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<PAGE> PAGE 10
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<PAGE> PAGE 14
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<PAGE> PAGE 20
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<PAGE> PAGE 21
062 R000500 0.0
063 A000500 0
063 B000500 7.6
064 A000500 Y
064 B000500 N
071 A000500 20240
071 B000500 3912
071 C000500 20869
071 D000500 19
072 A000500 12
072 B000500 1165
072 C000500 0
072 D000500 0
072 E000500 0
072 F000500 135
072 G000500 0
072 H000500 0
072 I000500 7
072 J000500 0
072 K000500 2
072 L000500 2
072 M000500 0
072 N000500 6
072 O000500 0
072 P000500 0
072 Q000500 0
072 R000500 1
072 S000500 0
072 T000500 23
072 U000500 0
072 V000500 0
072 W000500 2
072 X000500 178
072 Y000500 156
072 Z000500 1143
072AA000500 28
072BB000500 22
072CC010500 835
072CC020500 0
072DD010500 1145
072DD020500 0
072EE000500 0
073 A010500 0.5800
073 A020500 0.0000
073 B000500 0.0000
073 C000500 0.0000
074 A000500 128
074 A000500 0
074 A000500 200
074 B000500 29913
074 B000500 0
<PAGE> PAGE 22
074 B000500 0
074 C000500 0
074 C000500 0
074 C000500 0
074 D000500 30
074 D000500 15
074 D000500 629
074 E000500 0
074 E000500 30915
074 N000500 8556
074 N000500 0
074 N000500 0
074 O000500 482
074 P000500 0
074 Q000500 0
074 R010500 0
074 R020500 0
074 R030500 0
074 R040500 56
074 S000500 0
074 T000500 30377
074 U010500 2763
074 U020500 0
074 V010500 10.99
074 V020500 0.00
074 W000500 0.0000
074 X000500 481
074 Y000500 3510
075 A000500 0
075 B000500 21570
076 000500 0.00
SIGNATURE KIMBERLEY MONASTERIO
TITLE ASSISTANT TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN MUNICIPAL SECURITIES TRUST MAY 31, 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 01
<NAME> FRANKLIN HAWAII MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 41,918,493
<INVESTMENTS-AT-VALUE> 44,363,526
<RECEIVABLES> 930,513
<ASSETS-OTHER> 41,328
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 45,335,367
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 197,226
<TOTAL-LIABILITIES> 197,226
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,124,567
<SHARES-COMMON-STOCK> 4,043,306
<SHARES-COMMON-PRIOR> 3,706,117
<ACCUMULATED-NII-CURRENT> 114,350
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (545,809)
<ACCUM-APPREC-OR-DEPREC> 2,445,033
<NET-ASSETS> 45,138,141
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,466,298
<OTHER-INCOME> 0
<EXPENSES-NET> (172,352)
<NET-INVESTMENT-INCOME> 2,293,946
<REALIZED-GAINS-CURRENT> 246,873
<APPREC-INCREASE-CURRENT> 1,170,843
<NET-CHANGE-FROM-OPS> 3,711,662
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,307,589)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 779,362
<NUMBER-OF-SHARES-REDEEMED> (517,067)
<SHARES-REINVESTED> 74,894
<NET-CHANGE-IN-ASSETS> 5,135,467
<ACCUMULATED-NII-PRIOR> 127,993
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (792,682)
<GROSS-ADVISORY-FEES> (269,392)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (347,781)
<AVERAGE-NET-ASSETS> 43,102,488
<PER-SHARE-NAV-BEGIN> 10.790
<PER-SHARE-NII> .580
<PER-SHARE-GAIN-APPREC> .380
<PER-SHARE-DIVIDEND> (.590)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 11.160
<EXPENSE-RATIO> .400<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
<FN>
<F1>EXPENSE RATIO WITHOUT WAIVER .81%
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN MUNICIPAL SECURITIES TRUST MAY 31, 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 021
<NAME> FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND - CLASS I
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 430,987,966
<INVESTMENTS-AT-VALUE> 450,728,470
<RECEIVABLES> 10,883,704
<ASSETS-OTHER> 1,324,358
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 462,936,532
<PAYABLE-FOR-SECURITIES> 8,844,968
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,517,875
<TOTAL-LIABILITIES> 10,362,843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 435,120,288
<SHARES-COMMON-STOCK> 38,697,871
<SHARES-COMMON-PRIOR> 21,123,177
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (6,110)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,288,993)
<ACCUM-APPREC-OR-DEPREC> 19,740,504
<NET-ASSETS> 452,573,689
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,243,392
<OTHER-INCOME> 0
<EXPENSES-NET> (1,283,307)
<NET-INVESTMENT-INCOME> 18,960,085
<REALIZED-GAINS-CURRENT> (116,948)
<APPREC-INCREASE-CURRENT> 15,006,888
<NET-CHANGE-FROM-OPS> 33,850,025
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,741,641)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,284,623
<NUMBER-OF-SHARES-REDEEMED> (5,372,964)
<SHARES-REINVESTED> 663,035
<NET-CHANGE-IN-ASSETS> 228,552,875
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (25,090)
<OVERDIST-NET-GAINS-PRIOR> (2,164,045)
<GROSS-ADVISORY-FEES> (1,729,049)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (2,405,087)
<AVERAGE-NET-ASSETS> 305,653,665
<PER-SHARE-NAV-BEGIN> 10.10
<PER-SHARE-NII> .620
<PER-SHARE-GAIN-APPREC> .550
<PER-SHARE-DIVIDEND> (.620)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.65
<EXPENSE-RATIO> .350<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
<FN>
<F1>EXPENSE RATIO EXCLUDING WAIVER .69%
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN MUNICIPAL SECURITIES TRUST MAY 31, 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 022
<NAME> FRANKLIN CALIFORNIA HIGH YIELD MUNICIPAL FUND - CLASS II
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 430,987,966
<INVESTMENTS-AT-VALUE> 450,728,470
<RECEIVABLES> 10,883,704
<ASSETS-OTHER> 1,324,358
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 462,936,532
<PAYABLE-FOR-SECURITIES> 8,844,968
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,517,875
<TOTAL-LIABILITIES> 10,362,843
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 435,120,288
<SHARES-COMMON-STOCK> 3,780,428
<SHARES-COMMON-PRIOR> 1,049,884
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (6,110)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,280,993)
<ACCUM-APPREC-OR-DEPREC> 19,740,504
<NET-ASSETS> 452,573,689
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,243,392
<OTHER-INCOME> 0
<EXPENSES-NET> (1,283,307)
<NET-INVESTMENT-INCOME> 18,960,085
<REALIZED-GAINS-CURRENT> (116,948)
<APPREC-INCREASE-CURRENT> 15,006,888
<NET-CHANGE-FROM-OPS> 33,850,025
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,199,464)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,979,250
<NUMBER-OF-SHARES-REDEEMED> (300,304)
<SHARES-REINVESTED> 51,598
<NET-CHANGE-IN-ASSETS> 228,552,875
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (25,090)
<OVERDIST-NET-GAINS-PRIOR> (2,164,045)
<GROSS-ADVISORY-FEES> (1,729,049)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (2,405,087)
<AVERAGE-NET-ASSETS> 23,209,641
<PER-SHARE-NAV-BEGIN> 10.12
<PER-SHARE-NII> .560
<PER-SHARE-GAIN-APPREC> .560
<PER-SHARE-DIVIDEND> (.560)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.68
<EXPENSE-RATIO> .900<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
<FN>
<F1>EXPENSE RATIO EXCLUDING WAIVER 1.24%
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN MUNICIPAL SECURITIES TRUST MAY 31, 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 03
<NAME> FRANKLIN WASHINGTON MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 9,555,289
<INVESTMENTS-AT-VALUE> 10,128,998
<RECEIVABLES> 208,745
<ASSETS-OTHER> 52,413
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10,390,156
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,997
<TOTAL-LIABILITIES> 13,997
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9,895,147
<SHARES-COMMON-STOCK> 989,775
<SHARES-COMMON-PRIOR> 828,587
<ACCUMULATED-NII-CURRENT> 33,989
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (126,686)
<ACCUM-APPREC-OR-DEPREC> 573,709
<NET-ASSETS> 10,376,159
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 529,641
<OTHER-INCOME> 0
<EXPENSES-NET> (9,378)
<NET-INVESTMENT-INCOME> 520,263
<REALIZED-GAINS-CURRENT> 2,260
<APPREC-INCREASE-CURRENT> 345,821
<NET-CHANGE-FROM-OPS> 868,344
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (526,988)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 187,538
<NUMBER-OF-SHARES-REDEEMED> (61,822)
<SHARES-REINVESTED> 35,472
<NET-CHANGE-IN-ASSETS> 2,015,470
<ACCUMULATED-NII-PRIOR> 40,714
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (128,946)
<GROSS-ADVISORY-FEES> (58,648)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (79,193)
<AVERAGE-NET-ASSETS> 9,383,474
<PER-SHARE-NAV-BEGIN> 10.090
<PER-SHARE-NII> .570
<PER-SHARE-GAIN-APPREC> .410
<PER-SHARE-DIVIDEND> (.590)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.480
<EXPENSE-RATIO> .100<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
<FN>
<F1>Expense ratio excluding waiver .84%
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN MUNICIPAL SECURITIES TRUST MAY 31, 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 04
<NAME> FRANKLIN TENNESSEE MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 42,736,665
<INVESTMENTS-AT-VALUE> 44,909,447
<RECEIVABLES> 1,454,066
<ASSETS-OTHER> 1,263,580
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 47,627,093
<PAYABLE-FOR-SECURITIES> 2,958,932
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,324
<TOTAL-LIABILITIES> 3,101,256
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,182,903
<SHARES-COMMON-STOCK> 3,949,484
<SHARES-COMMON-PRIOR> 2,493,560
<ACCUMULATED-NII-CURRENT> 34,304
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 135,848
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,172,782
<NET-ASSETS> 44,525,837
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,007,687
<OTHER-INCOME> 0
<EXPENSES-NET> (145,210)
<NET-INVESTMENT-INCOME> 1,862,477
<REALIZED-GAINS-CURRENT> 201,405
<APPREC-INCREASE-CURRENT> 1,488,290
<NET-CHANGE-FROM-OPS> 3,552,172
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,851,295)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,961,959
<NUMBER-OF-SHARES-REDEEMED> (609,509)
<SHARES-REINVESTED> 103,474
<NET-CHANGE-IN-ASSETS> 17,817,376
<ACCUMULATED-NII-PRIOR> 23,122
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (65,557)
<GROSS-ADVISORY-FEES> (227,268)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (295,971)
<AVERAGE-NET-ASSETS> 36,361,885
<PER-SHARE-NAV-BEGIN> 10.710
<PER-SHARE-NII> .570
<PER-SHARE-GAIN-APPREC> .560
<PER-SHARE-DIVIDEND> (.570)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 11.270
<EXPENSE-RATIO> .400<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
<FN>
<F1>EXPENSE RATIO EXCLUDING WAIVER .81%
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN MUNICIPAL SECURITIES TRUST MAY 31, 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANICAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 05
<NAME> FRANKLIN ARKANSAS MUNICIPAL BOND FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<INVESTMENTS-AT-COST> 28,964,222
<INVESTMENTS-AT-VALUE> 30,122,946
<RECEIVABLES> 674,787
<ASSETS-OTHER> 127,743
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30,915,476
<PAYABLE-FOR-SECURITIES> 482,015
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,279
<TOTAL-LIABILITIES> 538,294
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,214,337
<SHARES-COMMON-STOCK> 2,763,059
<SHARES-COMMON-PRIOR> 1,250,114
<ACCUMULATED-NII-CURRENT> 43,656
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (29,535)
<ACCUM-APPREC-OR-DEPREC> 1,148,724
<NET-ASSETS> 30,377,182
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,164,643
<OTHER-INCOME> 0
<EXPENSES-NET> (21,500)
<NET-INVESTMENT-INCOME> 1,143,143
<REALIZED-GAINS-CURRENT> 5,532
<APPREC-INCREASE-CURRENT> 834,896
<NET-CHANGE-FROM-OPS> 1,983,571
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,144,675)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,545,732
<NUMBER-OF-SHARES-REDEEMED> (90,387)
<SHARES-REINVESTED> 57,600
<NET-CHANGE-IN-ASSETS> 17,236,832
<ACCUMULATED-NII-PRIOR> 45,188
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (35,067)
<GROSS-ADVISORY-FEES> 134,808
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (178,004)
<AVERAGE-NET-ASSETS> 21,569,747
<PER-SHARE-NAV-BEGIN> 10.510
<PER-SHARE-NII> .560
<PER-SHARE-GAIN-APPREC> .500
<PER-SHARE-DIVIDEND> (.580)
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> .000
<PER-SHARE-NAV-END> 10.990
<EXPENSE-RATIO> .100<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
<FN>
<F1>EXPENSE RATIO EXCLUDING WAIVER .83%
</FN>
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Franklin Municipal Securities Trust
In planning and performing our audit of the financial
statements of Franklin Municipal Securities Trust for the
year ended May 31, 1998, we considered its internal control,
including controls over safeguarding securities, in order to
determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide
assurance on internal control.
The management of Franklin Municipal Securities Trust is
responsible for establishing and maintaining internal
control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected
benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's
objective of preparing financial statements for external
purposes that are fairly presented in conformity with
generally accepted accounting principles. Those controls
include the safeguarding of assets against unauthorized
acquisition, use, or disposition.
Because of inherent limitations in internal control, errors
or irregularities may occur and not be detected. Also,
projection of any evaluation of internal control to future
periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness
of the design and operation may deteriorate.
Our consideration of internal control would not necessarily
disclose all matters in internal control that might be
material weaknesses under standards established by the
American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or
operation of any specific internal control component does
not reduce to a relatively low level the risk that errors or
irregularities in amounts that would be material in relation
to the financial statements being audited may occur and not
be detected within a timely period by employees in the
normal course of performing their assigned functions.
However, we noted no matters involving internal control,
including controls over safeguarding securities that we
consider to be material weaknesses as defined above as of
May 31, 1998.
This report is intended solely for the information and use
of management and Securities and Exchange Commission.
PricewaterhouseCoopers LLP
San Francisco, California
June 26, 1998
