutual Shares Fund

BLEND
Franklin Blue Chip Fund
Franklin Convertible Securities Fund
Franklin Growth Fund
Franklin Rising Dividends Fund
Franklin U.S. Long-Short Fund 5

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

ASSET ALLOCATION
Franklin Templeton Corefolio Allocation Fund
Franklin Templeton Founding Funds Allocation Fund

TARGET FUNDS
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund

INCOME
Franklin Adjustable U.S. Government Securities Fund 6
Franklin's AGE High Income Fund
Franklin Federal Money Fund 6, 7
Franklin Floating Rate Daily Access Fund
Franklin Floating Rate Trust 4
Franklin Income Fund
Franklin Money Fund 6, 7
Franklin Short-Intermediate U.S. Government Securities Fund 6
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio 6
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 6
Templeton Global Bond Fund

TAX-FREE INCOME 8

NATIONAL FUNDS
Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 9
Tax-Exempt Money Fund 6, 7

LIMITED-TERM FUNDS
California Limited-Term Tax-Free Income Fund
Federal Limited-Term Tax-Free Income Fund
New York Limited-Term Tax-Free Income Fund

INTERMEDIATE-TERM FUNDS
California Intermediate-Term Tax-Free Income Fund
Federal Intermediate-Term Tax-Free Income Fund
New York Intermediate-Term Tax-Free Income Fund

STATE-SPECIFIC 8
Alabama
Arizona
California 10
Colorado
Connecticut
Florida 10
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 9
Michigan 9
Minnesota 9
Missouri
New Jersey
New York 10
North Carolina
Ohio 9
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS
Franklin Templeton Variable Insurance
Products Trust 11

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

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

3. Effective June 30, 2003, the fund reopened to all new investors.

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

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

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

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

8. For investors subject to the alternative minimum tax, a small portion of
these dividends may be taxable. Distributions of capital gains are generally
taxable.

9. Portfolio of insured municipal securities.

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

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

11/03 Not part of the semiannual report

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

WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?
Eligible shareholders can sign up for eDelivery at
franklintempleton.com. See inside for details.

SEMIANNUAL REPORT AND SHAREHOLDER LETTER
FRANKLIN MUNICIPAL
SECURITIES TRUST

INVESTMENT MANAGER
Franklin Advisers, Inc.

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

SHAREHOLDER SERVICES
1-800/632-2301

This report must be preceded or accompanied by the current Franklin Municipal
Securities Trust prospectus, which contains more complete information including
charges, expenses and risks.

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

MUN S2003 01/04

ITEM 2. CODE OF ETHICS.

(A) THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL
EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER.

(D) N/A

(F) PURSUANT TO ITEM 10(A), THE REGISTRANT IS ATTACHING AS AN EXHIBIT A COPY OF
ITS CODE OF ETHICS THAT APPLIES TO ITS PRINCIPAL EXECUTIVE OFFICERS FINANCIAL
AND ACCOUNTING OFFICER.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(A)(1) THE REGISTRANT HAS AN AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS
AUDIT COMMITTEE.

(2) THE AUDIT COMMITTEE FINANCIAL EXPERT IS FRANK W.T. LAHAYE, AND HE IS
"INDEPENDENT" AS DEFINED UNDER THE RELEVANT SECURITIES AND EXCHANGE COMMISSION
RULES AND RELEASES.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 9. CONTROLS AND PROCEDURES.
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form
N-CSR, the Registrant had carried out an evaluation, under the supervision and
with the participation of the Registrant's management, including the
Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(B) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Shareholder Report on Form N-CSR.

ITEM 10. EXHIBITS.

(A) CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS.

(B)(1) CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER

(B)(2) CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
OF JIMMY D. GAMBILL, CHIEF EXECUTIVE OFFICER - FINANCE AND ADMINISTRATION, AND
KIMBERLEY H. MONASTERIO, CHIEF FINANCIAL OFFICER

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN MUNICIPAL SECURITIES TRUST

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 30, 2004

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By /s/Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 30, 2004

By /s/Kimberley H. Monasterio
Chief Financial Officer
Date January 30, 2004