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 811-06481
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FRANKLIN MUNICIPAL SECURITIES TRUST
-----------------------------------
(Exact name of registrant as specified in charter)

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

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: 650 312-2000
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Date of fiscal year end: 5/31
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Date of reporting period: 11/30/07
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ITEM 1. REPORTS TO STOCKHOLDERS.

[GRAPHIC OMITTED]

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NOVEMBER 30, 2007
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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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WANT TO RECEIVE
THIS DOCUMENT
FASTER VIA EMAIL?
FRANKLIN
MUNICIPAL SECURITIES TRUST Eligible shareholders can
sign up for eDelivery at
franklintempleton.com.
See inside for details.
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[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

FRANKLIN o Templeton o Mutual Series

Franklin Templeton Investments

GAIN FROM OUR PERSPECTIVE(R)

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
recognized leader in fixed income investing and
also brings 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 offices in over 25 countries,
Templeton offers investors a truly global
perspective.

MUTUAL SERIES. Founded in 1949, Mutual Series is
dedicated to a unique style of value investing,
searching aggressively for opportunity among what
it believes are undervalued stocks, as well as
arbitrage situations and distressed securities.

TRUE DIVERSIFICATION Because our management groups work independently
and adhere to different investment approaches,
Franklin, Templeton and Mutual Series funds
typically have distinct portfolios. That's why
our funds can be used to build truly diversified
allocation plans 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, accurate and personal service
that has 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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[GRAPHIC OMITTED]

Not part of the semiannual report

Contents

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

SPECIAL FEATURE:

Understanding Interest Rates .............................................. 4

SEMIANNUAL REPORT

Municipal Bond Market Overview ............................................ 7

Franklin California High Yield Municipal Fund ............................. 9

Franklin Tennessee Municipal Bond Fund .................................... 18

Financial Highlights and Statements of Investments ........................ 25

Financial Statements ...................................................... 49

Notes to Financial Statements ............................................. 53

Shareholder Information ................................................... 62

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Semiannual Report

Municipal Bond Market Overview

The six-month period ended November 30, 2007, proved challenging for the
municipal bond market. A rather measured pullback in the municipal market was
exacerbated mid-period as all financial markets, even those such as the
municipal market with no direct exposure, felt the impact of subprime loan
defaults. Many major financial institutions tightened credit and reassessed the
risk of their direct and indirect exposure to subprime loans. A lack of
liquidity across most markets in August contributed to an increase in overall
volatility and declining values in many asset classes.

The Federal Open Market Committee (FOMC) took action to address liquidity
concerns by lowering the discount rate, which is the interest rate the Federal
Reserve charges member banks, 50 basis points (100 basis points equal one
percentage point) at a special meeting on August 17. This set the stage for
further easing at the September 18 and October 31 meetings, when the FOMC
lowered the federal funds target rate 50 and 25 basis points, respectively, to
4.50%. In related actions, the FOMC also reduced the discount rate at those
meetings, bringing it to 5.00% at period-end.

Over the reporting period, municipal market returns lagged those of the U.S.
Treasury market as uncertainty regarding the impact of problems associated with
subprime securities drove global investors to the relative safety of U.S.
Treasuries. Furthermore, investors began to require additional compensation for
taking on risk, and spreads for credit-driven securities widened. For the six
months ended November 30, 2007, the Lehman Brothers Municipal Bond Index had a
+2.40% total return, and the Lehman Brothers U.S. Treasury Index returned
+7.79%. 1 High yield municipal bonds, as measured by the Lehman Brothers
Municipal Bond Index: Non-Investment Grade, had a -2.43% return for the same
period. 2

1. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index
is a market value-weighted index engineered for the long-term tax-exempt bond
market. All bonds included have a minimum credit rating of at least Baa3/BBB-.
They must have an outstanding par value of at least $7 million and be issued as
part of a transaction of at least $75 million. The bonds must be dated after
12/31/90, and must be at least one year from their maturity date. Remarketed
issues, taxable municipal bonds, bonds with floating rates and derivatives are
excluded from the index. The index has four main bond sectors: general
obligation, revenue, insured and prerefunded. The Lehman Brothers U.S. Treasury
Index includes public obligations of the U.S. Treasury with a remaining maturity
of one year or more. All issues must have at least one year to final maturity
regardless of call features, have at least $250 million par amount outstanding
and be rated investment grade (Baa3 or better). They must also be dollar
denominated, nonconvertible and publicly issued.

2. Source: Standard & Poor's Micropal. The Lehman Brothers Municipal Bond Index:
Non-Investment Grade includes bonds with a maximum credit rating of Ba1. All
bonds included must have an outstanding par value of at least $3 million and be
issued as part of a transaction of at least $20 million. The bonds must be dated
after 12/31/90, and must be at least one year from their maturity date. Taxable
municipal bonds, bonds with floating rates and derivatives are excluded from the
index.

Semiannual Report | 7

In this environment, many investors opted for short- to intermediate-term bonds,
which resulted in steeper Treasury and municipal bond curves (spread between
short- and longer-term yields). On November 30, 2007, two-year, 10-year and
30-year Treasury yields were 3.04%, 3.97% and 4.38%, respectively. The yields on
two-year, 10-year and 30-year Treasuries fell 188, 93 and 63 basis points,
respectively, over the six-month period. According to Municipal Market Data, at
period-end, two-year, 10-year and 30-year municipal bonds yielded 3.18%, 3.62%
and 4.32%, respectively. 3 Yields for the two-year and 10-year fell 50 and 29
basis points, while the 30-year yield rose 7 basis points during the reporting
period. 3

3. Source: Thomson Financial.

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS AND OPINIONS AS OF NOVEMBER 30,
2007. THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET,
COUNTRY, INDUSTRY, SECURITY OR FUND. STATEMENTS OF FACT ARE FROM SOURCES
CONSIDERED RELIABLE.

8 | Semiannual Report

Franklin California
High Yield Municipal Fund

YOUR FUND'S GOALS AND MAIN INVESTMENTS: Franklin California High Yield Municipal
Fund seeks to provide a high level of income exempt from federal and California
personal income taxes by investing at least 80% of its net assets in California
municipal securities including higher-yielding, lower rated securities that pay
interest free from such taxes. 1 Its secondary goal is capital appreciation.

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CREDIT QUALITY BREAKDOWN*
Franklin California High Yield Municipal Fund
Based on Total Long-Term Investments as of 11/30/07**

[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]

AAA ............................................ 20.4%
AA ............................................. 4.7%
A .............................................. 11.1%
BBB ............................................ 10.9%
Below Investment Grade ......................... 3.8%
Not Rated by S&P ............................... 49.1%

* Standard & Poor's (S&P) is the primary independent rating agency; Moody's and
Fitch are the secondary and tertiary rating agencies. Securities not rated by an
independent rating agency are assigned comparable internal ratings. Ratings for
securities not rated by S&P are in the table below.

** Does not include short-term investments and other net assets.

RATINGS MOODY'S FITCH INTERNAL
AAA or Aaa 1.0% -- 7.4%
A 0.8% 0.5% 3.1%
BBB or Baa 1.1% 0.8% 11.8%
Below Investment Grade -- -- 22.6%
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Total 2.9% 1.3% 44.9%

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This semiannual report for Franklin California High Yield Municipal Fund
covers the period ended November 30, 2007.

1. For investors subject to alternative minimum tax, a small portion of Fund
dividends may be taxable. Distributions of capital gains are generally taxable.
To avoid the imposition of 28% backup withholding on all Fund distributions and
redemption proceeds, U.S. investors must be properly certified on Form W-9 and
non-U.S. investors on Form W-8BEN.

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 29.

Semiannual Report | 9

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PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. PLEASE VISIT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236 FOR
MOST RECENT MONTH-END PERFORMANCE.
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PERFORMANCE OVERVIEW

The Fund's Class A share price, as measured by net asset value, declined from
$10.44 on May 31, 2007, to $10.08 on November 30, 2007. The Fund's Class A
shares paid dividends totaling 23.52 cents per share for the reporting 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 4.50%, based
on an annualization of the current 3.95 cent per share monthly dividend and the
maximum offering price of $10.53 on November 30, 2007. An investor in the 2007
maximum combined effective federal and California personal income tax bracket of
41.05% would need to earn a distribution rate of 7.63% from a taxable investment
to match the Fund's Class A tax-free distribution rate. For the Fund's Class B,
C and Advisor shares' performance, please see the Performance Summary.

STATE UPDATE

During the six months under review, California's broad-based economy performed
in line with the nation's economy even though housing market weakness affected
the state more than many others. Foreclosures were on the rise and state
residential construction permits fell sharply. Over the past several years,
economic strength was notable in southern California where the defense industry
has grown. More recently, the economy in northern California, which softened
considerably in the 2001 recession, has also exhibited signs of strength.
Although the state added new jobs at a pace that was comparable to the nation's,
in November, California's 5.6% unemployment rate was higher than the 4.7%
national average. 3 Employment growth was supported by the education and health
services, government, and professional and business services sectors and
primarily offset by losses in construction and financial activities. Personal
incomes, which have been volatile in the past, were relatively stable.

The state, which has a history of uneven financial operations, ended fiscal year
2007 with a large operating deficit and drew on its general fund to compensate
for the shortfall. However, due to healthy tax revenue increases and subsequent
buildup and maintenance of reserves over the previous few fiscal years, the
state ended fiscal year 2007 with healthy reserves. The fiscal year 2008 budget
was enacted late after more than two months of deliberations

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

3. Source: Bureau of Labor Statistics.

10 | Semiannual Report

DIVIDEND DISTRIBUTIONS*
Franklin California High Yield Municipal Fund

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DIVIDEND PER SHARE
------------------------------------------------------
MONTH CLASS A CLASS B CLASS C ADVISOR CLASS
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June 3.90 cents 3.43 cents 3.42 cents 3.98 cents
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July 3.90 cents 3.43 cents 3.42 cents 3.98 cents
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August 3.90 cents 3.43 cents 3.42 cents 3.98 cents
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September 3.95 cents 3.48 cents 3.48 cents 4.03 cents
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October 3.95 cents 3.48 cents 3.48 cents 4.03 cents
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November 3.95 cents 3.48 cents 3.48 cents 4.03 cents
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* Assumes shares were purchased and held for the entire accrual period, which
differs from the calendar month. Since dividends accrue daily, your actual
distributions will vary depending on the date you purchased your shares and any
account activity. All Fund distributions will vary depending upon current market
conditions, and past distributions are not indicative of future trends.

by California legislators. The approved budget was balanced with revenues
equaling expenditures and did not include drawdowns on reserves. However, it was
based on optimistic revenue assumptions and since then, the depressed real
estate market and high energy and gas prices have weighed significantly on all
streams of state revenue growth including property, income, sales and corporate
tax receipts. In addition, tax receipts could be delayed due to the recent San
Diego County fires. California's future financial outlook remains challenged by
narrow reserves, persistent structural budget imbalance, significant exposure to
potential revenue volatility and constitutional and political constraints on the
state's fiscal flexibility and response capacity in the event of unanticipated
budgetary stress.

Although California has historically had a relatively moderate debt burden,
overall net tax-supported debt levels rose due to the state's recently
accelerating issuance of general obligation bonds. California's A+ credit rating
and stable outlook, assigned by independent credit rating agency Standard &
Poor's, reflected the state's better-than-expected financial performance for
fiscal year 2007, healthy tax revenues, and manageable debt levels in recent
years. 4

INVESTMENT STRATEGY

We use a consistent, disciplined strategy to maximize income for our
shareholders by seeking to maintain 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 portfolio becomes well

4. This does not indicate Standard & Poor's rating of the Fund.

Semiannual Report | 11

PORTFOLIO BREAKDOWN
Franklin California High Yield Municipal Fund
11/30/07

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% OF TOTAL
LONG-TERM INVESTMENTS*
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Tax-Supported 34.9%
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Prerefunded 14.7%
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Hospital & Health Care 13.4%
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General Obligation 10.6%
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Other Revenue 7.4%
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Transportation 6.5%
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Higher Education 4.8%
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Utilities 4.8%
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Subject to Government Appropriations 2.6%
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Housing 0.3%
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* Does not include short-term investments and other net assets.

diversified with a broad range of securities. This broad diversification may
help mitigate interest rate risk. We do not use leverage or exotic derivatives,
nor do we use hedging techniques that could add volatility and contribute to
underperformance in adverse markets. We generally stay fully invested to
maximize income distribution.

MANAGER'S DISCUSSION

Our value-oriented philosophy of investing primarily for income, combined with a
relatively steep municipal yield curve compared to Treasuries, favored
longer-term bonds during the reporting period. Consistent with our strategy, we
sought to remain fully invested in bonds ranging from 15 to 30 years in maturity
with good call features. We intend to maintain our conservative, buy-and-hold
investment strategy, as we attempt to provide shareholders with high, current,
tax-free income.

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

THE FOREGOING INFORMATION REFLECTS OUR ANALYSIS, OPINIONS AND PORTFOLIO HOLDINGS
AS OF NOVEMBER 30, 2007, THE END OF THE REPORTING PERIOD. THE WAY WE IMPLEMENT
OUR MAIN INVESTMENT STRATEGIES AND THE RESULTING PORTFOLIO HOLDINGS MAY CHANGE
DEPENDING ON FACTORS SUCH AS MARKET AND ECONOMIC CONDITIONS. THESE OPINIONS MAY
NOT BE RELIED UPON AS INVESTMENT ADVICE OR AN OFFER FOR A PARTICULAR SECURITY.
THE INFORMATION IS NOT A COMPLETE ANALYSIS OF EVERY ASPECT OF ANY MARKET, STATE,
INDUSTRY, SECURITY OR THE FUND. STATEMENTS OF FACT ARE FROM SOURCES CONSIDERED
RELIABLE, BUT THE INVESTMENT MANAGER MAKES NO REPRESENTATION OR WARRANTY AS TO
THEIR COMPLETENESS OR ACCURACY. ALTHOUGH HISTORICAL PERFORMANCE IS NO GUARANTEE
OF FUTURE RESULTS, THESE INSIGHTS MAY HELP YOU UNDERSTAND OUR INVESTMENT
MANAGEMENT PHILOSOPHY.

12 | Semiannual Report

Performance Summary as of 11/30/07

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 that a
shareholder would pay on Fund dividends, capital gain distributions, if any, or
any realized gains on the sale of Fund shares. Total return reflects
reinvestment of the Fund's dividends and capital gain distributions, if any, and
any unrealized gains or losses.

PRICE AND DISTRIBUTION INFORMATION

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CLASS A (SYMBOL: FCAMX) CHANGE 11/30/07 5/31/07
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Net Asset Value (NAV) -$0.36 $10.08 $10.44
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DISTRIBUTIONS (6/1/07-11/30/07)
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Dividend Income $0.2352
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CLASS B (SYMBOL: FBCAX) CHANGE 11/30/07 5/31/07
- --------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.36 $10.13 $10.49
- --------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/07-11/30/07)
- --------------------------------------------------------------------------------
Dividend Income $0.2071
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CLASS C (SYMBOL: FCAHX) CHANGE 11/30/07 5/31/07
- --------------------------------------------------------------------------------
Net Asset Value (NAV) -$0.35 $10.13 $10.48
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DISTRIBUTIONS (6/1/07-11/30/07)
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Dividend Income $0.2069
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ADVISOR CLASS (SYMBOL: FVCAX) CHANGE 11/30/07 5/31/07
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Net Asset Value (NAV) -$0.36 $10.09 $10.45
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DISTRIBUTIONS (6/1/07-11/30/07)
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Dividend Income $0.2400
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Semiannual Report | 13

Performance Summary (CONTINUED)

PERFORMANCE

CUMULATIVE TOTAL RETURN EXCLUDES SALES CHARGES. AVERAGE ANNUAL TOTAL RETURNS
INCLUDE MAXIMUM SALES CHARGES. CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE;
CLASS B: CONTINGENT DEFERRED SALES CHARGE (CDSC) DECLINING FROM 4% TO 1% OVER
SIX YEARS, AND ELIMINATED THEREAFTER; CLASS C: 1% CDSC IN FIRST YEAR ONLY;
ADVISOR CLASS: NO SALES CHARGES. THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS
MADE WITHIN SEVEN DAYS OF PURCHASE.

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

Cumulative Total Return 1 -1.19% -0.26% +30.39% +63.10%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -5.36% -4.50% +4.54% +4.56%
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/07) 3 -5.84% +3.87% +4.24%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate 4 4.50%
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Taxable Equivalent Distribution Rate 5 7.63%
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30-Day Standardized Yield 6 4.28%
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Taxable Equivalent Yield 5 7.26%
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Total Annual Operating Expenses 7 0.62%
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CLASS B 6-MONTH 1-YEAR 5-YEAR INCEPTION (2/1/00)
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 -1.46% -0.80% +26.73% +56.68%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -5.32% -4.62% +4.52% +5.90%
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/07) 3 -5.93% +3.88% +5.63%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate 4 4.13%
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Taxable Equivalent Distribution Rate 5 7.01%
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30-Day Standardized Yield 6 3.93%
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Taxable Equivalent Yield 5 6.67%
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Total Annual Operating Expenses 7 1.17%
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CLASS C 6-MONTH 1-YEAR 5-YEAR 10-YEAR
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Cumulative Total Return 1 -1.37% -0.81% +26.85% +54.53%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -2.33% -1.76% +4.87% +4.45%
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/07) 3 -3.12% +4.21% +4.13%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate 4 4.13%
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Taxable Equivalent Distribution Rate 5 7.01%
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30-Day Standardized Yield 6 3.93%
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Taxable Equivalent Yield 5 6.67%
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Total Annual Operating Expenses 7 1.17%
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ADVISOR CLASS 8 6-MONTH 1-YEAR 5-YEAR 10-YEAR
- -----------------------------------------------------------------------------------------------------------------
Cumulative Total Return 1 -1.15% -0.07% +30.65% +63.42%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return 2 -1.15% -0.07% +5.49% +5.03%
- -----------------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/07) 3 -1.46% +4.80% +4.70%
- -----------------------------------------------------------------------------------------------------------------
Distribution Rate 4 4.79%
- -----------------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 5 8.12%
- -----------------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 6 4.59%
- -----------------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 5 7.79%
- -----------------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 7 0.52%
- -----------------------------------------------------------------------------------------------------------------

PERFORMANCE DATA REPRESENT PAST PERFORMANCE, WHICH DOES NOT GUARANTEE FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND YOU MAY HAVE
A GAIN OR LOSS WHEN YOU SELL YOUR SHARES. CURRENT PERFORMANCE MAY DIFFER FROM
FIGURES SHOWN. FOR MOST RECENT MONTH-END PERFORMANCE, SEE "FUNDS AND
PERFORMANCE" AT FRANKLINTEMPLETON.COM OR CALL 1-800/342-5236.

14 | Semiannual Report

Performance Summary (CONTINUED)

ENDNOTES

BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS,
THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND
PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS
PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE
PRICE MAY DECLINE. 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. IN GENERAL, AN INVESTOR IS
PAID A HIGHER YIELD TO ASSUME A GREATER DEGREE OF CREDIT RISK. THE FUND'S
PROSPECTUS ALSO INCLUDES A DESCRIPTION OF THE MAIN INVESTMENT RISKS.

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

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

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

1. Cumulative total return represents the change in value of an investment over
the periods indicated.

2. Average annual total return represents the average annual change in value of
an investment over the periods indicated. 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 Classes B, C
and Advisor) per share on 11/30/07.

5. Taxable equivalent distribution rate and yield assume the published rates as
of 6/27/07 for the maximum combined effective federal and California state
personal income tax rate 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 11/30/07.

7. Figures are as stated in the Fund's prospectus current as of the date of this
report.

8. Effective 11/15/06, the Fund began offering Advisor Class shares, which do
not have sales charges or a Rule 12b-1 plan. Performance quotations for this
class reflect the following methods of calculation: (a) For periods prior to
11/15/06, a restated figure is used based upon the Fund's Class A performance,
excluding the effect of Class A's maximum initial sales charge, but reflecting
the effect of the Class A Rule 12b-1 fees; and (b) for periods after 11/14/06,
actual Advisor Class performance is used reflecting all charges and fees
applicable to that class. Since 11/15/06 (commencement of sales), the cumulative
and average annual total returns of Advisor Class shares were +0.59% and +0.57%.

Semiannual Report | 15

Your Fund's Expenses

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.

The following table shows ongoing costs of investing in the Fund and can help
you understand these costs and compare them with those of other mutual funds.
The table assumes a $1,000 investment held for the six months indicated.

ACTUAL FUND EXPENSES

The first line (Actual) for each share class listed in the table provides actual
account values and expenses. The "Ending Account Value" is derived from the
Fund's actual return, which includes the effect of Fund expenses.

You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Information in the second line (Hypothetical) for each class in the table can
help you compare ongoing costs of investing in the Fund with those of other
mutual funds. This information may not be used to estimate the actual ending
account balance or expenses you paid during the period. The hypothetical "Ending
Account Value" is based on the actual expense ratio for each class and an
assumed 5% annual rate of return before expenses, which does not represent the
Fund's actual return. The figure under the heading "Expenses Paid During Period"
shows the hypothetical expenses your account would have incurred under this
scenario. You can compare this figure with the 5% hypothetical examples that
appear in shareholder reports of other funds.

16 | Semiannual Report

Your Fund's Expenses (CONTINUED)

PLEASE NOTE THAT EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT ONGOING
COSTS AND DO NOT REFLECT ANY TRANSACTION COSTS, SUCH AS SALES CHARGES OR
REDEMPTION FEES. Therefore, the second line for each class is useful in
comparing ongoing costs only, and will not help you compare total costs of
owning different funds. In addition, if transaction costs were included, your
total costs would have been higher. Please refer to the Fund prospectus for
additional information on operating expenses.

- ---------------------------------------------------------------------------------------------------------
BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES PAID DURING
CLASS A VALUE 6/1/07 VALUE 11/30/07 PERIOD* 6/1/07-11/30/07
- ---------------------------------------------------------------------------------------------------------

Actual $1,000 $ 988.10 $3.08
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.90 $3.13
- ---------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $ 985.40 $5.81
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.91
- ---------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $ 986.30 $5.81
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,019.15 $5.91
- ---------------------------------------------------------------------------------------------------------
ADVISOR CLASS
- ---------------------------------------------------------------------------------------------------------
Actual $1,000 $ 988.50 $2.59
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,022.40 $2.63
- ---------------------------------------------------------------------------------------------------------

* Expenses are calculated using the most recent six-month expense ratio,
annualized for each class (A: 0.62%; B: 1.17%; C: 1.17%; and Advisor Class:
0.52%), multiplied by the average account value over the period, multiplied by
183/366 to reflect the one-half year period.

Semiannual Report | 17

Franklin Tennessee Municipal Bond Fund

YOUR FUND'S GOAL AND MAIN INVESTMENTS: Franklin Tennessee Municipal Bond Fund
seeks to maximize income exempt from federal and Tennessee personal income
taxes, consistent with prudent investment management and the preservation of
capital, by investing at least 80% of its total assets in securities that pay
interest free from such taxes. 1

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

CREDIT QUALITY BREAKDOWN*
Franklin Tennessee Municipal Bond Fund
Based on Total Long-Term Investments as of 11/30/07**

[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]

AAA ............................................... 38.1%
AA ................................................ 15.9%
A ................................................. 1.8%
BBB ............................................... 3.6%
Not Rated by S&P .................................. 40.6%

* Standard & Poor's (S&P) is the primary independent rating agency; Moody's is
the secondary rating agency. Ratings for securities not rated by S&P are in the
table below.

** Does not include short-term investments and other net assets.

RATINGS MOODY'S
AAA or Aaa 29.1%
AA or Aa 8.5%
A 0.3%
BBB or Baa 2.7%
- -----------------------------------------------------------
Total 40.6%

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

This semiannual report for Franklin Tennessee Municipal Bond Fund covers AAA the
period ended November 30, 2007.

PERFORMANCE OVERVIEW

The Fund's Class A share price, as measured by net asset value, declined from
$11.18 on May 31, 2007, to $11.16 on November 30, 2007. The Fund's

THE DOLLAR VALUE, NUMBER OF SHARES OR PRINCIPAL AMOUNT, AND NAMES OF ALL
PORTFOLIO HOLDINGS ARE LISTED IN THE FUND'S STATEMENT OF INVESTMENTS (SOI). THE
SOI BEGINS ON PAGE 44.

18 | Semiannual Report

Class A shares paid dividends totaling 22.05 cents per share for the reporting
period. 2 The Performance Summary beginning on page 21 shows that at the end of
this reporting period the Fund's Class A shares' distribution rate was 3.91%. An
investor in the 2007 maximum combined effective federal and Tennessee personal
income tax bracket of 38.90% would need to earn a distribution rate of 6.40%
from a taxable investment to match the Fund's Class A tax-free distribution
rate.

STATE UPDATE

Tennessee's stable and diversifying economy showed modest but ongoing growth.
Although hurt by accelerated declines in nondurable manufacturing and
auto-related segments, the state's overall employment picture was positive as
nonfarm payroll numbers increased. The services sector steadily expanded and
added jobs, while the retail and health care sectors were also strong. Personal
income grew, and unemployment, at 4.9% in November 2007, was above the 4.7%
national jobless rate. 3 Tennessee's residential housing market experienced a
mild slowdown, but major markets in Nashville and Memphis remained relatively
stable.

Preliminary estimates for fiscal year 2007 indicated strong state finances.
Sales tax revenues, along with franchise and excise taxes, were estimated to
exceed forecasts, and the reserve fund was set to reach a historical high of
$543 million. 4 The same trends were forecast to continue for fiscal year 2008.
The 2008 budget anticipated overall tax revenue growth, particularly in sales
tax collections, and that the reserve fund would reach $750 million. 4 This
marked the fifth consecutive year of reserve increases, and more importantly,
the fifth consecutive balanced budget.

Although Tennessee's financial position was healthy, it faced ongoing
expenditure pressures from education and health care related initiatives. Cover
Tennessee, a new non-mandated health care program for low income workers,
incurred about $100 million in costs for fiscal year 2008. 4 TennCare, the
state's Medicaid program, went through major cost-cutting reforms, and its costs
were curbed to within 26% of total state tax revenues. 4 Prior to the reforms,
TennCare costs neared 30% of the state budget, but for fiscal year 2008, they
were at 23%. 4

DIVIDEND DISTRIBUTIONS*
Franklin Tennessee Municipal Bond Fund
Class A

- --------------------------------------------------------------------------------
MONTH DIVIDEND PER SHARE
- --------------------------------------------------------------------------------
June 3.70 cents
- --------------------------------------------------------------------------------
July 3.70 cents
- --------------------------------------------------------------------------------
August 3.70 cents
- --------------------------------------------------------------------------------
September 3.70 cents
- --------------------------------------------------------------------------------
October 3.70 cents
- --------------------------------------------------------------------------------
November 3.70 cents
- --------------------------------------------------------------------------------

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

3. Source: Bureau of Labor Statistics.

4. Source: Moody's Investors Service, "New Issue: Tennessee (State of),"
10/30/07.

Semiannual Report | 19

PORTFOLIO BREAKDOWN
Franklin Tennessee Municipal Bond Fund
11/30/07

- --------------------------------------------------------------------------------
% OF TOTAL
LONG-TERM INVESTMENTS*
- --------------------------------------------------------------------------------
Utilities 35.9%**
- --------------------------------------------------------------------------------
Prerefunded 31.8%
- --------------------------------------------------------------------------------
General Obligation 11.0%
- --------------------------------------------------------------------------------
Hospital & Health Care 9.9%
- --------------------------------------------------------------------------------
Higher Education 3.9%
- --------------------------------------------------------------------------------
Housing 3.4%
- --------------------------------------------------------------------------------
Transportation 2.9%
- --------------------------------------------------------------------------------
Subject to Government Appropriations 0.6%
- --------------------------------------------------------------------------------
Tax-Supported 0.6%
- --------------------------------------------------------------------------------

* Does not include short-term investments and other net assets.

** 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.

Independent credit rating agency Moody's Investors Service upgraded Tennessee's
general obligation bonds to an Aa1 rating with a stable outlook. 5 The upgrade
reflected Moody's confidence in the state's active fiscal management and
strengthening economy, and also took into consideration Tennessee's low debt
burden and well funded pension programs.

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, the Fund's portfolio becomes
well diversified with a broad range of securities. This broad diversification
may help mitigate interest rate risk. We do not use leverage or exotic
derivatives, nor do we use hedging techniques that could add volatility and
contribute to underperformance in adverse markets. We generally stay fully
invested to maximize income distribution.

MANAGER'S DISCUSSION

Our value-oriented philosophy of investing primarily for income, combined with a
relatively steep municipal yield curve compared to Treasuries, favored
longer-term bonds during the reporting period. Consistent with our strategy, we
sought to remain fully invested in bonds ranging from 15 to 30 years in maturity
with good call features. We intend to maintain our conservative, buy-and-hold
investment strategy as we attempt to provide shareholders with high, current,
tax-free income.

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

5. This does not indicate Moody's rating of the Fund.

20 | Semiannual Report

Performance Summary as of 11/30/07

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 that a shareholder
would pay on Fund dividends, capital gain distributions, if any, or any realized
gains on the sale of Fund shares. Total return reflects reinvestment of the
Fund's dividends and capital gain distributions, if any, and any unrealized
gains or losses.

PRICE AND DISTRIBUTION INFORMATION

- ------------------------------------------------------------------------------------------------------
CLASS A (SYMBOL: FRTIX) CHANGE 11/30/07 5/31/07
- ------------------------------------------------------------------------------------------------------

Net Asset Value (NAV) -$0.02 $11.16 $11.18
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS (6/1/07-11/30/07)
- ------------------------------------------------------------------------------------------------------
Dividend Income $0.2205
- ------------------------------------------------------------------------------------------------------

PERFORMANCE 1

CUMULATIVE TOTAL RETURN EXCLUDES THE SALES CHARGE. AVERAGE ANNUAL TOTAL RETURNS
INCLUDE THE MAXIMUM SALES CHARGE. CLASS A: 4.25% MAXIMUM INITIAL SALES CHARGE.
THE FUND MAY CHARGE A 2% FEE ON REDEMPTIONS MADE WITHIN SEVEN DAYS OF PURCHASE.

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

Cumulative Total Return 2 +1.82% +2.01% +24.72% +59.89%
- ------------------------------------------------------------------------------------------------------
Average Annual Total Return 3 -2.54% -2.36% +3.61% +4.35%
- ------------------------------------------------------------------------------------------------------
Avg. Ann. Total Return (12/31/07) 4 -1.70% +3.21% +4.19%
- ------------------------------------------------------------------------------------------------------
Distribution Rate 5 3.91%
- ------------------------------------------------------------------------------------------------------
Taxable Equivalent Distribution Rate 6 6.40%
- ------------------------------------------------------------------------------------------------------
30-Day Standardized Yield 7 3.37%
- ------------------------------------------------------------------------------------------------------
Taxable Equivalent Yield 6 5.52%
- ------------------------------------------------------------------------------------------------------
Total Annual Operating Expenses 8
- ------------------------------------------------------------------------------------------------------
Without Waiver 0.75%
- ------------------------------------------------------------------------------------------------------
With Waiver 0.70%
- ------------------------------------------------------------------------------------------------------

THE MANAGER AND ADMINISTRATOR HAVE CONTRACTUALLY AGREED TO LIMIT FUND EXPENSES
SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT EXCEED 0.70% (OTHER THAN
CERTAIN NON-ROUTINE EXPENSES) UNTIL 9/30/08.

Semiannual Report | 21

Performance Summary (CONTINUED)

ENDNOTES

BECAUSE MUNICIPAL BONDS ARE PARTICULARLY SENSITIVE TO INTEREST RATE MOVEMENTS,
THE FUND'S YIELD AND SHARE PRICE WILL FLUCTUATE WITH MARKET CONDITIONS. BOND
PRICES GENERALLY MOVE IN THE OPPOSITE DIRECTION OF INTEREST RATES. THUS, AS
PRICES OF BONDS IN THE FUND ADJUST TO A RISE IN INTEREST RATES, THE FUND'S SHARE
PRICE MAY DECLINE. 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.

1. If the manager and administrator had not waived fees, the Fund's distribution
rate and total return would have been lower, and yield for the period would have
been 3.33%.

2. Cumulative total return represents the change in value of an investment over
the periods indicated.

3. Average annual total return represents the average annual change in value of
an investment over the periods indicated. 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 3.80 cent per
share monthly dividend and the maximum offering price of $11.66 per share on
11/30/07.

6. Taxable equivalent distribution rate and yield assume the published rates as
of 6/27/07 for the maximum combined effective federal and Tennessee state
personal income tax rate 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 11/30/07.

8. Figures are as stated in the Fund's prospectus current as of the date of this
report.

22 | Semiannual Report

Your Fund's Expenses

FRANKLIN TENNESSEE MUNICIPAL BOND FUND

As a Fund shareholder, you can incur two types of costs:

o Transaction costs, including sales charges (loads) on Fund purchases and
redemption fees; and

o Ongoing Fund costs, including management fees, distribution and service
(12b-1) fees, and other Fund expenses. All mutual funds have ongoing
costs, sometimes referred to as operating expenses.

ACTUAL FUND EXPENSES

You can estimate the expenses you paid during the period by following these
steps. OF COURSE, YOUR ACCOUNT VALUE AND EXPENSES WILL DIFFER FROM THOSE IN THIS
ILLUSTRATION:

1. Divide your account value by $1,000.
IF AN ACCOUNT HAD AN $8,600 VALUE, THEN $8,600 / $1,000 = 8.6.

2. Multiply the result by the number under the heading "Expenses Paid During
Period."
IF EXPENSES PAID DURING PERIOD WERE $7.50, THEN 8.6 X $7.50 = $64.50.

In this illustration, the estimated expenses paid this period are $64.50.

HYPOTHETICAL EXAMPLE FOR COMPARISON WITH OTHER FUNDS

Semiannual Report | 23

Your Fund's Expenses (CONTINUED)

Actual $1,000 $1,018.20 $3.53
- ---------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) $1,000 $1,021.50 $3.54
- ---------------------------------------------------------------------------------------------------------

* Expenses are calculated using the most recent annualized six-month expense
ratio, net of expense waiver, of 0.70%, multiplied by the average account value
over the period, multiplied by 183/366 to reflect the one-half year period.

24 | Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND

-------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2007 YEAR ENDED MAY 31,
CLASS A (UNAUDITED) 2007 2006 2005 2004 2003
-------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $ 10.44 $ 10.31 $ 10.39 $ 9.94 $ 10.21 $ 9.97
-------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ..................... 0.24 0.48 0.50 0.53 0.56 0.54
Net realized and unrealized gains (losses) .. (0.36) 0.13 (0.08) 0.47 (0.28) 0.25
-------------------------------------------------------------------------------
Total from investment operations ............... (0.12) 0.61 0.42 1.00 0.28 0.79
-------------------------------------------------------------------------------
Less distributions from net investment income .. (0.24) (0.48) (0.50) (0.55) (0.55) (0.55)
-------------------------------------------------------------------------------
Redemption fees ................................ -- e -- -- e -- e -- --
-------------------------------------------------------------------------------
Net asset value, end of period ................. $ 10.08 $ 10.44 $ 10.31 $ 10.39 $ 9.94 $ 10.21
===============================================================================

Total return c ................................. (1.19)% 6.03% 4.13% 10.26% 2.81% 8.15%

RATIOS TO AVERAGE NET ASSETS d
Expenses ....................................... 0.62% 0.62% 0.62% 0.64% 0.65% 0.65%
Net investment income .......................... 4.70% 4.58% 4.80% 5.22% 5.61% 5.36%

SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $1,266,258 $1,329,255 $1,067,011 $777,960 $548,292 $537,770
Portfolio turnover rate ........................ 8.70% 3.34% 11.18% 5.43% 8.79% 10.13%

a The amount shown for a share outstanding throughout the period may not
correlate with the Statement of Operations for the period due to the timing of
sales and repurchase of the Fund shares in relation to income earned and/or
fluctuating market value of the investments of the Fund.

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable, and is not annualized for periods less than one year.

d Ratios are annualized for periods less than one year.

e Amount rounds to less than $0.01 per share.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 25

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND

-------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2007 YEAR ENDED MAY 31,
CLASS B (UNAUDITED) 2007 2006 2005 2004 2003
-------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $ 10.49 $ 10.36 $ 10.44 $ 9.99 $ 10.25 $ 10.02
-------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ..................... 0.21 0.42 0.44 0.48 0.51 0.49
Net realized and unrealized gains (losses) .. (0.36) 0.14 (0.08) 0.46 (0.28) 0.24
-------------------------------------------------------------------------------
Total from investment operations ............... (0.15) 0.56 0.36 0.94 0.23 0.73
-------------------------------------------------------------------------------
Less distributions from net investment income .. (0.21) (0.43) (0.44) (0.49) (0.49) (0.50)
-------------------------------------------------------------------------------
Redemption fees ................................ -- e -- -- e -- e -- --
-------------------------------------------------------------------------------
Net asset value, end of period ................. $ 10.13 $ 10.49 $ 10.36 $ 10.44 $ 9.99 $ 10.25
===============================================================================

Total return c ................................. (1.46)% 5.43% 3.54% 9.61% 2.24% 7.52%

RATIOS TO AVERAGE NET ASSETS d
Expenses ....................................... 1.17% 1.17% 1.17% 1.19% 1.20% 1.20%
Net investment income .......................... 4.15% 4.03% 4.25% 4.67% 5.06% 4.81%

SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $ 24,851 $ 27,246 $ 29,980 $ 31,588 $ 28,197 $ 29,268
Portfolio turnover rate ........................ 8.70% 3.34% 11.18% 5.43% 8.79% 10.13%

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable, and is not annualized for periods less than one year.

d Ratios are annualized for periods less than one year.

e Amount rounds to less than $0.01 per share.

26 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND

-------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2007 YEAR ENDED MAY 31,
CLASS C (UNAUDITED) 2007 2006 2005 2004 2003
-------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $ 10.48 $ 10.35 $ 10.43 $ 9.97 $ 10.24 $ 10.01
-------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ..................... 0.21 0.42 0.44 0.48 0.51 0.48
Net realized and unrealized gains (losses) .. (0.35) 0.14 (0.08) 0.47 (0.29) 0.25
-------------------------------------------------------------------------------
Total from investment operations ............... (0.14) 0.56 0.36 0.95 0.22 0.73
-------------------------------------------------------------------------------
Less distributions from net investment income .. (0.21) (0.43) (0.44) (0.49) (0.49) (0.50)
-------------------------------------------------------------------------------
Redemption fees ................................ -- e -- -- e -- e -- --
-------------------------------------------------------------------------------
Net asset value, end of period ................. $ 10.13 $ 10.48 $ 10.35 $ 10.43 $ 9.97 $ 10.24
===============================================================================

Total return c ................................. (1.37)% 5.43% 3.54% 9.72% 2.24% 7.43%

SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $ 291,260 $ 285,410 $ 190,670 $ 120,521 $ 79,294 $ 77,748
Portfolio turnover rate ........................ 8.70% 3.34% 11.18% 5.43% 8.79% 10.13%

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable, and is not annualized for periods less than one year.

d Ratios are annualized for periods less than one year.

e Amount rounds to less than $0.01 per share.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 27

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS (CONTINUED)

FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND

----------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2007 PERIOD ENDED
ADVISOR CLASS (UNAUDITED) MAY 31, 2007 f
----------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ....................................................... $ 10.45 $ 10.53
----------------------------------
Income from investment operations a:
Net investment income b ................................................................. 0.25 0.26
Net realized and unrealized gains (losses) .............................................. (0.37) (0.08)
----------------------------------
Total from investment operations ........................................................... (0.12) 0.18
----------------------------------
Less distributions from net investment income .............................................. (0.24) (0.26)
----------------------------------
Redemption fees ............................................................................ -- e --
----------------------------------
Net asset value, end of period ............................................................. $ 10.09 $ 10.45
==================================

Total return c ............................................................................. (1.15)% 1.76%

RATIOS TO AVERAGE NET ASSETS d
Expenses ................................................................................... 0.52% 0.52%
Net investment income ...................................................................... 4.80% 4.68%

SUPPLEMENTAL DATA
Net assets, end of period (000's) .......................................................... $ 41,286 $ 18,156
Portfolio turnover rate .................................................................... 8.70% 3.34%

b Based on average daily shares outstanding.

c Total return is not annualized for periods less than one year.

d Ratios are annualized for periods less than one year.

e Amount rounds to less than $0.01 per share.

f For period November 15, 2006 (effective date) to May 31, 2007.

28 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED)

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

LONG TERM INVESTMENTS 99.9%
MUNICIPAL BONDS 99.9%
CALIFORNIA 95.7%
ABAG 1915 Act Special Assessment,
Windemere Ranch AD 1999-1, Pre-Refunded, 6.20%, 9/02/20 .................................. $ 1,950,000 $ 2,190,006
Windemere Ranch AD 1999-1, Pre-Refunded, 7.35%, 9/02/20 .................................. 7,820,000 8,208,811
Windemere Ranch AD 1999-1, Pre-Refunded, 6.30%, 9/02/25 .................................. 2,935,000 3,306,512
Windemere Ranch AD, Series 1, Pre-Refunded, 7.45%, 9/02/30 ............................... 4,815,000 5,057,869
ABAG Finance Authority for Nonprofit Corps. Revenue,
Elder Care Alliance, California Mortgage Insured, 5.60%, 8/15/34 ......................... 4,260,000 4,418,259
Hamlin School, 5.00%, 8/01/37 ............................................................ 10,485,000 9,467,431
Windemere Ranch Financing Program, Sub Series B, 5.00%, 9/02/27 .......................... 3,500,000 3,335,080
Windemere Ranch Financing Program, Sub Series B, 5.00%, 9/02/34 .......................... 5,320,000 4,791,352
Adelanto Water Authority Revenue,
Parity, Water System Acquisition Project, Series A, Pre-Refunded, 7.50%, 9/01/28 ......... 3,035,000 3,187,236
Subordinated, Water System Acquisition Project, Series A, Pre-Refunded, 7.50%,
9/01/28 ................................................................................ 2,000,000 2,099,560
Alameda CFD No. 2 Special Tax, Refunding, 6.125%, 9/01/16 ................................... 1,240,000 1,252,288
Alameda PFA Local Agency Revenue, Special Tax, CFD 1, Series A,
6.70%, 8/01/12 ........................................................................... 3,400,000 3,444,778
7.00%, 8/01/19 ........................................................................... 4,015,000 4,066,031
a Aliso Viejo CFD No. 2005-01 Special Tax, Glenwood at Aliso Viejo, 5.875%, 9/01/27 ........... 5,115,000 5,035,257
American Canyon Financing Authority Infrastructure Revenue Special Assessment,
American Canyon Road East,
5.00%, 9/02/25 ........................................................................... 1,305,000 1,242,647
5.00%, 9/02/30 ........................................................................... 2,020,000 1,828,201
5.10%, 9/02/35 ........................................................................... 1,695,000 1,524,178
Arcadia USD, GO,
Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn., 8/01/42 ........ 12,735,000 2,092,361
Capital Appreciation, Election of 2006, Series A, FSA Insured, zero cpn., 8/01/44 ........ 25,080,000 3,686,258
Election of 2006, Series A, FSA Insured, 5.00%, 8/01/32 .................................. 2,500,000 2,635,025
Avenal PFAR, Refunding, 5.00%,
9/01/30 .................................................................................. 1,325,000 1,341,006
9/01/36 .................................................................................. 710,000 716,298
Azusa Special Tax, Escrow, CFD 05-1,
Area 1, 5.00%, 9/01/27 ................................................................... 1,115,000 1,036,861
Area 1, 5.00%, 9/01/37 ................................................................... 2,845,000 2,538,707
Improvement, Area 1, 5.00%, 9/01/27 ...................................................... 2,640,000 2,431,282
Improvement, Area 1, 5.00%, 9/01/37 ...................................................... 9,250,000 8,218,255
Beaumont Financing Authority Local Agency Revenue,
Series B, 5.35%, 9/01/28 ................................................................. 1,000,000 969,470
Series B, 5.40%, 9/01/35 ................................................................. 1,490,000 1,412,058
Series C, 5.45%, 9/01/27 ................................................................. 6,435,000 6,335,064
Series C, 5.50%, 9/01/29 ................................................................. 855,000 845,304
Series C, 5.50%, 9/01/35 ................................................................. 5,035,000 4,854,294
Bell GO, Election of 2003, MBIA Insured, 5.00%, 8/01/34 ..................................... 5,195,000 5,391,059
Beverly Hills USD, GO, Election of 2002, Series B, 5.00%, 8/01/27 ........................... 3,940,000 4,118,088
Brentwood Infrastructure Financing Authority Infrastructure Revenue, CIFP, Series 1,
5.00%, 9/02/25 ........................................................................... 3,195,000 3,004,866
5.125%, 9/02/30 .......................................................................... 4,400,000 4,053,104
5.15%, 9/02/35 ........................................................................... 3,450,000 3,159,924

Semiannual Report | 29

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Burbank Wastewater Treatment Revenue, Refunding, Series A, AMBAC Insured, 5.00%,
6/01/34 ................................................................................... $ 1,430,000 $ 1,474,716
Cabrillo Community College District GO, Capital Appreciation, Election of 2004, Series B,
MBIA Insured, zero cpn.,
8/01/31 .................................................................................. 8,870,000 2,591,282
8/01/33 .................................................................................. 9,475,000 2,469,754
California City RDA Tax Allocation Revenue, Refunding, Series A-1, 7.75%, 9/01/34 ........... 9,470,000 10,044,355
California County Tobacco Securitization Agency Tobacco Settlement Revenue,
Asset-Backed, Los Angeles County Security, zero cpn. to 12/01/10, 5.70% thereafter,
6/01/46 ................................................................................ 5,000,000 3,699,150
Refunding, 5.25%, 6/01/46 ................................................................ 5,000,000 4,301,750
California Educational Facilities Authority Revenue,
California College of the Arts, Refunding, 5.00%, 6/01/30 ................................ 1,800,000 1,738,692
California College of the Arts, Refunding, 5.00%, 6/01/35 ................................ 4,405,000 4,184,309
College and University Financing Program, 5.00%, 2/01/30 ................................. 5,425,000 5,146,155
College and University Financing Program, 5.00%, 2/01/37 ................................. 1,150,000 1,074,767
College and University Financing Program, Refunding, 5.00%, 2/01/26 ...................... 1,000,000 963,760
Keck Graduate Institute, Pre-Refunded, 6.75%, 6/01/30 .................................... 2,500,000 2,732,525
Occidental College, Refunding, Series A, MBIA Insured, 5.00%, 10/01/30 ................... 2,000,000 2,070,540
Occidental College, Refunding, Series A, MBIA Insured, 5.00%, 10/01/33 ................... 7,345,000 7,564,909
Pooled College and University, Series B, 6.625%, 6/01/20 ................................. 1,000,000 1,082,060
California Health Facilities Financing Authority Revenue,
Asian Community Center, Series A, AMBAC Insured, 5.00%, 4/01/27 .......................... 4,850,000 4,958,494
California-Nevada Methodist, 5.00%, 7/01/26 .............................................. 1,750,000 1,753,570
California-Nevada Methodist, 5.00%, 7/01/36 .............................................. 2,075,000 2,040,825
Kaiser Permanente, Series A, 5.00%, 4/01/37 .............................................. 18,460,000 18,483,629
Kaiser Permanente, Series A, ETM, 5.40%, 5/01/28 ......................................... 2,500,000 2,541,600
Kaiser Permanente, Series B, ETM, 5.25%, 10/01/16 ........................................ 3,250,000 3,329,787
Sutter Health, Series A, 5.00%, 11/15/42 ................................................. 23,000,000 22,999,310
Sutter Health, Series A, 5.25%, 11/15/46 ................................................. 25,000,000 25,373,500
Thessalonika Family, Series A, California Mortgage Insured, 6.20%, 12/01/15 .............. 585,000 585,702
Verdugo Mental Health, Series A, California Mortgage Insured, 5.00%, 4/01/28 ............. 1,895,000 1,927,367
Verdugo Mental Health, Series A, California Mortgage Insured, 5.00%, 4/01/37 ............. 2,515,000 2,488,090
California Infrastructure and Economic Development Bank Revenue, Performing Arts Center,
5.00%, 12/01/42 ........................................................................... 4,390,000 4,441,626
California Municipal Finance Authority COP, Community Hospitals of Central California,
5.25%,
2/01/27 .................................................................................. 15,655,000 15,266,286
2/01/46 .................................................................................. 17,000,000 15,690,320
California Municipal Finance Authority Revenue, University Students Cooperative Associates,
5.00%, 4/01/37 ............................................................................ 4,000,000 3,839,360
California State GO,
FGIC Insured, 6.00%, 8/01/19 ............................................................. 30,000 30,121
Pre-Refunded, 5.00%, 2/01/33 ............................................................. 15,600,000 16,966,092
Refunding, AMBAC Insured, 5.00%, 3/01/34 ................................................. 10,000,000 10,322,400
Various Purpose, MBIA Insured, 5.00%, 3/01/33 ............................................ 2,025,000 2,081,781

30 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
California State Municipal Finance Authority Revenue, Loma Linda University, 5.00%,
4/01/37 ................................................................................... $ 3,500,000 $ 3,505,425
California State Public Works Board Lease Revenue,
Department of Mental Health, Coalinga, Series A, 5.125%, 6/01/29 ......................... 5,000,000 5,106,400
University of California, Institute Project, Series C, AMBAC Insured, 5.00%, 4/01/30 ..... 5,000,000 5,166,800
California State University of Fresno Assn. Inc. Revenue, Senior Auxiliary Organization Event
Center, Pre-Refunded, 6.00%, 7/01/22 ...................................................... 3,500,000 3,924,900
California Statewide CDA, COP,
Catholic Healthcare West, 6.50%, 7/01/20 ................................................. 3,365,000 3,661,827
Catholic Healthcare West, Pre-Refunded, 6.50%, 7/01/20 ................................... 8,695,000 9,473,463
International School of the Peninsula Project, Pre-Refunded, 7.50%, 11/01/29 ............. 10,080,000 10,830,154
California Statewide CDA Assisted Living Facilities Revenue, Hollenbeck Palms/Magnolia,
Series A, Radian Insured, 4.50%, 2/01/27 .................................................. 2,200,000 2,038,234
b California Statewide CDA Lease Revenue, Special Facilities, United Airlines, Series A, 5.70%,
10/01/33 .................................................................................. 3,320,000 1,050,282
California Statewide CDA Revenue,
Bentley School, Refunding, 6.75%, 7/01/32 ................................................ 8,250,000 8,744,092
California Baptist University, Refunding, Series A, 5.50%, 11/01/38 ...................... 4,500,000 4,422,285
California Mortgage Insured, 5.00%, 5/01/37 .............................................. 3,980,000 4,003,562
Drew School, Refunding, 5.30%, 10/01/37 .................................................. 1,070,000 1,017,688
Elder Care Alliance, Series A, Pre-Refunded, 8.00%, 11/15/22 ............................. 3,000,000 3,667,170
Elder Care Alliance, Series A, Pre-Refunded, 8.25%, 11/15/32 ............................. 4,000,000 4,949,880
Eskaton Village Grass Valley, Pre-Refunded, 8.25%, 11/15/31 .............................. 9,730,000 11,101,735
Henry Mayo Newhall Memorial Hospital, California Mortgage Insured, 5.00%,
10/01/27 ............................................................................... 3,000,000 3,034,710
John F. Kennedy University, 6.75%, 10/01/33 .............................................. 5,000,000 5,307,300
Kaiser Permanente, Series A, 5.00%, 4/01/31 .............................................. 10,000,000 10,036,300
Kaiser Permanente, Series B, 5.00%, 3/01/41 .............................................. 25,000,000 24,837,500
Lancer Educational Student Housing Project, 5.625%, 6/01/33 .............................. 3,000,000 2,946,210
a Lodi Memorial Hospital, Series A, California Mortgage Insured, 5.00%, 12/01/37 ........... 13,000,000 12,860,380
Monterey Institute International, 5.50%, 7/01/31 ......................................... 8,285,000 7,805,298
Presidio Hill School, 6.875%, 8/01/32 .................................................... 6,195,000 6,409,285
Prospect Sierra School, Pre-Refunded, 6.75%, 9/01/32 ..................................... 5,000,000 5,521,900
Seven Hills School, 6.50%, 8/01/31 ....................................................... 5,415,000 5,537,704
Sonoma County Day School, 6.75%, 1/01/32 ................................................. 5,910,000 5,999,773
Sutter Health, Refunding, Series A, 5.00%, 11/15/43 ...................................... 22,000,000 22,042,240
Thomas Jefferson School of Law Project, Pre-Refunded, 7.75%, 10/01/31 .................... 4,925,000 5,650,452
Turning Point, 6.50%, 11/01/31 ........................................................... 6,130,000 6,268,048
ValleyCare Health System, Refunding, Series A, 5.00%, 7/15/22 ............................ 1,000,000 962,810
ValleyCare Health System, Refunding, Series A, 5.125%, 7/15/31 ........................... 3,000,000 2,777,460
Camarillo PFA Wastewater Revenue, AMBAC Insured, 5.00%, 6/01/36 ............................. 2,960,000 3,050,813
Campbell RDA Tax Allocation, Central Campbell Redevelopment Project, Series A,
Pre-Refunded, 6.55%, 10/01/32 ............................................................. 5,300,000 5,715,520
Capistrano USD, CFD Special Tax, No. 05-1, Rancho Madrina, 5.25%, 9/01/34 ................... 1,120,000 1,062,914
Castro Valley USD, GO, Election of 2005, FGIC Insured, 5.00%, 8/01/34 ....................... 5,310,000 5,510,399

Semiannual Report | 31

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Cathedral City 1915 Act Special Assessment, Limited Obligation, Cove ID 04-02,
5.00%, 9/02/30 ........................................................................... $ 1,200,000 $ 1,106,496
5.05%, 9/02/35 ........................................................................... 1,335,000 1,218,121
Chabot-Las Positas Community College District GO, Capital Appreciation Bonds, Series C,
AMBAC Insured, zero cpn.,
8/01/44 .................................................................................. 32,750,000 4,694,712
8/01/46 .................................................................................. 35,370,000 4,560,608
Chatom USD, GO, Election of 2006, Capital Appreciation, Series C, XLCA Insured, zero cpn.,
8/01/47 ................................................................................... 9,450,000 995,558
Chino CFD Special Tax,
No. 03-1, 5.875%, 9/01/33 ................................................................ 1,250,000 1,262,888
No. 03-3, Improvement Area 1, 5.70%, 9/01/29 ............................................. 1,215,000 1,223,724
No. 03-3, Improvement Area 1, 5.75%, 9/01/34 ............................................. 1,420,000 1,426,149
Chula Vista CFD Special Tax,
No. 01-1, Improvement Area, San Miguel, Series B, 5.45%, 9/01/36 ......................... 2,175,000 2,066,011
No. 12-I, Mcmillin Otay Ranch, 5.25%, 9/01/30 ............................................ 2,135,000 1,993,087
No. 12-I, Mcmillin Otay Ranch, 5.25%, 9/01/36 ............................................ 3,705,000 3,406,340
Chula Vista Special Tax, CFD No. 2000-1, Pre-Refunded, 6.60%, 9/01/30 ....................... 1,500,000 1,565,475
Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, FGIC Insured, zero cpn.,
8/01/27 .................................................................................. 7,500,000 2,841,150
8/01/28 .................................................................................. 5,000,000 1,795,600
Corona CFD No. 2003-2 Special Tax, Highlands Collection,
5.15%, 9/01/34 ........................................................................... 2,810,000 2,571,375
5.20%, 9/01/34 ........................................................................... 1,000,000 922,380
Corona CFD Special Tax, No. 01-02, Improvement Nos. 1 and 2, 6.25%, 9/01/32 ................. 1,890,000 1,926,401
Corona-Norco USD, PFA Special Tax Revenue, Series B, 5.00%,
9/01/26 .................................................................................. 1,760,000 1,638,490
9/01/36 .................................................................................. 2,000,000 1,763,820
Corona-Norco USD Special Tax,
CFD No. 04-1, 5.00%, 9/01/24 ............................................................. 1,540,000 1,474,196
CFD No. 04-1, 5.20%, 9/01/36 ............................................................. 2,000,000 1,843,060
CFD No. 99-1, Pre-Refunded, 7.00%, 9/01/29 ............................................... 2,120,000 2,274,760
Series A, 5.35%, 9/01/26 ................................................................. 1,005,000 986,377
Series A, 5.40%, 9/01/36 ................................................................. 2,530,000 2,385,638
Cotati South Sonoma Business Park AD Special Assessment, Improvement, 6.50%,
9/02/33 ................................................................................... 5,575,000 5,640,227
Del Mar Race Track Authority Revenue, 5.00%, 8/15/25 ........................................ 3,665,000 3,616,036
Duarte RDA Tax Allocation,
Capital Appreciation, Merged Redevelopment Project, ETM, zero cpn., 12/01/28 ............. 30,795,000 10,461,061
Davis Addition Project Area, Refunding, 6.70%, 9/01/14 ................................... 1,020,000 1,047,387
Davis Addition Project Area, Refunding, 6.90%, 9/01/18 ................................... 2,115,000 2,170,794
Eastern California Municipal Water District CFD No. 2003-15, Special Tax, Morgan Valley,
Series A, 5.20%, 9/01/37 .................................................................. 2,000,000 1,841,300
El Dorado County Special Tax,
CFD No. 1992-1, 6.125%, 9/01/16 .......................................................... 4,735,000 4,835,098
CFD No. 2001-1, 5.35%, 9/01/35 ........................................................... 1,900,000 1,787,558
CFD No. 2005-1, 5.00%, 9/01/21 ........................................................... 1,000,000 920,410

32 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
El Dorado County Special Tax, (continued)
CFD No. 2005-1, 5.15%, 9/01/25 ........................................................... $ 2,075,000 $ 1,905,058
CFD No. 2005-1, 5.25%, 9/01/35 ........................................................... 6,705,000 6,083,245
El Monte Water Authority Revenue, Refunding, AMBAC Insured, 5.00%,
9/01/31 .................................................................................. 4,300,000 4,463,099
9/01/36 .................................................................................. 3,855,000 3,989,925
El Rancho USD, GO, Capital Appreciation, Election of 2003, FGIC Insured, zero cpn.,
8/01/29 ................................................................................... 2,400,000 879,456
Elsinore Valley Municipal Water District Special Tax, CFD No. 99-1, 7.00%, 9/01/29 .......... 3,500,000 3,613,260
Escondido Revenue COP, Series A, FGIC Insured,
6.00%, 9/01/31 ........................................................................... 805,000 867,025
Pre-Refunded, 6.00%, 9/01/31 ............................................................. 900,000 975,015
Escondido Special Tax, CFD No. 01, Eureka,
5.10%, 9/01/26 ........................................................................... 700,000 662,746
5.15%, 9/01/36 ........................................................................... 1,400,000 1,286,110
Fontana Special Tax,
CFD No. 12, Pre-Refunded, 6.60%, 9/01/19 ................................................. 3,295,000 3,513,426
CFD No. 12, Pre-Refunded, 6.625%, 9/01/30 ................................................ 7,675,000 8,186,999
CFD No. 37, 5.00%, 9/01/30 ............................................................... 1,000,000 887,170
Foothill/Eastern Corridor Agency Toll Road Revenue, Capital Appreciation, Refunding,
zero cpn.,
1/15/26 .................................................................................. 38,720,000 13,294,512
1/15/30 .................................................................................. 4,000,000 1,089,360
1/15/31 .................................................................................. 85,780,000 21,960,538
Fremont USD Alameda County GO, Election of 2002, Series B, FSA Insured, 5.00%,
8/01/27 ................................................................................... 5,665,000 5,958,787
Fullerton Water Revenue COP, AMBAC Insured, 5.00%,
9/01/28 .................................................................................. 2,650,000 2,754,225
9/01/34 .................................................................................. 2,795,000 2,893,356
Garden Grove Housing Authority MFHR, Set-Aside Tax Increment, Series C, 6.70%,
7/01/24 ................................................................................... 6,375,000 6,410,700
Glendora USD, GO, Election of 2005, Series A, MBIA Insured,
5.00%, 8/01/27 ........................................................................... 1,350,000 1,412,654
5.25%, 8/01/30 ........................................................................... 2,725,000 2,888,064
Golden State Tobacco Securitization Corp. Tobacco Settlement Revenue,
Asset-Backed, Series A-1, 5.75%, 6/01/47 ................................................. 14,500,000 13,602,450
Asset-Backed, Series A-2, Pre-Refunded, 7.90%, 6/01/42 ................................... 750,000 914,333
Asset-Backed, Series A-3, Pre-Refunded, 7.875%, 6/01/42 .................................. 6,400,000 7,794,368
Capital Appreciation, Asset-Backed, 2nd Sub Series C, zero cpn., 6/01/47 ................. 50,000,000 3,217,000
Enhanced, Asset-Backed, Refunding, Series A, 5.00%, 6/01/45 .............................. 10,000,000 9,752,000
Golden Valley USD, GO, Election of 1999, Series C, FSA Insured, 5.00%,
8/01/36 .................................................................................. 745,000 782,205
8/01/45 .................................................................................. 1,660,000 1,734,916
Half Moon Bay COP, Sea Crest School, 6.75%, 7/01/30 ......................................... 3,580,000 3,647,734
Hercules RDA Tax Allocation, Hercules Merged Project, Pre-Refunded, 6.40%, 9/01/21 .......... 5,000,000 5,361,950
Huntington Beach CFD Special Tax Revenue, Grand Coast Resort, 6.45%, 9/01/31 ................ 5,000,000 5,208,350

Semiannual Report | 33

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
c Imperial County Special Tax, CFD No. 98-1,
6.45%, 9/01/17 ........................................................................... $ 1,890,000 $ 1,875,901
6.50%, 9/01/31 ........................................................................... 5,705,000 5,554,388
Indio 1915 Act GO,
AD No. 1999-1, 7.125%, 9/02/20 ........................................................... 1,945,000 2,040,966
AD No. 2001-1, 6.50%, 9/02/26 ............................................................ 4,240,000 4,404,046
Indio CFD Special Tax,
5.00%, 9/01/25 ........................................................................... 4,000,000 3,744,800
5.10%, 9/01/30 ........................................................................... 1,275,000 1,162,609
No. 04-3, Terra Lago, Improvement Area 1, 5.15%, 9/01/35 ................................. 2,000,000 1,802,380
Irvine 1915 Act Special Assessment,
AD No. 00-18, Group Five, 5.00%, 9/02/26 ................................................. 1,275,000 1,191,781
AD No. 03-19, Group Five, Refunding, 5.00%, 9/02/25 ...................................... 1,500,000 1,433,580
AD No. 03-19, Group Five, Refunding, 5.00%, 9/02/29 ...................................... 2,000,000 1,859,520
AD No. 03-19, Group Three, 5.00%, 9/02/29 ................................................ 1,110,000 1,018,936
AD No. 04-20, Group One, 5.00%, 9/02/25 .................................................. 2,740,000 2,606,672
AD No. 04-20, Group One, 5.00%, 9/02/30 .................................................. 10,975,000 9,924,034
Limited Obligation, AD No. 03-19, Group Four, 5.00%, 9/02/29 ............................. 1,500,000 1,389,300
Irvine Special Tax, CFD No. 2005-2, 5.25%, 9/01/36 .......................................... 2,000,000 1,838,560
Jurupa Community Services District Special Tax,
CFD No. 7, Series A, 5.10%, 9/01/28 ...................................................... 2,695,000 2,591,377
CFD No. 7, Series A, 5.15%, 9/01/35 ...................................................... 3,690,000 3,452,327
CFD No. 11, Series A, 5.00%, 9/01/25 ..................................................... 1,930,000 1,824,197
CFD No. 11, Series A, 5.05%, 9/01/30 ..................................................... 2,495,000 2,307,476
CFD No. 11, Series A, 5.10%, 9/01/35 ..................................................... 2,065,000 1,856,889
CFD No. 12, Series A, 5.10%, 9/01/29 ..................................................... 2,000,000 1,884,580
CFD No. 12, Series A, 5.15%, 9/01/35 ..................................................... 3,000,000 2,740,050
CFD No. 17, Series A, 5.125%, 9/01/25 .................................................... 1,350,000 1,256,864
CFD No. 17, Series A, 5.20%, 9/01/36 ..................................................... 3,325,000 3,050,554
CFD No. 18, Eastvale, Series A, 5.00%, 9/01/26 ........................................... 1,295,000 1,204,013
CFD No. 18, Eastvale, Series A, 5.00%, 9/01/36 ........................................... 2,400,000 2,138,880
CFD No. 19, Eastvale, 5.00%, 9/01/27 ..................................................... 1,500,000 1,389,810
CFD No. 19, Eastvale, 5.00%, 9/01/36 ..................................................... 1,500,000 1,334,895
CFD No. 30, Series A, 5.60%, 9/01/37 ..................................................... 1,000,000 973,100
Lafayette RDA Tax Allocation, 5.75%, 8/01/32 ................................................ 1,000,000 1,052,340
Lake Elsinore 1915 Act Special Assessment, AD No. 93-1, Limited Obligation, Refunding,
7.00%, 9/02/30 ............................................................................ 8,325,000 8,773,717
Lake Elsinore CFD No. 2004-3 Special Tax, Series A,
5.20%, 9/01/26 ........................................................................... 915,000 868,683
5.25%, 9/01/37 ........................................................................... 2,800,000 2,567,656
Lake Elsinore CFD No. 2006-2 Special Tax, Viscaya, Series A, 5.40%, 9/01/36 ................. 2,020,000 1,904,739
Lake Elsinore Special Tax,
CFD No. 2, Area A, Series A, 5.45%, 9/01/36 .............................................. 5,695,000 5,409,624
CFD No. 3, Improvement Area 1, 5.10%, 9/01/22 ............................................ 750,000 731,730
CFD No. 3, Improvement Area 1, 5.15%, 9/01/25 ............................................ 635,000 615,563
CFD No. 3, Improvement Area 1, 5.25%, 9/01/30 ............................................ 1,195,000 1,115,568

34 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Lake Elsinore Special Tax, (continued)
CFD No. 3, Improvement Area 1, 5.25%, 9/01/35 ............................................ $ 1,225,000 $ 1,130,773
Improvements, CFD No. 2-A, 5.85%, 9/01/24 ................................................ 1,035,000 1,055,524
Improvements, CFD No. 2-A, 5.95%, 9/01/34 ................................................ 2,200,000 2,229,678
Lake Elsinore USD, CFD No. 2001-1 Special Tax, Pre-Refunded, 6.30%, 9/01/33 ................. 4,455,000 5,006,796
Lancaster Financing Authority Tax Allocation Revenue, Redevelopment Project Nos. 5 and 6,
Refunding,
5.40%, 2/01/29 ........................................................................... 500,000 510,715
5.60%, 2/01/34 ........................................................................... 1,250,000 1,289,900
Lee Lake Water District CFD No. 1 Special Tax, Sycamore Creek,
6.50%, 9/01/24 ........................................................................... 1,000,000 1,069,930
5.25%, 9/01/28 ........................................................................... 1,750,000 1,679,405
5.30%, 9/01/35 ........................................................................... 3,300,000 3,082,068
Lee Lake Water District CFD No. 3 Special Tax, Retreat, 5.875%, 9/01/27 ..................... 3,000,000 3,045,300
Lincoln CFD No. 2003-1 Special Tax, Pre-Refunded,
5.90%, 9/01/24 ........................................................................... 1,780,000 2,021,457
5.95%, 9/01/28 ........................................................................... 4,450,000 5,065,079
6.00%, 9/01/34 ........................................................................... 3,520,000 4,015,581
Lincoln PFA Special Tax Revenue, Sub Series B, 5.00%, 9/01/34 ............................... 3,435,000 3,055,089
Lodi USD, GO, Election of 2002, MBIA Insured, 5.00%, 8/01/29 ................................ 3,010,000 3,118,209
Loma Linda Hospital Revenue, Loma Linda University Medical Center, Series A, 5.00%,
12/01/21 .................................................................................. 7,500,000 7,432,950
Long Beach Bond Finance Authority Natural Gas Purchase Revenue, Series A,
5.00%, 11/15/29 .......................................................................... 9,630,000 9,245,474
5.50%, 11/15/37 .......................................................................... 25,000,000 25,293,750
Los Angeles Department of Water and Power Waterworks Revenue, System, Sub Series A-1,
AMBAC Insured, 5.00%, 7/01/32 ............................................................. 5,000,000 5,220,200
c Los Angeles MFR, Refunding, Series J-2C, 8.50%, 1/01/24 ..................................... 620,000 596,384
Los Angeles USD, GO, Election of 2005, Series C, AMBAC Insured, 5.00%, 7/01/28 .............. 3,565,000 3,724,035
Los Angeles Water and Power Revenue, Power Systems, Sub Series A-1, FSA Insured, 5.00%,
7/01/35 ................................................................................... 5,000,000 5,207,600
Los Gatos School District GO, Series D, FSA Insured, 5.00%, 8/01/32 ......................... 4,815,000 5,086,566
Lynwood PFA Lease Revenue,
6.25%, 9/01/22 ........................................................................... 1,080,000 1,126,343
6.30%, 9/01/29 ........................................................................... 2,680,000 2,789,424
Lynwood PFA Tax Allocation, Alameda Project Area, 6.30%, 9/01/24 ............................ 1,000,000 1,039,810
Lynwood PFAR, Water System Improvement Project, 6.50%, 6/01/21 .............................. 1,175,000 1,176,563
Magnolia School District GO, Refunding, FGIC Insured, 5.00%, 8/01/31 ........................ 2,555,000 2,675,570
Menifee USD Special Tax, CFD No. 2002-2,
6.05%, 9/01/26 ........................................................................... 1,000,000 1,023,870
6.10%, 9/01/34 ........................................................................... 3,715,000 3,781,870
Merced CFD No. 2005-1 Special Tax, Improvement Area No. 1, 5.30%, 9/01/36 ................... 2,400,000 2,232,888
Moorpark CFD No. 2004-1 Special Tax, Moorpark Highlands,
5.25%, 9/01/26 ........................................................................... 1,895,000 1,839,856
5.30%, 9/01/38 ........................................................................... 4,240,000 3,960,075

Semiannual Report | 35

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Moreland School District GO, Election of 2002, Series D, FGIC Insured, zero cpn.,
8/01/30 .................................................................................. $ 3,400,000 $ 993,650
8/01/31 .................................................................................. 2,000,000 551,240
8/01/32 .................................................................................. 4,405,000 1,146,974
8/01/34 .................................................................................. 4,405,000 1,100,501
8/01/37 .................................................................................. 5,700,000 1,202,016
Moreno Valley USD Special Tax,
CFD No. 2004-6, 5.00%, 9/01/22 ........................................................... 2,105,000 2,026,210
CFD No. 2004-6, 5.10%, 9/01/28 ........................................................... 2,000,000 1,875,720
CFD No. 2004-6, 5.20%, 9/01/36 ........................................................... 5,000,000 4,588,100
CFD No. 2005-2, 5.00%, 9/01/36 ........................................................... 815,000 726,328
Murrieta 1915 Act Special Tax, CFD No. 2000-1, 6.375%, 9/01/30 .............................. 4,100,000 4,262,032
Murrieta CFD No. 2000-2 Special Tax, The Oaks,
Improvement Area A, 5.90%, 9/01/27 ....................................................... 2,000,000 2,024,140
Improvement Area A, 6.00%, 9/01/34 ....................................................... 3,570,000 3,630,868
Improvement Area B, 6.00%, 9/01/27 ....................................................... 1,285,000 1,317,086
Improvement Area B, 6.00%, 9/01/34 ....................................................... 3,860,000 3,928,168
Murrieta CFD No. 2001-1 Special Tax, Bluestone, Improvement Area A, 6.20%, 9/01/25 .......... 2,105,000 2,155,688
Murrieta CFD No. 2003-2 Special Tax, Blackmore Ranch, 6.10%, 9/01/34 ........................ 2,000,000 2,040,540
Murrieta CFD No. 2004-1 Bremerton Special Tax, 5.625%, 9/01/34 .............................. 700,000 688,058
Napa Valley Community College District GO, Election of 2002, Series C, MBIA Insured,
zero cpn.,
8/01/33 .................................................................................. 13,130,000 3,509,124
8/01/34 .................................................................................. 13,380,000 3,387,816
Napa Valley USD, GO, Election of 2002, FGIC Insured, 5.00%, 8/01/29 ......................... 4,100,000 4,260,884
Norco Special Tax,
CFD No. 97-1, Pre-Refunded, 7.10%, 10/01/30 .............................................. 2,640,000 2,962,318
CFD No. 2002-1, 6.50%, 3/01/33 ........................................................... 1,500,000 1,576,635
North Natomas CFD Special Tax, No. 4, Series B, 6.375%, 9/01/31 ............................. 4,300,000 4,385,914
Oakland GO, Measure G, AMBAC Insured, 5.00%, 1/15/31 ........................................ 4,585,000 4,748,593
Oakland USD Alameda County GO, Election of 2000, MBIA Insured, 5.00%, 8/01/27 ............... 2,000,000 2,070,600
Oceanside CFD No. 2001-1 Special Tax, Morro Hills Development, 5.50%, 9/01/34 ............... 3,450,000 3,323,488
Ontario COP, Water System Improvement Project, MBIA Insured, 5.00%, 7/01/34 ................. 8,000,000 8,252,720
Orange County 1915 Act Special Assessment, Limited Obligation, AD No. 01-1-GP1,
5.00%, 9/02/28 ........................................................................... 3,000,000 2,794,470
5.10%, 9/02/33 ........................................................................... 2,000,000 1,838,840
Oxnard Financing Authority Wastewater Revenue, Headworks Project, AMBAC Insured,
5.00%, 6/01/31 ............................................................................ 2,705,000 2,805,328
Oxnard Harbor District Revenue,
Series A, 5.75%, 8/01/20 ................................................................. 1,110,000 1,139,493
Series B, 6.00%, 8/01/24 ................................................................. 2,000,000 2,147,980
Oxnard Special Tax, CFD No. 3, Seabridge, 5.00%, 9/01/35 .................................... 5,000,000 4,463,700
Perris CFD No. 05-2 Special Tax, Harmony Grove, Series A,
5.00%, 9/01/21 ........................................................................... 1,130,000 1,104,665
5.20%, 9/01/24 ........................................................................... 1,505,000 1,473,591
5.25%, 9/01/29 ........................................................................... 3,585,000 3,382,519
5.30%, 9/01/35 ........................................................................... 4,205,000 3,921,793

36 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Perris CFD No. 2001-1 Special Tax,
Improvement Area No. 4, May Farms, Series A, 5.00%, 9/01/25 .............................. $ 1,415,000 $ 1,326,577
Improvement Area No. 4, May Farms, Series A, 5.10%, 9/01/30 .............................. 865,000 789,875
Improvement Area No. 4, May Farms, Series A, 5.15%, 9/01/35 .............................. 1,075,000 976,089
Improvement Area No. 5, May Ranch, Series A, 5.00%, 9/01/26 .............................. 585,000 542,681
Improvement Area No. 5, May Ranch, Series A, 5.00%, 9/01/37 .............................. 1,600,000 1,427,744
Perris CFD No. 2002-1 Special Tax, Series A,
6.375%, 9/01/23 .......................................................................... 1,475,000 1,554,635
6.50%, 9/01/29 ........................................................................... 2,045,000 2,164,612
6.50%, 9/01/33 ........................................................................... 2,120,000 2,237,045
Perris CFD No. 2004-3 Special Tax, Improvement Area No. 2, Series A, 5.30%, 9/01/35 ......... 1,390,000 1,301,832
Perris PFA Local Agency Revenue, Series A, 6.25%, 9/01/33 ................................... 3,000,000 3,105,570
Perris PFAR Tax Allocation,
5.30%, 10/01/26 .......................................................................... 2,000,000 1,953,300
5.35%, 10/01/36 .......................................................................... 4,010,000 3,753,079
Pico Rivera Water Authority Revenue, Refunding, Series A, 6.25%, 12/01/32 ................... 7,250,000 7,660,712
Placentia-Yorba Linda USD, GO, Election of 2002, Series C, MBIA Insured, 5.00%,
8/01/29 ................................................................................... 4,100,000 4,260,884
Poway USD Special Tax,
CFD No. 6, 4S Ranch, 5.125%, 9/01/35 ..................................................... 6,000,000 5,681,220
CFD No. 6, Improvement Area B, 5.125%, 9/01/36 ........................................... 5,035,000 4,708,430
CFD No. 14, Area A, 5.125%, 9/01/26 ...................................................... 1,770,000 1,656,278
CFD No. 14, Area A, 5.25%, 9/01/36 ....................................................... 5,225,000 4,811,180
CFD No. 14, Del Sur, 5.125%, 9/01/26 ..................................................... 2,200,000 2,058,650
Rancho Cordova CFD No. 2003-1 Special Tax, Sunridge Anatolia,
5.25%, 9/01/25 ........................................................................... 2,235,000 2,137,867
5.375%, 9/01/30 .......................................................................... 1,650,000 1,565,867
5.375%, 9/01/37 .......................................................................... 7,130,000 6,645,089
5.50%, 9/01/37 ........................................................................... 2,635,000 2,501,906
Rancho Santiago Community College District GO, FSA Insured, 5.125%,
9/01/28 .................................................................................. 5,295,000 5,992,034
9/01/29 .................................................................................. 6,745,000 7,638,645
Rancho Water District Special Tax, CFD No. 99-1,
Area A, Series A, Pre-Refunded, 6.70%, 9/01/30 ........................................... 2,100,000 2,172,681
Area B, Series A, Pre-Refunded, 6.70%, 9/01/30 ........................................... 2,435,000 2,519,275
Richmond 1915 Act Special Assessment, Limited Obligation, ID No. 99-01, Pre-Refunded,
7.20%, 9/02/30 ............................................................................ 7,870,000 8,171,657
Richmond Joint Powers Financing Authority Revenue, Reassessment, Refunding, Series A,
AMBAC Insured, 5.00%, 9/02/30 ............................................................. 1,085,000 1,114,696
Rio Elementary School District Special Tax, CFD No. 1, 5.20%, 9/01/35 ....................... 5,000,000 4,588,200
Riverside County Special Tax,
CFD No. 87-5, senior lien, Refunding, Series A, 7.00%, 9/01/13 ........................... 5,855,000 6,070,757
CFD No. 89-1, Mountain Cove, Pre-Refunded, 6.50%, 9/01/25 ................................ 3,390,000 3,641,097
Riverside USD Special Tax,
CFD No. 13, Improvement Area 1, 5.375%, 9/01/34 .......................................... 2,320,000 2,177,668
CFD No. 14, Series A, 5.40%, 9/01/26 ..................................................... 1,010,000 997,022
CFD No. 14, Series A, 5.45%, 9/01/35 ..................................................... 2,060,000 1,985,675

Semiannual Report | 37

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Riverside USD Special Tax, (continued)
CFD No. 15, Improvement Area 1, 5.45%, 9/01/25 ........................................... $ 2,970,000 $ 2,949,715
CFD No. 15, Improvement Area 1, 5.55%, 9/01/30 ........................................... 2,390,000 2,335,460
CFD No. 15, Improvement Area 1, 5.60%, 9/01/34 ........................................... 2,000,000 1,956,420
CFD No. 15, Series A, 5.15%, 9/01/25 ..................................................... 1,730,000 1,659,918
CFD No. 15, Series A, 5.25%, 9/01/30 ..................................................... 1,230,000 1,156,040
CFD No. 15, Series A, 5.25%, 9/01/35 ..................................................... 1,500,000 1,396,500
CFD No. 17, Aldea, 5.125%, 9/01/35 ....................................................... 1,425,000 1,301,096
CFD No. 18, 5.00%, 9/01/25 ............................................................... 505,000 476,584
CFD No. 18, 5.00%, 9/01/34 ............................................................... 1,125,000 1,011,803
CFD No. 22, 5.25%, 9/01/35 ............................................................... 1,535,000 1,423,083
Romoland School District Special Tax, CFD 1,
Improvement Area 1, 5.45%, 9/01/38 ....................................................... 3,215,000 3,071,868
Improvement Area 2, 5.375%, 9/01/38 ...................................................... 3,085,000 2,895,519
Roseville Special Tax, CFD No. 1,
Fiddyment Ranch, 5.00%, 9/01/17 .......................................................... 1,520,000 1,455,415
Fiddyment Ranch, 5.00%, 9/01/19 .......................................................... 1,000,000 934,900
Fiddyment Ranch, 5.125%, 9/01/21 ......................................................... 1,000,000 924,980
Fiddyment Ranch, 5.00%, 9/01/24 .......................................................... 1,010,000 958,298
Fiddyment Ranch, 5.00%, 9/01/25 .......................................................... 1,020,000 909,473
Fiddyment Ranch, 5.125%, 9/01/26 ......................................................... 5,000,000 4,511,200
Fiddyment Ranch, 5.25%, 9/01/36 .......................................................... 8,000,000 7,112,320
Highland, Pre-Refunded, 6.30%, 9/01/25 ................................................... 8,610,000 9,218,899
Longmeadow, 5.00%, 9/01/36 ............................................................... 2,370,000 2,096,075
Stone Point, 6.375%, 9/01/24 ............................................................. 1,750,000 1,828,575
Stone Point, 6.375%, 9/01/28 ............................................................. 2,500,000 2,602,700
Stoneridge, Pre-Refunded, 6.20%, 9/01/21 ................................................. 1,250,000 1,400,450
Stoneridge, Pre-Refunded, 6.30%, 9/01/31 ................................................. 1,500,000 1,685,790
WestPark, 5.15%, 9/01/30 ................................................................. 5,500,000 4,873,715
WestPark, 5.20%, 9/01/36 ................................................................. 4,500,000 4,054,635
Woodcreek West, Pre-Refunded, 6.70%, 9/01/25 ............................................. 3,000,000 3,232,260
Roseville WestPark CFD No. 1 Special Tax, Public Facilities,
5.20%, 9/01/26 ........................................................................... 1,000,000 936,880
5.25%, 9/01/37 ........................................................................... 1,600,000 1,461,152
Sacramento County Sanitation District Financing Authority Revenue, Sacramento Regional
County Sanitation District, Series A, AMBAC Insured, Pre-Refunded, 5.00%, 12/01/35 ........ 7,000,000 7,696,080
Sacramento County Special Tax, CFD No. 1, Refunding, 6.30%, 9/01/21 ......................... 1,575,000 1,600,547
Sacramento Special Tax, North Natomas CFD No. 97-01, Refunding,
5.00%, 9/01/29 ........................................................................... 1,185,000 1,113,153
5.10%, 9/01/35 ........................................................................... 1,520,000 1,387,608
San Diego Port District Revenue, MBIA Insured, 5.00%, 9/01/29 ............................... 4,030,000 4,183,704
San Diego RDA Tax Allocation, Capital Appreciation, Series B, zero cpn.,
9/01/10 .................................................................................. 2,205,000 1,940,091
9/01/15 .................................................................................. 6,810,000 4,616,499
9/01/16 .................................................................................. 1,500,000 951,510
9/01/19 .................................................................................. 1,800,000 923,634

38 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
San Diego RDA Tax Allocation, Capital Appreciation, Series B, zero cpn., (continued)
9/01/20 .................................................................................. $ 1,800,000 $ 861,516
9/01/21 .................................................................................. 1,800,000 805,878
9/01/22 .................................................................................. 1,900,000 791,939
9/01/23 .................................................................................. 1,900,000 739,024
9/01/24 .................................................................................. 1,900,000 688,978
9/01/25 .................................................................................. 1,900,000 645,943
9/01/26 .................................................................................. 1,900,000 604,789
9/01/27 .................................................................................. 1,900,000 566,257
9/01/28 .................................................................................. 1,900,000 530,176
San Joaquin Hills Transportation Corridor Agency Toll Road Revenue,
Capital Appreciation, Refunding, Series A, 5.60%, 1/15/16 ................................ 4,500,000 4,736,160
Capital Appreciation, Refunding, Series A, 5.70%, 1/15/19 ................................ 3,000,000 3,122,220
Capital Appreciation, Refunding, Series A, 5.75%, 1/15/21 ................................ 24,750,000 25,673,175
junior lien, ETM, zero cpn., 1/01/28 ..................................................... 19,150,000 7,701,364
Refunding, Series A, 5.50%, 1/15/28 ...................................................... 3,320,000 3,321,560
senior lien, 5.00%, 1/01/33 .............................................................. 12,530,000 11,994,593
San Jose Airport Revenue, Refunding, Series B, AMBAC Insured, 5.00%, 3/01/37 ................ 10,000,000 10,282,400
San Marcos PFA Special Tax Revenue, Series A,
5.65%, 9/01/36 ........................................................................... 5,180,000 5,092,769
Pre-Refunded, 6.375%, 9/01/35 ............................................................ 3,535,000 3,683,541
San Marcos Public Facilities Authority Special Tax Revenue, Series A, 5.05%, 9/01/38 ........ 3,250,000 2,892,988
San Marcos RDA Tax Allocation, Affordable Housing Project, Series A, 5.65%, 10/01/28 ........ 2,000,000 2,022,000
San Mateo UHSD, COP, Phase I Projects, Series A, AMBAC Insured, 5.00%,
12/15/27 ................................................................................. 6,025,000 6,265,879
12/15/30 ................................................................................. 7,450,000 7,711,346
Santa Rosa RDA Tax Allocation, Southwest Redevelopment Project, Series A, AMBAC Insured,
5.00%, 8/01/25 ............................................................................ 1,250,000 1,287,575
Santee School District GO, Series A, FSA Insured, 5.00%,
8/01/26 .................................................................................. 1,305,000 1,390,295
8/01/31 .................................................................................. 6,845,000 7,236,602
Saugus USD, CFD No. 2005-4 Special Tax, 5.30%, 9/01/36 ...................................... 2,000,000 1,906,360
Sierra View Local Health Care District Revenue, 5.25%, 7/01/32 .............................. 3,000,000 3,011,070
Simi Valley 1915 Act Special Assessment, AD No. 98-1, Madera, 7.30%, 9/02/24 ................ 2,375,000 2,453,233
Southern California Public Power Authority Transmission Project Revenue, Southern
Transmission Project, 6.125%, 7/01/18 ..................................................... 50,000 50,059
Stockton 1915 Act Revenue, Limited Obligation, Mosher AD No. 2003-2, 6.20%,
9/02/23 ................................................................................... 2,955,000 3,047,935
Stockton 1915 Act Special Assessment, Limited Obligation, Mosher AD No. 2003-2, 6.30%,
9/02/33 ................................................................................... 3,390,000 3,492,717
Stockton Special Tax, Spanos Park West CFD No. 2001-1, Pre-Refunded, 6.25%,
9/01/25 ................................................................................... 3,500,000 4,005,925
Sunnyvale School District GO, Election of 2004, Series A, FSA Insured, 5.00%, 9/01/27 ....... 2,745,000 2,888,646
Temecula RDA Tax Allocation Revenue, sub. lien, Escrow, Redevelopment Project No. 1,
5.625%, 12/15/38 .......................................................................... 2,000,000 1,952,660
Temecula Valley USD, CFD No. 2005-1 Special Tax, 5.00%, 9/01/36 ............................. 1,000,000 888,650

Semiannual Report | 39

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
Tobacco Securitization Authority Northern California Tobacco Settlement Revenue,
Capital Appreciation, Asset-Backed, Series A-2, zero cpn. to 5/31/08, 5.40% thereafter,
6/01/27 ................................................................................ $ 1,250,000 $ 1,124,338
Series A-1, 5.375%, 6/01/38 .............................................................. 5,000,000 4,404,550
Series A-1, 5.50%, 6/01/45 ............................................................... 2,000,000 1,802,380
Tobacco Securitization Authority Southern California Tobacco Settlement Revenue,
Asset-Backed Bonds, Second Sub Series, zero cpn., 6/01/46 ................................. 25,000,000 1,730,500
Torrance COP, Refunding and Public Improvement Project, Series A, AMBAC Insured, 5.00%,
6/01/34 ................................................................................... 3,720,000 3,836,324
Truckee-Donner PUD Special Tax, CFD No. 04-1,
5.75%, 9/01/29 ........................................................................... 2,975,000 3,002,786
5.80%, 9/01/35 ........................................................................... 4,630,000 4,652,548
Truckee-Donner PUD Special Tax Allocation, Special Tax Bonds,
5.20%, 9/01/25 ........................................................................... 3,000,000 2,928,450
5.25%, 9/01/30 ........................................................................... 5,050,000 4,714,326
5.30%, 9/01/35 ........................................................................... 7,395,000 6,896,947
Tustin CFD No. 07-01 Special Tax, Tustin Legacy, 6.00%, 9/01/37 ............................. 2,100,000 2,121,357
Tustin USD, GO, School Facilities ID No. 2002-1, Election of 2002, Series B,
AMBAC Insured, 5.00%, 6/01/31 ............................................................. 3,605,000 3,751,651
University of California Regents Medical Center Pooled Revenue, Series A, MBIA Insured,
4.50%, 5/15/47 ............................................................................ 15,000,000 14,181,150
Upland CFD No. 2003-2 Special Tax, San Antonio, Improvement Area 1, Series A,
5.90%, 9/01/24 ........................................................................... 2,380,000 2,441,475
6.00%, 9/01/34 ........................................................................... 2,000,000 2,043,620
Vallejo RDA Tax Allocation, Housing Set-Aside, Refunding, Series A, 7.00%, 10/01/31 ......... 4,845,000 5,176,398
Valley Sanitary District 1915 Act Special Assessment, AD No. 04, Valley Sanitary District,
Limited Obligation,
5.00%, 9/02/25 ........................................................................... 1,060,000 1,005,611
5.20%, 9/02/30 ........................................................................... 1,370,000 1,269,839
Ventura USD, GO, Refunding, FSA Insured,
5.125%, 8/01/28 .......................................................................... 1,180,000 1,273,621
4.50%, 8/01/30 ........................................................................... 4,175,000 4,181,805
Washington USD Yolo County COP, New High School Project, AMBAC Insured, 5.00%,
8/01/30 ................................................................................... 5,000,000 5,150,300
West Kern Community College District GO, Capital Appreciation, Election of 2004, Series B,
XLCA Insured, zero cpn.,
11/01/25 ................................................................................. 2,435,000 991,727
11/01/26 ................................................................................. 2,480,000 953,585
11/01/27 ................................................................................. 1,400,000 508,802
11/01/28 ................................................................................. 1,445,000 497,094
11/01/29 ................................................................................. 1,485,000 483,368
11/01/30 ................................................................................. 2,650,000 815,829
11/01/31 ................................................................................. 2,695,000 786,266
West Sacramento Special Tax,
CFD No. 10, Pre-Refunded, 6.75%, 9/01/26 ................................................. 3,235,000 3,488,171
CFD No. 16, Pre-Refunded, 5.90%, 9/01/23 ................................................. 1,000,000 1,109,890

40 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
CALIFORNIA (CONTINUED)
West Sacramento Special Tax, (continued)
CFD No. 20, 5.125%, 9/01/25 .............................................................. $ 500,000 $ 482,730
CFD No. 20, 5.30%, 9/01/35 ............................................................... 1,740,000 1,627,352
Western Riverside County Water and Wastewater Finance Authority Revenue, Eastern
Municipal Water District Improvement, Series A, 5.00%,
9/01/30 .................................................................................. 1,925,000 1,935,896
9/01/35 .................................................................................. 2,000,000 1,999,840
Westside USD, CFD No. 2005-3 Special Tax, 5.00%,
9/01/26 .................................................................................. 700,000 642,124
9/01/36 .................................................................................. 2,080,000 1,837,181
William S. Hart UHSD, CFD No. 2005-1 Special Tax, 5.30%, 9/01/36 ............................ 2,500,000 2,319,350
Woodland Special Tax, CFD No. 1,
6.00%, 9/01/28 ........................................................................... 5,000,000 5,164,450
6.25%, 9/01/34 ........................................................................... 6,750,000 7,007,175
Yuba Community College District GO, Capital Appreciation, Election of 2006, Series B,
AMBAC Insured, zero cpn.,
8/01/42 .................................................................................. 10,090,000 1,630,040
8/01/43 .................................................................................. 10,540,000 1,604,293
8/01/44 .................................................................................. 11,010,000 1,589,624
---------------
1,552,981,290
---------------
U.S. TERRITORIES 4.2%
GUAM 0.8%
Guam Government GO, Refunding, Series A,
5.00%, 11/15/23 .......................................................................... 7,245,000 6,930,132
5.25%, 11/15/37 .......................................................................... 6,500,000 6,064,370
---------------
12,994,502
---------------
NORTHERN MARIANA ISLANDS 0.1%
Northern Mariana Islands Commonwealth Ports Authority Seaport Revenue, Series A, 6.60%,
3/15/28 ................................................................................... 1,750,000 1,892,712
---------------
PUERTO RICO 3.3%
Puerto Rico Commonwealth GO, Public Improvement, Series B,
5.00%, 7/01/35 ........................................................................... 3,580,000 3,516,777
Pre-Refunded, 5.00%, 7/01/35 ............................................................. 6,420,000 7,092,688
Puerto Rico Convention Center District Authority Hotel Occupancy Tax Revenue, Series A,
FGIC Insured, 5.00%,
7/01/25 .................................................................................. 12,330,000 12,755,138
7/01/26 .................................................................................. 13,940,000 14,380,644
University of Puerto Rico Revenues, University System, Refunding,
Series P, 5.00%, 6/01/26 ................................................................. 5,000,000 5,044,700
Series Q, 5.00%, 6/01/25 ................................................................. 5,000,000 5,058,600
Series Q, 5.00%, 6/01/36 ................................................................. 6,000,000 5,972,880
---------------
53,821,427
---------------
TOTAL U.S. TERRITORIES ...................................................................... 68,708,641
---------------
TOTAL LONG TERM INVESTMENTS (COST $1,618,258,530) ........................................... 1,621,689,931
---------------

Semiannual Report | 41

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

SHORT TERM INVESTMENTS 0.1%
MUNICIPAL BONDS 0.1%
CALIFORNIA 0.1%
d California State GO, Series A-2, Daily VRDN and Put, 3.49%, 5/01/33 ......................... $ 1,600,000 $ 1,600,000
d Los Angeles Water and Power Revenue, Refunding, Sub Series B-1, Weekly VRDN and Put,
3.47%, 7/01/34 ............................................................................ 400,000 400,000
---------------
TOTAL SHORT TERM INVESTMENTS (COST $2,000,000) .............................................. 2,000,000
---------------
TOTAL INVESTMENTS (COST $1,620,258,530) 100.0% .............................................. 1,623,689,931
OTHER ASSETS, LESS LIABILITIES 0.0% e ....................................................... (36,237)
---------------
NET ASSETS 100.0% ........................................................................... $1,623,653,694
===============

See Selected Portfolio Abbreviations on page 48.

a A portion or all of the securities purchased on a when-issued or delayed
delivery basis. See Note 1(b).

b See Note 6 regarding defaulted securities.

c Security has been deemed illiquid because it may not be able to be sold within
seven days. At November 30, 2007, the aggregate value of these securities was
$8,026,673, representing 0.49% of net assets.

d 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. The coupon rate shown represents the rate at period end.

e Rounds to less than 0.1% of net assets.

42 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL HIGHLIGHTS

FRANKLIN TENNESSEE MUNICIPAL BOND FUND

--------------------------------------------------------------------------------
SIX MONTHS ENDED
NOVEMBER 30, 2007
(UNAUDITED) YEAR ENDED MAY 31,
CLASS A 2007 2006 2005 2004 2003
--------------------------------------------------------------------------------

PER SHARE OPERATING PERFORMANCE
(for a share outstanding throughout the period)
Net asset value, beginning of period ........... $ 11.18 $ 11.18 $ 11.48 $ 11.04 $ 11.59 $ 10.95
--------------------------------------------------------------------------------
Income from investment operations a:
Net investment income b ..................... 0.23 0.46 0.47 0.48 0.49 0.50
Net realized and unrealized gains (losses) .. (0.03) -- e (0.30) 0.44 (0.55) 0.65
--------------------------------------------------------------------------------
Total from investment operations ............... 0.20 0.46 0.17 0.92 (0.06) 1.15
--------------------------------------------------------------------------------
Less distributions from net investment income .. (0.22) (0.46) (0.47) (0.48) (0.49) (0.51)
--------------------------------------------------------------------------------
Redemption fees ................................ -- e -- e -- e -- e -- --
--------------------------------------------------------------------------------
Net asset value, end of period ................. $ 11.16 $ 11.18 $ 11.18 $ 11.48 $ 11.04 $ 11.59
================================================================================

Total return c ................................. 1.82% 4.15% 1.54% 8.50% (0.56)% 10.64%

RATIOS TO AVERAGE NET ASSETS d
Expenses before waiver and payments
by affiliates ............................... 0.75% 0.75% 0.77% 0.79% 0.79% 0.80%
Expenses net of waiver and payments
by affiliates ............................... 0.70% 0.70% 0.70% 0.70% 0.60% 0.60%
Net investment income .......................... 4.10% 4.06% 4.15% 4.24% 4.34% 4.49%

SUPPLEMENTAL DATA
Net assets, end of period (000's) .............. $177,053 $167,215 $146,005 $121,645 $111,223 $115,514
Portfolio turnover rate ........................ 4.99% 10.25% 2.47% 8.36% 13.01% 8.24%

b Based on average daily shares outstanding.

c Total return does not reflect sales commissions or contingent deferred sales
charges, if applicable, and is not annualized for periods less than one year.

d Ratios are annualized for periods less than one year.

e Amount rounds to less than $0.01 per share.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 43

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED)

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

LONG TERM INVESTMENTS 95.7%
MUNICIPAL BONDS 95.7%
TENNESSEE 88.5%
Bristol Electric Revenue, System, AMBAC Insured, 5.00%, 9/01/29 ............................. $ 1,075,000 $ 1,122,580
Chattanooga GO, Pre-Refunded, 5.00%, 3/01/22 ................................................ 2,215,000 2,284,507
Clarksville Electric System Revenue, XLCA Insured, 5.00%,
9/01/23 .................................................................................. 2,325,000 2,470,359
9/01/32 .................................................................................. 4,000,000 4,168,840
Clarksville Water Sewer and Gas Revenue,
Improvement, FSA Insured, Pre-Refunded, 5.00%, 2/01/22 ................................... 1,210,000 1,273,343
Refunding and Improvement, FSA Insured, 5.00%, 2/01/22 ................................... 790,000 811,749
Cleveland Public Improvement GO, FGIC Insured, Pre-Refunded, 5.25%, 6/01/24 ................. 3,000,000 3,089,160
Fayetteville and Lincoln IDBR, Hospital Facility Lease, AMBAC Insured, Pre-Refunded, 5.30%,
5/01/28 ................................................................................... 1,170,000 1,179,571
Fayetteville and Lincoln IDBR, Hospital Facility Lease, AMBAC Insured, Pre-Refunded, 5.30%,
5/01/28 ................................................................................... 1,830,000 1,839,351
Franklin County Health and Educational Facilities Board Revenue, University South Project,
AMBAC Insured, 5.00%, 9/01/24 ............................................................. 2,000,000 2,096,580
Franklin GO, Sewer and Water, Series B, Pre-Refunded, 5.00%, 4/01/19 ........................ 1,000,000 1,079,270
Franklin Special School District GO, 5.00%, 6/01/22 ......................................... 1,455,000 1,534,879
Greene County GO, Refunding, Series B, MBIA Insured, 5.00%, 6/01/24 ......................... 1,000,000 1,048,620
Hallsdale-Powell Utility District Knox County Water and Sewer Revenue,
FGIC Insured, 5.00%, 4/01/31 ............................................................. 1,000,000 1,049,320
Refunding and Improvement, Series A, FGIC Insured, 5.00%, 4/01/27 ........................ 2,500,000 2,585,925
Harpeth Valley Utilities District Davidson and Williamson Counties Revenue, Utilities,
Improvement,
FGIC Insured, 5.00%, 9/01/35 ............................................................. 3,700,000 3,830,832
MBIA Insured, 5.00%, 9/01/29 ............................................................. 1,000,000 1,038,730
MBIA Insured, 5.00%, 9/01/34 ............................................................. 2,310,000 2,391,289
Johnson City GO, Solid Waste, AMBAC Insured, 5.80%, 5/01/09 ................................. 100,000 100,100
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 3,175,940
Series A, MBIA Insured, Pre-Refunded, 5.125%, 7/01/25 .................................... 3,000,000 3,072,660
Johnson City Health and Educational Facilities Board Revenue, Pine Oaks Assisted Project,
Series A, GNMA Secured, 5.90%, 6/20/37 .................................................... 1,380,000 1,406,275
Knox County First Utility District Water and Sewer Revenue,
MBIA Insured, 5.00%, 12/01/24 ............................................................ 1,790,000 1,888,056
MBIA Insured, 5.00%, 12/01/25 ............................................................ 1,000,000 1,052,490
Refunding and Improvement, Refunding, Series A, MBIA Insured, 5.625%, 12/01/19 ........... 555,000 561,538
Refunding and Improvement, Series A, MBIA Insured, Pre-Refunded, 5.625%, 12/01/19 ........ 445,000 449,450
Knox County Health Educational and Housing Facilities Board Hospital Facilities Revenue,
Covenant Health System, Refunding and Improvement, Series A, zero cpn., 1/01/36 .......... 5,000,000 1,087,150
Fort Sanders Alliance, Refunding, MBIA Insured, 5.75%, 1/01/14 ........................... 1,250,000 1,395,375
Knox County Health Educational and Housing Facilities Board Revenue, University Health
System Inc., Refunding, 5.25%, 4/01/27 .................................................... 2,500,000 2,493,800
Knoxville Electric Revenue, System, Series U, Pre-Refunded, 5.125%, 7/01/21 ................. 2,340,000 2,449,138
Knoxville Waste Water System Revenue, Improvement, Series A, MBIA Insured, 5.00%,
4/01/37 ................................................................................... 3,620,000 3,754,483
Knoxville Water Revenue, System Improvement, Series R, FSA Insured, 5.00%, 3/01/30 .......... 2,370,000 2,473,616

44 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
TENNESSEE (CONTINUED)
Lawrenceburg Electric Revenue, MBIA Insured, Pre-Refunded, 5.50%, 7/01/26 ................... $ 1,000,000 $ 1,035,120
Lawrenceburg PBA, GO, Electric Systems, Public Works, AMBAC Insured, 5.00%, 7/01/22 ......... 2,500,000 2,736,950
Lenoir City Electric System Revenue, Refunding and Improvement, FSA Insured, 5.00%,
6/01/21 ................................................................................... 2,000,000 2,070,440
Memphis GO, Pre-Refunded, 5.00%, 4/01/17 .................................................... 2,000,000 2,030,700
Memphis-Shelby County Airport Authority Airport Revenue, Series D, AMBAC Insured, 6.00%,
3/01/24 ................................................................................... 4,780,000 4,991,658
Memphis-Shelby County Sports Authority Inc. Revenue, Memphis Arena Project, Series A,
AMBAC Insured, Pre-Refunded, 5.25%, 11/01/23 .............................................. 7,145,000 7,771,045
Metropolitan Government of Nashville and Davidson County Electric Revenue, Series A,
5.20%, 5/15/23 ........................................................................... 800,000 820,768
AMBAC Insured, 5.00%, 5/15/25 ............................................................ 5,000,000 5,235,150
Metropolitan Government of Nashville and Davidson County GO,
Refunding, Series B, 5.00%, 8/01/25 ...................................................... 5,000,000 5,268,950
Series C, 5.00%, 2/01/25 ................................................................. 3,000,000 3,143,070
Metropolitan Government of Nashville and Davidson County Health and Educational Facilities
Board Revenue,
Ascension Health Credit, Series A, AMBAC Insured, Pre-Refunded, 5.875%, 11/15/28 ......... 2,500,000 2,645,625
Mortgage, Dandridge Towers Section 8, Series A, ETM, 6.375%, 1/01/11 ..................... 500,000 501,140
Metropolitan Government of Nashville and Davidson County Water and Sewer Revenue,
Refunding, 5.50%, 1/01/16 ................................................................. 395,000 399,689
Montgomery County Health Educational and Housing Facility Board Hospital Revenue,
Clarksville Regional Health System, Improvement, Pre-Refunded, 5.375%,
1/01/18 .................................................................................. 175,000 176,997
1/01/28 .................................................................................. 4,270,000 4,318,721
Oak Ridge Utility District Gas System Revenue, AMBAC Insured, 5.50%, 4/01/25 ................ 750,000 785,190
Rutherford County Consolidated Utility District Waterworks Revenue,
FSA Insured, 5.00%, 2/01/36 .............................................................. 3,060,000 3,184,511
Refunding, MBIA Insured, 5.00%, 2/01/27 .................................................. 1,000,000 1,049,770
Shelby County GO, Public Improvement and School, Series B, Pre-Refunded, 5.00%,
6/01/24 ................................................................................... 2,000,000 2,052,220
Shelby County Health Educational and Housing Facilities Board Revenue,
Ave Maria Assisted Living Project, Series A, 5.50%, 12/01/31 ............................. 2,010,000 2,058,280
St. Jude Children's Research Hospital, Refunding, 5.00%, 7/01/36 ......................... 5,000,000 5,027,500
South Blount County Utility District Waterworks Revenue, FGIC Insured, 4.50%, 12/01/22 ...... 1,750,000 1,773,397
Sullivan County IDBR, Brandymill, Refunding, Series I-A, 6.35%, 7/20/27 ..................... 350,000 354,015
Tennessee Energy Acquisition Corp. Gas Revenue, Series A, 5.25%, 9/01/26 .................... 5,000,000 5,023,300
Tennessee HDA Revenue, Homeownership Program,
5.375%, 7/01/23 .......................................................................... 390,000 393,576
2006-3, 4.90%, 7/01/37 ................................................................... 5,000,000 4,784,750
Series 3C, 6.00%, 1/01/20 ................................................................ 230,000 233,307
Tennessee State School Bond Authority Revenue, Higher Education Facilities, Second Program,
Refunding, Series A, MBIA Insured, 5.00%,
5/01/26 .................................................................................. 1,250,000 1,308,175
5/01/30 .................................................................................. 3,000,000 3,128,010
West Carroll Special School GO, MBIA Insured, Pre-Refunded, 5.375%, 6/01/29 ................. 1,055,000 1,088,254

Semiannual Report | 45

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

LONG TERM INVESTMENTS (CONTINUED)
MUNICIPAL BONDS (CONTINUED)
TENNESSEE (CONTINUED)
West Wilson Utility District Waterworks Revenue,
AMBAC Insured, Pre-Refunded, 5.25%, 6/01/23 .............................................. $ 3,780,000 $ 4,028,724
Improvement, MBIA Insured, Pre-Refunded, 5.00%, 6/01/26 .................................. 1,805,000 1,967,504
Refunding, AMBAC Insured, 5.25%, 6/01/23 ................................................. 720,000 750,226
Refunding, MBIA Insured, 4.75%, 6/01/23 .................................................. 1,805,000 1,861,190
Refunding and Improvement, MBIA Insured, 4.75%, 6/01/28 .................................. 2,000,000 2,030,540
White House Utility District Robertson and Sumner Counties Water and Sewer Revenue,
FSA Insured, Pre-Refunded, 5.125%, 1/01/26 ............................................... 1,100,000 1,160,148
FSA Insured, Pre-Refunded, 6.00%, 1/01/26 ................................................ 1,000,000 1,055,680
Refunding, FSA Insured, 5.125%, 1/01/26 .................................................. 1,400,000 1,438,136
Williamson County GO, Public Improvement,
Pre-Refunded, 5.375%, 3/01/19 ............................................................ 1,480,000 1,548,287
Pre-Refunded, 5.00%, 4/01/20 ............................................................. 2,000,000 2,134,160
Refunding, 5.00%, 3/01/20 ................................................................ 2,000,000 2,150,720
Wilson County COP, FSA Insured, 5.25%, 3/30/18 .............................................. 1,000,000 1,025,400
---------------
156,795,969
---------------
U.S. TERRITORIES 7.2%
PUERTO RICO 6.6%
Puerto Rico Commonwealth GO, Public Improvement, Series A, FGIC Insured, Pre-Refunded,
5.00%, 7/01/32 ............................................................................ 1,500,000 1,610,655
Puerto Rico Electric Power Authority Power Revenue, Refunding, Series SS, MBIA Insured,
5.00%, 7/01/25 ............................................................................ 5,000,000 5,188,000
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 ............................................................. 200,000 200,316
Puerto Rico Municipal Finance Agency Revenue, Series A, FSA Insured, 5.00%, 8/01/30 ......... 2,000,000 2,071,900
Puerto Rico PBA Guaranteed Revenue, Government Facilities,
Refunding, Series D, 5.375%, 7/01/33 ..................................................... 655,000 667,582
Series D, Pre-Refunded, 5.375%, 7/01/33 .................................................. 1,845,000 2,004,556
---------------
11,743,009
---------------
VIRGIN ISLANDS 0.6%
Virgin Islands PFAR, senior lien, Fund Loan Notes, Refunding, Series A, 5.50%, 10/01/18 ..... 1,000,000 1,017,070
---------------
TOTAL U.S. TERRITORIES ...................................................................... 12,760,079
---------------
TOTAL LONG TERM INVESTMENTS (COST $164,973,348) ............................................. 169,556,048
---------------

46 | Semiannual Report

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED) (CONTINUED)

SHORT TERM INVESTMENTS 2.1%
MUNICIPAL BONDS 2.1%
TENNESSEE 2.1%
a Clarksville PBA Revenue, Pooled Financing, Tennessee Municipal Bond Fund, Daily VRDN and
Put, 3.62%,
1/01/33 .................................................................................. $ 100,000 $ 100,000
7/01/34 .................................................................................. 1,000,000 1,000,000
11/01/35 ................................................................................. 400,000 400,000
a Montgomery County PBA Pooled Financing Revenue, Tennessee County Loan Pool, Daily VRDN
and Put, 3.62%,
4/01/32 .................................................................................. 700,000 700,000
7/01/34 .................................................................................. 970,000 970,000
2/01/36 .................................................................................. 500,000 500,000
---------------
TOTAL SHORT TERM INVESTMENTS (COST $3,670,000) .............................................. 3,670,000
---------------
TOTAL INVESTMENTS (COST $168,643,348) 97.8% ................................................. 173,226,048
OTHER ASSETS, LESS LIABILITIES 2.2% ......................................................... 3,826,979
---------------
NET ASSETS 100.0% ........................................................................... $ 177,053,027
===============

See Selected Portfolio Abbreviations on page 48.

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. The coupon rate shown represents the rate at period end.

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 47

Franklin Municipal Securities Trust

STATEMENT OF INVESTMENTS, NOVEMBER 30, 2007 (UNAUDITED)

SELECTED PORTFOLIO ABBREVIATIONS

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
CIFP - Capital Improvement Financing Program
COP - Certificate of Participation
ETM - Escrow to Maturity
FGIC - Financial Guaranty Insurance Co.
FSA - Financial Security Assurance Inc.
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency
ID - Improvement District
IDBR - Industrial Development Board Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
MFR - Multi-Family Revenue
PBA - Public Building Authority
PFA - Public Financing Authority
PFAR - Public Financing Authority Revenue
PUD - Public Utility District
RDA - Redevelopment Agency/Authority
UHSD - Unified/Union High School District
USD - Unified/Union School District
XLCA - XL Capital Assurance

48 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL STATEMENTS

STATEMENTS OF ASSETS AND LIABILITIES
November 30, 2007 (unaudited)

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

Assets:
Investments in securities:
Cost ............................................................................. $ 1,620,258,530 $ 168,643,348
=========================================
Value ............................................................................ $ 1,623,689,931 $ 173,226,048
Cash ................................................................................ 101,094 78,686
Receivables:
Capital shares sold .............................................................. 4,864,524 1,603,103
Interest ......................................................................... 22,296,042 2,599,227
-----------------------------------------
Total assets .................................................................. 1,650,951,591 177,507,064
-----------------------------------------
Liabilities:
Payables:
Investment securities purchased .................................................. 17,910,734 --
Capital shares redeemed .......................................................... 6,310,454 133,693
Affiliates ....................................................................... 917,420 92,437
Distributions to shareholders .................................................... 2,005,548 211,867
Accrued expenses and other liabilities .............................................. 153,741 16,040
-----------------------------------------
Total liabilities ............................................................. 27,297,897 454,037
-----------------------------------------
Net assets, at value ....................................................... $ 1,623,653,694 $ 177,053,027
=========================================
Net assets consist of:
Paid-in capital ..................................................................... $ 1,674,804,745 $ 176,673,588
Undistributed net investment income (distributions in excess of net investment
income) .......................................................................... 1,052,814 (14,538)
Net unrealized appreciation (depreciation) .......................................... 3,431,401 4,582,700
Accumulated net realized gain (loss) ................................................ (55,635,266) (4,188,723)
-----------------------------------------
Net assets, at value ....................................................... $ 1,623,653,694 $ 177,053,027
=========================================

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 49

Franklin Municipal Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
November 30, 2007 (unaudited)

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

CLASS A:
Net assets, at value ................................................................ $ 1,266,257,704 $ 177,053,027
=========================================
Shares outstanding .................................................................. 125,613,924 15,860,445
=========================================
Net asset value per share a ......................................................... $ 10.08 $ 11.16
=========================================
Maximum offering price per share (net asset value per share / 95.75%) ............... $ 10.53 $ 11.66
=========================================
CLASS B:
Net assets, at value ................................................................ $ 24,850,627
===================
Shares outstanding .................................................................. 2,452,456
===================
Net asset value and maximum offering price per share a .............................. $ 10.13
===================
CLASS C:
Net assets, at value ................................................................ $ 291,259,659
===================
Shares outstanding .................................................................. 28,762,244
===================
Net asset value and maximum offering price per share a .............................. $ 10.13
===================
ADVISOR CLASS:
Net assets, at value ................................................................ $ 41,285,704
===================
Shares outstanding .................................................................. 4,091,897
===================
Net asset value and maximum offering price per share a .............................. $ 10.09
===================

a Redemption price is equal to net asset value less contingent deferred sales
charges, if applicable, and redemption fees retained by the Fund.

50 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Municipal Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF OPERATIONS
for the six months ended November 30, 2007 (unaudited)

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

Investment income:
Interest .................................................................................. $ 43,515,627 $ 4,101,349
-----------------------------
Expenses:
Management fees (Note 3a) ................................................................. 3,805,659 489,386
Distribution fees: (Note 3c)
Class A ................................................................................ 645,191 85,650
Class B ................................................................................ 83,767 --
Class C ................................................................................ 946,663 --
Transfer agent fees (Note 3e) ............................................................. 236,354 26,009
Custodian fees ............................................................................ 12,087 1,223
Reports to shareholders ................................................................... 39,619 4,786
Registration and filing fees .............................................................. 32,832 4,040
Professional fees ......................................................................... 24,229 12,126
Trustees' fees and expenses ............................................................... 14,204 1,922
Other ..................................................................................... 65,304 11,524
-----------------------------
Total expenses ...................................................................... 5,905,909 636,666
Expenses waived/paid by affiliates (Note 3f) ........................................ -- (39,026)
-----------------------------
Net expenses ..................................................................... 5,905,909 597,640
-----------------------------
Net investment income ......................................................... 37,609,718 3,503,709
-----------------------------
Realized and unrealized gain (losses):
Net realized gain (loss) from investments ................................................. (1,276,162) (16,869)
Net change in unrealized appreciation (depreciation) on investments ....................... (56,646,310) (295,546)
-----------------------------
Net realized and unrealized gain (loss) ...................................................... (57,922,472) (312,415)
-----------------------------
Net increase (decrease) in net assets resulting from operations .............................. $ (20,312,754) $ 3,191,294
=============================

Semiannual Report |
The accompanying notes are an integral part of these financial statements. | 51

Franklin Municipal Securities Trust

FINANCIAL STATEMENTS (CONTINUED)

STATEMENTS OF CHANGES IN NET ASSETS

------------------------------------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL FUND MUNICIPAL BOND FUND
------------------------------------------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, 2007 YEAR ENDED NOVEMBER 30, 2007 YEAR ENDED
(UNAUDITED) MAY 31, 2007 (UNAUDITED) MAY 31, 2007
------------------------------------------------------------------------

Increase (decrease) in net assets:
Operations:
Net investment income ........................ $ 37,609,718 $ 66,035,750 $ 3,503,709 $ 6,440,820
Net realized gain (loss) from investments .... (1,276,162) 317,314 (16,869) (21,490)
Net change in unrealized appreciation
(depreciation) on investments ............. (56,646,310) 14,573,641 (295,546) (169,451)
------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations ........... (20,312,754) 80,926,705 3,191,294 6,249,879
------------------------------------------------------------------------
Distributions to shareholders from:
Net investment income:
Class A ................................... (29,661,843) (55,564,834) (3,387,831) (6,458,042)
Class B ................................... (523,396) (1,165,723) -- --
Class C ................................... (5,863,029) (9,448,052) -- --
Advisor Class ............................. (771,990) (161,828) -- --
------------------------------------------------------------------------
Total distributions to shareholders ............. (36,820,258) (66,340,437) (3,387,831) (6,458,042)
------------------------------------------------------------------------
Capital share transactions: (Note 2)
Class A ................................... (17,787,314) 249,880,606 10,034,894 21,417,319
Class B ................................... (1,485,348) (3,101,066) -- --
Class C ................................... 15,863,154 92,719,254 -- --
Advisor Class ............................. 24,126,374 18,320,509 -- --
------------------------------------------------------------------------
Total capital share transactions ................ 20,716,866 357,819,303 10,034,894 21,417,319
------------------------------------------------------------------------
Redemption fees ................................. 2,523 -- 30 118
------------------------------------------------------------------------
Net increase (decrease) in net assets .. (36,413,623) 372,405,571 9,838,387 21,209,274
Net assets:
Beginning of period ............................. 1,660,067,317 1,287,661,746 167,214,640 146,005,366
------------------------------------------------------------------------
End of period ................................... $ 1,623,653,694 $ 1,660,067,317 $ 177,053,027 $ 167,214,640
========================================================================
Undistributed net investment income (distributions
in excess of net investment
income) included in net assets:
End of period ................................ $ 1,052,814 $ 263,354 $ (14,538) $ (130,416)
========================================================================

52 | The accompanying notes are an integral part of these financial statements.
| Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Franklin Municipal Securities Trust (Trust) is registered under the Investment
Company Act of 1940, as amended, (1940 Act) as a diversified, open-end
investment company, consisting of two funds (Funds). 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 & ADVISOR CLASS
- -------------------------------------------------------------------------------------------

Franklin Tennessee Municipal Bond Fund Franklin California High Yield Municipal Fund

The following summarizes the Funds' significant accounting policies.

A. SECURITY VALUATION

Municipal securities generally trade in the over-the-counter market rather than
on a securities exchange. The Trust may utilize independent pricing services,
quotations from bond dealers, and information with respect to bond and note
transactions, to assist in determining a current market value for each security.
The Trust's pricing services use valuation models or matrix pricing, which
considers information with respect to comparable bond and note transactions,
quotations from bond dealers or by reference to other securities that are
considered comparable in such characteristics as rating, interest rate and
maturity date, to determine current value.

The Trust has procedures to determine the fair value of individual securities
and other assets for which market prices are not readily available or which may
not be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the fund. If such an event occurs, the securities may be valued
using fair value procedures, which may include the use of independent pricing
services. All security valuation procedures are approved by the Trust's Board of
Trustees.

B. SECURITIES PURCHASED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS

The Funds may purchase securities on a when-issued or delayed delivery basis,
with payment and delivery scheduled for a future date. These transactions are
subject to market fluctuations and are subject to the risk that the value at
delivery may be more or less than the trade date purchase price. Although the
Funds will generally purchase these securities with the intention of holding the
securities, they may sell the securities before the settlement date. Sufficient
assets have been segregated for these securities.

Semiannual Report | 53

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

C. INCOME TAXES

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

D. SECURITY TRANSACTIONS, INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Security transactions are accounted for on trade date. Realized gains and losses
on security transactions are determined on a specific identification basis.
Interest income and estimated expenses are accrued daily. Amortization of
premium and accretion of discount on debt securities are included in interest
income. Dividends from net investment income are normally declared daily and
distributed monthly to shareholders. Distributions to shareholders are
determined according to income tax regulations (tax basis). Distributable
earnings determined on a tax basis may differ from earnings recorded in
accordance with accounting principles generally accepted in the United States of
America. These differences may be permanent or temporary. Permanent differences
are reclassified among capital accounts to reflect their tax character. These
reclassifications have no impact on net assets or the results of operations.
Temporary differences are not reclassified, as they may reverse in subsequent
periods.

Common expenses incurred by the Trust are allocated among the Funds based on the
ratio of net assets of each fund to the combined net assets of the Trust. Fund
specific expenses are charged directly to the fund that incurred the expense.

Realized and unrealized gains and losses and net investment income, other than
class specific expenses, are allocated daily to each class of shares based upon
the relative proportion of net assets of each class. Differences in per share
distributions, by class, are generally due to differences in class specific
expenses.

E. 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.

F. REDEMPTION FEES

A short term trading redemption fee will be imposed, with some exceptions, on
any fund shares that are redeemed or exchanged within seven calendar days
following their purchase date. The redemption fee is 2% of the amount redeemed.
Such fees are retained by the funds and accounted for as an addition to paid-in
capital.

54 | Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

G. GUARANTEES AND INDEMNIFICATIONS

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

2. SHARES OF BENEFICIAL INTEREST

At November 30, 2007, there were an unlimited number of shares authorized
(without par value). Transactions in the Funds' shares were as follows:

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

CLASS A SHARES:
Six months ended November 30, 2007
Shares sold ........................................... 15,921,318 $ 162,515,116 1,831,852 $ 20,356,987
Shares issued in reinvestment
of distributions .................................... 1,613,992 16,434,453 198,195 2,198,670
Shares redeemed ....................................... (19,277,751) (196,736,883) (1,128,079) (12,520,763)
----------------------------------------------------------
Net increase (decrease) ............................... (1,742,441) $ (17,787,314) 901,968 $ 10,034,894
==========================================================
Year ended May 31, 2007
Shares sold ........................................... 42,071,653 $ 440,621,071 3,477,884 $ 39,150,876
Shares issued in reinvestment
of distributions .................................... 2,664,718 27,905,573 343,340 3,866,577
Shares redeemed ....................................... (20,867,820) (218,646,038) (1,919,139) (21,600,134)
----------------------------------------------------------
Net increase (decrease) ............................... 23,868,551 $ 249,880,606 1,902,085 $ 21,417,319
==========================================================
CLASS B SHARES:
Six months ended November 30, 2007
Shares sold ........................................... 56,345 $ 574,571
Shares issued in reinvestment
of distributions .................................... 26,832 274,663
Shares redeemed ....................................... (227,956) (2,334,582)
----------------------------
Net increase (decrease) ............................... (144,779) $ (1,485,348)
============================
Year ended May 31, 2007
Shares sold ........................................... 98,410 $ 1,034,494
Shares issued in reinvestment
of distributions .................................... 57,377 603,444
Shares redeemed ....................................... (451,564) (4,739,004)
----------------------------
Net increase (decrease) ............................... (295,777) $ (3,101,066)
============================

Semiannual Report | 55

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 C SHARES:
Six months ended November 30, 2007
Shares sold ........................................... 4,101,565 $ 42,107,148
Shares issued in reinvestment
of distributions .................................... 316,931 3,242,333
Shares redeemed ....................................... (2,882,115) (29,486,327)
---------------------------
Net increase (decrease) ............................... 1,536,381 $ 15,863,154
===========================
Year ended May 31, 2007
Shares sold ........................................... 11,769,160 $ 123,836,877
Shares issued in reinvestment
of distributions .................................... 478,252 5,029,277
Shares redeemed ....................................... (3,438,176) (36,146,900)
---------------------------
Net increase (decrease) ............................... 8,809,236 $ 92,719,254
===========================
ADVISOR CLASS SHARES:
Six months ended November 30, 2007
Shares sold ........................................... 2,939,929 $ 30,126,416
Shares issued in reinvestment
of distributions .................................... 14,389 146,967
Shares redeemed ....................................... (600,608) (6,147,009)
---------------------------
Net increase (decrease) ............................... 2,353,710 $ 24,126,374
===========================
Period ended May 31, 2007 a
Shares sold ........................................... 1,822,041 $ 19,204,688
Shares issued in reinvestment
of distributions .................................... 1,665 17,511
Shares redeemed ....................................... (85,519) (901,690)
---------------------------
Net increase (decrease) ............................... 1,738,187 $ 18,320,509
===========================

a For the period November 15, 2006 (effective date) to May 31, 2007.

3. TRANSACTIONS WITH AFFILIATES

Franklin Resources, Inc. is the holding company for various subsidiaries that
together are referred to as Franklin Templeton Investments. Certain officers and
trustees of the Trust are also officers and/or directors of the following
subsidiaries:

- ------------------------------------------------------------------------------------------
SUBSIDIARY AFFILIATION
- ------------------------------------------------------------------------------------------

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

56 | Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

A. MANAGEMENT FEES

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

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $10 billion
0.440% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion

Effective January 1, 2008, the Funds will pay fees based on the average daily
net assets of each of the Funds as follows:

- --------------------------------------------------------------------------------
ANNUALIZED FEE RATE NET ASSETS
- --------------------------------------------------------------------------------
0.625% Up to and including $100 million
0.500% Over $100 million, up to and including $250 million
0.450% Over $250 million, up to and including $7.5 billion
0.440% Over $7.5 billion, up to and including $10 billion
0.430% Over $10 billion, up to and including $12.5 billion
0.420% Over $12.5 billion, up to and including $15 billion
0.400% Over $15 billion, up to and including $17.5 billion
0.380% Over $17.5 billion, up to and including $20 billion
0.360% In excess of $20 billion

B. ADMINISTRATIVE FEES

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.

C. DISTRIBUTION FEES

The Trust's Board of Trustees has adopted distribution plans for each share
class, with the exception of Advisor Class shares, pursuant to Rule 12b-1 under
the 1940 Act. Under the Funds' Class A reimbursement distribution plans, the
Funds reimburse Distributors for costs incurred in connection with the
servicing, sale and distribution of each fund's shares up to the maximum annual
plan rate. Under the Class A reimbursement distribution plans, costs exceeding
the maximum for the current plan year cannot be reimbursed in subsequent
periods.

Semiannual Report | 57

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

3. TRANSACTIONS WITH AFFILIATES (CONTINUED)

C. DISTRIBUTION FEES (CONTINUED)

In addition, under the Funds' compensation distribution plans, the Funds pay
Distributors for costs incurred in connection with the servicing, sale and
distribution of each fund's shares up to the maximum annual plan rate for each
class.

The maximum annual plan rates, based on the average daily net assets, for each
class, are as follows:

------------------------------------------
FRANKLIN CALIFORNIA FRANKLIN TENNESSEE
HIGH YIELD MUNICIPAL
MUNICIPAL FUND BOND FUND
------------------------------------------
Reimbursement Plans:
Class A ......................... 0.15% 0.15%

Distributors has agreed to limit the current rate to 0.10% per year for each of
the Funds.

Compensation Plans:
Class B ......................... 0.65% --
Class C ......................... 0.65% --

D. SALES CHARGES/UNDERWRITING AGREEMENTS

Distributors has advised the Funds of the following commission transactions
related to the sales and redemptions of the Funds' shares for the period:

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

Sales charges retained net of commissions paid to unaffiliated
broker/dealers ................................................... $ 201,592 $ 51,565
Contingent deferred sales charges retained .......................... $ 198,185 --

E. TRANSFER AGENT FEES

For the period ended November 30, 2007, the Funds paid transfer agent fees as
noted in the Statements of Operations of which the following amounts were
retained by Investor Services:

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

Transfer agent fees ................................................. $ 130,314 $ 14,188

F. WAIVER AND EXPENSE REIMBURSEMENTS

For the Franklin Tennessee Municipal Bond Fund, Advisers has agreed in advance
to waive all or a portion of its fees and to assume payment of other expenses
through September 30, 2008. Total expenses waived are not subject to
reimbursement by the Fund subsequent to the Fund's fiscal year end. After
September 30, 2008, Advisers may discontinue this waiver at any time upon notice
to the Fund's Board of Trustees.

58 | Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

4. INCOME TAXES

For tax purposes, capital losses may be carried over to offset future capital
gains, if any. At May 31, 2007, the capital loss carryforwards were as follows:

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

Capital loss carryforwards expiring in:
2008 ...................................... $ 7,867,595 $ 491,071
2009 ...................................... 31,858,136 1,676,320
2010 ...................................... 4,003,471 480,932
2011 ...................................... -- 95,080
2012 ...................................... 7,294,061 984,101
2013 ...................................... 2,650,186 422,643
2015 ...................................... 684,955 11,310
-----------------------------------------
$ 54,358,404 $ 4,161,457
=========================================

For tax purposes, realized capital losses occurring subsequent to October 31,
may be deferred and treated as occurring on the first day of the following
fiscal year. At May 31, 2007, the Franklin Tennessee Municipal Bond Fund
deferred realized capital losses of $10,396.

At November 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

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

Cost of investments .......................... $ 1,618,649,042 $ 168,606,263
=========================================

Unrealized appreciation ...................... $ 51,466,587 $ 5,615,730
Unrealized depreciation ...................... (46,425,698) (995,945)
-----------------------------------------
Net unrealized appreciation (depreciation) ... $ 5,040,889 $ 4,619,785
=========================================

Net investment income and net realized gains (losses) differ for financial
statement and tax purposes primarily due to differing treatment of bond
discounts.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short term securities) for the
period ended November 30, 2007, were as follows:

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

Purchases .................................... $ 229,270,769 $ 16,367,863
Sales ........................................ $ 139,156,047 $ 8,344,070

Semiannual Report | 59

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

6. CREDIT RISK AND DEFAULTED SECURITIES

The Franklin California High Yield Municipal Fund has 26.35% 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 securities and/or other securities for which the income
has been deemed uncollectible. At November 30, 2007, the value of this security
was $1,050,282, representing 0.06% of the fund's net assets. The Fund
discontinues accruing income on securities for which income has been deemed
uncollectible and provides an estimate for losses on interest receivable. The
securities have been identified on the accompanying Statement of Investments.

7. CONCENTRATION OF RISK

Each of the Funds invests a large percentage of its total assets in obligations
of issuers within its respective state and U.S. territories. Such concentration
may subject the Funds to risks associated with industrial or regional matters,
and economic, political or legal developments occurring within those states and
U.S. territories.

8. REGULATORY AND LITIGATION MATTERS

As part of various investigations by a number of federal, state, and foreign
regulators and governmental entities, including the Securities and Exchange
Commission ("SEC"), relating to certain practices in the mutual fund industry,
including late trading, market timing and marketing support payments to
securities dealers who sell fund shares ("marketing support"), Franklin
Resources, Inc. and certain of its subsidiaries (collectively, the "Company"),
entered into settlements with certain of those regulators and governmental
entities. Specifically, the Company entered into settlements with the SEC, among
others, concerning market timing and marketing support.

On June 6, 2007, the SEC posted for public comment the proposed plan of
distribution for the market timing settlement. Once the SEC approves the final
plan of distribution, disbursements of settlement monies will be made promptly
to individuals who were shareholders of the designated funds during the relevant
period, in accordance with the terms and conditions of the settlement and plan.

60 | Semiannual Report

Franklin Municipal Securities Trust

NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)

8. REGULATORY AND LITIGATION MATTERS (CONTINUED)

In addition, the Company, as well as most of the mutual funds within Franklin
Templeton Investments and certain current or former officers, Company directors,
fund directors, and employees, have been named in private lawsuits (styled as
shareholder class actions, or as derivative actions on behalf of either the
named funds or Franklin Resources, Inc.). The lawsuits relate to the industry
practices referenced above.

The Company and fund management believe that the claims made in each of the
private lawsuits referenced above are without merit and intend to defend against
them vigorously. The Company cannot predict with certainty the eventual outcome
of these lawsuits, nor whether they will have a material negative impact on the
Company. If it is determined that the Company bears responsibility for any
unlawful or inappropriate conduct that caused losses to the Trust, it is
committed to making the Trust or its shareholders whole, as appropriate.

9. NEW ACCOUNTING PRONOUNCEMENTS

The Funds adopted Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109" (FIN 48), on November 30, 2007. FIN 48
clarifies the accounting for uncertainty in tax positions taken or expected to
be taken in a tax return. FIN 48 provides guidance on the measurement,
recognition, classification and disclosure of tax positions, along with
accounting for the related interest and penalties. The Funds have reviewed the
tax positions for open tax years (tax years ended May 31, 2005 - 2007) and have
determined that the implementation of FIN 48 did not have a material impact on
the Funds' financial statements.

In September 2006, FASB issued FASB Statement No. 157, "Fair Value Measurement"
(SFAS 157), which defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. SFAS 157 is
effective for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. The Trust believes the adoption of SFAS 157
will have no material impact on its financial statements.

Semiannual Report | 61

Franklin Municipal Securities Trust

SHAREHOLDER INFORMATION

PROXY VOTING POLICIES AND PROCEDURES

The Trust has established Proxy Voting Policies and Procedures (Policies) that
the Trust uses to determine how to vote proxies relating to portfolio
securities. Shareholders may view the Trust's complete Policies online at
franklintempleton.com. Alternatively, shareholders may request copies of the
Policies free of charge by calling the Proxy Group collect at 1-954/527-7678 or
by sending a written request to: Franklin Templeton Companies, LLC, 500 East
Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy
Group. Copies of the Trust's proxy voting records are also made available online
at franklintempleton.com and posted on the U.S. Securities and Exchange
Commission's website at sec.gov and reflect the most recent 12-month period
ended June 30.

QUARTERLY STATEMENT OF INVESTMENTS

The Trust files a complete statement of investments with the U.S. Securities and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, DC. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.

62 | Semiannual Report

This page intentionally left blank.

Literature Request

LITERATURE REQUEST. TO RECEIVE A BROCHURE AND PROSPECTUS, PLEASE CALL US AT
1-800/DIAL BEN(R) (1-800/342-5236) OR VISIT FRANKLINTEMPLETON.COM. INVESTORS
SHOULD CAREFULLY CONSIDER A FUND'S INVESTMENT GOALS, RISKS, CHARGES AND EXPENSES
BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND OTHER INFORMATION. PLEASE
CAREFULLY READ THE PROSPECTUS BEFORE INVESTING. 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 FUNDS

INTERNATIONAL

Mutual European Fund
Templeton BRIC Fund
Templeton China World Fund
Templeton Developing Markets Trust
Templeton Emerging Markets Small Cap Fund
Templeton Foreign Fund
Templeton Foreign Smaller Companies Fund 1

GLOBAL

Mutual Discovery Fund
Templeton Global Long-Short Fund
Templeton Global Opportunities Trust
Templeton Global Smaller Companies Fund 1
Templeton Growth Fund
Templeton World Fund

GROWTH

Franklin Capital Growth Fund
Franklin Flex Cap Growth Fund
Franklin Growth Opportunities Fund 2
Franklin Small Cap Growth Fund II 3
Franklin Small-Mid Cap Growth Fund

VALUE

Franklin All Cap Value Fund
Franklin Balance Sheet Investment Fund 1
Franklin Equity Income Fund
Franklin Large Cap Value Fund
Franklin MicroCap Value Fund 1
Franklin MidCap Value Fund
Franklin Small Cap Value Fund
Mutual Beacon Fund
Mutual Qualified Fund
Mutual Recovery Fund 4
Mutual Shares Fund

BLEND

Franklin Balanced Fund
Franklin Convertible Securities Fund
Franklin Focused Core Equity Fund
Franklin Growth Fund
Franklin Rising Dividends Fund

SECTOR

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

ASSET ALLOCATION

Franklin Templeton Corefolio(R) Allocation Fund
Franklin Templeton Founding Funds Allocation Fund
Franklin Templeton Perspectives Allocation Fund
Franklin Templeton Conservative Target Fund
Franklin Templeton Growth Target Fund
Franklin Templeton Moderate Target Fund
Franklin Templeton 2015 Retirement Target Fund
Franklin Templeton 2025 Retirement Target Fund
Franklin Templeton 2035 Retirement Target Fund
Franklin Templeton 2045 Retirement Target Fund

INCOME

Franklin Adjustable U.S. Government
Securities Fund 5
Franklin Floating Rate Daily Access Fund
Franklin High Income Fund
Franklin Income Fund
Franklin Limited Maturity
U.S. Government Securities Fund 5
Franklin Low Duration Total Return Fund
Franklin Real Return Fund
Franklin Strategic Income Fund
Franklin Strategic Mortgage Portfolio
Franklin Templeton Hard Currency Fund
Franklin Total Return Fund
Franklin U.S. Government Securities Fund 5
Templeton Global Bond Fund
Templeton Income Fund
Templeton International Bond Fund

TAX-FREE INCOME 6

NATIONAL FUNDS

Double Tax-Free Income Fund
Federal Tax-Free Income Fund
High Yield Tax-Free Income Fund
Insured Tax-Free Income Fund 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

Alabama
Arizona
California 8
Colorado
Connecticut
Florida
Georgia
Kentucky
Louisiana
Maryland
Massachusetts 7
Michigan 7
Minnesota 7
Missouri
New Jersey
New York 8
North Carolina
Ohio 7
Oregon
Pennsylvania
Tennessee
Virginia

INSURANCE FUNDS

Franklin Templeton Variable Insurance Products Trust 9

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

2. Effective 11/1/07, Franklin Aggressive Growth Fund changed its name to
Franklin Growth Opportunities Fund. The fund's investment goal and strategy
remained the same.

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

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

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

7. The fund invests primarily in insured municipal securities.

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

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

12/07 Not part of the semiannual report

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

o WANT TO RECEIVE THIS DOCUMENT FASTER VIA EMAIL?

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

SEMIANNUAL REPORT AND SHAREHOLDER LETTER

FRANKLIN 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

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

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

MUN S2007 01/08

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 12(a)(1), the Registrant is attaching as an exhibit a copy
of its code of ethics that applies to its principal executive officers and
principal financial and accounting officer.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

(a)(1) The Registrant has an audit committee financial expert serving on its
audit committee.

(2) The audit committee financial expert is John B. Wilson and he is
"independent" as defined under the relevant Securities and Exchange Commission
Rules and Releases.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. N/A

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. N/A

ITEM 6. SCHEDULE OF INVESTMENTS. N/A

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES. N/A

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT
INVESTMENT COMPANIES. N/A

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END
MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. N/A

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have
been no changes to the procedures by which shareholders may recommend nominees
to the Registrant's Board of Trustees that would require disclosure herein.

ITEM 11. CONTROLS AND PROCEDURES.
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules
and forms of the Securities and Exchange Commission. Such information is
accumulated and communicated to the Registrant's management, including its
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure. The Registrant's
management, including the principal executive officer and the principal
financial officer, recognizes that any set of controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives.

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

(B) CHANGES IN INTERNAL CONTROLS. There have been no 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 12. EXHIBITS.

(a)(1) Code of Ethics

(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of
Jimmy D. Gambill, Chief Executive Officer - Finance and Administration, and
Galen G. Vetter, Chief Financial Officer

SIGNATURES

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

FRANKLIN MUNICIPAL SECURITIES TRUST

By /S/JIMMY D. GAMBILL
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 25, 2008

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
-------------------
Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date January 25, 2008

By /S/GALEN G. VETTER
------------------
Galen G. Vetter
Chief Financial Officer
Date January 25, 2008