INVESTMENT MANAGEMENT AGREEMENT

ADDENDUM TO

INVESTMENT MANAGEMENT AGREEMENT

This Addendum dated January 1, 2008, is to the Investment Management Agreement made as of February 26, 1992, as amended May 1, 2005 and August 1, 1995, (the “Agreement”) by and between Franklin Municipal Securities Trust, a Delaware statutory trust (the “Trust”), on behalf of Franklin California High Yield Municipal Bond Fund and Franklin Tennessee Municipal Bond Fund (the “Funds”), and Franklin Advisers, Inc., a California corporation, (the “Manager”).

WHEREAS, both the Manager and the Trust wish to revised the investment management fee schedule of the Agreement; and

WHEREAS, the Board of Trustees of the Trust, including a majority of the Independent Trustees of the Trust present in person, approved the following addendum at a meeting on December 3, 2007.

     NOW, THEREFORE, in consideration of the foregoing premises, the parties hereto agree as follows:
 

A.     For purposes of calculating such fee, the value of the net assets of each Fund shall be determined in the same manner as such Fund uses to compute the value of its net assets in connection with the determination of the net asset value of its shares, all as set forth more fully in the Funds’ current prospectus and statement of additional information. The annual rate of the management fee payable by each Fund shall be as follows:

0.625% of the value of net assets up to and including $100 million;

   0.500% of the value of net assets over $100 million and not over $250 million;

0.450% of the value of net assets over $250 million and not over $7.5 billion;

   0.440% of the value of net assets over $7.5 billion and not over $10 billion;

0.430% of the value of net assets over $10 billion and not over $12.5 billion;

0.420% of the value of net assets over $12.5 billion and not over $15 billion;

   0.400% of the value of net assets over $15 billion and not over $17.5 billion;

0.380% of the value of net assets over $17.5 billion and not over $20 billion; and

   0.360% of the value of net assets in excess of $20 billion.

IN WITNESS WHEREOF, this Addendum has been executed on behalf of each party as of the date set forth above.

FRANKLIN MUNICIPAL SECURITIES TRUST
on behalf of Franklin California High Yield Municipal Bond Fund
and Franklin Tennessee Municipal Bond Fund

By     /s/ XXXXX X. XXXXXXXX

Xxxxx X. Xxxxxxxx

Title:     Vice President and Secretary
 
 
 
FRANKLIN ADVISERS, INC.
 
 
By:     /s/ XXXXXX X. XXXXXXXX

Xxxxxx X. Xxxxxxxx

Title:     President and Chief Investment Officer