MESSAGE FROM THE CHAIRMAN
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Table of Contents
Page
Message from the Chairman 1
Fund Reports
Franklin Arkansas
Municipal Bond Fund 4
Franklin California
High Yield Municipal Fund 8
Franklin Hawaii
Municipal Bond Fund 12
Franklin Tennessee
Municipal Bond Fund 16
Franklin Washington
Municipal Bond Fund 20
Statement of Investments 24
Financial Statements 37
Notes to Financial Statements 41
To ensure the highest quality of service, telephone calls to or from our service
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To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most Fund reports, such as the Fund's annual and semi-annual
reports, may be mailed to a household. Additional reports may be obtained,
without charge, by calling Fund Information at 1-800/DIAL BEN (1-800/342-5236).
January 15, 1996
Dear Shareholder:
It's a pleasure to bring you the semi-annual report of the Franklin Municipal
Securities Trust for the period ended November 30, 1995.
Since our last report dated May 31, 1995, the municipal securities market has
shown renewed strength as prices rallied in response to declining interest rates
and the continued low supply of new bonds. Fixed-income securities, in general,
benefited from the Federal Reserve Board's move in July to lower interest rates.
As interest rates declined, the municipal bond market generally performed well.
Higher bond prices were welcome after a volatile 1994 (one of the worst markets
in 25 years for fixed income securities), but performance was not as robust as
we had anticipated. While demand for municipal securities was strong in the
beginning of 1995, it started to decline in April, due in part to the lingering
investor concern over last year's municipal bankruptcy filing of Orange County,
California, and negative media attention regarding a proposed "flat tax." It is
probably too early to draw any conclusions on how any of the proposed tax reform
plans could impact the municipal bond market. Therefore, we will continue to
monitor the situation.
Performance was also marginally inhibited by a strong U.S. stock market, which
encouraged some investors to move assets away from fixed-income securities into
equities. Nonetheless, the funds within the Franklin Municipal Securities Trust
performed well.
Fortunately, given less-than-perfect investment conditions in the municipal
market, the portfolio managers of the Franklin Municipal Securities Trust took
advantage of attractive investment opportunities in higher quality municipal
securities. In the recent declining interest-rate environment, the yields
available on high-quality AAA-rated municipal securities were attractive
relative to lower-quality issues, as investor demand for higher yields pushed up
prices (and thus lowered yields) on lower-quality bonds. Overall, the result has
been a much smaller yield difference, or "narrow spread," between high-quality
AAA-rated insured bonds and lesser-grade BBB bonds.
A relatively large supply of insured municipal issues also made it possible for
your managers to concentrate on higher-quality investments. We believe the
market's response to the December 1994 municipal bankruptcy of Orange County,
was a primary reason for the increased supply of AAA insured bonds. In fact,
since the beginning of this year, approximately 45% of new municipal bonds were
insured, versus 37% in 1994.1 In California alone, that figure jumped to 48%,
compared with 34% in 1994.2
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1. Source: Bond Buyer, 12/7/95. 1995 data as of 11/30/95.
2. Source: Bond Buyer, 1/30/95, 11/3/95. 1995 data as of 9/30/95.
During the reporting period, while striving to provide shareholders with a high
level of current income, we also kept a watchful eye on market volatility. One
way we seek to reduce your funds' exposure to risk is by investing in a broad
range of cities and counties throughout each respective state. Additionally, we
purchase securities from a variety of municipal sectors. In the fund summaries
that follow, you will find specific information about how your fund's assets
were invested on November 30, 1995, including portfolio breakdowns by bond
credit quality and municipal investment sector.
Looking forward to 1996, we believe continued slow to moderate economic growth
and subdued inflation should bode well for fixed-income securities.
Furthermore, trends in municipal financing indicate that the market's supply and
demand fundamentals should be favorable to bond investors, as supply may remain
low. The rebound of the municipal securities market in 1995 has reinforced our
philosophy that our shareholders should keep a long-term perspective. While your
fund may experience volatility from time to time, we believe that the
performance of tax-free income funds will be rewarding over the long term.
As always, we appreciate your continued support, welcome your comments, and look
forward to serving you in the years to come.
Sincerely,
Charles B. Johnson
Chairman
Franklin Municipal Securities Trust
FRANKLIN ARKANSAS MUNICIPAL BOND FUND
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Fund Objective:
Managed to provide shareholders with a high level of current income exempt from
regular federal and Arkansas state personal income taxes while seeking
preservation of capital by investing primarily in a portfolio of Arkansas
municipal securities.*
*The fund may invest as much as 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax. All or a significant portion of
the income on these obligations may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable.
Arkansas' low debt levels and low municipal bond issuance made the state's
securities attractive to fixed-income investors. In fact, Arkansas enjoys
excellent credit ratings of AA from Standard & Poor's and Aa from Moody's, two
national credit rating agencies. These ratings are the result of a strong,
diversified economy, conservative financial operations and a low level of debt.
GRAPHIC MATERIAL 1 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
**Quality breakdown includes internal ratings for bonds not rated by a national
rating agency.
The state's positive financial situation is partially a result of its adherence
to a 1973 revenue stabilization law, which dictates expenditures cannot exceed
revenues in any fiscal year. Deficit spending is prohibited, keeping Arkansas'
debt levels well in check and new bond issuance levels relatively low. We
anticipate controlled spending will continue, and our outlook for the state, as
well as for the fund, is positive.
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Franklin Arkansas Municipal Bond Fund
Portfolio Breakdown on 11/30/95
Based on Total Net Assets
% of Total
Sector Net Assets
Utilities 31.2%
Hospitals 21.1%
Housing 15.7%
Education 11.9%
General Obligations 9.2%
Transportation 6.1%
Industrial 4.8%
For a complete list of portfolio holdings, please see page 24 of this report.
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Performance Summary
The share price of the Franklin Arkansas Municipal Bond Fund, as measured by net
asset value, increased to $10.53 on November 30, 1995, from $10.32 on May 31,
1995. The fund continued to meet its investment objective of providing high
current income to its shareholders. For example, during the six-month period
ended November 30, 1995, your fund paid income distributions totaling 28.9 cents
($0.289) per share.+ Dividends will vary based on the earnings of the fund's
portfolio and past distributions are not predictive of future results.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all income earned by the
fund during the reporting period.
At the end of the reporting period, your fund's distribution rate was 5.24%,
based on an annualization of the current monthly dividend of 4.8 cents per share
and the maximum offering price of $11.00 on November 30, 1995. This double
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. As the chart above illustrates, if you are in the 43.8%
maximum combined federal and Arkansas state personal income tax bracket, you
would have to earn 9.32% from a taxable investment to match your fund's tax-free
distribution rate.
GRAPHIC MATERIAL 2 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
The fund posted a cumulative total return of +4.94% for the six-month and
+20.63% for the one-year periods ended November 30, 1995. Total return measures
the change in value of an investment over the periods indicated, assuming
reinvestment of dividends and any capital gains. This calculation does not
include the initial sales charge, and past performance is not predictive of
future results.
Franklin Arkansas Municipal Bond Fund
Periods ended November 30, 1995
Since
One- Inception
Year (05/10/94)
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Cumulative Total Return1 20.63% 13.07%
Average Annual Total Return2 15.51% 5.24%
Distribution Rate3 5.24%
Equivalent Taxable Distribution Rate4 9.32%
30-Day Standardized Yield5 5.26%
Equivalent Taxable Yield4 9.36%
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1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See note below.
3. Based on an annualization of the fund's current 4.8 cents per share monthly
dividend and the maximum offering price of $11.00 on November 30, 1995.
4. Equivalent taxable distribution rate and yield assume the 1995 maximum
combined federal and Arkansas state personal income tax bracket of 43.8%, based
on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended November 30, 1995.
Note: All total return calculations assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate, yield
and total return to shareholders. Without this waiver, the fund's distribution
rate and total return would have been lower, and yield for the period would have
been 4.32%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.
FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND
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Fund Objective:
Managed to provide shareholders with a high level of current income exempt from
regular federal and California state personal income taxes while seeking
preservation of capital by investing primarily in a portfolio of high yielding,
medium-, lower-, and non-rated California municipal securities.*
*The fund may invest as much as 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax. All or a significant portion of
the income on these obligations may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable. In general, an investor is paid a higher yield to assume a
greater degree of risk.
The fund's exposure to higher quality bonds increased over the reporting period,
with 12.1% of its total net assets invested in AAA and AA-rated bonds as of
November 30, 1995, up from 7.5% on May 31, 1995. This increase in quality was a
result of the low supply of high yield bonds in California, as well as the
narrowing of quality yield spreads in the market.
GRAPHIC MATERIAL 3 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
**Quality breakdown includes internal ratings for bonds not rated by a national
rating agency.
California finally showed signs of recovery after a long recession, with a
broadened economic base and an improved financial position. Although employment
rates were lower than the national average, recent personal income tax receipts
were stronger than employment data indicated. While job losses resulting from
military base closures are expected to be permanent, expansion in other areas,
such as service, entertainment and tourism, may offset those losses. Various
sectors have exhibited above-average growth, and our outlook for the state, as
well as for the fund, is positive.
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Franklin California High Yield Municipal Fund
Portfolio Breakdown on 11/30/95
Based on Total Net Assets
% of Total
Sector Net Assets
Mello-Roos Bonds 16.6%
Transportation 15.9%
Special Assessment Bonds 13.1%
Certificates of Participation 10.3%
Tax Allocation Bonds 8.7%
Hospitals 8.0%
Utilities 6.2%
Housing 6.0%
Other Revenue 3.7%
Marks-Roos Bonds 3.7%
Education 3.5%
Health Care 2.8%
Industrial Revenue Bonds 1.5%
For a complete list of portfolio holdings, please see page 26 of this report.
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Performance Summary
The California High Yield Municipal Fund's share price, as measured by net asset
value, increased to $10.08 on November 30, 1995, from $9.93 on May 31, 1995. The
fund continued to meet its investment objective of providing high current income
to its shareholders. For the six-month period ended November 30, 1995, your fund
paid income distributions totaling 32.6 cents ($0.326) per share.+ We are
pleased to inform you that your fund's dividend rate increased to 5.5 cents
($0.055) per share from 5.3 cents ($0.053) per share as of the August 1995
distribution. Dividends will vary based on the earnings of the fund's portfolio
and past distributions are not predictive of future results.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all income earned by the
fund during the reporting period.
At the end of the reporting period, your fund's distribution rate was 6.27%,
based on an annualization of the current monthly dividend of 5.5 cents per share
and the maximum offering price of $10.53 on November 30 ,1995. This double
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. As the chart above illustrates, if you are in the 46.2%
maximum combined federal and California state personal income tax bracket, you
would have to earn 11.65% from a taxable investment to match your fund's
tax-free distribution rate.
GRAPHIC MATERIAL 4 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
The fund posted a cumulative total return of +4.93% for the six-month period
ended November 30, 1995, and a one-year total return of +18.11%. Total return
measures the change in value of an investment over the periods indicated,
assuming reinvestment of dividends and any capital gains. This calculation does
not include the initial sales charge, and past performance is not predictive of
future results.
Franklin California High Yield Municipal Fund
Periods ended November 30, 1995
Since
One- Inception
Year (05/03/93)
Cumulative Total Return1 18.11% 17.60%
Average Annual Total Return2 13.14% 4.72%
Distribution Rate3 6.27%
Equivalent Taxable Distribution Rate4 11.65%
30-Day Standardized Yield5 6.05%
Equivalent Taxable Yield4 11.25%
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See note below.
3. Based on an annualization of the fund's current 5.5 cents per share monthly
dividend and the maximum offering price of $10.53 on November 30, 1995.
4. Equivalent taxable distribution rate and yield assume the 1995 maximum
combined federal and California state personal income tax bracket of 46.2%,
based on the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended November 30, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a higher initial sales
charge. Thus, actual total returns of purchasers of shares during that period
would have been different than noted above. All total return figures assume
reinvestment of dividends and capital gains at net asset value. Investment
return and principal value will fluctuate with market conditions, and you may
have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
The fund's manager has agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate, yield
and total return to shareholders. Without this waiver, the fund's distribution
rate and total return would have been lower, and yield for the period would have
been 5.57%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.
FRANKLIN HAWAII MUNICIPAL BOND FUND
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Fund Objective:
Managed to provide shareholders with a high level of current income exempt from
regular federal and Hawaii state personal income taxes while seeking
preservation of capital by investing primarily in a portfolio of Hawaii
municipal securities.*
*The fund may invest as much as 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax. All or a significant portion of
the income on these obligations may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable.
Hawaii experienced moderate growth during the six-month reporting period ended
November 30, 1995. The economy improved as tourism rebounded from recessionary
lows.
The state's debt ratio remains high, but Hawaii's $3 billion in outstanding
general obligation bonds have been rated AA by Standard & Poor's, a national
rating agency. Attempts to realign the state's budget have been partially
successful,and the government is expected to rein in the remaining deficit.
Despite Hawaii's weakened economic performance, our outlook for the state
remains positive.
GRAPHIC MATERIAL 5 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
**Quality breakdown includes internal ratings for bonds not rated by a national
rating agency.
We are pleased to inform you that your fund reported a cumulative total return
of +20.81% for the one-year period ended November 30, 1995, and Lipper
Analytical Services, Inc. ranked your fund #1 out of 12 Hawaii municipal bond
funds.++
++The fund was ranked #1 out of 12 Hawaii municipal bond funds in total return
for the one-year period ended November 30, 1995, and #1 out of 5 for the
three-year period spanning September 30, 1992 to September 30, 1995, as measured
by Lipper Analytical Services, Inc., a nationally recognized mutual fund rating
organization. Three year figures for the period ended November 30, 1995 are not
available. Lipper rankings do not include sales charges; past and present
expense reductions by the fund's manager increased the fund's total returns.
Rankings may have been different if these factors had been considered. Past
performance cannot guarantee future results.
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Franklin Hawaii Municipal Bond Fund
Portfolio Breakdown on 11/30/95
Based on Total Net Assets
% of Total
Sector Net Assets
Utilities 27.5%
Transportation 20.1%
Housing 19.8%
Hospitals 14.5%
General Obligations 11.7%
Industrial 3.4%
Pre-refunded 2.1%
Education 0.9%
For a complete list of portfolio holdings, please see page 29 of this report.
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Performance Summary
The Franklin Hawaii Municipal Bond Fund's share price, as measured by net asset
value, increased to $10.88 on November 30, 1995, from $10.67 on May 31, 1995.
The fund continued to meet its investment objective of providing high current
income to its shareholders. For the six-month period ended November 30, 1995,
your fund paid income distributions totaling 30.1 cents ($0.301) per share.+
Dividends will vary based on the earnings of the fund's portfolio and past
distributions are not predictive of future results.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all income earned by the
fund during the reporting period.
At the end of the reporting period, your fund's distribution rate was 5.28%,
based on an annualization of the current monthly dividend of 5.0 cents ($0.05)
per share and the maximum offering price of $11.36 on November 30 ,1995. This
double tax-free rate is generally higher than the after-tax return on a
comparable taxable investment. As the chart above illustrates, if you are in the
45.6% maximum combined federal and Hawaii state personal income tax bracket, you
would have to earn 9.71% from a taxable investment to match your fund's tax-free
distribution rate.
GRAPHIC MATERIAL 6 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
The fund posted a cumulative total return of +4.90% for the six-month period
ended November 30, 1995, and a one-year total return of +20.81%. Total return
measures the change in value of an investment over the periods indicated,
assuming reinvestment of dividends and any capital gains. This calculation does
not include the initial sales charge, and past performance is not predictive of
future results.
Franklin Hawaii Municipal Bond Fund
Periods ended November 30, 1995
Since
One- Three- Inception
Year Year (02/26/92)
- ------------------------------------------------------------------------
Cumulative Total Return1 20.81% 24.90% 34.05%
Average Annual Total Return2 15.71% 6.14% 6.87%
Distribution Rate3 5.28%
Equivalent Taxable
Distribution Rate4 9.71%
30-Day
Standardized Yield5 5.29%
Equivalent Taxable Yield4 9.72%
- ------------------------------------------------------------------------
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See note below.
3. Based on an annualization of the fund's current 5.0 cents per share monthly
dividend and the maximum offering price of $11.36 on November 30, 1995.
4. Equivalent taxable distribution rate and yield assume the 1995 maximum
combined federal and Hawaii personal income tax bracket of 45.6%, based on the
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended November 30, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a higher initial sales
charge. Thus, actual total returns for purchasers of shares during that period
would have been different than noted above. All total return figures assume
reinvestment of dividends and capital gains at net asset value. Investment
return and principal value will fluctuate with market conditions, and you may
have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
The fund's manager has agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate, yield
and total return to shareholders. Without this waiver, the fund's distribution
rate and total return would have been lower, and yield for the period would have
been 4.78%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.
FRANKLIN TENNESSEE MUNICIPAL BOND FUND
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Fund Objective:
Managed to provide shareholders with a high level of current income exempt from
regular federal and Tennessee state personal income taxes while seeking
preservation of capital by investing primarily in a portfolio of Tennessee
municipal securities.*
*The fund may invest as much as 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax. All or a significant portion of
the income on these obligations may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable.
Tennessee's robust economy, low debt burden and improved financial operations
created an ideal investment environment for municipal bonds. The low rate of new
bond issuance made Tennessee's debt securities attractive to investors. As a
result, the state's general obligation bonds received an AA+ rating from
Standard & Poor's, a national rating agency.
GRAPHIC MATERIAL 7 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
**Quality breakdown includes internal ratings for bonds not rated by a national
rating agency.
Although Tennessee's economy relies considerably on manufacturing, it has
expanded into service-oriented sectors, such as health care. Services, trade and
manufacturing each account for roughly 23% of the state's nonagricultural
employment. As Tennessee's economy continues to diversify, our outlook for the
state, as well as for the fund, is positive.
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Franklin Tennessee Municipal Bond Fund
Portfolio Breakdown on 11/30/95
Based on Total Net Assets
% of Total
Sector Net Assets
Industrial 24.3%
Utilities 19.7%
Hospitals 15.3%
General Obligations 12.4%
Housing 10.2%
Other Revenue 7.4%
Education 5.6%
Certificates of Participation 2.6%
Transportation 2.5%
For a complete list of portfolio holdings, please see page 32 of this report.
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Performance Summary
The Franklin Tennessee Municipal Bond Fund's share price, as measured by net
asset value, increased to $10.75 on November 30, 1995, from $10.53 on May 31,
1995. The fund continued to meet its investment objective of providing high
current income to its shareholders. For the six-month period ended November 30,
1995, your fund paid income distributions totaling 29.5 cents ($0.295) per
share.+ Due to increased income earned by the fund, we were able to raise the
monthly dividend to 5.0 cents ($0.05) per share from 4.9 cents ($0.049) per
share, as of the November 1995 distribution. Dividends will vary based on the
earnings of the fund's portfolio and past distributions are not predictive of
future results.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all income earned by the
fund during the reporting period.
At the end of the reporting period, your fund's distribution rate was 5.34%,
based on an annualization of the current monthly dividend of 5.0 cents per share
and the maximum offering price of $11.23 on November 30 ,1995. This double
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. As the chart above illustrates, if you are in the 43.2%
maximum combined federal and Tennessee state personal income tax bracket, you
would have to earn 9.40% from a taxable investment to match your fund's tax-free
distribution rate.
GRAPHIC MATERIAL 8 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
Your fund delivered a cumulative total return of +5.00% for the six-month period
ended November 30, 1995, and a one-year total return of +20.95%. Total return
measures the change in value of an investment over the periods indicated,
assuming reinvestment of dividends and any capital gains. This calculation does
not include the initial sales charge, and past performance is not predictive of
future results.
Franklin Tennessee Municipal Bond Fund
Periods ended November 30, 1995
Since
One- Inception
Year (05/10/94)
- ------------------------------------------------------------
Cumulative Total Return1 20.95% 15.50%
Average Annual Total Return2 15.78% 6.69%
Distribution Rate3 5.34%
Equivalent Taxable Distribution Rate4 9.40%
30-Day Standardized Yield5 5.23%
Equivalent Taxable Yield4 9.21%
- ------------------------------------------------------------
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See note below.
3. Based on an annualization of the fund's current 5.0 cents per share monthly
dividend and the maximum offering price of $11.23 on November 30, 1995.
4. Equivalent taxable distribution rate and yield assume the 1995 maximum
combined federal and Tennessee personal income tax bracket of 43.2%, based on
the federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended November 30, 1995.
Note: All total return figures assume reinvestment of dividends and capital
gains at net asset value. Investment return and principal value will fluctuate
with market conditions, and you may have a gain or loss when you sell your
shares. Past performance is not predictive of future results.
The fund's manager has agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate, yield
and total return to shareholders. Without this waiver, the fund's distribution
rate and total return would have been lower, and yield for the period would have
been 4.65%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.
FRANKLIN WASHINGTON MUNICIPAL BOND FUND
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Fund Objective:
Managed to provide shareholders with a high level of current income exempt from
regular federal income taxes while seeking preservation of capital by investing
primarily in a portfolio of Washington municipal securities.*
*The fund may invest as much as 100% of its assets in bonds that pay interest
subject to the federal alternative minimum tax. All or a significant portion of
the income on these obligations may be subject to such tax. Distributions of
capital gains and of ordinary income from accrued market discount, if any, are
generally taxable.
Washington's sound financial performance, strong economic base and moderate debt
burden continued to make the state's bonds attractive to investors. All of these
factors contributed to a AA rating of the state's general obligation bonds from
Standard & Poor's, a national credit rating agency.
GRAPHIC MATERIAL 9 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
**Quality breakdown includes internal ratings for bonds not rated by a national
rating agency.
Moving away from the aerospace and agriculture industries, Washington's economic
base became less vulnerable to the cyclical trends of these particular areas.+
Economic diversification is currently indicated through strength in trade,
retail sales and high technology.
+Source: Standard & Poor's Creditweek Municipal, 4/10/95
Also notable is a moderate debt burden, which can partly be attributed to the
budget restrictions mandated by Initiative 601. The initiative limits the amount
of spending, including debt service, that the state can undertake. This new
policy has contributed significantly to Washington's sound financial position,
and our outlook for the state, as well as the fund, is positive.
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Franklin Washington Municipal Bond Fund
Portfolio Breakdown on 11/30/95
Based on Total Net Assets
% of Total
Sector Net Assets
Utilities 31.5%
General Obligations 25.8%
Industrial 13.5%
Education 10.6%
Housing 10.1%
Transportation 3.4%
Hospitals 3.4%
Certificates of Participation 1.7%
For a complete list of portfolio holdings, please see page 35 of this report.
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Performance Summary
The share price of the Franklin Washington Municipal Bond Fund, as measured by
net asset value, increased to $10.16 on November 30, 1995, from $9.90 on May 31,
1995. The fund continued to meet its investment objective of providing high
current income to its shareholders. For the six-month period ended November 30,
1995, your fund paid income distributions totaling 28.9 cents ($0.289) per
share.+ Dividends will vary based on the earnings of the fund's portfolio and
past distributions are not predictive of future results.
+Assumes shares were purchased and held for the entire accrual period. Since
dividends accrue daily, your actual distributions will vary depending on the
date you purchased your shares and any account activity during the month. Income
distributions and total return calculations include all income earned by the
fund during the reporting period.
At the end of the reporting period, your fund's distribution rate was 5.43%,
based on an annualization of the current monthly dividend of 4.8 cents ($0.048)
per share and the maximum offering price of $10.61 on November 30,1995. This
tax-free rate is generally higher than the after-tax return on a comparable
taxable investment. As the chart above illustrates, if you are in the maximum
39.6% federal income tax bracket, you would have to earn 8.99% from a taxable
investment to match your fund's tax-free distribution rate.
GRAPHIC MATERIAL 10 OMMITTED - SEE APPENDIX AT END OF DOCUMENT
The fund posted a cumulative total return of +5.68% for the six-month period
ended November 30, 1995, and a one-year total return of +23.22%. Total return
measures the change in value of an investment over the periods indicated,
assuming reinvestment of dividends and any capital gains. This calculation does
not include the initial sales charge, and past performance is not predictive of
future results.
Franklin Washington Municipal Bond Fund
Periods ended November 30, 1995
Since
One- Inception
Year (05/03/93)
- ------------------------------------------------------------
Cumulative Total Return1 23.22% 16.41%
Average Annual Total Return2 17.96% 4.31%
Distribution Rate3 5.43%
Equivalent Taxable Distribution Rate4 8.99%
30-Day Standardized Yield5 5.47%
Equivalent Taxable Yield4 9.06%
- ------------------------------------------------------------
1. Cumulative total returns measure the change in value of an investment over
the periods indicated and do not include the current, maximum 4.25% initial
sales charge. See note below.
2. Average annual total returns represent the average annual change in value of
an investment over the specified periods and reflect the current, maximum 4.25%
initial sales charge. See note below.
3. Based on an annualization of the fund's current 4.8 cents per share monthly
dividend and the maximum offering price of $10.61 on November 30, 1995.
4. Equivalent taxable distribution rate and yield assume the 1995 maximum
federal income tax rate of 39.6%.
5. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended November 30, 1995.
Note: Prior to July 1, 1994, fund shares were offered at a higher initial sales
charge. Thus, actual total returns for purchasers of shares during that period
would have been different than noted above. All total return figures assume
reinvestment of dividends and capital gains at net asset value. Investment
return and principal value will fluctuate with market conditions, and you may
have a gain or loss when you sell your shares. Past performance is not
predictive of future results.
The fund's manager has agreed in advance to waive a portion of the management
fees, which reduces operating expenses and increases distribution rate, yield
and total return to shareholders. Without this waiver, the fund's distribution
rate and total return would have been lower, and yield for the period would have
been 4.49%. The fee waiver may be discontinued at any time upon notification to
the fund's Board of Trustees.
<TABLE>
<CAPTION>
FRANKLIN MUNICIPAL SECURITIES TRUST
Statement of Investments in Securities and Net Assets, November 30, 1995 (unaudited)
Face Value
Amount Franklin Arkansas Municipal Bond Fund (Note 1)
Bonds 100.9%
<S> <C> <C>
Arkansas Development Financing Authority,
$130,000 SFMR, MBS Program, Series D, 6.85%, 01/01/27 ..................................... $ 138,000
175,000 Water Revenue, Revolving Loan Fund, Series A, MBIA Insured, 5.75%, 06/01/18 ...... 181,214
130,000 Arkansas GO, Refunding, Waste Disposal and Pollution, Series B, 6.25%, 07/01/20 ..... 135,746
100,000 Arkansas State Water Reserve Development, Series B, 5.75%, 07/01/25 ................. 101,539
100,000 Blytheville Solid Waste Recycling and Sewage Treatment Revenue, Nucor Corp. Project,
6.375%, 01/01/23 ................................................................... 104,364
250,000 Camden Environmental Improvement Revenue, International Paper Co. Project, Series A,
7.625%, 11/01/18 ................................................................... 289,115
130,000 Fort Smith Water and Sewer Revenue, Refunding and Construction, MBIA Insured, 6.00%,
10/01/12............................................................................ 137,881
130,000 Fouke School District No. 15, Refunding and Construction, MBIA Insured, 6.60%,
04/01/19 ........................................................................... 139,793
115,000 Greenland School District No. 95, Washington County, Refunding and Construction,
MBIA Insured, 6.50%, 05/01/13 ...................................................... 121,645
125,000 Guam Airport Authority Revenue, Series B, 6.60%, 10/01/10 ........................... 126,696
200,000 Independence County Public Health, Education and Housing Facilities Board Revenue,
Refunding, White River Medical Center Project, FSA Insured, 5.50%, 06/01/09 ........ 204,898
400,000 Jefferson County PCR, Refunding, Arkansas Power & Light Co., 6.30%, 06/01/18 ........ 417,144
140,000 Little Rock Capital Improvement, Refunding, 6.30%, 02/01/09 ......................... 146,367
130,000 Little Rock Municipal Airport Revenue, Refunding, MBIA Insured, 6.00%, 11/01/14 ..... 135,045
120,000 Little Rock School District GO, Refunding, 6.25%, 12/01/07 .......................... 121,370
100,000 Little Rock School District, Refunding, FSA Insured, 5.60%, 01/01/20 ................ 100,652
240,000 bLittle Rock Waste Disposal Revenue, 5.80%, 05/01/16 ................................. 240,329
500,000 Pope County PCR, Refunding, Arkansas Power & Light Co. Project, 6.30%, 11/01/20 ..... 503,015
250,000 Puerto Rico Commonwealth GO, 6.50%, 07/01/23 ........................................ 267,828
100,000 Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue,
Refunding, Series V, 5.75%, 07/01/18 ............................................... 100,537
175,000 Puerto Rico Electric Power Authority Revenue, Series R, 6.25%, 07/01/17 ............. 182,289
175,000 Puerto Rico SFMR, Bank and Financial Agency, Affordable Housing Mortgage, Portfolio I,
6.25%, 04/01/29 .................................................................... 178,250
125,000 Pulaski County Health Facilities Board Revenue, Refunding, Nazareth Sisters of Charity,
St. Vincent's Infirmary, MBIA Insured, 6.05%, 11/01/09 ............................. 136,586
600,000 Pulaski County Public Facilities Board, MFR, Refunding, South Oaks Apartments, Series A,
6.50%, 10/20/29 .................................................................... 619,782
100,000 Pulaski County Special School District, Refunding, FSA Insured, 5.25%, 02/01/13 ..... 98,109
700,000 Saline County Hospital Revenue, Refunding, Connie Lee Insured, 6.00%, 09/01/19 ...... 723,779
$195,000 Saline County, Retirement Housing and Healthcare Facilities Board Revenue, Refunding,
AMBAC Insured, 5.80%, 06/01/11 ..................................................... $ 201,273
125,000 University of Southern Arkansas, Student Fees, MBIA Insured, 6.00%, 10/01/13 ........ 129,259
-------------
Total Investments (Cost $5,731,175) 100.9% ................................... 5,982,505
Liabilities in Excess of Other Assets, Net (.9)% ............................. (52,656)
-------------
Net Assets 100.0% ........................................................... $5,929,849
=============
At November 30, 1995, the net unrealized appreciation based on the
cost of investments for income tax purposes of $5,731,175 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................... $ 251,330
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................... --
-------------
Net unrealized appreciation ....................................................... $ 251,330
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
FSA - Financial Security Assistance
GO - General Obligation
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage-Backed Securities
MFR - Multi-Family Revenue
PCR - Pollution Control Revenue
SFMR - Single Family Mortgage Revenue
bSee Note 1(e) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN MUNICIPAL SECURITIES TRUST
Statement of Investments in Securities and Net Assets, November 30, 1995 (unaudited)
Face Value
Amount Franklin California High Yield Municipal Fund (Note 1)
Bonds 97.3%
<S> <C> <C>
$ 1,160,000 Adelanto Improvement Agency, Tax Allocation, Refunding & Improvement Project,
Series C, 7.75%, 12/01/29 ...................................................... $ 1,010,650
495,000 Antioch Improvement Board, 1915 Act, AD No. 27, Series D, 7.30%, 09/02/13 ....... 509,934
1,510,000 Belmont RDA, Tax Allocation, Los Costanos Community Development, Series A,
6.80%, 08/01/24 ................................................................ 1,613,737
575,000 Benicia, 1915 Act, Refunding, Fleetside Industrial Park Assessment, 7.00%, 09/02/14 592,204
California Health Facilities Financing Authority Revenue
1,800,000 Cedarknoll, Insured, Series B, 7.50%, 08/01/20 ............................... 1,965,330
990,000 bThessalonika Family, Insured, Series A, 6.20%, 12/01/15 ...................... 994,138
California HFAR, Home Mortgage,
1,150,000 Series B, 7.125%, 02/01/26 ................................................... 1,233,651
1,800,000 Series F-1, 7.00%, 08/01/26 .................................................. 1,920,492
1,000,000 California PCFA, Solid Waste Disposal Revenue, Browning-Ferris Industry, 6.75%,
09/01/19........................................................................ 1,080,170
85,000 California Special District Association Finance Corp., COP, Series V, 7.50%,
05/01/13........................................................................ 89,191
1,800,000 California Statewide Communities Development Authority Revenue, COP, 7.25%,
12/01/22........................................................................ 1,994,310
1,000,000 Capistrano USD, CFD, Special Tax No. 92-1, 7.00%, 09/01/18 ...................... 952,980
2,300,000 Eden Township Hospital District, Health Facilities Revenue, COP, Refunding, Insured,
Eden Hospital Health Services Corp., 5.75%, 07/01/12 ........................... 2,261,314
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue, Senior Lien,
3,525,000 Series A, 6.50%, 01/01/32 .................................................... 3,602,903
1,575,000 Series A, 6.00%, 01/01/34 .................................................... 1,542,587
2,500,000 Gateway Improvement Authority Revenue, Marin City Community Facilities District,
Series A, 7.75%, 09/01/25 .................................................... 2,534,125
2,600,000 Hesperia Public Financing Authority, Improvement Revenue, Series B, 7.375%,
10/01/23...................................................................... 2,662,998
2,500,000 Irvine, 1915 Act, AD No. 94-15, 6.70%, 09/02/20 ................................. 2,432,025
Irvine Ranch Water District Joint Powers Agency, Local Pool Revenue,
1,000,000 Issue I, 7.875%, 02/15/23 .................................................... 1,056,810
2,000,000 Issue II, 8.25%, 08/15/23 .................................................... 2,159,100
1,500,000 John C. Fremont Hospital District Revenue, California Health Facilities Insured, 6.75%,
06/01/13 ....................................................................... 1,597,440
1,265,000 Lake Elsinore, 1915 Act, AD No. 93-1, Series A, 7.90%, 09/02/24 ................. 1,296,435
140,000 Long Beach Special Tax, CFD No. 2, Long Beach, 7.50%, 09/01/11 .................. 143,119
1,350,000 Los Angeles County Transportation Commission, Sales Tax Revenue, Series A,
6.25%, 07/01/16 ................................................................ 1,354,644
1,150,000 Los Angeles MFR, Refunding, Series J-2, 8.50%, 01/01/24 ......................... 1,123,493
1,175,000 Lynwood Public Financing Authority Revenue, Water System Improvement Project,
6.50%, 06/01/21 ................................................................ 1,179,700
$ 1,480,000 Millbrae Elementary School District, COP, Financing Project, 6.90%, 03/01/22 .... $ 1,575,120
1,619,000 Orinda, 1915 Act, AD No. 94-1, Oak Springs, 8.25%, 09/02/19 ..................... 1,669,173
10,000,000 Palmdale Special Tax, CFD, No. 93-1, Ritter Ranch Project, Series A, 8.50%,
09/01/17 ...................................................................... 10,195,900
500,000 Perris Public Financing Authority, Local Agency Revenue, Series B, 7.25%, 08/15/23 505,850
1,115,000 Richmond Joint Powers Financing Authority, 1915 Act, ID Nos. 851 and 853, Series B,
8.50%, 09/02/19 ................................................................ 1,149,810
85,000 Sacramento County, 1915 Act, Refunding, Sunrise/U.S. Corridor Assessment, 7.00%,
09/02/09........................................................................ 86,490
1,750,000 San Buenaventura COP, Capital Improvement Projects, 6.85%, 08/01/16 ............. 1,795,518
850,000 San Diego County Educational Facilities Authority No. 1, Lease Revenue, 6.50%,
08/15/15........................................................................ 876,325
3,500,000 bSan Francisco City and County Airports Commission, International Airport Revenue,
Second Series, Issue 9A, FGIC Insured, 5.90%, 05/01/25 ......................... 3,532,270
800,000 San Francisco City and County Revenue, Irwin Memorial Blood Centers, Series A,
6.80%, 12/01/21 ................................................................ 842,208
San Joaquin Hills Transportation Corridor Agency, Toll Road Revenue, Senior Lien,
750,000 7.00%, 01/01/30 .............................................................. 793,770
450,000 6.75%, 01/01/32 .............................................................. 468,531
1,500,000 San Ramon Public Financing Authority, Refunding, Tax Allocation, 6.90%, 02/01/24 1,580,820
1,500,000 Santa Rosa, 1915 Act, Fountain Grove Parkway Extension Assessment, 7.625%,
09/02/19 ...................................................................... 1,545,030
2,000,000 Thousand Oaks Redevelopment Agency, Tax Allocation, Refunding,
Thousand Oaks Blvd. Redevelopment, MBIA Insured, 5.375%, 12/01/25 .............. 1,940,600
1,200,000 Tracy COP, I-205 Corridor Improvement Project, 7.00%, 10/01/27 .................. 1,252,608
2,250,000 West Covina COP, Refunding, Civic Center, 6.875%, 09/01/14 ...................... 2,320,087
-------------
Total Bonds (Cost $68,580,274) ............................................ 71,033,590
-------------
aShort Term Investments 5.9%
500,000 California PCFA, PCR, Refunding, Shell Oil Co. Project, Series A, Daily VRDN and Put,
3.45%, 10/01/06 ................................................................ 500,000
1,000,000 California Statewide Communities Development Authority Revenue, COP,
Sutter Health Obligation Group, Daily VRDN and Put, 3.50%, 07/01/15 ............ 1,000,000
500,000 Irvine, 1915 Act, AD No. 94-15, Daily VRDN and Put, 3.65%, 09/02/20 ............. 500,000
Irvine Ranch Water District GO,
500,000 Consolidated Bonds, DATES, Series C, Daily VRDN and Put, 3.65%, 10/01/10 ..... 500,000
200,000 Consolidated Districts Nos. 105, 250, and 290, Daily VRDN and Put, 3.50%,
08/01/16..................................................................... 200,000
$ 900,000 Orange County, COP, Office and Courthouse Projects, Orange County Public Facilities
Corp., Daily VRDN and Put, 3.70%, 12/01/15 ..................................... $ 900,000
700,000 Orange County Various Sanitation Districts, COP, No. 1-3, 5-7, 11, 13 and 14, Capital
Improvement Program 1990-92, Series A, Daily VRDN and Put, 3.55%, 08/01/15 ..... 700,000
-------------
Total Short Term Investments (Cost $4,300,000) ............................ 4,300,000
-------------
Total Investments (Cost $72,880,274) 103.2% .......................... 75,333,590
Liabilities in Excess of Other Assets, Net (3.2)% .................... (2,351,289)
-------------
Net Assets 100.0% .................................................... $72,982,301
=============
At November 30, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $72,880,274 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ............................................... $ 2,651,650
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................ (198,334)
-------------
Net unrealized appreciation ................................................... $ 2,453,316
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
1915 Act - Improvement Bond Act of 1915
AD - Assessment District
CFD - Community Facilities District
COP - Certificate of Participation
DATES - Demand Adjustable Tax-Exempt Securities
FGIC - Financial Guaranty Insurance Co.
GO - General Obligation
HFAR - Housing Finance Agency Revenue
ID - Improvement District
MBIA - Municipal Bond Investors Assurance Corp.
MFR - Multi-Family Revenue
PCFA - Pollution Control Financing Authority
PCR - Pollution Control Revenue
RDA - Redevelopment Agency
USD - Unified School District
aVariable rate demand notes (VRDN's) 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 upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
bSee Note 1(e) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN MUNICIPAL SECURITIES TRUST
Statement of Investments in Securities and Net Assets, November 30, 1995 (unaudited)
Face Value
Amount Franklin Hawaii Municipal Bond Fund (Note 1)
Bonds 95.9%
<S> <C> <C>
Guam Airport Authority Revenue,
$ 200,000 Series B, 6.60%, 10/01/10 ...................................................... $ 202,714
1,000,000 Series B, 6.70%, 10/01/23 ...................................................... 1,009,890
280,000 Guam Government Limited Obligation Highway, Refunding, Series A, CGIC Insured,
6.30%, 05/01/12 .................................................................. 300,294
300,000 Guam Power Authority Revenue, Series A, 6.30%, 10/01/22 ........................... 302,994
Hawaii State Airport System Revenue,
300,000 Refunding, Third Series 1994, AMBAC Insured, 5.75%, 07/01/09 ................... 308,847
60,000 Second Series 1990, FGIC Insured, 7.50%, 07/01/20 .............................. 67,332
1,520,000 Second Series 1991, 7.00%, 07/01/18 ............................................ 1,673,642
200,000 Second Series 1991, MBIA Insured, 6.75%, 07/01/21 .............................. 215,004
400,000 Second Series 1992, MBIA Insured, 6.90%, 07/01/12 .............................. 461,312
Hawaii State Department of Budget and Finance, Special Purpose Mortgage Revenue,
3,425,000 Hawaii Electric Co. and Subsidiaries, MBIA Insured, 6.55%, 12/01/22 ............ 3,669,785
1,950,000 Hawaii Electric Co., Series A, MBIA Insured, 6.60%, 01/01/25 ................... 2,109,062
100,000 Hawaii Electric Light Co. Project, 7.20%, 12/01/14 ............................. 107,783
105,000 Pali Momi Medical Center Project, Pre-Refunded, 7.65%, 07/01/19 ................ 123,916
500,000 Queens Medical Center Project, FGIC Insured, 6.20%, 07/01/22 ................... 520,865
25,000 Refunding, Hawaii Electric Co., 6.875%, 04/01/12 ............................... 25,941
100,000 Refunding, Kaiser Permanente, Series A, 6.25%, 03/01/21 ........................ 103,094
600,000 Refunding, Kapiolani Health Care System, 6.40%, 07/01/13 ....................... 622,110
1,125,000 Refunding, Kapiolani Health Care System, 6.00%, 07/01/19 ....................... 1,124,933
725,000 Refunding, Queens Medical Center Project, FGIC Insured, 6.50%, 07/01/12 ........ 751,260
1,100,000 Refunding, Wahiawa General Hospital Project, 7.50%, 07/01/12 ................... 1,186,548
1,100,000 St. Francis Medical Centers, CGIC Insured, 6.50%, 07/01/22 ..................... 1,171,995
875,000 Hawaii State Department of Transportation, Special Facilities Revenue, Refunding,
Matson Terminals, Inc., 5.75%, 03/01/13 .......................................... 886,795
Hawaii State GO,
100,000 Series BT, Pre-Refunded, 6.125%, 02/01/11 ...................................... 108,913
100,000 Series BW, 6.375%, 03/01/11 .................................................... 111,355
100,000 Series CA, 6.00%, 01/01/09 ..................................................... 108,705
500,000 Series CK, 5.60%, 09/01/14 ..................................................... 504,055
Hawaii State Harbor Capital Improvement Revenue,
1,000,000 Refunding, Series 1994, FGIC Insured, 6.25%, 07/01/15 .......................... 1,057,000
500,000 Refunding, Series 1994, FGIC Insured, 6.375%, 07/01/24 ......................... 531,395
70,000 Series 1990, MBIA Insured, 7.25%, 07/01/10 ..................................... 78,303
80,000 Series 1990, MBIA Insured, 7.00%, 07/01/17 ..................................... 87,809
200,000 Series 1992, FGIC Insured, 6.50%, 07/01/19 ..................................... 213,794
Hawaii State Housing Finance and Development Corp. Revenue,
1,000,000 Affordable Rental Housing Program, Series A, 6.00%, 07/01/15 ................... 1,006,570
750,000 Affordable Rental Housing Program, Series A, 6.05%, 07/01/22 ................... 754,920
Hawaii State Housing Finance and Development Corp. Revenue, (cont.)
$ 250,000 Affordable Rental Housing Program, Series A, 6.10%, 07/01/30 ................... $ 251,635
250,000 University of Hawaii Faculty Housing Project, AMBAC Insured, 5.70%, 10/01/25 ... 253,630
Hawaii State Housing Finance and Development Corp., SFM Purchase Revenue,
465,000 Series A, 7.10%, 07/01/24 ...................................................... 485,962
200,000 Series A, 6.00%, 07/01/26 ...................................................... 199,432
3,050,000 Series B, 5.85%, 07/01/17 ...................................................... 3,071,350
Honolulu City and County,
150,000 Refunding, Series 1992, 6.00%, 12/01/14 ........................................ 160,977
85,000 Series A, 6.30%, 03/01/08 ...................................................... 91,578
100,000 Series A, 6.30%, 03/01/11 ...................................................... 106,184
75,000 Series A, Pre-Refunded, 6.70%, 08/01/07 ........................................ 84,536
100,000 Series A, Pre-Refunded, 6.70%, 08/01/11 ........................................ 112,714
1,000,000 Series B, 6.125%, 06/01/14 ..................................................... 1,049,620
Honolulu City and County, MFHR,
150,000 Hale Pauahi Project, Series A, FHA Mortgage Insured, MBIA Insured, 8.70%,
12/01/28....................................................................... 155,891
1,205,000 Waipahu Towers Project, Series A, 6.90%, 06/20/35 .............................. 1,282,964
220,000 Kauai County GO, Refunding, Series C, AMBAC Insured, 5.95%, 08/01/10 .............. 235,822
100,000 Maui County Board, Water Supply Revenue, Series A, FGIC Insured, Pre-Refunded,
6.70%, 12/01/11 .................................................................. 113,328
Maui County GO,
50,000 Refunding, Series 1992, 6.05%, 09/01/07 ........................................ 52,842
300,000 Refunding, Series 1992, 6.10%, 09/01/08 ........................................ 316,635
385,000 Refunding, Series A, FGIC Insured, 5.75%, 01/01/11 ............................. 394,178
250,000 Series A, FGIC Insured, 5.75%, 01/01/13 ........................................ 253,755
1,000,000 Northern Mariana Islands, Commonwealth Ports Authority, Seaport Revenue,
Port Saipan Harbor Improvement, Series A, 6.85%, 10/01/25 ........................ 1,020,170
145,000 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue, Series A, 7.00%,
07/01/19.......................................................................... 156,659
1,000,000 Puerto Rico Commonwealth GO, Series A, MBIA Insured, 5.75%, 07/01/24 .............. 1,016,000
315,000 Puerto Rico Commonwealth, Highway and Transportation Authority Revenue, Series T,
6.625% 07/01/18 .................................................................. 337,255
Puerto Rico Electric Power Authority Revenue,
500,000 Refunding, Series U, 6.00%, 07/01/14 ........................................... 513,360
60,000 Series O, 7.125%, 07/01/14 ..................................................... 65,992
55,000 Series O, Pre-Refunded, 7.125%, 07/01/14 ....................................... 61,285
1,000,000 Series R, 6.25%, 07/01/17 ...................................................... 1,041,650
1,000,000 Series T, 6.375%, 07/01/24 ..................................................... 1,058,690
350,000 Puerto Rico Industrial Medical and Environmental Facilities Revenue PCFA,
PepsiCo., Inc. Project, 6.25%, 11/15/13 .......................................... 378,959
$ 215,000 Puerto Rico PBA, Guaranteed, Public Education and Health Facilities, Series L,
Pre-Refunded, 6.875%, 07/01/21 ................................................... $ 248,832
1,230,000 Puerto Rico Telephone Authority Revenue, Refunding, Series L, 6.125%, 01/01/22 .... 1,269,802
325,000 University of Hawaii System Revenue, Series G, AMBAC Insured, 5.70%, 10/01/17 ..... 328,785
-------------
Total Bonds (Cost $ 36,083,882) ............................................. 37,679,407
-------------
aShort Term Investments .3%
100,000 Puerto Rico Commonwealth Government Development Bank, Refunding, Weekly VRDN
and Put, 3.30%, 12/01/15 (Cost $100,000).......................................... 100,000
-------------
Total Investments (Cost $36,183,882) 96.2% ............................. 37,779,407
Other Assets and Liabilities, Net 3.8% ................................. 1,511,056
-------------
Net Assets 100.0% ...................................................... $39,290,463
=============
At November 30, 1995, the net unrealized appreciation based on
the cost of investments for income tax purposes of $36,183,882 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................. $ 1,595,525
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................. --
-------------
Net unrealized appreciation ..................................................... $ 1,595,525
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CGIC - Capital Guaranty Insurance Co.
FGIC - Financial Guaranty Insurance Corp.
FHA - Federal Housing Agency/Authority
GO - General Obligation
MBIA - Municipal Bond Investors Assurance Corp.
MFHR - Multi-Family Housing Revenue
PBA - Public Building Authority
PCFA - Pollution Control Financing Authority
SFM - Single Family Mortgage
aVariable rate demand notes (VRDN's) 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 upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN MUNICIPAL SECURITIES TRUST
Statement of Investments in Securities and Net Assets, November 30, 1995 (unaudited)
Face Value
Amount Franklin Tennessee Municipal Bond Fund (Note 1)
Bonds 98.8%
<S> <C> <C>
$500,000 Carroll County, IDB, IDR, Refunding, Henry I, Siegel Co., Inc. Project, 7.20%, 04/01/05 $ 507,005
600,000 Humphreys County IDB, Solid Waste Disposal Revenue, Du Pont (E.I.) De Nemours & Co.
Project, 6.70%, 05/01/24 ........................................................... 655,080
300,000 Jackson Hospital Revenue, Refunding & Improvement, AMBAC Insured, 5.625%,
04/01/15............................................................................ 302,097
100,000 Johnson City Public Improvement, GO, Series B, AMBAC Insured, 6.70%, 05/01/20 ....... 110,239
100,000 Johnson City Solid Waste, AMBAC Insured, 5.80%, 05/01/09 ............................ 104,769
100,000 Knox-Chapman Utility District, Knox County Water and Sewer Revenue, Refunding,
MBIA Insured, 6.10%, 01/01/19 ...................................................... 104,273
250,000 Knox County Health, Educational and Housing Facilities Board Hospital Revenue,
Refunding, Mercy Health Systems, Series B, AMBAC Insured, 5.875%, 09/01/15 ......... 256,213
145,000 Knox County Public Improvement, 6.875%, 04/01/14 .................................... 158,814
375,000 Loudon County, IDB, Solid Waste Disposal Revenue, Kimberly-Clark Corp. Project, 6.20%,
02/01/23............................................................................ 385,770
150,000 Macon County GO, FGIC Insured, 5.90%, 09/01/13 ...................................... 155,171
220,000 Maury County IDB, PCR, Multi-Modal, Refunding, Saturn Corp. Project, 6.50%, 09/01/24 231,079
Memphis Health Educational and Housing Facilities Board Mortgage Revenue, Refunding,
150,000 Edgewater Territory, FHA/GNMA Insured, 7.375%, 01/20/27 .......................... 160,938
100,000 MF, River Trace II, Series A, 6.45%, 04/01/26 .................................... 102,971
100,000 Memphis-Shelby County Airport Authority, Special Facilities and Project Revenues,
Refunding, Federal Express Corp., 6.75%, 09/01/12 .................................. 107,340
350,000 Metropolitan Government of Nashville and Davidson County, 6.125%, 05/15/19 .......... 365,565
200,000 Metropolitan Government of Nashville and Davidson County, Electric Revenue, Refunding,
Series A, 6.00%, 05/15/17 .......................................................... 207,768
205,000 Metropolitan Nashville Airport Authority Revenue, Series C, FGIC Insured, 6.60%,
07/01/15............................................................................ 222,007
Metropolitan Nashville and Davidson County, Health and Educational Facilities Board
Revenue,
200,000 Adventist Health Systems, MBIA Insured, 5.75%, 11/15/25 .......................... 201,884
150,000 Meharry Medical College Project, AMBAC Insured, 6.875%, 12/01/24 ................. 166,427
180,000 Milan Special School District, AMBAC Insured, 6.625%, 04/01/11 ...................... 195,273
400,000 bNorth Anderson County Utility District, Waterworks Revenue, MBIA Insured, 5.60%,
01/01/19 ........................................................................... 401,288
300,000 Northern Mariana Islands Commonwealth Ports Authority, Seaport Revenue, Port Saipan
Harbor Improvement, Series A, 6.85%, 10/01/25 ...................................... 306,051
100,000 Pigeon Forge Public Improvement, MBIA Insured, 5.90%, 06/01/09 ...................... 105,054
185,000 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue, Series A, 7.00%,
07/01/19............................................................................ 199,876
100,000 Puerto Rico Commonwealth, Electric Power Authority Revenue, Water Resources,
Series R, 6.25%, 07/01/17 ......................................................... 104,165
100,000 Puerto Rico Commonwealth, GO, 6.50%, 07/01/23 ....................................... 107,131
$200,000 Puerto Rico Industrial Tourist Educational Medical and Environmental Control, Facilities
Financing Authority Hospital Revenue, Auxilio Mutuo Obligation Group, Series A,
MBIA Insured, 6.25%, 07/01/24 ..................................................... $ 212,134
100,000 Sevier County IDB, IDR, Refunding, Kmart Corp. Project, 7.00%, 10/01/06 ............. 94,998
250,000 Sevier County PBA, Solid Waste Facility, AMBAC Insured, 5.60%, 09/01/15 ............. 250,748
100,000 Shelby County GO, Series A, 5.90%, 03/01/15 ......................................... 103,272
250,000 Shelby County Health, Educational and Housing Facility Board, Hospital Revenue,
Refunding, Methodist Health Systems, Inc., MBIA Insured, 5.25%, 08/01/15 ........... 243,995
105,000 Shelby County Public Improvement, Series A, 6.00%, 03/01/18 ......................... 108,143
300,000 South Fulton Inc., IDBR, Tyson Foods, Inc. Project, 6.40%, 10/01/20 ................. 309,768
350,000 Sullivan County IDBR, Refunding, Brandymill, Series I-A, GNMA Insured, 6.35%,
07/20/27............................................................................ 360,161
Tennessee HDA, Mortgage Finance,
200,000 Series A, 6.90%, 07/01/25 ........................................................ 212,800
300,000 Series B, 6.60%, 07/01/25 ........................................................ 312,255
130,000 Series B, MBIA Insured, 6.20%, 07/01/18 .......................................... 132,031
100,000 Tennessee State Local Development Authority Revenue, Community Provider Pooled Loan
Program, 6.55%, 10/01/23 ........................................................... 106,203
100,000 Tennessee State School Board Authority, Higher Education Facilities, Series A, 6.25%,
05/01/22............................................................................ 105,388
100,000 Trenton Special School District, Series 1995, AMBAC Insured, 5.75%, 11/01/20 ........ 101,544
200,000 Tullahoma IDBR, Refunding, First Mortgage, 6.875%, 06/15/06 ......................... 188,495
220,000 Wilson County COP, Educational Facilities, 6.125%, 06/30/10 ......................... 231,981
-------------
Total Bonds (Cost $8,558,735) ................................................. 8,998,164
-------------
aShort Term Investments 2.2%
100,000 Bradley County IDBR, Refunding, Olin Corp. Project, Series C, Daily VRDN and Put, 3.75%,
11/01/17............................................................................ 100,000
100,000 Tennessee State School Board Authority, Higher Education, BAN, Series A, Weekly VRDN
and Put, 3.65%, 03/01/98 ........................................................... 100,000
-------------
Total Short Term Investments (Cost $200,000) .................................. 200,000
-------------
Total Investments (Cost $8,758,735) 101.0% ............................... 9,198,164
Liabilitites in Excess of Other Assets, Net (1.0)% ....................... (88,638)
-------------
Net Assets 100.0% ........................................................ $9,109,526
=============
At November 30, 1995, the net unrealized appreciation based on the
cost of investments for income tax purposes of $8,758,735 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost .................................................... $ 455,935
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value .................................................... (16,506)
-------------
Net unrealized appreciation ....................................................... $ 439,429
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
BAN - Bond Anticipation Note
COP - Certificate of Participation
FGIC - Financial Guaranty Insurance Co.
FHA - Federal Housing Authority/Agency
GNMA - Government National Mortgage Association
GO - General Obligation
HDA - Housing Development Authority/Agency
IDB - Industrial Development Board
IDBR - Industrial Development Board Revenue
IDR - Industrial Development Revenue
MBIA - Municipal Bond Investors Assurance Corp.
MF - Multi-Family
PBA - Public Building Authority
PCR - Pollution Control Revenue
aVariable rate demand notes (VRDN's) 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 upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
bSee Note 1(e) regarding securities purchased on a when-issued basis.
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN MUNICIPAL SECURITIES TRUST
Statement of Investments in Securities and Net Assets, November 30, 1995 (unaudited)
Face Value
Amount Franklin Washington Municipal Bond Fund (Note 1)
Bonds 95.2%
<S> <C> <C>
$100,000 Aberdeen GO, Series A, MBIA Insured, 5.80%, 12/01/12 ................................ $ 102,306
100,000 Bellevue Water and Sewer Revenue, Refunding, 5.875%, 07/01/10 ....................... 104,195
200,000 Bellingham Housing Authority Revenue, Cascade Meadows Project, 7.10%, 11/01/23 ...... 210,762
100,000 Clark County School District No. 114, Evergreen School, Refunding, AMBAC Insured,
5.95%, 12/01/12 .................................................................... 105,865
400,000 Conservation and Renewable Energy System Revenue, Washington Conservation Project,
6.50%, 10/01/14 .................................................................... 427,204
100,000 Douglas County PUD No. 1, Electric District Systems Revenue, MBIA Insured, 6.00%,
01/01/15............................................................................ 104,100
100,000 Federal Way Washington GO, Refunding, 5.85%, 12/01/21 ............................... 101,334
100,000 King County GO, Sewer District, 5.875%, 01/01/15 .................................... 102,554
175,000 King County Housing Authority Revenue, Woodridge Park Project, 6.25%, 05/01/15 ...... 176,969
100,000 King County School District No. 412, Shoreline, 6.10%, 06/01/13 ..................... 103,939
200,000 Lewis County PUD No. 001, Cowlitz Falls Hydroelectric Project Revenue, 6.00%,
10/01/24 ........................................................................... 202,522
175,000 Pierce County EDC Revenue, Solid Waste, Occidental Petroleum Corp., 5.80%, 09/01/29 . 165,599
650,000 Pilchuck Development Public Corp., Special Facilities Revenue, Airport Tramco, Inc. Project,
6.00%, 08/01/23 .................................................................... 642,154
200,000 Port Chelan County GO, MBIA Insured, 6.25%, 12/01/15 ................................ 207,978
200,000 Port of Seattle Revenue, Series B, 6.00%, 11/01/17 .................................. 203,144
450,000 SeaTac GO, MBIA Insured, 6.50%, 12/01/13 ............................................ 486,738
100,000 Seattle Housing Authority, Low Income Housing Assistance Revenue, Kin On Project,
7.40%, 11/20/36 .................................................................... 109,513
100,000 Seattle Municipality Metropolitan Sewer Revenue, Refunding, Series V, 6.20%, 01/01/32 104,046
100,000 Snohomish County GO, MBIA Insured, 5.90%, 12/01/15 .................................. 102,308
200,000 Snohomish County PUD No. 1 Electric and Generation Systems Revenue, Refunding,
FGIC Insured, 6.00%, 01/01/18 ...................................................... 205,476
100,000 Spokane County Water District No. 3 Revenue, Refunding, 5.90%, 01/01/14 ............. 102,535
300,000 Stevens County Public Corp., PCR, Refunding, Water Power Co. Project, 6.00%,
12/01/23............................................................................ 302,460
100,000 Sunnyside GO, MBIA Insured, 6.10%, 12/01/14 ......................................... 104,209
200,000 Tacoma Electric Systems Revenue, Refunding, FGIC Insured, 6.25%, 01/01/15 ........... 211,470
100,000 Tacoma Refuse Utility Revenue, AMBAC Insured, 7.00%, 12/01/19 ....................... 111,375
500,000 University of Washington, Alumni Association, Lease Revenue, Roosevelt University
Medical Center, CGIC Insured, 6.30%, 08/15/14 ..................................... 529,695
100,000 Washington State COP, Office Building Project, Series A, MBIA Insured, 6.00%, 04/01/12 102,487
Washington State Health Care Facilities Authority Revenue,
100,000 Multicare Medical Center, FGIC Insured, 5.75%, 08/15/22 .......................... 100,329
100,000 Refunding, Peace Health Facility, MBIA Insured, 5.625%, 11/15/15 ................. 99,936
100,000 Washington State Housing Finance, SFMR, MBS Program, Series A, 7.05%, 07/01/22 ...... 106,909
$125,000 Washington State Motor Vehicle Fuel Tax, Series D, 6.00%, 09/01/20 .................. $ 128,135
100,000 Whatcom County School District No. 501, Bellingham, 6.05%, 12/01/13 ................. 103,483
-------------
Total Bonds (Cost $5,739,315) ................................................. 5,971,729
-------------
aShort Term Investments 1.6%
100,000 Washington State Health Care Facilities Authority Revenue, Sisters Providence, Series B,
Daily VRDN and Put, 3.70%, 10/01/05 (Cost $100,000) ............................... 100,000
-------------
Total Investments (Cost $5,839,315) 96.8% ................................ 6,071,729
Other Assets and Liabilities, Net 3.2% ................................... 201,586
-------------
Net Assets 100.0% ........................................................ $6,273,315
=============
At November 30, 1995, the net unrealized appreciation based on the
cost of investments for income tax purposes of $5,839,315 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was an
excess of value over tax cost ................................................... $ 248,291
Aggregate gross unrealized depreciation for all investments in which there was an
excess of tax cost over value ................................................... (15,877)
-------------
Net unrealized appreciation ....................................................... $ 232,414
=============
</TABLE>
PORTFOLIO ABBREVIATIONS:
AMBAC - American Municipal Bond Assurance Corp.
CGIC - Capital Guaranty Insurance Co.
COP - Certificate of Participation
EDC - Economic Development Corp.
FGIC - Financial Guaranty Insurance Co.
GO - General Obligation
MBIA - Municipal Bond Investors Assurance Corp.
MBS - Mortgage Backed Securities
PCR - Pollution Control Revenue
PUD - Public Utility District
SFMR - Single Family Mortgage Revenue
aVariable rate demand notes (VRDN's) 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 upon
short notice prior to specified dates. The interest rate may change on specified
dates in relationship with changes in a designated rate (such as the prime
interest rate or U.S. Treasury bills rate).
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
FRANKLIN MUNICIPAL SECURITIES TRUST
Financial Statements
Statements of Assets and Liabilities
November 30, 1995 (unaudited)
Franklin Franklin Franklin Franklin Franklin
Arkansas California Hawaii Tennessee Washington
Municipal High Yield Municipal Municipal Municipal
Bond Fund Municipal Fund Bond Fund Bond Fund Bond Fund
-------- ---------- --------- -------- --------
Assets:
Investments in securities:
<S> <C> <C> <C> <C> <C>
At identified cost........................... $5,731,175 $72,880,274 $36,183,882 $8,758,735 $5,839,315
======== ========== ========= ======== ========
At value..................................... 5,982,505 75,333,590 37,779,407 9,198,164 6,071,729
Cash.......................................... 99,804 329,070 699,557 191,445 87,683
Receivables:
Interest..................................... 97,820 1,496,011 876,862 133,005 120,403
Capital shares sold.......................... 124 522,963 141 -- --
Unamortized organization costs (Note 2)....... -- -- 1,695 -- --
Prepaid expenses.............................. -- 3,578 610 -- 3,353
-------- ---------- --------- -------- --------
Total assets............................. 6,180,253 77,685,212 39,358,272 9,522,614 6,283,168
-------- ---------- --------- -------- --------
Liabilities:
Payables:
Investment securities purchased:
When-issued basis (Note 1).................. 237,929 4,513,719 -- 393,990 --
Distributions payable to shareholders........ 8,980 114,440 53,319 13,925 8,885
Capital shares repurchased................... -- 48,247 -- -- 10
Distribution fees............................ 1,101 4,704 5,202 1,209 945
Shareholder servicing cost................... -- -- -- -- 13
Management fees.............................. -- 21,801 9,288 -- --
Accrued expenses and other liabilities....... 2,394 -- -- 3,964 --
-------- ---------- --------- -------- --------
Total liabilities........................ 250,404 4,702,911 67,809 413,088 9,853
-------- ---------- --------- -------- --------
Net assets, at value........................... $5,929,849 $72,982,301 $39,290,463 $9,109,526 $6,273,315
======== ========== ========= ======== ========
Net assets consist of:
Undistributed net investment income........... $ 35,679 $ 139,023 $ 110,967 $ 50,138 $ 38,075
Net unrealized appreciation on investments.... 251,330 2,453,316 1,595,525 439,429 232,414
Net realized loss............................. (26,124) (1,773,645) (763,515) (4,396) (124,542)
Capital shares................................ 5,668,964 72,163,607 38,347,486 8,624,355 6,127,368
-------- ---------- --------- -------- --------
Net assets, at value........................... $5,929,849 $72,982,301 $39,290,463 $9,109,526 $6,273,315
======== ========== ========= ======== ========
Shares outstanding............................. 563,101 7,238,744 3,611,757 847,504 617,343
======== ========== ========= ======== ========
Net asset value per share*..................... $10.53 $10.08 $10.88 $10.75 $10.16
======== ========== ========= ======== ========
*Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
FRANKLIN MUNICIPAL SECURITIES TRUST
Financial Statements (cont.)
Statements of Operations
for the six months ended November 30, 1995 (unaudited)
Franklin Franklin Franklin Franklin Franklin
Arkansas California Hawaii Tennessee Washington
Municipal High Yield Municipal Municipal Municipal
Bond FundMunicipal Fund Bond Fund Bond Fund Bond Fund
------- ---------- -------- ------- --------
Investment income:
<S> <C> <C> <C> <C> <C>
Interest (Note 1)................................... $147,573 $2,055,160 $1,113,463 $229,223 $175,414
------- ---------- -------- ------- --------
Expenses:
Management fees (Note 6)............................ 15,828 181,128 117,033 23,617 18,258
Distribution fees (Note 6).......................... 1,458 25,054 16,600 2,952 1,591
Shareholder servicing costs (Note 6)................ 621 5,955 4,908 726 730
Professional fees................................... 3,147 2,973 4,035 2,244 2,897
Directors fees and expenses......................... 75 228 81 75 75
Reports to shareholders............................. 2,382 9,302 5,199 2,193 2,052
Registration and filing fees........................ 2,046 6,993 3,070 792 2,904
Custodian fees...................................... 210 2,589 1,688 303 291
Amortization of organization cost (Note 2).......... -- -- 849 -- --
Other............................................... 705 4,468 4,410 1,458 1,455
Payments from Manager (Note 6)...................... (23,950) (137,767) (92,244) (24,392) (27,338)
------- ---------- -------- ------- --------
Total expenses................................. 2,522 100,923 65,629 9,968 2,915
------- ---------- -------- ------- --------
Net investment income.......................... 145,051 1,954,237 1,047,834 219,255 172,499
------- ---------- -------- ------- --------
Realized and unrealized gain (loss) on investments:
Net realized gain (loss)....................... 10,534 (4,508) (41,515) 347 (39,744)
Net unrealized appreciation during the period.. 113,296 1,055,467 807,461 184,865 199,769
------- ---------- -------- ------- --------
Net realized and unrealized gain on investments...... 123,830 1,050,959 765,946 185,212 160,025
------- ---------- -------- ------- --------
Net increase in net assets resulting from operations. $268,881 $3,005,196 $1,813,780 $404,467 $332,524
======= ========== ======== ======= ========
The accompanying notes are an integral part of these financial statements.
FRANKLIN MUNICIPAL SECURITIES TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets
for the six months ended November 30, 1995
(unaudited)
and the year ended May 31, 1995
Franklin Arkansas Franklin California High Franklin Hawaii
Municipal Bond Fund Yield Municipal Fund Municipal Bond Fund
------------------ ------------------- -------------------
Six months Year Six months Year Six months Year
ended ended ended ended ended ended
11/30/95 5/31/95 11/30/95 5/31/95 11/30/95 5/31/95
-------- -------- --------- --------- --------- ---------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income.......... $ 145,051 $ 168,208 $ 1,954,237 $ 2,824,163 $ 1,047,834 $ 1,692,708
Net realized gain (loss) from
security transactions........... 10,534 (36,658) (4,508) (1,402,544) (41,515) (551,385)
Net unrealized appreciation
on investments.................. 113,296 127,376 1,055,467 2,759,666 807,461 1,468,052
-------- -------- --------- --------- --------- ---------
Net increase in net
assets resulting from
operations...................... 268,881 258,926 3,005,196 4,181,285 1,813,780 2,609,375
Distributions to shareholders from:
Undistributed net investment
income.......................... (141,153) (138,970) (1,911,773) (2,727,267) (1,052,136) (1,655,958)
Increase in net assets from capital
share transactions (Note 3)..... 1,668,380 1,800,584 20,787,336 17,709,221 1,701,451 8,969,891
-------- -------- --------- --------- --------- ---------
Net increase in net assets. 1,796,108 1,920,540 21,880,759 19,163,239 2,463,095 9,923,308
Net assets:
Beginning of year............... 4,133,741 2,213,201 51,101,542 31,938,303 36,827,368 26,904,060
-------- -------- --------- --------- --------- ---------
End of year..................... $5,929,849 $4,133,741 $72,982,301 $51,101,542 $39,290,463 $36,827,368
======== ======== ========= ========= ========= =========
Undistributed net investment income included in net assets:
Beginning of year.............. $ 31,781 $ 2,543 $ 96,559 $ (337) $ 115,269 $ 78,519
======== ======== ========= ========= ========= =========
End of year.................... $ 35,679 $ 31,781 $ 139,023 $ 96,559 $ 110,967 $ 115,269
======== ======== ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
FRANKLIN MUNICIPAL SECURITIES TRUST
Financial Statements (cont.)
Statements of Changes in Net Assets (cont.)
for the six months ended November 30, 1995 (unaudited)
and the year ended May 31, 1995
Franklin Tennessee Franklin Washington
Municipal Bond Fund Municipal Bond Fund
------------------ ------------------
Six months Year Six months Year
ended ended ended ended
11/30/95 5/31/95 11/30/95 5/31/95
-------- -------- -------- --------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income....................................... $ 219,255 $ 217,345 $ 172,499 $ 292,735
Net realized gain (loss) from security transactions......... 347 (4,742) (39,744) (53,725)
Net unrealized appreciation on investments.................. 184,865 232,907 199,769 282,570
-------- -------- -------- --------
Net increase in net assets resulting from operations.... 404,467 445,510 332,524 521,580
Distributions to shareholders from:
Undistributed net investment income.......................... (211,237) (177,638) (170,896) (287,372)
Increase in net assets from capital share transactions (Note 3) 2,930,318 3,494,037 370,890 1,234,321
-------- -------- -------- --------
Net increase in net assets.............................. 3,123,548 3,761,909 532,518 1,468,529
Net assets:
Beginning of year............................................ 5,985,978 2,224,069 5,740,797 4,272,268
-------- -------- -------- --------
End of year.................................................. $9,109,526 $5,985,978 $6,273,315 $5,740,797
======== ======== ======== ========
Undistributed net investment income included in net assets:
Beginning of year............................................ $ 42,120 $ 2,413 $ 36,472 $ 31,109
======== ======== ======== ========
End of year.................................................. $ 50,138 $ 42,120 $ 38,075 $ 36,472
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FRANKLIN MUNICIPAL SECURITIES TRUST
Notes to Financial Statements (unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES
Franklin Municipal Securities Trust (the Trust) is an open-end management
investment company (mutual fund) registered under the Investment Company Act of
1940 as amended. The Trust currently has five separate non-diversified funds
(the Funds), consisting of the Franklin Arkansas Municipal Bond Fund (the
Arkansas Fund), Franklin California High Yield Municipal Fund (the California
High Yield Fund), Franklin Hawaii Municipal Bond Fund (the Hawaii Fund),
Franklin Tennessee Municipal Bond Fund (the Tennessee Fund), and Franklin
Washington Municipal Bond Fund (the Washington Fund). Each of the Funds issues a
separate series of the Trust's shares and maintains a totally separate
investment portfolio.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.
a. Security Valuation:
Tax-free bonds generally trade in the over-the-counter market rather than on a
national securities exchange. Often there are no transactions in a particular
security on any given day. In the absence of a recorded sale or reported bid and
asked prices, information with respect to bond and note transactions, quotations
from bond dealers, market transactions in comparable securities, and various
relationships between securities are used to determine the value of the
security. The Trust may utilize a pricing service, bank or broker/dealer
experienced in such matters to perform any of the pricing functions, under
procedures approved by the Board of Trustees (the Board). Other securities for
which market quotations are not available, if any, are valued in accordance with
procedures established by the Board.
b. Income Taxes:
The Trust intends to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
Each Fund is treated as a separate entity in the determination of compliance
with the Internal Revenue Code.
c. Security Transactions:
Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.
d. Investment Income, Expenses and Distributions:
Distributions to shareholders are recorded on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Bond discount and premium, if
any, are amortized as required by the Internal Revenue Code. The Fund normally
declares dividends from its net investment income daily and distributes monthly.
Daily allocations of net investment income will commence on the day following
the receipt of an investor's funds. Dividends are normally declared each day the
New York Stock Exchange is open for business and are equal to an amount per day
set from time to time by the Board, and are payable to shareholders of record at
the beginning of business on the ex-date. Once each month, dividends are
reinvested in additional shares of the Funds, or paid in cash as requested by
the shareholders.
1. SIGNIFICANT ACCOUNTING POLICIES (cont.)
e. Securities Purchased on a When-Issued Basis:
The Funds may trade 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 acquiring the
securities, they may sell the securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Funds have set aside sufficient investment
securities as collateral for these purchase commitments.
f. Expense Allocation:
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. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.
2. ORGANIZATION COSTS
The organization costs of the Hawaii Fund are amortized on a straight-line basis
over a period of five years from February 26, 1992 (the effective date of
registration under the Securities Act of 1933). In the event Franklin Resources,
Inc. (Resources), which was the sole shareholder prior to February 26, 1992,
redeems its shares within the five-year period, the pro-rata share of the
then-unamortized deferred organization costs will be deducted from the
redemption price paid to Resources. New investors purchasing shares of the
Hawaii Fund subsequent to that date bear such costs during the amortization
period only as such charges are accrued daily against investment income.
Franklin Advisers, Inc. (Advisers) had advanced all of the organization costs of
the Hawaii Fund, which approximated $7,269. The remaining unamortized balance of
such costs at November 30, 1995 was $1,695.
3. TRUST SHARES
At November 30, 1995, there was an unlimited number of no par value shares of
beneficial interest authorized. Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
California
Arkansas Fund High Yield Fund Hawaii Fund
---------------- ------------------ -----------------
Shares Amount Shares Amount Shares Amount
------ -------- -------- --------- ------- ---------
Six Months Ended November 30, 1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold............................. 117,537 $1,208,864 2,089,263 $20,728,937 336,414 $ 3,577,826
Shares issued in reinvestment of
distributions........................... 10,850 111,579 76,177 751,033 45,600 482,714
Shares redeemed......................... (11,709) (120,169) (350,681) (3,453,606) (207,211) (2,196,781)
Changes from exercise of exchange
privilege:
Shares sold........................... 48,537 495,698 652,078 6,453,805 29,620 314,110
Shares redeemed....................... (2,683) (27,592) (373,965) (3,692,833) (45,449) (476,418)
------ -------- -------- --------- ------- ---------
Net increase....................... 162,532 $1,668,380 2,092,872 $20,787,336 158,974 $ 1,701,451
====== ======== ======== ========= ======= =========
3. TRUST SHARES (cont.)
California
Arkansas Fund High Yield Fund Hawaii Fund
---------------- ------------------ -----------------
Shares Amount Shares Amount Shares Amount
------ -------- -------- --------- ------- ---------
Year Ended May 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold............................. 146,322 $1,458,232 1,405,516 $13,498,165 1,051,753 $10,928,396
Shares issued in reinvestment of
distributions........................... 12,161 119,791 105,767 1,008,368 90,526 918,020
Shares redeemed......................... (8,622) (85,760) (363,980) (3,422,710) (432,587) (4,337,679)
Changes from exercise of exchange
privilege:
Shares sold........................... 31,203 313,265 1,471,739 13,772,479 246,439 2,459,733
Shares redeemed....................... (495) (4,944) (756,537) (7,147,081) (100,947) (998,579)
------ -------- -------- --------- ------- ---------
Net increase....................... 180,569 $1,800,584 1,862,505 $17,709,221 855,184 $ 8,969,891
====== ======== ======== ========= ======= =========
Tennessee Fund Washington Fund
--------------- ----------------
Shares Amount Shares Amount
------ -------- ------ --------
Six Months Ended November 30, 1995
<S> <C> <C> <C> <C>
Shares sold......................................................... 218,748 $2,304,210 22,417 $ 221,506
Shares issued in reinvestment of distributions...................... 13,831 145,215 12,932 127,182
Shares redeemed..................................................... (19,004) (198,480) (15,242) (148,998)
Changes from exercise of exchange privilege:
Shares sold........................................................ 65,483 679,596 35,281 348,010
Shares redeemed.................................................... (21) (223) (17,919) (176,810)
------ -------- ------ --------
Net increase................................................... 279,037 $2,930,318 37,469 $ 370,890
====== ======== ====== ========
Year Ended May 31, 1995
Shares sold......................................................... 244,843 $2,472,558 101,086 $ 943,550
Shares issued in reinvestment of distributions...................... 13,285 133,124 23,137 216,457
Shares redeemed..................................................... (1,364) (13,923) (44,411) (405,642)
Changes from exercise of exchange privilege:
Shares sold........................................................ 133,558 1,323,485 91,931 844,196
Shares redeemed.................................................... (41,855) (421,207) (39,231) (364,240)
------ -------- ------ --------
Net increase................................................... 348,467 $3,494,037 132,512 $1,234,321
====== ======== ====== ========
4. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS
At May 31, 1995, for tax purposes, the Trust had capital loss carryovers as
follows:
California
Arkansas High Yield Hawaii Tennessee Washington
Fund Fund Fund Fund Fund
------- --------- ------- ------- -------
Capital loss carryovers expiring:
<S> <C> <C> <C> <C> <C>
2001........................................... $-- $-- $ 10,752 $-- $--
2002........................................... -- -- 159,863 1 --
2003........................................... 36,658 1,769,137 551,385 4,742 84,798
------- --------- ------- ------- -------
$36,658 $1,769,137 $722,000 $4,743 $84,798
======= ========= ======= ======= =======
For income tax purposes, the aggregate cost of securities and unrealized
appreciation of the Trust are the same as for financial reporting purposes at
November 30, 1995.
5. PURCHASES AND SALES OF SECURITIES
Aggregate purchases and sales of securities (excluding purchases and sales of
short-term securities) for the six months ended November 30, 1995 were as
follows:
California
Arkansas High Yield Hawaii Tennessee Washington
Fund Fund Fund Fund Fund
------- --------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Purchases.................................. $2,409,598 $24,961,684 $9,409,122 $3,640,515 $1,092,546
======= ========= ======= ======= =======
Sales...................................... $ 400,497 $ 4,343,918 $3,370,959 $ 795,029 $1,147,132
======= ========= ======= ======= =======
</TABLE>
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Under the terms of a management agreement, Advisers provides investment advice,
office space and facilities to each Fund, and receives fees computed monthly
based on the average daily net assets of each Fund at an annual rate of 5/8 of
1% of the first $100 million of net assets; 1/2 of 1% of net assets in excess of
$100 million up to and including $250 million; and 45/100 of 1% of net assets in
excess of $250 million. The terms of the management agreement provide that
annual aggregate expenses of the Funds be limited to the extent necessary to
comply with the limitations set forth in the laws, regulations, and
administrative interpretations of the states in which the Funds' shares are
registered. The Funds' expenses did not exceed these limitations; however, for
the six months ended November 30, 1995, Advisers agreed in advance to waive the
management fees and to make payments for other expenses as follows:
<TABLE>
<CAPTION>
California
Arkansas High Yield Hawaii Tennessee Washington
Fund Fund Fund Fund Fund
------ --------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Management fees................................. $15,828 $135,562 $90,327 $23,617 $18,258
====== ========= ====== ====== =======
Other expenses.................................. $ 7,501 $ -- $ -- $ 172 $ 8,350
====== ========= ====== ====== =======
6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)
In its capacity as underwriter for the shares of the Funds, Franklin/Templeton
Distributors, Inc. (Distributors) received commissions on sales of the Funds'
shares. Commissions are deducted from the gross proceeds received from the sale
of the Funds' shares, and as such are not expenses of the Funds. Distributors
may also make payments, out of its own resources, to dealers for certain sales
of the Funds' shares. Commissions received by Distributors and the amounts paid
to other dealers for the six months ended November 30, 1995 were as follows:
California
Arkansas High Yield Hawaii Tennessee Washington
Fund Fund Fund Fund Fund
------ --------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Total commissions received...................... $49,137 $698,339 $97,045 $85,104 $9,757
====== ========= ====== ====== =======
Paid to other dealers........................... $46,071 $666,754 $96,419 $79,484 $9,149
====== ========= ====== ====== =======
Under the terms of distribution agreements pursuant to Rule 12b-1 of the
Investment Company Act of 1940, the Hawaii Fund will reimburse Distributors in
an amount up to 0.10% per annum of its average daily net assets while the
Arkansas Fund, California High Yield Fund, Tennessee Fund and Washington Fund
will reimburse up to 0.15% per annum of the Funds' average daily net assets for
costs incurred in the promotion, offering and marketing of the Funds' shares.
Distribution fees incurred for the six months ended November 30, 1995 were as
follows:
California
Arkansas High Yield Hawaii Tennessee Washington
Fund Fund Fund Fund Fund
------ --------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Distribution fees............................... $1,458 $25,054 $16,600 $2,952 $1,591
====== ========= ====== ====== =======
Under the terms of a shareholder servicing agreement with Franklin/Templeton
Investor Services, Inc. (Investor Services), the Funds pay costs on a per
shareholder account basis. Shareholder servicing costs incurred and waived under
advance agreement by Investor Services for the six months ended November 30,
1995 were as follows:
California
Arkansas High Yield Hawaii Tennessee Washington
Fund Fund Fund Fund Fund
------ --------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Shareholder servicing costs..................... $621 $5,955 $4,908 $726 $730
====== ========= ====== ====== =======
Waived shareholder servicing costs.............. $621 $2,205 $1,917 $603 $730
====== ========= ====== ====== =======
</TABLE>
Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, and Investor Services, all wholly-owned subsidiaries of
Resources.
At November 30, 1995, Resources owned 42%, 28% and 41% of the Arkansas Fund,
Tennessee Fund and Washington Fund, respectively.
7. CREDIT RISKS
Although each of the Funds has a diversified investment portfolio, all of its
investments are in the securities of issuers within its respective state, Guam
and Puerto Rico. Such concentration may subject the Funds more significantly to
economic changes occurring within those states, and territories.
8. FINANCIAL HIGHLIGHTS
Selected data for a share of beneficial interest outstanding throughout the
periods, by Fund, are as follows:
<TABLE>
<CAPTION>
Per Share Operating Performance Ratios/Supplemental Data
----------------------------------------------- ------------------------
Ratio of Ratio of
Distri- Distri- Net Expenses Net
Net Asset Net Net Realized butions butions Net Asset Assets to Average Investment
Period Value at Invest-& Unrealized Total From From Net From Total Value at End Net Assets Income Portfolio
Ended Beginning ment Gain (Loss) Investment Investment Capital Distri- at End Total of Period See to Average Turnover
May 31 of Period Income on SecuritiesOperations Income Gains butionsof Period Return++(in 000's) Note 6)** Net Assets Rate
Arkansas Fund
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19941 $10.00 $.01 $ .050 $.060 -- -- -- $10.06 .60% $ 2,213 .03%* 2.00%* --%
1995 10.06 .51 .191 .701 (.441) -- (.441) 10.32 7.27 4,134 .10 5.64 77.63
19954 10.32 .273 .226 .499 (.289) -- (.289) 10.53 4.94 5,930 .10* 5.75* 8.25
California High Yield Fund
19932 10.00 .03 (.060) (.030) -- -- -- 9.97 (3.60)* 2,245 -- 3.85* 8.89
1994 9.97 .53 (.199) .331 (.558) (.013) (.571) 9.73 3.22 31,938 .07 6.14 40.74
1995 9.73 .66 .176 .836 (.636) -- (.636) 9.93 9.08 51,102 .20 6.89 57.06
19954 9.93 .328 .150 .478 (.328) -- (.328) 10.08 4.93 72,982 .35* 6.77* 7.62
Hawaii Fund
19923 10.00 .09 .158 .248 (.068) -- (.068) 10.18 8.96* 2,978 -- 4.55* --
1993 10.18 .63 .634 1.264 (.644) -- (.644) 10.80 12.77 18,657 -- 5.95 48.70
1994 10.80 .62 (.459) .161 (.601) -- (.601) 10.36 1.35 26,904 .05 5.76 31.35
1995 10.36 .60 .310 .910 (.600) -- (.600) 10.67 9.26 36,827 .20 6.02 22.88
19954 10.67 .298 .213 .511 (.301) -- (.301) 10.88 4.90 39,290 .35* 5.62* 9.50
Tennessee Fund
19941 10.00 .01 .100 .110 -- -- -- 10.11 1.10 2,224 .03* 1.89* 22.64
1995 10.11 .52 .353 .873 (.453) -- (.453) 10.53 8.97 5,986 .10 6.02 24.71
19954 10.53 .281 .235 .516 (.296) -- (.296) 10.75 5.00 9,110 .26* 5.82* 10.65
Washington Fund
19932 10.00 .03 (.040) (.010) -- -- -- 9.99 (1.20)* 2,198 -- 3.44* --
1994 9.99 .51 (.464) .046 (.472) (.014) (.486) 9.55 2.88 4,272 .05 5.59 39.52
1995 9.55 .56 .355 .915 (.565) -- (.565) 9.90 10.10 5,741 .10 6.13 18.46
19954 9.90 .288 .261 .549 (.289) -- (.289) 10.16 5.68 6,273 .10* 5.92* 19.20
</TABLE>
*Annualized
1For the period May 10, 1994 (effective date of registration) to May 31, 1994.
2For the period May 3, 1993 (effective date of registration) to May 31, 1993.
3For the period February 26, 1992 (effective date of registration) to May 31,
1992.
4For the six months ended November 30, 1995.
++Total return measures the change in value of an investment over the period
indicated. It does not include the maximum initial sales charge and assumes
reinvestment of dividends and capital gains at net asset value.
8. FINANCIAL HIGHLIGHTS (cont.)
**During the periods indicated, Advisers agreed in advance to waive all or a
portion of its management fees and to make payments of other expenses incurred
by the Funds. Had such action not been taken, the ratios of operating expenses
to average net assets would have been as follows:
<TABLE>
<CAPTION>
Ratio of
Expenses
to Average
Net Assets
Arkansas Fund
<S> <C>
19941..................................................... 1.20%*
1995...................................................... 1.11
19954..................................................... 1.05*
California High Yield Fund
19932..................................................... 1.42*
1994...................................................... .87
1995...................................................... .88
19954..................................................... .83*
Hawaii Fund
19923..................................................... 1.57*
1993...................................................... 1.06
1994...................................................... .92
1995...................................................... .87
19954..................................................... .85*
Tennessee Fund
19941..................................................... 1.05*
1995...................................................... .92
19954..................................................... .91*
Washington Fund
19932..................................................... 1.44*
1994...................................................... .71
1995...................................................... 1.05
19954..................................................... 1.04*
</TABLE>
Franklin Municipal Securities Trust
APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)
GRAPHIC MATERIAL (1)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 11/30/95
<S> <C>
AAA 54.2%
AA 8.2%
A 18.1%
BBB 19.5%
</TABLE>
GRAPHIC MATERIAL (2)
This bar chart shows the comparison between the fund's distribution rate of
5.24% and the equivalent taxable distribution rate of 9.32%.
GRAPHIC MATERIAL (3)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 11/30/95
<S> <C>
AAA 7.7%
AA 4.4%
A 34.1%
BBB 27.7%
Below Investment Grade 26.1%
</TABLE>
GRAPHIC MATERIAL (4)
This bar chart shows the comparison between the fund's distribution rate of
6.27% and the equivalent taxable distribution rate of 11.65%.
GRAPHIC MATERIAL (5)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 11/30/95
<S> <C>
AAA 43.2%
AA 15.9%
A 30.7%
BBB 10.2%
</TABLE>
GRAPHIC MATERIAL (6)
This bar chart shows the comparison between the fund's distribution rate of
5.28% and the equivalent taxable distribution rate of 9.71%.
GRAPHIC MATERIAL (7)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 11/30/95
<S> <C>
AAA 43.2%
AA 23.2%
A 20.2%
BBB 13.4%
</TABLE>
GRAPHIC MATERIAL (8)
This bar chart shows the comparison between the fund's distribution rate of
5.34% and the equivalent taxable distribution rate of 9.40%.
GRAPHIC MATERIAL (9)
This chart shows in pie chart format the fund's securities quality breakdown, as
a percentage of the fund's total net assets.
<TABLE>
<CAPTION>
Portfolio Breakdown on 11/30/95
<S> <C>
AAA 46.7%
AA 26.0%
A 8.7%
BBB 18.6%
</TABLE>
GRAPHIC MATERIAL (10)
This bar chart shows the comparison between the fund's distribution rate of
5.43% and the equivalent taxable distribution rate of 8.99%.
