-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lx/vEh6G+wF9pPtjBMCxmbjbKoKkCaDkr42vh4pJw2bRnaJ9vUJN0qHL8sJ5Dk89 dOTOR9kpuxWgxJ1VnMZ+cA== 0000912291-09-000030.txt : 20090928 0000912291-09-000030.hdr.sgml : 20090927 20090928082811 ACCESSION NUMBER: 0000912291-09-000030 CONFORMED SUBMISSION TYPE: N-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20090731 FILED AS OF DATE: 20090928 DATE AS OF CHANGE: 20090928 EFFECTIVENESS DATE: 20090928 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLIN STRATEGIC SERIES CENTRAL INDEX KEY: 0000872625 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: N-Q SEC ACT: 1940 Act SEC FILE NUMBER: 811-06243 FILM NUMBER: 091089163 BUSINESS ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 BUSINESS PHONE: 650-570-3000 MAIL ADDRESS: STREET 1: ONE FRANKLIN PARKWAY CITY: SAN MATEO STATE: CA ZIP: 94403-1906 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN CALIFORNIA 250 GROWTH FUND DATE OF NAME CHANGE: 19911216 FORMER COMPANY: FORMER CONFORMED NAME: FRANKLIN CALIFORNIA 250 GROWTH INDEX FUND DATE OF NAME CHANGE: 19910917 0000872625 S000006878 FRANKLIN GROWTH OPPORTUNITIES FUND C000018615 CLASS A FGRAX C000018616 CLASS B FKABX C000018617 CLASS C FKACX C000018618 ADVISOR CLASS FRAAX C000018619 CLASS R FKARX 0000872625 S000006879 FRANKLIN STRATEGIC INCOME FUND C000018620 CLASS A FRSTX C000018621 CLASS B FKSBX C000018622 CLASS C FSGCX C000018623 ADVISOR CLASS FKSAX C000018624 CLASS R FKSRX 0000872625 S000006882 FRANKLIN BIOTECHNOLOGY DISCOVERY FUND C000018631 CLASS A FBDIX C000081539 Advisor 0000872625 S000006884 FRANKLIN FLEX CAP GROWTH FUND C000018636 CLASS A FKCGX C000018637 CLASS B FKCBX C000018638 CLASS C FCIIX C000018639 CLASS R FRCGX C000018640 ADVISOR CLASS FKCAX 0000872625 S000006887 FRANKLIN NATURAL RESOURCES FUND C000018647 CLASS C C000018648 CLASS A FRNRX C000018649 ADVISOR CLASS FNRAX 0000872625 S000006888 FRANKLIN SMALL-MID CAP GROWTH FUND C000018650 CLASS A FRSGX C000018651 CLASS B FBSMX C000018652 CLASS C FRSIX C000018653 ADVISOR CLASS FSGAX C000018654 CLASS R FSMRX 0000872625 S000006889 FRANKLIN SMALL CAP GROWTH FUND C000018655 CLASS A FSGRX C000018656 CLASS B FBSGX C000018657 CLASS C FCSGX C000018658 ADVISOR CLASS FSSAX C000018659 CLASS R FSSRX 0000872625 S000019837 Franklin Focused Core Equity Fund C000055670 A C000055671 C C000055672 R C000055673 Advisor N-Q 1 fssnq0709.txt FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number 811-06243 ---------- FRANKLIN STRATEGOC SERIES ------------------------------------------ (Exact name of registrant as specified in charter) ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 -------------------------------------------------- (Address of principal executive offices) (Zip code) CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906 ---------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 650 312-2000 ------------ Date of fiscal year end: 04/30 ----- Date of reporting period: 7/31/09 -------- Item 1. Schedule of Investments. Franklin Strategic Series QUARTERLY STATEMENTS OF INVESTMENTS JULY 31, 2009 CONTENTS Franklin Biotechnology Discovery Fund .................................... 3 Franklin Flex Cap Growth Fund ............................................ 5 Franklin Focused Core Equity Fund ........................................ 9 Franklin Growth Opportunities Fund ....................................... 11 Franklin Natural Resources Fund .......................................... 14 Franklin Small Cap Growth Fund ........................................... 18 Franklin Small-Mid Cap Growth Fund ....................................... 21 Franklin Strategic Income Fund ........................................... 25 Notes to Statements of Investments ....................................... 48
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO) FRANKLIN - Templeton - Mutual Series Quarterly Statements of Investments | 1 This page intentionally left blank. Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
FRANKLIN BIOTECHNOLOGY DISCOVERY FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS 95.6% BIOTECHNOLOGY 69.9% (a) 3SBio Inc., ADR ............................................... China 94,100 $ 913,711 (a) AEterna Zentaris Inc. ......................................... Canada 1,182,925 3,099,263 (a) AEterna Zentaris Inc., wts., 12/23/11 ......................... Canada 152,329 85,304 (a) Alexion Pharmaceuticals Inc. .................................. United States 77,800 3,427,090 (a) Amgen Inc. .................................................... United States 574,600 35,803,326 (a) Anadys Pharmaceuticals Inc. ................................... United States 349,500 908,700 (a) ARIAD Pharmaceuticals Inc. .................................... United States 845,000 1,630,850 (a) ArQule Inc. ................................................... United States 491,209 3,006,199 (a) Biogen Idec Inc. .............................................. United States 243,161 11,562,306 (a) BioMarin Pharmaceutical Inc. .................................. United States 600,400 9,852,564 (a) Celgene Corp. ................................................. United States 569,400 32,433,024 (a) Cephalon Inc. ................................................. United States 200,100 11,735,865 (a) Chelsea Therapeutics International Ltd. ....................... United States 305,400 1,511,730 (a) ConjuChem Biotechnologies Inc., wts., 12/31/11 ................ Canada 2,343,750 -- (a) Curis Inc. .................................................... United States 967,900 1,355,060 (a) Dendreon Corp. ................................................ United States 60,800 1,471,968 (a) Facet Biotech Corp. ........................................... United States 183,560 1,618,999 (a) Gentium SpA, ADR .............................................. Italy 851,600 1,830,940 (a) Genzyme Corp. ................................................. United States 493,100 25,586,959 (a) Gilead Sciences Inc. .......................................... United States 701,700 34,334,181 (a) Halozyme Therapeutics Inc. .................................... United States 93,100 657,286 (a) Incyte Corp. .................................................. United States 150,000 780,000 (a, b) Indevus Pharmaceuticals Inc., Escrow Account .................. United States 1,006,900 1,100,743 (a) Myriad Genetics Inc. .......................................... United States 144,400 3,959,448 (a) Neurocrine Biosciences Inc. ................................... United States 375,300 1,197,207 (a) Onyx Pharmaceuticals Inc. ..................................... United States 177,400 6,372,208 (a) Orexigen Therapeutics Inc. .................................... United States 524,154 4,287,580 (a) OSI Pharmaceuticals Inc. ...................................... United States 188,800 6,379,552 PDL BioPharma Inc. ............................................ United States 917,800 7,553,494 (a) Pharmasset Inc. ............................................... United States 217,325 3,344,632 (a) RXi Pharmaceuticals Corp. ..................................... United States 18,744 69,353 (a) United Therapeutics Corp. ..................................... United States 30,800 2,852,696 (a) VaxGen Inc. ................................................... United States 826,000 413,000 (a) Vertex Pharmaceuticals Inc. ................................... United States 216,100 7,781,761 ---------------- 228,916,999 ---------------- LIFE SCIENCES TOOLS & SERVICES 8.7% (a) Helicos BioSciences Corp. ..................................... United States 639,100 364,415 (a) Illumina Inc. ................................................. United States 171,500 6,198,010 (a) Life Technologies Corp. ....................................... United States 322,200 14,669,766 (a) QIAGEN NV ..................................................... Netherlands 258,900 4,908,744 (a, c) Sequenom Inc. ................................................. United States 416,120 2,396,851 ---------------- 28,537,786 ---------------- PHARMACEUTICALS 17.0% (a) Access Pharmaceuticals Inc. ................................... United States 121,988 548,946 Allergan Inc. ................................................. United States 78,300 4,183,569 (a) Ardea Biosciences Inc. ........................................ United States 169,012 3,292,354 (a) ARYx Therapeutics Inc. ........................................ United States 273,100 931,271 (a) Biodel Inc. ................................................... United States 175,900 867,187
Quarterly Statements of Investments | 3 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN BIOTECHNOLOGY DISCOVERY FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) PHARMACEUTICALS (CONTINUED) (a) BioForm Medical Inc. .......................................... United States 1,338,400 $ 3,359,384 (a) Biospecifics Technologies Corp. ............................... United States 32,500 838,175 (a) Cadence Pharmaceuticals Inc. .................................. United States 174,500 2,111,450 (a) Cardiome Pharma Corp. ......................................... Canada 576,828 2,341,921 (a) Cypress Bioscience Inc. ....................................... United States 175,100 1,547,884 (a) DepoMed Inc. .................................................. United States 14,177 54,156 (a) Nuvo Research Inc. ............................................ Canada 6,884,200 2,427,163 (a) Penwest Pharmaceuticals Co. ................................... United States 369,400 1,012,156 Roche Holding AG .............................................. Switzerland 84,300 13,290,185 Shire PLC, ADR ................................................ United Kingdom 101,100 4,530,291 Teva Pharmaceutical Industries Ltd., ADR ...................... Israel 266,600 14,220,444 ---------------- 55,556,536 ---------------- TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS (COST $275,379,695) ........................................ 313,011,321 ---------------- PREFERRED STOCKS (COST $5,065,936) 1.6% BIOTECHNOLOGY 1.6% (a, b) FibroGen Inc., pfd., E ........................................ United States 1,128,271 5,223,895 ---------------- PRINCIPAL AMOUNT(d) ---------------------- CONVERTIBLE BONDS (COST $1,480,677) 0.3% BIOTECHNOLOGY 0.3% (b) ConjuChem Biotechnologies Inc., cvt., sub. note, 144A, 8.00%, 12/31/10 ................................................... Canada 1,500,000 CAD 739,353 ---------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $281,926,308) ........................................ 318,974,569 ---------------- SHARES ---------------------- SHORT TERM INVESTMENTS 5.0% MONEY MARKET FUNDS (COST $13,740,858) 4.2% (e) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ... United States 13,740,858 13,740,858 ---------------- INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED SECURITIES 0.8% MONEY MARKET FUNDS (COST $2,814,000) 0.8% (f) Bank of New York Institutional Cash Reserve Fund, 0.17% ....... United States 2,814,000 2,785,860 ---------------- TOTAL INVESTMENTS (COST $298,481,166) 102.5% .................. 335,501,287 OTHER ASSETS, LESS LIABILITIES (2.5)% ......................... (8,107,056) ---------------- NET ASSETS 100.0% ............................................. $ 327,394,231 ================
See Abbreviations on page 56. (a) Non-income producing. (b) See Note 5 regarding restricted and illiquid securities. (c) A portion or all of the security is on loan at July 31, 2009. (d) The principal amount is stated in U.S. dollars unless otherwise indicated. (e) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. (f) The rate shown is the annualized seven-day yield at period end. See Notes to Statements of Investments. 4 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
FRANKLIN FLEX CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS 95.9% AUTOMOBILES & COMPONENTS 1.4% Johnson Controls Inc. .......................................................... 1,400,000 $ 36,232,000 ---------------- BANKS 0.9% Wells Fargo & Co. .............................................................. 900,000 22,014,000 ---------------- CAPITAL GOODS 5.6% AMETEK Inc. .................................................................... 600,000 19,416,000 Danaher Corp. .................................................................. 800,000 48,992,000 (a) Jacobs Engineering Group Inc. .................................................. 330,000 13,523,400 Precision Castparts Corp. ...................................................... 450,000 35,914,500 (a) SunPower Corp., A .............................................................. 400,000 12,880,000 United Technologies Corp. ...................................................... 250,000 13,617,500 ---------------- 144,343,400 ---------------- COMMERCIAL & PROFESSIONAL SERVICES 1.5% (a) Stericycle Inc. ................................................................ 750,000 38,400,000 ---------------- CONSUMER DURABLES & APPAREL 1.0% NIKE Inc., B ................................................................... 450,000 25,488,000 ---------------- DIVERSIFIED FINANCIALS 2.5% BlackRock Inc. ................................................................. 145,000 27,628,300 JPMorgan Chase & Co. ........................................................... 331,700 12,820,205 T. Rowe Price Group Inc. ....................................................... 500,000 23,355,000 ---------------- 63,803,505 ---------------- ENERGY 8.8% Devon Energy Corp. ............................................................. 450,000 26,140,500 (a) FMC Technologies Inc. .......................................................... 700,000 30,450,000 Occidental Petroleum Corp. ..................................................... 500,000 35,670,000 (a) Petrohawk Energy Corp. ......................................................... 1,150,000 27,922,000 Range Resources Corp. .......................................................... 550,000 25,525,500 Schlumberger Ltd. .............................................................. 450,000 24,075,000 Smith International Inc. ....................................................... 1,000,000 25,130,000 XTO Energy Inc. ................................................................ 850,000 34,195,500 ---------------- 229,108,500 ---------------- FOOD & STAPLES RETAILING 2.1% CVS Caremark Corp. ............................................................. 1,600,000 53,568,000 ---------------- FOOD, BEVERAGE & TOBACCO 2.0% (a) Hansen Natural Corp. ........................................................... 400,000 12,404,000 PepsiCo Inc. ................................................................... 700,000 39,725,000 ---------------- 52,129,000 ---------------- HEALTH CARE EQUIPMENT & SERVICES 8.4% Baxter International Inc. ...................................................... 450,000 25,366,500 C. R. Bard Inc. ................................................................ 330,000 24,278,100 (a) DaVita Inc. .................................................................... 400,000 19,880,000 (a) Express Scripts Inc. ........................................................... 550,000 38,522,000 (a) Intuitive Surgical Inc. ........................................................ 120,000 27,278,400 Quality Systems Inc. ........................................................... 150,000 8,233,500 Stryker Corp. .................................................................. 450,000 17,496,000
Quarterly Statements of Investments | 5 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN FLEX CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS (CONTINUED) HEALTH CARE EQUIPMENT & SERVICES (CONTINUED) (a) Varian Medical Systems Inc. .................................................... 500,000 $ 17,635,000 (a) VCA Antech Inc. ................................................................ 1,500,000 38,370,000 ---------------- 217,059,500 ---------------- HOUSEHOLD & PERSONAL PRODUCTS 2.5% Clorox Co. ..................................................................... 325,000 19,828,250 Mead Johnson Nutrition Co., A .................................................. 400,000 14,564,000 The Procter & Gamble Co. ....................................................... 550,000 30,530,500 ---------------- 64,922,750 ---------------- INSURANCE 1.8% Aflac Inc. ..................................................................... 900,000 34,074,000 Assurant Inc. .................................................................. 500,000 12,760,000 ---------------- 46,834,000 ---------------- MATERIALS 4.1% Ecolab Inc. .................................................................... 1,050,000 43,585,500 Praxair Inc. ................................................................... 800,000 62,544,000 ---------------- 106,129,500 ---------------- MEDIA 1.0% (a) The DIRECTV Group Inc. ......................................................... 550,000 14,245,000 The Walt Disney Co. ............................................................ 500,000 12,560,000 ---------------- 26,805,000 ---------------- PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 8.9% Abbott Laboratories ............................................................ 325,000 14,621,750 (a) Celgene Corp. .................................................................. 750,000 42,720,000 (a) Gilead Sciences Inc. ........................................................... 1,000,000 48,930,000 Johnson & Johnson .............................................................. 500,000 30,445,000 (a) Life Technologies Corp. ........................................................ 475,000 21,626,750 Schering-Plough Corp. .......................................................... 1,750,000 46,392,500 (a) Waters Corp. ................................................................... 500,000 25,125,000 ---------------- 229,861,000 ---------------- RETAILING 1.5% (a) Amazon.com Inc. ................................................................ 300,000 25,728,000 PetSmart Inc. .................................................................. 550,000 12,303,500 ---------------- 38,031,500 ---------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 3.0% Altera Corp. ................................................................... 850,000 15,886,500 (a) Lam Research Corp. ............................................................. 700,000 21,042,000 Microchip Technology Inc. ...................................................... 1,500,000 40,395,000 ---------------- 77,323,500 ---------------- SOFTWARE & SERVICES 18.3% Accenture Ltd., A .............................................................. 800,000 28,056,000 (a) Activision Blizzard Inc. ....................................................... 2,500,000 28,625,000 (a) Adobe Systems Inc. ............................................................. 950,000 30,799,000 (a) Alliance Data Systems Corp. .................................................... 275,000 14,025,000
6 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN FLEX CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS (CONTINUED) SOFTWARE & SERVICES (CONTINUED) (a) Autodesk Inc. .................................................................. 600,000 $ 13,086,000 (a) Concur Technologies Inc. ....................................................... 450,000 15,520,500 FactSet Research Systems Inc. .................................................. 400,000 22,680,000 (a) Google Inc., A ................................................................. 140,000 62,027,000 MasterCard Inc., A ............................................................. 275,000 53,358,250 (a) McAfee Inc. .................................................................... 500,000 22,290,000 (a) Nuance Communications Inc. ..................................................... 1,900,000 25,080,000 Oracle Corp. ................................................................... 2,800,000 61,964,000 Paychex Inc. ................................................................... 950,000 25,175,000 (a) SAIC Inc. ...................................................................... 700,000 12,663,000 (a) Salesforce.com Inc. ............................................................ 300,000 13,002,000 Visa Inc., A ................................................................... 700,000 45,822,000 ---------------- 474,172,750 ---------------- TECHNOLOGY HARDWARE & EQUIPMENT 15.4% (a) Apple Inc. ..................................................................... 500,000 81,695,000 (a) Cisco Systems Inc. ............................................................. 3,500,000 77,035,000 (a) FLIR Systems Inc. .............................................................. 1,550,000 33,309,500 Hewlett-Packard Co. ............................................................ 1,225,000 53,042,500 (a) Juniper Networks Inc. .......................................................... 600,000 15,678,000 (a) NetApp Inc. .................................................................... 559,500 12,566,370 QUALCOMM Inc. .................................................................. 1,750,000 80,867,500 (a) Research In Motion Ltd. (Canada) ............................................... 350,000 26,600,000 (a) Trimble Navigation Ltd. ........................................................ 800,000 18,968,000 ---------------- 399,761,870 ---------------- TELECOMMUNICATION SERVICES 2.7% (a) American Tower Corp., A ........................................................ 1,650,000 56,248,500 (a, b) Anda Networks .................................................................. 36,443 28,061 (a) NII Holdings Inc. .............................................................. 600,000 13,812,000 ---------------- 70,088,561 ---------------- TRANSPORTATION 2.5% C.H. Robinson Worldwide Inc. ................................................... 525,000 28,628,250 Expeditors International of Washington Inc. .................................... 1,100,000 37,323,000 ---------------- 65,951,250 ---------------- TOTAL COMMON STOCKS (COST $2,221,071,544) ...................................... 2,482,027,586 ---------------- PREFERRED STOCKS (COST $9,999,998) 0.4% PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 0.4% (a, b) FibroGen Inc., pfd., E ......................................................... 2,227,171 10,311,802 ---------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $2,231,071,542) ....................................................... 2,492,339,388 ---------------- SHORT TERM INVESTMENTS (COST $96,720,080) 3.7% MONEY MARKET FUNDS 3.7% (c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% .................... 96,720,080 96,720,080 ---------------- TOTAL INVESTMENTS (COST $2,327,791,622) 100.0% ................................. 2,589,059,468 OTHER ASSETS, LESS LIABILITIES 0.0%(d) ......................................... 413,288 ---------------- NET ASSETS 100.0% .............................................................. $ 2,589,472,756 ================
Quarterly Statements of Investments | 7 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED) FRANKLIN FLEX CAP GROWTH FUND (a) Non-income producing. (b) See Note 5 regarding restricted and illiquid securities. (c) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. (d) Rounds to less than 0.1% of net assets. See Notes to Statements of Investments. 8 |Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
FRANKLIN FOCUSED CORE EQUITY FUND COUNTRY SHARES VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS 90.9% CONSUMER DISCRETIONARY 10.2% CBS Corp., B .................................................. United States 4,920 $ 40,295 Harley-Davidson Inc. .......................................... United States 8,140 183,964 Harman International Industries Inc. .......................... United States 3,620 89,342 The Sherwin-Williams Co. ...................................... United States 2,330 134,557 Target Corp. .................................................. United States 5,110 222,898 Weight Watchers International Inc. ............................ United States 2,320 64,682 ---------------- 735,738 ---------------- CONSUMER STAPLES 9.5% Corn Products International Inc. .............................. United States 7,680 215,040 CVS Caremark Corp. ............................................ United States 9,100 304,668 (a) Hansen Natural Corp. .......................................... United States 5,330 165,283 ---------------- 684,991 ---------------- ENERGY 7.5% Marathon Oil Corp. ............................................ United States 8,290 267,352 Petroplus Holdings AG ......................................... Switzerland 13,523 214,587 (a) SEACOR Holdings Inc. .......................................... United States 700 55,636 ---------------- 537,575 ---------------- FINANCIALS 11.7% (a) Berkshire Hathaway Inc., B .................................... United States 105 333,952 CapitalSource Inc. ............................................ United States 8,200 38,048 Discover Financial Services ................................... United States 6,100 72,468 (a) iStar Financial Inc. .......................................... United States 5,400 13,122 Legg Mason Inc. ............................................... United States 3,280 92,299 U.S. Bancorp .................................................. United States 14,260 291,047 ---------------- 840,936 ---------------- HEALTH CARE 17.7% Aetna Inc. .................................................... United States 8,680 234,100 Merck & Co. Inc. .............................................. United States 8,730 261,987 Pharmaceutical Product Development Inc. ....................... United States 6,610 137,290 Roche Holding AG .............................................. Switzerland 2,150 338,955 Schering-Plough Corp. ......................................... United States 11,450 303,539 ---------------- 1,275,871 ---------------- INDUSTRIALS 12.9% 3M Co. ........................................................ United States 2,760 194,635 Precision Castparts Corp. ..................................... United States 3,310 264,171 Republic Services Inc. ........................................ United States 7,500 199,500 Rockwell Collins Inc. ......................................... United States 3,830 161,626 (a) Ryanair Holdings PLC, ADR ..................................... Ireland 3,840 108,711 ---------------- 928,643 ---------------- INFORMATION TECHNOLOGY 14.7% (a) Apple Inc. .................................................... United States 420 68,624 (a) Autodesk Inc. ................................................. United States 9,630 210,030 Corning Inc. .................................................. United States 10,490 178,330
Quarterly Statements of Investments | 9 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN FOCUSED CORE EQUITY FUND COUNTRY SHARES VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS (CONTINUED) INFORMATION TECHNOLOGY (CONTINUED) MasterCard Inc., A ............................................ United States 1,760 $ 341,493 Maxim Integrated Products Inc. ................................ United States 11,990 212,463 (a) VeriFone Holdings Inc. ........................................ United States 5,170 46,582 ---------------- 1,057,522 ---------------- MATERIALS 3.6% Celanese Corp., A ............................................. United States 10,120 260,084 ---------------- TELECOMMUNICATION SERVICES 3.1% (a) NII Holdings Inc. ............................................. United States 9,490 218,460 ---------------- TOTAL COMMON STOCKS (COST $6,571,567) ......................... 6,539,820 ---------------- CONVERTIBLE PREFERRED STOCKS (COST $84,854) 1.7% HEALTH CARE 1.7% Mylan Inc., 6.50%, cvt. pfd. .................................. United States 140 122,535 ---------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $6,656,421) .......................................... 6,662,355 ---------------- SHORT TERM INVESTMENTS (COST $403,918) 5.6% MONEY MARKET FUNDS 5.6% (b) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ... United States 403,918 403,918 ---------------- TOTAL INVESTMENTS (COST $7,060,339) 98.2% ..................... 7,066,273 OTHER ASSETS, LESS LIABILITIES 1.8% ........................... 127,438 ---------------- NET ASSETS 100.0% ............................................. $ 7,193,711 ================
See Abbreviations on page 56. (a) Non-income producing. (b) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. See Notes to Statements of Investments. 10 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
FRANKLIN GROWTH OPPORTUNITIES FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS 97.3% CONSUMER DISCRETIONARY 9.9% Abercrombie & Fitch Co., A .................................... United States 55,300 $ 1,581,027 (a) Amazon.com Inc. ............................................... United States 30,800 2,641,408 (a) Capella Education Co. ......................................... United States 21,800 1,403,048 Guess? Inc. ................................................... United States 211,500 6,148,305 (a) ITT Educational Services Inc. ................................. United States 30,200 2,939,970 NIKE Inc., B .................................................. United States 41,800 2,367,552 (a) Priceline.com Inc. ............................................ United States 38,200 4,951,484 Strayer Education Inc. ........................................ United States 20,100 4,268,838 (a) Urban Outfitters Inc. ......................................... United States 228,400 5,490,736 (a) WMS Industries Inc. ........................................... United States 86,800 3,138,688 ---------------- 34,931,056 ---------------- CONSUMER STAPLES 1.7% Bunge Ltd. .................................................... United States 28,600 2,001,142 (a) Hansen Natural Corp. .......................................... United States 132,300 4,102,623 ---------------- 6,103,765 ---------------- ENERGY 8.7% (a) Concho Resources Inc. ......................................... United States 128,400 3,941,880 (a) Continental Resources Inc. .................................... United States 144,400 4,885,052 (a) FMC Technologies Inc. ......................................... United States 124,680 5,423,580 (a) McMoRan Exploration Co. ....................................... United States 283,409 1,802,481 (a) Petrohawk Energy Corp. ........................................ United States 120,500 2,925,740 Schlumberger Ltd. ............................................. United States 91,780 4,910,230 (a) Weatherford International Ltd. ................................ United States 269,500 5,055,820 XTO Energy Inc. ............................................... United States 38,800 1,560,924 ---------------- 30,505,707 ---------------- FINANCIALS 3.6% BlackRock Inc. ................................................ United States 37,580 7,160,493 The Charles Schwab Corp. ...................................... United States 159,700 2,853,839 (a) MSCI Inc., A .................................................. United States 99,300 2,775,435 ---------------- 12,789,767 ---------------- HEALTH CARE 21.7% Allergan Inc. ................................................. United States 66,100 3,531,723 (a) Athenahealth Inc. ............................................. United States 128,600 4,750,484 Baxter International Inc. ..................................... United States 46,600 2,626,842 (a) BioMarin Pharmaceutical Inc. .................................. United States 235,700 3,867,837 (a) Celgene Corp. ................................................. United States 238,400 13,579,264 (a) Gilead Sciences Inc. .......................................... United States 207,160 10,136,339 (a) Illumina Inc. ................................................. United States 233,700 8,445,918 (a) Intuitive Surgical Inc. ....................................... United States 25,200 5,728,464 (a) Life Technologies Corp. ....................................... United States 174,400 7,940,432 (a) Myriad Genetics Inc. .......................................... United States 256,080 7,021,714 Perrigo Co. ................................................... United States 166,166 4,509,745 Pharmaceutical Product Development Inc. ....................... United States 209,200 4,345,084 ---------------- 76,483,846 ----------------
Quarterly Statements of Investments | 11 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN GROWTH OPPORTUNITIES FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) INDUSTRIALS 10.2% ABB Ltd., ADR ................................................. Switzerland 312,400 $ 5,710,672 AMETEK Inc. ................................................... United States 160,200 5,184,072 C.H. Robinson Worldwide Inc. .................................. United States 112,530 6,136,261 (a) Digitalglobe Inc. ............................................. United States 48,100 875,420 Expeditors International of Washington Inc. ................... United States 63,500 2,154,555 (a) First Solar Inc. .............................................. United States 16,000 2,470,240 Flowserve Corp. ............................................... United States 47,200 3,812,344 (a) Huron Consulting Group Inc. ................................... United States 56,100 2,488,035 (a) Jacobs Engineering Group Inc. ................................. United States 28,300 1,159,734 Precision Castparts Corp. ..................................... United States 58,730 4,687,241 (a) Ryanair Holdings PLC, ADR ..................................... Ireland 47,000 1,330,570 ---------------- 36,009,144 ---------------- INFORMATION TECHNOLOGY 34.8% (a) Activision Blizzard Inc. ...................................... United States 307,600 3,522,020 (a) Adobe Systems Inc. ............................................ United States 58,800 1,906,296 (a) Alliance Data Systems Corp. ................................... United States 70,800 3,610,800 (a) ANSYS Inc. .................................................... United States 56,500 1,766,190 (a) Apple Inc. .................................................... United States 70,400 11,502,656 (a) Cavium Networks Inc. .......................................... United States 147,600 2,785,212 (a, b) Cia Brasileira de Meios de Pagamento SA (Visanet), Reg S ...... Brazil 350,400 3,361,286 (a) Cisco Systems Inc. ............................................ United States 168,000 3,697,680 (a) Concur Technologies Inc. ...................................... United States 200,750 6,923,868 (a, c) Dilithium Networks Inc., wts., 12/31/09 ....................... United States 12,447 -- (a) Dolby Laboratories Inc., A .................................... United States 53,100 2,210,553 (a) F5 Networks Inc. .............................................. United States 92,700 3,441,024 (a) FLIR Systems Inc. ............................................. United States 389,800 8,376,802 (a) FormFactor Inc. ............................................... United States 130,200 3,001,110 (a) Google Inc., A ................................................ United States 17,990 7,970,470 (a) Hittite Microwave Corp. ....................................... United States 43,491 1,527,404 (a) Juniper Networks Inc. ......................................... United States 200,900 5,249,517 MasterCard Inc., A ............................................ United States 50,600 9,817,918 (a) NetApp Inc. ................................................... United States 191,300 4,296,598 (a) Netlogic Microsystems Inc. .................................... United States 44,500 1,768,430 QUALCOMM Inc. ................................................. United States 160,080 7,397,297 (a) Research In Motion Ltd. ....................................... Canada 45,300 3,442,800 (a) Riverbed Technology Inc. ...................................... United States 86,685 1,734,567 (a) Salesforce.com Inc. ........................................... United States 81,900 3,549,546 (a) Silicon Laboratories Inc. ..................................... United States 40,500 1,734,615 (a) Solarwinds Inc. ............................................... United States 108,100 2,162,000 Tandberg ASA .................................................. Norway 256,700 5,441,688 (a) Trimble Navigation Ltd. ....................................... United States 173,440 4,112,262 Visa Inc., A .................................................. United States 98,600 6,454,356 ---------------- 122,764,965 ---------------- MATERIALS 2.9% Ecolab Inc. ................................................... United States 80,000 3,320,800 Monsanto Co. .................................................. United States 48,500 4,074,000 The Mosaic Co. ................................................ United States 51,700 2,696,155 ---------------- 10,090,955 ----------------
12 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN GROWTH OPPORTUNITIES FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) TELECOMMUNICATION SERVICES 3.8% (a) NII Holdings Inc. ............................................. United States 245,880 $ 5,660,158 (a) SBA Communications Corp. ...................................... United States 293,760 7,664,198 ---------------- 13,324,356 ---------------- TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS (COST $276,366,717) ........................................ 343,003,561 ---------------- PREFERRED STOCKS (COST $873,300) 0.1% INFORMATION TECHNOLOGY 0.1% (a, c) Dilithium Networks Inc., depository receipt, D, pfd., 144A, PIPES ...................................................... United States 374,806 333,577 ---------------- PRINCIPAL AMOUNT ---------------------- NOTES (COST $14,501) 0.0%(d) INFORMATION TECHNOLOGY 0.0%(d) (a, c) Dilithium Networks Inc., 11.00%, 12/31/09 ..................... United States $ 14,501 14,501 ---------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $277,254,518) ........................................ 343,351,639 ---------------- SHARES ---------------------- SHORT TERM INVESTMENTS (COST $18,897,621) 5.4% MONEY MARKET FUNDS 5.4% (e) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ... United States 18,897,621 18,897,621 ---------------- TOTAL INVESTMENTS (COST $296,152,139) 102.8% .................. 362,249,260 OTHER ASSETS, LESS LIABILITIES (2.8)% ......................... (9,984,217) ---------------- NET ASSETS 100.0% ............................................. $ 352,265,043 ================
See Abbreviations on page 56. (a) Non-income producing. (b) Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust's Board of Trustees. At July 31, 2009, the aggregate value of this security was $3,361,286, representing 0.95% of net assets. (c) See Note 5 regarding restricted and illiquid securities. (d) Rounds to less than 0.1% of net assets. (e) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. See Notes to Statements of Investments. Quarterly Statements of Investments | 13 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
FRANKLIN NATURAL RESOURCES FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS 90.5% AGRICULTURAL PRODUCTS 0.8% Bunge Ltd. .................................................... United States 77,000 $ 5,387,690 ---------------- ALUMINUM 0.4% Alcoa Inc. .................................................... United States 200,000 2,352,000 ---------------- COAL & CONSUMABLE FUELS 3.2% (a) Alpha Natural Resources Inc. .................................. United States 170,000 5,662,700 (a, b) Energy Coal Resources, 144A ................................... United States 199,375 -- Peabody Energy Corp. .......................................... United States 300,000 9,933,000 (a) Uranium One Inc. .............................................. Canada 1,690,000 4,515,866 ---------------- 20,111,566 ---------------- CONSTRUCTION & ENGINEERING 0.2% Boart Longyear Group .......................................... Australia 5,703,000 1,406,474 ---------------- DIVERSIFIED METALS & MINING 6.9% BHP Billiton PLC, ADR ......................................... United Kingdom 197,000 10,421,300 (a) First Uranium Corp. ........................................... South Africa 390,000 1,418,445 (a, c) First Uranium Corp., 144A ..................................... Canada 205,200 746,320 Freeport-McMoRan Copper & Gold Inc., B ........................ United States 60,000 3,618,000 (a) Ivanhoe Australia Ltd. ........................................ Australia 800,000 1,267,376 (a) Ivanhoe Mines Ltd. ............................................ Canada 450,000 3,627,000 (a) Mineral Deposits Ltd. ......................................... Australia 3,000,000 1,755,600 (a) Mirabela Nickel Ltd. .......................................... Australia 180,000 444,238 (a, c) Mirabela Nickel Ltd., 144A .................................... Australia 845,850 2,087,550 (a) Nautilus Minerals Inc. ........................................ Canada 817,000 917,211 (a, c) Nautilus Minerals Inc., 144A .................................. Canada 474,000 532,140 OZ Minerals Ltd. .............................................. Australia 2,700,000 2,528,064 (a) PanAust Ltd. .................................................. Australia 3,663,435 1,255,679 (a, c) PanAust Ltd., 144A ............................................ Australia 5,767,586 1,976,898 Rio Tinto PLC, ADR ............................................ United Kingdom 27,000 4,524,660 Southern Copper Corp. ......................................... United States 60,000 1,545,600 Xstrata PLC ................................................... Switzerland 420,000 5,664,506 ---------------- 44,330,587 ---------------- FERTILIZERS & AGRICULTURAL CHEMICALS 0.7% The Mosaic Co. ................................................ United States 80,000 4,172,000 ---------------- GOLD 7.8% AngloGold Ashanti Ltd., ADR ................................... South Africa 130,000 5,096,000 Barrick Gold Corp. ............................................ Canada 145,000 5,060,500 (a, c) Centamin Egypt Ltd., 144A ..................................... Australia 2,000,000 3,210,243 (a) Centerra Gold Inc. ............................................ Canada 330,000 2,097,328 (c) Franco-Nevada Corp., 144A ..................................... Canada 90,000 2,246,242 (a) Gammon Gold Inc. .............................................. Canada 350,000 2,448,506 Gold Fields Ltd., ADR ......................................... South Africa 260,000 3,135,600 (a) Great Basin Gold Ltd. ......................................... Canada 2,000,000 2,913,342 (a) Great Basin Gold Ltd., wts., 10/15/10 ......................... Canada 1,000,000 361,848 IAMGOLD Corp. ................................................. Canada 301,000 3,178,560 (a, c) Jinshan Gold Mines Inc., 144A ................................. Canada 1,241,000 1,554,417 (a) Nevsun Resources Ltd. ......................................... Canada 700,000 1,169,048
14 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN NATURAL RESOURCES FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) GOLD (CONTINUED) Newcrest Mining Ltd. .......................................... Australia 340,000 $ 8,527,201 (a, c) Osisko Mining Corp., 144A ..................................... Canada 642,200 4,069,610 (a, c) Osisko Mining Corp., wts., 144A, 11/17/09 ..................... Canada 321,100 491,571 Randgold Resources Ltd., ADR .................................. United Kingdom 68,800 4,273,856 ---------------- 49,833,872 ---------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 0.2% (a, c) Magma Energy Corp., 144A ...................................... Canada 799,800 1,409,928 ---------------- INTEGRATED OIL & GAS 14.9% Chevron Corp. ................................................. United States 190,000 13,199,300 ConocoPhillips ................................................ United States 147,000 6,425,370 Exxon Mobil Corp. ............................................. United States 170,000 11,966,300 Hess Corp. .................................................... United States 150,000 8,280,000 Marathon Oil Corp. ............................................ United States 537,000 17,318,250 Murphy Oil Corp. .............................................. United States 125,000 7,275,000 Occidental Petroleum Corp. .................................... United States 308,000 21,972,720 Petroleo Brasileiro SA, ADR ................................... Brazil 68,000 2,804,320 Total SA, B, ADR .............................................. France 100,000 5,565,000 ---------------- 94,806,260 ---------------- MARINE 0.4% (a) Aries Maritime Transport Ltd. ................................. Bermuda 387,850 259,859 Genco Shipping & Trading Ltd. ................................. United States 103,000 2,462,730 ---------------- 2,722,589 ---------------- OIL & GAS DRILLING 3.1% (a) Nabors Industries Ltd. ........................................ United States 230,000 3,914,600 Noble Corp. ................................................... United States 60,000 2,031,600 Rowan Cos. Inc. ............................................... United States 114,000 2,431,620 (a) Transocean Ltd. ............................................... United States 145,000 11,555,050 ---------------- 19,932,870 ---------------- OIL & GAS EQUIPMENT & SERVICES 17.9% Baker Hughes Inc. ............................................. United States 81,000 3,280,500 (a) Cameron International Corp. ................................... United States 275,000 8,588,250 (a) Dresser-Rand Group Inc. ....................................... United States 112,000 3,260,320 (a) Dril-Quip Inc. ................................................ United States 220,000 9,303,800 (a) FMC Technologies Inc. ......................................... United States 255,000 11,092,500 (a) Global Industries Ltd. ........................................ United States 520,000 3,551,600 Halliburton Co. ............................................... United States 560,000 12,370,400 (a) Helix Energy Solutions Group Inc. ............................. United States 437,000 4,584,130 (a) Hornbeck Offshore Services Inc. ............................... United States 126,000 2,744,280 (a) National Oilwell Varco Inc. ................................... United States 270,000 9,703,800 (a) Oil States International Inc. ................................. United States 140,000 3,796,800 (a) PHI Inc., non-voting .......................................... United States 74,000 1,616,160 Schlumberger Ltd. ............................................. United States 180,000 9,630,000 Smith International Inc. ...................................... United States 440,000 11,057,200 (a) Superior Energy Services Inc. ................................. United States 260,000 4,313,400
Quarterly Statements of Investments | 15 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN NATURAL RESOURCES FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) OIL & GAS EQUIPMENT & SERVICES (CONTINUED) (a) T-3 Energy Services Inc. ...................................... United States 200,000 $ 2,710,000 (a) Tesco Corp. ................................................... Canada 255,000 2,557,650 (a) Weatherford International Ltd. ................................ United States 540,000 10,130,400 ---------------- 114,291,190 ---------------- OIL & GAS EXPLORATION & PRODUCTION 28.1% Addax Petroleum Corp. ......................................... Canada 140,000 6,657,079 (c) Addax Petroleum Corp., 144A ................................... Canada 150,000 7,132,585 (a) Bill Barrett Corp. ............................................ United States 150,000 4,738,500 (a) Concho Resources Inc. ......................................... United States 180,000 5,526,000 (a) Continental Resources Inc. .................................... United States 250,000 8,457,500 Devon Energy Corp. ............................................ United States 370,000 21,493,300 EOG Resources Inc. ............................................ United States 230,000 17,026,900 (a) Gran Tierra Energy Inc. ....................................... Canada 1,400,000 5,194,000 (a) Mariner Energy Inc. ........................................... United States 490,000 5,875,100 (a) McMoRan Exploration Co. ....................................... United States 500,000 3,180,000 Noble Energy Inc. ............................................. United States 280,000 17,113,600 (a) Northern Oil & Gas Inc. ....................................... United States 317,000 2,089,030 (a) Petrohawk Energy Corp. ........................................ United States 660,000 16,024,800 Range Resources Corp. ......................................... United States 385,000 17,867,850 (a) Southwestern Energy Co. ....................................... United States 450,000 18,643,500 XTO Energy Inc. ............................................... United States 550,000 22,126,500 ---------------- 179,146,244 ---------------- OIL & GAS REFINING & MARKETING 2.6% Aegean Marine Petroleum Network Inc. .......................... United States 185,000 3,145,000 (a) CVR Energy Inc. ............................................... United States 317,000 2,707,180 Holly Corp. ................................................... United States 200,000 4,254,000 Petroplus Holdings AG ......................................... Switzerland 94,000 1,491,617 Valero Energy Corp. ........................................... United States 273,000 4,914,000 ---------------- 16,511,797 ---------------- OIL & GAS STORAGE & TRANSPORTATION 0.5% DHT Maritime Inc. ............................................. Jersey Islands 370,600 1,864,118 General Maritime Corp. ........................................ United States 177,000 1,474,410 ---------------- 3,338,528 ---------------- PRECIOUS METALS & MINERALS 2.0% (c) Fresnillo PLC, 144A ........................................... United Kingdom 362,000 3,778,375 (a, c) G-Resources Group Ltd., 144A .................................. Hong Kong 22,034,900 1,819,691 Impala Platinum Holdings Ltd. ................................. South Africa 190,000 4,605,816 (a) MAG Silver Corp. .............................................. Canada 250,000 1,217,758 (a) Romarco Minerals Inc. ......................................... Canada 1,500,000 1,280,386 ---------------- 12,702,026 ---------------- SPECIALTY CHEMICALS 0.1% (a) Flotek Industries Inc. ........................................ United States 293,000 550,840 ----------------
16 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN NATURAL RESOURCES FUND COUNTRY SHARES/WARRANTS VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED) STEEL 0.7% Cliffs Natural Resources Inc. ................................. United States 160,000 $ 4,382,400 ---------------- TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS (COST $552,302,370) ........................................ 577,388,861 ---------------- CONVERTIBLE PREFERRED STOCKS 1.1% OIL & GAS EXPLORATION & PRODUCTION 1.1% (a) McMoRan Exploration Co., 8.00%, cvt. pfd. ..................... United States 2,400 2,485,296 (a, c) SandRidge Energy Inc., 8.50%, cvt. pfd., 144A ................. United States 35,000 4,711,000 ---------------- TOTAL CONVERTIBLE PREFERRED STOCKS (COST $5,726,400) .......... 7,196,296 ---------------- PREFERRED STOCKS 2.2% COAL & CONSUMABLE FUELS 0.0% (a, b) Energy Coal Resources, 144A, pfd. ............................. United States 29,847 -- ---------------- DIVERSIFIED METALS & MINING 0.8% Vale SA, ADR, pfd., A ......................................... Brazil 298,000 5,125,600 ---------------- INTEGRATED OIL & GAS 1.4% Petroleo Brasileiro SA, ADR, pfd. ............................. Brazil 260,000 8,762,000 ---------------- TOTAL PREFERRED STOCKS (COST $11,456,542) ..................... 13,887,600 ---------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $569,485,312) ........................................ 598,472,757 ---------------- SHORT TERM INVESTMENTS (COST $41,288,524) 6.5% MONEY MARKET FUNDS 6.5% (d) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ... United States 41,288,524 41,288,524 ---------------- TOTAL INVESTMENTS (COST $610,773,836) 100.3% .................. 639,761,281 OTHER ASSETS, LESS LIABILITIES (0.3)% ......................... (2,094,952) ---------------- NET ASSETS 100.0% ............................................. $ 637,666,329 ================
See Abbreviations on page 56. (a) Non-income producing. (b) See Note 5 regarding restricted and illiquid securities. (c) Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust's Board of Trustees. At July 31, 2009, the aggregate value of these securities was $35,766,570, representing 5.61% of net assets. (d) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. See Notes to Statements of Investments. Quarterly Statements of Investments | 17 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
FRANKLIN SMALL CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS 95.3% CONSUMER DISCRETIONARY 13.3% (a) Buffalo Wild Wings Inc. ........................................................ 35,900 $ 1,448,565 (a) Capella Education Co. .......................................................... 73,300 4,717,588 (a) Chipotle Mexican Grill Inc., B ................................................. 19,800 1,618,650 (a) Drew Industries Inc. ........................................................... 221,200 4,244,828 (a) FGX International Holdings Ltd. (Virgin Islands (British)) ..................... 345,624 4,565,693 (a) Gaiam Inc., A .................................................................. 315,000 1,578,150 Guess? Inc. .................................................................... 40,100 1,165,707 (a) K12 Inc. ....................................................................... 171,100 3,218,391 (a) Lions Gate Entertainment Corp. ................................................. 601,900 3,527,134 (a) Panera Bread Co. ............................................................... 19,700 1,082,712 (a) Shuffle Master Inc. ............................................................ 728,900 5,248,080 (a) Tenneco Inc. ................................................................... 166,700 2,695,539 (a) Tractor Supply Co. ............................................................. 29,600 1,419,912 (a) Under Armour Inc., A ........................................................... 55,400 1,345,666 ---------------- 37,876,615 ---------------- CONSUMER STAPLES 3.9% (a) Hain Celestial Group Inc. ...................................................... 276,600 4,594,326 (a) Hansen Natural Corp. ........................................................... 58,500 1,814,085 (a) TreeHouse Foods Inc. ........................................................... 144,300 4,682,535 ---------------- 11,090,946 ---------------- ENERGY 3.5% (a) Bill Barrett Corp. ............................................................. 59,900 1,892,241 (a) Dril-Quip Inc. ................................................................. 59,600 2,520,484 (a) Helix Energy Solutions Group Inc. .............................................. 136,000 1,426,640 (a) Mariner Energy Inc. ............................................................ 174,000 2,086,260 (a) Superior Energy Services Inc. .................................................. 124,700 2,068,773 ---------------- 9,994,398 ---------------- FINANCIALS 4.7% (a) Affiliated Managers Group Inc. ................................................. 61,700 4,073,434 FelCor Lodging Trust Inc. ...................................................... 447,000 1,050,450 (a) iStar Financial Inc. ........................................................... 383,600 932,148 (a) MSCI Inc., A ................................................................... 84,600 2,364,570 (a) Stifel Financial Corp. ......................................................... 56,200 2,806,066 Waddell & Reed Financial Inc., A ............................................... 74,900 2,124,913 ---------------- 13,351,581 ---------------- HEALTH CARE 19.5% (a) American Medical Systems Holdings Inc. ......................................... 326,700 4,995,243 (a) Ardea Biosciences Inc. ......................................................... 44,100 859,068 (a) Athenahealth Inc. .............................................................. 89,100 3,291,354 (a) BioMarin Pharmaceutical Inc. ................................................... 183,300 3,007,953 (a) Cadence Pharmaceuticals Inc. ................................................... 318,600 3,855,060 (a) Community Health Systems Inc. .................................................. 133,600 3,783,552 (a) Dendreon Corp. ................................................................. 57,400 1,389,654 (a) Dexcom Inc. .................................................................... 489,300 3,160,878 (a) IDEXX Laboratories Inc. ........................................................ 70,300 3,502,346
18 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS (CONTINUED) HEALTH CARE (CONTINUED) (a) Impax Laboratories Inc. ........................................................ 131,700 $ 987,750 (a) Masimo Corp. ................................................................... 125,400 3,066,030 (a) Medidata Solutions Inc. ........................................................ 50,100 924,345 (a) MWI Veterinary Supply Inc. ..................................................... 45,800 1,757,804 (a) Myriad Genetics Inc. ........................................................... 48,600 1,332,612 (a) OSI Pharmaceuticals Inc. ....................................................... 36,700 1,240,093 (a) PAREXEL International Corp. .................................................... 316,700 4,899,349 (a) Penwest Pharmaceuticals Co. .................................................... 354,000 969,960 (a) Phase Forward Inc. ............................................................. 207,500 2,946,500 (a) Psychiatric Solutions Inc. ..................................................... 162,200 4,382,644 Quality Systems Inc. ........................................................... 27,500 1,509,475 (a, b) Sequenom Inc. .................................................................. 196,900 1,134,144 (a) VCA Antech Inc. ................................................................ 99,200 2,537,536 ---------------- 55,533,350 ---------------- INDUSTRIALS 11.0% (a) Allegiant Travel Co. ........................................................... 98,500 4,266,035 (a) BE Aerospace Inc. .............................................................. 161,700 2,613,072 (a) Clean Harbors Inc. ............................................................. 61,400 3,203,238 (a) Digitalglobe Inc. .............................................................. 118,700 2,160,340 (a) Force Protection Inc. .......................................................... 90,600 468,402 (a) FTI Consulting Inc. ............................................................ 81,100 4,414,273 Heico Corp. .................................................................... 18,000 664,740 (a) Huron Consulting Group Inc. .................................................... 92,300 4,093,505 (a) ICF International Inc. ......................................................... 45,700 1,183,630 Kaydon Corp. ................................................................... 53,600 1,751,112 Knight Transportation Inc. ..................................................... 17,400 315,636 (a) Mobile Mini Inc. ............................................................... 256,400 4,148,552 Wabtec Corp. ................................................................... 61,200 2,059,380 ---------------- 31,341,915 ---------------- INFORMATION TECHNOLOGY 37.4% (a) ANSYS Inc. ..................................................................... 121,500 3,798,090 (a) Art Technology Group Inc. ...................................................... 193,800 734,502 (a) Atheros Communications ......................................................... 134,100 3,352,500 (a) Bottomline Technologies Inc. ................................................... 527,604 5,397,389 (a) Coherent Inc. .................................................................. 132,400 2,597,688 (a) Compellent Technologies Inc. ................................................... 124,336 1,976,943 (a) Concur Technologies Inc. ....................................................... 63,000 2,172,870 (a) CyberSource Corp. .............................................................. 143,600 2,490,024 (a) DealerTrack Holdings Inc. ...................................................... 202,500 4,015,575 (a) DivX Inc. ...................................................................... 344,300 2,007,269 (a) EPIQ Systems Inc. .............................................................. 156,100 2,505,405 (a) FARO Technologies Inc. ......................................................... 226,900 4,016,130 (a) FLIR Systems Inc. .............................................................. 135,100 2,903,299 (a) FormFactor Inc. ................................................................ 198,400 4,573,120 Global Payments Inc. ........................................................... 53,700 2,271,510 (a) Ixia ........................................................................... 421,200 3,175,848
Quarterly Statements of Investments | 19 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS (CONTINUED) INFORMATION TECHNOLOGY (CONTINUED) (a) LogMeIn Inc. ................................................................... 15,900 $ 310,209 (a) Microsemi Corp. ................................................................ 136,900 1,868,685 (a) Microtune Inc. ................................................................. 407,500 839,450 (a) Netlogic Microsystems Inc. ..................................................... 126,800 5,039,032 (a) Nuance Communications Inc. ..................................................... 390,300 5,151,960 (a) Omniture Inc. .................................................................. 147,800 2,021,904 (a) Polycom Inc. ................................................................... 110,400 2,622,000 Power Integrations Inc. ........................................................ 109,600 3,210,184 (a) Quest Software Inc. ............................................................ 229,900 3,388,726 (a) Riverbed Technology Inc. ....................................................... 113,700 2,275,137 (a) Sapient Corp. .................................................................. 723,500 4,832,980 (a) Silicon Laboratories Inc. ...................................................... 125,400 5,370,882 (a) SPSS Inc. ...................................................................... 79,000 3,908,920 Tandberg ASA (Norway) .......................................................... 126,800 2,687,986 (a) Trimble Navigation Ltd. ........................................................ 117,300 2,781,183 (a) Varian Semiconductor Equipment Associates Inc. ................................. 161,875 5,186,475 (a) ViaSat Inc. .................................................................... 222,900 6,018,300 (a) Xyratex Ltd. (Bermuda) ......................................................... 194,300 1,152,199 ---------------- 106,654,374 ---------------- MATERIALS 0.4% FMC Corp. ...................................................................... 24,700 1,201,408 ---------------- TELECOMMUNICATION SERVICES 1.6% (a) SBA Communications Corp. ....................................................... 171,800 4,482,262 ---------------- TOTAL COMMON STOCKS (COST $247,955,263) ........................................ 271,526,849 ---------------- SHORT TERM INVESTMENTS 5.8% MONEY MARKET FUNDS (COST $15,078,282) 5.3% (c) Institutional Fiduciary Trust Money Market Portfolio, 0.00% .................... 15,078,282 15,078,282 ---------------- INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED SECURITIES 0.5% MONEY MARKET FUNDS (COST $1,346,000) 0.5% (d) Bank of New York Institutional Cash Reserve Fund, 0.17% ........................ 1,346,000 1,332,540 ---------------- TOTAL INVESTMENTS (COST $264,379,545) 101.1% ................................... 287,937,671 OTHER ASSETS, LESS LIABILITIES (1.1)% .......................................... (3,227,828) ---------------- NET ASSETS 100.0% .............................................................. $ 284,709,843 ================
(a) Non-income producing. (b) A portion or all of the security is on loan at July 31, 2009. (c) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. (d) The rate shown is the annualized seven-day yield at period end. See Notes to Statements of Investments. 20 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
FRANKLIN SMALL-MID CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS 97.9% CONSUMER DISCRETIONARY 15.5% Abercrombie & Fitch Co., A ..................................................... 1,027,200 $ 29,367,648 Advance Auto Parts Inc. ........................................................ 62,900 2,907,867 (a) Apollo Group Inc., A ........................................................... 358,800 24,771,552 BorgWarner Inc. ................................................................ 1,162,200 38,573,418 (a) Buffalo Wild Wings Inc. ........................................................ 630,000 25,420,500 (a) Capella Education Co. .......................................................... 418,700 26,947,532 (a, b) Chipotle Mexican Grill Inc., A ................................................. 273,100 25,624,973 (a) Chipotle Mexican Grill Inc., B ................................................. 47,200 3,858,600 (a) Dick's Sporting Goods Inc. ..................................................... 1,809,550 35,919,568 Guess? Inc. .................................................................... 2,109,200 61,314,444 (a) Jarden Corp. ................................................................... 798,000 19,670,700 Johnson Controls Inc. .......................................................... 1,875,000 48,525,000 (a) Liberty Media Corp. - Entertainment, A ......................................... 1,300,000 36,361,000 NIKE Inc., B ................................................................... 441,200 24,989,568 (a) Under Armour Inc., A ........................................................... 758,335 18,419,957 (a) Urban Outfitters Inc. .......................................................... 1,923,700 46,245,748 Wolverine World Wide Inc. ...................................................... 2,269,075 54,684,707 ---------------- 523,602,782 ---------------- CONSUMER STAPLES 3.2% Clorox Co. ..................................................................... 484,500 29,559,345 (a) Hain Celestial Group Inc. ...................................................... 1,437,200 23,871,892 (a) Hansen Natural Corp. ........................................................... 709,800 22,010,898 Mead Johnson Nutrition Co., A .................................................. 911,500 33,187,715 ---------------- 108,629,850 ---------------- ENERGY 7.0% (a) Cameron International Corp. .................................................... 931,900 29,103,237 (a) Concho Resources Inc. .......................................................... 1,175,600 36,090,920 (a) FMC Technologies Inc. .......................................................... 1,359,256 59,127,636 (a) Petrohawk Energy Corp. ......................................................... 1,541,900 37,437,332 Range Resources Corp. .......................................................... 769,800 35,726,418 Smith International Inc. ....................................................... 935,100 23,499,063 (a) Weatherford International Ltd. ................................................. 800,000 15,008,000 ---------------- 235,992,606 ---------------- FINANCIALS 5.4% (a) Affiliated Managers Group Inc. ................................................. 855,300 56,466,906 BlackRock Inc. ................................................................. 100,000 19,054,000 The Charles Schwab Corp. ....................................................... 1,833,400 32,762,858 FelCor Lodging Trust Inc. ...................................................... 2,072,500 4,870,375 (a, b) iStar Financial Inc. ........................................................... 3,968,090 9,642,459 (b) M&T Bancorp .................................................................... 348,930 20,349,597 T. Rowe Price Group Inc. ....................................................... 840,100 39,241,071 ---------------- 182,387,266 ---------------- HEALTH CARE 22.8% Aetna Inc. ..................................................................... 975,000 26,295,750 Allscripts-Misys Healthcare Solutions Inc. ..................................... 1,448,700 24,961,101
Quarterly Statements of Investments | 21 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL-MID CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS (CONTINUED) HEALTH CARE (CONTINUED) (a) Athenahealth Inc. .............................................................. 464,200 $ 17,147,548 (a) BioMarin Pharmaceutical Inc. ................................................... 1,148,500 18,846,885 C. R. Bard Inc. ................................................................ 523,200 38,491,824 (a) Celgene Corp. .................................................................. 716,600 40,817,536 (a) Cerner Corp. ................................................................... 633,612 41,235,469 (a) Community Health Systems Inc. .................................................. 1,736,986 49,191,444 (a) DaVita Inc. .................................................................... 581,800 28,915,460 (a) Dendreon Corp. ................................................................. 325,000 7,868,250 (a) Express Scripts Inc. ........................................................... 1,071,000 75,012,840 (a) Illumina Inc. .................................................................. 415,000 14,998,100 (a) Intuitive Surgical Inc. ........................................................ 205,100 46,623,332 (a) Life Technologies Corp. ........................................................ 887,100 40,389,663 (a) Masimo Corp. ................................................................... 875,000 21,393,750 (a) Mettler-Toledo International Inc. .............................................. 405,327 34,071,788 (a) Myriad Genetics Inc. ........................................................... 1,201,900 32,956,098 (a) OSI Pharmaceuticals Inc. ....................................................... 170,900 5,774,711 Perrigo Co. .................................................................... 1,181,490 32,065,639 Pharmaceutical Product Development Inc. ........................................ 1,525,000 31,674,250 (a) QIAGEN NV (Netherlands) ........................................................ 1,563,700 29,647,752 (a, b) Sequenom Inc. .................................................................. 1,156,000 6,658,560 (a) Stereotaxis Inc. ............................................................... 1,463,200 6,613,664 (a) Varian Medical Systems Inc. .................................................... 1,340,000 47,261,800 (a) Waters Corp. ................................................................... 1,019,100 51,209,775 ---------------- 770,122,989 ---------------- INDUSTRIALS 12.0% (a) Allegiant Travel Co. ........................................................... 655,270 28,379,744 AMETEK Inc. .................................................................... 1,263,000 40,870,680 C.H. Robinson Worldwide Inc. ................................................... 518,200 28,257,446 Danaher Corp. .................................................................. 398,400 24,398,016 Expeditors International of Washington Inc. .................................... 856,800 29,071,224 Flowserve Corp. ................................................................ 536,800 43,357,336 Heico Corp. .................................................................... 84,022 3,102,932 (a) Jacobs Engineering Group Inc. .................................................. 489,900 20,076,102 Knight Transportation Inc. ..................................................... 29,100 527,874 Precision Castparts Corp. ...................................................... 682,110 54,439,199 Robert Half International Inc. ................................................. 1,678,400 41,607,536 Rockwell Collins Inc. .......................................................... 1,100,000 46,420,000 (a) Ryanair Holdings PLC, ADR (Ireland) ............................................ 1,348,800 38,184,528 (a) Tetra Tech Inc. ................................................................ 250,000 7,530,000 ---------------- 406,222,617 ---------------- INFORMATION TECHNOLOGY 28.2% (a) Activision Blizzard Inc. ....................................................... 2,906,700 33,281,715 (a) Affiliated Computer Services Inc., A ........................................... 896,900 42,522,029 (a) Alliance Data Systems Corp. .................................................... 827,400 42,197,400 (a) ANSYS Inc. ..................................................................... 1,122,200 35,079,972
22 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL-MID CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- COMMON STOCKS (CONTINUED) INFORMATION TECHNOLOGY (CONTINUED) (a) Citrix Systems Inc. ............................................................ 705,000 $ 25,098,000 (a) Concur Technologies Inc. ....................................................... 559,600 19,300,604 FactSet Research Systems Inc. .................................................. 700,000 39,690,000 (a) FLIR Systems Inc. .............................................................. 2,597,200 55,813,828 (a) FormFactor Inc. ................................................................ 1,839,105 42,391,370 (a) Hittite Microwave Corp. ........................................................ 799,300 28,071,416 (a) Juniper Networks Inc. .......................................................... 1,650,000 43,114,500 (a) Lam Research Corp. ............................................................. 1,088,000 32,705,280 MasterCard Inc., A ............................................................. 437,200 84,829,916 (a) McAfee Inc. .................................................................... 730,200 32,552,316 (a) NetApp Inc. .................................................................... 1,825,100 40,991,746 (a) Netlogic Microsystems Inc. ..................................................... 263,700 10,479,438 (a) Nuance Communications Inc. ..................................................... 5,804,500 76,619,400 (a) SAIC Inc. ...................................................................... 2,379,700 43,048,773 (a) Silicon Laboratories Inc. ...................................................... 1,530,400 65,547,032 Tandberg ASA (Norway) .......................................................... 2,607,800 55,281,788 (a) Trimble Navigation Ltd. ........................................................ 1,512,660 35,865,169 (a) Varian Semiconductor Equipment Associates Inc. ................................. 1,100,000 35,244,000 (a) ViaSat Inc. .................................................................... 299,067 8,074,809 Xilinx Inc. .................................................................... 1,150,000 24,943,500 ---------------- 952,744,001 ---------------- MATERIALS 1.0% Ecolab Inc. .................................................................... 821,300 34,092,163 ---------------- TELECOMMUNICATION SERVICES 2.3% (a) American Tower Corp., A ........................................................ 838,100 28,570,829 (a, c) Anda Networks .................................................................. 91,107 70,152 (a) SBA Communications Corp. ....................................................... 1,844,000 48,109,960 ---------------- 76,750,941 ---------------- UTILITIES 0.5% (a) Calpine Corp. .................................................................. 1,277,800 16,458,064 ---------------- TOTAL COMMON STOCKS (COST $2,952,588,980) ...................................... 3,307,003,279 ---------------- PRINCIPAL AMOUNT ---------------------- CONVERTIBLE BONDS 0.5% INDUSTRIALS 0.2% SunPower Corp., cvt., senior bond, 1.25%, 2/15/27 .............................. $ 6,704,000 5,857,620 ---------------- INFORMATION TECHNOLOGY 0.3% (d) Alliance Data Systems Corp., cvt., senior note, 144A, 4.75%, 5/15/14 ........... 3,243,000 4,021,320 Microchip Technology Inc., cvt., 2.125%, 12/15/37 .............................. 8,161,000 7,559,127 ---------------- 11,580,447 ---------------- TOTAL CONVERTIBLE BONDS (COST $13,327,541) ..................................... 17,438,067 ---------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $2,965,916,521) ....................................................... 3,324,441,346 ----------------
Quarterly Statements of Investments | 23 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
FRANKLIN SMALL-MID CAP GROWTH FUND SHARES VALUE -------------------------------------------------------------------------------- ---------------------- ---------------- SHORT TERM INVESTMENTS 2.4% MONEY MARKET FUNDS (COST $45,283,802) 1.4% (e) Institutional Fiduciary Trust Money Market Portfolio, 0.00% .................... 45,283,802 $ 45,283,802 ---------------- INVESTMENTS FROM CASH COLLATERAL RECEIVED FOR LOANED SECURITIES 1.0% MONEY MARKET FUNDS (COST $35,309,763) 1.0% (f) Bank of New York Institutional Cash Reserve Fund, 0.17% ........................ 35,309,763 34,956,665 ---------------- TOTAL INVESTMENTS (COST $3,046,510,086) 100.8% ................................. 3,404,681,813 OTHER ASSETS, LESS LIABILITIES (0.8)% .......................................... (25,825,326) ---------------- NET ASSETS 100.0% .............................................................. $ 3,378,856,487 ================
See Abbreviations on page 56. (a) Non-income producing. (b) A portion or all of the security is on loan at July 31, 2009. (c) See Note 5 regarding restricted and illiquid securities. (d) Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. This security has been deemed liquid under guidelines approved by the Trust's Board of Trustees. At July 31, 2009, the value of this security was $4,021,320, representing 0.12% of net assets. (e) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. (f) The rate shown is the annualized seven-day yield at period end. See Notes to Statements of Investments. 24 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION SHARES VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- COMMON STOCKS 0.0% AUTOMOBILES & COMPONENTS 0.0% (a, b) Cambridge Industries Liquidating Trust Interest ............... United States 516,372 $ -- ---------------- COMMERCIAL & PROFESSIONAL SERVICES 0.0% (a, b) VS Holdings Inc. .............................................. United States 64,666 -- ---------------- TOTAL COMMON STOCKS (COST $64,666) ............................ -- ---------------- CONVERTIBLE PREFERRED STOCKS (COST $6,060,000) 0.0%(c) BANKS 0.0%(c) (a) Fannie Mae, 8.75%, cvt. pfd. .................................. United States 121,200 109,686 ---------------- PREFERRED STOCKS 0.0%(c) BANKS 0.0%(c) (a) Freddie Mac, 8.375%, pfd., Z .................................. United States 200,000 262,000 ---------------- DIVERSIFIED FINANCIALS 0.0%(c) (d) Preferred Blocker Inc., 7.00%, pfd., 144A ..................... United States 2,081 958,366 ---------------- TOTAL PREFERRED STOCKS (COST $5,738,755) ...................... 1,220,366 ---------------- PRINCIPAL AMOUNT(e) ---------------------- (f) SENIOR FLOATING RATE INTERESTS 10.7% AUTOMOBILES & COMPONENTS 0.3% (g) Dayco Products LLC (Mark IV), Replacement Term Loan, 6.75%, 6/23/11 .................................................... United States 2,042,544 574,465 Federal-Mogul Corp., Term Loan B, 4.188%, 12/27/14 ............ United States 11,152,416 8,447,955 Key Safety Systems Inc., Term Loan B, 2.538% - 2.851%, 3/10/14 .................................................... United States 1,299,625 552,341 ---------------- 9,574,761 ---------------- CAPITAL GOODS 0.4% RBS Global Inc. (Rexnord), Incremental Tranche B-2, 2.313%, 7/22/13 ................ United States 4,190,647 3,771,582 Term Loan, 2.813% - 3.063%, 7/22/13 ..................... United States 6,910,454 6,288,513 TransDigm Inc., Term Loan B, 2.285% - 2.612%, 6/23/13 ......... United States 3,230,676 3,136,447 ---------------- 13,196,542 ---------------- COMMERCIAL & PROFESSIONAL SERVICES 0.6% ARAMARK Corp., Synthetic L/C, 2.336%, 1/26/14 .......................... United States 1,007,512 958,396 Term Loan B, 2.473%, 1/26/14 ............................ United States 15,723,649 14,957,121 Duratek Inc. (EnergySolutions), Term Loan B, 2.54%, 6/07/13 ... United States 941,982 885,463 EnergySolutions LLC, Synthetic L/C (Add-On), 2.54%, 6/07/13 .................. United States 126,535 120,209 Synthetic L/C, 2.54%, 6/07/13 ........................... United States 130,869 124,326 Term Loan B, 2.54%, 6/07/13 ............................. United States 1,963,382 1,845,579 (h) EnviroSolutions Inc., Initial Term Loan, PIK, 10.50%, 7/07/12 .................................................... United States 4,064,970 2,947,103 ---------------- 21,838,197 ----------------
Quarterly Statements of Investments | 25 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- (f) SENIOR FLOATING RATE INTERESTS (CONTINUED) CONSUMER DURABLES & APPAREL 0.4% Jarden Corp., Term Loan B1, 2.348%, 1/24/12 ........................... United States 5,690,826 $ 5,565,628 Term Loan B2, 2.348%, 1/24/12 ........................... United States 5,343,408 5,225,853 Jostens IH Corp. (Visant Holding Corp.), Term Loan C, 2.637%, 10/04/11 ................................................... United States 4,558,727 4,433,363 ---------------- 15,224,844 ---------------- CONSUMER SERVICES 1.0% Education Management LLC, Term Loan C, 2.375%, 6/01/13 ........ United States 11,941,853 11,464,179 Green Valley Ranch Gaming LLC, Term Loan B, 4.25%, 2/16/14 .... United States 2,896,034 2,038,084 (h, i) Kuilima Resort Co. (Turtle Bay), First Lien Term Loan, PIK, 9.00%, 9/30/10 ............................................. United States 37,979,689 10,824,211 (i) Penn National Gaming Inc., Term Loan B, 2.04% - 2.72%, 10/03/12 ................................................... United States 11,129,753 10,923,062 ---------------- 35,249,536 ---------------- DIVERSIFIED FINANCIALS 0.1% TD Ameritrade Holding Corp., Term Loan B, 1.79%, 12/31/12 ..... United States 5,308,980 5,157,674 ---------------- ENERGY 0.1% ATP Oil and Gas Corp., Tranche B-1, 8.00%, 7/15/14 ............................. United States 4,837,338 3,881,964 Tranche B-2, 8.00%, 1/15/11 ............................. United States 1,271,806 998,368 ---------------- 4,880,332 ---------------- FOOD, BEVERAGE & TOBACCO 0.5% Constellation Brands Inc., Term Loan B, 1.813%, 6/05/13 ....... United States 5,411,162 5,328,306 Dean Foods Co., Term Loan B, 1.665% - 1.975%, 4/02/14 ......... United States 11,932,334 11,509,727 ---------------- 16,838,033 ---------------- HEALTH CARE EQUIPMENT & SERVICES 1.7% Community Health Systems Inc., Delayed Draw Term Loan, 2.535%, 7/25/14 ................. United States 1,040,823 980,325 Term Loan, 2.535% - 2.924%, 7/25/14 ..................... United States 20,398,595 19,212,927 DaVita Inc., Term Loan B-1, 1.79% - 2.10%, 10/05/12 ........... United States 6,927,000 6,649,920 DJO Finance LLC, Term Loan B, 3.285% - 3.598%, 5/20/14 ........ United States 7,318,396 6,854,900 Fresenius Medical Care Holdings Inc., Term Loan B, 1.885% - 1.985%, 3/31/13 ................................... Germany 7,876,658 7,641,997 HCA Inc., Term Loan A-1, 2.098%, 11/19/12 ......................... United States 4,613,123 4,352,482 Term Loan B-1, 2.848%, 11/18/13 ......................... United States 12,274,747 11,545,210 LifePoint Hospitals Inc., Term Loan B, 2.295%, 4/15/12 ........ United States 6,649,011 6,389,699 ---------------- 63,627,460 ---------------- INSURANCE 0.5% (i) Conseco Inc., Term Loan, 6.25%, 10/10/13 ...................... United States 23,148,430 16,898,354 ----------------
26 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- (f) SENIOR FLOATING RATE INTERESTS (CONTINUED) MATERIALS 1.4% Celanese U.S. Holdings LLC, Dollar Term Loan, 2.345%, 4/02/14 .................................................... United States 16,175,351 $ 15,358,998 Georgia-Pacific LLC, Additional Term Loan, 2.30% - 2.339%, 12/20/12 .......... United States 1,753,298 1,696,316 Term Loan B, 2.30% - 2.65%, 12/20/12 .................... United States 7,039,786 6,810,993 Term Loan C, 3.55% - 3.90%, 12/23/14 .................... United States 4,842,556 4,739,652 Nalco Co., Term Loan B, 6.50%, 5/13/16 ........................ United States 1,593,614 1,615,526 Nalco Holding Co., Term Loan B, 2.063%, 5/13/16 ............... United States 812,771 810,943 Novelis Corp., U.S. Term Loan, 2.29% - 2.60%, 7/07/14 ......... United States 7,083,995 6,366,740 Rockwood Specialties Group Inc., Term Loan H, 6.00%, 5/15/14 .. United States 12,902,286 13,063,565 ---------------- 50,462,733 ---------------- MEDIA 2.2% Cinemark USA Inc., Term Loan, 2.04% - 2.67%, 10/05/13 ......... United States 5,401,755 5,191,059 CSC Holdings Inc., Incremental Term Loan B-2, 2.038%, 3/29/16 .................................................... United States 9,852,246 9,628,807 (i) Cumulus Media Inc., Replacement Term Loan, 6.25%, 6/07/14 ..... United States 2,504,207 1,690,340 Dex Media East LLC, Term Loan B, 2.49% - 2.67%, 10/24/14 ...... United States 1,445,899 1,087,316 DIRECTV Holdings LLC, Term Loan B, 1.785%, 4/13/13 ............ United States 6,862,229 6,730,701 Discovery Communications Inc., Term Loan B, 2.598%, 5/14/14 ... United States 6,151,654 6,074,758 (i) Metro-Goldwyn-Mayer Inc., Term Loan B, 3.535%, 4/08/12 ............................ United States 25,328,684 14,690,637 Tranche B-1 Term Loan, 5.50%, 4/08/12 ................... United States 3,581,898 2,077,501 Regal Cinemas Corp., Term Loan, 4.348%, 10/27/13 .............. United States 4,662,400 4,631,786 (g) Tribune Co., Incremental Term Loan, 5.25%, 5/14/14 ............ United States 20,734,928 7,999,141 Univision Communications Inc., Initial Term Loan, 4.50%, 9/29/14 .................................................... United States 11,152,416 9,031,138 UPC Financing Partnership, Term Loan N, 2.059%, 12/31/16 ........................... Netherlands 8,030,954 7,684,619 Term Loan T, 3.809%, 12/31/16 ........................... Netherlands 5,806,990 5,681,170 ---------------- 82,198,973 ---------------- PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 0.0%(c) Mylan Inc., Term Loan B, 3.563% - 3.875%, 10/02/14 ............ United States 1,292,964 1,259,606 ---------------- SOFTWARE & SERVICES 0.5% Affiliated Computer Services Inc., Additional Term Loan, 2.285% - 2.296%, 3/20/13 ................................... United States 8,938,582 8,784,346 Lender Processing Services Inc., Term Loan B, 2.785%, 7/02/14 .................................................... United States 1,090,068 1,091,431 SunGard Data Systems Inc., New U.S. Term Loan, 2.046% - 2.724%, 2/28/14 ................................... United States 11,039,208 10,487,248 ---------------- 20,363,025 ----------------
Quarterly Statements of Investments | 27 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- (f) SENIOR FLOATING RATE INTERESTS (CONTINUED) TELECOMMUNICATION SERVICES 0.7% (h) Hawaiian Telecom Communications Inc., Term Loan C, PIK, 4.75%, 6/01/14 ............................................. United States 4,020,522 $ 2,472,621 Intelsat Corp. (Panamsat), Incremental Term Loan B-2-A, 2.804%, 1/03/14 ............ United States 275,617 263,616 Incremental Term Loan B-2-B, 2.804%, 1/03/14 ............ United States 275,533 263,536 Incremental Term Loan B-2-C, 2.804%, 1/03/14 ............ United States 275,533 263,536 (i) Tranche B-2-A, 2.804%, 1/03/14 .......................... United States 3,083,529 2,949,265 (i) Tranche B-2-B, 2.804%, 1/03/14 .......................... United States 3,082,587 2,948,365 (i) Tranche B-2-C, 2.804%, 1/03/14 .......................... United States 3,082,587 2,948,365 NTELOS Inc., Term Loan B-1, 2.54%, 8/24/11 .................... United States 3,614,239 3,591,650 Windstream Corp., Tranche B-1, 1.79% - 2.02%, 7/17/13 ......... United States 10,105,742 9,802,570 ---------------- 25,503,524 ---------------- UTILITIES 0.3% NRG Energy Inc., Credit Link, 0.498%, 2/01/13 ............................ United States 4,381,597 4,165,803 Term Loan, 1.785% - 2.098%, 2/01/13 ..................... United States 8,179,675 7,776,826 ---------------- 11,942,629 ---------------- TOTAL SENIOR FLOATING RATE INTERESTS (COST $392,235,414) ........................................ 394,216,223 ---------------- CORPORATE BONDS 40.8% AUTOMOBILES & COMPONENTS 0.6% Ford Motor Credit Co. LLC, senior note, 9.75%, 9/15/10 .......................................... United States 5,000,000 4,977,920 9.875%, 8/10/11 ......................................... United States 11,000,000 11,082,500 (d) TRW Automotive Inc., senior note, 144A, 7.25%, 3/15/17 ........ United States 8,000,000 6,840,000 ---------------- 22,900,420 ---------------- BANKS 1.7% Barclays Bank PLC, senior note, 5.20%, 7/10/14 ................ United Kingdom 5,900,000 6,130,731 BB&T Capital Trust IV, junior sub. bond, 6.82%, 6/12/77 ....... United States 9,800,000 7,664,335 BB&T Corp., senior note, 6.85%, 4/30/19 ....................... United States 2,500,000 2,682,392 (d, j) BNP Paribas, 144A, 7.195%, Perpetual .......................... France 10,000,000 7,393,060 HSBC Holdings PLC, sub. note, 6.50%, 9/15/37 .................. United Kingdom 10,000,000 9,794,604 Svensk Exportkredit AB, senior note, 7.625%, 6/30/14 .......... Sweden 3,780,000 NZD 2,592,172 UBS AG Stamford, senior note, 5.875%, 12/20/17 ................ United States 10,000,000 9,628,740 Wells Fargo & Co., senior note, 5.625%, 12/11/17 .............. United States 5,000,000 5,090,160 (j) Wells Fargo Capital XIII, pfd., 7.70%, Perpetual .............. United States 8,000,000 6,965,272 (j) Wells Fargo Capital XV, pfd., 9.75%, Perpetual ................ United States 6,700,000 6,822,972 ---------------- 64,764,438 ---------------- CAPITAL GOODS 1.2% (d) Allison Transmission Inc., senior note, 144A, 11.00%, 11/01/15 ................................................... United States 9,000,000 8,235,000 Case New Holland Inc., senior note, 7.125%, 3/01/14 ........... United States 9,350,000 8,835,750
28 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) CAPITAL GOODS (CONTINUED) L-3 Communications Corp., senior sub. note, 5.875%, 1/15/15 ......................................... United States 4,500,000 $ 4,286,250 6.375%, 10/15/15 ........................................ United States 4,000,000 3,860,000 (d) New York City IDA, 144A, 11.00%, 3/1/29 ....................... United States 1,800,000 1,875,384 RBS Global & Rexnord Corp., senior note, 9.50%, 8/01/14 ....... United States 10,000,000 8,750,000 RSC Equipment Rental Inc., senior note, 9.50%, 12/01/14 ....... United States 10,000,000 8,625,000 ---------------- 44,467,384 ---------------- COMMERCIAL & PROFESSIONAL SERVICES 0.7% ARAMARK Corp., senior note, 8.50%, 2/01/15 .................... United States 10,000,000 10,125,000 (d) Casella Waste Systems Inc., senior secured note, 144A, 11.00%, 7/15/14 ............................................ United States 4,050,000 4,232,250 Iron Mountain Inc., senior sub. note, 8.75%, 7/15/18 .......... United States 2,600,000 2,652,000 JohnsonDiversey Holdings Inc., senior disc. note, 10.67%, 5/15/13 .................................................... United States 5,000,000 4,525,000 JohnsonDiversey Inc., senior sub. note, B, 9.625%, 5/15/12 .... United States 4,000,000 4,080,000 ---------------- 25,614,250 ---------------- CONSUMER DURABLES & APPAREL 0.9% D.R. Horton Inc., senior note, 6.50%, 4/15/16 ................. United States 7,500,000 6,787,500 Jarden Corp., senior sub. note, 7.50%, 5/01/17 ................ United States 10,000,000 9,650,000 Jostens IH Corp., senior sub. note, 7.625%, 10/01/12 .......... United States 9,000,000 9,090,000 KB Home, senior note, 6.25%, 6/15/15 .......................................... United States 6,000,000 5,460,000 7.25%, 6/15/18 .......................................... United States 1,000,000 915,000 ---------------- 31,902,500 ---------------- CONSUMER SERVICES 1.8% (d, g) Fontainebleau Las Vegas, 144A, 10.25%, 6/15/15 ................ United States 8,000,000 280,000 (d) Harrah's Operating Escrow, senior secured note, 144A, 11.25%, 6/01/17 .................................................... United States 12,000,000 12,210,000 Host Hotels & Resorts LP, senior note, K, 7.125%, 11/01/13 ..................................... United States 6,900,000 6,727,500 M, 7.00%, 8/15/12 ....................................... United States 2,000,000 1,990,000 S, 6.875%, 11/01/14 ..................................... United States 1,000,000 955,000 MGM MIRAGE, senior note, 6.625%, 7/15/15 ......................................... United States 13,000,000 9,490,000 7.50%, 6/01/16 .......................................... United States 1,000,000 735,000 Pinnacle Entertainment Inc., (d, i) senior note, 144A, 8.625%, 8/01/17 ...................... United States 5,000,000 5,025,000 senior sub. note, 8.25%, 3/15/12 ........................ United States 3,300,000 3,316,500 senior sub. note, 8.75%, 10/01/13 ....................... United States 4,200,000 4,347,000 senior sub. note, 7.50%, 6/15/15 ........................ United States 1,500,000 1,338,750 Royal Caribbean Cruises Ltd., senior deb., 7.25%, 3/15/18 ............................. United States 10,000,000 7,950,000 senior note, 11.875%, 7/15/15 ........................... United States 1,000,000 1,035,000
Quarterly Statements of Investments | 29 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) CONSUMER SERVICES (CONTINUED) Starwood Hotels & Resorts Worldwide Inc., senior note, 6.75%, 5/15/18 .................................................... United States 10,000,000 $ 9,792,033 (g) Station Casinos Inc., senior note, 6.00%, 4/01/12 ............................. United States 1,200,000 366,000 senior note, 7.75%, 8/15/16 ............................. United States 3,800,000 1,159,000 senior sub. note, 6.50%, 2/01/14 ........................ United States 500,000 10,000 senior sub. note, 6.875%, 3/01/16 ....................... United States 3,800,000 76,000 ---------------- 66,802,783 ---------------- DIVERSIFIED FINANCIALS 4.4% American Express Co., senior note, 7.00%, 3/19/18 ............. United States 8,000,000 8,235,272 American Express Credit Corp., senior note, C, 7.30%, 8/20/13 .................................................... United States 4,000,000 4,276,532 Bank of America Corp., (j) pfd., sub. bond, M, 8.125%, Perpetual ................... United States 14,000,000 11,994,080 senior note, 5.65%, 5/01/18 ............................. United States 5,000,000 4,783,580 (i) Capital One Capital V, 10.25%, 8/15/39 ........................ United States 4,800,000 4,895,501 Capital One Financial Corp., senior note, 7.375%, 5/23/14 ..... United States 9,200,000 9,991,982 Citigroup Inc., senior note, 6.125%, 11/21/17 ........................... United States 5,000,000 4,611,165 senior note, 8.125%, 7/15/39 ............................ United States 5,000,000 5,062,015 sub. note, 5.00%, 9/15/14 ............................... United States 13,500,000 12,106,125 The Export-Import Bank of Korea, senior note, 8.125%, 1/21/14 .................................................... South Korea 7,905,000 8,760,187 General Electric Capital Corp., senior note, A, 8.50%, 4/06/18 .................................................... United States 170,000,000 MXN 10,846,620 (d) GMAC LLC, senior note, 144A, 7.25%, 3/02/11 .......................................... United States 2,849,000 2,713,673 6.875%, 9/15/11 ......................................... United States 8,000,000 7,460,000 6.875%, 8/28/12 ......................................... United States 2,532,000 2,316,780 The Goldman Sachs Group Inc., senior note, 6.00%, 5/01/14 ............................. United States 900,000 977,047 sub. note, 6.75%, 10/01/37 .............................. United States 12,500,000 12,680,687 JPMorgan Chase & Co., 6.00%, 1/15/18 .......................................... United States 5,000,000 5,310,750 (j) junior sub. note, 1, 7.90%, Perpetual ................... United States 5,000,000 4,766,890 JPMorgan Chase Capital XXII, sub. bond, 6.45%, 2/02/37 ........ United States 14,000,000 11,860,380 (g) Lehman Brothers Holdings Inc., senior note, 6.20%, 9/26/14 .................................................... United States 16,000,000 2,840,000 Merrill Lynch & Co. Inc., senior note, 6.40%, 8/28/17 ......... United States 10,000,000 9,772,368 Morgan Stanley, senior note, 6.00%, 4/28/15 .......................................... United States 12,000,000 12,450,024 7.30%, 5/13/19 .......................................... United States 3,000,000 3,390,237 ---------------- 162,101,895 ---------------- ENERGY 5.4% Anadarko Petroleum Corp., senior note, 6.95%, 6/15/19 ......... United States 6,500,000 7,154,752 (d) Arch Coal Inc., senior note, 144A, 8.75%, 8/01/16 ............. United States 1,800,000 1,827,000 Berry Petroleum Co., senior note, 10.25%, 6/01/14 ............. United States 3,600,000 3,780,000
30 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) ENERGY (CONTINUED) Bill Barrett Corp., senior note, 9.875%, 7/17/16 .............. United States 1,700,000 $ 1,780,750 Canadian Natural Resources Ltd., 5.90%, 2/01/18 ............... Canada 10,000,000 10,698,400 Chesapeake Energy Corp., senior note, 7.625%, 7/15/13 ......................................... United States 1,500,000 1,511,250 9.50%, 2/15/15 .......................................... United States 1,000,000 1,066,250 6.625%, 1/15/16 ......................................... United States 3,500,000 3,285,625 6.25%, 1/15/18 .......................................... United States 6,000,000 5,370,000 7.25%, 12/15/18 ......................................... United States 1,000,000 945,000 Compagnie Generale de Geophysique-Veritas, senior note, 7.50%, 5/15/15 .......................................... France 7,000,000 6,755,000 7.75%, 5/15/17 .......................................... France 1,800,000 1,732,500 (d) 144A, 9.50%, 5/15/16 .................................... France 600,000 626,970 Copano Energy LLC, senior note, 8.125%, 3/01/16 ......................................... United States 8,000,000 7,840,000 7.75%, 6/01/18 .......................................... United States 2,000,000 1,890,000 El Paso Corp., senior note, 12.00%, 12/12/13 .................. United States 9,000,000 10,260,000 (f) Enterprise Products Operating LLP, junior sub. note, FRN, 7.034%, 1/15/68 ............................................ United States 10,000,000 8,112,050 Mariner Energy Inc., senior note, 7.50%, 4/15/13 .......................................... United States 9,000,000 8,595,000 11.75%, 6/30/16 ......................................... United States 500,000 526,875 MarkWest Energy Partners LP, senior note, 6.875%, 11/01/14 ........................................ United States 8,000,000 7,160,000 8.75%, 4/15/18 .......................................... United States 800,000 748,000 (d) 144A, 6.875%, 11/01/14 .................................. United States 700,000 619,500 Peabody Energy Corp., senior note, B, 6.875%, 3/15/13 ......... United States 8,800,000 8,932,000 (d) Petrohawk Energy Corp., senior note, 144A, 10.50%, 8/01/14 .... United States 9,000,000 9,675,000 (d) Petroplus Finance Ltd., senior note, 144A, 6.75%, 5/01/14 ..... Switzerland 8,000,000 7,165,780 Plains Exploration & Production Co., senior note, 10.00%, 3/01/16 ......................................... United States 1,000,000 1,086,250 7.625%, 6/01/18 ......................................... United States 9,000,000 8,752,500 Quicksilver Resources Inc., senior note, 8.25%, 8/01/15 .......................................... United States 9,000,000 8,685,000 11.75%, 1/01/16 ......................................... United States 500,000 550,625 (d) SandRidge Energy Inc., senior note, 144A, 8.00%, 6/01/18 ...... United States 10,000,000 9,150,000 Smith International Inc., senior note, 9.75%, 3/15/19 ......... United States 10,000,000 12,130,680 Tesoro Corp., senior note, 6.25%, 11/01/12 ......................................... United States 500,000 485,000 6.50%, 6/01/17 .......................................... United States 10,000,000 8,800,000 Weatherford International Ltd., senior note, 6.00%, 3/15/18 .......................................... United States 8,000,000 8,158,232 9.625%, 3/01/19 ......................................... United States 2,000,000 2,487,992 The Williams Cos. Inc., senior note, 7.625%, 7/15/19 ......................................... United States 4,000,000 4,287,520 7.875%, 9/01/21 ......................................... United States 4,400,000 4,794,486 8.75%, 3/15/32 .......................................... United States 1,300,000 1,469,594 (d) Woodside Finance Ltd., 144A, 8.75%, 3/01/19 ................... Australia 10,000,000 11,503,200 ---------------- 200,398,781 ----------------
Quarterly Statements of Investments | 31 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) FOOD & STAPLES RETAILING 0.8% (d, i) Duane Reade Inc., senior secured note, 144A, 11.75%, 8/01/15 .. United States 3,250,000 $ 3,166,052 The Kroger Co., 6.15%, 1/15/20 .......................................... United States 7,500,000 8,034,000 senior note, 7.50%, 1/15/14 ............................. United States 2,500,000 2,851,338 (d) Rite Aid Corp., senior secured note, 144A, 9.75%, 6/12/16 ..... United States 6,100,000 6,466,000 SUPERVALU Inc., senior note, 8.00%, 5/01/16 ................... United States 10,000,000 9,975,000 ---------------- 30,492,390 ---------------- FOOD, BEVERAGE & TOBACCO 2.1% Altria Group Inc., senior bond, 9.25%, 8/06/19 ............................. United States 3,300,000 3,958,489 senior note, 9.70%, 11/10/18 ............................ United States 8,000,000 9,756,200 (d) Anheuser-Busch InBev NV, senior note, 144A, 7.75%, 1/15/19 .... United States 12,000,000 14,059,560 (d) BAT International Finance PLC, senior note, 144A, 9.50%, 11/15/18 ................................................... United Kingdom 5,000,000 6,248,750 (d) Cargill Inc., 144A, 5.20%, 1/22/13 .................................... United States 500,000 523,091 144A, 6.00%, 11/27/17 ................................... United States 7,000,000 7,322,931 senior note, 144A, 7.35%, 3/06/19 ....................... United States 3,000,000 3,313,659 Dean Foods Inc., senior note, 7.00%, 6/01/16 .................. United States 3,800,000 3,600,500 (d) Dole Food Co. Inc, senior note, 144A, 13.875%, 3/15/14 ........ United States 9,500,000 10,687,500 (d) JBS USA LLC, senior note, 144A, 11.625%, 5/01/14 .............. United States 9,000,000 9,157,500 (d) Tyson Foods Inc., senior note, 144A, 10.50%, 3/01/14 .......... United States 7,000,000 7,805,000 ---------------- 76,433,180 ---------------- HEALTH CARE EQUIPMENT & SERVICES 3.3% (d) CareFusion Corp., senior note, 144A, 6.375%, 8/01/19 .......... United States 12,000,000 12,698,796 Coventry Health Care Inc., senior note, 6.30%, 8/15/14 .......................................... United States 5,200,000 4,704,591 5.95%, 3/15/17 .......................................... United States 2,800,000 2,359,185 DaVita Inc., senior sub. note, 7.25%, 3/15/15 ................. United States 10,000,000 9,850,000 FMC Finance III SA, senior note, 6.875%, 7/15/17 .............. Germany 7,500,000 7,275,000 Fresenius Medical Care Capital Trust IV, 7.875%, 6/15/11 ...... Germany 2,500,000 2,593,750 (d) Fresenius US Finance II, senior note, 144A, 9.00%, 7/15/15 .... Germany 7,000,000 7,595,000 HCA Inc., senior note, 6.50%, 2/15/16 ............................. United States 3,000,000 2,677,500 senior secured note, 9.125%, 11/15/14 ................... United States 10,000,000 10,325,000 (h) senior secured note, PIK, 9.625%, 11/15/16 .............. United States 4,207,000 4,396,315 Medco Health Solutions Inc., 7.125%, 3/15/18 .................. United States 10,000,000 11,281,140 Quest Diagnostics Inc., 6.40%, 7/01/17 ........................ United States 8,500,000 8,947,729 (d) Tenet Healthcare Corp., senior note, 144A, 9.00%, 05/01/15 ...................... United States 2,500,000 2,650,000 senior note, 144A, 10.00%, 5/01/18 ...................... United States 3,000,000 3,330,000 senior secured note, 144A, 8.875%, 7/01/19 .............. United States 4,500,000 4,792,500 (h) United Surgical Partners International Inc., senior sub. note, PIK, 9.25%, 5/01/17 ........................................ United States 9,000,000 7,740,000
32 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) HEALTH CARE EQUIPMENT & SERVICES (CONTINUED) (f, h) US Oncology Holdings Inc., senior note, PIK, FRN, 6.904%, 3/15/12 .................................................... United States 9,434,000 $ 8,066,070 (d) US Oncology Inc., senior secured note, 144A, 9.125%, 8/15/17 .. United States 800,000 830,000 Vanguard Health Holding Co. II LLC, senior sub. note, 9.00%, 10/01/14 ................................................... United States 10,000,000 10,050,000 ---------------- 122,162,576 ---------------- INSURANCE 1.1% Aflac Inc., senior note, 8.50%, 5/15/19 ....................... United States 12,000,000 13,524,744 Lincoln National Corp., senior note, 8.75%, 7/01/19 ........... United States 12,000,000 13,250,676 (d, f) MetLife Capital Trust X, secured bond, 144A, FRN, 9.25%, 4/08/68 .................................................... United States 1,900,000 1,830,825 MetLife Inc., 7.717%, 2/15/19 ......................................... United States 3,000,000 3,403,440 (f) junior sub. note, FRN, 6.40%, 12/15/66 .................. United States 8,000,000 6,297,520 senior note, A, 6.817%, 8/15/18 ......................... United States 2,000,000 2,147,884 ---------------- 40,455,089 ---------------- MATERIALS 3.3% (d) Anglo American Capital PLC, senior note, 144A, 9.375%, 4/08/14 .................................................... United Kingdom 9,000,000 10,305,000 ArcelorMittal, senior note, 9.85%, 6/01/19 .................... Luxembourg 12,000,000 13,928,604 (d) Clearwater Paper Corp., senior note, 144A, 10.625%, 6/15/16 ... United States 7,950,000 8,427,000 Crown Americas Inc., senior note, 7.75%, 11/15/15 ............. United States 9,000,000 9,180,000 (d) Crown Americas LLC and Crown Americas Capital Corp. II, senior note, 144A, 7.625%, 5/15/17 ......................... United States 900,000 920,250 Freeport-McMoRan Copper & Gold Inc., senior note, 8.375%, 4/01/17 .................................................... United States 9,000,000 9,553,527 Huntsman International LLC, senior sub. note, 7.875%, 11/15/14 ................................................... United States 10,000,000 8,550,000 (d) Ineos Group Holdings PLC, senior secured note, 144A, 8.50%, 2/15/16 .................................................... United Kingdom 8,000,000 3,360,000 (d) MacDermid Inc., senior sub. note, 144A, 9.50%, 4/15/17 ........ United States 8,500,000 6,587,500 Nalco Co., (d) senior note, 144A, 8.25%, 5/15/17 ....................... United States 1,000,000 1,045,000 senior sub. note, 8.875%, 11/15/13 ...................... United States 9,000,000 9,360,000 NewPage Corp., senior secured note, 10.00%, 5/01/12 ........... United States 9,000,000 4,050,000 Novelis Inc., senior note, 7.25%, 2/15/15 ..................... Canada 2,000,000 1,640,000 Owens-Brockway Glass Container Inc., senior note, 6.75%, 12/01/14 ......................................... United States 8,000,000 7,820,000 (d) 144A, 7.375%, 5/15/16 ................................... United States 1,000,000 995,000 Owens-Illinois Inc., senior note, 7.80%, 5/15/18 .............. United States 1,000,000 990,000 Solo Cup Co., (d) senior secured note, 144A, 10.50%, 11/01/13 ............. United States 1,700,000 1,810,500 senior sub. note, 8.50%, 2/15/14 ........................ United States 6,100,000 5,352,750
Quarterly Statements of Investments | 33 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) MATERIALS (CONTINUED) (d) Teck Resources Ltd., senior secured note, 144A, 10.75%, 5/15/19 .................................................... Canada 7,300,000 $ 8,531,875 (d) Xstrata Finance Canada Ltd., 144A, 5.80%, 11/15/16 ............ United Kingdom 10,000,000 9,600,820 ---------------- 122,007,826 ---------------- MEDIA 4.2% (d) British Sky Broadcasting Group PLC, senior note, 144A, 6.10%, 2/15/18 ....................................................... United Kingdom 10,000,000 10,229,730 (g, k) CanWest Media Inc., senior sub. note, 8.00%, 9/15/12 .......... Canada 7,500,000 3,787,500 (g, k) CCH I LLC, senior secured note, 11.00%, 10/01/15 .............. United States 4,000,000 515,000 (g, k) CCH II LLC, senior note, 10.25%, 9/15/10 ...................... United States 10,000,000 10,750,000 (g, k) CCO Holdings LLC, senior note, 8.75%, 11/15/13 ................ United States 4,000,000 4,010,000 Comcast Corp., senior note, 6.30%, 11/15/17 ................... United States 10,000,000 11,046,200 CSC Holdings Inc., senior deb., 7.625%, 7/15/18 ............................ United States 6,000,000 5,880,000 senior note, 6.75%, 4/15/12 ............................. United States 600,000 600,000 (d) senior note, 144A, 8.50%, 4/15/14 ....................... United States 3,000,000 3,105,000 (g, k) Dex Media Inc., senior disc. note, 9.00%, 11/15/13 ...................... United States 2,000,000 350,000 senior note, B, 8.00%, 11/15/13 ......................... United States 6,000,000 1,050,000 (g, k) Dex Media West Finance, senior sub. note, 9.875%, 8/15/13 .................................................... United States 4,000,000 750,000 DIRECTV Holdings LLC, senior note, 7.625%, 5/15/16 ............ United States 7,500,000 7,631,250 EchoStar DBS Corp., senior note, 6.375%, 10/01/11 ........................................ United States 5,500,000 5,472,500 7.125%, 2/01/16 ......................................... United States 5,000,000 4,875,000 (g) Idearc Inc., senior note, 8.00%, 11/15/16 ..................... United States 9,000,000 438,750 Lamar Media Corp., (d) senior note, 144A, 9.75%, 4/01/14 ....................... United States 1,000,000 1,057,500 senior sub. note, 7.25%, 1/01/13 ........................ United States 7,500,000 7,275,000 senior sub. note, B, 6.625%, 8/15/15 .................... United States 1,500,000 1,297,500 Liberty Media Corp., senior note, 5.70%, 5/15/13 .............. United States 10,000,000 9,025,000 LIN Television Corp., senior sub. note, 6.50%, 5/15/13 ........ United States 9,000,000 6,840,000 Quebecor Media Inc., senior note, 7.75%, 3/15/16 .............. Canada 10,000,000 9,550,000 Radio One Inc., senior sub. note, 6.375%, 2/15/13 ............. United States 8,000,000 2,540,000 Reed Elsevier PLC, senior note, 8.625%, 1/15/19 ............... United Kingdom 10,000,000 12,108,860 Time Warner Inc., 7.625%, 4/15/31 ............................. United States 9,000,000 9,803,250 (d) UPC Holding BV, senior note, 144A, 9.875%, 4/15/18 ............ Netherlands 2,500,000 2,541,150 Viacom Inc., senior note, 6.875%, 4/30/36 ..................... United States 12,000,000 12,621,948 (d) WMG Acquisition Corp., senior secured note, 144A, 9.50%, 6/15/16 .................................................... United States 9,000,000 9,585,000 ---------------- 154,736,138 ---------------- REAL ESTATE 0.6% ERP Operating LP, 5.75%, 6/15/17 .............................. United States 3,300,000 3,201,487 Forest City Enterprises Inc., senior note, 7.625%, 6/01/15 .... United States 6,600,000 4,323,000 Simon Property Group LP, senior note, 10.35%, 4/01/19 ......... United States 12,000,000 14,475,066 ---------------- 21,999,553 ----------------
34 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) RETAILING 0.5% Dollar General Corp., senior note, 10.625%, 7/15/15 ........... United States 9,000,000 $ 10,080,000 Michaels Stores Inc., senior note, 10.00%, 11/01/14 ........... United States 9,000,000 8,505,000 ---------------- 18,585,000 ---------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 0.1% Freescale Semiconductor Inc., senior note, 8.875%, 12/15/14 ................................................... United States 7,000,000 4,725,000 ---------------- SOFTWARE & SERVICES 0.4% SunGard Data Systems Inc., senior note, 9.125%, 8/15/13 ............................ United States 6,000,000 6,150,000 senior sub. note, 10.25%, 8/15/15 ....................... United States 7,000,000 7,210,000 ---------------- 13,360,000 ---------------- TECHNOLOGY HARDWARE & EQUIPMENT 0.5% (i) Jabil Circuit Inc., senior note, 7.75%, 7/15/16 ............... United States 1,700,000 1,634,431 (g) Nortel Networks Ltd., senior note, 10.75%, 7/15/16 ............ Canada 8,000,000 3,540,000 Sanmina-SCI Corp., (d, f) senior note, 144A, FRN, 3.379%, 6/15/14 ................. United States 2,000,000 1,750,000 senior sub. note, 6.75%, 3/01/13 ........................ United States 4,300,000 3,934,500 senior sub. note, 8.125%, 3/01/16 ....................... United States 2,000,000 1,780,000 Xerox Corp., senior note, 8.25%, 5/15/14 ...................... United States 4,300,000 4,693,364 ---------------- 17,332,295 ---------------- TELECOMMUNICATION SERVICES 3.0% (d) CC Holdings GS V LLC, senior secured note, 144A, 7.75%, 5/01/17 .................................................... United States 1,400,000 1,435,000 Crown Castle International Corp., senior note, 9.00%, 1/15/15 .................................................... United States 8,000,000 8,490,000 (d) Digicel Group Ltd., senior note, 144A, 8.875%, 1/15/15 ........ Jamaica 10,000,000 8,650,000 Inmarsat Finance PLC, senior note, 10.375%, 11/15/12 .......... United Kingdom 10,000,000 10,500,000 Intelsat Bermuda Ltd., senior note, 11.25%, 6/15/16 ........... Bermuda 3,500,000 3,745,000 Intelsat Subsidiary Holding Co. Ltd., senior note, 8.50%, 1/15/13 .................................................... Bermuda 10,000,000 10,150,000 MetroPCS Wireless Inc., senior note, 9.25%, 11/01/14 .......... United States 10,000,000 10,400,000 Millicom International Cellular SA, senior note, 10.00%, 12/01/13 ................................................... Luxembourg 9,000,000 9,405,000 Qwest Communications International Inc., senior note, 7.50%, 2/15/14 .................................................... United States 7,500,000 7,368,750 (d) Qwest Corp., senior note, 144A, 8.375%, 5/01/16 ............... United States 3,900,000 4,017,000 (d) SBA Telecommunications Inc., senior note, 144A, 8.25%, 8/15/19 .................................................... United States 3,900,000 3,978,000 Telecom Italia Capital, senior note, 6.999%, 6/04/18 .......... Italy 1,500,000 1,660,443 Telecom Italia Capital SA, senior note, 4.95%, 9/30/14 .......................................... Italy 9,000,000 9,115,735 7.175%, 6/18/19 ......................................... Italy 2,000,000 2,169,085 Verizon New York Inc., senior deb., A, 6.875%, 4/01/12 ...................................... United States 5,000,000 5,388,490 B, 7.375%, 4/01/32 ...................................... United States 1,500,000 1,593,540
Quarterly Statements of Investments | 35 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- CORPORATE BONDS (CONTINUED) TELECOMMUNICATION SERVICES (CONTINUED) (d) Wind Acquisition Finance SA, senior note, 144A, 10.75%, 12/01/15 ........................................ Italy 10,000,000 $ 10,650,000 11.75%, 7/15/17 ......................................... Luxembourg 900,000 918,000 ---------------- 109,634,043 ---------------- TRANSPORTATION 0.2% (d) Ceva Group PLC, senior note, 144A, 10.00%, 9/01/14 ............ United Kingdom 9,000,000 6,705,000 ---------------- UTILITIES 4.0% The AES Corp., senior note, 8.00%, 10/15/17 ................................................ United States 8,000,000 7,880,000 6/01/20 ................................................. United States 2,000,000 1,920,000 Ameren Corp., senior note, 8.875%, 5/15/14 .................... United States 10,000,000 10,721,370 CenterPoint Energy Inc., senior note, 6.125%, 11/01/17 ........................................ United States 7,500,000 7,342,838 6.50%, 5/01/18 .......................................... United States 1,500,000 1,427,424 (d) Centrais Eletricas Brasileiras SA, senior note, 144A, 6.875%, 7/30/09 .................................................... Brazil 12,000,000 12,405,218 CMS Energy Corp., senior note, 8.75%, 6/15/19 ................. United States 5,400,000 5,706,266 Dominion Resources Inc., 6.40%, 6/15/18 ....................... United States 8,000,000 8,820,368 Duke Energy Corp., senior note, 6.30%, 2/01/14 ................ United States 10,000,000 11,016,280 Dynegy Holdings Inc., senior note, 8.375%, 5/01/16 ............ United States 10,000,000 8,750,000 Edison Mission Energy, senior note, 7.00%, 5/15/17 ............ United States 8,000,000 6,410,000 (d) Intergen NV, senior secured note, 144A, 9.00%, 6/30/17 ........ Netherlands 10,000,000 9,900,000 Mirant North America LLC, senior note, 7.375%, 12/31/13 ....... United States 10,000,000 9,925,000 NRG Energy Inc., senior note, 7.25%, 2/01/14 .......................................... United States 2,500,000 2,462,500 7.375%, 2/01/16 ......................................... United States 7,000,000 6,790,000 7.375%, 1/15/17 ......................................... United States 2,500,000 2,418,750 PG&E Corp., senior note, 5.75%, 4/01/14 ....................... United States 10,000,000 10,929,200 Sempra Energy, senior note, 9.80%, 2/15/19 .................... United States 9,450,000 12,062,830 Texas Competitive Electric Holdings Co. LLC, senior note, A, 10.25%, 11/01/15 ........................................... United States 16,000,000 12,640,000 ---------------- 149,528,044 ---------------- TOTAL CORPORATE BONDS (COST $1,491,790,783) 1,507,108,585 ---------------- CONVERTIBLE BONDS (COST $5,295,410) 0.1% PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES 0.1% Mylan Inc., cvt., senior note, 1.25%, 3/15/12 ................. United States 6,000,000 5,415,000 ---------------- ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES 6.7% BANKS 4.0% (f) Banc of America Commercial Mortgage Inc., 2005-6, A4, FRN, 5.351%, 9/10/47 ............................................ United States 8,000,000 7,809,894 (f) Citibank Credit Card Issuance Trust, 2005-A3, A3, FRN, 0.355%, 4/24/14 ............................................ United States 13,000,000 12,655,326
36 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) BANKS (CONTINUED) Citigroup/Deutsche Bank Commercial Mortgage Trust, (f) 2005-CD1, A4, FRN, 5.399%, 7/15/44 ...................... United States 8,940,000 $ 8,844,322 2006-CD3, A5, 5.617%, 10/15/48 .......................... United States 22,000,000 19,043,292 Countrywide Asset-Backed Certificates, 2004-7, AF4, 4.774%, 8/25/32 ............................ United States 114,310 113,692 2005-11, AF4, 5.21%, 3/25/34 ............................ United States 2,800,000 1,133,141 GE Capital Commercial Mortgage Corp., 2003-C1, A4, 4.819%, 1/10/38 .................................................... United States 1,827,831 1,835,851 Greenwich Capital Commercial Funding Corp., 2004-GG1, A7, 5.317%, 6/10/36 ........................... United States 15,546,036 15,531,469 2005-GG5, A5, 5.224%, 4/10/37 ........................... United States 20,380,000 17,728,154 (f) 2006-GG7, A4, FRN, 6.116%, 7/10/38 ...................... United States 12,000,000 10,384,740 GS Mortgage Securities Corp. II, 2003-C1, A3, 4.608%, 1/10/40 ............................ United States 3,965,000 3,996,779 (f) 2006-GG6, A4, FRN, 5.553%, 4/10/38 ...................... United States 10,000,000 8,678,881 2006-GG8, A4, 5.56%, 11/10/39 ........................... United States 5,000,000 4,645,148 LB-UBS Commercial Mortgage Trust, (f) 2002-C2, A4, FRN, 5.594%, 6/15/31 ....................... United States 5,000,000 5,178,566 2006-C1, A4, 5.156%, 2/15/31 ............................ United States 13,250,000 12,012,671 (f) Morgan Stanley Capital I Trust, 2004-IQ7, A4, FRN, 5.538%, 6/15/38 .................................................... United States 7,000,000 6,643,428 (d, f) Schiller Park CLO Ltd., 2007-1A, A2, 144A, FRN, 0.744%, 4/25/21 .................................................... United States 12,300,000 9,340,005 ---------------- 145,575,359 ---------------- DIVERSIFIED FINANCIALS 2.7% (f) Advanta Business Card Master Trust, 2007-A4, A4, FRN, 0.319%, 4/22/13 ............................................ United States 11,204,737 10,312,535 (f) American Express Credit Account Master Trust, 2004-4, A, FRN, 0.378%, 3/15/12 ......................... United States 3,000,000 2,999,525 2008-1, A, FRN, 0.738%, 8/15/13 ......................... United States 8,200,000 8,101,715 (f) Chase Issuance Trust, 2005-A9, A9, FRN, 0.308%, 11/15/11 ...................... United States 2,000,000 1,999,097 2007-A9, A9, FRN, 0.318%, 6/16/14 ....................... United States 12,000,000 11,678,767 sub. note, 2006-A7, A, FRN, 0.298%, 2/15/13 ............. United States 4,000,000 3,953,000 Citigroup Commercial Mortgage Trust, (f) 2007-C6, AM, FRN, 5.888%, 6/10/17 ....................... United States 3,500,000 2,055,929 2008-C7, A4, 6.299%, 12/10/49 ........................... United States 19,150,000 16,795,942 JPMorgan Chase Commercial Mortgage Securities Corp., (f) 2004-CB9, A4, FRN, 5.558%, 6/12/41 ...................... United States 8,871,306 8,552,150 2004-LN2, A2, 5.115%, 7/15/41 ........................... United States 807,292 752,128 2005-LDP2, AM, 4.78%, 7/15/42 ........................... United States 2,200,000 1,654,276 (f) 2005-LDP5, A4, FRN, 5.344%, 12/15/44 .................... United States 11,700,000 11,417,053 (d) Keystone Owner Trust, 1997-P3, M2, 144A, 7.98%, 12/25/24 ................................................... United States 120 120
Quarterly Statements of Investments | 37 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) DIVERSIFIED FINANCIALS (CONTINUED) (f) MBNA Credit Card Master Note Trust, 2005-A4, A4, FRN, 0.328%, 11/15/12 ........................................... United States 6,000,000 $ 5,939,632 (f) MBNA Master Credit Card Trust II, 1997-B, A, FRN, 0.448%, 8/15/14 .................................................... United States 15,000,000 14,386,437 Residential Asset Securities Corp., 2004-KS1, AI4, 4.213%, 4/25/32 .................................................... United States 198,458 172,130 ---------------- 100,770,436 ---------------- TOTAL ASSET-BACKED SECURITIES AND COMMERCIAL MORTGAGE-BACKED SECURITIES (COST $256,512,860) ............. 246,345,795 ---------------- MORTGAGE-BACKED SECURITIES 9.2% (f) FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) ADJUSTABLE RATE 0.0%(c) FHLMC, 4.057%, 1/01/33 ........................................ United States 280,942 283,410 ---------------- FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) FIXED RATE 3.5% FHLMC Gold 15 Year, 4.50%, 10/01/18 - 9/01/19 ................. United States 4,848,202 5,025,316 FHLMC Gold 15 Year, 5.00%, 12/01/17 - 7/01/22 ................. United States 10,124,121 10,574,607 FHLMC Gold 15 Year, 5.50%, 7/01/17 - 2/01/19 .................. United States 792,560 836,240 FHLMC Gold 15 Year, 6.50%, 4/01/11 ............................ United States 245 261 FHLMC Gold 15 Year, 7.00%, 9/01/11 ............................ United States 333 349 FHLMC Gold 30 Year, 5.00%, 3/01/34 - 9/01/38 .................. United States 30,982,464 31,753,368 FHLMC Gold 30 Year, 5.50%, 6/01/33 - 7/01/38 .................. United States 24,838,962 25,778,466 FHLMC Gold 30 Year, 6.00%, 6/01/33 - 6/01/38 .................. United States 28,858,543 30,309,656 FHLMC Gold 30 Year, 6.50%, 10/01/21 - 8/01/38 ................. United States 22,058,561 23,563,641 FHLMC Gold 30 Year, 7.00%, 9/01/21 - 8/01/32 .................. United States 205,178 224,486 FHLMC Gold 30 Year, 7.50%, 4/01/24 - 1/01/31 .................. United States 34,774 38,838 FHLMC Gold 30 Year, 8.00%, 11/01/25 - 1/01/26 ................. United States 787 890 FHLMC Gold 30 Year, 9.00%, 12/01/24 ........................... United States 333 381 ---------------- 128,106,499 ---------------- (f) FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) ADJUSTABLE RATE 0.0%(c) FNMA, 4.592%, 4/01/20 ......................................... United States 252,257 256,062 FNMA, 4.634%, 12/01/34 ........................................ United States 1,236,212 1,267,380 ---------------- 1,523,442 ---------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) FIXED RATE 5.4% FNMA 15 Year, 4.50%, 3/01/20 .................................. United States 1,045,177 1,084,490 FNMA 15 Year, 5.00%, 1/01/18 - 6/01/18 ........................ United States 1,381,736 1,453,257 FNMA 15 Year, 5.50%, 3/01/14 - 4/01/21 ........................ United States 4,762,268 5,002,322 FNMA 15 Year, 6.00%, 4/01/13 - 10/01/16 ....................... United States 155,165 165,659 FNMA 15 Year, 6.50%, 4/01/11 - 6/01/13 ........................ United States 11,557 12,330 FNMA 15 Year, 7.50%, 10/01/14 ................................. United States 12,639 13,716 FNMA 30 Year, 4.50%, 4/01/39 .................................. United States 22,245,055 22,365,179 FNMA 30 Year, 5.00%, 4/01/34 - 6/01/38 ........................ United States 50,616,039 51,871,175 FNMA 30 Year, 5.50%, 9/01/33 - 6/01/37 ........................ United States 42,587,516 44,254,698
38 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- MORTGAGE-BACKED SECURITIES (CONTINUED) FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) FIXED RATE (CONTINUED) FNMA 30 Year, 6.00%, 6/01/34 - 11/01/37 ....................... United States 43,268,545 $ 45,523,047 FNMA 30 Year, 6.50%, 1/01/24 - 10/01/37 ....................... United States 26,833,016 28,755,476 FNMA 30 Year, 7.50%, 12/01/28 - 10/01/29 ...................... United States 32,319 35,965 FNMA 30 Year, 8.00%, 1/01/25 - 6/01/26 ........................ United States 16,679 18,839 FNMA 30 Year, 8.50%, 7/01/25 .................................. United States 720 822 ---------------- 200,556,975 ---------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) FIXED RATE 0.3% GNMA I SF 30 Year, 5.00%, 6/15/34 - 7/15/34 ................... United States 1,207,307 1,246,344 GNMA I SF 30 Year, 5.50%, 2/15/33 - 6/15/36 ................... United States 3,790,016 3,964,058 GNMA I SF 30 Year, 6.00%, 8/15/36 ............................. United States 553,417 582,338 GNMA I SF 30 Year, 6.50%, 3/15/24 - 3/15/32 ................... United States 267,282 288,927 GNMA I SF 30 Year, 7.00%, 11/15/27 - 5/15/28 .................. United States 52,197 57,311 GNMA I SF 30 Year, 7.50%, 9/15/23 - 5/15/27 ................... United States 13,919 15,548 GNMA I SF 30 Year, 8.00%, 2/15/25 - 9/15/27 ................... United States 13,086 14,823 GNMA I SF 30 Year, 8.50%, 8/15/24 ............................. United States 134 153 GNMA I SF 30 Year, 9.00%, 1/15/25 ............................. United States 467 538 GNMA I SF 30 Year, 9.50%, 6/15/25 ............................. United States 703 813 GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33 ................. United States 1,738,960 1,789,202 GNMA II SF 30 Year, 5.50%, 6/20/34 ............................ United States 886,083 923,806 GNMA II SF 30 Year, 6.00%, 11/20/34 ........................... United States 755,117 793,287 GNMA II SF 30 Year, 6.50%, 7/20/28 - 12/20/31 ................. United States 335,008 361,982 GNMA II SF 30 Year, 7.50%, 8/20/16 - 4/20/32 .................. United States 187,728 206,609 ---------------- 10,245,739 ---------------- TOTAL MORTGAGE-BACKED SECURITIES (COST $326,221,925) ........................................ 340,716,065 ---------------- U.S. GOVERNMENT AND AGENCY SECURITIES 9.1% FHLMC, 2.125%, 3/23/12 ......................................... United States 11,000,000 11,131,307 5.00%, 2/16/17 .......................................... United States 11,000,000 12,090,122 5.625%, 3/15/11 ......................................... United States 15,700,000 16,857,514 senior note, 4.75%, 3/05/12 ............................. United States 22,000,000 23,759,230 FNMA, 1.375%, 4/28/11 ......................................... United States 15,500,000 15,579,716 4.125%, 4/15/14 ......................................... United States 2,000,000 2,127,144 U.S. Treasury Bond, 4.50%, 2/15/16 .......................................... United States 13,100,000 14,284,122 4.50%, 5/15/17 .......................................... United States 33,000,000 35,838,528 5.25%, 2/15/29 .......................................... United States 1,750,000 1,971,485 6.25%, 8/15/23 .......................................... United States 6,800,000 8,335,318 6.88%, 8/15/25 .......................................... United States 1,000,000 1,315,313 7.125%, 2/15/23 ......................................... United States 10,200,000 13,400,250 7.875%, 2/15/21 ......................................... United States 7,200,000 9,821,254
Quarterly Statements of Investments | 39 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- U.S. GOVERNMENT AND AGENCY SECURITIES (CONTINUED) U.S. Treasury Note, 3.375%, 10/15/09 ........................................ United States 500,000 $ 503,223 3.375%, 6/30/13 ......................................... United States 2,000,000 2,101,252 3.50%, 12/15/09 ......................................... United States 4,500,000 4,554,319 4.00%, 8/31/09 .......................................... United States 7,000,000 7,021,602 4.00%, 4/15/10 .......................................... United States 1,100,000 1,128,189 4.00%, 11/15/12 ......................................... United States 1,850,000 1,984,704 4.125%, 8/15/10 ......................................... United States 2,900,000 3,008,524 4.25%, 8/15/13 .......................................... United States 1,000,000 1,083,907 4.25%, 11/15/14 ......................................... United States 700,000 756,274 4.375%, 8/15/12 ......................................... United States 1,000,000 1,082,579 4.50%, 9/30/11 .......................................... United States 2,500,000 2,675,782 4.625%, 2/15/17 ......................................... United States 9,400,000 10,293,009 4.75%, 8/15/17 .......................................... United States 7,000,000 7,719,691 4.875%, 7/31/11 ......................................... United States 7,250,000 7,786,957 5.00%, 8/15/11 .......................................... United States 2,100,000 2,265,869 (l) Index Linked, 1.625%, 1/15/15 ........................... United States 24,637,413 24,575,820 (l) Index Linked, 1.875%, 7/15/15 ........................... United States 20,887,837 21,155,452 (l) Index Linked, 2.00%, 1/15/14 ............................ United States 23,608,584 24,095,511 (l) Index Linked, 2.00%, 7/15/14 ............................ United States 12,251,829 12,519,838 (l) Index Linked, 2.00%, 1/15/16 ............................ United States 11,851,209 12,051,198 (l) Index Linked, 2.50%, 7/15/16 ............................ United States 20,647,543 21,699,287 ---------------- TOTAL U.S. GOVERNMENT AND AGENCY SECURITIES (COST $327,032,702) ........................................ 336,574,290 ---------------- FOREIGN GOVERNMENT AND AGENCY SECURITIES 18.0% Corporacion Andina De Fomento, 8.125%, 6/04/19 ................ Supranational(m) 11,440,000 12,620,608 (d) Emirate of Abu Dhabi, 144A, 6.75%, 4/08/19 .................... United Arab Emirates 9,640,000 10,354,122 European Investment Bank, senior note, 1612/37, 6.50%, 9/10/14 .................................................... Supranational(m) 12,905,000 NZD 8,859,296 Government of Argentina, senior bond, amortization and cpn., 8/03/09 .......................... Argentina 106,878,000 13,787,262 (f, n) FRN, 1.683%, 8/03/12 .................................... Argentina 106,878,000 27,895,158 Government of Hungary, 3.50%, 7/18/16 .......................................... Hungary 180,000 EUR 216,475 4.375%, 7/04/17 ......................................... Hungary 695,000 EUR 870,506 5.75%, 6/11/18 .......................................... Hungary 505,000 EUR 687,267 senior note, 3.875%, 2/24/20 ............................ Hungary 290,000 EUR 323,834 Government of Indonesia, FR10, 13.15%, 3/15/10 ................................... Indonesia 7,125,000,000 IDR 746,600 FR19, 14.25%, 6/15/13 ................................... Indonesia 63,035,000,000 IDR 7,478,460 FR20, 14.275%, 12/15/13 ................................. Indonesia 28,415,000,000 IDR 3,406,936 FR26, 11.00%, 10/15/14 .................................. Indonesia 4,500,000,000 IDR 489,672 FR28, 10.00%, 7/15/17 ................................... Indonesia 10,200,000,000 IDR 1,053,401 FR34, 12.80%, 6/15/21 ................................... Indonesia 108,710,000,000 IDR 12,661,845 FR39, 11.75%, 8/15/23 ................................... Indonesia 29,150,000,000 IDR 3,113,249 FR42, 10.25%, 7/15/27 ................................... Indonesia 86,000,000,000 IDR 8,101,759 (i) FR44, 10.00%, 9/15/24 ................................... Indonesia 19,740,000,000 IDR 1,839,748
40 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- FOREIGN GOVERNMENT AND AGENCY SECURITIES (CONTINUED) Government of Indonesia, (continued) FR47, 10.00%, 2/15/28 ................................... Indonesia 28,000,000,000 IDR $ 2,567,256 (d) senior bond, 144A, 6.625%, 2/17/37 ...................... Indonesia 940,000 819,305 (d) senior bond, 144A, 7.75%, 1/17/38 ....................... Indonesia 11,270,000 11,495,400 (d) senior bond, 144A, 8.50%, 10/12/35 ...................... Indonesia 945,000 1,013,513 (d) senior note, 144A, 11.625%, 3/04/19 ..................... Indonesia 2,655,000 3,580,931 (o) Government of Iraq, Reg S, 5.80%, 1/15/28 ..................... Iraq 3,620,000 2,431,916 Government of Malaysia, 3.461%, 7/31/13 ......................................... Malaysia 28,900,000 MYR 8,246,382 (i) 3.756%, 4/28/11 ......................................... Malaysia 104,670,000 MYR 30,412,481 3.833%, 9/28/11 ......................................... Malaysia 6,150,000 MYR 1,792,598 4.24%, 2/07/18 .......................................... Malaysia 64,800,000 MYR 18,517,145 Government of Mexico, 8.00%, 12/17/15 ......................................... Mexico 725,000(p) MXN 5,645,401 10.00%, 12/05/24 ........................................ Mexico 4,035,000(p) MXN 34,737,104 Government of Poland, (i) 4.75%, 4/25/12 .......................................... Poland 29,300,000 PLN 10,023,785 5.75%, 4/25/14 .......................................... Poland 24,040,000 PLN 8,372,865 5.75%, 9/23/22 .......................................... Poland 38,200,000 PLN 12,659,684 6.25%, 10/24/15 ......................................... Poland 44,475,000 PLN 15,845,261 senior note, 6.375%, 7/15/19 ............................ Poland 18,000,000 19,159,200 (d) Government of Qatar, senior note, 144A, 6.55%, 4/09/19 ........ Qatar 9,810,000 10,349,550 Government of Russia, (d) 144A, 7.50%, 3/31/30 .................................... Russia 60,190,080 60,788,971 (o) senior bond, Reg S, 7.50%, 3/31/30 ...................... Russia 10,656,000 10,762,027 Government of South Africa, 6.875%, 5/27/19 ......................................... South Africa 10,820,000 11,902,000 senior note, 5.875%, 5/30/22 ............................ South Africa 13,645,000 13,662,056 Government of Sweden, 4.00%, 12/01/09 ......................................... Sweden 302,400,000 SEK 42,451,034 5.25%, 3/15/11 .......................................... Sweden 73,480,000 SEK 10,885,601 5.50%, 10/08/12 ......................................... Sweden 24,960,000 SEK 3,830,125 Government of Venezuela, 10.75%, 9/19/13 ......................................... Venezuela 9,900,000 8,464,500 (o) senior bond, Reg S, 5.375%, 8/07/10 ..................... Venezuela 7,755,000 7,454,494 KfW Bankengruppe, senior note, 6.50%, 11/15/11 ................ Germany 10,164,000 NZD 6,968,978 Korea Development Bank, senior note, 8.00%, 1/23/14 ........... South Korea 11,695,000 12,904,275 Korea Treasury Bond, (i) 0400-1206, 4.00%, 6/10/12 ............................... South Korea 5,733,710,000 KRW 4,667,744 0475-1112, 4.75%, 12/10/11 .............................. South Korea 24,468,700,000 KRW 20,299,045 (i) 0525-1209, 5.25%, 9/10/12 ............................... South Korea 21,000,000,000 KRW 17,527,812 0525-1303, 5.25%, 3/10/13 ............................... South Korea 767,400,000 KRW 641,183 0525-2703, 5.25%, 3/10/27 ............................... South Korea 1,273,740,000 KRW 1,006,790 0550-1106, 5.50%, 6/10/11 ............................... South Korea 7,842,350,000 KRW 6,604,324 0550-1709, 5.50%, 9/10/17 ............................... South Korea 12,874,390,000 KRW 10,679,372 0575-1809, 5.75%, 9/10/18 ............................... South Korea 3,500,000,000 KRW 2,958,426 senior note, 7.125%, 4/16/19 ............................ South Korea 11,970,000 13,482,673 New South Wales Treasury Corp., senior note, 5.50%, 3/01/17 .................................................... Australia 12,025,000 AUD 9,647,407
Quarterly Statements of Investments | 41 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- FOREIGN GOVERNMENT AND AGENCY SECURITIES (CONTINUED) Nota Do Tesouro Nacional, 10.082%, 1/01/12 ........................................ Brazil 8,445(q) BRL $ 4,423,115 10.082%, 1/01/14 ........................................ Brazil 5,200(q) BRL 2,585,859 10.082%, 1/01/17 ........................................ Brazil 60,650(q) BRL 28,373,187 (r) Index Linked, 6.00%, 5/15/15 ............................ Brazil 17,930(q) BRL 17,201,113 (r) Index Linked, 6.00%, 5/15/45 ............................ Brazil 3,570(q) BRL 3,269,102 Province of Manitoba, 6.375%, 9/01/15 ......................... Canada 3,000,000 NZD 1,919,963 Province of Ontario, 6.25%, 6/16/15 ........................... Canada 2,826,000 NZD 1,839,176 Queensland Treasury Corp., 11, 6.00%, 6/14/11 ...................................... Australia 2,145,000 AUD 1,844,078 13, 6.00%, 8/14/13 ...................................... Australia 2,045,000 AUD 1,733,787 17, 6.00%, 9/14/17 ...................................... Australia 4,090,000 AUD 3,369,203 (d) 144A, 7.125%, 9/18/17 ................................... Australia 15,990,000 NZD 10,948,997 ---------------- TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $658,799,724) 667,272,392 ---------------- MUNICIPAL BONDS 3.1% Bay Area Toll Authority Toll Bridge Revenue, San Francisco Bay Area, Refunding, Series F1, 5.00%, 4/01/39 ............. United States 880,000 844,492 California State GO, 6.00%, 4/01/38 .......................................... United States 20,000,000 20,679,200 Refunding, 5.00%, 4/01/38 ............................... United States 35,000,000 31,836,350 Various Purpose, Refunding, 5.25%, 3/01/38 .............. United States 7,220,000 6,871,418 Chicago Board of Education GO, Refunding, Series C, Assured Guaranty, 5.25%, 12/01/26 .......................... United States 2,625,000 2,802,240 Chicago GO, Project and Refunding, Series A, FSA Insured, 5.00%, 1/01/25 ............................................. United States 690,000 706,670 Clovis USD, GO, Capital Appreciation, Election of 2004, Series A, NATL Guarantee, zero cpn., 8/01/25 ...................... United States 7,720,000 2,977,990 NATL Guarantee, zero cpn., 8/01/26 ...................... United States 3,985,000 1,420,533 NATL Guarantee, zero cpn., 8/01/29 ...................... United States 5,315,000 1,471,617 FGIC Insured, zero cpn., 8/01/27 ........................ United States 5,315,000 1,760,381 District of Columbia University Revenue, Georgetown University, Refunding, Series D, BHAC Insured, 5.50%, 4/01/36 .......... United States 2,240,000 2,304,736 Energy Northwest Electric Revenue, Columbia Generating Station, Refunding, Series A, 5.00%, 7/01/24 ........................ United States 2,240,000 2,346,378 (i) Indianapolis Local Public Improvement Bond Bank Revenue, Waterworks Project, Series A, Assured Guaranty, 5.50%, 1/01/38 ................................................. United States 7,725,000 7,647,827 Kentucky State Municipal Power Agency Power System Revenue, Prairie State Project, Series A, BHAC Insured, 5.25%, 9/01/42 ................................................. United States 3,470,000 3,497,101 Las Vegas Valley Water District GO, Refunding, Series A, MBIA Insured, 5.00%, 6/01/26 ............................... United States 570,000 578,293 Lewisville ISD, GO, School Building, 5.00%, 8/15/26 ........... United States 790,000 834,746 Los Angeles USD, GO, Series I, 5.00%, 7/01/26 ................................................. United States 265,000 265,808 7/01/27 ................................................. United States 280,000 278,351
42 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION PRINCIPAL AMOUNT(e) VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- MUNICIPAL BONDS (CONTINUED) Matanuska-Susitna Borough Lease Revenue, Goose Creek Correctional Center, Assured Guaranty, 5.50%, 9/01/23 .......................................... United States 2,320,000 $ 2,579,654 6.00%, 9/01/28 .......................................... United States 2,900,000 3,202,064 MTA Revenue, Series B, Assured Guaranty, 5.25%, 11/15/20 ............. United States 1,120,000 1,223,656 Transportation, Series A, FSA Insured, 5.50%, 11/15/21 .. United States 1,060,000 1,178,137 Metropolitan Water District of Southern California Waterworks Revenue, Series A, 5.00%, 7/01/37 .......................... United States 2,140,000 2,156,585 Palomar Pomerado Health GO, Election of 2004, Series A, MBIA Insured, 5.125%, 8/01/37 ................................... United States 3,015,000 2,771,901 Philadelphia GO, Series B, Assured Guaranty, 7.125%, 7/15/38 .. United States 1,285,000 1,375,078 Placentia-Yorba Linda USD, GO, 2008 Election, Series A, 5.25%, 8/01/32 ............................................. United States 3,480,000 3,492,354 Poway USD, GO, Election of 2008, ID 07-1-A, zero cpn., 8/01/27 ................................................. United States 1,025,000 337,010 8/01/30 ................................................. United States 1,025,000 263,384 8/01/32 ................................................. United States 1,280,000 277,005 8/01/33 ................................................. United States 675,000 134,777 Regional Transportation District Sales Tax Revenue, Fastracks Project, Series A, AMBAC Insured, 5.00%, 11/01/27 .......... United States 850,000 886,082 San Bernardino Community College District GO, Election of 2002, Series A, 6.375%, 8/01/26 ......................................... United States 580,000 656,920 6.50%, 8/01/27 .......................................... United States 840,000 953,106 6.50%, 8/01/28 .......................................... United States 350,000 394,660 6.25%, 8/01/33 .......................................... United States 870,000 933,632 San Mateo County Community College District GO, Election of 2001, Series C, MBIA Insured, zero cpn., 9/01/30 ................................................. United States 2,475,000 738,862 3/01/31 ................................................. United States 675,000 188,224 ---------------- TOTAL MUNICIPAL BONDS (COST $112,327,100) ..................... 112,867,222 ---------------- TOTAL INVESTMENTS BEFORE SHORT TERM INVESTMENTS (COST $3,582,079,339) ...................................... 3,598,058,362 ---------------- SHORT TERM INVESTMENTS 4.2% FOREIGN GOVERNMENT AND AGENCY SECURITIES 0.3% (s) Egypt Treasury Bill, 8/11/09 -9/22/09 ......................... Egypt 22,650,000 EGP 4,027,117 Government of Malaysia, 3.869%, 4/13/10 ....................... Malaysia 17,480,000 MYR 5,026,300 ---------------- TOTAL FOREIGN GOVERNMENT AND AGENCY SECURITIES (COST $9,084,053) .......................................... 9,053,417 ---------------- TOTAL INVESTMENTS BEFORE MONEY MARKET FUNDS (COST $3,591,163,392) ...................................... 3,620,899,040 ----------------
Quarterly Statements of Investments | 43 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY/ FRANKLIN STRATEGIC INCOME FUND ORGANIZATION SHARES VALUE --------------------------------------------------------------- -------------- ---------------------- ---------------- SHORT TERM INVESTMENTS (CONTINUED) MONEY MARKET FUNDS (COST $144,339,893) 3.9% (t) Institutional Fiduciary Trust Money Market Portfolio, 0.00% ... United States 144,339,893 $ 144,339,893 ---------------- TOTAL INVESTMENTS (COST $3,735,503,285) 101.9% ................ 3,765,238,934 OTHER ASSETS, LESS LIABILITIES (1.9)% ......................... (69,365,447) ---------------- NET ASSETS 100.0% ............................................. $ 3,695,873,487 ================
See Abbreviations on page 56. (a) Non-income producing. (b) See Note 5 regarding restricted and illiquid securities. (c) Rounds to less than 0.1% of net assets. (d) Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust's Board of Trustees. At July 31, 2009, the aggregate value of these securities was $459,784,584, representing 12.44% of net assets. (e) The principal amount is stated in U.S. dollars unless otherwise indicated. (f) The coupon rate shown represents the rate at period end. (g) Defaulted security or security for which income has been deemed uncollectible. (h) Income may be received in additional securities and/or cash. (i) A portion or all of the security purchased on a when-issued or delayed delivery basis. (j) Perpetual security with no stated maturity date. (k) See Note 7 regarding other considerations. (l) Principal amount of security is adjusted for inflation. (m) A supranational organization is an entity formed by two or more central governments through international treaties. (n) The principal amount is stated in original face, and scheduled paydowns are reflected in the market price on ex-date. (o) Security was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under guidelines approved by the Trust's Board of Trustees. At July 31, 2009, the aggregate value of these securities was $20,648,437, representing 0.56% of net assets. (p) Principal amount is stated in 100 Mexican Peso Units. (q) Principal amount is stated in 1000 Brazilian Real Units. (r) Redemption price at maturity is adjusted for inflation. (s) The security is traded on a discount basis with no stated coupon rate. (t) The Institutional Fiduciary Trust Money Market Portfolio is managed by the Fund's investment manager. The rate shown is the annualized seven-day yield at period end. 44 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED) FRANKLIN STRATEGIC INCOME FUND At July 31, 2009, the Fund had the following forward exchange contracts outstanding. See Note 3. FORWARD EXCHANGE CONTRACTS
SETTLEMENT UNREALIZED UNREALIZED CURRENCY COUNTERPARTY TYPE QUANTITY CONTRACT AMOUNT* DATE APPRECIATION DEPRECIATION - ------------------------ ------------ ---- --------------- ------------------ ---------- ------------ ------------ New Zealand Dollar ..... DBAB Sell 2,601,679 1,453,912 8/03/09 $ -- $ (267,933) New Zealand Dollar ..... BZWS Sell 1,018,449 581,565 8/03/09 -- (92,466) New Zealand Dollar ..... BZWS Buy 1,018,449 670,037 8/03/09 3,993 -- New Zealand Dollar ..... DBAB Buy 2,601,679 1,713,206 8/03/09 8,639 -- Brazilian Real ......... DBAB Sell 11,270,000 4,997,561 8/04/09 -- (1,041,557) Indonesian Rupiah ...... HSBC Buy 204,079,388,412 30,299,970 NZD 8/04/09 493,064 -- Indonesian Rupiah ...... HSBC Sell 204,079,388,412 31,310,700 NZD 8/04/09 284,308 -- New Zealand Dollar ..... CITI Sell 2,583,681 1,453,912 8/04/09 -- (255,910) New Zealand Dollar ..... BZWS Sell 1,026,315 577,097 8/04/09 -- (102,095) New Zealand Dollar ..... DBAB Sell 1,030,760 581,565 8/04/09 -- (100,569) New Zealand Dollar ..... BZWS Buy 1,026,315 675,213 8/04/09 3,980 -- New Zealand Dollar ..... DBAB Buy 1,030,760 674,941 8/04/09 7,192 -- New Zealand Dollar ..... DBAB Sell 1,532,902 865,645 8/05/09 -- (148,729) New Zealand Dollar ..... CITI Sell 2,023,648 1,154,194 8/06/09 -- (184,837) New Zealand Dollar ..... FBCO Sell 1,009,952 577,097 8/06/09 -- (91,180) New Zealand Dollar ..... DBAB Sell 2,005,773 1,147,242 8/07/09 -- (179,874) New Zealand Dollar ..... CITI Sell 1,996,763 1,147,242 8/07/09 -- (173,913) New Zealand Dollar ..... FBCO Sell 1,973,988 1,147,242 8/07/09 -- (158,843) New Zealand Dollar ..... FBCO Sell 988,968 573,621 8/10/09 -- (80,600) New Zealand Dollar ..... FBCO Sell 988,482 573,621 8/11/09 -- (80,236) New Zealand Dollar ..... DBAB Sell 5,050,133 2,976,296 8/12/09 -- (364,029) Russian Ruble .......... DBAB Buy 98,105,572 5,846,578 NZD 8/12/09 -- (751,796) New Zealand Dollar ..... DBAB Sell 5,487,492 66,500,169,499 VND 8/14/09 94,451 -- Russian Ruble .......... DBAB Buy 97,208,161 5,808,327 NZD 8/14/09 -- (755,963) New Zealand Dollar ..... FBCO Sell 4,934,741 2,976,438 8/24/09 -- (285,015) New Zealand Dollar ..... DBAB Sell 4,911,000 2,969,829 8/26/09 -- (275,511) South Korean Won ....... JPHQ Buy 5,415,120,000 4,497,384 CHF 8/28/09 218,816 -- South Korean Won ....... JPHQ Sell 5,415,120,000 5,385,446 CHF 8/28/09 612,300 -- Russian Ruble .......... DBAB Buy 48,366,965 2,908,311 NZD 9/15/09 -- (396,121) Mexican Peso ........... DBAB Sell 35,638,464 85,218,696 RUB 9/17/09 1,768 -- United States Dollar ... UBSW Buy 20,000,000 14,359,254 EUR 9/17/09 -- (468,207) Chinese Yuan ........... HSBC Buy 102,616,000 14,958,601 9/23/09 76,490 -- Russian Ruble .......... BZWS Buy 85,937,019 4,088,221 AUD 9/24/09 -- (702,770) Russian Ruble .......... BZWS Buy 132,105,686 6,349,870 AUD 9/28/09 -- (1,137,265) Vietnamese Dong ........ HSBC Buy 32,917,966,021 2,673,084 AUD 10/07/09 -- (399,425) Chinese Yuan ........... HSBC Buy 10,867,913 2,348,144 AUD 10/13/09 -- (359,183) Chinese Yuan ........... HSBC Buy 11,141,998 2,365,951 AUD 10/19/09 -- (332,774) Chinese Yuan ........... HSBC Buy 19,992,188 2,890,297 10/23/09 39,862 -- Chinese Yuan ........... HSBC Buy 33,924,068 4,878,259 10/26/09 93,976 -- Chinese Yuan ........... HSBC Buy 20,270,115 2,893,664 10/27/09 77,347 -- Swiss Franc ............ UBSW Buy 23,100,000 15,594,937 EUR 10/27/09 -- (596,163) Swiss Franc ............ UBSW Sell 23,100,000 15,631,344 EUR 10/27/09 648,058 --
Quarterly Statements of Investments | 45 Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED) FRANKLIN STRATEGIC INCOME FUND FORWARD EXCHANGE CONTRACTS (CONTINUED)
SETTLEMENT UNREALIZED UNREALIZED CURRENCY COUNTERPARTY TYPE QUANTITY CONTRACT AMOUNT* DATE APPRECIATION DEPRECIATION - ------------------------ ------------ ---- --------------- ------------------ ---------- ------------ ------------ New Zealand Dollar ..... CITI Sell 4,842,580 2,976,438 11/30/09 $ -- $ (204,136) New Zealand Dollar ..... UBSW Sell 1,573,470 965,560 11/30/09 -- (67,885) New Zealand Dollar ..... DBAB Sell 1,563,991 962,402 11/30/09 -- (64,817) Euro ................... UBSW Sell 5,950,000 8,287,160 12/01/09 -- (194,334) Mexican Peso ........... CITI Sell 12,522,000 924,303 12/01/09 -- (7,678) New Zealand Dollar ..... DBAB Sell 3,669,964 2,232,329 12/02/09 -- (177,771) New Zealand Dollar ..... BZWS Sell 2,608,522 1,612,067 12/02/09 -- (100,974) New Zealand Dollar ..... FBCO Sell 1,211,093 749,025 12/02/09 -- (46,312) Euro ................... CITI Sell 10,316,000 14,448,899 12/16/09 -- (256,432) Euro ................... UBSW Sell 3,226,000 4,517,755 12/16/09 -- (80,868) Mexican Peso ........... DBAB Sell 96,600,000 7,002,791 12/17/09 -- (170,368) Mexican Peso ........... DBAB Sell 85,260,000 6,295,503 1/04/10 -- (19,248) Euro ................... DBAB Sell 7,289,000 9,902,107 1/12/10 -- (488,621) United States Dollar ... JPHQ Buy 5,000,000 3,585,129 EUR 1/13/10 - (110,734) Euro ................... BZWS Sell 7,281,540 10,271,850 1/20/10 -- (108,346) Mexican Peso ........... CITI Sell 12,642,000 927,377 1/29/10 -- (5,609) New Zealand Dollar ..... UBSW Sell 1,052,968 685,377 1/29/10 -- (3,565) Euro ................... DBAB Sell 9,257,000 13,101,988 2/04/10 -- (247,281) Singapore Dollar ....... HSBC Sell 22,605,000 15,000,000 2/17/10 -- (696,377) Singapore Dollar ....... BZWS Sell 22,582,500 15,000,000 2/17/10 -- (680,754) Singapore Dollar ....... UBSW Sell 3,797,000 2,499,918 3/23/10 -- (136,655) Indian Rupee ........... DBAB Buy 59,919,000 1,157,989 4/09/10 73,531 -- Indian Rupee ........... DBAB Buy 128,487,000 2,481,402 4/12/10 158,923 -- Indian Rupee ........... JPHQ Buy 86,303,000 1,654,265 4/13/10 119,099 -- Indian Rupee ........... JPHQ Buy 84,715,000 1,654,267 4/15/10 86,256 -- Indian Rupee ........... DBAB Buy 29,785,000 580,604 4/19/10 31,199 -- Indian Rupee ........... JPHQ Buy 42,318,000 829,439 4/19/10 39,800 -- Indian Rupee ........... DBAB Buy 60,176,000 1,161,219 4/26/10 74,312 -- Chilean Peso ........... JPHQ Buy 937,202,000 1,601,644 4/27/10 140,043 -- Chilean Peso ........... CITI Buy 940,566,000 1,601,645 4/27/10 146,294 -- Indian Rupee ........... JPHQ Buy 8,585,000 165,894 4/27/10 10,363 -- Chilean Peso ........... UBSW Buy 189,154,000 320,329 4/28/10 31,193 -- Chilean Peso ........... CITI Buy 1,510,671,000 2,562,631 4/28/10 244,781 -- Indian Rupee ........... JPHQ Buy 42,592,000 829,445 4/28/10 44,952 -- Indian Rupee ........... JPHQ Buy 42,633,000 829,436 4/30/10 45,707 -- Indian Rupee ........... DBAB Buy 81,531,000 1,661,220 6/01/10 9,469 -- Indian Rupee ........... HSBC Buy 2,417,000 49,835 6/02/10 -- (310) Indian Rupee ........... HSBC Buy 11,961,000 249,188 6/03/10 -- (4,116) Indian Rupee ........... HSBC Buy 79,838,000 1,661,215 6/04/10 -- (25,487) Indian Rupee ........... DBAB Buy 39,919,000 830,608 6/07/10 -- (12,877) Indian Rupee ........... DBAB Buy 20,136,000 417,759 6/08/10 -- (5,301) Indian Rupee ........... HSBC Buy 16,031,000 332,249 6/08/10 -- (3,876) Indian Rupee ........... DBAB Buy 16,259,000 334,203 6/10/10 -- (1,197)
46 | Quarterly Statements of Investments Franklin Strategic Series STATEMENT OF INVESTMENTS, JULY 31, 2009 (UNAUDITED) (CONTINUED) FRANKLIN STRATEGIC INCOME FUND FORWARD EXCHANGE CONTRACTS (CONTINUED)
SETTLEMENT UNREALIZED UNREALIZED CURRENCY COUNTERPARTY TYPE QUANTITY CONTRACT AMOUNT* DATE APPRECIATION DEPRECIATION - ------------------------ ------------ ---- --------------- ------------------ ---------- ------------ ------------ Indian Rupee ........... BZWS Buy 24,313,000 501,299 6/11/10 $ -- $ (3,362) Indian Rupee ........... HSBC Buy 16,292,000 334,195 6/11/10 -- (530) Indian Rupee ........... DBAB Buy 40,697,000 835,496 6/16/10 -- (2,238) Indian Rupee ........... DBAB Buy 37,071,000 751,947 6/21/10 6,862 -- Euro ................... UBSW Sell 9,972,000 13,906,353 6/29/10 -- (324,517) New Zealand Dollar ..... DBAB Sell 29,251,645 18,000,000 7/06/10 -- (940,507) New Zealand Dollar ..... DBAB Sell 2,611,615 1,680,574 7/30/10 -- (7,604) New Zealand Dollar ..... DBAB Sell 2,601,679 1,671,189 8/03/10 -- (10,095) New Zealand Dollar ..... BZWS Sell 1,018,449 653,844 8/03/10 -- (4,308) New Zealand Dollar ..... DBAB Sell 1,030,760 658,552 8/04/10 -- (7,509) New Zealand Dollar ..... BZWS Sell 1,026,315 658,894 8/04/10 -- (4,295) ------------ ------------ Unrealized appreciation (depreciation) ...................................................... 3,927,028 (15,009,858) ------------ ------------ Net unrealized appreciation (depreciation) .............................................. $(11,082,830) ============
* In U.S. dollars unless otherwise indicated. See Abbreviations on page 56. See Notes to Statements of Investments. Quarterly Statements of Investments | 47 Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) 1. ORGANIZATION Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940, as amended, as an open-end investment company, consisting of eight funds (Funds). 2. SECURITY VALUATION Equity and other securities listed on a securities exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Over-the-counter securities and listed securities for which there is no reported sale are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities. Investments in open-end mutual funds and non-registered money market funds are valued at the closing net asset value. Short term investments are valued at cost. Corporate debt securities, government securities, municipal securities, mortgage backed securities, asset-backed securities, collateralized debt obligations and other debt securities generally trade in the over-the-counter market rather than on a securities exchange. The Funds may utilize independent pricing services, quotations from bond dealers, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Funds' pricing services may use valuation models or matrix pricing which considers information with respect to comparable bond and note transactions, quotations from bond dealers, or by reference to other securities that are considered comparable in such characteristics as rating, interest rate and maturity date, option adjusted spread models, prepayment projections, interest rate spreads and yield curves, to determine current value. Debt securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the close of the NYSE on the date that the values of the foreign debt securities are determined. Senior secured corporate loans with floating or variable interest rates generally trade in the over-the-counter market rather than on a securities exchange. The Funds may utilize independent pricing services, quotations from loan dealers and other financial institutions, and information with respect to bond and note transactions, to assist in determining a current market value for each security. The Funds' pricing services use independent market quotations from loan dealers or financial institutions and may incorporate valuation methodologies that consider multiple bond characteristics such as dealer quotes, issuer type, coupon, maturity, weighted average maturity, interest rate spreads and yield curves, cash flow and credit risk/quality analysis, to determine current value. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or the NYSE, whichever is earlier. If no sale is reported at that time, the foreign equity security will be valued within the range of the most recent quoted bid and ask prices. The value is then converted into its U.S. dollar equivalent at the foreign exchange 48 | Quarterly Statements of Investments Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) 2. SECURITY VALUATION (CONTINUED) rate in effect at the close of the NYSE on the day that the value of the security is determined. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert to the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Funds' Board of Trustees. The Funds have procedures to determine the fair value of individual securities and other assets for which market prices are not readily available or which may not be reliably priced. Methods for valuing these securities may include: fundamental analysis based upon the underlying investment book value, anticipated future cash flows, market changes in comparable or similar securities, matrix pricing, discounts from market prices of similar securities, or discounts applied due to the nature and duration of restrictions on the disposition of the securities. Due to the inherent uncertainty of valuations of such securities, the fair values may differ significantly from the values that would have been used had a ready market for such investments existed. Occasionally, events occur between the time at which trading in a security is completed and the close of the NYSE that might call into question the availability (including the reliability) of the value of a portfolio security held by the fund. The investment manager monitors price movements following the close of trading in foreign stock markets through a series of country specific market proxies (such as baskets of American Depository Receipts, futures contracts and exchange traded funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services. All security valuation procedures are approved by the Funds' Board of Trustees. 3. DERIVATIVE FINANCIAL INSTRUMENTS Certain funds may invest in derivative financial instruments (derivatives) in order to manage risk or gain exposure to various other investments or markets. Derivatives are financial contracts based on an underlying or notional amount, require no initial investment or an initial net investment that is smaller than would normally be required to have a similar response to changes in market factors, and require or permit net settlement. Derivatives may contain various risks including the potential inability of the counterparty to fulfill their obligations under the terms of the contract, the potential for an illiquid secondary market, and the potential for market movements. Derivatives are marked to market daily based upon quotations from market makers or the Fund's independent pricing services and the Fund's net benefit or obligation under the contract, as measured by the fair market value of the contract, is included in net assets. Certain funds enter into forward exchange contracts in order to hedge against fluctuations in foreign exchange rates or to gain exposure to certain foreign currencies. A forward exchange contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency for a specific exchange rate on a future date. Pursuant to the terms of the forward exchange contacts, cash or securities may be required to be deposited as collateral. Quarterly Statements of Investments | 49 Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) 4. INCOME TAXES At July 31, 2009, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:
FRANKLIN FRANKLIN FRANKLIN FRANKLIN GROWTH BIOTECHNOLOGY FLEX CAP FOCUSED CORE OPPORTUNITIES DISCOVERY FUND GROWTH FUND EQUITY FUND FUND -------------- -------------- ------------ --------------- Cost of investments .......... $ 303,375,539 $2,329,229,895 $ 7,090,629 $ 308,430,123 ============== ============== ============ =============== Unrealized appreciation ...... $ 73,390,773 $ 421,137,913 $ 870,037 $ 73,485,595 Unrealized depreciation ...... (41,265,025) (161,308,340) (894,393) (19,666,458) -------------- -------------- ------------ --------------- Net unrealized appreciation (depreciation) ............ $ 32,125,748 $ 259,829,573 $ (24,356) $ 53,819,137 ============== ============== ============ ===============
FRANKLIN FRANKLIN FRANKLIN FRANKLIN NATURAL SMALL CAP SMALL-MID CAP STRATEGIC RESOURCES FUND GROWTH FUND GROWTH FUND INCOME FUND -------------- -------------- -------------- ------------- Cost of investments .......... $ 631,160,560 $ 277,039,098 $3,046,823,835 $3,745,025,244 ============= ============== ============== ============== Unrealized appreciation ...... $ 115,399,339 $ 62,178,214 $ 694,463,285 $ 187,342,755 Unrealized depreciation ...... (106,798,618) (51,279,641) (336,605,307) (167,129,065) ------------- -------------- -------------- -------------- Net unrealized appreciation (depreciation) ............ $ 8,600,721 $ 10,898,573 $ 357,857,978 $ 20,213,690 ============= ============== ============== ==============
5. RESTRICTED SECURITIES At July 31, 2009, the following funds held investments in restricted securities, excluding 144A securities deemed to be liquid, valued in accordance with procedures approved by the Trust's Board of Trustees as reflecting fair value, as follows:
SHARES/WARRANTS/ ACQUISITION PRINCIPAL AMOUNT ISSUER DATES COST VALUE - ---------------- ---------------------------------------------------- ----------- ---------- ----------- FRANKLIN BIOTECHNOLOGY DISCOVERY FUND 1,500,000(a) CAD ConjuChem Biotechnologies Inc., cvt., sub. note, 144A, 8.00%, 12/31/10 ........................................ 12/12/07 $1,480,677 $ 739,353 1,128,271 Fibrogen Inc., pfd., E ............................. 5/19/00 5,065,937 5,223,895 1,006,900 Indevus Pharmaceuticals Inc., Escrow Account ......................................... 2/20/09 1,107,590 1,100,743 ----------- TOTAL RESTRICTED SECURITIES (2.16% of Net Assets) .......................... $ 7,063,991 =========== FRANKLIN FLEX CAP GROWTH FUND 36,443 Anda Networks ...................................... 3/24/00 $2,000,000 $ 28,061 2,227,171 FibroGen Inc., pfd., E ............................. 5/19/00 9,999,998 10,311,802 ----------- TOTAL RESTRICTED SECURITIES (0.40% of Net Assets) .......................... $10,339,863 ===========
50 | Quarterly Statements of Investments Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) 5. RESTRICTED SECURITIES (CONTINUED)
SHARES/WARRANTS/ ACQUISITION PRINCIPAL AMOUNT ISSUER DATES COST VALUE - ---------------- ---------------------------------------------------------- ---------------- ---------- -------- FRANKLIN GROWTH OPPORTUNITIES FUND 374,806 Dilithium Networks Inc., depository receipt, D, pfd., 144A, PIPES ......................... 7/13/06 $ 873,300 $333,577 14,501 Dilithium Networks Inc., 11.00%, 12/31/09 .............................................. 10/30/08 14,501 14,501 12,447 Dilithium Networks Inc., wts., 12/31/09 .............................................. 10/30/08 -- -- -------- TOTAL RESTRICTED SECURITIES (0.10% of Net Assets) .. $348,078 ======== FRANKLIN NATURAL RESOURCES FUND 199,375 Energy Coal Resources, 144A .............................. 11/16/05-5/05/06 $ 741,939 $ -- 29,847 Energy Coal Resources, 144A, pfd. ........................ 3/17/09 2,376,164 -- -------- TOTAL RESTRICTED SECURITIES (0.00% of Net Assets) .. $ -- ======== FRANKLIN SMALL-MID CAP GROWTH FUND 91,107 Anda Networks ............................................ 3/24/00 $5,000,000 $ 70,152 ======== TOTAL RESTRICTED SECURITIES (0.00%(b) of Net Assets) FRANKLIN STRATEGIC INCOME FUND 516,372 Cambridge Industries Liquidating Trust Interest ........................................ 1/09/02 $ -- $ -- 64,666 VS Holdings Inc. ......................................... 12/06/01 64,666 -- -------- TOTAL RESTRICTED SECURITIES (0.00% of Net Assets) .. $ -- ========
(a) The fund also invests in unrestricted securities of the issuer, valued at $0 as of July 31, 2009. (b) Rounds to less than 0.01% of net assets. See Abbreviations on page 56. 6. HOLDINGS OF 5% VOTING SECURITIES OF PORTFOLIO COMPANIES Investments in "affiliated companies" for the Franklin Small-Mid Cap Growth Fund for the three months ended July 31, 2009, were as shown below.
NUMBER OF NUMBER OF SHARES HELD SHARES HELD VALUE AT REALIZED AT BEGINNING GROSS GROSS AT END END OF INVESTMENT CAPITAL NAME OF ISSUER OF PERIOD ADDITIONS REDUCTIONS OF PERIOD PERIOD INCOME GAIN (LOSS) - ---------------------------------- ------------ --------- ---------- ----------- -------- ---------- ----------- FRANKLIN SMALL-MID CAP GROWTH FUND NON-CONTROLLED AFFILIATES FormFactor Inc. .................. 2,717,524 -- 878,419 1,839,105 $--(a) $-- $(9,208,270) --- --- -----------
(a) As of July 31, 2009 no longer an affiliate. Quarterly Statements of Investments | 51 Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) 7. OTHER CONSIDERATIONS From time to time, officers, directors or employees of the Franklin Strategic Income Fund's Investment Manager may have discussions or enter into agreements with issuers, underwriters or creditors' committees which, pursuant to the fund's policies and requirements of applicable securities laws, could prevent the fund from trading in the securities of such company for limited or extended periods of time. 8. FAIR VALUE MEASUREMENTS Financial Accounting Standards Board (FASB) Statement No. 157, "Fair Value Measurement" (SFAS 157) establishes a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Trust's own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds' investments and are summarized in the following fair value hierarchy: - Level 1 - quoted prices in active markets for identical securities - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speed, credit risk, etc.) - Level 3 - significant unobservable inputs (including the fund's own assumptions in determining the fair value of investments) The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used as of July 31, 2009, in valuing the funds' assets and liabilities carried at fair value:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL -------------- ---------- ----------- -------------- FRANKLIN BIOTECHNOLOGY DISCOVERY FUND ASSETS: Investments in Securities: Equity Investments:(a) Biotechnology $ 227,730,952 $ 85,304 $ 6,324,638 $ 234,140,894 Other Equity Investments(b) 84,094,322 -- -- 84,094,322 Convertible Bonds -- -- 739,353 739,353 Short Term Investments 13,740,858 2,785,860 -- 16,526,718 -------------- ---------- ----------- -------------- Total Investments in Securities $ 325,566,132 $2,871,164 $ 7,063,991 $ 335,501,287 ============== ========== =========== ==============
52 | Quarterly Statements of Investments Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) 8. FAIR VALUE MEASUREMENTS (CONTINUED)
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL -------------- ---------- ----------- -------------- FRANKLIN FLEX CAP GROWTH FUND ASSETS: Investments in Securities: Equity Investments:(a) Pharmaceuticals, Biotechnology & Life Sciences $ 229,861,000 $ -- $10,311,802 $ 240,172,802 Telecommunication Services 70,060,500 -- 28,061 70,088,561 Other Equity Investments(b) 2,182,078,025 -- -- 2,182,078,025 Short Term Investments 96,720,080 -- -- 96,720,080 -------------- ---------- ----------- -------------- Total Investments in Securities $2,578,719,605 $ -- $10,339,863 $2,589,059,468 ============== ========== =========== ============== FRANKLIN FOCUSED CORE EQUITY FUND ASSETS: Investments in Securities: Equity Investments:(a) Health Care $ 1,275,871 $ 122,535 $ -- $ 1,398,406 Other Equity Investments(b) 5,263,949 -- -- 5,263,949 Short Term Investments 403,918 -- -- 403,918 -------------- ---------- ----------- -------------- Total Investments in Securities $ 6,943,738 $ 122,535 $ -- $ 7,066,273 ============== ========== =========== ============== FRANKLIN GROWTH OPPORTUNITIES FUND ASSETS: Investments in Securities: Equity Investments:(a) Information Technology $ 122,764,965 $ -- $ 333,577 $ 123,098,542 Other Equity Investments(b) 220,238,596 -- -- 220,238,596 Notes -- -- 14,501 14,501 Short Term Investments 18,897,621 -- -- 18,897,621 -------------- ---------- ----------- -------------- Total Investments in Securities $ 361,901,182 $ -- $ 348,078 $ 362,249,260 ============== ========== =========== ============== FRANKLIN NATURAL RESOURCES FUND ASSETS: Investments in Securities: Equity Investments:(a) Coal & Consumable Fuels $ 20,111,566 $ -- $ --(c) $ 20,111,566 Oil & Gas Exploration & Production 179,146,244 7,196,296 -- 186,342,540 Other Equity Investments(b) 392,018,651 -- -- 392,018,651 Short Term Investments 41,288,524 -- -- 41,288,524 -------------- ---------- ----------- -------------- Total Investments in Securities $ 632,564,985 $7,196,296 $ -- $ 639,761,281 ============== ========== =========== ==============
Quarterly Statements of Investments | 53 Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) 8. FAIR VALUE MEASUREMENTS (CONTINUED)
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL -------------- -------------- ------- -------------- FRANKLIN SMALL CAP GROWTH FUND ASSETS: Investments in Securities: Equity Investments(a, b) $ 271,526,849 $ -- $ -- $ 271,526,849 Short Term Investments 15,078,282 1,332,540 -- 16,410,822 -------------- -------------- ------- -------------- Total Investments in Securities $ 286,605,131 $ 1,332,540 $ -- $ 287,937,671 ============== ============== ======= ============== FRANKLIN SMALL-MID CAP GROWTH FUND ASSETS: Investments in Securities: Equity Investments:(a) Telecommunication Services $ 76,680,789 $ -- $70,152 $ 76,750,941 Other Equity Investments(b) 3,230,252,338 -- -- 3,230,252,338 Convertible Bonds -- 17,438,067 -- 17,438,067 Short Term Investments 45,283,802 34,956,665 -- 80,240,467 -------------- -------------- ------- -------------- Total Investments in Securities $3,352,216,929 $ 52,394,732 $70,152 $3,404,681,813 ============== ============== ======= ============== FRANKLIN STRATEGIC INCOME FUND ASSETS: Investments in Securities: Equity Investments:(a) Automobiles & Components $ -- $ -- $ --(c) $ -- Banks 262,000 109,686 -- 371,686 Commercial & Professional Services -- -- --(c) -- Diversified Financials -- 958,366 -- 958,366 Senior Floating Rate Interests -- 394,216,223 -- 394,216,223 Corporate Bonds -- 1,507,108,585 -- 1,507,108,585 Convertible Bonds -- 5,415,000 -- 5,415,000 Asset-Backed Securities and Commercial Mortgage-Backed Securities -- 246,345,795 -- 246,345,795 Mortgage-Backed Securities -- 340,716,065 -- 340,716,065 U.S. Government and Agency Securities -- 336,574,290 -- 336,574,290 Foreign Government and Agency Securities -- 667,272,392 -- 667,272,392 Municipal Bonds -- 112,867,222 -- 112,867,222 Short Term Investments 144,339,893 9,053,417 -- 153,393,310 -------------- -------------- ------- -------------- Total Investments in Securities $ 144,601,893 $3,620,637,041 $ -- $3,765,238,934 ============== ============== ======= ============== Forward Exchange Contracts -- 3,927,028 -- 3,927,028 LIABILITIES: Forward Exchange Contracts -- 15,009,858 -- 15,009,858
(a) Includes common and preferred stock as well as other equity investments. (b) For detailed industry descriptions, see the accompanying Statement of Investments. (c) Includes securities determined to have no value at July 31, 2009. 54 | Quarterly Statements of Investments Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) 8. FAIR VALUE MEASUREMENTS (CONTINUED) At July 31, 2009, the reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining the Funds' fair value, were as follows:
NET CHANGE IN UNREALIZED NET CHANGE APPRECIATION IN (DEPRECIATION) NET UNREALIZED NET TRANSFER ATTRIBUTABLE TO BEGINNING REALIZED APPRECIATION PURCHASES IN (OUT) OF ENDING ASSETS STILL HELD BALANCE GAIN (LOSS) (DEPRECIATION) (SALES) LEVEL 3 BALANCE AT PERIOD END ----------- ----------- -------------- --------- ----------- ----------- ----------------- FRANKLIN BIOTECHNOLOGY DISCOVERY FUND ASSETS Equity Investments:(a) Biotechnology ......... $ 6,787,229 $-- $(462,591) $-- $-- $ 6,324,638 $(462,591) Convertible Bonds ........ 785,900 -- (46,547) -- -- 739,353 (46,547) ----------- --- --------- --- --- ----------- --------- Total .............. $ 7,573,129 $-- $(509,138) $-- $-- $ 7,063,991 $(509,138) =========== === ========= === === =========== ========= FRANKLIN FLEX CAP GROWTH FUND ASSETS Equity Investments:(a) Pharmaceuticals, Biotechnology & Life Sciences ........... $11,224,942 $-- $(913,140) $-- $-- $10,311,802 $(913,140) Telecommunication Services ........... 28,061 -- -- -- -- 28,061 -- ----------- --- --------- --- --- ----------- --------- Total .............. $11,253,003 $-- $(913,140) $-- $-- $10,339,863 $(913,140) =========== === ========= === === =========== ========= FRANKLIN GROWTH OPPORTUNITIES FUND ASSETS Equity Investments:(a) Information Technology ......... $ 487,248 $-- $(153,671) $-- $-- $ 333,577 $(153,671) Notes .................... 14,501 -- -- -- -- 14,501 -- ----------- --- --------- --- --- ----------- --------- Total .............. $ 501,749 $-- $(153,671) $-- $-- $ 348,078 $(153,671) =========== === ========= === === =========== ========= FRANKLIN NATURAL RESOURCES FUND ASSETS Equity Investments:(a) Coal & Consumable Fuels .............. $ 399,194 $-- $(399,194) $-- $-- $ --(b) $(399,194) FRANKLIN SMALL-MID CAP GROWTH FUND ASSETS Equity Investments: Telecommunication Services ........... $ 70,152 $-- $ -- $-- $-- $ 70,152 $ --
(a) Includes common and preferred stock as well as other equity investments. (b) Includes securities determined to have no value at July 31, 2009. 9. SUBSEQUENT EVENTS The Funds have evaluated subsequent events through September 22, 2009, the issuance date of the financial statements and determined that no events have occurred that require disclosure. Quarterly Statements of Investments | 55 Franklin Strategic Series NOTES TO STATEMENTS OF INVESTMENTS (UNAUDITED) (CONTINUED) ABBREVIATIONS CURRENCY AUD - Australian Dollar BRL - Brazilian Real CAD - Canadian Dollar CHF - Swiss Franc EGP - Egyptian Pound EUR - Euro IDR - Indonesian Rupiah KRW - South Korean Won MXN - Mexican Peso MYR - Malaysian Ringgit NZD - New Zealand Dollar PLN - Polish Zloty RUB - Russian Ruble SEK - Swedish Krona VND - Vietnamese Dong SELECTED PORTFOLIO ADR - American Depository Receipt AMBAC - American Municipal Bond Assurance Corp. BHAC - Berkshire Hathaway Assurance Corp. CLO - Collateralized Loan Obligation FGIC - Financial Guaranty Insurance Co. FRN - Floating Rate Note FSA - Financial Security Assurance Inc. GO - General Obligation ID - Improvement District IDA - Industrial Development Authority/Agency ISD - Independent School District L/C - Letter of Credit MBIA - Municipal Bond Investors Assurance Corp. (effective February 18, 2009, MBIA spun-off and established National Public Financial Guarantee Corp. as a subsidiary under MBIA) MTA - Metropolitan Transit Authority NATL - National Public Financial Guarantee Corp. PIK - Payment-In-Kind PIPES - Private Investment in Public Equity Security SF - Single Family USD - Unified/Union School District COUNTERPARTY BZWS - Barclays Bank PLC CITI - Citibank N.A. DBAB - Deutsche Bank AG FBCO - Credit Suisse International HSBC - HSBC Bank USA JPHQ - JPMorgan Chase Bank, N.A. UBSW - UBS AG For information on the Funds' policy regarding other significant accounting policies, please refer to the Funds' most recent semiannual or annual shareholder report. 56 | Quarterly Statements of Investments Item 2. Controls and Procedures. (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant's filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant's management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant's management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Within 90 days prior to the filing date of this Quarterly Schedule of Portfolio Holdings on Form N-Q, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant's management, including the Registrant's principal executive officer and the Registrant's principal financial officer, of the effectiveness of the design and operation of the Registrant's disclosure controls and procedures. Based on such evaluation, the Registrant's principal executive officer and principal financial officer concluded that the Registrant's disclosure controls and procedures are effective. (b) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the Registrant's internal controls or in other factors that could significantly affect the internal controls subsequent to the date of their evaluation in connection with the preparation of this Quarterly Schedule of Portfolio Holdings on Form N-Q. Item 3. Exhibits. (a) Certification pursuant to Section 30a-2 under the Investment Company Act of 1940 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officerand Chief Accounting Officer. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FRANKLIN STRATEGIC SERIES By /s/LAURA F. FERGERSON ------------------ Laura F. Fergerson Chief Executive Officer - Finance and Administration Date September 25, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By /s/LAURA F. FERGERSON ------------------ Laura F. Fergerson Chief Executive Officer - Finance and Administration Date September 25, 2009 By /s/GASTON GARDEY --------------------- Gaston Gardey Chief Financial Officer and Chief Accounting Officer Date September 25, 2009 EX-99.CERT 2 fss302cert.txt Item 3(a) I, Laura F. Fergerson, certify that: 1. I have reviewed this report on Form N-Q of FRANKLIN STRATEGIC SERIES; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 9/25/2009 S\ LAURA F. FERGERSON Laura F. Fergerson Chief Executive Officer - Finance and Administration Item 3(a) I, Gaston Gardey, certify that: 1. I have reviewed this report on Form N-Q of FRANKLIN STRATEGIC SERIES; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. 9/25/2009 S\ GASTON GARDEY Gaston Gardey Chief Financial Officer and Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----