fssncsr4-3015.htm - Generated by SEC Publisher for SEC Filing

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06243

Franklin Strategic 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: 4/30

Date of reporting period: 4/30/15

Item 1. Reports to Stockholders.

Franklin Templeton Investments

Gain From Our Perspective®

At Franklin Templeton Investments, we’re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we’re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world’s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe.

Focus on Investment Excellence

At the core of our firm, you’ll find multiple independent investment teams—each with a focused area of expertise—from traditional to alternative strategies and multi-asset solutions. And because our portfolio groups operate autonomously, their strategies can be combined to deliver true style and asset class diversification.

All of our investment teams share a common commitment to excellence grounded in rigorous, fundamental research and robust, disciplined risk management. Decade after decade, our consistent, research-driven processes have helped Franklin Templeton earn an impressive record of strong, long-term results.

Global Perspective Shaped by Local Expertise

In today’s complex and interconnected world, smart investing demands a global perspective. Franklin Templeton pioneered international investing over 60 years ago, and our expertise in emerging markets spans more than a quarter of a century. Today, our investment professionals are on the ground across the globe, spotting investment ideas and potential risks firsthand. These locally based teams bring in-depth understanding of local companies, economies and cultural nuances, and share their best thinking across our global research network.

Strength and Experience

Franklin Templeton is a global leader in asset management serving clients in over 150 countries.¹We run our business with the same prudence we apply to asset management, staying focused on delivering relevant investment solutions, strong long-term results and reliable, personal service. This approach, focused on putting clients first, has helped us to become one of the most trusted names in financial services.

1. As of 12/31/14. Clients are represented by the total number of shareholder accounts.

Not FDIC Insured | May Lose Value | No Bank Guarantee

Annual Report

Economic and Market Overview

U.S. economic growth moderated during the 12 months ended April 30, 2015, especially in the second half of the review period. The economy grew for most of 2014, supported in some quarters by greater spending by consumers, businesses, and state and local governments, partially offset by the negative impacts of a wider trade deficit and lower federal defense spending. In the first quarter of 2015, factors including low energy prices and U.S. dollar strength led exports to decline. In addition, harsh weather and labor disruptions weighed on business spending. Manufacturing and non-manufacturing activities increased, and the unemployment rate declined to 5.4% at period-end from 6.2% in April 2014.¹Housing market data were positive for most of the period as home sales and prices rose while mortgage rates declined. After a brief slump during the period, retail sales rebounded toward period-end as auto sales surged. Inflation, as measured by the Consumer Price Index, remained subdued during the past 12 months but rose late in the period amid higher energy prices bouncing from recent lows.

The Federal Reserve Board (Fed) ended its bond buying program in October 2014, based on its view that underlying economic strength could support ongoing progress in labor market conditions. Although the Fed had repeatedly stated that it could be patient with regard to raising interest rates, in March 2015, the Fed removed the word “patient” from its monetary policy guidance. It added, however, that it might keep interest rates lower than what it viewed as normal. In its April 2015 meeting, the Fed attributed the economy’s first-quarter slowdown to transitory factors. The Fed reiterated that it would raise interest rates when it saw further improvement in the labor market and was reasonably confident that inflation would move back to its 2% objective over the medium term.

Investor confidence grew during the period as corporate profits remained healthy, the Fed maintained its cautious tone on raising interest rates and China introduced more stimulus measures. The stock markets endured some sell-offs when many investors reacted to political instability in certain emerging markets, Greece’s debt negotiations and relatively weak economic growth in Europe and Japan, as well as less robust growth in China. U.S. stocks rose overall for the 12 months under review as the Standard & Poor’s 500 Index and the Dow Jones Industrial Average reached all-time highs.

The foregoing information reflects our analysis and opinions as of April 30, 2015. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable.

1. Source: Bureau of Labor Statistics.

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Franklin Flex Cap Growth Fund

This annual report for Franklin Flex Cap Growth Fund covers the fiscal year ended April 30, 2015.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation. The Fund normally invests predominantly in equity securities of companies that the manager believes have the potential for capital appreciation. The Fund has flexibility to invest in companies located, headquartered or operating inside and outside the U.S., across the entire market capitalization spectrum from small, emerging growth companies to well-established, large cap companies.

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a +13.59% cumulative total return. In comparison, the Fund’s narrow benchmark, the Russell 3000^®Growth Index, which measures performance of Russell 3000^®Index companies with higher price-to-book ratios and higher forecasted growth values, generated a +16.50% total return.¹Also in comparison, the Russell 1000^®Growth Index, which tracks performance of the largest companies in the Russell 3000^®Index with higher price-to-book ratios and higher forecasted growth values, produced a +16.67% total return.¹Additionally, the Fund’s broad benchmark, the Standard & Poor’s 500 Index (S&P 500^®), which tracks the broad U.S. stock market, posted a +12.98% total return.¹You can find the Fund’s long-term performance data in the Performance Summary beginning on page 7.

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. Please visit franklintempleton.com or call (800) 342-5236 for most recent month-end performance.

Investment Strategy

strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple

1. Source: Morningstar. Russell Investment Group is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes.
Russell^®is a trademark of Russell Investment Group.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 59.

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FRANKLIN FLEX CAP GROWTH FUND


Top 10 Equity Holdings
4/30/15
Company	% of Total
*Sector/Industry*	Net Assets

Apple Inc.	6.6	%
Technology Hardware & Equipment
Actavis PLC	3.9	%
Pharmaceuticals, Biotechnology & Life Sciences
Biogen Inc.	3.1	%
Pharmaceuticals, Biotechnology & Life Sciences
MasterCard Inc., A	3.0	%
Software & Services
Celgene Corp.	2.2	%
Pharmaceuticals, Biotechnology & Life Sciences
LinkedIn Corp., A	2.0	%
Software & Services
Affiliated Managers Group Inc.	2.0	%
Diversified Financials
Amazon.com Inc.	2.0	%
Retailing
NXP Semiconductors NV (Netherlands)	2.0	%
Semiconductors & Semiconductor Equipment
McKesson Corp.	2.0	%
Health Care Equipment & Services

scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

Manager’s Discussion

During the 12 months under review, nearly all sectors represented in the Fund’s portfolio delivered gains and contributed to absolute performance. Relative to the Russell 3000^®Growth Index, major contributors included stock selection in the information technology (IT), health care and consumer staples sectors.²

In the IT sector, top performers included game software content and services firm Electronic Arts, cybersecurity company Palo Alto Networks and an off-benchmark investment in integrated circuit manufacturer NXP Semiconductors. Electronic Arts generated fiscal fourth-quarter 2015 results above its guidance, driven by an increase in revenues from its console and mobile platforms, while revenues from its personal computer and other platform segments declined moderately. NXP Semiconductors generated positive 2014 and first-quarter 2015 results, with strong performance across its high-performance mixed signal and standard products segments. Shares surged after the company announced its acquisition of Freescale Semiconductor to expand its market share in the chips industry.

Within health care, our holdings in specialty pharmaceutical company Actavis and medical device company DexCom were among the strongest contributors to relative returns. Actavis’s share price rose as the company reported strong demand for its products and completed several acquisitions during the year. Most notable was the acquisition of aesthetics and dermatology company Allergan. Post the merger the company announced its intention to adopt “Allergan” as its new corporate name. DexCom reported growth in revenues and a lower net loss for 2014 and also generated a profit for the first time in the fourth quarter of 2014. During the period, the company received Food and Drug Administration approval for its continuous glucose monitoring remote mobile communications device, DexCom SHARE. In the consumer staples sector, energy drink company Monster Beverage contributed to relative returns. Monster shares advanced after the company entered into a long-term strategic partnership with Coca-Cola to accelerate growth in the fast-growing energy drink category. Monster’s healthy domestic and international sales growth supported the stock price.

Elsewhere, apparel and footwear manufacturer Under Armour performed well. The company reported growth across all its business segments: apparel, footwear and accessories. Additionally, the company raised its 2015 revenue and operating income guidance as it continues to expand its brand internationally.

In contrast, stock selection in the consumer discretionary, industrials and energy sectors detracted from the Fund’s relative performance.³

In the consumer discretionary sector, our positions in luxury goods maker and retailer Michael Kors Holdings⁴and full-service restaurant company Chuy’s Holdings⁴hurt relative performance. Michael Kors’s share price suffered as discounts

2. The IT sector comprises semiconductors and semiconductor equipment, software and services, and technology hardware and equipment in the SOI. The health care
sector comprises health care equipment and services; and pharmaceuticals, biotechnology and life sciences in the SOI. The consumer staples sector comprises food
and staples retailing; and food, beverage and tobacco in the SOI.
3. The consumer discretionary sector comprises automobiles and components, consumer durables and apparel, consumer services, media and retailing in the SOI.
The industrials sector comprises capital goods, commercial and professional services, and transportation in the SOI.
4. No longer held at period-end.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN FLEX CAP GROWTH FUND

on its fall inventory led to narrower margins in the first quarter. The company’s share price declined, despite an increase in its quarterly revenues and earnings, as comparable store sales growth was lower than the company’s estimates. Shares of Chuy’s Holdings declined after the company reported lower-than-expected quarterly earnings and sales growth decreased due to unfavorable weather conditions.

In the industrials sector, our positions in metal components manufacturer Precision Castparts⁴and commercial foodservice and heavy equipment manufacturer Manitowoc⁴weighed on relative performance. Manitowoc reported disappointing first-quarter 2015 results amid reduced revenues from the food-service and crane segments and an adverse foreign exchange impact. Additionally, the company announced flat revenue guidance for the foodservice segment and a decline in crane revenues for 2015.

Energy stocks generally retreated as crude oil prices fell sharply during the period resulting mainly from excess global supply from North American shale producers. Several of our energy holdings detracted from relative returns, particularly our positions in oil and gas companies Oasis Petroleum⁴and Rice Energy.⁴Oasis Petroleum’s fourth-quarter 2014 revenues decreased mainly due to falling commodity prices and the company’s average daily oil production exceeding its guidance range.

Other key individual detractors included our position in 3D printing company Stratasys.⁴Shares of Stratasys declined after the company projected weak quarterly results and cut its 2015 guidance. The company generated muted first-quarter 2015 revenues and posted a net loss.

Conducting ongoing reviews of our portfolio holdings and investment process are critical elements in our efforts to provide consistently strong results. In recent quarters, these reviews have led us to focus on those investments in which we have the highest levels of conviction. This focus is reflected in larger position sizes in some holdings and an overall reduction in the number of Fund positions. We believe the key strength of our investment strategy is the long-standing emphasis on bottom-up, fundamental research that in our view has the potential to generate superior long-term risk-adjusted returns.

Thank you for your continued participation in Franklin Flex Cap Growth Fund. We look forward to serving your future investment needs.

The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2015, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^®is a trademark owned by CFA Institute.

6 | Annual Report

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FRANKLIN FLEX CAP GROWTH FUND

Performance Summary as of April 30, 2015

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FKCGX)	$	51.56	$	53.93	-$	2.37
C (FCIIX)	$	43.10	$	46.79	-$	3.69
R (FRCGX)	$	49.22	$	51.99	-$	2.77
R6 (FFCRX)	$	53.67	$	55.54	-$	1.87
Advisor (FKCAX)	$	53.38	$	55.40	-$	2.02


Distributions (5/1/14–4/30/15)
		Short-Term		Long-Term
Share Class		Capital Gain		Capital Gain		Total
A	$	0.7993	$	8.2279	$	9.0272
C	$	0.7993	$	8.2279	$	9.0272
R	$	0.7993	$	8.2279	$	9.0272
R6	$	0.7993	$	8.2279	$	9.0272
Advisor	$	0.7993	$	8.2279	$	9.0272

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FRANKLIN FLEX CAP GROWTH FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹

Cumulative total return excludes sales charges. Average annual total returns and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;

Class R/R6/Advisor Class: no sales charges.


	Cumulative		Average Annual			Value of	Average Annual		Total Annual Operating
Share Class	Total Return²		Total Return³		$	10,000 Investment⁴	Total Return (3/31/15)⁵		Operating Expenses⁶
A									0.97	%
1-Year	+13.59	%	+7.06	%	$	10,706	+5.18	%
5-Year	+76.65	%	+10.73	%	$	16,648	+11.27	%
10-Year	+121.93	%	+7.66	%	$	20,918	+7.52	%
C									1.72	%
1-Year	+12.76	%	+11.84	%	$	11,184	+9.87	%
5-Year	+70.14	%	+11.21	%	$	17,014	+11.75	%
10-Year	+105.91	%	+7.49	%	$	20,591	+7.35	%
R									1.22	%
1-Year	+13.31	%	+13.31	%	$	11,331	+11.33	%
5-Year	+74.45	%	+11.77	%	$	17,445	+12.31	%
10-Year	+116.46	%	+8.03	%	$	21,646	+7.89	%
R6									0.48	%
1-Year	+14.12	%	+14.12	%	$	11,412	+12.11	%
Since Inception (5/1/13)	+41.88	%	+19.14	%	$	14,188	+20.94	%
Advisor									0.72	%
1-Year	+13.88	%	+13.88	%	$	11,388	+11.88	%
5-Year	+78.88	%	+12.33	%	$	17,888	+12.88	%
10-Year	+127.56	%	+8.57	%	$	22,756	+8.43	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

8 | Annual Report

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FRANKLIN FLEX CAP GROWTH FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹(continued)

All investments involve risks, including possible loss of principal. Growth stock prices reflect projections of future earnings or revenues, and can, therefore,
fall dramatically if the company fails to meet those projections. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to
changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities
have experienced more price volatility than larger company stocks, especially over the short term. To the extent the Fund focuses on particular countries,
regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a
fund that invests in a wider variety of countries, regions, industries, sectors or investments. Foreign securities involve special risks, including currency fluctua-
tions and economic and political uncertainties. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce
the desired results. The Fund’s prospectus also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

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FRANKLIN FLEX CAP GROWTH FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

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

Actual Fund Expenses

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

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transaction costs, such as sales charges. Therefore, the second line for each class is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transaction costs were included, your total costs would have been higher. Please refer to the Fund prospectus for additional information on operating expenses.

12 | Annual Report

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YOUR FUND’S EXPENSES


		Beginning Account		Ending Account		Expenses Paid During
Share Class		Value 11/1/14		Value 4/30/15		*Period 11/1/14–4/30/15**
A
Actual	$	1,000	$	1,050.20	$	4.73
Hypothetical (5% return before expenses)	$	1,000	$	1,020.18	$	4.66
C
Actual	$	1,000	$	1,046.20	$	8.52
Hypothetical (5% return before expenses)	$	1,000	$	1,016.46	$	8.40
R
Actual	$	1,000	$	1,048.80	$	5.99
Hypothetical (5% return before expenses)	$	1,000	$	1,018.94	$	5.91
R6
Actual	$	1,000	$	1,052.40	$	2.49
Hypothetical (5% return before expenses)	$	1,000	$	1,022.36	$	2.46
Advisor
Actual	$	1,000	$	1,051.30	$	3.46
Hypothetical (5% return before expenses)	$	1,000	$	1,021.42	$	3.41

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.93%;
C: 1.68%; R: 1.18%; R6: 0.49%; and Advisor: 0.68%), multiplied by the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.

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Franklin Focused Core Equity Fund

We are pleased to bring you Franklin Focused Core Equity Fund’s annual report for the fiscal year ended April 30, 2015.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation by normally investing at least 80% of its net assets in equity securities. The Fund normally invests primarily to predominantly in equity securities of large capitalization companies, which are similar in size to those in the Standard & Poor’s 500 Index (S&P 500).

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a +16.84% cumulative total return. In comparison, the S&P 500, which tracks the broad U.S. stock market, posted a +12.98% total return.¹You can find more of the Fund’s performance data in the Performance Summary beginning on page 17.

Investment Strategy

We are research-driven, bottom-up, fundamental investors. Our investment approach is opportunistic and contrarian, and we seek to identify mispriced companies using fundamental analysis. We seek to take advantage of price dislocations that result from the market’s short-term focus. Our analysis includes the investigation of the valuation for each investment based upon the view that the price paid for the security is a critical factor determining long-term success. We rely on a team of analysts to help provide in-depth industry expertise and use both qualitative and quantitative analysis to evaluate companies. Our analysts identify each company’s market opportunity, competitive position, management and financial strength, business and financial risks, and valuation. We choose to invest in those companies that, in our opinion, offer the best trade-off between growth opportunity, business and financial risk, and valuation.

Manager’s Discussion

During the 12 months under review, most sectors the Fund invested in contributed to absolute performance led by the health care, information technology (IT) and financials sectors. Holdings in consumer discretionary and consumer staples also benefited absolute performance, but energy detracted.

In the health care sector, pharmaceuticals performed well as shares of Valeant Pharmaceuticals International, Actavis and Allergan²rallied. Valeant develops drugs for unmet medical needs and distributes generic and branded drugs globally. It posted robust double-digit organic growth for the year, resulting in the company raising its 2015 revenue and earnings guidance. Additionally, the company acquired Salix Pharmaceuticals during the period. Specialty pharmaceutical company Actavis’s share price rose as the company reported strong demand for its products and completed several acquisitions

1. Source: Morningstar.
The index is unmanaged and includes reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
2. No longer held at period-end.
See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 67.

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FRANKLIN FOCUSED CORE EQUITY FUND


Top 10 Equity Holdings
4/30/15
Company	% of Total
*Sector/Industry*	Net Assets

Valeant Pharmaceuticals International Inc.	6.8	%
Health Care
Actavis PLC	5.2	%
Health Care
The Hartford Financial Services Group Inc.	4.3	%
Financials
QUALCOMM Inc.	3.9	%
Information Technology
Equinix Inc.	3.3	%
Information Technology
Adobe Systems Inc.	3.1	%
Information Technology
Microsoft Corp.	3.1	%
Information Technology
The Charles Schwab Corp.	3.1	%
Financials
Twenty-First Century Fox Inc., B	3.1	%
Consumer Discretionary
MasterCard Inc., A	2.9	%
Information Technology

during the year. Most notable was the acquisition of aesthetics and dermatology company Allergan. Post the merger the company announced its intention to adopt “Allergan” as its new corporate name.

Interconnection and data center company Equinix and digital marketing and digital media solutions provider Adobe Systems were major contributors in the IT sector. Equinix started 2015 as a real estate investment trust, and its first-quarter 2015 results were healthy due to strong demand across geographic regions. Although its 2014 revenues were robust, the company recorded a net loss for the year hurt by higher interest expenses and a loss on debt extinguishment. Adobe reported strong revenues and earnings for 2015’s first quarter and added a significant number of paid Creative Cloud subscribers. Further, the company’s healthy fourth-quarter and full-year 2014 results supported performance. Adobe’s new stock repurchase program and its partnership with Google to provide Creative Cloud for Chromebooks also helped its shares.

In the financials sector, commercial real estate services firm CBRE Group and property and casualty insurer The Hartford

Financial Services Group aided returns. CBRE’s share price advanced following strong 2014 results with double-digit revenue growth in almost all segments. The company’s first-quarter 2015 revenues and earnings also rose, and management estimated higher 2015 earnings than in 2014. Toward period-end, shares rose after the company announced the acquisition of Johnson Controls’ workplace solutions business, which would increase CBRE’s geographical presence for fully integrated real estate and facilities solutions. Hartford’s 2014 core earnings rose, driven by improved revenue from property and casualty underwriting results, which partly offset the decline in investment income. The company sold its Japanese annuity business in 2014, significantly reducing its risk profile.

Although nearly all Fund positions contributed to absolute performance, positions in the energy sector detracted, particularly independent exploration and production company Marathon Oil.²Stocks in the energy sector generally retreated as crude oil prices fell sharply during the period resulting mainly from excess global supply from North American shale producers. Marathon Oil’s 2014 net revenues increased due to higher production, and the company sold its Angola and Norway businesses during the year. Marathon posted a first-quarter 2015 net loss and reduced its 2015 capital expenditure plan mainly due to falling oil prices.

Other notable detractors included global semiconductor company QUALCOMM and concentrated phosphate and potash producer and marketer The Mosaic Co.²Although QUAL-COMM reported stronger-than-expected fiscal second-quarter 2015 results, the company lowered its outlook for the second half of the fiscal year. Additionally, the company posted modest results for fiscal year 2014 and the first quarter of 2015. The China National Development and Reform Commission’s fine on QUALCOMM for patent antitrust abuses weighed on the company’s shares. QUALCOMM stock plunged after the chipmaker confirmed that a key customer would not use the company’s chips in one of its flagship phones. Mosaic reported dismal 2014 results due to lower potash prices, and its shares fell when the company announced it would cut phosphate fertilizer production due to high sulfur and ammonia prices. However, first-quarter 2015 revenues and earnings increased, helped by higher phosphate and potash prices, higher phosphate sales volumes and lower potash operating costs.

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FRANKLIN FOCUSED CORE EQUITY FUND

Thank you for your continued participation in Franklin Focused Core Equity Fund. We look forward to serving your future investment needs.

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FRANKLIN FOCUSED CORE EQUITY FUND

Performance Summary as of April 30, 2015


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FCEQX)	$	15.29	$	13.38	+$	1.91
C (n/a)	$	14.73	$	12.98	+$	1.75
R (n/a)	$	15.15	$	13.28	+$	1.87
R6 (FEFCX)	$	15.46	$	13.49	+$	1.97
Advisor (n/a)	$	15.44	$	13.48	+$	1.96


Distributions (5/1/14–4/30/15)
		Dividend		Short-Term		Long-Term
Share Class		Income		Capital Gain		Capital Gain		Total
A		—	$	0.0808	$	0.2301	$	0.3109
C		—	$	0.0808	$	0.2301	$	0.3109
R		—	$	0.0808	$	0.2301	$	0.3109
R6	$	0.0364	$	0.0808	$	0.2301	$	0.3473
Advisor	$	0.0197	$	0.0808	$	0.2301	$	0.3306

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FRANKLIN FOCUSED CORE EQUITY FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹

Class R/R6/Advisor Class: no sales charges.


						Value of	Average Annual		Total Annual
									Operating Expenses⁶
	Cumulative		Average Annual		$	10,000	Total Return
Share Class	Total Return²		Total Return³			Investment⁴	(3/31/15	)⁵	(with waiver)		(without waiver)
A									1.30	%	1.73	%
1-Year	+16.84	%	+10.09	%	$	11,009	+10.74	%
5-Year	+90.12	%	+12.38	%	$	17,921	+12.22	%
Since Inception (12/13/07)	+75.73	%	+7.08	%	$	16,563	+6.99	%
C									2.00	%	2.43	%
1-Year	+16.12	%	+15.12	%	$	11,512	+15.66	%
5-Year	+83.75	%	+12.94	%	$	18,375	+12.77	%
Since Inception (12/13/07)	+66.90	%	+7.19	%	$	16,690	+7.11	%
R									1.50	%	1.93	%
1-Year	+16.66	%	+16.66	%	$	11,666	+17.30	%
5-Year	+88.19	%	+13.48	%	$	18,819	+13.32	%
Since Inception (12/13/07)	+72.79	%	+7.69	%	$	17,279	+7.62	%
R6									0.85	%	2.28	%
1-Year	+17.45	%	+17.45	%	$	11,745	+18.10	%
Since Inception (5/1/13)	+53.19	%	+23.81	%	$	15,319	+24.19	%
Advisor									1.00	%	1.43	%
1-Year	+17.25	%	+17.25	%	$	11,725	+17.80	%
5-Year	+92.84	%	+14.04	%	$	19,284	+13.87	%
Since Inception (12/13/07)	+79.36	%	+8.24	%	$	17,936	+8.16	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

18 | Annual Report

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FRANKLIN FOCUSED CORE EQUITY FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹(continued)

All investments involve risks, including possible loss of principal. To the extent the Fund focuses on particular countries, regions, industries, sectors or types
of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of
countries, regions, industries, sectors or investments. The Fund may have investments in both growth and value stocks, or in stocks with characteristics of
both. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections.
A value stock may not increase in price as anticipated by the investment manager if other investors fail to recognize the company’s value and bid up the price,
the markets favor faster growing companies, or the factors that the investment manager believes will increase the price of the security do not occur. Foreign
securities involve special risks, including currency fluctuations and economic and political uncertainties. The Fund is actively managed but there is no guaran-
tee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1. The Fund has an expense reduction contractually guaranteed through at least 8/31/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
5. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
6. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
7. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN FOCUSED CORE EQUITY FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

22 | Annual Report

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FRANKLIN FOCUSED CORE EQUITY FUND
YOUR FUND’S EXPENSES


		Beginning Account		Ending Account		Expenses Paid During
Share Class		Value 11/1/14		Value 4/30/15		*Period 11/1/14–4/30/15**
A
Actual	$	1,000	$	1,078.90	$	6.70
Hypothetical (5% return before expenses)	$	1,000	$	1,018.35	$	6.51
C
Actual	$	1,000	$	1,075.80	$	10.29
Hypothetical (5% return before expenses)	$	1,000	$	1,014.88	$	9.99
R
Actual	$	1,000	$	1,078.20	$	7.73
Hypothetical (5% return before expenses)	$	1,000	$	1,017.36	$	7.50
R6
Actual	$	1,000	$	1,081.50	$	4.34
Hypothetical (5% return before expenses)	$	1,000	$	1,020.63	$	4.21
Advisor
Actual	$	1,000	$	1,080.30	$	5.16
Hypothetical (5% return before expenses)	$	1,000	$	1,019.84	$	5.01

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 1.30%;
C: 2.00%; R: 1.50%; R6: 0.84%; and Advisor: 1.00%), multiplied by the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.

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Franklin Growth Opportunities Fund

We are pleased to bring you Franklin Growth Opportunities Fund’s annual report for the fiscal year ended April 30, 2015.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation by normally investing substantially in equity securities of companies demonstrating accelerating growth, increasing profitability, or above-average growth or growth potential, when compared with the overall economy.

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a cumulative total return of +18.87%. In comparison, the Fund’s narrow benchmark, the Russell 3000^®Growth Index, which measures performance of Russell 3000^®Index companies with higher price-to-book ratios and higher forecasted growth values, generated a +16.50% total return.¹The Fund’s broad benchmark, the Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, produced a +12.98% total return.¹You can find the Fund’s long-term performance data in the Performance Summary beginning on page 27.

Investment Strategy

We use fundamental, bottom-up research to seek companies meeting our criteria of growth potential, quality and valuation. In seeking sustainable growth characteristics, we look for companies we believe can produce sustainable earnings and cash flow growth, evaluating the long-term market opportunity and competitive structure of an industry to target leaders and emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of

potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

Manager’s Discussion

The Fund outperformed its benchmark, the Russell 3000^®Growth Index, for the 12 months under review as holdings across several sectors contributed to relative performance. An overweighting and stock selection in the health care sector were particularly beneficial. Additionally, stock selection in consumer staples, telecommunication services and information technology (IT), along with underweightings in materials and energy, added to relative returns.

In health care, biotechnology firm Medivation as well as pharmaceutical companies Valeant Pharmaceuticals International²and Actavis performed well. Valeant develops drugs for unmet

1. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
2. Not part of the index.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 74.

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FRANKLIN GROWTH OPPORTUNITIES FUND


Top 10 Equity Holdings
4/30/15
Company	% of Total
*Sector/Industry*	Net Assets

Actavis PLC	4.0	%
Health Care
Celgene Corp.	3.4	%
Health Care
MasterCard Inc., A	3.4	%
Information Technology
Google Inc., A & C	3.4	%
Information Technology
Apple Inc.	3.1	%
Information Technology
SBA Communications Corp.	3.1	%
Telecommunication Services
Facebook Inc., A	2.8	%
Information Technology
Valeant Pharmaceuticals International Inc.	2.6	%
Health Care
Amazon.com Inc.	2.4	%
Consumer Discretionary
Anadarko Petroleum Corp.	2.4	%
Energy

medical needs and distributes generic and branded drugs globally. It posted robust double-digit organic growth for the year, resulting in the company’s raising its 2015 revenue and earnings guidance. Additionally, the company acquired Salix Pharmaceuticals during the period. Specialty pharmaceutical company Actavis’s share price rose as the company reported strong demand for its products and completed several acquisitions during the year. Most notable was the acquisition of aesthetics and dermatology company Allergan. Post the merger the company announced its intention to adopt “Allergan” as its new corporate name.

In consumer staples, energy drink company Monster Beverage contributed to relative returns. Monster shares advanced after the company entered into a long-term strategic partnership with Coca-Cola to accelerate growth in the fast-growing energy drink category. Monster’s healthy domestic and international sales growth supported the stock price. Wireless tower operator SBA Communications aided relative returns in the telecommunication services sector, as it continued to benefit from the secular growth trends in wireless usage. Within IT, integrated circuit manufacturer NXP Semiconductors²and cybersecurity company Palo Alto Networks contributed to relative performance. NXP Semiconductors generated positive 2014 and first-quarter 2015 results, with strong performance across its high-performance mixed signal and standard products segments. Shares surged after the company announced its acquisition of Freescale Semiconductor to expand its market share in the chips industry.

In the energy sector, underweightings in oil, gas and consumable fuel companies added to relative returns. Energy stocks retreated as crude oil prices fell sharply during the 12-month period mainly due to excess global supply from North American shale producers.

In contrast, stock selection in industrials and consumer discretionary detracted from the Fund’s performance relative to the benchmark. In the industrials sector, metal components manufacturer Precision Castparts,³flow control products and services provider Flowserve, and industrial enterprise solutions provider Colfax³weighed on relative returns. Precision shares fell after the company issued weak fiscal fourth-quarter 2015 guidance amid declining demand in its energy and power businesses. Colfax reported lower first-quarter 2015 revenues as gas- and fluid-handling orders declined, but the company’s 2014 revenues and orders were higher than in the previous year. The weakness in the global energy markets impacted our industrial companies during the year.

Among consumer discretionary holdings, casino and resort operating company Las Vegas Sands and luxury goods maker and retailer Michael Kors Holdings³hurt relative results. A slowdown in the key gambling market of Macau weighed on Las Vegas Sands shares. The company, however, reported modest 2014 results, driven by growth across its properties. Michael Kors’s share price suffered as discounts on its fall inventory led to narrower margins in the first quarter. The company’s share price declined, despite an increase in its quarterly revenues and earnings, as comparable store sales growth was lower than the company’s estimates.

Other notable detractors included technology solutions company Trimble Navigation³and onshore energy production services provider Key Energy Services.^2,3Key Energy’s share price fell after the company reported weak revenues and a challenging outlook for the energy end markets it serves.

3. No longer held at period-end.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN GROWTH OPPORTUNITIES FUND

Thank you for your continued participation in Franklin Growth Opportunities Fund. We look forward to serving your future investment needs.

26 | Annual Report

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FRANKLIN GROWTH OPPORTUNITIES FUND

Performance Summary as of April 30, 2015


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14	Change
A (FGRAX)	$	33.13	$	28.48	+$4.65
C (FKACX)	$	29.27	$	25.41	+$3.86
R (FKARX)	$	32.10	$	27.67	+$4.43
R6 (FOPPX)	$	35.09	$	29.98	+$5.11
Advisor (FRAAX)	$	34.96	$	29.93	+$5.03


Distributions (5/1/14–4/30/15)
		Long-Term
Share Class		Capital Gain
A	$	0.6612
C	$	0.6612
R	$	0.6612
R6	$	0.6612
Advisor	$	0.6612

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FRANKLIN GROWTH OPPORTUNITIES FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹

Cumulative total return excludes sales charges. Average annual total return and value of $10,000 investment include maximum sales charges. Class A: 5.75% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only;

Class R/R6/Advisor Class: no sales charges.


	Cumulative		Average Annual			Value of	Average Annual		Total Annual Operating
Share Class	Total Return²		Total Return³		$	10,000 Investment⁴	Total Return (3/31/15)⁵		Operating Expenses⁶
A									1.17	%
1-Year	+18.87	%	+12.03	%	$	11,203	+9.15	%
5-Year	+95.52	%	+13.00	%	$	18,423	+13.59	%
10-Year	+187.33	%	+10.48	%	$	27,087	+10.00	%
C									1.87	%
1-Year	+18.04	%	+17.04	%	$	11,704	+13.99	%
5-Year	+88.76	%	+13.55	%	$	18,876	+14.15	%
10-Year	+167.56	%	+10.34	%	$	26,756	+9.88	%
R									1.37	%
1-Year	+18.63	%	+18.63	%	$	11,863	+15.56	%
5-Year	+93.49	%	+14.11	%	$	19,349	+14.71	%
10-Year	+181.32	%	+10.90	%	$	28,132	+10.43	%
R6									0.71	%
1-Year	+19.47	%	+19.47	%	$	11,947	+16.39	%
Since Inception (5/1/13)	+46.83	%	+21.20	%	$	14,683	+22.41	%
Advisor									0.87	%
1-Year	+19.23	%	+19.23	%	$	11,923	+16.15	%
5-Year	+98.47	%	+14.69	%	$	19,847	+15.29	%
10-Year	+195.80	%	+11.46	%	$	29,580	+10.99	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

28 | Annual Report

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FRANKLIN GROWTH OPPORTUNITIES FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹(continued)

All investments involve risks, including possible loss of principal. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have experienced more price volatility than larger company stocks, especially over the short term. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

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FRANKLIN GROWTH OPPORTUNITIES FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

32 | Annual Report

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FRANKLIN GROWTH OPPORTUNITIES FUND
YOUR FUND’S EXPENSES


		Beginning Account		Ending Account		Expenses Paid During
Share Class		Value 11/1/14		Value 4/30/15		*Period 11/1/14–4/30/15**
A
Actual	$	1,000	$	1,075.80	$	6.07
Hypothetical (5% return before expenses)	$	1,000	$	1,018.94	$	5.91
C
Actual	$	1,000	$	1,072.00	$	9.66
Hypothetical (5% return before expenses)	$	1,000	$	1,015.47	$	9.39
R
Actual	$	1,000	$	1,074.80	$	7.10
Hypothetical (5% return before expenses)	$	1,000	$	1,017.95	$	6.90
R6
Actual	$	1,000	$	1,078.50	$	3.50
Hypothetical (5% return before expenses)	$	1,000	$	1,021.42	$	3.41
Advisor
Actual	$	1,000	$	1,077.50	$	4.53
Hypothetical (5% return before expenses)	$	1,000	$	1,020.43	$	4.41

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 1.18%;
C: 1.88%; R: 1.38%; R6: 0.68%; and Advisor: 0.88%), multiplied by the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.

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Franklin Small Cap Growth Fund

This annual report for Franklin Small Cap Growth Fund covers the fiscal year ended April 30, 2015. At the market close on February 12, 2015, the Fund closed to new investors with limited exceptions. Existing shareholders may add to their accounts. We believe this closure can help us effectively manage our current level of assets.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth by normally investing at least 80% of its net assets in equity securities of small cap companies, which for this Fund are those with market capitalizations not exceeding $1.5 billion or that of the highest market capitalization in the Russell 2000^®Index, whichever is greater, at the time of purchase.¹

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a cumulative total return of +8.34%. In comparison, the Russell 2000^®Growth Index, which measures performance of small cap companies with higher price-to-book ratios and higher forecasted growth values, generated a +14.65% total return.²The Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, produced a +12.98% total return.²You can find the Fund’s long-term performance data in the Performance Summary beginning on page 37.

Investment Strategy

and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

Manager’s Discussion

During the 12 months under review, most sectors represented in the Fund’s portfolio contributed to absolute performance. Relative to the Russell 2000^®Growth Index, stock selection in the consumer staples and industrials sectors contributed to performance. An underweighting in materials also aided relative returns.

1. The Russell 2000 Index is market capitalization weighted and measures performance of the 2,000 smallest companies in the Russell 3000 Index, which represent
a small amount of the total market capitalization of the Russell 3000 Index.
2. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 82.

34 | Annual Report franklintempleton.com

FRANKLIN SMALL CAP GROWTH FUND


Top 10 Equity Holdings
4/30/15
Company	% of Total
*Sector/Industry*	Net Assets

Demandware Inc.	1.6	%
Information Technology
Astronics Corp.	1.5	%
Industrials
DexCom Inc.	1.4	%
Health Care
US Ecology Inc.	1.4	%
Industrials
Tenneco Inc.	1.4	%
Consumer Discretionary
Grand Canyon Education Inc.	1.4	%
Consumer Discretionary
The Advisory Board Co.	1.3	%
Industrials
Lattice Semiconductor Corp.	1.3	%
Information Technology
ViaSat Inc.	1.3	%
Information Technology
Cavium Inc.	1.3	%
Information Technology

In consumer staples, our position in natural and organic food company Annie’s was a major contributor.³Shares of Annie’s, which we purchased during the period, jumped after the company announced a definitive agreement to be acquired by General Mills, enabling Annie’s to begin a new growth phase and maximize shareholder value.

In the industrials sector, notable contributors included Astronics, a provider of advanced technologies for the global aerospace and defense industries. Astronics’s 2014 and first-quarter 2015 revenues and net incomes grew, resulting from sales growth in its aerospace segment aided by organic growth and acquisitions during the period. The company also forecast robust revenue growth for 2015.

Other key individual contributors included several health care holdings such as medical device company DexCom, operator of freestanding emergency rooms Adeptus Health, and technology-based specialty pharmaceutical company Impax Laboratories. A position in 2U, an education technology company, also helped relative returns.

DexCom reported growth in revenues and a lower net loss for 2014 and also generated a profit for the first time in the fourth quarter of 2014. During the period, the company received Food and Drug Administration (FDA) approval for its continuous glucose monitoring remote mobile communications device, DexCom SHARE. Impax Laboratories posted 2014 revenue growth as sales in its global pharmaceuticals division rose mainly due to a surge in sales of authorized generic drug Renvela. However, its Impax Pharmaceuticals division reported a steep decline in revenues due to lower sales of Zomig. The company’s shares surged after it received FDA approval for Parkinson’s disease treatment drug Rytary, and also after the company announced it had completed the acquisitions of Tower Holdings and Lineage Therapeutics, which were expected to provide a robust product pipeline and a diversified manufacturing base. The company also generated first-quarter 2015 revenue growth as sales increased for existing and acquired products.

In contrast, several sectors detracted from the Fund’s relative performance, particularly the information technology (IT) sector owing to stock selection. Stock selection and an underweighting in health care as well as stock selection in energy also hampered relative results. Stock selection in financials and an overweighting in consumer discretionary further weighed on relative performance. In the IT sector, key detractors included our positions in programmable logic products manufacturer Lattice Semiconductor and application and networking technologies provider A10 Networks. Investor concerns about a slowdown in the semiconductor industry weighed on Lattice Semiconductor’s shares. Further pressuring shares were the company’s lower third- and fourth-quarter 2014 reported revenues. Additionally, the company provided muted first-quarter 2015 revenue guidance and posted a net loss for the same period, mainly due to acquisition-related costs. Lattice Semiconductor acquired Silicon Image, a wireless connectivity solutions provider, during 2015’s first quarter to obtain a diversified global customer base along with business and operational synergies. A10’s share price fell after the company reported a greater-than-expected second-quarter 2014 loss and lowered its third-quarter revenue guidance. In the health care sector, specialty biopharmaceutical company Revance Therapeutics performed poorly.

3. No longer held at period-end.

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FRANKLIN SMALL CAP GROWTH FUND

Stocks in the energy sector generally retreated as crude oil prices fell sharply during the period resulting mainly from excess global supply from North American shale producers. Several of our energy holdings detracted from relative returns, particularly our position in independent energy company Rex Energy and our off-benchmark investment in onshore energy production services provider Key Energy Services.³Rex Energy reported growth in 2014 operational revenues and production. The company generated robust production volumes for 2015’s first quarter and also raised its 2015 production guidance due to better-than-expected performance of recently completed wells with increased sand concentrations. Key Energy’s share price fell after the company reported weak revenues and a challenging outlook for the energy end markets it serves.

Investment management services provider Virtus Investment Partners in the financials sector hindered relative returns, as did restaurant chain Noodles & Co. in consumer discretionary. Other key individual detractors included our off-benchmark position in commercial foodservice and heavy equipment manufacturer The Manitowoc Co.⁴Manitowoc reported disappointing first-quarter 2015 results amid reduced revenues from the foodservice and crane segments and an adverse foreign exchange impact. Additionally, the company announced flat revenue guidance for the foodservice segment and a decline in crane revenues for 2015.

Thank you for your continued participation in Franklin Small Cap Growth Fund. We look forward to serving your future investment needs.

4. Not part of the index.
See www.franklintempletondatasources.com for additional data provider information.

36 | Annual Report

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FRANKLIN SMALL CAP GROWTH FUND

Performance Summary as of April 30, 2015


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FSGRX)	$	18.83	$	18.20	+$	0.63
C (FCSGX)	$	16.36	$	16.03	+$	0.33
R (FSSRX)	$	18.11	$	17.57	+$	0.54
R6 (FSMLX)	$	20.02	$	19.21	+$	0.81
Advisor (FSSAX)	$	19.94	$	19.17	+$	0.77


Distributions (5/1/14–4/30/15)
		Short-Term		Long-Term
Share Class		Capital Gain		Capital Gain		Total
A	$	0.3714	$	0.4457	$	0.8171
C	$	0.3714	$	0.4457	$	0.8171
R	$	0.3714	$	0.4457	$	0.8171
R6	$	0.3714	$	0.4457	$	0.8171
Advisor	$	0.3714	$	0.4457	$	0.8171

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FRANKLIN SMALL CAP GROWTH FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹

Class R/R6/Advisor Class: no sales charges.


						Value of	Average Annual		Total Annual
									Operating Expenses⁶
	Cumulative		Average Annual		$	10,000	Total Return
Share Class	Total Return²		Total Return³			Investment⁴	(3/31/15	)⁵	(with waiver)		(without waiver)
A									1.21	%	1.22	%
1-Year	+8.34	%	+2.12	%	$	10,212	-0.78	%
5-Year	+110.19	%	+14.65	%	$	19,813	+16.40	%
10-Year	+172.36	%	+9.88	%	$	25,666	+9.44	%
C									1.91	%	1.92	%
1-Year	+7.58	%	+6.58	%	$	10,658	+3.55	%
5-Year	+102.98	%	+15.21	%	$	20,298	+16.97	%
10-Year	+153.61	%	+9.75	%	$	25,361	+9.30	%
R									1.41	%	1.42	%
1-Year	+8.12	%	+8.12	%	$	10,812	+5.07	%
5-Year	+108.14	%	+15.79	%	$	20,814	+17.55	%
10-Year	+166.63	%	+10.30	%	$	26,663	+9.85	%
R6									0.73	%	0.74	%
1-Year	+8.91	%	+8.91	%	$	10,891	+5.79	%
Since Inception (5/1/13)	+47.90	%	+21.65	%	$	14,790	+24.17	%
Advisor									0.91	%	0.92	%
1-Year	+8.65	%	+8.65	%	$	10,865	+5.55	%
5-Year	+113.47	%	+16.38	%	$	21,347	+18.15	%
10-Year	+180.37	%	+10.86	%	$	28,037	+10.39	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

38 | Annual Report

franklintempleton.com

FRANKLIN SMALL CAP GROWTH FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹(continued)

All investments involve risks, including possible loss of principal. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have experienced more price volatility than larger company stocks, especially over the short term. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. From time to time, the trading market for a particular security or type of security in which the Fund invests may become less liquid or even illiquid. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

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| 41

FRANKLIN SMALL CAP GROWTH FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

42 | Annual Report

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FRANKLIN SMALL CAP GROWTH FUND

YOUR FUND’S EXPENSES


		Beginning Account		Ending Account		Expenses Paid During
Share Class		Value 11/1/14		Value 4/30/15		*Period 11/1/14–4/30/15**
A
Actual	$	1,000	$	1,060.70	$	5.93
Hypothetical (5% return before expenses)	$	1,000	$	1,019.04	$	5.81
C
Actual	$	1,000	$	1,057.40	$	9.59
Hypothetical (5% return before expenses)	$	1,000	$	1,015.47	$	9.39
R
Actual	$	1,000	$	1,059.50	$	7.05
Hypothetical (5% return before expenses)	$	1,000	$	1,017.95	$	6.90
R6
Actual	$	1,000	$	1,063.60	$	3.33
Hypothetical (5% return before expenses)	$	1,000	$	1,021.57	$	3.26
Advisor
Actual	$	1,000	$	1,062.20	$	4.50
Hypothetical (5% return before expenses)	$	1,000	$	1,020.43	$	4.41

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 1.16%;
C: 1.88%; R: 1.38%; R6: 0.65%; and Advisor: 0.88%), multiplied by the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.

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Franklin Small-Mid Cap Growth Fund

This annual report for Franklin Small-Mid Cap Growth Fund covers the fiscal year ended April 30, 2015.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth by normally investing at least 80% of its net assets in equity securities of small-cap and mid-cap companies. The Fund defines small-cap companies as those within the market capitalization range of companies in the Russell 2500™ Index at the time of purchase, and mid-cap companies as those within the market capitalization range of the Russell Midcap^®Index at the time of purchase.¹

Performance Overview

For the 12 months under review, the Fund’s Class A shares delivered a +15.78% cumulative total return. In comparison, the Russell Midcap^®Growth Index, which measures performance of companies in the Russell Midcap^®Index with higher price-to-book ratios and higher forecasted growth values, generated a +16.46% total return.²Also in comparison, the Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, produced a +12.98% total return.²You can find the Fund’s long-term performance data in the Performance Summary beginning on page 47.

Investment Strategy

emerging leaders. We define quality companies as those with strong and improving competitive positions in attractive markets. We also believe important attributes of quality are experienced and talented management teams as well as financial strength reflected in the capital structure, gross and operating margins, free cash flow generation and returns on capital employed. Our valuation analysis includes a range of potential outcomes based on an assessment of multiple scenarios. In assessing value, we consider whether security prices fully reflect the balance of the sustainable growth opportunities relative to business and financial risks.

1. The Russell 2500 Index is market capitalization weighted and measures performance of the 2,500 smallest companies in the Russell 3000 Index, which represent
a modest amount of the Russell 3000 Index’s total market capitalization. The Russell Midcap Index is market capitalization weighted and measures performance of the
smallest companies in the Russell 1000 Index, which represent a modest amount of the Russell 1000 Index’s total market capitalization.
2. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 90.

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FRANKLIN SMALL-MID CAP GROWTH FUND


Top 10 Equity Holdings
4/30/15
Company	% of Total
*Sector/Industry*	Net Assets

NXP Semiconductors NV (Netherlands)	1.7	%
Information Technology
AMETEK Inc.	1.4	%
Industrials
Perrigo Co. PLC	1.4	%
Health Care
Affiliated Managers Group Inc.	1.4	%
Financials
Impax Laboratories Inc.	1.4	%
Health Care
Jarden Corp.	1.3	%
Consumer Discretionary
Intercontinental Exchange Inc.	1.3	%
Financials
Axalta Coating Systems Ltd.	1.2	%
Materials
Electronic Arts Inc.	1.2	%
Information Technology
Quintiles Transnational Holdings Inc.	1.2	%
Health Care

Manager’s Discussion

During the 12 months under review, most sectors in the Fund’s portfolio contributed to absolute performance as the broader stock market rallied. Relative to the Russell Midcap^®Growth Index, major contributors to the Fund’s performance included an overweighting in the health care sector, an underweighting and stock selection in materials, and an overweighting and stock selection in information technology (IT).

In the health care sector, key contributors included our investments in technology-based specialty pharmaceutical company Impax Laboratories³and medical device firm CareFusion,^3,4Impax Laboratories posted 2014 revenue growth as sales in its global pharmaceuticals division rose mainly due to a surge in sales of authorized generic drug Renvela. However, its Impax Pharmaceuticals division reported a steep decline in revenues due to lower sales of Zomig. The company’s shares surged after it got an approval from the Food and Drug Administration for Parkinson’s disease treatment drug Rytary, and also after the company announced it had completed the acquisitions of Tower Holdings and Lineage Therapeutics, which were expected to provide a robust product pipeline and a diversified manufacturing base. The company also generated first-quarter 2015 revenue growth helped by an increase in sales of existing and acquired products. CareFusion reported healthy fiscal first-quarter 2015 results, led by gains in the procedural solutions segment. An acquisition of Vital Signs, which helped the dispensing technologies business line, also supported revenue growth. In addition, the company raised fiscal year 2015 earnings guidance based on a tax settlement with the Internal Revenue Service. Shares of CareFusion advanced after Becton, Dickinson and Co. entered into a deal to acquire the medical device firm in an effort to create a global leader in the medication management and patient safety solutions market.

Within materials, our position in global coatings company Axalta Coating Systems added to relative results. The company’s first-quarter 2015 revenues rose, meeting the company’s estimates, driven by higher volumes. Growth across Axalta’s performance coatings and transportation coatings segments contributed to the company’s performance, although unfavorable currency exchange rates weighed on results. Axalta shares gained after Berkshire Hathaway agreed to purchase 20 million shares of the company. In the IT sector, holdings in integrated circuit manufacturers NXP Semiconductors³and Freescale Semiconductor, as well as a position in game software content and services firm Electronic Arts, helped relative performance. NXP Semiconductors generated positive 2014 and first-quarter 2015 results, with strong performance across its high-performance mixed signal and standard products segments. Shares surged after the company announced its acquisition of Freescale Semiconductor to expand its market share in the chips industry. Electronic Arts generated fiscal fourth-quarter 2015 results above its guidance, driven by an increase in revenues from its console and mobile platforms, while revenues from its personal computer and other platform segments declined moderately.

3. Not part of the index.
4. No longer held at period-end.
See www.franklintempletondatasources.com for additional data provider information.

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| 45

FRANKLIN SMALL-MID CAP GROWTH FUND

In contrast, key detractors from the Fund’s relative performance included stock selection in consumer discretionary and industrials. In consumer discretionary, our holdings in home-building company KB Home³and health and wellness products retailer GNC Holdings⁴hampered relative returns. KB Home shares fell after the company projected a sharp drop in gross margins in its 2015 fiscal first quarter amid higher labor and material costs as well as sales incentives. However, for the same quarter, the company reported better-than-expected earnings and higher revenues, led by an increase in orders and selling prices. Additionally, KB Home reported modest results for its 2014 fiscal year ended November 30. Within industrials, our positions in industrial manufacturing and engineering company Colfax⁴and commercial foodservice and heavy equipment manufacturer The Manitowoc Co.⁴hurt relative performance. Colfax reported lower first-quarter 2015 revenues as gas- and fluid-handling orders declined during the quarter, but the company’s 2014 revenues and orders were higher than in the previous year. The weakness in the global energy markets impacted our industrial companies during the year. Manitowoc reported disappointing first-quarter 2015 results amid reduced revenues from the foodservice and crane segments and an adverse foreign exchange impact. Additionally, the company announced flat revenue guidance for the foodservice segment and a decline in crane revenues for 2015.

Other key individual detractors included our positions in 3D printing company Stratasys,⁴oil and gas explorer and producer Oasis Petroleum,⁴wireless and technology solutions company Trimble Navigation,⁴and online urban guide Yelp. Shares of Stratasys declined after the company projected weak quarterly results and cut its 2015 guidance. The company generated muted first-quarter 2015 revenues and posted a net loss. Oasis Petroleum’s fourth-quarter 2014 revenues decreased mainly due to falling commodity prices and the company’s average daily oil production exceeding its guidance range.

Thank you for your continued participation in Franklin Small-Mid Cap Growth Fund. We look forward to serving your future investment needs.

46 | Annual Report

franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH FUND

Performance Summary as of April 30, 2015


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FRSGX)	$	38.38	$	40.42	-$	2.04
C (FRSIX)	$	30.43	$	33.78	-$	3.35
R (FSMRX)	$	36.18	$	38.61	-$	2.43
R6 (FMGGX)	$	41.04	$	42.53	-$	1.49
Advisor (FSGAX)	$	40.83	$	42.44	-$	1.61


Distributions (5/1/14–4/30/15)
		Short-Term		Long-Term
Share Class		Capital Gain		Capital Gain		Total
A	$	0.9032	$	6.7080	$	7.6112
C	$	0.9032	$	6.7080	$	7.6112
R	$	0.9032	$	6.7080	$	7.6112
R6	$	0.9032	$	6.7080	$	7.6112
Advisor	$	0.9032	$	6.7080	$	7.6112

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FRANKLIN SMALL-MID CAP GROWTH FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹

Class R/R6/Advisor Class: no sales charges.


	Cumulative		Average Annual			Value of	Average Annual		Total Annual Operating
Share Class	Total Return²		Total Return³		$	10,000 Investment⁴	Total Return (3/31/15)⁵		Operating Expenses⁶
A									0.96	%
1-Year	+15.78	%	+9.11	%	$	10,911	+7.05	%
5-Year	+92.61	%	+12.67	%	$	18,153	+13.69	%
10-Year	+155.17	%	+9.17	%	$	24,050	+8.75	%
C									1.71	%
1-Year	+14.96	%	+14.06	%	$	11,406	+11.92	%
5-Year	+85.49	%	+13.15	%	$	18,549	+14.18	%
10-Year	+136.77	%	+9.00	%	$	23,677	+8.58	%
R									1.21	%
1-Year	+15.52	%	+15.52	%	$	11,552	+13.33	%
5-Year	+90.17	%	+13.72	%	$	19,017	+14.76	%
10-Year	+148.80	%	+9.54	%	$	24,880	+9.12	%
R6									0.47	%
1-Year	+16.32	%	+16.32	%	$	11,632	+14.13	%
Since Inception (5/1/13)	+44.74	%	+20.34	%	$	14,474	+21.94	%
Advisor									0.71	%
1-Year	+16.09	%	+16.09	%	$	11,609	+13.87	%
5-Year	+95.10	%	+14.30	%	$	19,510	+15.33	%
10-Year	+161.74	%	+10.10	%	$	26,174	+9.67	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

48 | Annual Report

franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹(continued)

All investments involve risks, including possible loss of principal. Growth stock prices reflect projections of future earnings or revenues, and can, therefore, fall dramatically if the company fails to meet those projections. Smaller, midsized and relatively new or unseasoned companies can be particularly sensitive to changing economic conditions, and their prospects for growth are less certain than those of larger, more established companies. Historically, these securities have experienced more price volatility than larger company stocks, especially over the short term. To the extent the Fund focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a fund that invests in a wider variety of countries, regions, industries, sectors or investments. From time to time, the trading market for a particular security or type of security in which the Fund invests may become less liquid or even illiquid. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

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FRANKLIN SMALL-MID CAP GROWTH FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

52 | Annual Report

franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH FUND

YOUR FUND’S EXPENSES


		Beginning Account		Ending Account		Expenses Paid During
Share Class		Value 11/1/14		Value 4/30/15		*Period 11/1/14–4/30/15**
A
Actual	$	1,000	$	1,079.30	$	4.79
Hypothetical (5% return before expenses)	$	1,000	$	1,020.18	$	4.66
C
Actual	$	1,000	$	1,075.40	$	8.65
Hypothetical (5% return before expenses)	$	1,000	$	1,016.46	$	8.40
R
Actual	$	1,000	$	1,078.10	$	6.08
Hypothetical (5% return before expenses)	$	1,000	$	1,018.94	$	5.91
R6
Actual	$	1,000	$	1,081.60	$	2.48
Hypothetical (5% return before expenses)	$	1,000	$	1,022.41	$	2.41
Advisor
Actual	$	1,000	$	1,080.70	$	3.51
Hypothetical (5% return before expenses)	$	1,000	$	1,021.42	$	3.41

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.93%;
C: 1.68%; R: 1.18%; R6: 0.48%; and Advisor: 0.68%), multiplied by the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.

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FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Flex Cap Growth Fund
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	53.93		$	51.21		$	51.12		$	52.42		$	43.55
Income from investment operations^a:
Net investment income (loss)^b		(0.21	)		(0.16	)		0.04	^c		(0.05	)		(0.11	)
Net realized and unrealized gains (losses)		6.87			11.51			1.69			0.67			8.98
Total from investment operations		6.66			11.35			1.73			0.62			8.87
Less distributions from:
Net investment income		—			—			(0.01	)		—			—
Net realized gains		(9.03	)		(8.63	)		(1.63	)		(1.92	)		—
Total distributions		(9.03	)		(8.63	)		(1.64	)		(1.92	)		—
Net asset value, end of year	$	51.56		$	53.93		$	51.21		$	51.12		$	52.42

Total return^d		13.59	%		22.31	%		3.70	%		1.86	%		20.37	%

Ratios to average net assets
Expenses		0.94	%^e		0.97	%^e		0.99	%		0.98	%		0.98	%
Net investment income (loss)		(0.38	)%		(0.27	)%		0.09	%^c		(0.10	)%		(0.23	)%

Supplemental data
Net assets, end of year (000’s)	$	2,245,756		$	2,171,053		$	2,080,349		$	2,094,119		$	2,233,642
Portfolio turnover rate		74.72	%		41.08	%		63.09	%		49.59	%		51.32	%

54 | Annual Report | The accompanying notes are an integral part of these financial statements.

franklintempleton.com


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Flex Cap Growth Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	46.79		$	45.70		$	46.14		$	47.88		$	40.08
Income from investment operations^a:
Net investment income (loss)^b		(0.53	)		(0.52	)		(0.29	)^c		(0.37	)		(0.41	)
Net realized and unrealized gains (losses)		5.87			10.24			1.48			0.55			8.21
Total from investment operations		5.34			9.72			1.19			0.18			7.80
Less distributions from net realized gains		(9.03	)		(8.63	)		(1.63	)		(1.92	)		—
Net asset value, end of year	$	43.10		$	46.79		$	45.70		$	46.14		$	47.88

Total return^d		12.76	%		21.38	%		2.92	%		1.10	%		19.46	%

Ratios to average net assets
Expenses		1.69	%^e		1.72	%^e		1.74	%		1.73	%		1.73	%
Net investment income (loss)		(1.13	)%		(1.02	)%		(0.66	)%^c		(0.85	)%		(0.98	)%

Supplemental data
Net assets, end of year (000’s)	$	363,532		$	348,040		$	298,253		$	323,249		$	352,282
Portfolio turnover rate		74.72	%		41.08	%		63.09	%		49.59	%		51.32	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.07 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment
income to average net assets would have been (0.81)%.
^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^eBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 55


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Flex Cap Growth Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	51.99		$	49.74		$	49.82		$	51.27		$	42.70
Income from investment operations^a:
Net investment income (loss)^b		(0.32	)		(0.28	)		(0.08	)^c		(0.16	)		(0.21	)
Net realized and unrealized gains (losses)		6.58			11.16			1.63			0.63			8.78
Total from investment operations		6.26			10.88			1.55			0.47			8.57
Less distributions from net realized gains		(9.03	)		(8.63	)		(1.63	)		(1.92	)		—
Net asset value, end of year	$	49.22		$	51.99		$	49.74		$	49.82		$	51.27

Total return		13.31	%		22.01	%		3.43	%		1.60	%		20.07	%

Ratios to average net assets
Expenses		1.19	%^d		1.22	%^d		1.24	%		1.23	%		1.23	%
Net investment income (loss)		(0.63	)%		(0.52	)%		(0.16	)%^c		(0.35	)%		(0.48	)%

Supplemental data
Net assets, end of year (000’s)	$	45,269		$	56,274		$	63,134		$	76,340		$	72,532
Portfolio turnover rate		74.72	%		41.08	%		63.09	%		49.59	%		51.32	%

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS


Franklin Flex Cap Growth Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	55.54		$	51.70
Income from investment operations^b:
Net investment income^c		0.06			0.11
Net realized and unrealized gains (losses)		7.10			12.36
Total from investment operations		7.16			12.47
Less distributions from net realized gains		(9.03	)		(8.63	)
Net asset value, end of year	$	53.67		$	55.54

Total return		14.12	%		24.32	%

Ratios to average net assets
Expenses^d		0.48	%		0.48	%
Net investment income		0.08	%		0.22	%

Supplemental data
Net assets, end of year (000’s)	$	295,822		$	376,607
Portfolio turnover rate		74.72	%		41.08	%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 57


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Flex Cap Growth Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	55.40		$	52.29		$	52.12		$	53.26		$	44.14
Income from investment operations^a:
Net investment income (loss)^b		(0.08	)		0.03			0.18	^c		0.07			0.01
Net realized and unrealized gains (losses)		7.09			11.71			1.71			0.71			9.11
Total from investment operations		7.01			11.74			1.89			0.78			9.12
Less distributions from:
Net investment income		—			—			(0.09	)		—			—
Net realized gains		(9.03	)		(8.63	)		(1.63	)		(1.92	)		—
Total distributions		(9.03	)		(8.63	)		(1.72	)		(1.92	)		—
Net asset value, end of year	$	53.38		$	55.40		$	52.29		$	52.12		$	53.26

Total return		13.88	%		22.63	%		3.94	%		2.13	%		20.66	%

Ratios to average net assets
Expenses		0.69	%^d		0.72	%^d		0.74	%		0.73	%		0.73	%
Net investment income (loss)		(0.13	)%		(0.02	)%^e		0.34	%^c		0.15	%		0.02	%

Supplemental data
Net assets, end of year (000’s)	$	393,961		$	329,671		$	836,225		$	1,162,624		$	1,233,168
Portfolio turnover rate		74.72	%		41.08	%		63.09	%		49.59	%		51.32	%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^bBased on average daily shares outstanding.
^cNet investment income per share includes approximately $0.07 per share received in the form of special dividends. Excluding these amounts, the ratio of net investment
income to average net assets would have been 0.19%.
^dBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.
^eRatio is calculated based on the Fund level net investment income, as reflected in the Statement of Operations, and adjusted for class specific expenses. The amount may
not correlate with the per share amount due to the timing of income earned and/or fluctuating fair value of the investments of the Fund in relation to the timing of sales and
repurchases of Fund shares.

58 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com


	FRANKLIN STRATEGIC SERIES




Statement of Investments, April 30, 2015

Franklin Flex Cap Growth Fund
	Shares		Value
Common Stocks 93.7%
Automobiles & Components 0.8%
BorgWarner Inc.	243,800	$	14,432,960
^a,bTesla Motors Inc.	50,000		11,302,500
			25,735,460
Banks 2.3%
^aSignature Bank	294,775		39,526,380
^aSVB Financial Group	275,000		36,509,000
			76,035,380
Capital Goods 4.1%
^aHD Supply Holdings Inc.	1,825,000		60,225,000
Honeywell International Inc.	210,000		21,193,200
Pall Corp.	151,753		14,768,602
^aProto Labs Inc.	62,500		4,375,000
Roper Technologies Inc.	210,000		35,315,700
			135,877,502
Commercial & Professional Services 2.3%
^aIHS Inc., A	353,500		44,353,645
^aStericycle Inc.	250,000		33,357,500
			77,711,145
Consumer Durables & Apparel 3.9%
NIKE Inc., B	660,000		65,234,400
^aTRI Pointe Homes Inc.	2,000,000		28,560,000
^aUnder Armour Inc., A	450,000		34,897,500
			128,691,900
Consumer Services 1.6%
^aBuffalo Wild Wings Inc.	175,000		27,877,500
^aChipotle Mexican Grill Inc.	40,000		24,853,600
			52,731,100
Diversified Financials 2.7%
^aAffiliated Managers Group Inc.	300,000		67,839,000
Intercontinental Exchange Inc.	105,000		23,575,650
			91,414,650
Energy 1.0%
^aDiamondback Energy Inc.	275,000		22,706,750
^aFMC Technologies Inc.	225,000		9,922,500
			32,629,250
Food & Staples Retailing 0.8%
Whole Foods Market Inc.	525,000		25,074,000
Food, Beverage & Tobacco 2.9%
^aBoston Beer Inc., A	26,100		6,467,580
^aConstellation Brands Inc., A	360,000		41,738,400
Mead Johnson Nutrition Co., A	155,000		14,867,600
^aMonster Beverage Corp.	255,000		34,963,050
			98,036,630

franklintempleton.com Annual Report | 59


FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS




Franklin Flex Cap Growth Fund (continued)
	Shares		Value
Common Stocks (continued)
Health Care Equipment & Services 8.1%
^aCerner Corp.	550,000	$	39,495,500
^aDexCom Inc.	450,000		30,406,500
^aEdwards Lifesciences Corp.	210,000		26,596,500
^aEnvision Healthcare Holdings Inc.	1,575,000		59,787,000
^aIDEXX Laboratories Inc.	150,000		18,805,500
McKesson Corp.	300,000		67,020,000
Medtronic PLC	400,000		29,780,000
			271,891,000
Materials 2.7%
Cytec Industries Inc.	725,000		40,085,250
Ecolab Inc.	460,000		51,510,800
			91,596,050
Media 3.7%
^aCharter Communications Inc., A	180,000		33,670,800
^aIMAX Corp. (Canada)	300,000		11,208,000
Twenty-First Century Fox Inc., B	600,000		20,010,000
The Walt Disney Co.	550,000		59,796,000
			124,684,800
Pharmaceuticals, Biotechnology & Life Sciences 18.1%
^aActavis PLC	460,000		130,115,600
^bAduro Biotech Inc.	86,175		2,188,845
^aBiogen Inc.	275,000		102,830,750
^aBioMarin Pharmaceutical Inc.	125,000		14,006,250
Bristol-Myers Squibb Co.	600,000		38,238,000
^aCelgene Corp.	665,000		71,859,900
^aCelldex Therapeutics Inc.	550,000		13,200,000
^a,cFibroGen Inc.	890,868		19,677,056
^aIllumina Inc.	184,000		33,902,000
^aJazz Pharmaceuticals PLC	125,000		22,337,500
^aKaryopharm Therapeutics Inc.	240,000		6,518,400
^aPrestige Brands Holdings Inc.	633,400		24,860,950
^aPuma Biotechnology Inc.	50,000		9,029,000
^aQuintiles Transnational Holdings Inc.	475,000		31,293,000
^aRegeneron Pharmaceuticals Inc.	42,000		19,213,320
^aRevance Therapeutics Inc.	338,700		6,663,922
^aValeant Pharmaceuticals International Inc.	265,000		57,486,450
			603,420,943
Retailing 6.0%
Advance Auto Parts Inc.	360,000		51,480,000
^aAmazon.com Inc.	160,000		67,484,800
^aNetflix Inc.	20,000		11,130,000
^aThe Priceline Group Inc.	40,000		49,512,400
Tractor Supply Co.	260,000		22,375,600
			201,982,800
Semiconductors & Semiconductor Equipment 4.2%
^aCavium Inc.	625,000		40,493,750
^aNanometrics Inc.	500,000		7,730,000

60 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Flex Cap Growth Fund (continued)
	Shares		Value
Common Stocks (continued)
Semiconductors & Semiconductor Equipment (continued)
^aNXP Semiconductors NV (Netherlands)	700,000	$	67,284,000
Skyworks Solutions Inc.	275,000		25,368,750
			140,876,500
Software & Services 17.1%
^aBroadSoft Inc.	237,000		7,498,680
^aCoStar Group Inc.	165,000		33,730,950
^aDemandware Inc.	175,000		10,780,000
^aElectronic Arts Inc.	800,000		46,472,000
^aFacebook Inc., A	750,000		59,077,500
^aFleetCor Technologies Inc.	335,000		53,898,150
^aLinkedIn Corp., A	270,000		68,075,100
MasterCard Inc., A	1,110,000		100,133,100
^aMobileye NV	300,000		13,458,000
^aSalesforce.com Inc.	620,000		45,148,400
^aServiceNow Inc.	525,000		39,301,500
^aSplunk Inc.	170,000		11,278,650
^aTwitter Inc.	600,000		23,376,000
Visa Inc., A	900,000		59,445,000
			571,673,030
Technology Hardware & Equipment 8.6%
Apple Inc.	1,770,000		221,515,500
Harris Corp.	150,000		12,036,000
^aPalo Alto Networks Inc.	375,000		55,395,000
			288,946,500
Transportation 2.8%
^aGenesee & Wyoming Inc.	440,000		40,898,000
Kansas City Southern	80,200		8,219,698
^aSpirit Airlines Inc.	650,000		44,505,500
			93,623,198
Total Common Stocks (Cost $2,037,358,388)			3,132,631,838
Short Term Investments 2.7%
Money Market Funds (Cost $80,463,597) 2.4%
^a,dInstitutional Fiduciary Trust Money Market Portfolio	80,463,597		80,463,597
^eInvestments from Cash Collateral Received for Loaned Securities 0.3%
Money Market Funds (Cost $11,905,000) 0.3%
^a,dInstitutional Fiduciary Trust Money Market Portfolio	11,905,000		11,905,000
Total Investments (Cost $2,129,726,985) 96.4%			3,225,000,435
Other Assets, less Liabilities 3.6%			119,339,621
Net Assets 100.0%		$	3,344,340,056

^aNon-income producing.
^bA portion or all of the security is on loan at April 30, 2015. See Note 1(c).
^cSee Note 7 regarding restricted securities.
^dSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
^eSee Note 1(c) regarding securities on loan.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 61


FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Focused Core Equity Fund
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.38		$	10.63		$	9.47		$	10.35		$	9.03
Income from investment operations^a:
Net investment income (loss)^b		(0.01	)		0.03			0.07			0.02			0.06
Net realized and unrealized gains (losses)		2.23			2.92			1.16			(0.31	)		1.29
Total from investment operations		2.22			2.95			1.23			(0.29	)		1.35
Less distributions from:
Net investment income		—			(0.07	)		—			(0.11	)		(0.03	)
Net realized gains		(0.31	)		(0.13	)		(0.07	)		(0.48	)		—
Total distributions		(0.31	)		(0.20	)		(0.07	)		(0.59	)		(0.03	)
Net asset value, end of year	$	15.29		$	13.38		$	10.63		$	9.47		$	10.35

Total return^c		16.84	%		28.00	%		13.08	%		(2.17	)%		14.92	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.54	%		1.73	%		1.89	%		1.81	%		1.87	%
Expenses net of waiver and payments by affiliates		1.28	%		1.22	%		1.19	%		1.21	%		1.10	%
Net investment income (loss)		(0.07	)%		0.23	%		0.76	%		0.25	%		0.61	%

Supplemental data
Net assets, end of year (000’s)	$	92,612		$	40,372		$	19,029		$	26,253		$	14,481
Portfolio turnover rate		25.55	%		43.30	%		74.50	%		51.85	%		63.80	%


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Focused Core Equity Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	12.98		$	10.36		$	9.29		$	10.14		$	8.90
Income from investment operations^a:
Net investment income (loss)^b		(0.11	)		(0.06	)		0.01			(0.04	)		(0.01	)
Net realized and unrealized gains (losses)		2.17			2.84			1.13			(0.29	)		1.25
Total from investment operations		2.06			2.78			1.14			(0.33	)		1.24
Less distributions from:
Net investment income		—			(0.03	)		—			(0.04	)		—
Net realized gains		(0.31	)		(0.13	)		(0.07	)		(0.48	)		—
Total distributions		(0.31	)		(0.16	)		(0.07	)		(0.52	)		—
Net asset value, end of year	$	14.73		$	12.98		$	10.36		$	9.29		$	10.14

Total return^c		16.12	%		26.99	%		12.36	%		(2.66	)%		13.93	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		2.24	%		2.43	%		2.59	%		2.50	%		2.66	%
Expenses net of waiver and payments by affiliates		1.98	%		1.92	%		1.89	%		1.90	%		1.89	%
Net investment income (loss)		(0.77	)%		(0.47	)%		0.06	%		(0.44	)%		(0.18	)%

Supplemental data
Net assets, end of year (000’s)	$	18,758		$	6,666		$	2,502		$	3,265		$	2,095
Portfolio turnover rate		25.55	%		43.30	%		74.50	%		51.85	%		63.80	%


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Focused Core Equity Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.28		$	10.56		$	9.43		$	10.30		$	9.00
Income from investment operations^a:
Net investment income (loss)^b		(0.04	)		0.01			0.05			0.02			0.03
Net realized and unrealized gains (losses)		2.22			2.90			1.15			(0.32	)		1.28
Total from investment operations		2.18			2.91			1.20			(0.30	)		1.31
Less distributions from:
Net investment income		—			(0.06	)		—			(0.09	)		(0.01	)
Net realized gains		(0.31	)		(0.13	)		(0.07	)		(0.48	)		—
Total distributions		(0.31	)		(0.19	)		(0.07	)		(0.57	)		(0.01	)
Net asset value, end of year	$	15.15		$	13.28		$	10.56		$	9.43		$	10.30

Total return		16.66	%		27.70	%		12.81	%		(2.22	)%		14.51	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.74	%		1.93	%		2.09	%		1.99	%		2.16	%
Expenses net of waiver and payments by affiliates		1.48	%		1.42	%		1.39	%		1.39	%		1.39	%
Net investment income (loss)		(0.27	)%		0.03	%		0.56	%		0.07	%		0.32	%

Supplemental data
Net assets, end of year (000’s)	$	169		$	124		$	76		$	41		$	27
Portfolio turnover rate		25.55	%		43.30	%		74.50	%		51.85	%		63.80	%

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS


Franklin Focused Core Equity Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.49		$	10.54
Income from investment operations^b:
Net investment income^c		0.05			0.07
Net realized and unrealized gains (losses)		2.27			3.11
Total from investment operations		2.32			3.18
Less distributions from:
Net investment income		(0.04	)		(0.10	)
Net realized gains		(0.31	)		(0.13	)
Total distributions		(0.35	)		(0.23	)
Net asset value, end of year	$	15.46		$	13.49

Total return		17.45	%		30.43	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.09	%		2.28	%
Expenses net of waiver and payments by affiliates		0.83	%		0.77	%
Net investment income		0.38	%		0.68	%

Supplemental data
Net assets, end of year (000’s)	$	25,739		$	14
Portfolio turnover rate		25.55	%		43.30	%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 65


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Focused Core Equity Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	13.48		$	10.70		$	9.50		$	10.37		$	9.06
Income from investment operations^a:
Net investment income^b		0.04			0.07			0.10			0.06			0.08
Net realized and unrealized gains (losses)		2.25			2.93			1.17			(0.32	)		1.28
Total from investment operations		2.29			3.00			1.27			(0.26	)		1.36
Less distributions from:
Net investment income		(0.02	)		(0.09	)		—			(0.13	)		(0.05	)
Net realized gains		(0.31	)		(0.13	)		(0.07	)		(0.48	)		—
Total distributions		(0.33	)		(0.22	)		(0.07	)		(0.61	)		(0.05	)
Net asset value, end of year	$	15.44		$	13.48		$	10.70		$	9.50		$	10.37

Total return		17.25	%		28.27	%		13.46	%		(1.80	)%		15.08	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.24	%		1.43	%		1.59	%		1.49	%		1.66	%
Expenses net of waiver and payments by affiliates		0.98	%		0.92	%		0.89	%		0.89	%		0.89	%
Net investment income		0.23	%		0.53	%		1.06	%		0.57	%		0.82	%

Supplemental data
Net assets, end of year (000’s)	$	9,914		$	6,990		$	4,347		$	3,188		$	1,966
Portfolio turnover rate		25.55	%		43.30	%		74.50	%		51.85	%		63.80	%

FRANKLIN STRATEGIC SERIES


Statement of Investments, April 30, 2015

Franklin Focused Core Equity Fund
	Country	Shares		Value
Common Stocks 94.9%
Consumer Discretionary 12.3%
^aAltice SA	Luxembourg	31,560	$	3,342,175
BorgWarner Inc.	United States	48,730		2,884,816
NIKE Inc., B	United States	34,718		3,431,527
Twenty-First Century Fox Inc., B	United States	135,720		4,526,262
The Walt Disney Co.	United States	35,610		3,871,519
				18,056,299
Consumer Staples 2.3%
CVS Health Corp.	United States	34,040		3,379,832
Energy 6.6%
Anadarko Petroleum Corp.	United States	34,310		3,228,571
Pioneer Natural Resources Co.	United States	16,660		2,878,515
Schlumberger Ltd.	United States	37,780		3,574,366
				9,681,452
Financials 23.6%
BlackRock Inc.	United States	9,237		3,361,714
^aCBRE Group Inc.	United States	95,780		3,672,205
The Charles Schwab Corp.	United States	148,880		4,540,840
Citigroup Inc.	United States	62,060		3,309,039
Discover Financial Services	United States	53,680		3,111,830
The Hartford Financial Services Group Inc.	United States	154,590		6,302,634
JPMorgan Chase & Co.	United States	53,043		3,355,500
LPL Financial Holdings Inc.	United States	92,820		3,756,425
MetLife Inc.	United States	65,350		3,351,802
				34,761,989
Health Care 14.9%
^aActavis PLC	United States	27,164		7,683,609
Sanofi, ADR	France	83,771		4,234,624
^aValeant Pharmaceuticals International Inc.	United States	46,300		10,043,859
				21,962,092
Industrials 7.7%
The ADT Corp.	United States	92,470		3,476,872
FedEx Corp.	United States	12,340		2,092,494
^aGenesee & Wyoming Inc.	United States	42,400		3,941,080
Precision Castparts Corp.	United States	8,560		1,769,266
				11,279,712
Information Technology 21.5%
^aAdobe Systems Inc.	United States	60,080		4,569,685
Equinix Inc.	United States	18,900		4,837,077
^aGoogle Inc., A	United States	3,660		2,008,498
^aGoogle Inc., C	United States	3,730		2,004,278
MasterCard Inc., A	United States	47,360		4,272,346
Microsoft Corp.	United States	93,930		4,568,755
Motorola Solutions Inc.	United States	60,190		3,596,352
QUALCOMM Inc.	United States	84,820		5,767,760
				31,624,751

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| 67


								FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Growth Opportunities Fund
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	28.48		$	24.29		$	23.02		$	24.28		$	19.59
Income from investment operations^a:
Net investment income (loss)^b		(0.19	)		(0.19	)		(0.12	)		(0.16	)		(0.15	)
Net realized and unrealized gains (losses)		5.50			5.11			1.95			0.40			4.84
Total from investment operations		5.31			4.92			1.83			0.24			4.69
Less distributions from net realized gains		(0.66	)		(0.73	)		(0.56	)		(1.50	)		—
Net asset value, end of year	$	33.13		$	28.48		$	24.29		$	23.02		$	24.28

Total return^c		18.87	%		20.26	%		8.29	%		1.90	%		23.94	%

Ratios to average net assets
Expenses		1.18	%^d		1.17	%^d,e		1.25	%		1.28	%		1.28	%
Net investment income (loss)		(0.59	)%		(0.70	)%		(0.56	)%		(0.71	)%		(0.73	)%

Supplemental data
Net assets, end of year (000’s)	$	457,619		$	349,343		$	213,639		$	209,382		$	211,435
Portfolio turnover rate		40.64	%		36.64	%		58.76	%		63.57	%		69.74	%


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Growth Opportunities Fund (continued)
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	25.41		$	21.89		$	20.95		$	22.40		$	18.20
Income from investment operations^a:
Net investment income (loss)^b		(0.36	)		(0.35	)		(0.26	)		(0.29	)		(0.27	)
Net realized and unrealized gains (losses)		4.88			4.60			1.76			0.34			4.47
Total from investment operations		4.52			4.25			1.50			0.05			4.20
Less distributions from net realized gains		(0.66	)		(0.73	)		(0.56	)		(1.50	)		—
Net asset value, end of year	$	29.27		$	25.41		$	21.89		$	20.95		$	22.40

Total return^c		18.04	%		19.42	%		7.47	%		1.24	%		23.08	%

Ratios to average net assets
Expenses		1.88	%^d		1.87	%^d,e		1.97	%		1.99	%		1.98	%
Net investment income (loss)		(1.29	)%		(1.40	)%		(1.28	)%		(1.42	)%		(1.43	)%

Supplemental data
Net assets, end of year (000’s)	$	110,513		$	85,883		$	51,719		$	50,453		$	56,658
Portfolio turnover rate		40.64	%		36.64	%		58.76	%		63.57	%		69.74	%


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Growth Opportunities Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	27.67		$	23.67		$	22.49		$	23.81		$	19.25
Income from investment operations^a:
Net investment income (loss)^b		(0.24	)		(0.24	)		(0.17	)		(0.20	)		(0.19	)
Net realized and unrealized gains (losses)		5.33			4.97			1.91			0.38			4.75
Total from investment operations		5.09			4.73			1.74			0.18			4.56
Less distributions from net realized gains		(0.66	)		(0.73	)		(0.56	)		(1.50	)		—
Net asset value, end of year	$	32.10		$	27.67		$	23.67		$	22.49		$	23.81

Total return		18.63	%		19.99	%		8.03	%		1.73	%		23.69	%

Ratios to average net assets
Expenses		1.38	%^c		1.37	%^c,d		1.47	%		1.49	%		1.48	%
Net investment income (loss)		(0.79	)%		(0.90	)%		(0.78	)%		(0.92	)%		(0.93	)%

Supplemental data
Net assets, end of year (000’s)	$	48,266		$	42,953		$	34,399		$	33,783		$	29,053
Portfolio turnover rate		40.64	%		36.64	%		58.76	%		63.57	%		69.74	%

FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS


Franklin Growth Opportunities Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	29.98		$	24.99
Income from investment operations^b:
Net investment income (loss)^c		(0.03	)		(0.07	)
Net realized and unrealized gains (losses)		5.80			5.79
Total from investment operations		5.77			5.72
Less distributions from net realized gains		(0.66	)		(0.73	)
Net asset value, end of year	$	35.09		$	29.98

Total return		19.47	%		22.90	%

Ratios to average net assets
Expenses^d		0.68	%		0.71	%^e
Net investment income (loss)		(0.09	)%		(0.24	)%

Supplemental data
Net assets, end of year (000’s)	$	246,911		$	180,843
Portfolio turnover rate		40.64	%		36.64	%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
^eBenefit of expense reduction rounds to less than 0.01%.

72 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Growth Opportunities Fund (continued)
					Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	29.93		$	25.43		$	23.99		$	25.16		$	20.24
Income from investment operations^a:
Net investment income (loss)^b		(0.10	)		(0.13	)		(0.06	)		(0.10	)		(0.09	)
Net realized and unrealized gains (losses)		5.79			5.36			2.06			0.43			5.01
Total from investment operations		5.69			5.23			2.00			0.33			4.92
Less distributions from net realized gains		(0.66	)		(0.73	)		(0.56	)		(1.50	)		—
Net asset value, end of year	$	34.96		$	29.93		$	25.43		$	23.99		$	25.16

Total return		19.23	%		20.58	%		8.62	%		2.20	%		24.31	%

Ratios to average net assets
Expenses		0.88	%^c		0.87	%^c,d		0.97	%		0.99	%		0.98	%
Net investment income (loss)		(0.29	)%		(0.40	)%		(0.28	)%		(0.42	)%		(0.43	)%

Supplemental data
Net assets, end of year (000’s)	$	269,887		$	224,469		$	182,954		$	154,708		$	172,528
Portfolio turnover rate		40.64	%		36.64	%		58.76	%		63.57	%		69.74	%


FRANKLIN STRATEGIC SERIES




Statement of Investments, April 30, 2015

Franklin Growth Opportunities Fund
	Country	Shares		Value
Common Stocks 97.1%
Consumer Discretionary 17.1%
^aAmazon.com Inc.	United States	65,778	$	27,743,845
^aBuffalo Wild Wings Inc.	United States	45,700		7,280,010
^aChipotle Mexican Grill Inc.	United States	13,687		8,504,281
^aDISH Network Corp., A	United States	121,665		8,231,854
Hanesbrands Inc.	United States	280,971		8,732,579
Harman International Industries Inc.	United States	100,612		13,117,792
Las Vegas Sands Corp.	United States	145,502		7,694,146
Lowe’s Cos. Inc.	United States	160,638		11,061,533
NIKE Inc., B	United States	144,084		14,241,262
^aThe Priceline Group Inc.	United States	15,755		19,501,696
Starbucks Corp.	United States	472,870		23,444,895
^aUnder Armour Inc., A	United States	225,761		17,507,765
The Walt Disney Co.	United States	241,868		26,295,889
				193,357,547
Consumer Staples 3.6%
^aBoston Beer Inc., A	United States	19,783		4,902,227
^aConstellation Brands Inc., A	United States	103,888		12,044,775
Mead Johnson Nutrition Co., A	United States	111,431		10,688,462
^aMonster Beverage Corp.	United States	99,544		13,648,478
				41,283,942
Energy 4.6%
Anadarko Petroleum Corp.	United States	294,184		27,682,714
^aDiamondback Energy Inc.	United States	218,724		18,060,041
Schlumberger Ltd.	United States	64,869		6,137,256
				51,880,011
Financials 6.4%
^aAffiliated Managers Group Inc.	United States	57,025		12,895,063
American Tower Corp.	United States	102,027		9,644,613
BlackRock Inc.	United States	28,312		10,303,869
^aCBRE Group Inc.	United States	368,470		14,127,140
The Charles Schwab Corp.	United States	458,851		13,994,956
^aSignature Bank	United States	86,324		11,575,185
Virtu Financial Inc., A	United States	22,700		485,553
				73,026,379
Health Care 25.4%
^aActavis PLC	United States	161,263		45,614,852
^aAlnylam Pharmaceuticals Inc.	United States	43,715		4,453,247
^aBiogen Inc.	United States	59,925		22,407,755
^aCelgene Corp.	United States	358,010		38,686,561
^aCelldex Therapeutics Inc.	United States	265,002		6,360,048
^aEnvision Healthcare Holdings Inc.	United States	298,239		11,321,152
^aGilead Sciences Inc.	United States	224,872		22,601,885
^aHMS Holdings Corp.	United States	283,560		4,823,356
^aIllumina Inc.	United States	95,831		17,656,862
^aImpax Laboratories Inc.	United States	136,306		6,169,210
^aIncyte Corp.	United States	91,062		8,847,584
^aJazz Pharmaceuticals PLC	United States	78,529		14,033,132
^aKaryopharm Therapeutics Inc.	United States	183,481		4,983,344
^aMedivation Inc.	United States	127,261		15,365,493


74 \| Annual Report		franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Growth Opportunities Fund (continued)
	Country	Shares		Value
Common Stocks (continued)
Health Care (continued)
Perrigo Co. PLC	United States	94,376	$	17,297,233
^aPuma Biotechnology Inc.	United States	30,080		5,431,846
^aSagent Pharmaceuticals Inc.	United States	206,195		4,806,406
^aValeant Pharmaceuticals International Inc.	United States	134,425		29,160,815
^aVWR Corp.	United States	303,700		8,060,198
				288,080,979
Industrials 6.7%
Allegiant Travel Co.	United States	47,945		7,372,023
American Airlines Group Inc.	United States	273,610		13,211,259
B/E Aerospace Inc.	United States	120,085		7,179,882
^aDigitalGlobe Inc.	United States	216,700		6,971,239
Flowserve Corp.	United States	224,023		13,112,066
Hexcel Corp.	United States	122,870		6,161,931
^aIHS Inc., A	United States	92,352		11,587,405
Kansas City Southern	United States	98,006		10,044,635
				75,640,440
Information Technology 26.4%
^aAdobe Systems Inc.	United States	108,119		8,223,531
Apple Inc.	United States	282,775		35,389,291
ARM Holdings PLC	United Kingdom	307,305		5,257,965
Avago Technologies Ltd.	Singapore	136,568		15,962,068
^aBroadSoft Inc.	United States	227,230		7,189,557
^aElectronic Arts Inc.	United States	148,965		8,653,377
^aFacebook Inc., A	United States	406,976		32,057,500
^aFreescale Semiconductor Ltd.	United States	218,508		8,541,478
^aGoogle Inc., A	United States	38,312		21,024,476
^aGoogle Inc., C	United States	31,531		16,942,868
^aLinkedIn Corp., A	United States	43,424		10,948,493
MasterCard Inc., A	United States	424,507		38,294,776
^aMobileye NV	United States	106,302		4,768,708
^aNetSuite Inc.	United States	70,325		6,720,960
^aNXP Semiconductors NV	Netherlands	173,112		16,639,525
^aPalo Alto Networks Inc.	United States	79,850		11,795,442
^aSalesforce.com Inc.	United States	133,088		9,691,468
^aServiceNow Inc.	United States	118,198		8,848,302
^aViaSat Inc.	United States	111,504		6,703,621
Visa Inc., A	United States	381,532		25,200,189
				298,853,595
Materials 3.8%
^aAxalta Coating Systems Ltd.	United States	376,446		11,549,363
Ecolab Inc.	United States	73,801		8,264,236
LyondellBasell Industries NV, A	United States	123,252		12,759,047
Martin Marietta Materials Inc.	United States	70,361		10,036,997
				42,609,643
Telecommunication Services 3.1%
^aSBA Communications Corp.	United States	302,827		35,073,423
Total Common Stocks (Cost $739,778,154)				1,099,805,959

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Annual Report

| 75


								FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Small Cap Growth Fund
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	18.20		$	14.26		$	12.84		$	13.02		$	10.02
Income from investment operations^a:
Net investment income (loss)^b		(0.12	)		(0.15	)		(0.09	)		(0.07	)		(0.10	)
Net realized and unrealized gains (losses)		1.57			4.75			1.87			(0.11	)		3.10
Total from investment operations		1.45			4.60			1.78			(0.18	)		3.00
Less distributions from net realized gains		(0.82	)		(0.66	)		(0.36	)		—			—
Net asset value, end of year	$	18.83		$	18.20		$	14.26		$	12.84		$	13.02

Total return^c		8.34	%		32.40	%		14.35	%		(1.38	)%		29.94	%

Ratios to average net assets
Expenses		1.16	%^d		1.20	%^d		1.33	%		1.37	%		1.37	%
Net investment income (loss)		(0.66	)%		(0.85	)%		(0.68	)%		(0.60	)%		(0.94	)%

Supplemental data
Net assets, end of year (000’s)	$	1,164,218		$	851,317		$	327,882		$	244,570		$	270,271
Portfolio turnover rate		30.15	%		40.35	%		41.02	%		50.08	%		63.07	%


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Small Cap Growth Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	16.03		$	12.70		$	11.57		$	11.80		$	9.15
Income from investment operations^a:
Net investment income (loss)^b		(0.22	)		(0.24	)		(0.16	)		(0.14	)		(0.16	)
Net realized and unrealized gains (losses)		1.37			4.23			1.65			(0.09	)		2.81
Total from investment operations		1.15			3.99			1.49			(0.23	)		2.65
Less distributions from net realized gains		(0.82	)		(0.66	)		(0.36	)		—			—
Net asset value, end of year	$	16.36		$	16.03		$	12.70		$	11.57		$	11.80

Total return^c		7.58	%		31.57	%		13.41	%		(1.95	)%		28.96	%

Ratios to average net assets
Expenses		1.87	%^d		1.90	%^d		2.03	%		2.07	%		2.07	%
Net investment income (loss)		(1.37	)%		(1.55	)%		(1.38	)%		(1.30	)%		(1.64	)%

Supplemental data
Net assets, end of year (000’s)	$	225,105		$	187,271		$	77,644		$	67,212		$	72,394
Portfolio turnover rate		30.15	%		40.35	%		41.02	%		50.08	%		63.07	%


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Small Cap Growth Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	17.57		$	13.81		$	12.48		$	12.67		$	9.77
Income from investment operations^a:
Net investment income (loss)^b		(0.16	)		(0.18	)		(0.11	)		(0.09	)		(0.12	)
Net realized and unrealized gains (losses)		1.52			4.60			1.80			(0.10	)		3.02
Total from investment operations		1.36			4.42			1.69			(0.19	)		2.90
Less distributions from net realized gains		(0.82	)		(0.66	)		(0.36	)		—			—
Net asset value, end of year	$	18.11		$	17.57		$	13.81		$	12.48		$	12.67

Total return		8.12	%		32.15	%		14.04	%		(1.50	)%		29.68	%

Ratios to average net assets
Expenses		1.37	%^c		1.40	%^c		1.53	%		1.57	%		1.57	%
Net investment income (loss)		(0.87	)%		(1.05	)%		(0.88	)%		(0.80	)%		(1.14	)%

Supplemental data
Net assets, end of year (000’s)	$	92,455		$	51,190		$	15,783		$	8,489		$	8,993
Portfolio turnover rate		30.15	%		40.35	%		41.02	%		50.08	%		63.07	%

FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS


Franklin Small Cap Growth Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	19.21		$	14.64
Income from investment operations^b:
Net investment income (loss)^c		(0.03	)		(0.06	)
Net realized and unrealized gains (losses)		1.66			5.29
Total from investment operations		1.63			5.23
Less distributions from net realized gains		(0.82	)		(0.66	)
Net asset value, end of year	$	20.02		$	19.21

Total return		8.91	%		35.80	%

Ratios to average net assets
Expenses^d		0.66	%		0.72	%
Net investment income (loss)		(0.16	)%		(0.37	)%

Supplemental data
Net assets, end of year (000’s)	$	844,293		$	87,777
Portfolio turnover rate		30.15	%		40.35	%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.

80 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Small Cap Growth Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	19.17		$	14.94		$	13.41		$	13.55		$	10.39
Income from investment operations^a:
Net investment income (loss)^b		(0.07	)		(0.11	)		(0.05	)		(0.04	)		(0.07	)
Net realized and unrealized gains (losses)		1.66			5.00			1.94			(0.10	)		3.23
Total from investment operations		1.59			4.89			1.89			(0.14	)		3.16
Less distributions from net realized gains		(0.82	)		(0.66	)		(0.36	)		—			—
Net asset value, end of year	$	19.94		$	19.17		$	14.94		$	13.41		$	13.55

Total return		8.65	%		32.87	%		14.56	%		(1.03	)%		30.41	%

Ratios to average net assets
Expenses		0.87	%^c		0.90	%^c		1.03	%		1.07	%		1.07	%
Net investment income (loss)		(0.37	)%		(0.55	)%		(0.38	)%		(0.30	)%		(0.64	)%

Supplemental data
Net assets, end of year (000’s)	$	1,077,822		$	427,406		$	91,687		$	49,159		$	49,489
Portfolio turnover rate		30.15	%		40.35	%		41.02	%		50.08	%		63.07	%


FRANKLIN STRATEGIC SERIES




Statement of Investments, April 30, 2015

Franklin Small Cap Growth Fund
	Shares		Value
Common Stocks 91.4%
Consumer Discretionary 18.1%
^a2U Inc.	1,401,923	$	37,305,171
^aAmerican Axle & Manufacturing Holdings Inc.	1,239,900		30,910,707
^aBuffalo Wild Wings Inc.	138,300		22,031,190
^aFive Below Inc.	650,400		21,931,488
^aGlobal Eagle Entertainment Inc.	1,296,756		16,559,574
^aGrand Canyon Education Inc.	1,052,500		47,657,200
^aIMAX Corp. (Canada)	1,092,500		40,815,800
KB Home	883,700		12,804,813
Lithia Motors Inc.	324,795		32,391,804
^a,bM/I Homes Inc.	1,280,400		28,885,824
^a,cMattress Firm Holding Corp.	463,900		27,407,212
^a,cNoodles & Co.	943,735		18,893,575
^aNord Anglia Education Inc. (Hong Kong)	706,724		18,410,160
^aParty City Holdco Inc.	275,300		5,723,487
^a,b,cPotbelly Corp.	1,640,851		24,629,174
^aShutterfly Inc.	911,800		40,812,168
^a,b,cSportsman’s Warehouse Holdings Inc.	2,356,900		22,696,947
^aTenneco Inc.	821,400		48,010,830
^a,b,cTile Shop Holdings Inc.	2,625,700		34,055,329
^aTumi Holdings Inc.	593,200		13,874,948
Wolverine World Wide Inc.	1,301,000		39,979,730
^a,b,cZoe’s Kitchen Inc.	1,025,400		31,408,002
			617,195,133
Consumer Staples 2.9%
^aBoston Beer Inc., A	117,500		29,116,500
^a,cFreshpet Inc.	748,500		16,227,480
^aSmart & Final Stores Inc.	1,126,900		19,517,908
^aTreeHouse Foods Inc.	401,500		32,625,890
			97,487,778
Energy 5.2%
^aC&J Energy Services Ltd.	1,184,700		20,673,015
^a,bCallon Petroleum Co.	4,435,282		39,651,421
^aMatador Resources Co.	1,089,239		30,193,705
^a,b,cRex Energy Corp.	5,509,700		27,548,500
^aRigNet Inc.	704,800		26,401,808
^a,cSanchez Energy Corp.	2,174,900		31,949,281
			176,417,730
Financials 4.9%
BBCN Bancorp Inc.	469,500		6,662,205
^aEssent Group Ltd.	772,631		19,277,143
Evercore Partners Inc.	497,000		23,975,280
^aSquare 1 Financial Inc., A	963,600		24,918,696
Talmer Bancorp Inc., A	1,822,500		28,030,050
Virtus Investment Partners Inc.	244,503		32,670,491
^aWestern Alliance Bancorp	967,200		29,905,824
			165,439,689
Health Care 19.3%
^aAdeptus Health Inc., A	516,200		32,763,214
^cAduro Biotech Inc.	257,420		6,538,468


82 \| Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Small Cap Growth Fund (continued)
	Shares		Value
Common Stocks (continued)
Health Care (continued)
^a,bAratana Therapeutics Inc.	2,013,519	$	25,994,530
^aCelldex Therapeutics Inc.	1,366,600		32,798,400
^aCorium International Inc.	628,550		5,656,950
^aDexCom Inc.	719,000		48,582,830
^a,cExact Sciences Corp.	387,213		8,092,752
^aFluidigm Corp.	795,300		29,791,938
^aFoamix Pharmaceuticals Ltd. (Israel)	437,780		4,342,778
^aGreatbatch Inc.	596,000		32,136,320
^aHalozyme Therapeutics Inc.	791,400		11,768,118
HealthEquity Inc.	889,916		23,324,698
^aHealthStream Inc.	477,500		13,818,850
^aHeartWare International Inc.	426,800		32,313,028
^aHeron Therapeutics Inc.	739,593		7,987,604
^aHMS Holdings Corp.	2,082,900		35,430,129
^aImpax Laboratories Inc.	850,300		38,484,578
^aKaryopharm Therapeutics Inc.	968,686		26,309,512
^a,cKeryx Biopharmaceuticals Inc.	2,110,000		22,492,600
^aNeogen Corp.	703,900		31,351,706
^aNevro Corp.	333,700		15,023,174
^aOphthotech Corp.	149,709		6,778,824
^aPAREXEL International Corp.	624,900		39,728,017
Pfenex Inc.	860,600		11,489,010
^a,bRevance Therapeutics Inc.	1,344,100		26,445,168
^aSage Therapeutics Inc.	166,400		8,819,200
^aSagent Pharmaceuticals Inc.	964,500		22,482,495
^aThe Spectranetics Corp.	1,411,600		36,207,540
^aTandem Diabetes Care Inc.	1,264,500		16,881,075
^aTherapeuticsMD Inc.	761,900		4,937,112
			658,770,618
Industrials 16.0%
^aThe Advisory Board Co.	880,900		45,709,901
Allegiant Travel Co.	132,448		20,365,204
Altra Industrial Motion Corp.	1,302,100		34,336,377
^aAstronics Corp.	749,660		50,459,615
^aBeacon Roofing Supply Inc.	862,000		25,618,640
^aDigitalGlobe Inc.	1,314,200		42,277,814
Exponent Inc.	262,308		23,243,112
^aHub Group Inc., A	950,300		37,916,970
^aHuron Consulting Group Inc.	201,700		12,227,054
Interface Inc.	1,846,000		40,113,580
^a,b,cThe KEYW Holding Corp.	3,081,560		29,737,054
The Manitowoc Co. Inc.	594,864		11,736,667
Mobile Mini Inc.	719,900		27,744,946
^aPaylocity Holding Corp.	723,711		20,372,465
^aProto Labs Inc.	340,400		23,828,000
^aSpirit Airlines Inc.	155,900		10,674,473
Steelcase Inc., A	1,679,200		29,503,544
US Ecology Inc.	1,024,990		48,082,281
^a,cVirgin America Inc.	330,430		9,496,558
			543,444,255

franklintempleton.com Annual Report | 83

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Small Cap Growth Fund (continued)
	Shares		Value
Common Stocks (continued)
Information Technology 22.7%
^a,cA10 Networks Inc.	2,129,800	$	9,690,590
^a,bBazaarvoice Inc.	4,314,900		23,214,162
^aBorderfree Inc.	1,286,968		8,133,638
^aBottomline Technologies Inc.	1,572,004		42,066,827
^aBroadSoft Inc.	1,350,974		42,744,817
^a,bCallidus Software Inc.	2,907,900		35,912,565
^aCavium Inc.	660,700		42,806,753
^aCognex Corp.	875,500		39,301,195
^aCoherent Inc.	521,300		31,278,000
^aDemandware Inc.	858,700		52,895,920
^aFARO Technologies Inc.	729,000		29,036,070
^aGuidewire Software Inc.	595,500		29,745,225
^aHomeAway Inc.	1,372,800		38,369,760
^a,cHubspot Inc.	511,729		19,809,030
Intersil Corp., A	2,812,000		37,540,200
^aIxia	2,671,000		31,998,580
^a,bLattice Semiconductor Corp.	7,451,500		44,187,395
^aM/A-COM Technology Solutions Holdings Inc.	851,700		25,951,299
^a,cMobile Iron Inc.	1,609,628		9,689,960
^a,bNanometrics Inc.	2,431,800		37,595,628
^aSemtech Corp.	1,086,500		25,304,585
^aShoretel Inc.	1,173,900		8,170,344
^aSilicon Laboratories Inc.	637,300		32,929,291
^aViaSat Inc.	727,400		43,731,288
^aZendesk Inc.	1,349,514		31,119,793
			773,222,915
Materials 2.3%
H.B. Fuller Co.	976,600		40,792,582
Quaker Chemical Corp.	465,400		38,730,588
			79,523,170
Total Common Stocks (Cost $2,788,098,379)			3,111,501,288
Short Term Investments 11.9%
Money Market Funds (Cost $183,750,044) 5.4%
^a,dInstitutional Fiduciary Trust Money Market Portfolio	183,750,044		183,750,044
^eInvestments from Cash Collateral Received for Loaned Securities
(Cost $219,970,892) 6.5%
Money Market Funds 6.5%
^a,dInstitutional Fiduciary Trust Money Market Portfolio	219,970,892		219,970,892
Total Investments (Cost $3,191,819,315) 103.3%			3,515,222,224
Other Assets, less Liabilities (3.3)%			(111,329,354	)
Net Assets 100.0%		$	3,403,892,870

^aNon-income producing.
^bSee Note 8 regarding holdings of 5% voting securities.
^cA portion or all of the security is on loan at April 30, 2015. See Note 1(c).
^dSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
^eSee Note 1(c) regarding securities on loan.

84 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com


								FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Small-Mid Cap Growth Fund
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	40.42		$	38.01		$	38.51		$	41.47		$	32.29
Income from investment operations^a:
Net investment income (loss)^b		(0.14	)		(0.20	)		(0.10	)		(0.14	)		(0.11	)
Net realized and unrealized gains (losses)		5.71			8.39			3.08			(1.18	)		9.29
Total from investment operations		5.57			8.19			2.98			(1.32	)		9.18
Less distributions from net realized gains		(7.61	)		(5.78	)		(3.48	)		(1.64	)		—
Net asset value, end of year	$	38.38		$	40.42		$	38.01		$	38.51		$	41.47

Total return^c		15.78	%		21.99	%		8.95	%		(2.54	)%		28.43	%

Ratios to average net assets
Expenses		0.94	%^d		0.96	%^d,e		0.98	%		0.99	%		0.99	%
Net investment income (loss)		(0.35	)%		(0.48	)%		(0.27	)%		(0.38	)%		(0.31	)%

Supplemental data
Net assets, end of year (000’s)	$	2,535,853		$	2,371,448		$	2,355,507		$	2,492,205		$	2,939,925
Portfolio turnover rate		47.98	%		40.82	%		43.72	%		47.37	%		44.42	%


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Small-Mid Cap Growth Fund (continued)
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	33.78		$	32.80		$	33.97		$	37.10		$	29.10
Income from investment operations^a:
Net investment income (loss)^b		(0.36	)		(0.43	)		(0.32	)		(0.37	)		(0.33	)
Net realized and unrealized gains (losses)		4.62			7.19			2.63			(1.12	)		8.33
Total from investment operations		4.26			6.76			2.31			(1.49	)		8.00
Less distributions from net realized gains		(7.61	)		(5.78	)		(3.48	)		(1.64	)		—
Net asset value, end of year	$	30.43		$	33.78		$	32.80		$	33.97		$	37.10

Total return^c		14.96	%		21.04	%		8.11	%		(3.28	)%		27.49	%

Ratios to average net assets
Expenses		1.69	%^d		1.71	%^d,e		1.73	%		1.74	%		1.74	%
Net investment income (loss)		(1.10	)%		(1.23	)%		(1.02	)%		(1.13	)%		(1.06	)%

Supplemental data
Net assets, end of year (000’s)	$	448,722		$	404,923		$	348,144		$	367,272		$	426,526
Portfolio turnover rate		47.98	%		40.82	%		43.72	%		47.37	%		44.42	%


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Small-Mid Cap Growth Fund (continued)
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	38.61		$	36.61		$	37.32		$	40.35		$	31.50
Income from investment operations^a:
Net investment income (loss)^b		(0.23	)		(0.29	)		(0.18	)		(0.23	)		(0.19	)
Net realized and unrealized gains (losses)		5.41			8.07			2.95			(1.16	)		9.04
Total from investment operations		5.18			7.78			2.77			(1.39	)		8.85
Less distributions from net realized gains		(7.61	)		(5.78	)		(3.48	)		(1.64	)		—
Net asset value, end of year	$	36.18		$	38.61		$	36.61		$	37.32		$	40.35

Total return		15.52	%		21.66	%		8.66	%		(2.79	)%		28.10	%

Ratios to average net assets
Expenses		1.19	%^c		1.21	%^c,d		1.23	%		1.24	%		1.24	%
Net investment income (loss)		(0.60	)%		(0.73	)%		(0.52	)%		(0.63	)%		(0.56	)%

Supplemental data
Net assets, end of year (000’s)	$	96,593		$	85,921		$	65,397		$	64,743		$	86,814
Portfolio turnover rate		47.98	%		40.82	%		43.72	%		47.37	%		44.42	%

FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS


Franklin Small-Mid Cap Growth Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	42.53		$	38.96
Income from investment operations^b:
Net investment income^c		0.05			0.01
Net realized and unrealized gains (losses)		6.07			9.34
Total from investment operations		6.12			9.35
Less distributions from net realized gains		(7.61	)		(5.78	)
Net asset value, end of year	$	41.04		$	42.53

Total return		16.32	%		24.43	%

Ratios to average net assets
Expenses^d		0.48	%		0.47	%^e
Net investment income		0.11	%		0.01	%

Supplemental data
Net assets, end of year (000’s)	$	206,548		$	157,153
Portfolio turnover rate		47.98	%		40.82	%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.
^eBenefit of expense reduction rounds to less than 0.01%.

88 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Small-Mid Cap Growth Fund (continued)
					Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	42.44		$	39.56		$	39.83		$	42.73		$	33.19
Income from investment operations^a:
Net investment income (loss)^b		(0.04	)		(0.10	)		(0.01	)		(0.05	)		(0.02	)
Net realized and unrealized gains (losses)		6.04			8.76			3.22			(1.21	)		9.56
Total from investment operations		6.00			8.66			3.21			(1.26	)		9.54
Less distributions from net realized gains		(7.61	)		(5.78	)		(3.48	)		(1.64	)		—
Net asset value, end of year	$	40.83		$	42.44		$	39.56		$	39.83		$	42.73

Total return		16.09	%		22.30	%		9.21	%		(2.29	)%		28.74	%

Ratios to average net assets
Expenses		0.69	%^c		0.71	%^c,d		0.73	%		0.74	%		0.74	%
Net investment income (loss)		(0.10	)%		(0.23	)%		(0.02	)%		(0.13	)%		(0.06	)%

Supplemental data
Net assets, end of year (000’s)	$	708,617		$	650,426		$	909,895		$	822,827		$	878,248
Portfolio turnover rate		47.98	%		40.82	%		43.72	%		47.37	%		44.42	%


FRANKLIN STRATEGIC SERIES




Statement of Investments, April 30, 2015

Franklin Small-Mid Cap Growth Fund
	Shares		Value
Common Stocks 97.1%
Consumer Discretionary 20.2%
Advance Auto Parts Inc.	100,000	$	14,300,000
BorgWarner Inc.	559,800		33,140,160
^aBuffalo Wild Wings Inc.	155,600		24,787,080
^aCharter Communications Inc., A	151,900		28,414,414
^aChipotle Mexican Grill Inc.	72,500		45,047,150
Dick’s Sporting Goods Inc.	620,400		33,662,904
^aDollar Tree Inc.	420,600		32,138,046
^aGlobal Eagle Entertainment Inc.	1,449,000		18,503,730
^aGrand Canyon Education Inc.	624,600		28,281,888
Hanesbrands Inc.	721,000		22,408,680
Harman International Industries Inc.	282,400		36,819,312
^aIMAX Corp. (Canada)	576,300		21,530,568
^aJarden Corp.	998,292		51,092,585
^bKB Home	2,133,200		30,910,068
L Brands Inc.	465,100		41,561,336
Marriott International Inc., A	573,900		45,940,695
^aMGM Resorts International	988,319		20,902,947
^aNetflix Inc.	84,930		47,263,545
Nordstrom Inc.	409,100		30,911,596
Polaris Industries Inc.	151,000		20,680,960
^aShutterfly Inc.	253,802		11,360,177
^aTenneco Inc.	673,500		39,366,075
Tiffany & Co.	241,100		21,091,428
Tractor Supply Co.	408,800		35,181,328
^aUnder Armour Inc., A	394,400		30,585,720
Wolverine World Wide Inc.	712,900		21,907,417
^a,bZoe’s Kitchen Inc.	609,500		18,668,985
			806,458,794
Consumer Staples 4.8%
^aBoston Beer Inc., A	121,800		30,182,040
^aConstellation Brands Inc., A	391,700		45,413,698
^a,bFreshpet Inc.	1,103,200		23,917,376
^aMonster Beverage Corp.	325,000		44,560,750
^aTreeHouse Foods Inc.	376,500		30,594,390
Whole Foods Market Inc.	325,528		15,547,217
			190,215,471
Energy 4.9%
Cabot Oil & Gas Corp., A	1,357,010		45,894,078
^aConcho Resources Inc.	349,000		44,204,340
^aDiamondback Energy Inc.	421,200		34,778,484
EQT Corp.	403,500		36,290,790
^aMatador Resources Co.	829,600		22,996,512
Oceaneering International Inc.	227,300		12,526,503
			196,690,707
Financials 7.1%
^aAffiliated Managers Group Inc.	251,800		56,939,534
Arthur J. Gallagher & Co.	524,400		25,082,052
Brown & Brown Inc.	672,800		21,495,960
Intercontinental Exchange Inc.	227,048		50,979,087
Jones Lang LaSalle Inc.	105,300		17,486,118


90 \| Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Small-Mid Cap Growth Fund (continued)
	Shares		Value
Common Stocks (continued)
Financials (continued)
Lazard Ltd., A	724,800	$	38,436,144
^aSignature Bank	349,200		46,824,228
T. Rowe Price Group Inc.	296,900		24,102,342
Virtu Financial Inc., A	103,500		2,213,865
			283,559,330
Health Care 18.7%
Aduro Biotech Inc.	199,100		5,057,140
^aBioMarin Pharmaceutical Inc.	239,600		26,847,180
^aCelldex Therapeutics Inc.	793,900		19,053,600
^aCerner Corp.	588,000		42,224,280
The Cooper Cos. Inc.	243,800		43,413,466
^aDaVita HealthCare Partners Inc.	459,900		37,297,890
DENTSPLY International Inc.	442,000		22,542,000
^aDexCom Inc.	282,300		19,075,011
^aEdwards Lifesciences Corp.	253,000		32,042,450
^aEnvision Healthcare Holdings Inc.	1,071,700		40,681,732
^aHCA Holdings Inc.	620,200		45,901,002
HealthEquity Inc.	337,500		8,845,875
^aHeartWare International Inc.	118,230		8,951,193
^aHMS Holdings Corp.	228,100		3,879,981
^aHologic Inc.	1,081,300		36,483,062
^aIllumina Inc.	154,900		28,540,325
^aImpax Laboratories Inc.	1,232,000		55,760,320
^aIncyte Corp.	205,200		19,937,232
Inovalon Holdings Inc., A	359,300		9,072,325
^aInsulet Corp.	109,000		3,253,650
^aKaryopharm Therapeutics Inc.	240,300		6,526,548
^a,bKeryx Biopharmaceuticals Inc.	398,100		4,243,746
^aMettler-Toledo International Inc.	104,500		33,127,545
^aNevro Corp.	88,750		3,995,525
Perrigo Co. PLC	310,817		56,966,540
Pfenex Inc.	650,500		8,684,175
^aPuma Biotechnology Inc.	73,800		13,326,804
^aQuintiles Transnational Holdings Inc.	728,400		47,986,992
^a,bRevance Therapeutics Inc.	623,900		12,275,233
St. Jude Medical Inc.	428,000		29,981,400
^aTandem Diabetes Care Inc.	233,200		3,113,220
^aVertex Pharmaceuticals Inc.	133,700		16,482,536
			745,569,978
Industrials 14.4%
Acuity Brands Inc.	135,300		22,588,335
^aThe Advisory Board Co.	498,700		25,877,543
Allegiant Travel Co.	61,110		9,396,274
AMETEK Inc.	1,096,050		57,454,941
B/E Aerospace Inc.	530,500		31,718,595
^aDigitalGlobe Inc.	853,300		27,450,661
Flowserve Corp.	484,400		28,351,932
^aGenesee & Wyoming Inc.	300,200		27,903,590
^aHD Supply Holdings Inc.	872,000		28,776,000
Hexcel Corp.	756,709		37,948,956


franklintempleton.com	Annual Report \| 91

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Small-Mid Cap Growth Fund (continued)
	Shares		Value
Common Stocks (continued)
Industrials (continued)
^aIHS Inc., A	320,600	$	40,225,682
J.B. Hunt Transport Services Inc.	237,800		20,736,160
Kansas City Southern	246,900		25,304,781
Robert Half International Inc.	834,900		46,295,205
Roper Technologies Inc.	268,830		45,209,141
^aSpirit Airlines Inc.	501,900		34,365,093
Towers Watson & Co.	167,500		21,256,587
^aWABCO Holdings Inc.	367,400		45,722,930
			576,582,406
Information Technology 22.9%
^aAlliance Data Systems Corp.	54,600		16,233,126
^aANSYS Inc.	227,100		19,494,264
Applied Materials Inc.	1,626,600		32,190,414
Avago Technologies Ltd. (Singapore)	387,500		45,291,000
^aBottomline Technologies Inc.	565,600		15,135,456
^aCognex Corp.	761,800		34,197,202
^aCoStar Group Inc.	206,200		42,153,466
^aDemandware Inc.	347,100		21,381,360
^aElectronic Arts Inc.	833,700		48,429,633
Equinix Inc.	133,069		34,056,349
Fidelity National Information Services Inc.	272,900		17,053,521
^aFleetCor Technologies Inc.	243,800		39,224,982
^aFortinet Inc.	424,500		16,020,630
^aFreescale Semiconductor Ltd.	713,700		27,898,533
^bGoDaddy Inc., A	100,200		2,512,014
^aHomeAway Inc.	833,300		23,290,735
Intersil Corp., A	2,174,600		29,030,910
^aJDS Uniphase Corp.	1,980,400		25,071,864
Lam Research Corp.	236,400		17,867,112
^aLinkedIn Corp., A	128,600		32,423,918
^aNetSuite Inc.	169,800		16,227,786
^aNXP Semiconductors NV (Netherlands)	714,900		68,716,188
^aPalo Alto Networks Inc.	100,000		14,772,000
^aPandora Media Inc.	1,196,200		21,340,208
^aRed Hat Inc.	442,800		33,325,128
^aServiceNow Inc.	386,000		28,895,960
^aTwitter Inc.	851,000		33,154,960
^aVantiv Inc., A	672,600		26,298,660
^aVeriFone Systems Inc.	840,400		30,061,108
^aViaSat Inc.	637,896		38,350,308
^aWorkday Inc.	200,800		18,314,968
Xilinx Inc.	564,100		24,459,376
^aYelp Inc.	547,800		21,577,842
			914,450,981
Materials 3.6%
^aAxalta Coating Systems Ltd.	1,579,270		48,452,004
Cytec Industries Inc.	721,800		39,908,322
H.B. Fuller Co.	556,333		23,238,029
Martin Marietta Materials Inc.	235,500		33,594,075
			145,192,430

92 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Small-Mid Cap Growth Fund (continued)
	Shares		Value
Common Stocks (continued)
Utilities 0.5%
^aCalpine Corp.	997,600	$	21,757,656
Total Common Stocks (Cost $2,566,045,801)			3,880,477,753
Short Term Investments 4.8%
Money Market Funds (Cost $142,198,800) 3.6%
^a,cInstitutional Fiduciary Trust Money Market Portfolio	142,198,800		142,198,800
^dInvestments from Cash Collateral Received for Loaned Securities
(Cost $48,611,025) 1.2%
Money Market Funds 1.2%
^a,cInstitutional Fiduciary Trust Money Market Portfolio	48,611,025		48,611,025
Total Investments (Cost $2,756,855,626) 101.9%			4,071,287,578
Other Assets, less Liabilities (1.9)%			(74,954,915	)
Net Assets 100.0%		$	3,996,332,663

^aNon-income producing.
^bA portion or all of the security is on loan at April 30, 2015. See Note 1(c).
^cSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
^dSee Note 1(c) regarding securities on loan.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 93


FRANKLIN STRATEGIC SERIES




Financial Statements

Statements of Assets and Liabilities
April 30, 2015

		Franklin Flex Cap			Franklin Focused			Franklin Growth
		Growth Fund			Core Equity Fund			Opportunities Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,037,358,388		$	116,988,379		$	739,778,154
Cost - Sweep Money Fund (Note 3f)		92,368,597			8,816,207			31,128,570
Total cost of investments	$	2,129,726,985		$	125,804,586		$	770,906,724
Value - Unaffiliated issuers	$	3,132,631,838		$	139,613,420		$	1,099,805,959
Value - Sweep Money Fund (Note 3f)		92,368,597			8,816,207			31,128,570
Total value of investments^a		3,225,000,435			148,429,627			1,130,934,529
Receivables:
Investment securities sold		243,065,862			148,128			10,993,173
Capital shares sold		2,866,692			314,305			1,260,599
Dividends and interest		469,963			50,603			165,876
Other assets		1,735			65			554
Total assets		3,471,404,687			148,942,728			1,143,354,731
Liabilities:
Payables:
Investment securities purchased		108,693,184			1,578,508			8,221,627
Capital shares redeemed		3,296,243			21,672			877,427
Management fees		1,283,511			84,531			597,925
Distribution fees		798,536			37,240			225,250
Transfer agent fees		886,527			20,119			193,868
Payable upon return of securities loaned		11,905,000			—			—
Accrued expenses and other liabilities		201,630			8,335			42,750
Total liabilities		127,064,631			1,750,405			10,158,847
Net assets, at value	$	3,344,340,056		$	147,192,323		$	1,133,195,884
Net assets consist of:
Paid-in capital	$	1,979,576,938		$	121,483,880		$	753,388,146
Undistributed net investment income (loss)		(6,551,185	)		(109,547	)		(2,383,730	)
Net unrealized appreciation (depreciation)		1,095,273,450			22,623,525			360,028,253
Accumulated net realized gain (loss)		276,040,853			3,194,465			22,163,215
Net assets, at value	$	3,344,340,056		$	147,192,323		$	1,133,195,884



^aIncludes securities loaned	$	11,308,875		$	—		$	—

94 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com


					FRANKLIN STRATEGIC SERIES
					FINANCIAL STATEMENTS


Statements of Assets and Liabilities (continued)
April 30, 2015

			Franklin Flex Cap		Franklin Focused	Franklin Growth
			Growth Fund		Core Equity Fund	Opportunities Fund
Class A:
Net assets, at value	$		2,245,755,844	$	92,611,880	$		457,618,644
Shares outstanding			43,555,449		6,055,606			13,813,786
Net asset value per share^a		$	51.56	$	15.29		$	33.13
Maximum offering price per share (net asset value
per share ÷ 94.25%)		$	54.71	$	16.22		$	35.15
Class C:
Net assets, at value	$		363,531,992	$	18,757,598	$		110,513,114
Shares outstanding			8,435,489		1,273,528			3,775,513
Net asset value and maximum offering price per share^a		$	43.10	$	14.73		$	29.27
Class R:
Net assets, at value	$		45,268,898	$	169,157	$		48,266,044
Shares outstanding			919,675		11,167			1,503,523
Net asset value and maximum offering price per share		$	49.22	$	15.15		$	32.10
Class R6:
Net assets, at value	$		295,822,010	$	25,739,190	$		246,911,084
Shares outstanding			5,511,989		1,664,940			7,036,134
Net asset value and maximum offering price per share		$	53.67	$	15.46		$	35.09
Advisor Class:
Net assets, at value	$		393,961,312	$	9,914,498	$		269,886,998
Shares outstanding			7,379,652		641,970			7,719,806
Net asset value and maximum offering price per share		$	53.38	$	15.44		$	34.96

^aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 95


FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statements of Assets and Liabilities (continued)
April 30, 2015

		Franklin Small Cap		Franklin Small-Mid Cap
		Growth Fund		Growth Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	2,309,693,255	$	2,566,045,801
Cost - Non-controlled affiliated issuers (Note 8)		478,405,124		—
Cost - Sweep Money Fund (Note 3f)		403,720,936		190,809,825
Total cost of investments	$	3,191,819,315	$	2,756,855,626
Value - Unaffiliated issuers	$	2,679,539,589	$	3,880,477,753
Value - Non-controlled affiliated issuers (Note 8)		431,961,699		—
Value - Sweep Money Fund (Note 3f)		403,720,936		190,809,825
Total value of investments^a		3,515,222,224		4,071,287,578
Receivables:
Investment securities sold		16,335,681		2,933,310
Capital shares sold		129,490,303		4,961,837
Dividends and interest		1,218,688		1,095,966
Due from custodian		1,421,425		190,650
Other assets		1,516		1,994
Total assets		3,663,689,837		4,080,471,335
Liabilities:
Payables:
Investment securities purchased		27,977,800		26,215,986
Capital shares redeemed		7,462,562		5,196,825
Management fees		1,630,538		1,513,570
Distribution fees		471,586		950,248
Transfer agent fees		737,754		1,286,824
Payable upon return of securities loaned		221,392,317		48,801,675
Accrued expenses and other liabilities		124,410		173,544
Total liabilities		259,796,967		84,138,672
Net assets, at value	$	3,403,892,870	$	3,996,332,663
Net assets consist of:
Paid-in capital	$	3,026,300,786	$	2,525,998,873
Undistributed net investment income (loss)		—		(4,043,161	)
Net unrealized appreciation (depreciation)		323,402,909		1,314,431,952
Accumulated net realized gain (loss)		54,189,175		159,944,999
Net assets, at value	$	3,403,892,870	$	3,996,332,663



^aIncludes securities loaned	$	211,301,814	$	46,784,095

96 | Annual Report | The accompanying notes are an integral part of these financial statements.

franklintempleton.com


		FRANKLIN STRATEGIC SERIES
		FINANCIAL STATEMENTS


Statements of Assets and Liabilities (continued)
April 30, 2015

		Franklin Small Cap		Franklin Small-Mid Cap
		Growth Fund				Growth Fund
Class A:
Net assets, at value	$	1,164,217,992	$	2,535,853,203
Shares outstanding		61,823,112				66,064,074
Net asset value per share^a	$	18.83			$	38.38
Maximum offering price per share (net asset value per share ÷ 94.25%)	$	19.98			$	40.72
Class C:
Net assets, at value	$	225,105,488		$		448,721,694
Shares outstanding		13,762,678				14,744,058
Net asset value and maximum offering price per share^a	$	16.36			$	30.43
Class R:
Net assets, at value	$	92,454,509		$		96,592,657
Shares outstanding		5,104,534				2,669,562
Net asset value and maximum offering price per share	$	18.11			$	36.18
Class R6:
Net assets, at value	$	844,292,878		$		206,547,836
Shares outstanding		42,174,734				5,033,408
Net asset value and maximum offering price per share	$	20.02			$	41.04
Advisor Class:
Net assets, at value	$	1,077,822,003		$		708,617,273
Shares outstanding		54,043,372				17,355,925
Net asset value and maximum offering price per share	$	19.94			$	40.83


FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statements of Operations
for the year ended April 30, 2015

		Franklin Flex Cap			Franklin Focused			Franklin Growth
		Growth Fund			Core Equity Fund			Opportunities Fund
Investment income:
Dividends	$	16,912,188		$	1,209,982		$	5,562,203
Income from securities loaned		2,027,170			—			293,740
Total investment income		18,939,358			1,209,982			5,855,943
Expenses:
Management fees (Note 3a)		15,463,437			945,420			6,492,010
Distribution fees: (Note 3c)
Class A		5,567,315			193,877			1,167,008
Class C		3,602,925			119,209			965,439
Class R		263,949			763			236,122
Transfer agent fees: (Note 3e)
Class A		4,638,734			94,021			784,028
Class C		750,505			17,351			194,605
Class R		109,977			222			95,197
Class R6		587			131			1,170
Advisor Class		807,537			12,473			507,965
Custodian fees (Note 4)		30,693			1,429			9,562
Reports to shareholders		451,197			14,012			87,461
Registration and filing fees		233,232			76,419			137,044
Professional fees		65,747			41,822			45,513
Trustees’ fees and expenses		37,187			706			10,387
Other		48,653			8,983			21,115
Total expenses		32,071,675			1,526,838			10,754,626
Expense reductions (Note 4)		(59	)		—			—
Expenses waived/paid by affiliates (Notes 3f and 3g)		(49,299	)		(261,149	)		(16,671	)
Net expenses		32,022,317			1,265,689			10,737,955
Net investment income (loss)		(13,082,959	)		(55,707	)		(4,882,012	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		487,591,360			4,915,224			30,871,066
Foreign currency transactions		—			(441	)		(1,297	)
Net realized gain (loss)		487,591,360			4,914,783			30,869,769
Net change in unrealized appreciation (depreciation) on:
Investments		(48,517,586	)		10,557,832			145,265,246
Translation of other assets and liabilities denominated in
foreign currencies		—			(2,842	)		161
Net change in unrealized appreciation (depreciation)		(48,517,586	)		10,554,990			145,265,407
Net realized and unrealized gain (loss)		439,073,774			15,469,773			176,135,176
Net increase (decrease) in net assets resulting from
operations	$	425,990,815		$	15,414,066		$	171,253,164

98 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com


		FRANKLIN STRATEGIC SERIES
		FINANCIAL STATEMENTS


Statements of Operations (continued)
for the year ended April 30, 2015

		Franklin Small Cap			Franklin Small-Mid Cap
		Growth Fund			Growth Fund
Investment income:
Dividends	$	6,795,866		$	20,267,809
Income from securities loaned		5,161,438			1,984,960
Total investment income		11,957,304			22,252,769
Expenses:
Management fees (Note 3a)		15,143,792			17,364,552
Distribution fees: (Note 3c)
Class A		2,963,572			6,053,930
Class C		2,117,318			4,249,567
Class R		359,205			465,973
Transfer agent fees: (Note 3e)
Class A		2,134,820			5,174,291
Class C		437,773			907,920
Class R		148,545			199,152
Class R6		12,008			1,023
Advisor Class		1,612,940			1,445,785
Custodian fees (Note 4)		21,312			35,118
Reports to shareholders		319,016			345,355
Registration and filing fees		428,989			228,689
Professional fees		52,758			63,118
Trustees’ fees and expenses		21,718			41,128
Other		29,324			53,577
Total expenses		25,803,090			36,629,178
Expense reductions (Note 4)		(36	)		—
Expenses waived/paid by affiliates (Note 3f)		(114,532	)		(79,961	)
Net expenses		25,688,522			36,549,217
Net investment income (loss)		(13,731,218	)		(14,296,448	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		101,307,993			501,684,738
Non-controlled affiliated issuers (Note 8)		(397,318	)		—
Foreign currency transactions		—			2,053
Net realized gain (loss)		100,910,675			501,686,791
Net change in unrealized appreciation (depreciation) on investments		117,033,709			64,843,012
Net realized and unrealized gain (loss)		217,944,384			566,529,803
Net increase (decrease) in net assets resulting from operations	$	204,213,166		$	552,233,355

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 99


FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statements of Changes in Net Assets


		Franklin						Franklin
		Flex Cap Growth Fund						Focused Core Equity Fund
		Year Ended April 30,						Year Ended April 30,
		2015			2014			2015			2014
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(13,082,959	)	$	(9,087,281	)	$	(55,707	)	$	80,297
Net realized gain (loss) from investments and foreign
currency transactions		487,591,360			547,040,961			4,914,783			3,001,159
Net change in unrealized appreciation (depreciation) on
investments and translation of other assets and liabilities
denominated in foreign currencies		(48,517,586	)		149,336,366			10,554,990			6,359,861
Net increase (decrease) in net assets resulting from
operations		425,990,815			687,290,046			15,414,066			9,441,317
Distributions to shareholders from:
Net investment income:
Class A		—			—			—			(192,481	)
Class C		—			—			—			(11,368	)
Class R		—			—			—			(445	)
Class R6		—			—			(54,580	)		(49	)
Advisor Class		—			—			(12,538	)		(39,406	)
Net realized gains:
Class A		(342,846,125	)		(301,818,476	)		(1,515,213	)		(346,062	)
Class C		(64,406,445	)		(54,830,001	)		(294,362	)		(51,272	)
Class R		(8,219,922	)		(9,202,542	)		(3,890	)		(1,074	)
Class R6		(55,730,307	)		(49,991,855	)		(466,176	)		(63	)
Advisor Class		(61,364,271	)		(52,429,221	)		(197,864	)		(57,087	)
Total distributions to shareholders		(532,567,070	)		(468,272,095	)		(2,544,623	)		(699,307	)
Capital share transactions: (Note 2)
Class A		136,476,026			(40,787,141	)		43,753,093			14,846,786
Class C		36,940,650			41,930,551			10,579,825			3,202,995
Class R		(9,432,569	)		(10,211,593	)		25,410			25,544
Class R6		(69,772,541	)		351,377,703			24,014,926			12,502
Advisor Class		75,060,076			(557,643,800	)		1,784,405			1,381,150
Total capital share transactions		169,271,642			(215,334,280	)		80,157,659			19,468,977
Net increase (decrease) in net assets		62,695,387			3,683,671			93,027,102			28,210,987
Net assets:
Beginning of year		3,281,644,669			3,277,960,998			54,165,221			25,954,234
End of year	$	3,344,340,056		$	3,281,644,669		$	147,192,323		$	54,165,221
Undistributed net investment income (loss) included in
net assets:
End of year	$	(6,551,185	)	$	—		$	(109,547	)	$	13,720

₁₀₀| Annual Report | The accompanying notes are an integral part of these financial statements.

franklintempleton.com


								FRANKLIN STRATEGIC SERIES
								FINANCIAL STATEMENTS


Statements of Changes in Net Assets (continued)


		Franklin Growth						Franklin Small Cap
		Opportunities Fund						Growth Fund
		Year Ended April 30,						Year Ended April 30,
		2015			2014			2015			2014
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(4,882,012	)	$	(4,328,922	)	$	(13,731,218	)	$	(9,044,371		)
Net realized gain (loss) from investments and foreign
currency transactions		30,869,769			34,734,849			100,910,675			118,376,734
Net change in unrealized appreciation (depreciation)
on investments and translation of other assets and
liabilities denominated in foreign currencies		145,265,407			72,755,872			117,033,709			102,087,491
Net increase (decrease) in net assets resulting
from operations		171,253,164			103,161,799			204,213,166			211,419,854
Distributions to shareholders from:
Net realized gains:
Class A		(8,226,701	)		(7,721,877	)		(45,578,212	)		(24,165,547		)
Class C		(2,289,412	)		(2,096,347	)		(10,662,075	)		(6,035,996		)
Class R		(1,046,546	)		(1,119,208	)		(3,386,123	)		(1,265,928		)
Class R6		(4,459,467	)		(3,094,887	)		(15,120,957	)		(1,954,443		)
Advisor Class		(5,048,872	)		(5,609,140	)		(33,104,015	)		(8,618,047		)
Total distributions to shareholders		(21,070,998	)		(19,641,459	)		(107,851,382	)		(42,039,961		)
Capital share transactions: (Note 2)
Class A		51,147,182			97,823,516			273,601,463			418,746,753
Class C		11,203,177			25,708,687			32,688,066			87,582,326
Class R		(1,590,662	)		2,812,217			38,786,269			30,683,689
Class R6		32,429,351			160,891,720			743,017,911			77,135,611
Advisor Class		6,333,425			30,022,943			614,477,070			308,435,474
Total capital share transactions		99,522,473			317,259,083			1,702,570,779			922,583,853
Net increase (decrease) in net assets		249,704,639			400,779,423			1,798,932,563			1,091,963,746
Net assets:
Beginning of year		883,491,245			482,711,822			1,604,960,307			512,996,561
End of year	$	1,133,195,884		$	883,491,245		$	3,403,892,870		$	1,604,960,307
Undistributed net investment income (loss) included in
net assets:
End of year	$	(2,383,730	)	$	(1,886,845	)	$	—			$	—

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | ₁₀₁


FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statements of Changes in Net Assets (continued)


		Franklin Small-Mid Cap
		Growth Fund
		Year Ended April 30,
		2015			2014
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(14,296,448	)	$	(18,790,409	)
Net realized gain (loss) from investments and foreign currency transactions		501,686,791			731,676,246
Net change in unrealized appreciation (depreciation) on investments		64,843,012			39,368,824
Net increase (decrease) in net assets resulting from operations		552,233,355			752,254,661
Distributions to shareholders from:
Net realized gains:
Class A		(417,947,469	)		(308,312,450	)
Class C		(89,717,291	)		(59,893,715	)
Class R		(17,750,873	)		(10,409,543	)
Class R6		(31,845,395	)		(13,191,566	)
Advisor Class		(113,021,649	)		(87,681,400	)
Total distributions to shareholders		(670,282,677	)		(479,488,674	)
Capital share transactions: (Note 2)
Class A		230,068,449			(158,638,312	)
Class C		73,872,191			44,837,913
Class R		14,705,787			17,358,312
Class R6		53,747,705			157,466,945
Advisor Class		72,116,723			(342,862,855	)
Total capital share transactions		444,510,855			(281,837,997	)
Net increase (decrease) in net assets		326,461,533			(9,072,010	)
Net assets:
Beginning of year		3,669,871,130			3,678,943,140
End of year	$	3,996,332,663		$	3,669,871,130
Undistributed net investment income (loss) included in net assets:
End of year	$	(4,043,161	)	$	260,343

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FRANKLIN STRATEGIC SERIES

Notes to Financial Statements

1. Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of nine separate funds, five of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The financial statements of the remaining funds in the Trust are presented separately. The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees. Franklin Small Cap Growth Fund was closed to new investors with limited exceptions effective at the close of market February 12, 2015.

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds’ calculate the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an 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. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities 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 are valued at the closing NAV.

The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting

Policies (continued)

a. Financial Instrument Valuation (continued)

funds). These price movements are measured against established trigger thresholds for each specific market proxy to assist in determining if an event has occurred that may call into question the reliability of the values of the foreign securities held by the Funds. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Funds’ portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Funds for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Funds may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert 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 Board.

The Funds do not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statements of Operations.

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c. Securities Lending

Certain funds participate in an agency based securities lending program to earn additional income. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the funds. The total cash collateral received at year end was $11,905,000, $221,392,317 and $48,801,675 for Franklin Flex Cap Growth Fund, Franklin Small Cap Growth Fund and Franklin Small-Mid Cap Growth Fund, respectively of which $1,421,425 and $190,650 was uninvested cash included in due from custodian in the Statements of Assets and Liabilities for Franklin Small Cap Growth Fund and Franklin Small-Mid Cap Growth Fund, respectively. The fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned is reported separately in the Statements of Operations. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the fund. If the borrower defaults on its obligation to return the securities loaned, the fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

d. Income and Deferred Taxes

It is each fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. Each fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

The Funds may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, the Funds record an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

Each fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of April 30, 2015, and for all open tax years, each fund has determined that no liability for unrecognized tax benefits is required in each fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Funds. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

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

Realized and unrealized gains and losses and net investment income, not including class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions, by class, are generally due to differences in class specific expenses.

f. Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

g. Guarantees and Indemnifications

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

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

2. Shares of Beneficial Interest

At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:


	Franklin						Franklin Focused Core
	Flex Cap Growth Fund						Equity Fund
	Shares			Amount			Shares			Amount

Class A Shares:
Year ended April 30, 2015
Shares sold	5,829,133		$	313,652,976			4,330,719		$	62,326,695
Shares issued in reinvestment of distributions	6,536,512			313,687,386			108,790			1,506,743
Shares redeemed	(9,069,735	)		(490,864,336		)	(1,402,021	)		(20,080,345		)
Net increase (decrease)	3,295,910		$	136,476,026			3,037,488		$	43,753,093
Year ended April 30, 2014
Shares sold	6,700,704		$	375,096,611			2,207,069		$	26,644,238
Shares issued in reinvestment of distributions	5,171,210			276,039,156			43,741			534,953
Shares redeemed	(12,236,062	)		(691,922,908		)	(1,023,326	)		(12,332,405		)
Net increase (decrease)	(364,148	)	$	(40,787,141		)	1,227,484		$	14,846,786

Class C Shares:
Year ended April 30, 2015
Shares sold	806,709		$	37,072,619			917,755		$	12,810,782
Shares issued in reinvestment of distributions	1,554,274			62,512,881			21,304			285,046
Shares redeemed	(1,363,573	)		(62,644,850		)	(178,945	)		(2,516,003		)
Net increase (decrease)	997,410		$	36,940,650			760,114		$	10,579,825
Year ended April 30, 2014
Shares sold	893,299		$	44,126,041			351,843		$	4,174,110
Shares issued in reinvestment of distributions	1,140,917			52,995,741			5,240				62,354
Shares redeemed	(1,121,933	)		(55,191,231		)	(85,283	)		(1,033,469		)
Net increase (decrease)	912,283		$	41,930,551			271,800		$	3,202,995

Class R Shares:
Year ended April 30, 2015
Shares sold	112,069			$	5,883,467		4,453			$	63,598
Shares issued in reinvestment of distributions	178,575				8,187,653		283				3,890
Shares redeemed	(453,418	)		(23,503,689		)	(2,901	)		(42,078		)
Net increase (decrease)	(162,774	)		$	(9,432,569	)	1,835			$	25,410
Year ended April 30, 2014
Shares sold	165,427			$	9,014,678		1,978			$	24,090
Shares issued in reinvestment of distributions	178,238				9,181,050		125				1,519
Shares redeemed	(530,379	)		(28,407,321		)	(5	)			(65	)
Net increase (decrease)	(186,714	)	$	(10,211,593		)	2,098			$	25,544

Class R6 Shares:
Year ended April 30, 2015
Shares sold	208,100		$	11,229,853			1,731,134		$	25,050,510
Shares issued in reinvestment of distributions	1,074,806			53,600,581			37,238			520,591
Shares redeemed	(2,551,233	)		(134,602,975		)	(104,481	)		(1,556,175		)
Net increase (decrease)	(1,268,327	)	$	(69,772,541		)	1,663,891		$	24,014,926
Year ended April 30, 2014^a
Shares sold^b	6,538,546		$	339,702,428			1,049			$	12,502
Shares issued in reinvestment of distributions	910,764			49,991,855			—				—
Shares redeemed	(668,994	)		(38,316,580		)	—				—
Net increase (decrease)	6,780,316		$	351,377,703			1,049			$	12,502

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS


	Franklin						Franklin Focused Core
	Flex Cap Growth Fund						Equity Fund
	Shares				Amount		Shares				Amount

Advisor Class Shares:
Year ended April 30, 2015
Shares sold	1,687,564			$	95,480,580		187,731			$	2,722,580
Shares issued in reinvestment of distributions	1,215,776				60,351,143		10,555				147,563
Shares redeemed	(1,474,007	)			(80,771,647	)	(74,691	)			(1,085,738	)
Net increase (decrease)	1,429,333			$	75,060,076		123,595			$	1,784,405
Year ended April 30, 2014
Shares sold	1,105,318			$	63,767,861		151,580			$	1,862,457
Shares issued in reinvestment of distributions	941,204				51,568,568		7,778				95,825
Shares redeemed^b	(12,088,944	)			(672,980,229	)	(47,289	)			(577,132	)
Net increase (decrease)	(10,042,422	)	$	(557,643,800		)	112,069			$	1,381,150

	Franklin Growth						Franklin
	Opportunities Fund						Small Cap Growth Fund
	Shares			Amount			Shares				Amount

Class A Shares:
Year ended April 30, 2015
Shares sold	4,284,487		$	135,816,417			35,113,831		$	646,367,733
Shares issued in reinvestment of distributions	260,551				7,871,257		2,517,935				43,107,019
Shares redeemed	(2,999,072	)		(92,540,492		)	(22,575,043	)		(415,873,289		)
Net increase (decrease)	1,545,966		$	51,147,182			15,056,723		$	273,601,463
Year ended April 30, 2014
Shares sold	5,335,483		$	149,644,541			32,871,636		$	580,436,703
Shares issued in reinvestment of distributions	259,497				7,351,542		1,287,541				22,969,714
Shares redeemed	(2,121,489	)		(59,172,567		)	(10,393,514	)		(184,659,664		)
Net increase (decrease)	3,473,491		$	97,823,516			23,765,663		$	418,746,753
Class C Shares:
Year ended April 30, 2015
Shares sold	938,449		$	26,354,628			4,518,973			$	72,788,301
Shares issued in reinvestment of distributions	80,384				2,151,087		643,984				9,601,848
Shares redeemed	(623,578	)		(17,302,538		)	(3,082,359	)		(49,702,083		)
Net increase (decrease)	395,255		$	11,203,177			2,080,598			$	32,688,066
Year ended April 30, 2014
Shares sold	1,424,840		$	35,757,550			6,739,782		$	105,854,080
Shares issued in reinvestment of distributions	78,027				1,977,203		347,196				5,468,331
Shares redeemed	(485,128	)		(12,026,066		)	(1,517,438	)		(23,740,085		)
Net increase (decrease)	1,017,739		$	25,708,687			5,569,540			$	87,582,326
Class R Shares:
Year ended April 30, 2015
Shares sold	362,355		$	10,891,578			3,379,988			$	60,467,102
Shares issued in reinvestment of distributions	35,413				1,037,235		205,380				3,384,666
Shares redeemed	(446,651	)		(13,519,475		)	(1,393,481	)		(25,065,499		)
Net increase (decrease)	(48,883	)	$	(1,590,662		)	2,191,887			$	38,786,269
Year ended April 30, 2014
Shares sold	545,166		$	14,740,941			2,300,867			$	39,848,549
Shares issued in reinvestment of distributions	40,261				1,108,798		73,430				1,265,928
Shares redeemed	(486,471	)		(13,037,522		)	(604,595	)		(10,430,788		)
Net increase (decrease)	98,956			$	2,812,217		1,769,702			$	30,683,689

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS


2. Shares of Beneficial Interest (continued)
	Franklin Growth					Franklin
	Opportunities Fund					Small Cap Growth Fund
	Shares			Amount		Shares			Amount

Class R6 Shares:
Year ended April 30, 2015
Shares sold	1,338,415		$	43,718,352		40,533,757		$	802,392,823
Shares issued in reinvestment of distributions	103,593			3,308,745		719,645			13,068,756
Shares redeemed	(438,062	)		(14,597,746	)	(3,648,550	)		(72,443,668		)
Net increase (decrease)	1,003,946		$	32,429,351		37,604,852		$	743,017,911
Year ended April 30, 2014^a
Shares sold^b	6,199,116		$	165,959,115		4,726,169			$	80,264,676
Shares issued in reinvestment of distributions	103,960			3,094,887		104,015				1,954,443
Shares redeemed	(270,888	)		(8,162,282	)	(260,302	)			(5,083,508	)
Net increase (decrease)	6,032,188		$	160,891,720		4,569,882			$	77,135,611
Advisor Class Shares:
Year ended April 30, 2015
Shares sold	1,172,189		$	38,291,441		44,799,317		$	871,011,128
Shares issued in reinvestment of distributions	156,179			4,972,740		1,598,050			28,940,693
Shares redeemed	(1,108,533	)		(36,930,756	)	(14,643,992	)		(285,474,751		)
Net increase (decrease)	219,835		$	6,333,425		31,753,375		$	614,477,070
Year ended April 30, 2014
Shares sold	6,718,925		$	202,105,098		21,984,752		$	414,137,550
Shares issued in reinvestment of distributions	187,091			5,564,089		373,668				7,013,753
Shares redeemed^b	(6,601,759	)		(177,646,244	)	(6,203,491	)		(112,715,829		)
Net increase (decrease)	304,257		$	30,022,943		16,154,929		$	308,435,474


	Franklin Small-Mid Cap
	Growth Fund
	Shares				Amount

Class A Shares:
Year ended April 30, 2015
Shares sold	9,606,826		$	377,655,732
Shares issued in reinvestment of distributions	10,740,727				372,273,602
Shares redeemed	(12,948,880	)			(519,860,885	)
Net increase (decrease)	7,398,673		$	230,068,449
Year ended April 30, 2014
Shares sold	8,518,651		$	352,913,687
Shares issued in reinvestment of distributions	7,034,330				277,011,793
Shares redeemed	(18,857,338	)			(788,563,792	)
Net increase (decrease)	(3,304,357	)	$	(158,638,312		)

Class C Shares:
Year ended April 30, 2015
Shares sold	1,922,933			$	61,150,043
Shares issued in reinvestment of distributions	3,007,899				82,897,682
Shares redeemed	(2,173,499	)			(70,175,534	)
Net increase (decrease)	2,757,333			$	73,872,191
Year ended April 30, 2014
Shares sold	1,311,930			$	46,282,012
Shares issued in reinvestment of distributions	1,665,263				54,953,680
Shares redeemed	(1,603,672	)			(56,397,779	)
Net increase (decrease)	1,373,521			$	44,837,913

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS


	Franklin Small-Mid Cap
	Growth Fund
	Shares				Amount

Class R Shares:
Year ended April 30, 2015
Shares sold	929,258			$	35,571,744
Shares issued in reinvestment of distributions	531,661				17,385,302
Shares redeemed	(1,016,736	)			(38,251,259	)
Net increase (decrease)	444,183			$	14,705,787
Year ended April 30, 2014
Shares sold	827,089			$	33,172,661
Shares issued in reinvestment of distributions	273,999				10,316,051
Shares redeemed	(661,910	)			(26,130,400	)
Net increase (decrease)	439,178			$	17,358,312

Class R6 Shares:
Year ended April 30, 2015
Shares sold	1,395,483			$	59,630,680
Shares issued in reinvestment of distributions	675,017				24,968,887
Shares redeemed	(732,222	)			(30,851,862	)
Net increase (decrease)	1,338,278			$	53,747,705
Year ended April 30, 2014^a
Shares sold	3,770,614		$	161,755,908
Shares issued in reinvestment of distributions	318,927				13,190,824
Shares redeemed	(394,411	)			(17,479,787	)
Net increase (decrease)	3,695,130		$	157,466,945

Advisor Class Shares:
Year ended April 30, 2015
Shares sold	2,813,541		$	118,449,511
Shares issued in reinvestment of distributions	2,768,890				101,978,223
Shares redeemed	(3,553,308	)			(148,311,011	)
Net increase (decrease)	2,029,123			$	72,116,723
Year ended April 30, 2014
Shares sold	3,625,676		$	157,249,867
Shares issued in reinvestment of distributions	1,961,538				81,031,144
Shares redeemed	(13,258,411	)			(581,143,866	)
Net increase (decrease)	(7,671,197	)	$	(342,862,855		)

^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bEffective May 1, 2013, a portion of Advisor Class shares were exchanged into Class R6 for Franklin Flex Cap Growth Fund, Franklin Growth Opportunities Fund, and
Franklin Small Cap Growth Fund.

3. Transactions with Affiliates

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


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

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates (continued)

a. Management Fees

Franklin Flex Cap Growth Fund and Franklin Small-Mid Cap Growth Fund pay an investment management fee to Advisers based on the average daily net assets of each of the funds as follows:


Annualized Fee Rate		Net Assets
0.625	%	Up to and including $100 million
0.500	%	Over $100 million, up to and including $250 million
0.450	%	Over $250 million, up to and including $7.5 billion
0.440	%	Over $7.5 billion, up to and including $10 billion
0.430	%	Over $10 billion, up to and including $12.5 billion
0.420	%	Over $12.5 billion, up to and including $15 billion
0.400	%	In excess of $15 billion

Franklin Focused Core Equity Fund pays an investment management fee to Advisers based on the average daily net assets of the fund as follows:


Annualized Fee Rate		Net Assets
0.950	%	Up to and including $500 million
0.850	%	Over $500 million, up to and including $1 billion
0.800	%	Over $1 billion, up to and including $1.5 billion
0.750	%	Over $1.5 billion, up to and including $6.5 billion
0.725	%	Over $6.5 billion, up to and including $11.5 billion
0.700	%	Over $11.5 billion, up to and including $16.5 billion
0.690	%	Over $16.5 billion, up to and including $19 billion
0.680	%	Over $19 billion, up to and including $21.5 billion
0.670	%	In excess of $21.5 billion

Franklin Growth Opportunities Fund pays an investment management fee to Advisers based on the average daily net assets of the fund as follows:


Annualized Fee Rate		Net Assets
0.700	%	Up to and including $500 million
0.600	%	Over $500 million, up to and including $1 billion
0.550	%	Over $1 billion, up to and including $1.5 billion
0.500	%	Over $1.5 billion, up to and including $6.5 billion
0.475	%	Over $6.5 billion, up to and including $11.5 billion
0.450	%	Over $11.5 billion, up to and including $16.5 billion
0.440	%	Over $16.5 billion, up to and including $19 billion
0.430	%	Over $19 billion, up to and including $21.5 billion
0.420	%	In excess of $21.5 billion

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Small Cap Growth Fund pays an investment management fee to Advisers based on the average daily net assets of the fund as follows:


Annualized Fee Rate		Net Assets
0.750	%	Up to and including $500 million
0.650	%	Over $500 million, up to and including $1 billion
0.600	%	Over $1 billion, up to and including $1.5 billion
0.550	%	Over $1.5 billion, up to and including $6.5 billion
0.525	%	Over $6.5 billion, up to and including $11.5 billion
0.500	%	Over $11.5 billion, up to and including $16.5 billion
0.490	%	Over $16.5 billion, up to and including $19 billion
0.480	%	Over $19 billion, up to and including $21.5 billion
0.470	%	In excess of $21.5 billion

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on each of the Funds’ average daily net assets, and is not an additional expense of the Funds.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C and R compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each fund.

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


					Franklin
	Franklin		Franklin		Growth		Franklin		Franklin
	Flex Cap		Focused Core		Opportunities		Small Cap		Small-Mid Cap
	Growth Fund		Equity Fund		Fund		Growth Fund		Growth Fund
Reimbursement Plans:
Class A	0.25	%	0.35	%	0.35	%	0.35	%	0.25	%
Compensation Plans:
Class C	1.00	%	1.00	%	1.00	%	1.00	%	1.00	%
Class R	0.50	%	0.50	%	0.50	%	0.50	%	0.50	%

The Board has set the current rate at 0.30% per year for Class A shares for Franklin Focused Core Equity Fund, Franklin Growth Opportunities Fund and Franklin Small Cap Growth Fund until further notice and approval by the Board.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates (continued)

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Funds. These charges are deducted from the proceeds of sales of fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Funds of the following commission transactions related to the sales and redemptions of the Funds’ shares for the year:


						Franklin
		Franklin		Franklin		Growth		Franklin		Franklin
		Flex Cap		Focused Core		Opportunities		Small Cap		Small-Mid Cap
		Growth Fund		Equity Fund		Fund		Growth Fund		Growth Fund

Sales charges retained net of commissions
paid to unaffiliated broker/dealers	$	879,132	$	94,244	$	331,324	$	509,073	$	466,920
CDSC retained	$	33,129	$	4,071	$	26,943	$	93,517	$	15,146

e. Transfer Agent Fees

Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including shareholding servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the year ended April 30, 2015, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:


						Franklin
		Franklin		Franklin		Growth		Franklin		Franklin
		Flex Cap		Focused Core		Opportunities		Small Cap		Small-Mid Cap
		Growth Fund		Equity Fund		Fund		Growth Fund		Growth Fund

Transfer agent fees	$	3,343,137	$	61,382	$	876,693	$	1,776,204	$	3,833,393

f. Investments in Institutional Fiduciary Trust Money Market Portfolio

The Funds invest in Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an affiliated open-end management investment company. Management fees paid by the Funds are waived on assets invested in the Sweep Money Fund, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Sweep Money Fund. Prior to May 1, 2013, the waiver was accounted for as a reduction to management fees.

g. Waiver and Expense Reimbursements

Advisers and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by Franklin Focused Core Equity Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for Class A, Class C, Class R and Advisor Class do not exceed 1.00% and Class R6 does not exceed 0.85% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until August 31, 2015.

Additionally, Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees for the Funds, except Franklin Focused Core Equity Fund, do not exceed 0.01% until August 31, 2015. There were no Class R6 transfer agent fees waived during the year ended April 30, 2015.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

h. Other Affiliated Transactions

At April 30, 2015, one or more of the funds in Franklin Fund Allocator Series owned a percentage of the following funds’ outstanding shares:


Franklin		Franklin		Franklin Growth		Franklin
Flex Cap		Focused Core		Opportunities		Small Cap
Growth Fund		Equity Fund		Fund		Growth Fund
7.96	%	16.30	%	15.53	%	1.89	%

4. Expense Offset Arrangement

The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the year ended April 30, 2015, the custodian fees were reduced as noted in the Statements of Operations.

5. Income Taxes

For tax purposes, the Funds may elect to defer any portion of a post-October capital loss or late-year ordinary loss to the first day of the following fiscal year. At April 30, 2015, the deferred post-October capital losses and late-year ordinary losses were as follows:


						Franklin
		Franklin		Franklin		Growth		Franklin
		Flex Cap		Focused Core		Opportunities		Small-Mid Cap
		Growth Fund		Equity Fund		Fund		Growth Fund

Realized capital losses	$	—	$	—	$	—	$	6,952,601
Late-year ordinary losses	$	6,551,185	$	109,546	$	2,383,730	$	4,043,161

The tax character of distributions paid during the years ended April 30, 2015 and 2014, was as follows:


		Franklin Flex Cap				Franklin Focused Core					Franklin Growth
		Growth Fund				Equity Fund					Opportunities Fund
		2015		2014		2015		2014			2015			2014
Distributions paid from:
Ordinary income	$	47,149,148	$	30,002,450	$	710,996		$	243,749	$	—		$	—
Long term capital gain		485,417,922		438,269,645		1,833,627			455,558		21,070,998		19,641,459
	$	532,567,070	$	468,272,095	$	2,544,623		$	699,307	$	21,070,998	$	19,641,459

		Franklin Small Cap				Franklin Small-Mid Cap
		Growth Fund				Growth Fund
		2015		2014		2015		2014
Distributions paid from:
Ordinary income	$	49,022,134	$	9,609,487	$	75,776,742	$	48,006,745
Long term capital gain		58,829,248		32,430,474		594,505,935		431,481,929
	$	107,851,382	$	42,039,961	$	670,282,677	$	479,488,674

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

5. Income Taxes (continued)

At April 30, 2015, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:


								Franklin
		Franklin			Franklin			Growth			Franklin			Franklin
		Flex Cap			Focused Core			Opportunities			Small Cap			Small-Mid Cap
		Growth Fund			Equity Fund			Fund			Growth Fund			Growth Fund
Cost of investments	$	2,135,260,472		$	126,006,771		$	774,019,430		$	3,197,392,220		$	2,758,813,513

Unrealized appreciation	$	1,105,630,734		$	23,463,170		$	361,587,313		$	467,554,309		$	1,350,114,115
Unrealized depreciation		(15,890,771	)		(1,040,314	)		(4,672,214	)		(149,724,305	)		(37,640,050	)
Net unrealized appreciation
(depreciation)	$	1,089,739,963		$	22,422,856		$	356,915,099		$	317,830,004		$	1,312,474,065

Undistributed ordinary income	$	—		$	1,253,355		$	—		$	31,680,861		$	—
Undistributed long term capital gains		281,574,342			2,143,294			25,275,921			28,081,216			168,855,494
Distributable earnings	$	281,574,342		$	3,396,649		$	25,275,921		$	59,762,077		$	168,855,494

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of wash sales.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2015, were as follows:


						Franklin
		Franklin		Franklin		Growth		Franklin		Franklin
		Flex Cap		Focused Core		Opportunities		Small Cap		Small-Mid Cap
		Growth Fund		Equity Fund		Fund		Growth Fund		Growth Fund

Purchases	$	2,482,722,891	$	96,550,366	$	446,917,405	$	2,071,918,535	$	1,788,043,180
Sales	$	3,039,412,921	$	24,201,046	$	401,096,015	$	699,431,477	$	2,086,368,102

7. Restricted Securities

Certain funds invest in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Funds may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At April 30, 2015, Franklin Flex Cap Growth Fund held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


		Acquisition
Shares	Issuer	Date		Cost		Value

890,868	FibroGen Inc. (Value is 0.59% of Net Assets)	5/19/00	$	9,999,998	$	19,677,056

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

8. Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for Franklin Small Cap Growth Fund for the year ended April 30, 2015, were as shown below.


	Number of				Number of
	Shares Held				Shares
	at Beginning	Gross	Gross		Held at End		Value at		Investment		Realized
Name of Issuer	of Year	Additions	Reductions		of Year		End of Year		Income		Gain (Loss)
Non-Controlled Affiliates
Aratana Therapeutics Inc.	1,003,436	1,010,083	—		2,013,519	$	25,994,530	$	—	$	—
Bazaarvoice Inc.	2,774,300	1,540,600	—		4,314,900		23,214,162		—		—
Callidus Software Inc.	849,800	2,058,100	—		2,907,900		35,912,565		—		—
Callon Petroleum Co.	—	4,435,282	—		4,435,282		39,651,421		—		—
The KEYW Holding Corp.	963,013	2,118,547	—		3,081,560		29,737,054		—		—
Lattice Semiconductor Corp.	3,554,700	3,979,500	(82,700	)	7,451,500		44,187,395		—		183,495
M/I Homes Inc.	703,300	577,100	—		1,280,400		28,885,824		—		—
Nanometrics Inc.	955,471	1,476,329	—		2,431,800		37,595,628		—		—
Potbelly Corp.	816,500	866,200	(41,849	)	1,640,851		24,629,174		—		(580,813	)
Revance Therapeutics Inc.	—	1,344,100	—		1,344,100		26,445,168		—		—
Rex Energy Corp.	855,700	4,654,000	—		5,509,700		27,548,500		—		—
Sportsman's Warehouse Holdings
Inc.	808,400	1,548,500	—		2,356,900		22,696,947		—		—
Tile Shop Holdings Inc.	1,586,800	1,038,900	—		2,625,700		34,055,329		—		—
Zoe's Kitchen Inc.	—	1,025,400	—		1,025,400		31,408,002		—		—
Total Affiliated Securities (Value is 12.69% of Net Assets)						$	431,961,699	$	—	$	(397,318	)

9. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 12, 2016. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Funds shall, in addition to interest charged on any borrowings made by the Funds and other costs incurred by the Funds, pay their share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon their relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statements of Operations. During the year ended April 30, 2015, the Funds did not use the Global Credit Facility.

10. Fair Value Measurements

The Trust follows 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’ financial instruments and are summarized in the following fair value hierarchy:

Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

10. Fair Value Measurements (continued)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of April 30, 2015, in valuing the Funds’ assets carried at fair value, is as follows:


		Level 1		Level 2		Level 3		Total

Franklin Flex Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:
Pharmaceuticals, Biotechnology & Life Sciences	$	583,743,887	$	—	$	19,677,056	$	603,420,943
Other Equity Investments^a		2,529,210,895		—		—		2,529,210,895
Short Term Investments		92,368,597		—		—		92,368,597
Total Investments in Securities	$	3,205,323,379	$	—	$	19,677,056	$	3,225,000,435

Franklin Focused Core Equity Fund
Assets:
Investments in Securities:
Equity Investments:^a	$	139,613,420	$	—	$	—	$	139,613,420
Short Term Investments		8,816,207		—		—		8,816,207
Total Investments in Securities	$	148,429,627	$	—	$	—	$	148,429,627

Franklin Growth Opportunities Fund
Assets:
Investments in Securities:
Equity Investments:^a	$	1,099,805,959	$	—	$	—	$	1,099,805,959
Short Term Investments		31,128,570		—		—		31,128,570
Total Investments in Securities	$	1,130,934,529	$	—	$	—	$	1,130,934,529

Franklin Small Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:^a	$	3,111,501,288	$	—	$	—	$	3,111,501,288
Short Term Investments		403,720,936		—		—		403,720,936
Total Investments in Securities	$	3,515,222,224	$	—	$	—	$	3,515,222,224

Franklin Small-Mid Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:^a	$	3,880,477,753	$	—	$	—	$	3,880,477,753
Short Term Investments		190,809,825		—		—		190,809,825
Total Investments in Securities	$	4,071,287,578	$	—	$	—	$	4,071,287,578

^aFor detailed categories, see the accompanying Statement of Investments.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the year.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

11. New Accounting Pronouncements

In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2014-11, Transfers and Servicing (Topic 860), Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The ASU changes the accounting for certain repurchase agreements and expands disclosure requirements related to repurchase agreements, securities lending, repurchase-to-maturity and similar transactions. The ASU is effective for interim and annual reporting periods beginning after December 15, 2014. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

12. Subsequent Events

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

Abbreviations

Selected Portfolio

ADR American Depositary Receipt

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FRANKLIN STRATEGIC SERIES

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Franklin Strategic Series

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Flex Cap Growth Fund, Franklin Focused Core Equity Fund, Franklin Growth Opportunities Fund, Franklin Small Cap Growth Fund, and Franklin Small-Mid Cap Growth Fund (separate portfolios of Franklin Strategic Series, hereafter referred to as the “Funds”) at April 30, 2015, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2015 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
June 15, 2015

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FRANKLIN STRATEGIC SERIES

Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended April 30, 2015:


	Franklin		Franklin		Franklin Growth		Franklin		Franklin
	Flex Cap		Focused Core		Opportunities		Small Cap		Small-Mid Cap
	Growth Fund		Equity Fund		Fund		Growth Fund		Growth Fund
$	485,417,922	$	1,833,627	$	21,070,998	$	58,829,248	$	594,505,935

Under Section 871(k)(2)(C) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended April 30, 2015:


	Franklin		Franklin		Franklin		Franklin
	Flex Cap		Focused Core		Small Cap		Small-Mid Cap
	Growth Fund		Equity Fund		Growth Fund		Growth Fund
$	47,149,148	$	643,878	$	49,022,134	$	75,776,742

Under Section 854(b)(1)(A) of the Code, the Funds hereby report the following percentage amounts of the ordinary income

dividends as income qualifying for the dividends received deduction for the fiscal year ended April 30, 2015:


Franklin		Franklin		Franklin		Franklin
Flex Cap		Focused Core		Small Cap		Small-Mid Cap
Growth Fund		Equity Fund		Growth Fund		Growth Fund
32.57	%	100.00	%	13.68	%	21.81	%

Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended April 30, 2015:


	Franklin		Franklin		Franklin Growth		Franklin		Franklin
	Flex Cap		Focused Core		Opportunities		Small Cap		Small-Mid Cap
	Growth Fund		Equity Fund		Fund		Growth Fund		Growth Fund
$	16,182,351	$	1,078,358	$	4,392,941	$	6,795,866	$	17,383,285

Distributions, including qualified dividend income, paid during calendar year 2015 will be reported to shareholders on Form 1099-DIV by mid-February 2016. Shareholders are advised to check with their tax advisors for information on the treatment of these amounts on their individual income tax returns.

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FRANKLIN STRATEGIC SERIES

Board Members and Officers

The name, year of birth and address of the officers and board members, as well as their affiliations, positions held with the Trust, principal occupations during at least the past five years and number of portfolios overseen in the Franklin Templeton Investments fund complex are shown below. Generally, each board member serves until that person’s successor is elected and qualified.


Independent Board Members

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Harris J. Ashton (1932)	Trustee	Since 1991	145	Bar-S Foods (meat packing company)
One Franklin Parkway				(1981-2010).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950)	Trustee	Since	119	Avis Budget Group Inc. (car rental)
One Franklin Parkway		October 2014		(2007-present), Omnicom Group Inc.
San Mateo, CA 94403-1906				(advertising and marketing communi-
				cations services) (2011-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1998-2006).

Principal Occupation During at Least the Past 5 Years:
Founding Partner and Senior Managing Director, Strategic Investment Group (investment management group) (1987-present); director of
various companies; and formerly, Founding Partner and Managing Director, Emerging Markets Management LLC (investment management
firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial
institution) (1977-1987).

Edith E. Holiday (1952)	Trustee	Since 1998	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1993-present),
San Mateo, CA 94403-1906				RTI International Metals, Inc. (manu-
				facture and distribution of titanium)
				(1999-present), Canadian National
				Railway (railroad) (2001-present),
				White Mountains Insurance Group, Ltd.
				(holding company) (2004-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1994-2013).
Principal Occupation During at Least the Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant
Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989).

J. Michael Luttig (1954)	Trustee	Since 2009	145	Boeing Capital Corporation
One Franklin Parkway				(aircraft financing) (2006-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company); and
formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

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Independent Board Members (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Frank A. Olson (1932)	Trustee	Since 2007	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1998-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June-December 1987).

Larry D. Thompson (1945)	Trustee	Since 2007	145	Cbeyond, Inc. (business commu-
One Franklin Parkway				nications provider) (2010-2012),
San Mateo, CA 94403-1906				The Southern Company (energy
				company) (December 2014;
				previously 2010-2012) and Graham
				Holdings Company (education and
				media organization) (2011-present).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (January 2015;
previously 2011-2012); and formerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo,
Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc.
(2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and
Deputy Attorney General, U.S. Department of Justice (2001-2003).

John B. Wilson (1959)	Lead	Trustee since	119	None
One Franklin Parkway	Independent	2006 and Lead
San Mateo, CA 94403-1906	Trustee	Independent
		Trustee since 2008

Principal Occupation During at Least the Past 5 Years:
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail)
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President –
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).




Interested Board Members and Officers

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Gregory E. Johnson (1961)	Trustee	Since June 2013	162	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment
companies in Franklin Templeton Investments; and Vice Chairman, Investment Company Institute.

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Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Rupert H. Johnson, Jr. (1940) Chairman of		Chairman of	145	None
One Franklin Parkway	the Board and	the Board since
San Mateo, CA 94403-1906	Trustee	2013 and Trustee
		since 1991
Principal Occupation During at Least the Past 5 Years:
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments.

Alison E. Baur (1964)	Vice President	Since 2012	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments.

Laura F. Fergerson (1962)	Chief Executive Since 2009		Not Applicable	Not Applicable
One Franklin Parkway	Officer –
San Mateo, CA 94403-1906	Finance and
	Administration
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Gaston Gardey (1967)	Treasurer,	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway	Chief Financial
San Mateo, CA 94403-1906	Officer and
	Chief
	Accounting
	Officer
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Products and Client Services, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.

Aliya S. Gordon (1973)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton
Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

Steven J. Gray (1955)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin
Alternative Strategies Advisers, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Selena L. Holmes (1965)	Vice President	Since 2012	Not Applicable	Not Applicable
100 Fountain Parkway	– AML
St. Petersburg, FL 33716-1205	Compliance
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance Monitoring; Chief Compliance Officer, Franklin Alternative Strategies Advisers, LLC; Vice President, Franklin
Templeton Companies, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Edward B. Jamieson (1948)	President and	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway	Chief Executive
San Mateo, CA 94403-1906	Officer –
	Investment
	Management

Principal Occupation During at Least the Past 5 Years:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC;
and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment
companies in Franklin Templeton Investments.

Christopher J. Molumphy (1962) Vice President		Since 2000	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director and Executive Vice President, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.

Kimberly H. Novotny (1972)	Vice President	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice
President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies
in Franklin Templeton Investments.

Robert C. Rosselot (1960)	Chief	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street	Compliance
Fort Lauderdale, FL 33301-1923	Officer
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 46 of the
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952)	Vice President	Since 2006	Not Applicable	Not Applicable
One Franklin Parkway	and Secretary
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin Templeton
Investments.

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Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Craig S. Tyle (1960)	Vice President	Since 2005	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.

Lori A. Weber (1964)	Vice President	Since 2011	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment
companies in Franklin Templeton Investments.

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested
person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
Note 3: Effective April 30, 2015, Sam Ginn ceased to be a trustee of the Fund.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee
includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there
is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that
Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc.
from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the
Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of
such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth
and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for
financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant
Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request.
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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Shareholder Information

Board Review of Investment Management Agreement

At a meeting held April 14, 2015, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the separate funds within the Trust (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for the Funds, along with periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also noted that at the February meetings each year, it receives an annual report on all marketing support payments made by FTI to financial intermediaries.

In considering such materials, the independent Trustees received assistance and advice from and met separately with independent counsel. While the investment management agreements for all Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.

NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Funds and their shareholders, except as noted later in the discussion of investment performance. The Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for the Funds were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of shares of different funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm that also covered FOREX transactions. Consideration was also given to the experience of each Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager, noting the

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Agreement (continued) changes taking place in the nature of transfer agency services throughout the industry and regulatory initiatives in this area, and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Funds and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of the Funds in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewals. The Lipper reports prepared for each Fund showed the investment performance of its Class A shares in comparison to a performance universe selected by Lipper. Comparative performance for each Fund was shown for the one-year period ended January 31, 2015, and previous periods ended that date of up to 10 years depending on when a particular Fund commenced operations. The following summarizes the performance results for each of these Funds and the Board’s view of such performance.

Franklin Flex Cap Growth Fund – The performance universe for this Fund consisted of the Fund and all retail and institutional multi-cap growth funds as selected by Lipper. The Lipper report showed the Fund’s total return to be in the lowest performing quintile of such performance universe for the one-year period, and on an annualized basis to be in the second-lowest performing quintile of the performance universe during the previous three- and 10-year periods, and in the lowest performing quintile of such universe during the previous five-year period. The Board acknowledged the positive impact of steps taken by management in 2012 to commit additional resources to the

Fund and observed that management has undertaken a comprehensive review of the portfolio, given its underperformance in 2014 following strong performance in 2013. The Board found the Fund’s performance as shown in the Lipper report to be acceptable, noting its one-year total return exceeded 6%, and its annualized three- and five-year total returns exceeded 13%.

Franklin Focused Core Equity Fund – The performance universe for this Fund consisted of all retail and institutional multi-cap core funds as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the highest performing quintile of such performance universe, and on an annualized basis to be in the middle performing quintile of such performance universe for the previous three-year period and the second-lowest performing quintile of such universe for the previous five-year period. The Board believed that steps that management had taken to improve performance, including a change in the lead portfolio manager, were producing results and that no additional changes to portfolio management were necessary at the present time. The Board found the comparative performance of the Fund as set forth in the Lipper report to be satisfactory.

Franklin Growth Opportunities Fund – The performance universe for this Fund consisted of the Fund and all retail and institutional multi-cap growth funds as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the middle performing quintile of its performance universe, and on an annualized basis to be in the middle performing quintile of such universe during each of the previous three- and five-year periods, and the highest performing quintile of such universe for the previous 10-year period. The Board noted management’s focus on its highest conviction investments and found the comparative performance of the Fund as set forth in the Lipper report to be satisfactory.

Franklin Small-Mid Cap Growth Fund – The performance universe for this Fund consisted of all retail and institutional mid-cap growth funds as selected by Lipper. The Lipper report comparison for the Fund showed its total return during the one-year period to be in the middle performing quintile of such performance universe, and on an annualized basis to be in the middle performing quintile of such universe during each of the previous three-, five- and 10-year periods. Management explained its ongoing review of the portfolio and its conviction around the portfolio holdings. The Board found the comparative performance of the Fund as set forth in the Lipper report to be satisfactory.

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SHAREHOLDER INFORMATION

Franklin Small Cap Growth Fund – The performance universe for this Fund consisted of the Fund and a representative class/fund from each retail portfolio in the small-cap growth classification as selected by Lipper. The Lipper report showed the Fund’s total return to be in the middle performing quintile of such performance universe during the one-year period, and on an annualized basis to be in the highest performing quintile of such universe for the previous three- and five-year periods, and the second-highest performing quintile of such universe for the previous 10-year period. The Board was satisfied with the Fund’s investment performance as set forth in the Lipper report.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the management fees and total expense ratio of each Fund compared with those of a group of other funds selected by Lipper as its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on each Fund’s contractual investment management fee in comparison with the investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of each Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges as being part of the investment management fee, and actual total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares. The results of such expense comparisons showed the contractual investment management fee rates and actual total expense ratio for each of Franklin Flex Cap Growth Fund, Franklin Small Cap Growth Fund and Franklin Small-Mid Cap Growth Fund to be in the least expensive quintile of their respective Lipper expense groups. The contractual investment management fee rate for Franklin Growth Opportunities Fund was in the least expensive quintile of its Lipper expense group and its actual total expense ratio was below the median of such expense group. The contractual investment management fee rate for Franklin Focused Core Equity Fund was in the middle expense quintile of its Lipper expense group, while its actual total expense ratio was in the second least expensive quintile of such expense group. The Board was satisfied with the contractual management fee rate and total expense ratio of each of these Funds in comparison to its respective expense group as shown in the Lipper reports, noting that Franklin Growth Opportunities Fund and Franklin Focused Core Equity Fund benefited from fee waivers.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, the Funds’ independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Funds’ Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as

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Board Review of Investment Management

Agreement (continued) well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with the service providers and counterparties. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Funds grow larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board noted that economies of scale were shared with each Fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. The fee structure under the investment management agreement for each Fund contains breakpoints that continued to asset levels that exceeded its asset size at December 31, 2014. Despite the fact that the assets of Franklin Focused Core Equity Fund nearly tripled, amounting to approximately $121 million at December 31, 2014, the Board did not believe such size afforded any economies of scale, noting the still small asset size of the Fund. Even if the asset size grew significantly, the fee schedule provides breakpoints beyond the Fund’s current asset level. In view of such fee structure and the favorable expense comparisons of each Fund within its respective expense group, the Board believed that to the extent economies of scale may be realized by the Manager of the Funds and its affiliates, that there was a sharing of benefits with the Funds and their shareholders.

Proxy Voting Policies and Procedures

The Trust’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Trust uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Trust’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Trust’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

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

Householding of Reports and Prospectuses

You will receive each Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

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Annual Report

Economic and Market Overview

U.S. economic growth moderated during the 12 months ended April 30, 2015, especially in the second half of the review period. The economy grew for most of 2014, supported in some quarters by greater spending by consumers, businesses, and state and local governments, partially offset by the negative impacts of a wider trade deficit and lower federal defense spending. In the first quarter of 2015, factors including low energy prices and U.S. dollar strength led exports to decline. In addition, harsh weather and labor disruptions weighed on business spending. Manufacturing and non-manufacturing activities increased, and the unemployment rate declined to 5.4% at period-end from 6.2% in April 2014.¹Housing market data were positive for most of the period as home sales and prices rose while mortgage rates declined. After a brief slump during the period, retail sales rebounded toward period-end as auto sales surged. Inflation, as measured by the Consumer Price Index, remained subdued during the past 12 months but rose toward period-end amid higher energy prices bouncing from recent lows.

Investor confidence grew during the period as corporate profits remained healthy, the Fed maintained its cautious tone on raising interest rates and China introduced more stimulus measures. The stock markets endured some sell-offs when many investors reacted to political instability in certain emerging markets, Greece’s debt negotiations and relatively weak economic growth in Europe and Japan, as well as less robust growth in China. U.S. stocks rose overall for the 12 months under review as the Standard & Poor’s^®500 Index and the Dow Jones Industrial Average reached all-time highs.

1. Source: Bureau of Labor Statistics.

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Franklin Biotechnology Discovery Fund

We are pleased to bring you Franklin Biotechnology Discovery Fund’s annual report for the fiscal year ended April 30, 2015. Effective at the close of market on July 8, 2014, the Fund closed to new investors with limited exceptions. Existing shareholders may continue to add money to their accounts. We believe this closure can help us effectively manage our current level of assets.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation by investing at least 80% of its net assets in securities of biotechnology companies and discovery research firms located in the U.S. and other countries.

Performance Overview

The Fund’s Class A shares delivered a +46.81% cumulative total return for the 12 months under review. In comparison, the NASDAQ Biotechnology Index^®, which tracks U.S. and international-based biotechnology stocks, generated a +45.62% total return.¹Also in comparison, the Standard & Poor’s 500 Index (S&P 500^®), which is a broad measure of the U.S. stock market, generated a +12.98% total return.¹Finally, domestic and international-based stocks, as measured by the NASDAQ Composite Index^®, produced a +21.52% total return.¹You can find the Fund’s long-term performance data in the Performance Summary beginning on page 7.

Investment Strategy

The Fund is managed using a bottom-up approach to individual stock selection, with a focus on fundamental analysis and primary research. We look for biotechnology, biopharmaceutical and platform technology companies that possess products with favorable competitive profiles, large market opportunities and strong intellectual property, supported by thoughtful clinical and market development strategies. Our assessment of these products is based on extensive primary research and due diligence and includes, but is not limited to, a thorough review of

medical literature, consultation of community and academic physicians, and attendance at scientific meetings and symposia. Additionally, we favor companies with excellent management, strong financial characteristics and attractive valuations.

Manager’s Discussion

During the 12 months under review, shares of many bio-technology companies rallied amid clinical and regulatory successes. Within the Fund’s portfolio, the performance of individual stocks varied greatly, with several holdings reaching all-time highs and even delivering triple-digit gains. However, the biotechnology industry remained subject to volatility surrounding trial drug results, and a few positions declined notably following adverse outcomes. Please keep in mind that volatility is not uncommon in the biotechnology sector, and the Fund seeks to take advantage of short-term volatility by initiating investments in or adding to securities we believe to be undervalued.

Leading contributors to the Fund’s absolute performance included Celgene, Medivation and Gilead Sciences. Celgene discovers, develops and sells therapies for treating cancer and immunological diseases. Its shares benefited from the company’s broad pipeline and robust revenue and profit growth, driven by strong sales of its leading product, blood cancer treatment Revlimid. Celgene provided positive 2015 and long-term guidance, noting that recent achievements, including expanded regulatory approvals of several treatments and improved collaboration with certain partners, could help maintain its growth momentum.

1. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 29.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND


Top 10 Holdings
4/30/15
Company	% of Total
*Sector/Industry*	Net Assets

Gilead Sciences Inc.	8.5	%
Biotechnology
Celgene Corp.	8.5	%
Biotechnology
Biogen Inc.	7.0	%
Biotechnology
Amgen Inc.	4.8	%
Biotechnology
Incyte Corp.	3.6	%
Biotechnology
BioMarin Pharmaceutical Inc.	3.3	%
Biotechnology
Regeneron Pharmaceuticals Inc.	3.2	%
Biotechnology
Medivation Inc.	3.0	%
Biotechnology
Illumina Inc.	2.8	%
Life Sciences Tools & Services
Puma Biotechnology Inc.	2.7	%
Biotechnology

Medivation focuses on the development and commercialization of therapies to treat serious diseases for which there are limited treatment options. Its share price doubled during the period as the company generated strong revenue growth for fiscal year 2014, driven by robust sales of its primary product, XTANDI. Prescribers of the prostate cancer treatment increased, particularly in the urology and oncology segments, as regulatory approval expanded to pre-chemotherapy settings.

Gilead Sciences is a research-based biopharmaceutical company that discovers, develops and commercializes medicines to treat HIV/AIDS, liver diseases and serious cardiovascular and respiratory conditions. Its shares rose in value as the company delivered strong earnings results, driven by robust sales of its flagship hepatitis C drug, Sovaldi, as well as its recently launched hepatitis C drug, Harvoni. In April, the company declared its first quarterly cash dividend payment in accordance with its previously announced dividend program.

In contrast, certain Fund holdings weighed slightly on performance, including Repros Therapeutics,²Keryx Biopharmaceuticals and GlycoMimetics. Repros Therapeutics develops drugs for the treatment of hormonal and reproductive system disorders. The company’s shares plunged during the period’s first half after a Food and Drug Administration (FDA) advisory panel on testosterone replacement therapies expressed concern that doctors were prescribing low-testosterone drugs too broadly, including to middle-aged men who wanted to increase their libidos, and voted to advise the FDA to limit the drugs to a specific medical purpose, only after rigorous and costly cardiovascular tests to determine potential risk factors. Although the FDA advisory panel’s meeting was not about Repros’s leading drug for the treatment of secondary hypogo-nadism, Androxal, shares suffered due to investor concerns that the company might not have enough clinical data in the right patient population to obtain approval for Androxal.

Keryx Biopharmaceuticals, which provides therapies for patients with renal disease, received FDA approval in September for the use of its lead product, ferric citrate (Auryxia), in controlling phosphorus levels in patients with chronic kidney disease and who are on dialysis. Its share price fell, however, because of the slow initial launch of Auryxia. Moreover, a number of limitations and warnings somewhat restricted the drug’s sales potential, adding to the stock’s volatility in recent months. The drug was also being evaluated for use by non-dialysis patients.

GlycoMimetics is a clinical stage biotechnology company focused on the discovery and development of drugs that mimic the function of carbohydrates. Such drugs are designed to address unmet medical needs resulting from diseases in which carbohydrate biology plays a key role. The company has a licensing agreement with Pfizer for the development of riv-ipansel for several indications, including vaso-occlusive crisis (VOC; blockage of blood vessels) associated with sickle cell disease. The share price declined after the company reported weaker-than-expected first-quarter 2014 earnings results in May 2014 and announced in September that Pfizer would delay the start of a phase 3 clinical trial due to a manufacturing issue. Near period-end, the company announced that Pfizer planned to begin a phase 3 trial of rivipansel for the treatment of VOC in mid-2015.

2. Sold by period-end.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

Thank you for your continued participation in Franklin Biotechnology Discovery Fund. We look forward to serving your future investment needs.

CFA^®is a trademark owned by CFA Institute.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

Performance Summary as of April 30, 2015


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FBDIX)	$	182.30	$	129.27	+$	53.03
C (FBTDX)	$	180.67	$	129.06¹	+$	51.61
R6 (FRBRX)	$	185.75	$	131.09	+$	54.66
Advisor (FTDZX)	$	185.12	$	130.86	+$	54.26


Distributions (5/1/14–4/30/15)
		Short-Term		Long-Term
Share Class		Capital Gain		Capital Gain		Total
A	$	3.7275	$	2.9405	$	6.6680
C	$	3.7275	$	2.9405	$	6.6680
R6	$	3.7275	$	2.9405	$	6.6680
Advisor	$	3.7275	$	2.9405	$	6.6680

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Annual Report

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15²

Class R6/Advisor Class: no sales charges.


	Cumulative		Average Annual			Value of	Average Annual		Total Annual Operating
Share Class	Total Return³		Total Return⁴		$	10,000 Investment⁵	Total Return (3/31/15)⁶		Operating Expenses⁷
A									1.10	%
1-Year	+46.81	%	+38.37	%	$	13,837	+35.31	%
5-Year	+260.86	%	+27.74	%	$	34,011	+29.47	%
10-Year	+409.98	%	+17.00	%	$	48,065	+17.88	%
C									1.80	%
1-Year	+45.76	%¹	+44.76	%	$	14,476	+41.49	%
Since Inception (3/4/14)	+18.20	%	+14.72	%	$	11,720	+22.29	%
R6									0.63	%
1-Year	+47.40	%	+47.40	%	$	14,740	+44.17	%
Since Inception (5/1/13)	+97.67	%	+40.66	%	$	19,767	+46.98	%
Advisor⁸									0.80	%
1-Year	+47.17	%	+47.17	%	$	14,717	+43.93	%
5-Year	+265.97	%	+29.63	%	$	36,597	+31.39	%
10-Year	+418.24	%	+17.88	%	$	51,824	+18.77	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND
PERFORMANCE SUMMARY

All investments involve risks, including possible loss of principal. The Fund is a nondiversified fund that concentrates in a single sector, which involves risks such as patent considerations, product liability, government regulatory requirements, and regulatory approval for new drugs and medical products. Biotechnology companies often are small and/or relatively new. Smaller companies can be particularly sensitive to changes in economic conditions and have less certain growth prospects than larger, more established companies and can be volatile, especially over the short term. The Fund may also invest in foreign companies, which involve special risks, including currency fluctuations and political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1. Price and total return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to Class C shares’ net assets at
4/30/14 for financial reporting purposes, and as a result, Class C shares’ net asset values for shareholder transactions and the total returns based on those net asset values
differ from the adjusted net asset values and total returns reported in the Financial Highlights.
2. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waivers, to the extent
applicable; without these reductions, the results would have been lower.
3. Cumulative total return represents the change in value of an investment over the periods indicated.
4. Average annual total return represents the average annual change in value of an investment over the periods indicated.
5. These figures represent the value of a hypothetical $10,000 investment in the Fund over the periods indicated.
6. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
7. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
8. Effective 9/1/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the
following methods of calculation: (a) For periods prior to 9/1/09, a restated figure is used based upon the Fund’s Class A performance, excluding the effect of Class A’s
maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 9/1/09, actual Advisor Class performance is used reflecting all
charges and fees applicable to that class. Since 9/1/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were +318.61%
and +28.78%.
9. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. The NASDAQ
Biotechnology Index is a modified capitalization-weighted index designed to measure performance of all NASDAQ stocks in the biotechnology sector.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

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Franklin Natural Resources Fund

This annual report for Franklin Natural Resources Fund covers the fiscal year ended April 30, 2015.

Your Fund’s Goal and Main Investments

The Fund seeks high total return (total return consists of capital appreciation and current dividend and interest income) by investing, under normal market conditions, at least 80% of its net assets in equity and debt securities of companies that own, produce, refine, process, transport or market natural resources, as well as those that provide related services for natural resources companies.

Performance Overview

The Fund’s Class A shares had a -20.07% cumulative total return for the 12 months under review. In comparison, the Standard & Poor’s (S&P^®) North American Natural Resources Index, which tracks companies involved in industries such as mining, energy, timber and forestry services, and the production of pulp and paper, had a -10.98% total return.¹Also in comparison, the S&P 500^®Index, which is a broad measure of the U.S. stock market, generated a +12.98% total return.¹Please note index performance information is provided for reference and we do not attempt to track any index but rather undertake investments on the basis of fundamental research. The Fund’s strategy, which focuses on companies with higher long-term growth potential, differs from the natural resources index’s large weighting in income-oriented companies that typically provide more limited opportunities for growth. This difference may occasionally lead to wide performance discrepancies, especially in periods when investors focus on short-term safety and yield or, conversely, when investors focus more heavily on companies with stronger growth prospects, which benefited Fund performance late in the period under review. Furthermore, the Fund’s performance was generally in line with the performance of other natural resources funds with similar strategies. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 18.

Investment Strategy

We use a fundamental, research-driven approach to identify industries in the natural resources sector that we believe offer the strongest underlying attributes including, but not limited to, favorable supply and demand characteristics, barriers to entry and pricing power. Within those industries, we seek to identify individual companies that have identifiable growth drivers and that present, in our opinion, the best trade-off between growth potential, business and financial risk, and valuation. The Fund’s holdings are typically concentrated in the energy sector but also can include investments in metals and mining, chemicals, paper and forest products, and other related sectors.

Sector Overview

Global commodity prices generally declined during the 12 months under review as a moderating global economy and growing production led to excess supplies of oil and other commodities. In addition, U.S. dollar strength for most of the period under review exacerbated the impact of weakening supply-and-demand fundamentals as diverging monetary policies between the U.S. Federal Reserve Board (Fed) and other major global central banks led to the U.S. dollar’s rapid appreciation against

1. Source: Morningstar.
The indexes are unmanaged and include reinvested dividends. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 37.

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FRANKLIN NATURAL RESOURCES FUND

many foreign currencies. Near period-end, the Fed’s indication that it would remain patient with respect to raising interest rates amid mixed economic reports and the European Central Bank’s (ECB’s) assessment that its monetary stimulus efforts were having the desired effect led the U.S. dollar to retreat from recent highs, helping support global commodity prices.

Strong U.S. crude oil production and softening demand combined with a lack of action by the members of the Organization of the Petroleum Exporting Countries to help balance the market drove oil prices lower in late 2014 and early 2015, dragging many energy-related stocks to multi-year lows. A strengthening U.S. dollar also impacted oil prices as U.S. dollar-priced commodities became more expensive in most foreign currencies, which could negatively impact demand. After reaching a six-year low in March 2015, crude oil prices began to recover in April as U.S. production growth appeared to moderate and refinery demand picked up seasonally, leading U.S. inventories to decline for the first time since November 2014. Also supporting crude oil prices near period-end were concerns of potential supply disruptions in the Middle East due to rising geopolitical risks as Saudi Arabia launched a military campaign in Yemen and battles continued in Iraq and Syria. However, progress in nuclear negotiations with Iran and the potential lifting of sanctions prompted investor concerns related to the potential of Iranian oil returning to the global market, which could increase supply in a market that was moving toward a healthier balance. U.S. natural gas spot prices also fell for the period amid weak seasonal winter demand and rising U.S. natural gas production despite a drop in active rigs. Onshore rigs, in particular, declined sharply, from a peak of 1,876 in late 2014 to a low of 898 near period-end, as new drilling activity slowed, signaling the potential for better supply-and-demand balances over the longer term.²U.S. crude oil and natural gas production overall remained relatively robust at period-end despite the use of fewer rigs amid technological improvements and a focus on the most promising assets, combined with a lag from drilling to production. However, lower drilling activity is expected to have a greater impact on production in the near future.

Gold and silver prices fell to multi-year lows in November, as low global inflation, a strong U.S. dollar and stronger-than-expected third-quarter U.S. economic growth dimmed the appeal of gold and silver as investments. Gold appreciated early in 2015 as it attracted safe-haven demand amid market

volatility, the ECB’s monetary easing, Greece’s debt negotiations and geopolitical tensions in the Middle East and Ukraine. However, U.S. dollar strength, market expectations that the Fed would raise interest rates sometime in 2015, and India’s decision to maintain an import duty on gold pressured prices near period-end. Prices for platinum and palladium, industrial metals widely used for auto production, also declined for the 12-month period as moderating global economic growth raised concerns about industrial demand, particularly as investors worried that auto sales could fall from recent high levels.

Base metals had mixed performance during the period. Aluminum was supported by rising demand from car, truck and plane manufacturers. Zinc benefited from robust demand created by gains in U.S. construction activity and solid global car sales, while a Colombian mine strike that threatened to constrain supplies also supported prices. Lead prices ended the period higher as producers reduced their output. In contrast, copper prices fell to multi-year lows in January and iron ore prices plunged to a 10-year low in April, amid oversupply and soft demand, which significantly impacted related stocks. However, prices for both metals recovered somewhat by period-end amid a generally improving global economic outlook, a weakening U.S. dollar and hopes that China’s stimulus measures would revive demand in that country.

2. Source: Baker Hughes Incorporated, “North America Rotary Rig Count,” 5/29/15.

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FRANKLIN NATURAL RESOURCES FUND

Manager’s Discussion

During the 12 months under review, the Fund’s performance was hindered by a difficult period for many commodities, particularly crude oil and natural gas, causing many energy-related stocks to perform poorly. Many exploration and production (E&P) stocks and oilfield services stocks performed well through June 2014, but they reversed course as fears of oil supply disruption faded and a modest global oversupply, largely resulting from robust U.S. oil production, became more evident. Furthermore, as has been the case in the past few years, investors appeared to gravitate toward the stocks of large-capitalization, dividend-paying companies, which contributed to the Fund’s underperformance relative to the benchmark S&P North American Natural Resources Index. The index held sizable positions in large-cap stocks, whereas the Fund had a larger weighting in small- and mid-capitalization stocks that typically have stronger prospects for long-term growth. However, many of the biggest detractors from performance in 2014 recovered strongly toward period-end, benefiting the Fund’s year-to-date performance in 2015.

Overall, stock selection in the E&P industry was among the major detractors from the Fund’s relative performance. Although news stories focused on oil prices, natural gas prices also suffered as reduced summer demand led to a rapid rebuilding of inventory. This decline had a significant negative impact, in absolute and relative terms, on natural gas-focused stocks held in the Fund, such as Rex Energy,³Eclipse Resources,³a new holding, and Southwestern Energy. Another area of weakness in absolute and relative terms was the Fund’s holdings in foreign E&P companies such as Tullow Oil,³Gran Tierra Energy³and MEG Energy,³as well as many shale oil E&Ps, particularly Oasis Petroleum. However, several E&P holdings recovered from recent declines and delivered positive returns, notably Diamondback Energy, whose lower production costs and high-quality asset base helped it weather the difficult oil price environment.

Oilfield services holdings also hurt relative performance, largely due to the Fund’s overweighted allocation and stock selection in several U.S. onshore-focused companies. Investors avoided such stocks during most of the period as fears grew that the oil price decline could reduce onshore activity levels, which was confirmed as the U.S. onshore rig count declined


Top 10 Holdings
4/30/15
Company	% of Total
Sector/Industry, Country	Net Assets

Anadarko Petroleum Corp.	3.7	%
Oil & Gas Exploration & Production, U.S.
Occidental Petroleum Corp.	3.7	%
Integrated Oil & Gas, U.S.
Chevron Corp.	3.3	%
Integrated Oil & Gas, U.S.
Schlumberger Ltd.	3.2	%
Oil & Gas Equipment & Services, U.S.
BHP Billiton PLC, ADR	3.0	%
Diversified Metals & Mining, Australia
Cabot Oil & Gas Corp., A	2.9	%
Oil & Gas Exploration & Production, U.S.
Marathon Oil Corp.	2.3	%
Oil & Gas Exploration & Production, U.S.
Noble Energy Inc.	2.2	%
Oil & Gas Exploration & Production, U.S.
Exxon Mobil Corp.	2.2	%
Integrated Oil & Gas, U.S.
Freeport-McMoRan Inc., B	2.1	%
Diversified Metals & Mining, U.S.

precipitously late in the period. Major detractors from absolute and relative performance included Key Energy Services and C&J Energy Services. The Fund did own several stocks in the oilfield services industry that contributed to relative performance, including Dresser-Rand Group (not held at period-end), which received an acquisition offer from Siemens, and RPC, a new holding this period. An underweighting in National Oilwell Varco, which had a double-digit decline, also helped relative performance.

Many investors continued to favor master limited partnerships in the energy sector for their income potential, which bolstered midstream stocks or those in the oil and gas storage and transportation industry. Thus, the Fund’s lack of ownership in these stocks detracted from relative performance, as did an underweighting in oil and gas refining and marketing stocks, notably Valero and Marathon Petroleum. Although conservative, dividend-paying stocks outperformed over the entire 12-month period, they underperformed for the first four months of 2015 when many investors seemed to prefer smaller capitalization energy growth stocks amid tensions in the Middle East, the U.S. dollar’s retreat from recent highs toward period-end and a partial recovery in oil prices.

3. Not part of the index.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN NATURAL RESOURCES FUND

The diversified metals and mining industry also detracted from relative performance due to the Fund’s overweighted allocation compared to its benchmark’s modest exposure, but this effect was somewhat mitigated by stock selection. Significant detractors included Molycorp, which experienced start-up delays at its Mountain Pass facility, and global mining company BHP Billiton.³Stocks that performed well included MMG (not held at period-end), which benefited from the completion of the La Bambas acquisition from Glencore (also a Fund holding), and HudBay Minerals, a new holding this period.³Although metals and mining companies overall weighed on the Fund’s performance, we saw some positive signs near period-end, such as mine closures and capacity growth deferrals, which could help balance supply and demand over the longer term.

We sold several securities in May and June 2014 when we considered them fully valued and built our cash position during the period as we searched for more attractive investment opportunities. Positive contributors to relative performance included the Fund’s cash holdings, our off-benchmark allocation in the commodity chemicals industry, notably our investment in LyondellBassell Industries, and our underweighting in oil and gas drilling companies, particularly our lack of exposures to certain underperforming stocks. Furthermore, our holdings in certain gold stocks that outperformed the index and their peers, particularly Newcrest Mining and G-Resources Group, supported results.³Although many of the sectors in which we invested were out of favor for most of the period, we believed our strategy of investing in growth-oriented companies in an opportunistic fashion has the potential to provide strong long-term total returns. Meanwhile, the Fund’s cash position provided us with the flexibility to take advantage of what we saw as short-term market volatility and invest in new and existing positions at prices we considered more attractive.

Thank you for your continued participation in Franklin Natural Resources Fund. We look forward to serving your future investment needs.

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FRANKLIN NATURAL RESOURCES FUND

Performance Summary as of April 30, 2015


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FRNRX)	$	31.46	$	39.79	-$	8.33
C (FNCRX)	$	30.46	$	38.39	-$	7.93
R6 (N/A)	$	33.62	$	42.58	-$	8.96
Advisor (FNRAX)	$	33.63	$	42.52	-$	8.89


Distributions (5/1/14–4/30/15)
Dividend
Share Class		Income
A	$	0.2856
C	$	0.0084
R6	$	0.5021
Advisor	$	0.3861

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FRANKLIN NATURAL RESOURCES FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹

Class R6/Advisor Class: no sales charges.


						Value of	Average Annual		Total Annual
									Operating Expenses⁶
	Cumulative		Average Annual		$	10,000	Total Return
Share Class	Total Return²		Total Return³			Investment⁴	(3/31/15	)⁵	(with waiver)		(without waiver)
A									1.07	%	1.07	%
1-Year	-20.07	%	-24.67	%	$	7,533	-28.78	%
5-Year	-1.43	%	-1.46	%	$	9,290	-2.97	%
10-Year	+76.01	%	+5.19	%	$	16,591	+3.36	%
C									1.76	%	1.76	%
1-Year	-20.63	%	-21.42	%	$	7,858	-25.72	%
5-Year	-4.86	%	-0.99	%	$	9,514	-2.49	%
Since Inception (9/1/05)	+26.69	%	+2.48	%	$	12,669	+1.37	%
R6									0.53	%	0.55	%
1-Year	-19.61	%	-19.61	%	$	8,039	-24.03	%
Since Inception (9/20/13)	-10.10	%	-6.41	%	$	8,990	-13.09	%
Advisor									0.77	%	0.77	%
1-Year	-19.81	%	-19.81	%	$	8,019	-24.20	%
5-Year	+0.06	%	+0.01	%	$	10,006	-1.52	%
10-Year	+81.30	%	+6.13	%	$	18,130	+4.28	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

franklintempleton.com

Annual Report

| 19

FRANKLIN NATURAL RESOURCES FUND
PERFORMANCE SUMMARY

All investments involve risks, including possible loss of principal. Investing in a fund concentrating in the natural resources sector involves special risks, including increased susceptibility to adverse economic and regulatory developments affecting the sector. Smaller companies can be particularly sensitive to changes in economic conditions and have less certain growth prospects than larger, more established companies and can be volatile, especially over the short term. The Fund may also invest in foreign companies, which involve special risks, including currency fluctuations and political uncertainty. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

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

Class R6: Shares are available to certain eligible investors as described in the prospectus.

Advisor Class: Shares are available to certain eligible investors as described in the prospectus.

22 | Annual Report franklintempleton.com

FRANKLIN NATURAL RESOURCES FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

franklintempleton.com Annual Report | 23


								FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Biotechnology Discovery Fund
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	129.27		$	105.95		$	76.22		$	77.78		$	65.08
Income from investment operations^a:
Net investment income (loss)^b		(1.09	)		(1.07	)		(0.76	)		(0.75	)		(0.80	)
Net realized and unrealized gains (losses)		60.79			33.18			30.56			9.02			13.50
Total from investment operations		59.70			32.11			29.80			8.27			12.70
Less distributions from:
Net investment income		—			—			(0.07	)		(0.52	)		—
Net realized gains		(6.67	)		(8.79	)		—			(9.31	)		—
Total distributions		(6.67	)		(8.79	)		(0.07	)		(9.83	)		—
Net asset value, end of year	$	182.30		$	129.27		$	105.95		$	76.22		$	77.78

Total return^c		46.81	%		30.60	%		39.12	%		13.18	%		19.51	%

Ratios to average net assets
Expenses		1.00	%^d,e		1.10	%^d,e		1.20	%		1.26	%		1.31	%^e
Net investment income (loss)		(0.67	)%		(0.82	)%		(0.88	)%		(1.03	)%		(1.24	)%

Supplemental data
Net assets, end of year (000’s)	$	1,601,906		$	1,141,890		$	653,718		$	434,678		$	402,112
Portfolio turnover rate		41.43	%		48.70	%		33.64	%		46.54	%		235.14	%

FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS


Franklin Biotechnology Discovery Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	129.11		$	159.15
Income from investment operations^b:
Net investment income (loss)^c		(2.38	)		(0.34	)
Net realized and unrealized gains (losses)		60.61			(29.70	)
Total from investment operations		58.23			(30.04	)
Less distributions from net realized gains		(6.67	)		—
Net asset value, end of year	$	180.67		$	129.11

Total return^d		45.76	%		(18.88	)%

Ratios to average net assets^e
Expenses^f		1.75	%		1.82	%
Net investment income (loss)		(1.42	)%		(1.52	)%

Supplemental data
Net assets, end of year (000’s)	$	23,051		$	5,486
Portfolio turnover rate		41.43	%		48.70	%

^aFor the period March 4, 2014 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.
^eRatios are annualized for periods less than one year.
^fBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.

26 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS


Franklin Biotechnology Discovery Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	131.09		$	104.56
Income from investment operations^b:
Net investment income (loss)^c		(0.45	)		(0.49	)
Net realized and unrealized gains (losses)		61.78			35.81
Total from investment operations		61.33			35.32
Less distributions from net realized gains		(6.67	)		(8.79	)
Net asset value, end of year	$	185.75		$	131.09

Total return		47.40	%		34.10	%

Ratios to average net assets
Expenses^d		0.60	%		0.63	%
Net investment income (loss)		(0.27	)%		(0.35	)%

Supplemental data
Net assets, end of year (000’s)	$	76,436		$	50,846
Portfolio turnover rate		41.43	%		48.70	%

^aFor the period May 1, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 27


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Biotechnology Discovery Fund (continued)
					Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	130.86		$	106.86		$	76.65		$	78.15		$	65.20
Income from investment operations^a:
Net investment income (loss)^b		(0.70	)		(0.69	)		(0.52	)		(0.53	)		(0.62	)
Net realized and unrealized gains (losses)		61.63			33.48			30.80			9.05			13.57
Total from investment operations		60.93			32.79			30.28			8.52			12.95
Less distributions from:
Net investment income		—			—			(0.07	)		(0.71	)		—
Net realized gains		(6.67	)		(8.79	)		—			(9.31	)		—
Total distributions		(6.67	)		(8.79	)		(0.07	)		(10.02	)		—
Net asset value, end of year	$	185.12		$	130.86		$	106.86		$	76.65		$	78.15

Total return		47.17	%		31.02	%		39.51	%		13.51	%		19.86	%

Ratios to average net assets
Expenses		0.75	%^c,d		0.80	%^c,d		0.91	%		0.97	%		1.02	%^d
Net investment income (loss)		(0.42	)%		(0.52	)%		(0.59	)%		(0.74	)%		(0.95	)%

Supplemental data
Net assets, end of year (000’s)	$	167,035		$	91,012		$	25,744		$	9,330		$	5,009
Portfolio turnover rate		41.43	%		48.70	%		33.64	%		46.54	%		235.14	%


	FRANKLIN STRATEGIC SERIES




Statement of Investments, April 30, 2015

Franklin Biotechnology Discovery Fund
		Shares/
	Country	Warrants		Value

Common Stocks and Other Equity Interests 93.2%
Biotechnology 80.7%
^aAcadia Pharmaceuticals Inc.	United States	566,800	$	19,367,556
^aAcceleron Pharma Inc.	United States	205,900		5,693,135
^aAchillion Pharmaceuticals Inc.	United States	485,300		4,246,375
^a,bADMA Biologics Inc.	United States	131,700		1,107,597
^bAduro Biotech Inc.	United States	142,480		3,618,992
^aAlexion Pharmaceuticals Inc.	United States	226,600		38,347,518
^aAlkermes PLC	United States	128,600		7,120,582
^aAlnylam Pharmaceuticals Inc.	United States	251,400		25,610,118
Amgen Inc.	United States	562,600		88,840,166
^aAmicus Therapeutics Inc.	United States	733,700		7,381,022
^a,bAnthera Pharmaceuticals Inc.	United States	932,862		4,001,978
^a,cAptose Biosciences Inc., 144A	Canada	488,883		2,795,353
^aAquinox Pharmaceuticals Inc.	Canada	237,800		1,602,772
^a,bBellicum Pharmaceuticals Inc.	United States	331,600		7,951,768
^aBiogen Inc.	United States	351,461		131,421,812
^aBioMarin Pharmaceutical Inc.	United States	543,456		60,894,245
^aBiospecifics Technologies Corp.	United States	85,550		3,277,420
^aBluebird Bio Inc.	United States	156,128		20,794,688
^aCara Therapeutics Inc.	United States	202,400		2,175,800
^a,bCatalyst Pharmaceutical Partners Inc.	United States	914,000		2,888,240
^aCelgene Corp.	United States	1,462,700		158,059,362
^aCelldex Therapeutics Inc.	United States	1,343,229		32,237,496
^a,bCellectis SA, ADR	France	97,700		3,214,330
^a,bChemoCentryx Inc.	United States	595,308		3,982,610
^aConcert Pharmaceuticals Inc.	United States	263,800		3,827,738
^a,bCytRx Corp.	United States	589,000		2,585,710
^a,bDicerna Pharmaceuticals Inc.	United States	224,823		4,512,198
^aDyax Corp.	United States	306,600		7,330,806
^a,bDynavax Technologies Corp.	United States	306,770		6,170,679
^a,bEleven Biotherapeutics Inc.	United States	386,300		4,573,792
^a,dFibroGen Inc.	United States	451,308		9,968,265
^a,bForward Pharma AS, ADR	Denmark	114,700		3,502,938
^aGenocea Biosciences Inc.	United States	342,700		3,509,248
^aGilead Sciences Inc.	United States	1,582,300		159,036,973
^aGlycoMimetics Inc.	United States	337,000		2,793,730
^aHalozyme Therapeutics Inc.	United States	426,600		6,343,542
^a,b,eHeat Biologics Inc.	United States	624,200		3,676,538
^a,eHeron Therapeutics Inc.	United States	1,664,710		17,978,868
^a,c,eHeron Therapeutics Inc., wts., 144A, 7/01/16	United States	278,594		2,005,879
^aImmune Design Corp.	United States	327,300		7,341,339
^aIncyte Corp.	United States	695,900		67,613,644
^bInotek Pharmaceuticals Corp.	United States	332,200		2,013,132
^a,dIntarcia Therapeutics Inc., DD	United States	80,195		2,970,423
^aIntercept Pharmaceuticals Inc.	United States	110,600		27,960,786
^aIsis Pharmaceuticals Inc.	United States	240,400		13,635,488
^aKaryopharm Therapeutics Inc.	United States	675,800		18,354,728
^a,bKeryx Biopharmaceuticals Inc.	United States	1,435,500		15,302,430
^a,bKite Pharma Inc.	United States	123,144		6,203,995
^aLa Jolla Pharmaceutical Co.	United States	320,400		6,090,804
^a,fLion Biotechnologies Inc.	United States	830,700		9,910,251
^a,fLpath Inc., A	United States	833,913		1,684,504


franklintempleton.com		Annual Report \| 29


FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS




Franklin Biotechnology Discovery Fund (continued)
		Shares/
	Country	Warrants		Value

Common Stocks and Other Equity Interests (continued)
Biotechnology (continued)
^aMacroGenics Inc.	United States	293,900	$	8,408,479
^aMast Therapeutics Inc.	United States	5,353,500		2,730,285
^aMast Therapeutics Inc., wts., 6/14/18	United States	4,544,600		363,568
^aMedivation Inc.	United States	464,554		56,090,250
^a,bMirati Therapeutics Inc.	Canada	322,200		8,953,938
^aNeurocrine Biosciences Inc.	United States	541,100		18,446,099
^a,bNewLink Genetics Corp.	United States	231,000		10,302,600
^a,gNorthwest Biotherapeutics Inc., wts., 2/20/19	United States	223,880		1,173,581
^aNovavax Inc.	United States	1,332,300		10,298,679
^a,bOncoMed Pharmaceuticals Inc.	United States	91,700		2,198,966
^aOncothyreon Inc.	United States	2,973,100		4,459,650
^aOphthotech Corp.	United States	13,632		617,257
^a,bOrexigen Therapeutics Inc.	United States	1,391,623		9,142,963
^a,bOvaScience Inc.	United States	14,800		366,226
^a,cOvaScience Inc., 144A	United States	166,654		4,123,853
Pfenex Inc.	United States	625,100		8,345,085
^aPortola Pharmaceuticals Inc.	United States	605,400		21,606,726
^aProQR Therapeutics NV	Netherlands	103,700		1,967,189
^aPTC Therapeutics Inc.	United States	160,000		9,400,000
^aPuma Biotechnology Inc.	United States	278,244		50,245,301
^aRadius Health Inc.	United States	168,900		6,053,376
^aReceptos Inc.	United States	128,573		18,943,946
^aRegeneron Pharmaceuticals Inc.	United States	132,209		60,480,329
^aRetrophin Inc.	United States	519,794		11,196,363
^aSage Therapeutics Inc.	United States	197,070		10,444,710
^aSangamo BioSciences Inc.	United States	282,900		3,499,473
^aSpark Therapeutics Inc.	United States	53,000		3,035,310
^aStemline Therapeutics Inc.	United States	606,400		8,422,896
^aTargacept Inc.	United States	191,432		440,294
^a,bTekmira Pharmaceuticals Corp.	Canada	803,000		12,422,410
^aTesaro Inc.	United States	228,100		12,424,607
^aThreshold Pharmaceuticals Inc.	United States	1,055,600		3,736,824
^aThreshold Pharmaceuticals Inc., wts., 3/16/16	United States	190,476		82,286
^aThreshold Pharmaceuticals Inc., wts., 2/12/20	United States	439,500		—
^a,bTokai Pharmaceuticals Inc.	United States	183,000		1,830,000
^aTonix Pharmaceuticals Holding Corp.	United States	147,281		905,778
^aTrillium Therapeutics Inc.	Canada	158,100		3,011,805
^aUltragenyx Pharmaceutical Inc.	United States	82,400		4,649,832
^aVertex Pharmaceuticals Inc.	United States	397,500		49,003,800
^aXencor Inc.	United States	339,701		4,830,548
^a,bZafgen Inc.	United States	313,026		9,741,369
				1,507,926,014
Life Sciences Tools & Services 3.6%
^aFluidigm Corp.	United States	440,500		16,501,130
^aIllumina Inc.	United States	280,200		51,626,850
				68,127,980

30 | Annual Report

franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Biotechnology Discovery Fund (continued)
		Shares/
	Country	Warrants		Value

Common Stocks and Other Equity Interests (continued)
Pharmaceuticals 8.9%
^a,bAlcobra Ltd.	Israel	207,647	$	1,220,964
^aAratana Therapeutics Inc.	United States	546,000		7,048,860
^aCarbylan Therapeutics Inc.	United States	675,300		3,403,512
^aDermira Inc.	United States	159,200		2,348,200
^aFlex Pharma Inc.	United States	120,200		2,009,744
^aFoamix Pharmaceuticals Ltd.	Israel	413,800		4,104,896
^a,bGW Pharmaceuticals PLC, ADR	United Kingdom	94,767		9,917,367
^aIntra-Cellular Therapies Inc.	United States	146,500		2,995,925
^aJazz Pharmaceuticals PLC	United States	160,800		28,734,960
Marinus Pharmaceuticals Inc.	United States	490,600		4,356,528
^a,bNuvo Research Inc.	Canada	112,036		412,214
^a,cNuvo Research Inc., 144A	Canada	52,941		194,786
^aRelypsa Inc.	United States	271,600		7,857,388
^aRevance Therapeutics Inc.	United States	274,300		5,396,853
^aSagent Pharmaceuticals Inc.	United States	597,557		13,929,054
^aSciClone Pharmaceuticals Inc.	United States	1,669,019		13,635,885
Shire PLC, ADR	Ireland	165,400		40,276,554
^aTherapeuticsMD Inc.	United States	2,320,600		15,037,488
^a,bZogenix Inc.	United States	2,015,600		2,801,684
				165,682,862
Total Common Stocks and Other Equity Interests
(Cost $942,528,844)				1,741,736,856
Convertible Preferred Stocks (Cost $854,316) 0.3%
Biotechnology 0.3%
^a,dAduro Biotech Inc., 8.00%, cvt. pfd., D	United States	316,074		5,202,325
Preferred Stocks 0.3%
Biotechnology 0.3%
^a,gEdge Therapeutics Inc., pfd.	United States	688,172		3,200,000
^a,dNatera Inc., pfd.	United States	258,620		2,056,029
Total Preferred Stocks (Cost $5,224,998)				5,256,029
Total Investments before Short Term Investments
(Cost $948,608,158)				1,752,195,210
Short Term Investments 10.8%
Money Market Funds (Cost $117,766,042) 6.3%
^a,hInstitutional Fiduciary Trust Money Market Portfolio	United States	117,766,042		117,766,042
ⁱInvestments from Cash Collateral Received for Loaned Securities
(Cost $83,916,132) 4.5%
Money Market Funds 4.5%
^a,hInstitutional Fiduciary Trust Money Market Portfolio	United States	83,916,132		83,916,132
Total Investments (Cost $1,150,290,332) 104.6%				1,953,877,384
Other Assets, less Liabilities (4.6)%				(85,449,685	)
Net Assets 100.0%			$	1,868,427,699

franklintempleton.com

Annual Report

| 31

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS

Franklin Biotechnology Discovery Fund (continued)

See Abbreviations on page 56.

^aNon-income producing.
^bA portion or all of the security is on loan at April 30, 2015. See Note 1(c).
^cSecurity 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 April 30, 2015, the aggregate value of these securities was $9,119,871, representing 0.49% of net assets.
^dSee Note 7 regarding restricted securities.
^eSee Note 8 regarding holdings of 5% voting securities.
^fAt April 30, 2015, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited
or extended period of time.
^gSecurity has been deemed illiquid because it may not be able to be sold within seven days. At April 30, 2015, the aggregate value of these securities was $4,373,581,
representing 0.23% of net assets.
^hSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.
ⁱSee Note 1(c) regarding securities on loan.

32 | Annual Report | The accompanying notes are an integral part of these financial statements.

franklintempleton.com


								FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Natural Resources Fund
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	39.79		$	33.03		$	35.81		$	44.75		$	33.15
Income from investment operations^a:
Net investment income^b		0.23			0.19			0.08			0.04			0.03
Net realized and unrealized gains (losses)		(8.27	)		6.65			(2.86	)		(8.72	)		12.21
Total from investment operations		(8.04	)		6.84			(2.78	)		(8.68	)		12.24
Less distributions from net investment income		(0.29	)		(0.08	)		—			(0.26	)		(0.64	)
Net asset value, end of year	$	31.46		$	39.79		$	33.03		$	35.81		$	44.75

Total return^c		(20.07	)%		20.74	%		(7.76	)%		(19.36	)%		37.31	%

Ratios to average net assets
Expenses		1.08	%^d		1.07	%^d		1.08	%		1.03	%		1.00	%
Net investment income		0.67	%		0.53	%		0.26	%		0.11	%		0.07	%

Supplemental data
Net assets, end of year (000’s)	$	572,518		$	624,250		$	628,722		$	827,693		$	1,153,098
Portfolio turnover rate		30.05	%		21.03	%		20.40	%		26.75	%		23.60	%


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Natural Resources Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	38.39		$	32.02		$	34.96		$	43.87		$	32.57
Income from investment operations^a:
Net investment income (loss)^b		(0.01	)		(0.06	)		(0.14	)		(0.22	)		(0.23	)
Net realized and unrealized gains (losses)		(7.91	)		6.43			(2.80	)		(8.53	)		11.98
Total from investment operations		(7.92	)		6.37			(2.94	)		(8.75	)		11.75
Less distributions from net investment income		(0.01	)		—			—			(0.16	)		(0.45	)
Net asset value, end of year	$	30.46		$	38.39		$	32.02		$	34.96		$	43.87

Total return^c		(20.63	)%		19.89	%		(8.41	)%		(19.91	)%		36.30	%

Ratios to average net assets
Expenses		1.78	%^d		1.76	%^d		1.77	%		1.73	%		1.70	%
Net investment income (loss)		(0.03	)%		(0.16	)%		(0.43	)%		(0.59	)%		(0.63	)%

Supplemental data
Net assets, end of year (000’s)	$	123,735		$	126,651		$	130,424		$	176,036		$	241,746
Portfolio turnover rate		30.05	%		21.03	%		20.40	%		26.75	%		23.60	%

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS


Franklin Natural Resources Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	42.58		$	38.28
Income from investment operations^b:
Net investment income^c		0.46			0.19
Net realized and unrealized gains (losses)		(8.92	)		4.31
Total from investment operations		(8.46	)		4.50
Less distributions from net investment income		(0.50	)		(0.20	)
Net asset value, end of year	$	33.62		$	42.58

Total return^d		(19.61	)%		11.83	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		0.55	%		0.55	%
Expenses net of waiver and payments by affiliates^f		0.54	%		0.53	%
Net investment income		1.21	%		1.07	%

Supplemental data
Net assets, end of year (000’s)	$	439		$	939
Portfolio turnover rate		30.05	%		21.03	%

^aFor the period September 20, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.
^fBenefit of expense reduction rounds to less than 0.01%.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 35


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Natural Resources Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	42.52		$	35.31		$	38.17		$	47.58		$	35.19
Income from investment operations^a:
Net investment income^b		0.35			0.31			0.21			0.16			0.14
Net realized and unrealized gains (losses)		(8.85	)		7.10			(3.07	)		(9.27	)		12.98
Total from investment operations		(8.50	)		7.41			(2.86	)		(9.11	)		13.12
Less distributions from net investment income		(0.39	)		(0.20	)		—			(0.30	)		(0.73	)
Net asset value, end of year	$	33.63		$	42.52		$	35.31		$	38.17		$	47.58

Total return		(19.81	)%		21.07	%		(7.49	)%		(19.10	)%		37.70	%

Ratios to average net assets
Expenses		0.78	%^c		0.77	%^c		0.78	%		0.73	%		0.70	%
Net investment income		0.97	%		0.83	%		0.56	%		0.41	%		0.37	%

Supplemental data
Net assets, end of year (000’s)	$	79,307		$	94,651		$	117,087		$	235,810		$	243,180
Portfolio turnover rate		30.05	%		21.03	%		20.40	%		26.75	%		23.60	%

FRANKLIN STRATEGIC SERIES


Statement of Investments, April 30, 2015

Franklin Natural Resources Fund
	Country	Shares		Value
Common Stocks 92.1%
Coal & Consumable Fuels 0.3%
^a,bEnergy Coal Resources, 144A	United States	199,375	$	—
Peabody Energy Corp.	United States	515,650		2,439,023
				2,439,023
Commodity Chemicals 1.2%
Axiall Corp.	United States	106,800		4,357,440
LyondellBasell Industries NV, A	United States	46,400		4,803,328
				9,160,768
Construction Materials 0.4%
Martin Marietta Materials Inc.	United States	24,400		3,480,660
Diversified Metals & Mining 13.2%
^cBHP Billiton PLC, ADR	Australia	474,500		22,918,350
First Quantum Minerals Ltd.	Zambia	247,700		3,793,243
Freeport-McMoRan Inc., B	United States	707,900		16,472,833
Glencore PLC	Switzerland	3,198,000		15,238,884
HudBay Minerals Inc.	Canada	448,500		4,433,897
^aImperial Metals Corp.	Canada	321,800		3,490,667
^aNautilus Minerals Inc.	Canada	746,000		290,549
PanAust Ltd.	Australia	3,564,487		4,922,220
Rio Tinto PLC, ADR	United Kingdom	234,500		10,503,255
Sandfire Resources NL	Australia	1,648,867		6,419,768
Southern Copper Corp.	Mexico	110,700		3,606,606
Teck Resources Ltd., B	Canada	695,200		10,553,136
				102,643,408
Fertilizers & Agricultural Chemicals 0.7%
The Mosaic Co.	United States	127,600		5,614,400
Gold 4.5%
Agnico Eagle Mines Ltd.	Canada	119,500		3,616,441
Alamos Gold Inc.	Canada	291,100		2,011,829
^aB2Gold Corp.	Canada	2,411,100		3,776,241
Barrick Gold Corp.	Canada	295,100		3,842,202
^aG-Resources Group Ltd.	Hong Kong	76,942,160		2,531,515
Goldcorp Inc.	Canada	395,700		7,451,031
^aNewcrest Mining Ltd.	Australia	300,000		3,430,502
Randgold Resources Ltd., ADR	Jersey Islands	69,800		5,316,666
^aRomarco Minerals Inc.	Canada	6,980,400		2,631,930
				34,608,357
Integrated Oil & Gas 13.5%
BP PLC, ADR	United Kingdom	174,200		7,518,472
Chevron Corp.	United States	227,800		25,299,468
Exxon Mobil Corp.	United States	198,200		17,316,734
Occidental Petroleum Corp.	United States	358,000		28,675,800
^a,cPetroleo Brasileiro SA, ADR	Brazil	302,400		2,872,800
Royal Dutch Shell PLC, A, ADR	United Kingdom	167,000		10,592,810
Total SA, B, ADR	France	226,400		12,248,240
				104,524,324

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FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Natural Resources Fund (continued)
	Country	Shares		Value
Common Stocks (continued)
Oil & Gas Drilling 1.9%
Ensco PLC, A	United States	102,619	$	2,799,446
Noble Corp. PLC	United States	125,000		2,163,750
^aPioneer Energy Services Corp.	United States	709,337		5,284,561
Rowan Cos. PLC	United States	221,200		4,687,228
				14,934,985
Oil & Gas Equipment & Services 17.0%
Baker Hughes Inc.	United States	163,300		11,179,518
^aC&J Energy Services Ltd.	United States	323,500		5,645,075
^aCameron International Corp.	United States	210,600		11,545,092
^aDril-Quip Inc.	United States	77,800		6,202,216
^aFMC Technologies Inc.	United States	213,600		9,419,760
^aForum Energy Technologies Inc.	United States	116,700		2,714,442
Halliburton Co.	United States	236,035		11,553,913
^aHornbeck Offshore Services Inc.	United States	151,800		3,468,630
^aKey Energy Services Inc.	United States	773,800		1,888,072
National Oilwell Varco Inc.	United States	29,500		1,605,095
Oceaneering International Inc.	United States	225,300		12,416,283
^aOil States International Inc.	United States	70,400		3,350,336
^aPHI Inc., non-voting	United States	93,600		2,932,488
^aRigNet Inc.	United States	164,100		6,147,186
RPC Inc.	United States	200,600		3,191,546
Schlumberger Ltd.	United States	265,304		25,100,412
Superior Energy Services Inc.	United States	311,800		7,950,900
^aWeatherford International PLC	United States	390,900		5,687,595
				131,998,559
Oil & Gas Exploration & Production 35.1%
Anadarko Petroleum Corp.	United States	308,400		29,020,440
Cabot Oil & Gas Corp., A	United States	660,900		22,351,638
^aCallon Petroleum Co.	United States	749,300		6,698,742
Canadian Natural Resources Ltd.	Canada	413,700		13,743,719
Cimarex Energy Co.	United States	83,800		10,424,720
^aCobalt International Energy Inc.	United States	468,100		5,008,670
^aConcho Resources Inc.	United States	111,100		14,071,926
Devon Energy Corp.	United States	110,500		7,537,205
^aDiamondback Energy Inc.	United States	127,700		10,544,189
^aEclipse Resources Corp.	United States	295,100		1,867,983
EnCana Corp.	Canada	215,200		3,057,992
EOG Resources Inc.	United States	115,700		11,448,515
EQT Corp.	United States	157,900		14,201,526
^aGran Tierra Energy Inc.	Colombia	1,649,000		6,134,280
Hess Corp.	United States	201,800		15,518,420
Marathon Oil Corp.	United States	561,500		17,462,650
^aMatador Resources Co.	United States	209,746		5,814,159
^aMEG Energy Corp.	Canada	164,500		3,172,086
Noble Energy Inc.	United States	343,100		17,402,032
^aOasis Petroleum Inc.	United States	343,100		6,155,214
^aOphir Energy PLC	United Kingdom	1,750,000		3,816,711
Pioneer Natural Resources Co.	United States	77,400		13,373,172
^aRex Energy Corp.	United States	1,111,900		5,559,500
^aRice Energy Inc.	United States	132,000		3,251,160
SM Energy Co.	United States	174,900		10,138,953

38 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Natural Resources Fund (continued)
	Country		Shares		Value
Common Stocks (continued)
Oil & Gas Exploration & Production (continued)
^aSouthwestern Energy Co.	United States		402,300	$	11,276,469
Tullow Oil PLC	United Kingdom		488,600		3,106,074
					272,158,145
Oil & Gas Refining & Marketing 3.8%
HollyFrontier Corp.	United States		219,000		8,492,820
Marathon Petroleum Corp.	United States		45,100		4,445,507
Phillips 66	United States		141,800		11,246,158
Valero Energy Corp.	United States		95,800		5,451,020
					29,635,505
Precious Metals & Minerals 0.5%
Tahoe Resources Inc.	United States		176,600		2,495,157
^dTahoe Resources Inc., 144A	United States		82,000		1,158,566
					3,653,723
Total Common Stocks (Cost $630,752,780)					714,851,857
Convertible Preferred Stocks 0.8%
Oil & Gas Exploration & Production 0.8%
Sanchez Energy Corp., 4.875%, cvt. pfd.	United States		92,900		3,745,031
Sanchez Energy Corp., 6.50%, cvt. pfd., B	United States		54,500		2,360,395
Total Convertible Preferred Stocks (Cost $7,072,693)					6,105,426
Preferred Stocks (Cost $2,376,164) 0.0%
Coal & Consumable Fuels 0.0%
^a,bEnergy Coal Resources, 144A, pfd.	United States		29,847		—

			Principal
			Amount
Convertible Bonds 0.6%
Diversified Metals & Mining 0.1%
Molycorp Inc., cvt., senior note, 6.00%, 9/01/17	United States	$	4,453,000		491,665
Oil & Gas Exploration & Production 0.5%
Cobalt International Energy Inc., cvt., senior bond, 3.125%, 5/15/24	United States		4,787,000		3,760,787
Total Convertible Bonds (Cost $7,854,966)					4,252,452
Total Investments before Short Term Investments
(Cost $648,056,603)					725,209,735

			Shares
Short Term Investments 7.6%
Money Market Funds (Cost $52,015,256) 6.7%
^a,eInstitutional Fiduciary Trust Money Market Portfolio	United States		52,015,256		52,015,256
^fInvestments from Cash Collateral Received for Loaned Securities
(Cost $7,308,375) 0.9%
Money Market Funds 0.9%
^a,eInstitutional Fiduciary Trust Money Market Portfolio	United States		7,308,375		7,308,375
Total Investments (Cost $707,380,234) 101.1%					784,533,366
Other Assets, less Liabilities (1.1)%					(8,534,104	)
Net Assets 100.0%				$	775,999,262

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		FRANKLIN STRATEGIC SERIES




Financial Statements

Statements of Assets and Liabilities
April 30, 2015

		Franklin
		Biotechnology			Franklin Natural
		Discovery Fund			Resources Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	932,068,255		$	648,056,603
Cost - Non-controlled affiliated issuers (Note 8)		16,539,903			—
Cost - Sweep Money Fund (Note 3f)		201,682,174			59,323,631
Total cost of investments	$	1,150,290,332		$	707,380,234
Value - Unaffiliated issuers	$	1,728,533,925		$	725,209,735
Value - Non-controlled affiliated issuers (Note 8)		23,661,285			—
Value - Sweep Money Fund (Note 3f)		201,682,174			59,323,631
Total value of investments*		1,953,877,384			784,533,366
Receivables:
Investment securities sold (includes securities loaned in the amount of $1,001,238 and
$—, respectively)		2,600,830			4,132,838
Capital shares sold		1,947,947			3,013,221
Dividends and Interest		218,094			674,059
Due from custodian		2,905,275			—
Other assets		986			330
Total assets		1,961,550,516			792,353,814
Liabilities:
Payables:
Investment securities purchased		322,509			6,768,363
Capital shares redeemed		4,301,271			1,444,664
Management fees		917,188			286,012
Distribution fees		294,663			227,708
Transfer agent fees		381,697			260,003
Payable upon return of securities loaned		86,821,407			7,308,375
Accrued expenses and other liabilities		84,082			59,427
Total liabilities		93,122,817			16,354,552
Net assets, at value	$	1,868,427,699		$	775,999,262
Net assets consist of:
Paid-in capital	$	983,000,750		$	735,129,198
Undistributed net investment income (loss)		(6,715,528	)		158,696
Net unrealized appreciation (depreciation)		803,600,160			77,166,146
Accumulated net realized gain (loss)		88,542,317			(36,454,778	)
Net assets, at value	$	1,868,427,699		$	775,999,262



*Includes securities loaned	$	78,895,553		$	7,102,150

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The accompanying notes are an integral part of these financial statements. | Annual Report | 41


FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statements of Assets and Liabilities (continued)
April 30, 2015

			Franklin
			Biotechnology		Franklin Natural
			Discovery Fund		Resources Fund
Class A:
Net assets, at value	$		1,601,906,127	$	572,518,309
Shares outstanding			8,787,261		18,197,115
Net asset value per share^a		$	182.30	$	31.46
Maximum offering price per share (net asset value per share ÷ 94.25%)		$	193.42	$	33.38
Class C:
Net assets, at value	$		23,050,842	$	123,735,069
Shares outstanding			127,586		4,061,776
Net asset value and maximum offering price per share^a		$	180.67	$	30.46
Class R6:
Net assets, at value	$		76,435,818	$	438,740
Shares outstanding			411,494		13,050
Net asset value and maximum offering price per share		$	185.75	$	33.62
Advisor Class:
Net assets, at value	$		167,034,912	$	79,307,144
Shares outstanding			902,305		2,358,301
Net asset value and maximum offering price per share		$	185.12	$	33.63


^aRedemption price is equal to net asset value less contingent deferred sales charges, if applicable.
42 \| Annual Report \| The accompanying notes are an integral part of these financial statements.	franklintempleton.com


		FRANKLIN STRATEGIC SERIES
		FINANCIAL STATEMENTS


Statements of Operations
for the year ended April 30, 2015

		Franklin
		Biotechnology			Franklin Natural
		Discovery Fund			Resources Fund
Investment income:
Dividends	$	2,094,624		$	12,438,500
Interest		—			362,961
Income from securities loaned		3,379,178			172,658
Total investment income		5,473,802			12,974,119
Expenses:
Management fees (Note 3a)		9,464,896			3,598,382
Distribution fees: (Note 3c)
Class A		3,560,676			1,642,619
Class C		156,468			1,108,118
Transfer agent fees: (Note 3e)
Class A		2,143,642			1,383,614
Class C		23,560			280,726
Class R6		701			158
Advisor Class		213,777			218,297
Custodian fees (Note 4)		15,878			13,766
Reports to shareholders		203,346			141,056
Registration and filing fees		184,125			119,376
Professional fees		65,658			44,374
Trustees’ fees and expenses		16,792			8,381
Other		26,786			26,081
Total expenses		16,076,305			8,584,948
Expense reductions (Note 4)		(12	)		(9	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(68,198	)		(36,298	)
Net expenses		16,008,095			8,548,641
Net investment income (loss)		(10,534,293	)		4,425,478
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		142,933,521			8,114,188
Non-controlled affiliated issuers (Note 8)		(1,308,156	)		—
Foreign currency transactions		20,804			(154,668	)
Net realized gain (loss)		141,646,169			7,959,520
Net change in unrealized appreciation (depreciation) on:
Investments		467,561,764			(169,674,547	)
Translation of other assets and liabilities denominated in foreign currencies		13,108			15,073
Net change in unrealized appreciation (depreciation)		467,574,872			(169,659,474	)
Net realized and unrealized gain (loss)		609,221,041			(161,699,954	)
Net increase (decrease) in net assets resulting from operations	$	598,686,748		$	(157,274,476	)

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FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statements of Changes in Net Assets


		Franklin							Franklin
		Biotechnology Discovery Fund							Natural Resources Fund
		Year Ended April 30,							Year Ended April 30,
		2015				2014			2015				2014
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(10,534,293	)		$	(8,789,337	)	$	4,425,478			$	3,888,520
Net realized gain (loss) from investments and foreign
currency transactions		141,646,169				107,458,155			7,959,520				19,694,399
Net change in unrealized appreciation (depreciation) on
investments and translation of other assets and liabilities
denominated in foreign currencies		467,574,872				121,720,853			(169,659,474	)		131,394,739
Net increase (decrease) in net assets resulting from
operations		598,686,748				220,389,671			(157,274,476	)		154,977,658
Distributions to shareholders from:
Net investment income:
Class A		—				—			(4,357,432	)			(1,295,936	)
Class C		—				—			(26,149	)			—
Class R6		—				—			(8,714	)			(1,339	)
Advisor Class		—				—			(881,303	)			(479,364	)
Net realized gains:
Class A		(56,613,547	)			(68,524,706	)		—				—
Class C		(651,107	)			—			—				—
Class R6		(2,490,471	)			(3,579,787	)		—				—
Advisor Class		(5,889,371	)			(3,829,703	)		—				—
Total distributions to shareholders		(65,644,496	)			(75,934,196	)		(5,273,598	)			(1,776,639	)
Capital share transactions: (Note 2)
Class A		(1,965,528	)			350,198,470			66,759,221			(116,275,300		)
Class C		13,282,238				6,094,568			19,081,993			(25,999,370		)
Class R6		3,829,454				44,555,564			(273,768	)			886,459
Advisor Class		31,005,366				64,466,934			6,489,242			(41,555,321		)
Total capital share transactions		46,151,530				465,315,536			92,056,688			(182,943,532		)
Net increase (decrease) in net assets		579,193,782				609,771,011			(70,491,386	)		(29,742,513		)
Net assets:
Beginning of year		1,289,233,917				679,462,906			846,490,648			876,233,161
End of year	$	1,868,427,699		$	1,289,233,917			$	775,999,262		$	846,490,648
Undistributed net investment income (loss) included in
net assets, end of year	$	(6,715,528	)		$	—		$	158,696			$	—
Distributions in excess of net investment Income included in
net assets, end of year	$	—			$	—		$	—			$	(597,485	)

44 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements

1. Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of nine separate funds, two of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The financial statements of the remaining funds in the Trust are presented separately. The Funds offer four classes of shares: Class A, Class C, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees. Franklin Biotechnology Discovery Fund was closed to new investors with limited exceptions effective at the close of market July 8, 2014.

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an 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. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of the NYSE close, whichever is earlier. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the day that the value of the security is determined. Over-the-counter (OTC) securities 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 NAV.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting

Policies (continued)

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the fund. As a result, differences may arise between the value of the Funds’ portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC 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 Depositary 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 that may call into question the reliability of the values of the foreign securities held by the Funds. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

b. Foreign Currency Translation

c. Securities Lending

The Funds participate in an agency based securities lending program to earn additional income. The fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of fund business each day; any additional collateral required due to changes in security values is delivered to the fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Funds. The total cash collateral received at year end was $83,916,132 and $7,308,375 for Franklin Biotechnology Discovery Fund and Franklin Natural Resources Fund, respectively, of which $2,905,275 was uninvested cash included in due from custodian in the Statement of Assets and Liabilities for Franklin Biotechnology Discovery Fund. The fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned is reported separately in the Statements of Operations. The fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open

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market using the collateral received. The securities lending agent has agreed to indemnify the fund in the event of default by a third party borrower.

d. Income and Deferred Taxes

The Funds may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which the Funds invest. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Funds invest. When a capital gain tax is determined to apply, the Funds record an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from foreign securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Funds. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

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

f. Accounting Estimates

g. Guarantees and Indemnifications

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2. Shares of Beneficial Interest

At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:


	Franklin Biotechnology						Franklin Natural
	Discovery Fund						Resources Fund
	Shares				Amount		Shares				Amount

Class A Shares:
Year ended April 30, 2015
Shares sold	1,717,680		$	276,277,147			7,090,471		$	217,913,005
Shares issued in reinvestment of distributions	326,778				53,156,888		160,621				4,176,142
Shares redeemed	(2,090,836	)		(331,399,563		)	(4,744,194	)		(155,329,926		)
Net increase (decrease)	(46,378	)		$	(1,965,528	)	2,506,898			$	66,759,221
Year ended April 30, 2014
Shares sold	5,217,381		$	685,233,368			2,604,685			$	92,042,342
Shares issued in reinvestment of distributions	515,565				64,316,784		35,605				1,243,317
Shares redeemed	(3,069,325	)		(399,351,682		)	(5,984,517	)		(209,560,959		)
Net increase (decrease)	2,663,621		$	350,198,470			(3,344,227	)	$	(116,275,300		)
Class C Shares:
Year ended April 30, 2015
Shares sold	99,120			$	15,615,834		1,797,408			$	52,747,509
Shares issued in reinvestment of distributions	4,011				648,558		992				25,030
Shares redeemed	(18,036	)			(2,982,154	)	(1,035,528	)			(33,690,546	)
Net increase (decrease)	85,095			$	13,282,238		762,872			$	19,081,993
Year ended April 30, 2014^a
Shares sold	44,841			$	6,399,029		445,572			$	15,263,971
Shares redeemed	(2,350	)			(304,461	)	(1,219,381	)			(41,263,341	)
Net increase (decrease)	42,491			$	6,094,568		(773,809	)	$	(25,999,370		)
Class R6 Shares:
Year ended April 30, 2015
Shares sold	57,247			$	9,282,687		1,857			$	71,787
Shares issued in reinvestment of distributions	15,044				2,490,471		312				8,649
Shares redeemed	(48,654	)			(7,943,704	)	(11,163	)			(354,204	)
Net increase (decrease)	23,637			$	3,829,454		(8,994	)		$	(273,768	)
Year ended April 30, 2014^b,c
Shares sold^d,e	431,359			$	50,546,318		22,009			$	885,146
Shares issued in reinvestment of distributions	28,341				3,579,477		35				1,313
Shares redeemed	(71,843	)			(9,570,231	)	—				—
Net increase (decrease)	387,857			$	44,555,564		22,044			$	886,459

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	Franklin Biotechnology						Franklin Natural
	Discovery Fund						Resources Fund
	Shares				Amount		Shares				Amount

Advisor Class Shares:
Year ended April 30, 2015
Shares sold	470,819			$	73,058,064		1,438,440			$	50,510,303
Shares issued in reinvestment of distributions	29,024				4,790,912		28,618				794,445
Shares redeemed	(293,017	)			(46,843,610	)	(1,334,841	)			(44,815,506	)
Net increase (decrease)	206,826			$	31,005,366		132,217			$	6,489,242
Year ended April 30, 2014
Shares sold	755,324		$	105,199,247			824,952			$	31,227,566
Shares issued in reinvestment of distributions	24,447				3,083,964		11,764				438,464
Shares redeemed^d,e	(325,219	)			(43,816,277	)	(1,926,993	)			(73,221,351	)
Net increase (decrease)	454,552			$	64,466,934		(1,090,277	)	$	(41,555,321		)

^aFor the period March 4, 2014 (effective date) to April 30, 2014 for Franklin Biotechnology Discovery Fund.
^bFor the year May 1, 2013 (effective date) to April 30, 2014 for Franklin Biotechnology Discovery Fund.
^cFor the period September 20, 2013 (effective date) to April 30, 2014 for Franklin Natural Resources Fund.
^dEffective May 1, 2013, a portion of Advisor Class shares were exchanged into Class R6 for Franklin Biotechnology Discovery Fund.
^eEffective September 20, 2013, a portion of Advisor Class shares were exchanged into Class R6 for Franklin Natural Resources Fund.

3. Transactions with Affiliates


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

a. Management Fees

Franklin Biotechnology Discovery Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.775	%	up to and including $100 million
0.650	%	over $100 million, up to and including $200 million
0.635	%	over $200 million, up to and including $250 million
0.585	%	over $250 million, up to and including $700 million
0.550	%	over $700 million, up to and including $1.2 billion
0.525	%	over $1.2 billion, up to and including $7.5 billion
0.515	%	over $7.5 billion, up to and including $10 billion
0.505	%	over $10 billion, up to and including $12.5 billion
0.495	%	over $12.5 billion, up to and including $15 billion
0.475	%	in excess of $15 billion.

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3. Transactions with Affiliates (continued)

a. Management Fees (continued)

Effective May 1, 2014, Franklin Biotechnology Discovery Fund combined its investment management and administration agreements as approved by the Board. The fees paid under the combined agreement do not exceed the aggregate fees that were paid under the separate agreements.

Prior to May 1, 2014, Franklin Biotechnology Discovery Fund paid fees to Advisers based on the average daily net assets of the fund as follows:


Annualized Fee Rate		Net Assets
0.625	%	Up to and including $100 million
0.500	%	Over $100 million, up to and including $250 million
0.450	%	Over $250 million, up to and including $7.5 billion
0.440	%	Over $7.5 billion, up to and including $10 billion
0.430	%	Over $10 billion, up to and including $12.5 billion
0.420	%	Over $12.5 billion, up to and including $15 billion
0.400	%	In excess of $15 billion

Franklin Natural Resources Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625	%	Up to and including $100 million
0.500	%	Over $100 million, up to and including $250 million
0.450	%	Over $250 million, up to and including $7.5 billion
0.440	%	Over $7.5 billion, up to and including $10 billion
0.430	%	Over $10 billion, up to and including $12.5 billion
0.420	%	Over $12.5 billion, up to and including $15 billion
0.400	%	In excess of $15 billion

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on the Funds’ average daily net assets, and is not an additional expense of the Funds.

Prior to May 1, 2014, before the combining of the investment management and administrative agreements as approved by the Board, Franklin Biotechnology Discovery Fund paid administrative fees to FT Services based on the fund’s average daily net assets as follows:


Annualized Fee Rate		Net Assets
0.150	%	Up to and including $200 million
0.135	%	Over $200 million, up to and including $700 million
0.100	%	Over $700 million, up to and including $1.2 billion
0.075	%	In excess of $1.2 billion

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c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each fund.

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


Class A	0.35	%
Class C	1.00	%

The Board has set the current rate at 0.30% per year for Class A shares until further notice and approval by the Board.

d. Sales Charges/Underwriting Agreements


		Franklin
		Biotechnology		Franklin Natural
		Discovery Fund		Resources Fund
Sales charges retained net of commissions paid to
unaffiliated broker/dealers	$	559,941	$	528,818
CDSC retained	$	20,766	$	16,539

e. Transfer Agent Fees

For the year ended April 30, 2015, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:


		Franklin
		Biotechnology		Franklin Natural
		Discovery Fund		Resources Fund

Transfer agent fees	$	1,041,602	$	931,206

f. Investments in Institutional Fiduciary Trust Money Market Portfolio

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3. Transactions with Affiliates (continued)

g. Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until August 31, 2015. For Franklin Biotechnology Discovery Fund, there were no Class R6 transfer agent fees waived during the year ended April 30, 2015.

4. Expense Offset Arrangement

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.


At April 30, 2015, the capital loss carryforwards were as follows:

		Franklin Natural
		Resources Fund
Capital loss carryforwards subject to expiration:
2018	$	12,737,677
Capital loss carryforwards not subject to expiration:
Short term		—
Long term		—
Total capital loss carryforwards	$	12,737,677

During the year ended April 30, 2015, Franklin Natural Resources Fund utilized $20,586,350 of capital loss carryforwards.

For tax purposes, the Funds may elect to defer any portion of a post-October capital loss to the first day of the following fiscal year. At April 30, 2015, Franklin Natural Resources Fund deferred post-October capital losses of $13,569,447.

The tax character of distributions paid during the years ended April 30, 2015 and 2014, was as follows:


		Franklin Biotechnology				Franklin Natural
		Discovery Fund				Resources Fund
		2015		2014		2015		2014

Distributions paid from:
Ordinary income	$	36,696,134	$	13,679,735	$	5,273,598	$	1,776,639
Long term capital gain		28,948,362		62,254,461		—		—
	$	65,644,496	$	75,934,196	$	5,273,598	$	1,776,639

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		Franklin
		Biotechnology			Franklin Natural
		Discovery Fund			Resources Fund
Cost of investments	$	1,166,894,367		$	721,424,709

Unrealized appreciation	$	817,834,833		$	158,867,785
Unrealized depreciation		(30,851,816	)		(95,759,128	)
Net unrealized appreciation (depreciation)	$	786,983,017		$	63,108,657

Undistributed ordinary income	$	35,637,575		$	4,055,522
Undistributed long term capital gains		62,786,195			—
Distributable earnings	$	98,423,770		$	4,055,522

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of passive foreign investment company shares and wash sales.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2015, were as follows:


		Franklin
		Biotechnology		Franklin Natural
		Discovery Fund		Resources Fund

Purchases	$	651,734,460	$	300,537,993
Sales	$	789,143,640	$	212,948,779

7. Restricted Securities

The Funds invest in securities that are restricted under the Securities Act of 1933 (1933 Act) or which are subject to legal, contractual, or other agreed upon restrictions on resale. Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Funds may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At April 30, 2015, the Funds held investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, as follows:


		Acquisition
Shares	Issuer	Dates		Cost		Value
Franklin Biotechnology Discovery Fund
316,074	^aAduro Biotech Inc., 8.00%, cvt. pfd., D	12/18/14	$	854,316	$	5,202,325
451,308	FibroGen Inc.	5/19/00		5,065,932		9,968,265
80,195	Intarcia Therapeutics Inc., DD	3/26/14		2,597,516		2,970,423
258,620	Natera Inc, pfd.	11/20/14		2,024,998		2,056,029
	Total Restricted Securities (Value is 1.08% of Net Assets)		$	10,542,762	$	20,197,042
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 (Value is 0.00% of Net Assets)		$	3,118,103	$	—
^aThe Fund also invests in unrestricted securities of the issuer, valued at $3,618,992 as of April 30, 2015.

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8. Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. Investments in “affiliated companies” for Franklin Biotechnology Discovery Fund for the year ended April 30, 2015, were as shown below.


	Number of				Number of
	Shares/				Shares/
	Warrants Held				Warrants		Value at
	at Beginning	Gross	Gross		Held at End		End of		Investment		Realized
Name of Issuer	of Year	Additions	Reductions		of Year		Year		Income		Gain (Loss)
Franklin Biotechnology Discovery Fund
Non-Controlled Affiliates
Celsus Therapeutics PLC,
ADR	289,817	—	(289,817	)	—	$	—	$	—	$	(1,308,156	)
Heat Biologics Inc.	279,200	345,000	—		624,200		3,676,538		—		—
Heron Therapeutics Inc.	965,010	699,700	—		1,664,710		17,978,868		—		—
Heron Therapeutics Inc., wts.,
144A, 7/01/16	278,594	—	—		278,594		2,005,879		—		—
Total Affiliated Securities (Value is 1.27% of Net Assets)						$	23,661,285	$	—	$	(1,308,156	)

9. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $1.5 billion (Global Credit Facility) which matured on February 13, 2015. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests. Effective February 13, 2015, the Borrowers renewed the Global Credit Facility for a one year term, maturing February 12, 2016, for a total of $2 billion.

10. Fair Value Measurements

The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:

Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

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For movements between the levels within the fair value hierarchy, the Funds have adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of April 30, 2015, in valuing the Funds’ assets carried at fair value, is as follows:


		Level 1		Level 2		Level 3		Total

Franklin Biotechnology Discovery Fund
Assets:
Investments in Securities:
Equity Investments:^a
Biotechnology	$	1,491,362,012	$	2,451,733	$	24,570,623	$	1,518,384,368
Other Equity Investments^b		233,810,842		—		—		233,810,842
Short Term Investments		201,682,174		—		—		201,682,174
Total Investments in Securities	$	1,926,855,028	$	2,451,733	$	24,570,623	$	1,953,877,384

Franklin Natural Resources Fund
Assets:
Investments in Securities
Equity Investments:^a
Oil & Gas Exploration & Production	$	272,158,145	$	6,105,426	$	—	$	278,263,571
Other Equity Investments^b		442,693,712		—		—^c		442,693,712
Convertible Bonds		—		4,252,452		—		4,252,452
Short Term Investments		59,323,631		—		—		59,323,631
Total Investments in Securities	$	774,175,488	$	10,357,878	$	—	$	784,533,366

^aIncludes common, preferred, and convertible preferred stocks as well as other equity investments.
^bFor detailed categories, see the accompanying Statement of Investments.
^cIncludes securities determined to have no value at April 30, 2015.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the year. At April 30, 2015, the reconciliation of assets is as follows:

Unrealized

Net

Appreciation

Balance at

Transfers

Realized

Unrealized

Balance

(Depreciation)

Beginning

Into (Out of)

Cost Basis

Gain

Appreciation

at End

on Assets Held

of Year

Purchases

Sales

Level 3

Adjustments

(Loss)

(Depreciation)

of Year

at Year End

Franklin Biotechnology Discovery

Fund

Assets:

Investments in Securities:

Equity Investments:^a

Biotechnology

10,082,727

6,079,314

)

$ —

8,408,586

24,570,623

8,408,586

^aIncludes common and preferred stocks as well as other equity investments.

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10. Fair Value Measurements (continued)

Significant unobservable valuation inputs developed by the VLOC for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of April 30, 2015, are as follows:


								Impact to Fair
		Fair Value at	Valuation					Value if Input
Description		End of Year	Technique	Unobservable Inputs		Amount/Range		Increases^a
Assets:
Investments in Securities:
Equity Investments:^b
Biotechnology	$	20,197,042	Discounted
			Cash Flow
			Model	Free Cash Flow	$	2,364.7–$13,567.7	mil	Increase
				Cost of Equity		12.5	%	Decrease
				Probability Rate		75	%	Increase
			Market	Discount for lack of
			comparables	marketability		5	–35%	Decrease
All Other Investments^c		4,373,581
Total	$	24,570,623

^aRepresents the expected directional change in the fair value of the Level 3 investments that would result from an increase in the corresponding input. A decrease to the
unobservable input would have the opposite effect. Significant changes in these inputs could result in significantly higher or lower fair value measurement.
^bIncludes common and convertible preferred stocks.
^cIncludes fair value of immaterial investments developed using various valuation techniques and unobservable inputs. May also include investments with values derived
using prior transaction prices or third party pricing information without adjustment for which such inputs are also unobservable.

11. New Accounting Pronouncements

12. Subsequent Events

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.

Abbreviations

Selected Portfolio

ADR American Depositary Receipt

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Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Franklin Strategic Series

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Biotechnology Discovery Fund and Franklin Natural Resources Fund (separate portfolios of Franklin Strategic Series, hereafter referred to as the “Funds”) at April 30, 2015, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2015 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
June 15, 2015

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Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), Franklin Biotechnology Discovery Fund hereby reports the maximum amount allowable but no less than $28,948,362 as long term capital gain dividends for the fiscal year ended April 30, 2015.

Under Section 871(k)(2)(C) of the Code, Franklin Biotechnology Discovery Fund hereby reports the maximum amount allowable but no less than $36,696,134 as short term capital gain dividends for the purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended April 30, 2015.

Under Section 854(b)(1)(A) of the Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended April 30, 2015:


Franklin		Franklin
Biotechnology		Natural
Discovery Fund		Resources Fund
5.09	%	100.00	%


	Franklin		Franklin
	Biotechnology		Natural
	Discovery Fund		Resources Fund
$	1,977,620	$	11,492,114

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Board Members and Officers


Independent Board Members

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Harris J. Ashton (1932)	Trustee	Since 1991	145	Bar-S Foods (meat packing company)
One Franklin Parkway				(1981-2010).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950)	Trustee	Since	119	Avis Budget Group Inc. (car rental)
One Franklin Parkway		October 2014		(2007-present), Omnicom Group Inc.
San Mateo, CA 94403-1906				(advertising and marketing communi-
				cations services) (2011-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1998-2006).

Principal Occupation During at Least the Past 5 Years:
Founding Partner and Senior Managing Director, Strategic Investment Group (investment management group) (1987-present); director of
various companies; and formerly, Founding Partner and Managing Director, Emerging Markets Management LLC (investment management
firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial
institution) (1977-1987).

Edith E. Holiday (1952)	Trustee	Since 1998	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1993-present),
San Mateo, CA 94403-1906				RTI International Metals, Inc. (manu-
				facture and distribution of titanium)
				(1999-present), Canadian National
				Railway (railroad) (2001-present),
				White Mountains Insurance Group, Ltd.
				(holding company) (2004-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1994-2013).
Principal Occupation During at Least the Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant
Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989).

J. Michael Luttig (1954)	Trustee	Since 2009	145	Boeing Capital Corporation
One Franklin Parkway				(aircraft financing) (2006-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company); and
formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

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Independent Board Members (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Frank A. Olson (1932)	Trustee	Since 2007	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1998-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June-December 1987).

Larry D. Thompson (1945)	Trustee	Since 2007	145	Cbeyond, Inc. (business commu-
One Franklin Parkway				nications provider) (2010-2012),
San Mateo, CA 94403-1906				The Southern Company (energy
				company) (December 2014;
				previously 2010-2012) and Graham
				Holdings Company (education and
				media organization) (2011-present).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (January 2015;
previously 2011-2012); and formerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo,
Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc.
(2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and
Deputy Attorney General, U.S. Department of Justice (2001-2003).

John B. Wilson (1959)	Lead	Trustee since	119	None
One Franklin Parkway	Independent	2006 and Lead
San Mateo, CA 94403-1906	Trustee	Independent
		Trustee since 2008

Principal Occupation During at Least the Past 5 Years:
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail)
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President –
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).




Interested Board Members and Officers

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Gregory E. Johnson (1961)	Trustee	Since June 2013	162	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment
companies in Franklin Templeton Investments; and Vice Chairman, Investment Company Institute.

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Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Rupert H. Johnson, Jr. (1940) Chairman of		Chairman of	145	None
One Franklin Parkway	the Board and	the Board since
San Mateo, CA 94403-1906	Trustee	2013 and Trustee
		since 1991
Principal Occupation During at Least the Past 5 Years:
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments.

Alison E. Baur (1964)	Vice President	Since 2012	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments.

Laura F. Fergerson (1962)	Chief Executive Since 2009		Not Applicable	Not Applicable
One Franklin Parkway	Officer –
San Mateo, CA 94403-1906	Finance and
	Administration
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Gaston Gardey (1967)	Treasurer,	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway	Chief Financial
San Mateo, CA 94403-1906	Officer and
	Chief
	Accounting
	Officer
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Products and Client Services, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.

Aliya S. Gordon (1973)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton
Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

Steven J. Gray (1955)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin
Alternative Strategies Advisers, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

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Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Selena L. Holmes (1965)	Vice President	Since 2012	Not Applicable	Not Applicable
100 Fountain Parkway	– AML
St. Petersburg, FL 33716-1205	Compliance
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance Monitoring; Chief Compliance Officer, Franklin Alternative Strategies Advisers, LLC; Vice President, Franklin
Templeton Companies, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Edward B. Jamieson (1948)	President and	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway	Chief Executive
San Mateo, CA 94403-1906	Officer –
	Investment
	Management

Principal Occupation During at Least the Past 5 Years:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC;
and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment
companies in Franklin Templeton Investments.

Christopher J. Molumphy (1962) Vice President		Since 2000	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director and Executive Vice President, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.

Kimberly H. Novotny (1972)	Vice President	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice
President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies
in Franklin Templeton Investments.

Robert C. Rosselot (1960)	Chief	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street	Compliance
Fort Lauderdale, FL 33301-1923	Officer
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 46 of the
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952)	Vice President	Since 2006	Not Applicable	Not Applicable
One Franklin Parkway	and Secretary
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin Templeton
Investments.

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Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Craig S. Tyle (1960)	Vice President	Since 2005	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.

Lori A. Weber (1964)	Vice President	Since 2011	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment
companies in Franklin Templeton Investments.

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex.
These portfolios have a common investment manager or affiliated investment managers.
**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin
Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person
of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.
Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.
Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.
Note 3: Effective April 30, 2015, Sam Ginn ceased to be a trustee of the Fund.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee
includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there
is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that
Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc.
from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and experience, the
Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of
such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth
and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for
financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant
Securities and Exchange Commission Rules and Releases.

The Statement of Additional Information (SAI) includes additional information about the board members and is available, without charge, upon request.
Shareholders may call (800) DIAL BEN/342-5236 to request the SAI.

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Shareholder Information

Board Review of Investment Management Agreement

Board dealt with each Fund separately. In approving continuance of the investment management agreement for each Fund, the Board, including a majority of independent Trustees, determined that the existing management fee structure was fair and reasonable and that continuance of the investment management agreement was in the best interests of each Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s decision.

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SHAREHOLDER INFORMATION

Fund shareholders by an affiliate of the Manager, noting the changes taking place in the nature of transfer agency services throughout the industry and regulatory initiatives in this area, and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Funds and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.

Franklin Biotechnology Discovery Fund – The performance universe for this Fund consisted of the Fund and all retail and institutional health/biotechnology funds as selected by Lipper. The Lipper report showed the Fund’s total return for the one-year period to be in the second-highest performing quintile of its performance universe, and on an annualized basis, to be in the highest performing quintile of such universe for the previous three- and five-year periods, and the second-highest performing quintile of such universe for the previous 10-year period. The Board was satisfied with the Fund’s investment performance as set forth in the Lipper report.

Franklin Natural Resources Fund – The performance universe for this Fund consisted of the Fund and all retail and institutional global natural resources funds as selected by Lipper. The Lipper report comparison for the Fund showed its total return for the one-year period to be in the second-lowest performing quintile of its performance universe, and on an annualized basis to be in the lowest performing quintile of such universe for the previous three-year period, the middle performing quintile of such universe for the previous five-year period, and the second-lowest performing quintile of such universe for the previous 10-year period. The Board found the performance of the Fund to be unacceptable. It discussed with management the investment focus of the Fund, noting its explanation that underperformance was due in part to distress in global commodity markets. Management further explained its ongoing review of the Fund’s sector allocation. The Board determined that a portfolio management change was not required in light of management’s ongoing attention to the Fund, but it would continue to monitor the Fund.

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SHAREHOLDER INFORMATION

Board Review of Investment Management

Agreement (continued)

Discovery Fund to be in the least expensive quintile of their respective Lipper expense groups. The Board was satisfied with the contractual management fee rate and total expense ratio of each of these Funds in comparison to its respective expense group as shown in the Lipper reports

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, the Funds’ independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Funds’ Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to each Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with the service providers and counterparties. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to each Fund was not excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Funds grow larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board noted that economies of scale were shared with each Fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. The fee structure under the investment management agreement for each Fund contains breakpoints that continued to asset levels that exceeded its asset size at December 31, 2014. In view of such fee structure and the favorable expense comparisons of each Fund within its respective expense group, the Board believed that to the extent economies of scale may be realized by the Manager of the Funds and its affiliates, that there was a sharing of benefits with the Funds and their shareholders.

Proxy Voting Policies and Procedures

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SHAREHOLDER INFORMATION

Quarterly Statement of Investments

Householding of Reports and Prospectuses

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| 67

Franklin Templeton Investments

Gain From Our Perspective®

Focus on Investment Excellence

Global Perspective Shaped by Local Expertise

Strength and Experience

1. As of 12/31/14. Clients are represented by the total number of shareholder accounts.

Not FDIC Insured | May Lose Value | No Bank Guarantee

Annual Report

Franklin Strategic Income Fund

This annual report for Franklin Strategic Income Fund covers the fiscal year ended April 30, 2015.

Your Fund’s Goals and Main Investments

The Fund seeks a high level of current income, with capital appreciation over the long term as a secondary objective. The Fund uses an active asset allocation process and under normal market conditions invests at least 65% of its assets in U.S. and foreign debt securities, including those in emerging markets. The Fund may invest in all varieties of fixed and floating rate income securities, including bonds, corporate loans (and loan participations), mortgage-backed securities and other asset-backed securities, convertible securities and municipal securities.

Performance Overview

The Fund’s Class A shares posted a +1.16% cumulative total return for the 12 months under review. In comparison, the Barclays U.S. Aggregate Bond Index, which represents the U.S. investment-grade fixed rate taxable bond market, generated a +4.46% total return.¹The Lipper Multi-Sector Income Funds Classification Average, which consists of funds chosen by Lipper that seek current income by allocating assets among different fixed income securities sectors, with a significant portion rated below investment grade, produced a +2.30% total return.²You can find the Fund’s long-term performance data in the Performance Summary beginning on page 7.

Economic and Market Overview

U.S. economic growth moderated during the 12 months ended April 30, 2015, especially in the second half of the review period. The economy grew for most of 2014, supported in some quarters by greater spending by consumers, businesses, and state and local governments, partially offset by the negative impacts of a wider trade deficit and lower federal defense spending. In the first quarter of 2015, factors including low energy prices and U.S. dollar strength led export levels to fall. In addition, harsh weather and labor disruptions weighed on business spending. Manufacturing and non-manufacturing activities increased, and the unemployment rate declined to 5.4% at period-end from 6.2% in April 2014.³Housing market data were positive for most of the period as home sales and prices rose while mortgage rates declined. After a brief slump during the period, retail sales rebounded toward period-end as auto sales surged. Inflation, as measured by the Consumer Price Index, remained subdued during the 12 months but rose late in the period amid higher energy prices bouncing from recent lows.

1. Source: Morningstar.
2. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended 4/30/15, this category consisted of 261 funds. Lipper calculations do not include sales
charges or expense subsidization by a fund’s manager. Fund performance relative to the average may have differed if these or other factors had been considered.
The indexes are unmanaged and include reinvestment of any income or distributions. One cannot invest directly in an index, and an index is not representative of the
Fund’s portfolio.
3. Source: Bureau of Labor Statistics.
See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 19.

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FRANKLIN STRATEGIC INCOME FUND

Portfolio Breakdown*
Based on Total Net Assets
	4/30/15		4/30/14
High Yield Corporate Bonds & Preferred
Securities	31.7	%	28.3	%
Floating Rate Loans	20.4	%	14.5	%
International Government & Agency Bonds
(Non-$US)	15.0	%	20.0	%
Investment-Grade Corporate Bonds	6.5	%	8.2	%
Mortgage-Backed Securities	5.4	%	4.5	%
Municipal Bonds	4.1	%	5.8	%
International Government & Agency Bonds
($US)	3.3	%	2.4	%
Commercial Mortgage-Backed Securities	3.1	%	3.5	%
U.S. Treasury Securities	2.3	%	1.7	%
Other	0.3	%	—
Equities	0.1	%	1.2	%
Asset-Backed Securities	0.0	%**	1.5	%
Convertible Securities	0.0	%**	0.1	%
Short-Term Investments & Other Net Assets	7.9	%	8.3	%

*Figures reflect certain derivatives held in the portfolio (or their underlying
reference assets) and may not total 100% or may be negative due to rounding,
use of any derivatives, unsettled trades or other factors. The breakdown may not
match the SOI.
**Rounds to less than 0.1% of total net assets.

The 10-year Treasury yield, which moves inversely to price, declined from 2.67% at the start of the period to 2.05% by period-end, as investors sought less risky assets given concerns about the crisis in Ukraine, Greece’s debt negotiations and relatively weak economic growth in Europe and Japan, as well as less robust growth in China. Near period-end, soft domestic data and the Fed’s cautious tone on raising interest rates also supported Treasury prices.

During the period, global financial markets were broadly influenced by the pickup in growth in the U.S., economic stabilization in China, the abundance of global liquidity from the Bank of Japan (BOJ) and European Central Bank (ECB) and the sharp decline in oil prices. The U.S. dollar strengthened against the euro, Japanese yen, and a vast number of developed and emerging market currencies over the six-month period.

As risk aversion increased during November and December, the U.S. dollar broadly strengthened against developed and emerging market currencies. Local-currency sovereign bond yields decreased across the Americas, Europe and Asia while credit spreads widened. This trend persisted through January before sharply reversing course in February; credit spreads tightened as risk appetites returned and local-currency sovereign bond yields broadly shifted higher across the Americas, Europe and Asia. During this time, currencies in certain emerging markets rebounded against the U.S. dollar.

Shortly before the period began, the BOJ introduced a new round of quantitative easing (QE) with an indefinite time horizon. Although Japan’s QE was positive for global risk assets, it contributed to further yen depreciation. In Europe, the ECB began an ambitious QE program in March with the aim of increasing the size of its balance sheet to a level higher than its previous peak. The ECB’s renewed commitment to pursue highly accommodative monetary policies put further pressure on the euro, which depreciated against the U.S. dollar during the period.

Investment Strategy

The Fund uses an active asset allocation strategy, investing across the fixed income markets in sectors that may include high yield and investment-grade corporate bonds, international developed and emerging market bonds, U.S. government and agency securities, mortgage- and other asset-backed securities, corporate bank loans, convertible securities and preferred stocks, and municipal securities. In addition to our bottom-up fundamental analysis of market sectors, industries and issuers, we evaluate country risk, business cycles, yield curves, and values between and within markets as part of our portfolio construction process. We may also enter into various transactions involving certain currency-, interest rate- or credit-related derivative instruments for hedging purposes, to enhance returns or to obtain exposure to various market sectors.

Manager’s Discussion

Over the past year, the global fixed income markets were influenced by two broad themes: declining government bond yields and a strengthening U.S. dollar. A combination of relatively tepid global economic growth combined with QE measures implemented in the eurozone and Japan led to declines for longer term interest rates in many developed markets during the period. Additionally, while Europe and Japan engaged in forms of QE, the U.S. discontinued incremental QE and guided the market toward an expectation of likely increases in the short-term federal funds target rate.

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Dividend Distributions*
5/1/14–4/30/15
		Dividend per Share (cents)
					Advisor
Month	Class A	Class C	Class R	Class R6	Class
May	3.47	3.11	3.25	3.81	3.69
June	3.50	3.15	3.28	3.83	3.72
July	3.69	3.33	3.47	4.03	3.92
August	3.65	3.29	3.43	3.98	3.88
September	4.63	4.28	4.41	4.95	4.85
October	5.75	5.39	5.53	6.08	5.97
November	5.70	5.36	5.49	6.02	5.91
December	9.82	9.47	9.60	10.14	10.04
January	3.64	3.30	3.43	3.96	3.85
February	3.82	3.51	3.63	4.11	4.01
March	3.82	3.48	3.61	4.15	4.03
April	3.73	3.40	3.52	4.05	3.94
Total	55.22	51.07	52.65	59.11	57.81

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

As a result, the U.S. dollar generally strengthened. Overall for the period, the 10-year Treasury yield fell from 2.67% to 2.05%. In comparison, 10-year German government bond yields fell below 0.5%, with shorter maturity German bonds effectively offering negative yields. Although periods of risk aversion negatively impacted the broader financial markets, lower rates supported equity markets, and the Standard & Poor’s 500 Index gained 12.98%.¹

Although the Fund posted a positive total return for the review period, returns lagged those of the Barclays U.S. Aggregate Bond Index and the Fund’s peers in the Lipper Multi-Sector Income Funds Classification Average. Given the decline in longer term rates, longer duration U.S. fixed income securities performed well. Additionally, high yield corporate bonds underperformed the benchmark index as did certain non-U.S. dollar government bond sectors due to a stronger U.S. dollar. Consequently, relative to its benchmarks, the Fund’s heavier weighting in high yield and global bonds detracted from relative performance, as did its lesser exposure to U.S. interest rate duration. Conversely, the Fund’s net short positions in the Japanese yen and the euro, through the use of currency forwards, aided returns given weakness in these two currencies relative to the U.S. dollar. Also, the Fund’s holdings in longer duration municipal bonds, investment-grade corporate bonds and commercial mortgage-backed securities added to returns, as did its exposure to the leveraged corporate loan sector.

What is duration?

Duration is a measure of a bond’s price sensitivity to interest rate changes. In general, a portfolio of securities with a lower duration can be expected to be less sensitive to interest rate changes than a portfolio with a higher duration.

What is a currency forward contract?

A currency forward contract, or a currency forward, is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

In the corporate bond sector, U.S. dollar strength, along with a significant decline in energy-related companies’ profitability due to lower commodity prices, negatively impacted first-quarter 2015 earnings. However, the high yield default rate remained below historical averages, and corporate liquidity continued to be robust given the refinancing activity over the past several years that lowered interest costs and, in many cases, boosted cash reserves. Although many senior management teams focused on shareholder-friendly activity, including stock buybacks, dividends, and mergers and acquisitions, since the financial crisis, a greater focus on prudent balance sheet management remained. However, over the past 12 months, the drop in commodity prices weighed on high yield corporate bonds, with their heavy concentrations in the energy and metals and mining sectors. As a result, the high yield sector underper-formed the broader fixed income markets, particularly during 2014’s fourth quarter. Over the past year, we added to the Fund’s leveraged loan and high yield exposures, given our generally favorable outlook for corporate credit fundamentals and valuations we considered reasonable. In particular, we added to our loan positions, as we believed the sector should also be fairly insensitive to potential future interest rate increases.

Outside the U.S., the strong U.S. dollar negatively impacted the Fund’s non-U.S. dollar global bond positions. Although the Fund reduced its exposure to global government bonds over the past year, it was still hampered by its remaining non-U.S. dollar holdings. Conversely, the Fund’s net short positions in the yen and the euro, through the use of currency forwards, helped support performance given the decline in those currencies over the reporting period. The Fund maintained a fairly modest exposure to hard currency emerging market bonds; however, its position in Ukrainian debt securities detracted from performance given that country’s ongoing conflict with Russia.

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FRANKLIN STRATEGIC INCOME FUND

With the decline in longer term U.S. rates, the more rate-sensitive fixed income sectors, such as Treasuries, agencies and mortgage-backed securities, generally posted positive returns during the period. The Fund maintained a lower exposure to these sectors, preferring higher income opportunities in the corporate credit markets.

The combination of lower U.S. interest rates and some inflows into dedicated municipal bond funds helped support performance in this sector. However, concerns regarding Puerto Rico’s debt burden as well as its prospective treatment of certain municipal obligations in a restructuring scenario pressured certain issues from the U.S. commonwealth over the past year. Given overall strong performance from municipal securities, the Fund reduced its exposure to municipal debt during the period.

Thank you for your continued participation in Franklin Strategic Income Fund. We look forward to serving your future investment needs.

Roger Bayston is a senior vice president of the Franklin Templeton Fixed Income Group. He is also a senior portfolio manager for several fixed income products and private accounts for Franklin Templeton Investments. Mr. Bayston directs a staff performing research and trading responsibilities for government, mortgage-backed and asset-backed securities. He sits on the Fixed Income Policy Committee and helps set portfolio strategy for multi-sector fixed income portfolios. In addition, he leads the team responsible for developing and implementing quantitative-based fixed income strategies of Franklin’s bond portfolios and fixed income products. Before joining Franklin Templeton Investments in 1991, Mr. Bayston managed portfolios of fixed income securities for Bankers Trust Company’s Investment Management Group.

CFA^®is a trademark owned by CFA Institute.

6 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC INCOME FUND

Performance Summary as of April 30, 2015

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FRSTX)	$	10.04	$	10.57	-$	0.53
C (FSGCX)	$	10.04	$	10.57	-$	0.53
R (FKSRX)	$	10.01	$	10.54	-$	0.53
R6 (FGKNX)	$	10.05	$	10.58	-$	0.53
Advisor (FKSAX)	$	10.05	$	10.58	-$	0.53


Distributions (5/1/14–4/30/15)
		Dividend		Short-Term		Long-Term
Share Class		Income		Capital Gain		Capital Gain		Total
A	$	0.5522	$	0.0077	$	0.0876	$	0.6475
C	$	0.5107	$	0.0077	$	0.0876	$	0.6060
R	$	0.5265	$	0.0077	$	0.0876	$	0.6218
R6	$	0.5911	$	0.0077	$	0.0876	$	0.6864
Advisor	$	0.5781	$	0.0077	$	0.0876	$	0.6734

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Annual Report

| 7

FRANKLIN STRATEGIC INCOME FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹

Cumulative total return excludes sales charges. Average annual total returns include maximum sales charges. Class A: 4.25% maximum initial sales charge; Class C: 1% contingent deferred sales charge in first year only; Class R/R6/Advisor Class: no sales charges.


	Cumulative		Average Annual		Average Annual		Total Annual
Share Class	Total Return²		Total Return³		Total Return (3/31/15)⁴		Operating Expenses⁵
A							0.87	%
1-Year	+1.16	%	-3.15	%	-3.73	%
5-Year	+29.41	%	+4.38	%	+4.50	%
10-Year	+80.39	%	+5.62	%	+5.49	%
C							1.27	%
1-Year	+0.76	%	-0.19	%	-0.79	%
5-Year	+26.88	%	+4.88	%	+4.99	%
10-Year	+73.37	%	+5.66	%	+5.53	%
R							1.12	%
1-Year	+0.91	%	+0.91	%	+0.31	%
5-Year	+27.91	%	+5.05	%	+5.14	%
10-Year	+76.06	%	+5.82	%	+5.69	%
R6							0.49	%
1-Year	+1.54	%	+1.54	%	+1.03	%
Since Inception (5/1/13)	+4.48	%	+2.22	%	+1.78	%
Advisor							0.62	%
1-Year	+1.41	%	+1.41	%	+0.81	%
5-Year	+31.00	%	+5.55	%	+5.66	%
10-Year	+85.04	%	+6.35	%	+6.21	%


	Distribution		30-Day Standardized Yield⁷
Share Class	Rate⁶		(with waiver)		(without waiver)
A	5.26	%	3.96	%	3.95	%
C	5.09	%	3.73	%	3.72	%
R	5.26	%	3.88	%	3.87	%
R6	5.88	%	4.53	%	4.52	%
Advisor	5.75	%	4.39	%	4.38	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

8 | Annual Report

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FRANKLIN STRATEGIC INCOME FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹(continued)

All investments involve risks, including possible loss of principal. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of
bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit
rating may affect its value. High yields reflect the higher credit risks associated with certain lower rated securities held in the portfolio. Floating rate loans and
high yield corporate bonds are rated below investment grade and are subject to greater risk of default, which could result in loss of principal — a risk that may
be heightened in a slowing economy. The risks of foreign securities include currency fluctuations and political uncertainty. Investments in developing markets
involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity. Investing in derivative
securities and the use of foreign currency techniques involve special risks as such may not achieve the anticipated benefits and/or may result in losses to the
Fund. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus
also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1. The Fund has a fee waiver associated with its investments in a Franklin Templeton money fund, contractually guaranteed through at least its current fiscal year-end.
Class R6 has a fee waiver contractually guaranteed through at least the Fund’s current fiscal year-end. Fund investment results reflect the fee waivers, to the extent
applicable; without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Distribution rate is based on the sum of the respective class’s dividend distributions over the past 12 months and the maximum offering price (NAV for Classes C, R, R6
and Advisor) per share on 4/30/15.
7. The 30-day standardized yield for the 30 days ended 4/30/15 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be
regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends
paid to shareholders) or the income reported in the Fund’s financial statements.
8. Source: Morningstar. The Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index representing the U.S. investment-grade, fixed-rate, taxable bond
market with index components for government and corporate, mortgage pass-through and asset-backed securities. All issues included are SEC-registered, taxable, dollar
denominated and nonconvertible, must have at least one year to final maturity, and must be rated investment grade (Baa3/BBB-/BBB- or above) using the middle rating of
Moody’s, Standard & Poor’s and Fitch, respectively.
9. Source: Lipper, a Thomson Reuters Company. The Lipper Multi-Sector Income Funds Classification Average is calculated by averaging the total returns of all funds within
the Lipper Multi-Sector Income Funds classification in the Lipper Open-End underlying funds universe. Lipper Multi-Sector Income Funds are defined as funds that seek
current income by allocating assets among different fixed income securities sectors (not primarily in one sector except for defensive purposes), including U.S. and foreign
governments, with a significant portion rated below investment grade. For the 12-month period ended 4/30/15, there were 261 funds in this category. Lipper calculations do
not include sales charges, but include reinvestment of any income or distributions. Fund performance relative to the average may have differed if these and other factors
had been considered.
See www.franklintempletondatasources.com for additional data provider information.

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FRANKLIN STRATEGIC INCOME FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

12 | Annual Report

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FRANKLIN STRATEGIC INCOME FUND

YOUR FUND’S EXPENSES


		Beginning Account		Ending Account		Expenses Paid During
Share Class		Value 11/1/14		Value 4/30/15		*Period 11/1/14–4/30/15**
A
Actual	$	1,000	$	999.60	$	4.21
Hypothetical (5% return before expenses)	$	1,000	$	1,020.58	$	4.26
C
Actual	$	1,000	$	998.60	$	6.19
Hypothetical (5% return before expenses)	$	1,000	$	1,018.60	$	6.26
R
Actual	$	1,000	$	999.30	$	5.45
Hypothetical (5% return before expenses)	$	1,000	$	1,019.34	$	5.51
R6
Actual	$	1,000	$	1,001.50	$	2.33
Hypothetical (5% return before expenses)	$	1,000	$	1,022.46	$	2.36
Advisor
Actual	$	1,000	$	1,000.80	$	2.98
Hypothetical (5% return before expenses)	$	1,000	$	1,021.82	$	3.01

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.85%;
C: 1.25%; R: 1.10%; R6: 0.47%; and Advisor: 0.60%), multiplied by the average account value over the period, multiplied by 181/365 to
reflect the one-half year period.

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| 13


FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Strategic Income Fund
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.57		$	10.86		$	10.48		$	10.68		$	10.30
Income from investment operations^a:
Net investment income^b		0.42			0.44			0.45			0.50			0.55
Net realized and unrealized gains (losses)		(0.30	)		(0.18	)		0.54			(0.10	)		0.39
Total from investment operations		0.12			0.26			0.99			0.40			0.94
Less distributions from:
Net investment income and net foreign currency gains		(0.55	)		(0.45	)		(0.57	)		(0.60	)		(0.56	)
Net realized gains		(0.10	)		(0.10	)		(0.04	)		—			—
Total distributions		(0.65	)		(0.55	)		(0.61	)		(0.60	)		(0.56	)
Net asset value, end of year	$	10.04		$	10.57		$	10.86		$	10.48		$	10.68

Total return^c		1.16	%		2.52	%		9.70	%		3.97	%		9.41	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.86	%		0.86	%		0.87	%		0.89	%		0.88	%
Expenses net of waiver and payments by affiliates^d		0.85	%		0.86	%^e		0.87	%		0.89	%		0.88	%
Net investment income		4.03	%		4.16	%		4.21	%		4.81	%		5.26	%

Supplemental data
Net assets, end of year (000’s)	$	5,242,844		$	5,182,490		$	4,966,834		$	3,757,100		$	3,288,814
Portfolio turnover rate		72.51	%		54.11	%		47.27	%		36.11	%		66.78	%
Portfolio turnover rate excluding mortgage dollar rolls^f		49.36	%		54.11	%		44.33	%		36.11	%		66.78	%


								FRANKLIN STRATEGIC SERIES
								FINANCIAL HIGHLIGHTS



Franklin Strategic Income Fund (continued)
					Year Ended April 30,
		2015			2014			2013			2012			2011
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.57		$	10.85		$	10.48		$	10.68		$	10.30
Income from investment operations^a:
Net investment income^b		0.38			0.40			0.41			0.46			0.50
Net realized and unrealized gains (losses)		(0.30	)		(0.17	)		0.53			(0.10	)		0.40
Total from investment operations		0.08			0.23			0.94			0.36			0.90
Less distributions from:
Net investment income and net foreign currency gains		(0.51	)		(0.41	)		(0.53	)		(0.56	)		(0.52	)
Net realized gains		(0.10	)		(0.10	)		(0.04	)		—			—
Total distributions		(0.61	)		(0.51	)		(0.57	)		(0.56	)		(0.52	)
Net asset value, end of year	$	10.04		$	10.57		$	10.85		$	10.48		$	10.68

Total return^c		0.76	%		2.20	%		9.17	%		3.56	%		8.98	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.26	%		1.26	%		1.27	%		1.29	%		1.28	%
Expenses net of waiver and payments by affiliates^d		1.25	%		1.26	%^e		1.27	%		1.29	%		1.28	%
Net investment income		3.63	%		3.76	%		3.81	%		4.41	%		4.86	%

Supplemental data
Net assets, end of year (000’s)	$	2,070,739		$	2,109,049		$	2,108,962		$	1,569,746		$	1,358,857
Portfolio turnover rate		72.51	%		54.11	%		47.27	%		36.11	%		66.78	%
Portfolio turnover rate excluding mortgage dollar rolls^f		49.36	%		54.11	%		44.33	%		36.11	%		66.78	%


FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Strategic Income Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.54		$	10.82		$	10.45		$	10.65		$	10.27
Income from investment operations^a:
Net investment income^b		0.39			0.41			0.42			0.47			0.52
Net realized and unrealized gains (losses)		(0.29	)		(0.17	)		0.53			(0.10	)		0.39
Total from investment operations		0.10			0.24			0.95			0.37			0.91
Less distributions from:
Net investment income and net foreign currency gains		(0.53	)		(0.42	)		(0.54	)		(0.57	)		(0.53	)
Net realized gains		(0.10	)		(0.10	)		(0.04	)		—			—
Total distributions		(0.63	)		(0.52	)		(0.58	)		(0.57	)		(0.53	)
Net asset value, end of year	$	10.01		$	10.54		$	10.82		$	10.45		$	10.65

Total return		0.91	%		2.36	%		9.36	%		3.72	%		9.17	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		1.11	%		1.11	%		1.12	%		1.14	%		1.13	%
Expenses net of waiver and payments by affiliates^c		1.10	%		1.11	%^d		1.12	%		1.14	%		1.13	%
Net investment income		3.78	%		3.91	%		3.96	%		4.56	%		5.01	%

Supplemental data
Net assets, end of year (000’s)	$	223,758		$	227,359		$	260,647		$	249,662		$	234,775
Portfolio turnover rate		72.51	%		54.11	%		47.27	%		36.11	%		66.78	%
Portfolio turnover rate excluding mortgage dollar rolls^e		49.36	%		54.11	%		44.33	%		36.11	%		66.78	%

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS


Franklin Strategic Income Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.58		$	10.87
Income from investment operations^b:
Net investment income^c		0.46			0.49
Net realized and unrealized gains (losses)		(0.30	)		(0.19	)
Total from investment operations		0.16			0.30
Less distributions from:
Net investment income and net foreign currency gains		(0.59	)		(0.49	)
Net realized gains		(0.10	)		(0.10	)
Total distributions		(0.69	)		(0.59	)
Net asset value, end of year	$	10.05		$	10.58

Total return		1.54	%		2.90	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.48	%		0.48	%
Expenses net of waiver and payments by affiliates^d		0.47	%		0.48	%^e
Net investment income		4.41	%		4.54	%

Supplemental data
Net assets, end of year (000’s)	$	253,929		$	247,007
Portfolio turnover rate		72.51	%		54.11	%
Portfolio turnover rate excluding mortgage dollar rolls^f		49.36	%		54.11	%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases
of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dBenefit of expense reduction rounds to less than 0.01%.
^eBenefit of waiver and payments by affiliates rounds to less than 0.01%.
^fSee Note 1(h) regarding mortgage dollar rolls.

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FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS



Franklin Strategic Income Fund (continued)
								Year Ended April 30,
		2015			2014			2013			2012			2011
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.58		$	10.86		$	10.49		$	10.69		$	10.31
Income from investment operations^a:
Net investment income^b		0.44			0.47			0.48			0.53			0.57
Net realized and unrealized gains (losses)		(0.29	)		(0.17	)		0.53			(0.10	)		0.39
Total from investment operations		0.15			0.30			1.01			0.43			0.96
Less distributions from:
Net investment income and net foreign currency gains		(0.58	)		(0.48	)		(0.60	)		(0.63	)		(0.58	)
Net realized gains		(0.10	)		(0.10	)		(0.04	)		—			—
Total distributions		(0.68	)		(0.58	)		(0.64	)		(0.63	)		(0.58	)
Net asset value, end of year	$	10.05		$	10.58		$	10.86		$	10.49		$	10.69

Total return		1.41	%		2.87	%		9.87	%		4.22	%		9.67	%

Ratios to average net assets
Expenses before waiver and payments by affiliates		0.61	%		0.61	%		0.62	%		0.64	%		0.63	%
Expenses net of waiver and payments by affiliates^c		0.60	%		0.61	%^d		0.62	%		0.64	%		0.63	%
Net investment income		4.28	%		4.41	%		4.46	%		5.06	%		5.51	%

Supplemental data
Net assets, end of year (000’s)	$	1,130,796		$	1,010,755		$	956,001		$	713,659		$	589,220
Portfolio turnover rate		72.51	%		54.11	%		47.27	%		36.11	%		66.78	%
Portfolio turnover rate excluding mortgage dollar rolls^e		49.36	%		54.11	%		44.33	%		36.11	%		66.78	%

FRANKLIN STRATEGIC SERIES


Statement of Investments, April 30, 2015

Franklin Strategic Income Fund

	Country	Shares			Value
Common Stocks 0.1%
Consumer Services 0.1%
^a,b,cTurtle Bay Resort	United States	5,579,939		$	11,076,180
Materials 0.0%^†
^aVerso Corp	United States	52,816			73,942
Transportation 0.0%^†
^aCEVA Holdings LLC	United Kingdom	1,570			1,177,478
Total Common Stocks (Cost $8,876,698)					12,327,600
Convertible Preferred Stocks 0.0%^†
Transportation 0.0%^†
^aCEVA Holdings LLC, cvt. pfd., A-1	United Kingdom	62			65,100
^aCEVA Holdings LLC, cvt. pfd., A-2	United Kingdom	3,399			2,548,920
Total Convertible Preferred Stocks (Cost $5,149,790)					2,614,020
		Principal
		Amount*

Corporate Bonds 38.4%
Automobiles & Components 0.5%
^dAvis Budget Finance PLC, senior note, 144A, 6.00%, 3/01/21	United States	9,000,000	EUR		10,754,849
^dFiat Chrysler Automobiles NV, senior note, 144A, 5.25%, 4/15/23	United Kingdom	17,200,000			17,415,000
The Goodyear Tire & Rubber Co., senior note, 6.50%, 3/01/21	United States	20,000,000			21,260,000
					49,429,849
Banks 3.2%
Bank of America Corp.,
^ejunior sub. bond, AA, 6.10% to 3/17/25, FRN thereafter, Perpetual	United States	10,000,000			10,237,500
^ejunior sub. bond, M, 8.125% to 5/15/18, FRN thereafter, Perpetual	United States	22,000,000			23,870,000
senior note, 6.40%, 8/28/17	United States	10,000,000			11,055,280
senior note, 5.65%, 5/01/18	United States	10,000,000			11,069,820
CIT Group Inc., senior note,
5.375%, 5/15/20	United States	6,900,000			7,322,625
5.00%, 8/15/22	United States	18,000,000			18,528,750
^d144A, 6.625%, 4/01/18	United States	7,000,000			7,525,000
Citigroup Inc.,
^ejunior sub. bond, M, 6.30% to 5/15/24, FRN thereafter, Perpetual	United States	6,900,000			6,998,670
^ejunior sub. bond, O, 5.875% to 3/27/20, FRN thereafter, Perpetual	United States	10,000,000			10,087,500
senior note, 3.875%, 10/25/23	United States	20,000,000			20,850,500
sub. bond, 5.50%, 9/13/25	United States	10,000,000			11,220,020
sub. note, 4.05%, 7/30/22	United States	5,000,000			5,217,965
JPMorgan Chase & Co.,
^ejunior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual	United States	10,000,000			10,325,000
^ejunior sub. bond, V, 5.00% to 7/30/19, FRN thereafter, Perpetual	United States	5,000,000			4,925,000
^ejunior sub. note, X, 6.10% to 10/01/24, FRN thereafter, Perpetual	United States	5,000,000			5,187,500
senior note, 4.25%, 10/15/20	United States	10,000,000			10,866,350
senior note, 3.25%, 9/23/22	United States	5,000,000			5,080,290
sub. note, 3.375%, 5/01/23	United States	10,000,000			9,996,120
sub. note, 3.875%, 9/10/24	United States	10,000,000			10,140,380
Royal Bank of Scotland Group PLC, sub. note,
6.125%, 12/15/22	United Kingdom	10,000,000			11,106,250
5.125%, 5/28/24	United Kingdom	2,600,000			2,686,125
The Royal Bank of Scotland PLC, sub. note, 6.934%, 4/09/18	United Kingdom	13,000,000	EUR		16,719,947

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FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Corporate Bonds (continued)
Banks (continued)
^eWells Fargo & Co., junior sub. bond,
5.875% to 6/15/25, FRN thereafter, Perpetual	United States	22,000,000		$	23,485,000
S, 5.90% to 6/15/24, FRN thereafter, Perpetual	United States	28,000,000			29,400,000
					283,901,592
Capital Goods 1.0%
^dAbengoa Finance SAU, senior note, 144A,
8.875%, 11/01/17	Spain	18,000,000			18,753,750
7.75%, 2/01/20	Spain	1,600,000			1,590,000
^dBombardier Inc., senior bond, 144A, 7.50%, 3/15/25	Canada	18,100,000			18,009,500
^dKM Germany Holdings GmbH, senior secured note, first lien, 144A, 8.75%,
12/15/20	Germany	9,000,000	EUR		11,083,049
Meritor Inc., senior note, 6.75%, 6/15/21	United States	4,000,000			4,200,000
Navistar International Corp., senior note, 8.25%, 11/01/21	United States	12,200,000			12,108,500
Terex Corp., senior note, 6.00%, 5/15/21	United States	15,000,000			15,243,750
TransDigm Inc.,
senior sub. bond, 6.50%, 7/15/24	United States	4,000,000			4,079,400
senior sub. note, 6.00%, 7/15/22	United States	4,000,000			4,060,000
					89,127,949
Commercial & Professional Services 0.0%^†
^dAlgeco Scotsman Global Finance PLC, first lien, 144A, 9.00%, 10/15/18	United Kingdom	1,200,000	EUR		1,337,203
Consumer Durables & Apparel 0.6%
KB Home,
senior bond, 7.50%, 9/15/22	United States	5,000,000			5,250,000
senior note, 4.75%, 5/15/19	United States	9,400,000			9,376,500
senior note, 7.00%, 12/15/21	United States	13,300,000			13,931,750
M/I Homes Inc., senior note, 8.625%, 11/15/18	United States	2,200,000			2,293,500
Toll Brothers Finance Corp., senior bond, 5.625%, 1/15/24	United States	10,300,000			11,252,750
Visant Corp., senior note, 10.00%, 10/01/17	United States	14,300,000			12,548,250
					54,652,750
Consumer Services 1.6%
^d1011778 BC ULC/New Red Finance Inc., secured note, second lien, 144A,
6.00%, 4/01/22	Canada	20,000,000			20,750,000
^fCaesars Entertainment Operating Co. Inc., senior secured note, first lien,
11.25%, 6/01/17	United States	25,000,000			18,875,000
^d,gFinanciere Quick SAS,
144A, FRN, 7.511%, 10/15/19	France	6,600,000	EUR		6,518,125
secured note, 144A, FRN, 4.761%, 4/15/19	France	6,900,000	EUR		7,169,768
^dInternational Game Technology PLC,
senior secured bond, 144A, 6.50%, 2/15/25	United Kingdom	15,000,000			14,587,500
senior secured note, 144A, 6.25%, 2/15/22	United Kingdom	20,500,000			20,256,562
MGM Resorts International, senior note,
6.625%, 7/15/15	United States	15,000,000			15,131,250
7.50%, 6/01/16	United States	1,000,000			1,057,500
10.00%, 11/01/16	United States	1,000,000			1,110,000
8.625%, 2/01/19	United States	700,000			805,438
6.75%, 10/01/20	United States	1,800,000			1,946,250
6.625%, 12/15/21	United States	10,000,000			10,750,000
7.75%, 3/15/22	United States	2,000,000			2,255,000
6.00%, 3/15/23	United States	3,000,000			3,120,000

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FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Corporate Bonds (continued)
Consumer Services (continued)
Pinnacle Entertainment Inc.,
senior note, 6.375%, 8/01/21	United States	4,900,000		$	5,236,875
senior sub. note, 7.75%, 4/01/22	United States	2,200,000			2,453,000
^dScientific Games International Inc., senior note, 144A, 10.00%, 12/01/22	United States	10,900,000			10,164,250
^dWynn Macau Ltd., senior note, 144A, 5.25%, 10/15/21	Macau	200,000			188,000
					142,374,518
Diversified Financials 2.3%
^dAerCap Ireland Capital Ltd./AerCap Global Aviation Trust, senior note,
144A, 5.00%, 10/01/21	Netherlands	10,600,000			11,388,375
Ally Financial Inc., senior note, 7.50%, 9/15/20	United States	19,663,000			23,082,396
Deutsche Bank AG, sub. bond, 4.296% to 5/24/23, FRN thereafter,
5/24/28	Germany	33,000,000			32,051,250
E*TRADE Financial Corp., senior note,
5.375%, 11/15/22	United States	9,000,000			9,585,000
4.625%, 9/15/23	United States	8,100,000			8,292,375
^eThe Goldman Sachs Group Inc., junior sub. bond, M, 5.375% to 5/10/20,
FRN thereafter, Perpetual	United States	21,900,000			21,982,125
Morgan Stanley,
^ejunior sub. bond, 5.55% to 7/15/20, FRN thereafter, Perpetual	United States	25,600,000			25,792,000
sub. bond, 3.95%, 4/23/27	United States	10,000,000			9,803,000
Navient Corp., senior note,
8.45%, 6/15/18	United States	14,100,000			15,766,620
5.50%, 1/15/19	United States	16,000,000			16,304,000
5.875%, 3/25/21	United States	5,000,000			4,987,500
6.125%, 3/25/24	United States	10,000,000			9,750,000
^dNeuberger Berman Group LLC/Finance Corp., senior note, 144A,
5.625%, 3/15/20	United States	4,000,000			4,180,200
5.875%, 3/15/22	United States	10,000,000			10,800,000
					203,764,841
Energy 7.8%
Access Midstream Partner LP/ACMP Finance Corp., senior note, 6.125%,
7/15/22	United States	7,300,000			7,850,668
BreitBurn Energy Partners LP/BreitBurn Finance Corp., senior bond,
7.875%, 4/15/22	United States	28,400,000			23,430,000
California Resources Corp.,
senior bond, 6.00%, 11/15/24	United States	17,000,000			16,065,000
senior note, 5.50%, 9/15/21	United States	8,400,000			8,001,000
CGG SA, senior note,
7.75%, 5/15/17	France	3,429,000			3,377,565
6.50%, 6/01/21	France	10,000,000			8,150,000
6.875%, 1/15/22	France	10,000,000			8,187,500
^d144A, 5.875%, 5/15/20	France	3,500,000	EUR		3,824,087
Chaparral Energy Inc., senior note,
9.875%, 10/01/20	United States	8,000,000			6,940,000
8.25%, 9/01/21	United States	8,000,000			6,560,000
7.625%, 11/15/22	United States	1,400,000			1,113,000
CHC Helicopter SA,
senior note, 9.375%, 6/01/21	Canada	5,000,000			3,425,000
senior secured note, first lien, 9.25%, 10/15/20	Canada	20,001,600			17,501,400

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FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
Corporate Bonds (continued)
Energy (continued)
Chesapeake Energy Corp., senior note,
7.25%, 12/15/18	United States	1,000,000	$	1,077,500
6.625%, 8/15/20	United States	16,000,000		16,560,000
6.125%, 2/15/21	United States	6,000,000		6,060,000
5.75%, 3/15/23	United States	14,000,000		13,510,000
Clayton Williams Energy Inc., senior note, 7.75%, 4/01/19	United States	22,000,000		21,175,000
CONSOL Energy Inc., senior note,
5.875%, 4/15/22	United States	20,000,000		18,550,000
^d144A, 8.00%, 4/01/23	United States	13,700,000		13,939,750
Energy Transfer Equity LP, senior note, first lien, 7.50%, 10/15/20	United States	30,000,000		33,900,000
Energy Transfer Partners LP, senior note, 5.20%, 2/01/22	United States	10,000,000		10,909,050
Energy XXI Gulf Coast Inc.,
senior note, 9.25%, 12/15/17	United States	15,000,000		11,250,000
senior note, 7.50%, 12/15/21	United States	2,100,000		879,375
^dsenior note, 144A, 6.875%, 3/15/24	United States	15,000,000		6,037,500
^dsenior secured note, second lien, 144A, 11.00%, 3/15/20	United States	5,000,000		4,825,000
^dEnQuest PLC, senior note, 144A, 7.00%, 4/15/22	United Kingdom	15,000,000		11,690,625
Freeport-McMoRan Oil & Gas LLC/FCX Oil & Gas Inc., senior note,
6.875%, 2/15/23	United States	3,816,000		4,111,740
^d,hGaz Capital SA (OJSC Gazprom), loan participation,
senior bond, 144A, 6.51%, 3/07/22	Russia	8,000,000		8,083,744
senior note, 144A, 5.092%, 11/29/15	Russia	7,000,000		7,065,625
senior note, 144A, 3.85%, 2/06/20	Russia	20,000,000		18,362,500
Halcon Resources Corp., senior note,
9.75%, 7/15/20	United States	4,000,000		3,300,000
8.875%, 5/15/21	United States	15,000,000		11,790,000
9.25%, 2/15/22	United States	5,300,000		4,134,000
^dKinder Morgan Finance Co. LLC, senior secured note, 144A, 6.00%,
1/15/18	United States	17,000,000		18,686,043
Kinder Morgan Inc.,
senior bond, 4.30%, 6/01/25	United States	5,000,000		5,082,035
senior note, 7.00%, 6/15/17	United States	3,500,000		3,841,803
senior note, 6.50%, 9/15/20	United States	9,000,000		10,470,825
Linn Energy LLC/Finance Corp., senior note,
6.50%, 5/15/19	United States	5,000,000		4,387,500
6.25%, 11/01/19	United States	8,000,000		6,820,000
8.625%, 4/15/20	United States	10,000,000		9,125,000
7.75%, 2/01/21	United States	10,000,000		8,650,000
6.50%, 9/15/21	United States	2,500,000		2,050,000
^dLUKOIL International Finance BV, senior note, 144A, 4.563%, 4/24/23	Russia	35,000,000		31,193,750
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note,
7.25%, 2/15/21	United States	20,000,000		19,900,000
Midstates Petroleum Co. Inc./LLC, senior note, 9.25%, 6/01/21	United States	15,000,000		8,025,000
Oasis Petroleum Inc., senior note, 6.875%, 3/15/22	United States	10,400,000		10,634,000
Offshore Group Investment Ltd.,
senior bond, first lien, 7.125%, 4/01/23	United States	10,000,000		6,450,000
senior secured note, first lien, 7.50%, 11/01/19	United States	15,000,000		9,900,000
PBF Holding Co. LLC, first lien, 8.25%, 2/15/20	United States	20,000,000		21,300,000

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STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
Corporate Bonds (continued)
Energy (continued)
Peabody Energy Corp.,
^dsecond lien, 144A, 10.00%, 3/15/22	United States	2,000,000	$	1,700,000
senior note, 6.00%, 11/15/18	United States	5,000,000		3,924,500
senior note, 6.50%, 9/15/20	United States	8,300,000		5,187,500
senior note, 6.25%, 11/15/21	United States	20,000,000		12,100,000
Penn Virginia Corp., senior note, 8.50%, 5/01/20	United States	15,000,000		14,700,000
Penn Virginia Resource Partners LP/Penn Virginia Resource Finance
Corp., senior note,
8.375%, 6/01/20	United States	6,540,000		7,202,175
6.50%, 5/15/21	United States	5,000,000		5,362,500
^d,f,gQuicksilver Resources Inc., secured note, second lien, 144A,
FRN, 7.00%, 6/21/19	United States	12,000,000		7,590,000
Regency Energy Partners LP/Regency Energy Finance Corp.,
senior bond, 5.50%, 4/15/23	United States	5,000,000		5,325,000
senior note, 5.875%, 3/01/22	United States	1,300,000		1,452,750
senior note, 5.00%, 10/01/22	United States	10,000,000		10,725,000
Sabine Pass Liquefaction LLC,
first lien, 5.625%, 2/01/21	United States	24,000,000		24,665,040
first lien, 5.625%, 4/15/23	United States	6,200,000		6,293,000
senior secured note, first lien, 5.75%, 5/15/24	United States	3,300,000		3,349,500
^dsenior secured note, first lien, 144A, 5.625%, 3/01/25	United States	5,000,000		5,043,750
Sanchez Energy Corp., senior note,
7.75%, 6/15/21	United States	12,600,000		13,198,500
6.125%, 1/15/23	United States	12,000,000		11,820,000
W&T Offshore Inc., senior note, 8.50%, 6/15/19	United States	22,000,000		15,840,000
Williams Partners LP, senior bond, 4.00%, 9/15/25	United States	22,000,000		21,749,442
				695,381,242
Food & Staples Retailing 0.4%
^dCencosud SA, senior note, 144A,
4.875%, 1/20/23	Chile	15,000,000		15,294,975
5.15%, 2/12/25	Chile	20,000,000		20,376,300
				35,671,275
Food, Beverage & Tobacco 0.9%
^dBarry Callebaut Services SA, senior note, 144A, 5.50%, 6/15/23	Belgium	5,300,000		5,680,938
Constellation Brands Inc., senior note, 4.25%, 5/01/23	United States	10,600,000		10,931,250
^dJBS USA LLC/Finance Inc.,
senior bond, 144A, 5.875%, 7/15/24	United States	6,800,000		6,936,000
senior note, 144A, 8.25%, 2/01/20	United States	19,000,000		20,282,500
senior note, 144A, 7.25%, 6/01/21	United States	4,500,000		4,770,000
^dPost Holdings Inc., senior note, 144A,
6.75%, 12/01/21	United States	15,800,000		16,021,200
6.00%, 12/15/22	United States	10,000,000		9,787,500
^dSmithfield Foods Inc., senior note, 144A,
5.25%, 8/01/18	United States	2,500,000		2,565,625
5.875%, 8/01/21	United States	2,000,000		2,103,750
				79,078,763

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FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
Corporate Bonds (continued)
Health Care Equipment & Services 1.8%
Alere Inc., senior sub. note, 6.50%, 6/15/20	United States	4,900,000	$	5,132,750
AmSurg Corp., senior note, 5.625%, 7/15/22	United States	4,100,000		4,192,250
CHS/Community Health Systems Inc.,
senior note, 8.00%, 11/15/19	United States	10,200,000		10,837,500
senior note, 7.125%, 7/15/20	United States	6,000,000		6,442,500
senior note, 6.875%, 2/01/22	United States	3,300,000		3,518,625
senior secured note, first lien, 5.125%, 8/15/18	United States	6,000,000		6,240,000
DaVita HealthCare Partners Inc.,
senior bond, 5.125%, 7/15/24	United States	10,000,000		10,195,000
senior bond, 5.00%, 5/01/25	United States	9,300,000		9,323,250
senior note, 5.75%, 8/15/22	United States	10,000,000		10,662,500
HCA Inc.,
senior note, 6.50%, 2/15/16	United States	3,000,000		3,116,250
senior note, 7.50%, 2/15/22	United States	8,100,000		9,497,250
senior note, 5.875%, 5/01/23	United States	15,000,000		16,256,250
senior secured bond, first lien, 5.875%, 3/15/22	United States	10,000,000		11,212,500
senior secured bond, first lien, 5.25%, 4/15/25	United States	10,000,000		10,850,000
Omnicare Inc., senior note, 4.75%, 12/01/22	United States	6,900,000		7,572,750
Tenet Healthcare Corp.,
first lien, 6.00%, 10/01/20	United States	2,700,000		2,889,000
senior note, 8.125%, 4/01/22	United States	8,400,000		9,187,500
^dsenior note, 144A, 5.00%, 3/01/19	United States	6,700,000		6,674,875
^dsenior note, 144A, 5.50%, 3/01/19	United States	15,300,000		15,472,125
				159,272,875
Insurance 0.6%
MetLife Inc., junior sub. note, 6.40% to 12/15/36, FRN thereafter,
12/15/66	United States	15,000,000		17,737,500
^dNippon Life Insurance Co., sub. bond, 144A, 5.10% to10/16/24, FRN
thereafter, 10/16/44	Japan	35,000,000		38,245,725
				55,983,225
Materials 4.8%
ArcelorMittal, senior note,
6.25%, 3/01/21	Luxembourg	20,000,000		21,090,000
7.00%, 2/25/22	Luxembourg	15,000,000		16,425,000
^dArdagh Packaging Finance PLC, senior note, 144A, 9.125%, 10/15/20	Luxembourg	5,000,000		5,393,750
^dArdagh Packaging Finance PLC/Ardagh MP Holdings USA Inc.,
senior note, 144A, 6.25%, 1/31/19	Luxembourg	2,000,000		2,050,000
senior note, 144A, 7.00%, 11/15/20	Luxembourg	1,764,706		1,814,338
senior note, 144A, 6.75%, 1/31/21	Luxembourg	2,400,000		2,496,000
senior note, 144A, 6.00%, 6/30/21	Luxembourg	3,100,000		3,177,500
^gsenior secured note, 144A, FRN, 3.271%, 12/15/19	Luxembourg	8,700,000		8,613,000
^dBarminco Finance Pty. Ltd., senior note, 144A, 9.00%, 6/01/18	Australia	15,000,000		14,343,750
^dCemex Finance LLC, senior secured note,
144A, 9.375%, 10/12/22	Mexico	1,400,000		1,600,900
first lien, 144A, 6.00%, 4/01/24	Mexico	5,800,000		5,955,875
^dCemex SAB de CV,
first lien, 144A, 5.70%, 1/11/25	Mexico	15,000,000		15,046,875
secured note, 144A, 5.875%, 3/25/19	Mexico	10,000,000		10,337,500
senior secured bond, first lien, 144A, 6.125%, 5/05/25	Mexico	4,000,000		4,120,000

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FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Corporate Bonds (continued)
Materials (continued)
^dCeramtec Group GmbH, senior note, 144A, 8.25%, 8/15/21	Germany	13,700,000	EUR	$	16,995,761
^dFirst Quantum Minerals Ltd., senior note, 144A,
6.75%, 2/15/20	Canada	15,000,000			14,025,000
7.00%, 2/15/21	Canada	20,000,000			18,750,000
^dFMG Resources (August 2006) Pty. Ltd.,
senior note, 144A, 6.00%, 4/01/17	Australia	2,000,000			2,063,750
senior note, 144A, 6.875%, 2/01/18	Australia	5,333,333			5,526,667
senior secured note, 144A, 9.75%, 3/01/22	Australia	32,000,000			33,176,800
Freeport-McMoRan Inc., senior note, 4.55%, 11/14/24	United States	26,000,000			25,111,008
^dGlencore Finance Canada Ltd., senior note, 144A, 4.95%, 11/15/21	Switzerland	20,000,000			21,606,120
^dGlencore Funding LLC, senior note, 144A,
4.125%, 5/30/23	Switzerland	7,500,000			7,576,552
4.625%, 4/29/24	Switzerland	5,000,000			5,169,550
^dIneos Finance PLC, senior secured note, 144A, 7.50%, 5/01/20	Switzerland	2,000,000			2,112,500
^dIneos Group Holdings SA, senior note, 144A,
6.125%, 8/15/18	Switzerland	2,200,000			2,249,500
5.875%, 2/15/19	Switzerland	700,000			710,500
^dINVISTA Finance LLC, senior secured note, 144A, 4.25%, 10/15/19	United States	25,100,000			24,899,351
Novelis Inc., senior note,
8.375%, 12/15/17	Canada	9,000,000			9,371,250
8.75%, 12/15/20	Canada	8,000,000			8,580,000
^dOwens-Brockway Glass Container Inc.,
senior bond, 144A, 5.375%, 1/15/25	United States	7,600,000			7,894,500
senior note, 144A, 5.00%, 1/15/22	United States	5,700,000			5,871,000
Reynolds Group Issuer Inc./LLC/SA,
first lien, 5.75%, 10/15/20	United States	6,600,000			6,913,500
senior note, 8.50%, 5/15/18	United States	14,000,000			14,367,500
senior note, 9.00%, 4/15/19	United States	1,000,000			1,052,500
senior note, 9.875%, 8/15/19	United States	400,000			427,000
senior note, 8.25%, 2/15/21	United States	10,000,000			10,687,500
senior secured note, first lien, 7.125%, 4/15/19	United States	4,000,000			4,147,500
^dSealed Air Corp.,
senior bond, 144A, 5.125%, 12/01/24	United States	11,300,000			11,794,375
senior note, 144A, 6.50%, 12/01/20	United States	4,000,000			4,470,000
senior note, 144A, 8.375%, 9/15/21	United States	4,000,000			4,530,000
senior note, 144A, 4.875%, 12/01/22	United States	11,300,000			11,667,250
^dSteel Dynamics Inc.,
senior bond, 144A, 5.50%, 10/01/24	United States	9,700,000			10,039,500
senior note, 144A, 5.125%, 10/01/21	United States	9,200,000			9,453,000
^dU.S. Coatings Acquisition Inc./Flash Dutch 2 BV, 144A, 5.75%, 2/01/21	United States	8,000,000	EUR		9,582,307
Verso Paper Holdings LLC/Inc., senior secured note, first lien, 11.75%,
1/15/19	United States	2,523,000			2,213,932
					425,500,161
Media 3.7%
Cablevision Systems Corp., senior note, 8.625%, 9/15/17	United States	3,000,000			3,390,000
CCO Holdings LLC/CCO Holdings Capital Corp.,
senior bond, 5.25%, 9/30/22	United States	10,000,000			10,030,000
^dsenior bond, 144A, 5.375%, 5/01/25	United States	13,000,000			12,805,000
senior note, 6.50%, 4/30/21	United States	8,000,000			8,328,000

franklintempleton.com Annual Report | 25

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Corporate Bonds (continued)
Media (continued)
Clear Channel Worldwide Holdings Inc.,
senior note, 6.50%, 11/15/22	United States	3,000,000		$	3,157,500
senior note, 6.50%, 11/15/22	United States	5,000,000			5,312,500
senior sub. note, 7.625%, 3/15/20	United States	900,000			942,750
senior sub. note, 7.625%, 3/15/20	United States	6,400,000			6,752,000
CSC Holdings LLC,
senior bond, 7.625%, 7/15/18	United States	6,000,000			6,795,000
senior note, 6.75%, 11/15/21	United States	22,000,000			24,942,500
DISH DBS Corp.,
senior bond, 5.00%, 3/15/23	United States	10,000,000			9,575,000
senior note, 7.125%, 2/01/16	United States	13,000,000			13,471,250
senior note, 6.75%, 6/01/21	United States	4,000,000			4,245,320
senior note, 5.875%, 7/15/22	United States	3,000,000			3,030,000
senior note, 5.875%, 11/15/24	United States	5,000,000			4,912,500
Gannett Co. Inc.,
senior bond, 6.375%, 10/15/23	United States	19,200,000			20,856,000
^dsenior bond, 144A, 5.50%, 9/15/24	United States	2,800,000			2,919,000
senior note, 5.125%, 7/15/20	United States	9,800,000			10,302,250
iHeartCommunications Inc.,
senior secured bond, first lien, 9.00%, 3/01/21	United States	23,800,000			22,907,500
senior secured note, first lien, 9.00%, 9/15/22	United States	8,100,000			7,776,000
^dNielsen Finance LLC/Co., senior note, 144A, 5.00%, 4/15/22	United States	3,400,000			3,425,500
^dSirius XM Radio Inc., senior bond, 144A,
6.00%, 7/15/24	United States	14,600,000			15,184,000
5.375%, 4/15/25	United States	9,000,000			9,067,500
Time Warner Cable Inc., senior note, 4.00%, 9/01/21	United States	9,700,000			9,663,334
^dUnitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH,
senior secured bond, first lien, 144A, 5.75%, 1/15/23	Germany	3,330,000	EUR		4,061,029
senior secured note, first lien, 144A, 5.625%, 4/15/23	Germany	1,710,000	EUR		2,087,791
^dUnitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25	Germany	18,000,000			18,877,500
^dUnivision Communications Inc.,
senior secured bond, first lien, 144A, 6.75%, 9/15/22	United States	3,622,000			3,902,886
senior secured note, first lien, 144A, 5.125%, 5/15/23	United States	2,000,000			2,032,500
senior secured note, first lien, 144A, 5.125%, 2/15/25	United States	30,000,000			30,300,000
^dVideotron Ltd., senior bond, 144A, 5.375%, 6/15/24	Canada	6,400,000			6,648,000
^dVirgin Media Finance PLC, senior bond, 144A, 6.375%,
4/15/23	United Kingdom	500,000			528,750
10/15/24	United Kingdom	9,600,000	GBP		15,822,841
^dVirgin Media Secured Finance PLC,
senior secured bond, first lien, 144A, 5.50%, 1/15/25	United Kingdom	14,000,000			14,393,750
senior secured note, first lien, 144A, 5.375%, 4/15/21	United Kingdom	3,870,000			4,051,406
^dVTR Finance BV, senior secured note, 144A, 6.875%, 1/15/24	Chile	7,600,000			7,882,720
					330,379,577
Pharmaceuticals, Biotechnology & Life Sciences 1.5%
Actavis Funding SCS, senior bond, 3.80%, 3/15/25	United States	14,900,000			15,097,157
^dEndo Finance LLC/Endo Ltd./Endo Finco Inc., senior bond, 144A, 6.00%,
2/01/25	United States	11,900,000			12,242,125
^dGrifols Worldwide Operations Ltd., senior note, 144A, 5.25%, 4/01/22	United States	8,000,000			8,200,000
^dinVentiv Health Inc., senior secured note, 144A, 9.00%, 1/15/18	United States	700,000			738,500
^d,iJaguar Holding Co. I, senior note, 144A, PIK, 9.375%, 10/15/17	United States	24,100,000			24,702,500

26 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Corporate Bonds (continued)
Pharmaceuticals, Biotechnology & Life Sciences (continued)
^dValeant Pharmaceuticals International Inc.,
senior bond, 144A, 6.125%, 4/15/25	United States	3,100,000		$	3,216,250
senior note, 144A, 7.50%, 7/15/21	United States	10,800,000			11,745,000
senior note, 144A, 5.625%, 12/01/21	United States	5,000,000			5,131,250
senior note, 144A, 5.50%, 3/01/23	United States	8,000,000			8,100,000
^dVPI Escrow Corp., senior note, 144A, 6.375%, 10/15/20	United States	16,600,000			17,554,500
Zoetis Inc., senior bond, 3.25%, 2/01/23	United States	25,000,000			24,871,250
					131,598,532
Real Estate 0.1%
Crown Castle International Corp., senior bond, 5.25%, 1/15/23	United States	5,000,000			5,303,000
Retailing 0.8%
^dArgos Merger Sub Inc., senior note, 144A, 7.125%, 3/15/23	United States	7,000,000			7,367,500
^dEdcon Holdings Pty. Ltd., senior note, 144A, 13.375%, 6/30/19	South Africa	1,800,000	EUR		547,841
^dEdcon Pty. Ltd., secured note, 144A, 9.50%, 3/01/18	South Africa	15,325,000	EUR		14,067,999
^dFamily Tree Escrow LLC, senior note, 144A,
5.25%, 3/01/20	United States	1,600,000			1,684,000
5.75%, 3/01/23	United States	6,900,000			7,279,500
^dNetflix Inc.,
senior bond, 144A, 5.875%, 2/15/25	United States	9,100,000			9,737,000
senior note, 144A, 5.50%, 2/15/22	United States	13,600,000			14,382,000
^dNew Look Bondco I PLC, 144A, 8.75%, 5/14/18	United Kingdom	9,100,000	GBP		14,657,354
					69,723,194
Software & Services 1.1%
^dBMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21	United States	25,000,000			23,062,500
Equinix Inc., senior bond, 5.375%, 4/01/23	United States	25,000,000			25,937,500
First Data Corp.,
senior bond, 12.625%, 1/15/21	United States	2,000,000			2,366,000
senior note, 11.25%, 1/15/21	United States	3,218,000			3,628,295
^dsenior secured bond, second lien, 144A, 8.25%, 1/15/21	United States	28,000,000			29,828,680
Sterling International Inc., senior note, 11.00%, 10/01/19	United States	9,500,000			10,117,500
					94,940,475
Technology Hardware & Equipment 0.2%
^dAlcatel-Lucent USA Inc., senior note, 144A, 6.75%, 11/15/20	France	20,000,000			21,650,000
^d,iCommScope Holdings Co. Inc., senior note, 144A, PIK, 6.625%, 6/01/20	United States	1,800,000			1,851,840
					23,501,840
Telecommunication Services 3.5%
^jAT&T Inc., senior bond, 3.40%, 5/15/25	United States	18,700,000			18,565,416
CenturyLink Inc.,
senior bond, 6.75%, 12/01/23	United States	3,300,000			3,582,183
^dsenior bond, 144A, 5.625%, 4/01/25	United States	10,000,000			10,037,500
senior note, 6.00%, 4/01/17	United States	12,000,000			12,855,000
senior note, 6.45%, 6/15/21	United States	4,100,000			4,428,000
senior note, 5.80%, 3/15/22	United States	2,000,000			2,085,000
^dDigicel Group Ltd., senior note, 144A,
8.25%, 9/30/20	Bermuda	12,000,000			12,367,500
7.125%, 4/01/22	Bermuda	3,000,000			2,850,000

franklintempleton.com

Annual Report

| 27

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Corporate Bonds (continued)
Telecommunication Services (continued)
^dDigicel Ltd., senior note, 144A,
6.00%, 4/15/21	Bermuda	10,000,000		$	9,756,250
6.75%, 3/01/23	Bermuda	4,100,000			4,051,558
Frontier Communications Corp.,
senior bond, 7.625%, 4/15/24	United States	5,700,000			5,835,375
senior note, 8.50%, 4/15/20	United States	4,900,000			5,451,250
senior note, 8.75%, 4/15/22	United States	2,700,000			2,970,000
senior note, 7.125%, 1/15/23	United States	1,800,000			1,809,000
senior note, 7.875%, 1/15/27	United States	3,975,000			3,965,063
Intelsat Jackson Holdings SA,
senior bond, 6.625%, 12/15/22	Luxembourg	10,000,000			9,850,000
senior bond, 5.50%, 8/01/23	Luxembourg	3,000,000			2,848,125
senior note, 7.25%, 10/15/20	Luxembourg	15,000,000			15,504,375
senior note, 7.50%, 4/01/21	Luxembourg	9,000,000			9,382,500
^dMillicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21	Luxembourg	20,000,000			21,325,000
^dPlay Finance 1 SA, senior note, 144A, 6.50%, 8/01/19	Poland	3,900,000	EUR		4,638,555
^dPlay Finance 2 SA, senior secured note, 144A, 5.25%, 2/01/19	Poland	6,700,000	EUR		7,806,040
Sprint Communications Inc., senior note,
8.375%, 8/15/17	United States	17,000,000			18,615,000
6.00%, 11/15/22	United States	10,000,000			9,437,500
^d144A, 9.00%, 11/15/18	United States	8,000,000			9,122,480
^d144A, 7.00%, 3/01/20	United States	5,000,000			5,543,750
Sprint Corp., senior bond,
7.875%, 9/15/23	United States	4,700,000			4,729,375
7.125%, 6/15/24	United States	2,700,000			2,625,750
T-Mobile USA Inc.,
senior bond, 6.50%, 1/15/24	United States	3,500,000			3,661,875
senior bond, 6.375%, 3/01/25	United States	14,700,000			15,133,503
senior note, 6.542%, 4/28/20	United States	5,000,000			5,293,500
senior note, 6.633%, 4/28/21	United States	3,500,000			3,705,625
senior note, 6.125%, 1/15/22	United States	2,000,000			2,070,000
senior note, 6.731%, 4/28/22	United States	3,500,000			3,701,250
Verizon Communications Inc., senior note, 5.15%, 9/15/23	United States	22,000,000			24,882,242
^dWind Acquisition Finance SA, senior secured note, 144A,
4.00%, 7/15/20	Italy	14,400,000	EUR		16,420,079
7.00%, 4/23/21	Italy	17,300,000	EUR		20,791,037
					317,696,656
Transportation 0.7%
^dFlorida East Coast Holdings Corp.,
secured note, first lien, 144A, 6.75%, 5/01/19	United States	7,600,000			7,581,000
senior note, 144A, 9.75%, 5/01/20	United States	4,000,000			3,870,000
Hertz Corp., senior note,
6.75%, 4/15/19	United States	11,900,000			12,343,751
5.875%, 10/15/20	United States	1,800,000			1,840,500
6.25%, 10/15/22	United States	12,000,000			12,480,000
^dStena AB, senior bond, 144A, 7.00%, 2/01/24	Sweden	7,500,000			7,237,500
^dStena International SA, secured bond, 144A, 5.75%, 3/01/24	Sweden	15,000,000			14,439,225
					59,791,976

28 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
Corporate Bonds (continued)
Utilities 1.3%
Calpine Corp.,
senior bond, 5.75%, 1/15/25	United States	9,000,000	$	9,079,200
senior note, 5.375%, 1/15/23	United States	10,000,000		10,137,500
^dsenior secured bond, first lien, 144A, 7.875%, 1/15/23	United States	4,256,000		4,702,880
^dsenior secured bond, first lien, 144A, 5.875%, 1/15/24	United States	4,700,000		5,052,500
^dsenior secured note, first lien, 144A, 6.00%, 1/15/22	United States	1,300,000		1,391,000
^dDynegy Inc., senior bond, 144A, 7.625%, 11/01/24	United States	12,600,000		13,608,000
^d,eEDF SA,
junior sub. bond, 144A, 5.625% to 1/22/24, FRN thereafter, Perpetual	France	5,000,000		5,319,725
sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual	France	25,000,000		26,216,250
^dInterGen NV, secured bond, 144A, 7.00%, 6/30/23	Netherlands	25,000,000		24,187,500
^d,fTexas Competitive Electric Holdings Co. LLC/Texas Competitive Electric
Holdings Finance Inc., senior secured note, first lien, 144A, 11.50%,
10/01/20	United States	30,000,000		19,875,000
				119,569,555
Total Corporate Bonds (Cost $3,448,561,618)				3,427,981,048
^g,kSenior Floating Rate Interests 18.8%
Automobiles & Components 0.8%
Crowne Group LLC, Term Loan, 6.00%, 9/30/20	United States	16,425,361		16,404,829
FRAM Group Holdings Inc. (Autoparts Holdings),
Second Lien Term Loan, 10.50%, 1/29/18	United States	12,648,801		12,142,849
Term Loan, 7.00%, 7/29/17	United States	31,670,880		31,502,644
Henniges Automotive Holdings Inc., Term Loans, 5.50%, 6/12/21	United States	9,371,060		9,424,006
UCI International Inc., Term Loan, 5.50%, 7/26/17	United States	5,782,576		5,698,249
				75,172,577
Capital Goods 1.0%
Alfred Fueling Systems Inc. (Wayne Fueling),
First Lien Initial Term Loan, 4.75%, 6/20/21	United States	5,024,881		5,062,567
Second Lien Initial Term Loan, 8.50%, 6/20/22	United States	10,800,297		10,692,294
Allison Transmission Inc., Term B-3 Loans, 3.50%, 8/23/19	United States	4,725,632		4,761,811
Doncasters U.S. Finance LLC,
Second Lien Term Loan, 9.50%, 10/09/20	United States	1,202,597		1,204,100
Term B Loans, 4.50%, 4/09/20	United States	2,839,629		2,847,912
^lErickson Inc., Purchase Price Notes, 6.00%, 11/02/20	United States	1,133,618		992,074
^jOnsite Rental Group Operations Pty. Ltd., Term B Loan, 5.50%, 7/30/21	United States	24,316,824		24,043,260
Sensus USA Inc.,
First Lien Term Loan, 4.50%, 5/09/17	United States	13,352,300		13,343,954
Second Lien Term Loan, 8.50%, 5/09/18	United States	18,297,904		18,160,670
Signode Industrial Group U.S. Inc., Initial Term B Loan, 3.75%, 5/01/21	United States	4,689,971		4,700,965
TransDigm Inc.,
Tranche C Term Loan, 3.75%, 2/28/20	United States	3,137,426		3,148,975
Tranche D Term Loan, 3.75%, 6/04/21	United States	2,718,434		2,728,416
WireCo Worldgroup Inc., Term Loan, 6.00%, 2/15/17	United States	432,479		433,560
				92,120,558
Commercial & Professional Services 0.6%
AlixPartners LLP, Second Lien 2013 Recapitalization Term Loan, 9.00%,
7/10/21	United States	25,353,489		25,646,651
Interactive Data Corp., Term Loan, 4.75%, 5/02/21	United States	24,450,983		24,645,833
				50,292,484

franklintempleton.com Annual Report | 29

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
^g,kSenior Floating Rate Interests (continued)
Consumer Services 2.9%
24 Hour Fitness Worldwide Inc., Term Loan, 4.75%, 5/30/21	United States	13,678,943	$	13,687,493
Boyd Gaming Corp., Term A Loan, 3.146%, 8/14/18	United States	576,415		576,235
Caesars Entertainment Resort Properties LLC, Term B Loans, 7.00%,
10/11/20	United States	57,102,823		54,757,553
Cannery Casino Resorts LLC,
Second Lien Term Loan, 10.00%, 10/02/19	United States	9,663,335		8,397,438
Term Loan, 6.00%, 10/02/18	United States	30,164,461		30,126,756
^jFitness International LLC, Term B Loan, 5.50%, 7/01/20	United States	37,075,085		35,283,135
^jROC Finance LLC, Funded Term B Loans, 5.00%, 6/20/19	United States	22,753,062		22,639,297
^jSeaworld Parks and Entertainment Inc., Term B-2 Loan, 3.00%, 5/14/20	United States	16,773,392		16,481,954
TGI Friday’s Inc., First Lien Initial Term Loan, 5.25%, 7/15/20	United States	4,678,962		4,708,205
Town Sports International LLC, Initial Term Loan, 4.50%, 11/15/20	United States	12,606,066		10,856,974
Travelport Finance Luxembourg S.A.R.L., Initial Term Loan, 5.75%,
9/02/21	Luxembourg	31,609,028		31,976,989
^b,iTurtle Bay Holdings LLC, Term Loan B, PIK, 3.00%, 6/30/16	United States	26,682,675		26,015,608
				255,507,637
Diversified Financials 0.4%
Guggenheim Partners Investment Management Holdings LLC, Initial Term
Loan, 4.25%, 7/22/20	United States	8,468,825		8,527,048
Trans Union LLC, 2014 Replacement Term Loan, 4.00%, 4/09/21	United States	31,306,761		31,482,862
				40,009,910
Energy 2.0%
Bowie Resource Holdings LLC,
^jFirst Lien Initial Term Loan, 6.75%, 8/16/20	United States	21,181,993		20,599,488
Second Lien Initial Term Loan, 11.75%, 2/16/21	United States	7,582,077		7,392,525
Citgo Petroleum Corp., Term B Loan, 4.50%, 7/29/21	United States	2,084,605		2,094,378
^jDrillships Ocean Ventures Inc. and Drillships Vent, Term Loan, 5.50%,
7/25/21	Marshall Islands	14,386,354		12,540,110
Fieldwood Energy LLC,
^jLoans, 3.875%, 9/25/18	United States	27,636,861		27,015,032
Second Lien Loans, 8.375%, 9/30/20	United States	4,524,000		3,540,030
Foresight Energy LLC, Term Loans, 5.50%, 8/23/20	United States	10,860,000		10,764,975
McJunkin Red Man Corp., 2013 Term Loan, 5.00%, 11/11/19	United States	6,317,150		6,248,059
OSG Bulk Ships Inc., Initial Term Loan, 5.25%, 8/05/19	United States	11,869,566		11,928,914
OSG International Inc., Initial Term Loan, (OIN), 5.75%, 8/05/19	United States	20,941,937		21,125,179
^jPeabody Energy Corp., Term Loan, 4.25%, 9/24/20	United States	16,287,746		14,740,410
UTEX Industries Inc., First Lien Initial Term Loan, 5.00%, 5/22/21	United States	38,515,439		36,637,811
Westmoreland Coal Co., Term Loan, 7.50%, 12/16/20	United States	6,408,696		6,344,609
				180,971,520
Food, Beverage & Tobacco 0.2%
AdvancePierre Foods Inc., Second Lien Term Loan, 9.50%, 10/10/17	United States	14,572,878		14,663,958
^jCSM Bakery Supplies LLC (U.S. Acquisition), Second Lien Term Loan,
8.75%, 7/03/21	United States	2,161,805		2,032,097
				16,696,055
Health Care Equipment & Services 1.2%
Carestream Health Inc., Second Lien Loan, 9.50%, 12/07/19	United States	15,136,000		15,192,760
Connolly LLC,
Initial Term Loan, 5.00%, 5/14/21	United States	16,286,441		16,428,947
Second Lien Initial Term Loan, 8.00%, 5/14/22	United States	2,349,446		2,349,446

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STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
^g,kSenior Floating Rate Interests (continued)
Health Care Equipment & Services (continued)
Dialysis Newco Inc., Second Lien Term Loan B, 7.75%, 10/22/21	United States	2,417,433	$	2,429,521
^jKinetic Concepts Inc., Dollar Term E-1 Loan, 4.50%, 5/04/18	United States	10,294,284		10,380,066
Millennium Health LLC, Tranche B Term Loan, 5.25%, 4/16/21	United States	22,847,073		18,905,953
Surgery Centers Holdings Inc., Second Lien Term Loan, 8.50%, 11/03/21	United States	3,838,600		3,829,003
Truven Health Analytics Inc., New Tranche B Term Loan, 4.50%, 6/06/19	United States	21,787,828		21,869,271
U.S. Renal Care Inc., Tranche B-2 Term Loan, 4.25%, 7/03/19	United States	16,726,874		16,841,872
				108,226,839
Household & Personal Products 0.9%
FGI Operating Co. LLC (Freedom Group), Term B Loans, 5.50%, 4/19/19	United States	45,577,269		44,741,701
Revlon Consumer Products Corp., Replacement Term Loan, 3.25%, 11/19/17	United States	4,687,202		4,695,990
Sun Products Corp., Tranche B Term Loan, 5.50%, 3/23/20	United States	35,931,445		34,718,759
				84,156,450
Materials 2.6%
Appvion Inc., Term Loan, 5.75%, 6/28/19	United States	19,475,670		18,112,373
Atkore International Inc., Second Lien Initial Term Loan, 7.75%, 10/09/21	United States	1,941,300		1,839,382
Caraustar Industries Inc.,
Term Loan B, 8.00%, 5/01/19	United States	21,142,590		21,261,517
Term Loan C, 8.00%, 5/01/19	United States	27,341,475		27,495,271
CD&R Millennium U.S. Acquico LLC, Second Lien Initial Term Loan, 8.25%,
7/31/22	United States	5,569,613		5,527,841
Cyanco Intermediate Corp., Initial Term Loan, 5.50%, 5/01/20	United States	34,550,986		34,550,986
Exopack Holdings SA, USD Term Loan, 5.25%, 5/08/19	Luxembourg	37,397,931		37,694,011
^jFMG America Finance Inc. (Fortescue Metals Group), Loans, 3.75%,
6/30/19	Australia	20,078,726		18,186,587
HII Holding Corp. (Houghton International), Second Lien Term Loan, 9.50%,
12/20/20	United States	4,981,150		4,999,829
^jIneos U.S. Finance LLC, Dollar Term Loan, 3.75%, 3/31/22	United States	4,088,017		4,117,218
^jNexeo Solutions LLC,
Term B-1 Loan, 6.00%, 9/09/17	United States	1,127,852		1,115,163
Term B-3 Loan, 5.75%, 9/09/17	United States	17,820		17,620
OCI Beaumont LLC, Term B-3 Loan, 5.50%, 8/20/19	United States	9,055,322		9,168,513
Oxbow Carbon LLC,
First Lien Tranche B Term Loan, 4.25%, 7/19/19	United States	1,786,067		1,771,183
Second Lien Initial Term Loan, 8.00%, 1/19/20	United States	2,892,308		2,617,538
OXEA GmbH, Second Lien Term Loan, 8.25%, 7/15/20	Luxembourg	11,139,546		10,415,476
Solenis International LP and Solenis Holdings, Second Lien Term Loan,
7.75%, 7/31/22	United States	1,665,600		1,623,960
Tronox Pigments (Netherlands) BV, Term Loan, 4.25%, 3/19/20	Netherlands	4,857,442		4,879,300
Univar Inc., Term B Loan, 5.00%, 6/30/17	United States	2,153,781		2,165,224
^jWalter Energy Inc., B Term Loan, 7.25%, 4/01/18	United States	31,225,502		19,916,031
				227,475,023
Media 2.0%
Cengage Learning Acquisitions Inc., Original Term Loans, 7.00%, 3/31/20	United States	28,014,095		28,238,796
^jCharter Communications Operating LLC, Term Loan E, (CCO Safari),
4.50%, 7/01/20	United States	1,370,000		1,363,753
Cumulus Media Holdings Inc., Term Loans, 4.25%, 12/23/20	United States	14,525,506		14,347,568
MediArena Acquisition BV, Second Lien Dollar Term B Loan, 10.00%,
8/13/22	Netherlands	6,165,000		6,157,294
Radio One Inc., Term Loan B, 4.78%, 12/31/18	United States	69,578,879		69,709,339
^jRegal Cinemas Corp., Term Loan, 3.75%, 3/17/22	United States	4,825,024		4,855,759

franklintempleton.com Annual Report | 31

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
^g,kSenior Floating Rate Interests (continued)
Media (continued)
^jSinclair Television Group Inc., Incremental Term Loan B-1, 5.00%, 7/30/21	United States	1,690,357	$	1,694,582
UPC Financing Partnership (UPC Broadband Holdings BV), Term Loan AH,
3.25%, 6/30/21	Netherlands	12,556,661		12,570,109
William Morris Endeavor Entertainment LLC, Term Loans Second Lien,
8.25%, 5/06/22	United States	40,714,190		40,205,263
Zuffa LLC, Initial Term Loan, 3.75%, 2/25/20	United States	3,421,983		3,388,297
				182,530,760
Pharmaceuticals, Biotechnology & Life Sciences 0.5%
Grifols Worldwide Operations USA Inc., US Tranche B Term Loan, 3.184%,
2/27/21	United States	11,166,790		11,216,281
^jHorizon Pharma Inc., Term Loan B, 5.75%, 5/07/21	United States	547,133		551,749
Valeant Pharmaceuticals International Inc., Series F-1 New Term Loan,
4.00%, 4/01/22	Canada	34,814,289		35,099,349
				46,867,379
Real Estate 0.1%
Capital Automotive LP, Second Lien Term Loan, 6.00%, 4/30/20	United States	4,432,500		4,532,231
Retailing 1.4%
BJ’s Wholesale Club Inc.,
2013 (Nov)Replacement Loans, 4.50%, 9/26/19	United States	29,877,509		30,080,587
Second Lien 2013 (Nov) Replacement Loans, 8.50%, 3/26/20	United States	27,346,351		27,688,181
Dollar Tree Inc., Initial Term B Loans, 4.25%, 3/09/22	United States	10,236,748		10,383,072
Evergreen AcqCo. 1 LP (Savers), Term Loan, 5.00%, 7/09/19	United States	35,868,340		35,358,328
The Men’s Wearhouse Inc., Tranche B Term Loan, 4.50%, 6/18/21	United States	6,815,246		6,898,311
Party City Holdings Inc., 2014 Replacement Term Loan, 4.00%, 7/27/19	United States	10,601,255		10,643,851
				121,052,330
Semiconductors & Semiconductor Equipment 0.1%
M/A-COM Technology Solutions Holdings Inc., Initial Term Loan, 4.50%,
5/07/21	United States	4,743,356		4,790,790
Software & Services 1.7%
BMC Software Finance Inc., Initial U.S. Term Loans, 5.00%, 9/10/20	United States	57,923,492		57,018,438
MoneyGram International Inc., Term Loan, 4.25%, 3/28/20	United States	50,974,686		48,096,757
Sungard Availability Services Capital Inc., Tranche B Term Loan, 6.00%,
3/31/19	United States	29,987,398		27,938,269
Vertafore Inc., Second Lien Term Loan, 9.75%, 10/27/17	United States	15,025,339		15,169,326
				148,222,790
Technology Hardware & Equipment 0.0%^†
CIENA Corp., Term Loan, 3.75%, 7/15/19	United States	2,332,525		2,344,188
Telecommunication Services 0.2%
Intelsat Jackson Holdings SA, Tranche B-2 Term Loan, 3.75%, 6/30/19	Luxembourg	13,643,323		13,656,967
Utilities 0.2%
Calpine Construction Finance Co. LP,
^jTerm B-1 Loan, 3.00%, 5/03/20	United States	13,616,401		13,567,042
Term B-2 Loan, 3.25%, 1/31/22	United States	5,004,450		4,995,847
				18,562,889
Total Senior Floating Rate Interests
(Cost $1,692,612,313)				1,673,189,377

32 | Annual Report franklintempleton.com


		FRANKLIN STRATEGIC SERIES
		STATEMENT OF INVESTMENTS




Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Foreign Government and Agency Securities 17.3%
Government of Hungary,
7.75%, 8/24/15	Hungary	57,900,000	HUF	$	217,755
5.50%, 2/12/16	Hungary	7,719,020,000	HUF		29,373,737
5.50%, 12/22/16	Hungary	584,040,000	HUF		2,292,532
4.125%, 2/19/18	Hungary	4,390,000			4,591,479
6.50%, 6/24/19	Hungary	721,600,000	HUF		3,049,192
7.50%, 11/12/20	Hungary	8,507,000,000	HUF		38,469,616
5.375%, 2/21/23	Hungary	16,250,000			18,154,094
A, 6.75%, 11/24/17	Hungary	3,905,920,000	HUF		16,196,391
A, 5.50%, 12/20/18	Hungary	426,500,000	HUF		1,742,722
A, 7.00%, 6/24/22	Hungary	11,570,000	HUF		52,449
A, 6.00%, 11/24/23	Hungary	2,015,870,000	HUF		8,864,721
senior note, 6.25%, 1/29/20	Hungary	21,690,000			24,834,182
senior note, 6.375%, 3/29/21	Hungary	10,320,000			12,018,466
senior note, 5.75%, 11/22/23	Hungary	5,000,000			5,761,825
Government of Indonesia,
FR28, 10.00%, 7/15/17	Indonesia	10,200,000,000	IDR		827,567
FR34, 12.80%, 6/15/21	Indonesia	169,210,000,000	IDR		16,294,872
FR36, 11.50%, 9/15/19	Indonesia	35,400,000,000	IDR		3,120,620
FR39, 11.75%, 8/15/23	Indonesia	29,150,000,000	IDR		2,796,940
FR44, 10.00%, 9/15/24	Indonesia	8,340,000,000	IDR		739,904
Government of Malaysia,
3.835%, 8/12/15	Malaysia	52,480,000	MYR		14,760,396
4.72%, 9/30/15	Malaysia	106,594,000	MYR		30,112,618
3.197%, 10/15/15	Malaysia	126,590,000	MYR		35,548,604
senior bond, 4.24%, 2/07/18	Malaysia	64,800,000	MYR		18,634,024
senior note, 3.172%, 7/15/16	Malaysia	338,100,000	MYR		94,862,556
Government of Mexico,
6.00%, 6/18/15	Mexico	94,510^mMXN			618,334
8.00%, 12/17/15	Mexico	9,037,850^mMXN			60,677,215
^j6.25%, 6/16/16	Mexico	12,628,270^mMXN			84,766,087
7.25%, 12/15/16	Mexico	11,765,870^mMXN			80,910,514
Government of Poland,
6.25%, 10/24/15	Poland	70,991,000	PLN		20,144,135
5.00%, 4/25/16	Poland	11,250,000	PLN		3,224,140
4.75%, 10/25/16	Poland	265,000,000	PLN		76,869,934
^gFRN, 2.01%, 1/25/17	Poland	7,098,000	PLN		1,971,751
^gFRN, 2.01%, 1/25/21	Poland	7,201,000	PLN		1,983,573
Strip, 7/25/15	Poland	38,982,000	PLN		10,786,380
Strip, 1/25/16	Poland	67,525,000	PLN		18,536,012
^dGovernment of Portugal, 144A, 5.125%, 10/15/24	Portugal	50,000,000			54,277,000
^dGovernment of Serbia, senior note, 144A,
4.875%, 2/25/20	Serbia	29,400,000			30,267,741
7.25%, 9/28/21	Serbia	21,490,000			24,797,741
Government of Singapore, senior note, 1.125%, 4/01/16	Singapore	135,000,000	SGD		102,081,601
Government of Sri Lanka,
A, 6.50%, 7/15/15	Sri Lanka	86,940,000	LKR		652,370
A, 11.00%, 8/01/15	Sri Lanka	601,300,000	LKR		4,557,926
A, 6.40%, 8/01/16	Sri Lanka	48,100,000	LKR		359,648
A, 8.00%, 11/15/18	Sri Lanka	198,900,000	LKR		1,491,705
A, 9.00%, 5/01/21	Sri Lanka	220,720,000	LKR		1,706,945

franklintempleton.com Annual Report | 33


FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS




Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value
Foreign Government and Agency Securities (continued)
Government of Sri Lanka, (continued)
B, 6.40%, 10/01/16	Sri Lanka	45,400,000	LKR	$	338,279
B, 8.50%, 7/15/18	Sri Lanka	54,290,000	LKR		415,426
C, 8.50%, 4/01/18	Sri Lanka	24,240,000	LKR		185,030
D, 8.50%, 6/01/18	Sri Lanka	162,140,000	LKR		1,236,065
Government of the Philippines,
senior bond, 7.00%, 1/27/16	Philippines	1,154,290,000	PHP		26,572,579
senior bond, 9.125%, 9/04/16	Philippines	41,860,000	PHP		1,000,282
senior note, 1.625%, 4/25/16	Philippines	1,442,450,000	PHP		32,030,263
^dGovernment of Ukraine,
144A, 9.25%, 7/24/17	Ukraine	23,720,000			10,940,850
144A, 7.75%, 9/23/20	Ukraine	25,000,000			11,493,875
senior bond, 144A, 7.80%, 11/28/22	Ukraine	26,860,000			12,338,812
senior note, 144A, 6.75%, 11/14/17	Ukraine	900,000			414,000
senior note, 144A, 7.95%, 2/23/21	Ukraine	13,970,000			6,452,394
senior note, 144A, 7.50%, 4/17/23	Ukraine	12,000,000			5,707,500
ⁿGovernment of Uruguay, senior bond, Index Linked,
5.00%, 9/14/18	Uruguay	145,319,909	UYU		5,638,261
4.375%, 12/15/28	Uruguay	1,806,583,717	UYU		67,589,167
Korea Monetary Stabilization Bond,
senior bond, 2.80%, 8/02/15	South Korea	29,565,730,000	KRW		27,515,755
senior bond, 2.81%, 10/02/15	South Korea	23,911,000,000	KRW		22,294,251
senior note, 2.76%, 6/02/15	South Korea	31,746,600,000	KRW		29,491,249
senior note, 2.07%, 12/02/16	South Korea	32,000,000,000	KRW		29,844,358
Korea Treasury Bond, senior note,
3.25%, 6/10/15	South Korea	7,137,850,000	KRW		6,635,452
2.75%, 12/10/15	South Korea	53,650,740,000	KRW		50,115,757
3.00%, 12/10/16	South Korea	65,000,000,000	KRW		61,504,170
Nota Do Tesouro Nacional,
10.00%, 1/01/17	Brazil	125,850^oBRL			39,784,062
10.00%, 1/01/23	Brazil	52,000^oBRL			15,098,314
^pIndex Linked, 6.00%, 5/15/15	Brazil	16,430^oBRL			14,322,336
^pIndex Linked, 6.00%, 8/15/16	Brazil	4,799^oBRL			4,116,851
^pIndex Linked, 6.00%, 8/15/18	Brazil	34,550^oBRL			29,469,601
^j,pIndex Linked, 6.00%, 5/15/23	Brazil	19,500^oBRL			16,775,529
senior note, 10.00%, 1/01/19	Brazil	25,000^oBRL			7,636,627
Uruguay Notas del Tesoro,
10.25%, 8/22/15	Uruguay	395,600,000	UYU		14,949,745
9.50%, 1/27/16	Uruguay	50,700,000	UYU		1,919,445
ⁿ18, Index Linked, 2.25%, 8/23/17	Uruguay	121,729,884	UYU		4,390,474
ⁿIndex Linked, 4.00%, 6/14/15	Uruguay	147,218,994	UYU		5,571,873
Uruguay Treasury Bill, Strip,
7/02/15	Uruguay	3,560,000	UYU		131,697
8/20/15	Uruguay	445,261,000	UYU		16,197,672
Total Foreign Government and Agency Securities
(Cost $1,742,272,739)					1,544,116,015
U.S. Government and Agency Securities 2.3%
U.S. Treasury Bond,
4.50%, 5/15/17	United States	8,000,000			8,631,248
7.125%, 2/15/23	United States	3,000,000			4,156,407
6.25%, 8/15/23	United States	4,000,000			5,342,188
6.875%, 8/15/25	United States	1,000,000			1,448,594

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		FRANKLIN STRATEGIC SERIES
		STATEMENT OF INVESTMENTS




Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value
U.S. Government and Agency Securities (continued)
U.S. Treasury Bond, (continued)
6.50%, 11/15/26	United States	34,000,000	$	49,135,304
5.25%, 2/15/29	United States	1,750,000		2,357,031
U.S. Treasury Note,
4.75%, 8/15/17	United States	7,000,000		7,645,862
3.875%, 5/15/18	United States	22,000,000		23,949,068
3.75%, 11/15/18	United States	39,000,000		42,610,542
2.75%, 2/15/24	United States	33,000,000		35,075,403
ⁿIndex Linked, 2.125%, 1/15/19	United States	8,744,797		9,644,558
ⁿIndex Linked, 0.625%, 7/15/21	United States	10,412,823		10,961,120
Total U.S. Government and Agency Securities
(Cost $196,333,628)				200,957,325
Asset-Backed Securities and Commercial
Mortgage-Backed Securities 5.6%
Banks 3.3%
Banc of America Commercial Mortgage Trust, 2006-4, AJ, 5.695%,
7/10/46	United States	25,977,000		26,751,244
^gBear Stearns Adjustable Rate Mortgage Trust, 2004-4, A6, FRN, 3.517%,
6/25/34	United States	19,795,312		20,108,276
Bear Stearns Commercial Mortgage Securities Inc.,
^g2006-PW11, AJ, FRN, 5.43%, 3/11/39	United States	19,604,000		20,069,301
^g2006-PW12, AJ, FRN, 5.74%, 9/11/38	United States	20,666,000		21,259,145
2006-PW13, AJ, 5.611%, 9/11/41	United States	30,225,000		31,102,613
Citigroup Commercial Mortgage Trust,
2006-C5, AJ, 5.482%, 10/15/49	United States	17,791,000		17,682,715
^g2007-C6, AM, FRN, 5.711%, 6/10/17	United States	25,650,000		27,383,222
^gCitigroup/Deutsche Bank Commercial Mortgage Trust, 2006-CD3, AJ, FRN,
5.688%, 10/15/48	United States	21,795,000		21,279,439
Countrywide Asset-Backed Certificates, 2005-11, AF4, 5.21%, 3/25/34	United States	2,800,000		2,738,254
Greenwich Capital Commercial Funding Corp.,
^g2006-GG7, AJ, FRN, 5.819%, 7/10/38	United States	27,020,000		27,636,218
2007-GG9, AM, 5.475%, 3/10/39	United States	6,165,000		6,486,255
JP Morgan Chase Commercial Mortgage Securities Trust,
2006-CB17, AM, 5.464%, 12/12/43	United States	17,740,000		18,323,291
^g2006-LDP7, AJ, FRN, 5.905%, 4/15/45	United States	15,080,000		15,228,840
^gMerrill Lynch Mortgage Investors Trust, 2005-A6, 2A3, FRN, 0.561%,
8/25/35	United States	4,758,000		4,298,444
^gMerrill Lynch Mortgage Trust, 2005-CKI1, AJ, FRN, 5.275%, 11/12/37	United States	2,875,000		2,916,271
^gMorgan Stanley Capital I Trust,
2006-HQ8, AJ, FRN, 5.498%, 3/12/44	United States	7,045,000		7,189,785
2007-IQ16, AM, FRN, 6.084%, 12/12/49	United States	3,102,000		3,428,920
2007-IQ16, AMA, FRN, 6.08%, 12/12/49	United States	12,415,000		13,476,036
Wells Fargo Mortgage Backed Securities Trust,
^g2004-W, A9, FRN, 2.616%, 11/25/34	United States	3,285,632		3,344,841
2007-3, 3A1, 5.50%, 4/25/37	United States	978,580		1,012,404
				291,715,514
Diversified Financials 2.3%
^d,gARES CLO XII Ltd., 2007-12A, B, 144A, FRN, 1.262%, 11/25/20	United States	3,840,000		3,816,115
^d,gAtrium CDO Corp., 10A, C, 144A, FRN, 2.876%, 7/16/25	United States	13,950,000		13,784,971
^d,gAtrium XI, 11A, C, 144A, FRN, 3.477%, 10/23/25	Cayman Islands	15,440,000		15,511,950
^d,gBCAP LLC Trust, 2009-RR1, 2A2, 144A, FRN, 2.615%, 5/26/35	United States	9,473,234		9,457,035

franklintempleton.com Annual Report | 35

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*			Value

Asset-Backed Securities and Commercial
Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^d,gCatamaran CLO Ltd., 2013-1A, C, 144A, FRN, 2.877%, 1/27/25	Cayman Islands	11,250,000		$	10,931,513
^d,gCent CDO Ltd., 2007-15A, A2B, 144A, FRN, 0.607%, 3/11/21	United States	3,881,000			3,687,105
^d,gCent CLO LP, 2013-17A, D, 144A, FRN, 3.278%, 1/30/25	Cayman Islands	7,450,980			7,449,862
^d,gCIFC Funding Ltd., 2007-3A, A1J, 144A, FRN, 0.677%, 7/26/21	United States	5,130,000			5,017,961
^d,gColumbusNova CLO Ltd., 2007-2A, A2, 144A, FRN, 1.275%, 10/15/21	United States	2,680,000			2,625,194
^d,gCT CDO IV Ltd., 2006-4A, A1, 144A, FRN, 0.491%, 10/20/43	United States	8,636,927			8,613,650
^d,gEaton Vance CDO Ltd., 2014-1A,
A, 144A, FRN, 1.725%, 7/15/26	Cayman Islands	17,000,000			16,963,620
B, 144A, FRN, 2.325%, 7/15/26	United States	4,320,500			4,305,292
C, 144A, FRN, 3.275%, 7/15/26	United States	1,420,629			1,418,029
^dG-Force LLC, 2005-RRA, C, 144A, 5.20%, 8/22/36	United States	11,144,000			10,855,482
^d,gGleneagles CLO Ltd., 2005-1A, A2, 144A, FRN, 0.655%, 11/01/17	United States	8,002,000			7,964,791
^gImpac Secured Assets Trust, 2007-2, FRN, 0.431%, 4/25/37	United States	4,317,362			3,999,884
^d,gING Investment Management CLO Ltd.,
2013-1A, B, 144A, FRN, 3.175%, 4/15/24	Cayman Islands	2,740,000			2,753,645
2013-1A, C, 144A, FRN, 3.775%, 4/15/24	Cayman Islands	4,440,000			4,346,938
2013-2A, B, 144A, FRN, 2.957%, 4/25/25	United States	10,770,000			10,691,918
^gMortgageIT Trust,
05-5, A1, FRN, 0.441%, 12/25/35	United States	4,127,196			3,792,291
2004-1, A2, FRN, 1.081%, 11/25/34	United States	5,293,379			5,086,373
^d,gNewcastle CDO Ltd., 2004-5A, 1, 144A, FRN, 0.607%, 12/24/39	United States	2,606,093			2,570,416
^gOpteum Mortgage Acceptance Corp. Trust, 2005-4, 1APT, FRN, 0.491%,
11/25/35	United States	7,865,195			7,435,669
Residential Asset Securities Corp., 2004-KS1, AI4, 4.213%, 4/25/32	United States	38,254			38,239
^gStructured Asset Mortgage Investments Trust, 2003-AR2, A1, FRN,
0.921%, 12/19/33	United States	6,733,373			6,509,599
^gStructured Asset Securities Corp., 2005-2XS, 2A2, FRN, 1.679%,
2/25/35	United States	4,867,318			4,709,349
^g,qTalisman 6 Finance, Reg S, FRN, 0.191%, 10/22/16	Germany	9,341,497	EUR		10,405,634
^gThornburg Mortgage Securities Trust,
2005-1, A3, FRN, 2.234%, 4/25/45	United States	7,334,082			7,388,222
2005-2, A1, FRN, 2.135%, 7/25/45	United States	3,941,013			3,841,362
^d,gWestchester CLO Ltd., 2007-1A, A1A, 144A, FRN, 0.48%, 8/01/22	United States	12,414,364			12,226,411
					208,198,520
Total Asset-Backed Securities and Commercial
Mortgage-Backed Securities (Cost $487,735,296)					499,914,034
Mortgage-Backed Securities 4.5%
^gFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%^†
FHLMC, 2.348%, 1/01/33	United States	109,408			114,437
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 0.5%
^jFHLMC 30 Year, 3.50%, 5/01/45	United States	31,991,000			33,469,964
FHLMC Gold 15 Year, 4.50%, 10/01/18 - 9/01/19	United States	635,266			666,246
FHLMC Gold 15 Year, 5.00%, 12/01/17 - 7/01/22	United States	819,371			868,720
FHLMC Gold 15 Year, 5.50%, 7/01/17 - 2/01/19	United States	78,882			82,887
FHLMC Gold 30 Year, 4.50%, 10/01/40	United States	389,958			425,311
FHLMC Gold 30 Year, 5.00%, 5/01/27 - 2/01/38	United States	2,973,250			3,310,006
FHLMC Gold 30 Year, 5.50%, 6/01/33 - 6/01/36	United States	1,886,970			2,139,714
FHLMC Gold 30 Year, 6.00%, 6/01/33 - 6/01/37	United States	747,564			852,000
FHLMC Gold 30 Year, 6.50%, 10/01/21 - 6/01/36	United States	412,152			474,612
FHLMC Gold 30 Year, 7.00%, 9/01/21 - 8/01/32	United States	53,554			59,144
FHLMC Gold 30 Year, 7.50%, 1/01/26 - 1/01/31	United States	10,983			12,959

36 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value

Mortgage-Backed Securities (continued)
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate (continued)
FHLMC Gold 30 Year, 8.00%, 11/01/25 - 1/01/26	United States	267	$	279
FHLMC Gold 30 Year, 9.00%, 12/01/24	United States	154		181

				42,362,023
^gFederal National Mortgage Association (FNMA) Adjustable Rate 0.0%^†
FNMA, 2.31%, 12/01/34	United States	299,328		320,084
FNMA, 2.42%, 4/01/20	United States	74,131		76,169

				396,253
Federal National Mortgage Association (FNMA) Fixed Rate 3.2%
^jFNMA 15 Year, 2.50%, 7/01/27 - 5/01/30	United States	70,608,659		72,393,487
FNMA 15 Year, 4.50%, 3/01/20	United States	122,416		128,495
FNMA 15 Year, 5.00%, 1/01/18 - 6/01/18	United States	146,723		154,152
FNMA 15 Year, 5.50%, 6/01/15 - 4/01/22	United States	961,296		1,014,686
FNMA 15 Year, 6.00%, 7/01/16 - 10/01/16	United States	5,422		5,513
^jFNMA 30 Year, 3.00%, 5/01/45	United States	74,933,000		76,251,778
^jFNMA 30 Year, 3.50%, 5/01/45	United States	107,315,000		112,437,610
^jFNMA 30 Year, 4.00%, 5/01/45	United States	9,900,000		10,579,659
FNMA 30 Year, 4.50%, 3/01/28 - 2/01/41	United States	1,035,843		1,131,504
FNMA 30 Year, 5.00%, 9/01/23 - 10/01/35	United States	3,233,176		3,605,083
FNMA 30 Year, 5.50%, 9/01/33 - 12/01/35	United States	2,790,910		3,179,111
FNMA 30 Year, 6.00%, 6/01/34 - 5/01/38	United States	5,083,211		5,830,425
FNMA 30 Year, 6.50%, 3/01/28 - 10/01/37	United States	909,532		1,052,400
FNMA 30 Year, 7.50%, 10/01/29	United States	11,449		14,236
FNMA 30 Year, 8.00%, 1/01/25 - 5/01/26	United States	5,706		6,958
FNMA 30 Year, 8.50%, 7/01/25	United States	558		580

				287,785,677
Government National Mortgage Association (GNMA) Fixed Rate 0.8%
GNMA I SF 30 Year, 5.00%, 6/15/34 - 7/15/34	United States	304,608		344,022
GNMA I SF 30 Year, 5.50%, 2/15/33 - 6/15/36	United States	873,630		994,765
GNMA I SF 30 Year, 6.00%, 8/15/36	United States	84,506		98,252
GNMA I SF 30 Year, 6.50%, 12/15/28 - 3/15/32	United States	62,957		72,674
GNMA I SF 30 Year, 7.00%, 11/15/27 - 5/15/28	United States	28,563		31,678
GNMA I SF 30 Year, 7.50%, 9/15/23 - 5/15/27	United States	3,733		4,230
GNMA I SF 30 Year, 8.00%, 2/15/25 - 9/15/27	United States	6,462		7,370
GNMA I SF 30 Year, 8.50%, 8/15/24	United States	87		100
GNMA I SF 30 Year, 9.00%, 1/15/25	United States	335		337
GNMA I SF 30 Year, 9.50%, 6/15/25	United States	563		566
^jGNMA II SF 30 Year, 3.00%, 5/01/45	United States	8,000,000		8,226,093
^jGNMA II SF 30 Year, 3.50%, 5/01/45	United States	52,575,000		55,466,627
GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33	United States	468,469		526,792
GNMA II SF 30 Year, 5.50%, 6/20/34	United States	230,349		262,559
GNMA II SF 30 Year, 6.00%, 11/20/34	United States	199,867		232,424
GNMA II SF 30 Year, 6.50%, 7/20/28 - 12/20/31	United States	111,152		131,610
GNMA II SF 30 Year, 7.50%, 4/20/32	United States	27,264		31,728

				66,431,827
Total Mortgage-Backed Securities
(Cost $395,035,127)				397,090,217

Municipal Bonds 4.0%
Arkansas State GO, Four-Lane Highway Construction and
Improvement Bonds, 3.25%, 6/15/22	United States	7,300,000		7,914,295

franklintempleton.com Annual Report | 37

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)
		Principal
	Country	Amount*		Value

Municipal Bonds (continued)
California State GO,
Build America Bonds, Various Purpose, 7.625%, 3/01/40	United States	6,200,000	$	9,529,524
Various Purpose, 5.25%, 11/01/40	United States	3,375,000		3,925,328
Various Purpose, 7.60%, 11/01/40	United States	15,000,000		23,347,800
Various Purpose, Refunding, 5.25%, 3/01/38	United States	7,220,000		7,988,569
Various Purpose, Refunding, 5.00%, 4/01/38	United States	20,000,000		21,815,400
Various Purpose, Refunding, NATL Insured, 4.50%, 12/01/32	United States	1,815,000		1,907,710
Various Purpose, Series 1, AGMC Insured, Pre-Refunded, 4.75%,
9/01/31	United States	1,755,000		1,820,269
Chicago GO,
Build America Bonds, Direct Payment, Taxable Project, Series B,
7.517%, 1/01/40	United States	3,520,000		3,777,066
Taxable Project, Series B, 6.034%, 1/01/42	United States	4,975,000		4,502,972
Colorado State ISD, GO, Mitchell and Scurry Counties, School Building,
PSF Guarantee, 5.00%, 8/15/43	United States	3,105,000		3,491,666
Evansville Local Public Improvement Bond Bank Revenue, Sewage
Works Project, Series A, 5.00%, 7/01/36	United States	6,320,000		7,007,426
Florida Hurricane Catastrophe Fund Finance Corp. Revenue, Series A,
2.995%, 7/01/20	United States	30,000,000		30,792,600
Illinois State GO,
5.877%, 3/01/19	United States	20,000,000		22,344,400
Build America Bonds, 7.35%, 7/01/35	United States	8,000,000		9,440,720
Massachusetts State GO, Consolidated Loan of 2014, Series A, 4.50%,
12/01/43	United States	18,300,000		19,487,304
Minnesota State GO, Various Purpose, Refunding, Series F, 4.00%,
10/01/24	United States	21,400,000		24,429,170
Nassau County GO, General Improvement Bonds, Series B, 5.00%,
4/01/39	United States	12,500,000		13,703,375
4/01/43	United States	13,000,000		14,120,990
New Jersey EDA Revenue, School Facilities Construction, Refunding,
Series NN, 5.00%, 3/01/30	United States	5,200,000		5,495,932
New York City HDC Revenue, Series B1, 5.00%, 7/01/33	United States	3,500,000		3,948,945
New York City Municipal Water Finance Authority Water and
Sewer System Revenue, Second General Resolution, Fiscal 2014,
Refunding, Series BB, 5.00%, 6/15/46	United States	22,685,000		25,272,451
New York State Urban Development Corp. Revenue, State Personal
Income Tax, General Purpose, Series C, 5.00%, 3/15/29	United States	19,500,000		22,552,335
Puerto Rico Electric Power Authority Power Revenue,
Series A, 6.75%, 7/01/36	United States	30,900,000		18,619,722
Series XX, 5.25%, 7/01/40	United States	15,000,000		9,038,550
Puerto Rico Sales Tax FICO Revenue, Capital Appreciation, Refunding,
Series A, zero cpn., 8/01/26	United States	5,565,000		1,731,939
Puerto Rico Sales Tax FICO Sales Tax Revenue,
Capital Appreciation, Refunding, Series A, NATL Insured, zero cpn.,
8/01/46	United States	6,000,000		768,600
Capital Appreciation, Series A, zero cpn., 8/01/25	United States	6,480,000		2,237,479
first subordinate, Series A, 5.75%, 8/01/37	United States	5,000,000		2,867,200
first subordinate, Series A, 6.50%, 8/01/44	United States	18,300,000		11,145,615
Refunding, Series A, NATL Insured, zero cpn., 8/01/45	United States	25,700,000		3,514,475
Refunding, Series B, 6.05%, 8/01/37	United States	9,150,000		6,108,723
Refunding, Series B, 6.05%, 8/01/38	United States	11,230,000		7,497,260
South Carolina State Public Service Authority Revenue, Refunding,
Series B, 5.00%, 12/01/38	United States	7,200,000		7,954,416

Total Municipal Bonds (Cost $347,226,454)				360,100,226

38 | Annual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)

	Country	Shares		Value
Escrows and Litigation Trusts 0.0%
^a,lComfort Co. Inc., Escrow Account	United States	63,156	$	—
^a,lNewPage Corp., Litigation Trust	United States	14,000,000		—
Total Escrows and Litigation Trusts (Cost $—)				—
Total Investments before Short Term Investments
(Cost $8,323,803,663)				8,118,289,862
Short Term Investments (Cost $1,030,461,214) 11.5%
Money Market Funds 11.5%
^a,rInstitutional Fiduciary Trust Money Market Portfolio	United States	1,030,461,214		1,030,461,214
Total Investments (Cost $9,354,264,877) 102.5%				9,148,751,076
Other Assets, less Liabilities (2.5)%				(226,685,150	)
Net Assets 100.0%			$	8,922,065,926

^†Rounds to less than 0.1% of net assets.
^*The principal amount is stated in U.S. dollars unless otherwise indicated.
^aNon-income producing.
^bAt April 30, 2015, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund may be restricted from trading these securities for a limited
or extended period of time.
^cThe security is owned by FT Holdings Corporation II, a wholly-owned subsidiary of the Fund. See Note 1(g).
^dSecurity 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 April 30, 2015, the aggregate value of these securities was $1,761,447,141, representing 19.74% of net assets.
^ePerpetual security with no stated maturity date.
^fSee Note 7 regarding defaulted securities.
^gThe coupon rate shown represents the rate at period end.
^hSee Note 1(f) regarding loan participation notes.
ⁱIncome may be received in additional securities and/or cash.
^jA portion or all of the security purchased on a when-issued, delayed delivery, or to-be-announced (TBA) basis. See Note 1(c).
^kSee Note 1(i) regarding senior floating rate interests.
^lSecurity has been deemed illiquid because it may not be able to be sold within seven days. At April 30, 2015, the aggregate value of these securities was $992,074,
representing 0.01% of net assets.
^mPrincipal amount is stated in 100 Mexican Peso Units.
ⁿPrincipal amount of security is adjusted for inflation. See Note 1(k).
^oPrincipal amount is stated in 1,000 Brazilian Real Units.
^pRedemption price at maturity is adjusted for inflation. See Note 1(k).
^qSecurity 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 April 30, 2015, the value of this security
was $10,405,634, representing 0.12% of net assets.
^rSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.

franklintempleton.com Annual Report | 39

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Strategic Income Fund (continued)


At April 30, 2015, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts
					Contract Settlement			Unrealized		Unrealized
Currency	Counterparty^aType		Quantity		Amount	Date		Appreciation		Depreciation
British Pound	DBAB	Sell	10,446,924	$	17,002,833	5/07/15	$	958,215	$	—
Chilean Peso	CITI	Buy	1,510,671,000		2,536,811	5/07/15		—		(69,177	)
Chilean Peso	DBAB	Buy	3,025,000,000		4,991,749	5/07/15		—		(50,505	)
Chilean Peso	JPHQ	Buy	9,080,770,800		15,482,007	5/07/15		—		(648,848	)
Euro	BZWS	Sell	14,703,865		18,864,779	5/07/15		2,364,782		—
Euro	CITI	Sell	4,494,237		6,061,455	5/07/15		1,018,230		—
Euro	DBAB	Buy	39,555,581		43,271,542	5/07/15		1,318,447		(202,544	)
Euro	DBAB	Sell	102,293,614		135,321,123	5/07/15		20,531,958		—
Euro	GSCO	Sell	9,398,000		11,929,539	5/07/15		1,383,538		—
Euro	JPHQ	Sell	19,141,245		25,020,120	5/07/15		3,540,700		—
Japanese Yen	BZWS	Sell	190,148,000		1,861,139	5/07/15		268,372		—
Japanese Yen	CITI	Sell	100,563,000		983,809	5/07/15		141,447		—
Japanese Yen	DBAB	Sell	5,554,349,000		53,150,895	5/07/15		6,625,112		—
Japanese Yen	HSBC	Sell	467,487,000		4,574,595	5/07/15		658,709		—
Japanese Yen	JPHQ	Sell	1,733,630,500		16,373,758	5/07/15		1,852,071		—
Malaysian Ringgit	DBAB	Buy	30,637,000		9,281,127	5/07/15		—		(685,602	)
Malaysian Ringgit	DBAB	Sell	30,637,000		8,329,799	5/07/15		—		(265,726	)
Malaysian Ringgit	HSBC	Buy	20,429,388		6,186,974	5/07/15		—		(455,300	)
Malaysian Ringgit	HSBC	Sell	20,429,388		5,574,185	5/07/15		—		(157,489	)
Malaysian Ringgit	JPHQ	Buy	2,290,000		692,157	5/07/15		—		(49,674	)
Singapore Dollar	DBAB	Buy	3,355,500		2,687,625	5/07/15		—		(153,065	)
Chilean Peso	DBAB	Buy	2,000,000,000		3,299,513	6/18/15		—		(45,675	)
Euro	BZWS	Sell	2,275,342		2,873,120	6/18/15		318,394		—
Euro	CITI	Sell	10,316,000		12,727,716	6/18/15		1,145,037		—
Euro	DBAB	Sell	52,385,585		65,478,706	6/18/15		6,660,809		—
Euro	JPHQ	Sell	7,402,120		9,235,853	6/18/15		924,843		—
Indian Rupee	DBAB	Buy	1,472,000,000		23,097,442	6/18/15		—		(201,238	)
Japanese Yen	BZWS	Sell	386,912,500		3,549,493	6/18/15		306,909		—
Japanese Yen	DBAB	Sell	12,762,115,000		110,390,197	6/18/15		3,435,194		—
Japanese Yen	JPHQ	Sell	2,136,360,000		18,674,496	6/18/15		860,304		(89,924	)
Japanese Yen	MSCO	Sell	39,600,000		349,615	6/18/15		17,741		—
Malaysian Ringgit	DBAB	Buy	4,726,000		1,361,209	6/18/15		—		(39,162	)
Malaysian Ringgit	DBAB	Sell	4,020,000		1,088,841	6/18/15		—		(35,710	)
Malaysian Ringgit	HSBC	Buy	1,130,000		332,177	6/18/15		—		(16,072	)
British Pound	DBAB	Sell	1,072,503		1,625,379	7/23/15		—		(20,914	)
Chilean Peso	BZWS	Buy	2,082,200,000		3,331,520	7/23/15		45,057		—
Chilean Peso	DBAB	Buy	5,456,000,000		8,715,655	7/23/15		132,008		—
Euro	BZWS	Sell	23,056,204		27,522,883	7/23/15		1,623,031		—
Euro	DBAB	Sell	46,839,791		55,942,167	7/23/15		3,325,369		—
Euro	JPHQ	Sell	10,916,222		13,041,316	7/23/15		778,736		—
Euro	MSCO	Sell	2,920,000		3,487,327	7/23/15		207,187		—
Indian Rupee	CITI	Buy	116,369,000		1,835,473	7/23/15		—		(37,344	)
Indian Rupee	DBAB	Buy	2,529,734,000		38,627,791	7/23/15		461,564		—
Indian Rupee	HSBC	Buy	1,380,831,000		21,065,309	7/23/15		271,239		—
Indian Rupee	JPHQ	Buy	273,412,000		4,172,318	7/23/15		52,434		—
Japanese Yen	BZWS	Sell	1,046,497,000		8,829,112	7/23/15		54,641		—
Japanese Yen	CITI	Sell	1,022,550,000		8,614,647	7/23/15		40,962		—
Japanese Yen	DBAB	Sell	6,774,345,000		57,048,077	7/23/15		247,821		—
Japanese Yen	GSCO	Sell	755,750,000		6,387,070	7/23/15		50,399		—
Japanese Yen	HSBC	Sell	1,157,280,000		9,777,834	7/23/15		74,490		—
Japanese Yen	JPHQ	Sell	1,197,711,000		10,118,152	7/23/15		75,810		—
Singapore Dollar	DBAB	Buy	9,635,500		7,182,214	7/23/15		85,802		—
Singapore Dollar	HSBC	Buy	4,228,000		3,131,388	7/23/15		57,774		—
Singapore Dollar	JPHQ	Buy	2,638,000		1,953,640	7/23/15		36,192		—

40 | Annual Report franklintempleton.com


						FRANKLIN STRATEGIC SERIES
						STATEMENT OF INVESTMENTS




Franklin Strategic Income Fund (continued)


Forward Exchange Contracts (continued)
					Contract Settlement			Unrealized	Unrealized
Currency	Counterparty^aType		Quantity		Amount	Date		Appreciation	Depreciation
Euro	DBAB	Sell	56,259,845	$	64,283,847	8/27/15	$	1,049,299	$	—
Euro	JPHQ	Sell	20,514,800		23,484,625	8/27/15		426,543		—
Japanese Yen	DBAB	Sell	2,240,500,000		19,129,952	8/27/15		332,764		—
Japanese Yen	HSBC	Sell	286,000,000		2,443,672	8/27/15		44,209		—
Japanese Yen	JPHQ	Sell	605,200,000		5,171,045	8/27/15		93,581		—
British Pound	DBAB	Sell	6,992,149		10,795,879	9/17/15		66,352		—
Chilean Peso	DBAB	Buy	9,592,750,000		15,154,423	9/17/15		321,665		—
Chilean Peso	JPHQ	Buy	937,202,000		1,488,213	9/17/15		23,785		—
Chilean Peso	MSCO	Buy	881,530,000		1,397,812	9/17/15		24,370		—
Euro	BZWS	Sell	667,313		758,788	9/17/15		8,484		—
Euro	DBAB	Buy	2,493,833		2,694,587	9/17/15		109,396		—
Euro	DBAB	Sell	140,199,751		155,965,221	9/17/15		857,135		(2,527,828	)
Euro	GSCO	Sell	800,000		909,968	9/17/15		10,475		—
Euro	HSBC	Sell	711,759		809,605	9/17/15		9,326		—
Euro	JPHQ	Sell	9,285,384		10,561,029	9/17/15		120,853		—
Japanese Yen	DBAB	Sell	15,346,163,000		129,210,515	9/17/15		532,442		(121,873	)
Japanese Yen	HSBC	Sell	561,900,000		4,740,372	9/17/15		24,360		—
Japanese Yen	JPHQ	Sell	1,648,760,000		13,905,246	9/17/15		67,246		—
Singapore Dollar	DBAB	Buy	26,357,820		19,403,578	9/17/15		457,472		—
Singapore Dollar	HSBC	Buy	3,182,000		2,344,101	9/17/15		53,588		—
Singapore Dollar	JPHQ	Buy	18,544,500		13,684,968	9/17/15		288,617		—
Unrealized appreciation (depreciation)								66,873,290		(5,873,670	)
Net unrealized appreciation (depreciation)							$	60,999,620

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

At April 30, 2015, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts

Upfront

Periodic

Premiums

Counterparty/

Notional

Payment

Expiration

Paid

Unrealized

Description

Exchange

Amount^a

Rate

Date

(Received)

Appreciation

Depreciation

Value

Rating^b

OTC Swaps

Contracts to Sell Protection^c

Traded Index

MCDX.NA.24

CITI

30,000,000

1.00

6/20/20

68,828

76,294

—

145,122

Non

Investment

Grade

MCDX.NA.24

GSCO

75,000,000

1.00

6/20/20

172,071

190,736

—

362,807

Non

Investment

Grade

Unrealized appreciation (depreciation)

267,030

—

Net unrealized appreciation (depreciation)

267,030

^aIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no
recourse provisions have been entered into in association with the contracts.
^bBased on internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.
^cThe fund enters contracts to sell protection to create a long credit position. Performance triggers include failure to pay or bankruptcy of the underlying securities for traded
index swaps.
See Note 9 regarding other derivative information.
See Abbreviations on page 58.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 41


FRANKLIN STRATEGIC SERIES




Financial Statements

Statement of Assets and Liabilities
April 30, 2015

Franklin Strategic Income Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	8,323,803,663
Cost - Sweep Money Fund (Note 3f)		1,030,461,214
Total cost of investments	$	9,354,264,877
Value - Unaffiliated issuers	$	8,118,289,862
Value - Sweep Money Fund (Note 3f)		1,030,461,214
Total value of investments		9,148,751,076
Cash		1,422,923
Restricted Cash (Note 1e)		59,928,500
Foreign currency, at value (cost $96,499,352)		96,288,204
Receivables:
Investment securities sold		62,039,016
Capital shares sold		12,888,350
Interest		89,774,317
OTC swaps (premiums paid $243,721)		240,899
Unrealized appreciation on forward exchange contracts		66,873,290
Unrealized appreciation on OTC swap contracts		267,030
Other assets		8,116
Total assets		9,538,481,721
Liabilities:
Payables:
Investment securities purchased		518,651,142
Capital shares redeemed		20,694,639
Management fees		3,216,848
Distribution fees		2,275,544
Transfer agent fees		1,786,928
Distributions to shareholders		2,813,438
Due to brokers		59,990,500
Unrealized depreciation on forward exchange contracts		5,873,670
Unrealized depreciation on unfunded loan commitments (Note 8)		226,252
Deferred tax		224,914
Accrued expenses and other liabilities		661,920
Total liabilities		616,415,795
Net assets, at value	$	8,922,065,926
Net assets consist of:
Paid-in capital	$	9,134,393,819
Distributions in excess of net investment income		(57,248,362	)
Net unrealized appreciation (depreciation)		(144,849,721	)
Accumulated net realized gain (loss)		(10,229,810	)
Net assets, at value	$	8,922,065,926

42 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statement of Assets and Liabilities (continued)
April 30, 2015

Class A:
Net assets, at value	$	5,242,843,877
Shares outstanding		522,050,762
Net asset value per share^a	$	10.04
Maximum offering price per share (net asset value per share ÷ 95.75%)	$	10.49
Class C:
Net assets, at value	$	2,070,738,770
Shares outstanding		206,249,957
Net asset value and maximum offering price per share^a	$	10.04
Class R:
Net assets, at value	$	223,758,013
Shares outstanding		22,358,262
Net asset value and maximum offering price per share	$	10.01
Class R6:
Net assets, at value	$	253,929,131
Shares outstanding		25,254,798
Net asset value and maximum offering price per share	$	10.05
Advisor Class:
Net assets, at value	$	1,130,796,135
Shares outstanding		112,493,238
Net asset value and maximum offering price per share	$	10.05

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Operations
for the year ended April 30, 2015


Franklin Strategic Income Fund

Investment income:
Dividends	$	2,067,359
Interest		437,336,754
Total investment income		439,404,113
Expenses:
Management fees (Note 3a)		40,595,637
Distribution fees: (Note 3c)
Class A		13,204,149
Class C		13,784,598
Class R		1,142,098
Transfer agent fees: (Note 3e)
Class A		6,698,606
Class C		2,690,686
Class R		289,748
Class R6		1,464
Advisor Class		1,406,371
Custodian fees (Note 4)		1,115,602
Reports to shareholders		761,419
Registration and filing fees		457,700
Professional fees		168,019
Trustees’ fees and expenses		96,111
Other		190,861
Total expenses		82,603,069
Expense reductions (Note 4)		(9,524	)
Expenses waived/paid by affiliates (Note 3f)		(839,950	)
Net expenses		81,753,595
Net investment income		357,650,518
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		14,593,507
Foreign currency transactions		116,221,037
Swap contracts		7,700,340
Net realized gain (loss)		138,514,884
Net change in unrealized appreciation (depreciation) on:
Investments		(475,191,765	)
Translation of other assets and liabilities denominated in foreign currencies		73,879,657
Change in deferred taxes on unrealized appreciation		42,042
Net change in unrealized appreciation (depreciation)		(401,270,066	)
Net realized and unrealized gain (loss)		(262,755,182	)
Net increase (decrease) in net assets resulting from operations	$	94,895,336

44 | Annual Report | The accompanying notes are an integral part of these financial statements.

franklintempleton.com

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS


Statements of Changes in Net Assets


Franklin Strategic Income Fund
		Year Ended April 30,
		2015			2014
Increase (decrease) in net assets:
Operations:
Net investment income	$	357,650,518		$	344,373,059
Net realized gain (loss) from investments, foreign currency transactions and swap contracts		138,514,884			60,506,551
Net change in unrealized appreciation (depreciation) on investments, translation of other assets
and liabilities denominated in foreign currencies and deferred taxes		(401,270,066	)		(190,166,997	)
Net increase (decrease) in net assets resulting from operations		94,895,336			214,712,613
Distributions to shareholders from:
Net investment income and net foreign currency gains:
Class A		(282,280,270	)		(213,087,467	)
Class C		(104,690,062	)		(80,821,962	)
Class R		(11,662,658	)		(9,384,072	)
Class R6		(14,834,561	)		(8,216,596	)
Advisor Class		(62,495,206	)		(43,278,074	)
Net realized gains:
Class A		(49,068,785	)		(45,182,760	)
Class C		(19,599,475	)		(18,883,836	)
Class R		(2,116,015	)		(2,123,917	)
Class R6		(2,507,121	)		(2,119,812	)
Advisor Class		(10,474,079	)		(8,346,053	)
Total distributions to shareholders		(559,728,232	)		(431,444,549	)
Capital share transactions: (Note 2)
Class A		331,943,973			347,835,138
Class C		70,643,695			57,022,268
Class R		8,142,440			(26,386,053	)
Class R6		20,521,455			243,042,693
Advisor Class		178,987,572			79,433,172
Total capital share transactions		610,239,135			700,947,218
Net increase (decrease) in net assets		145,406,239			484,215,282
Net assets:
Beginning of year		8,776,659,687			8,292,444,405
End of year	$	8,922,065,926		$	8,776,659,687
Distributions in excess of net investment income included in net assets:
End of year	$	(57,248,362	)	$	(38,578,004	)

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 45

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements

Franklin Strategic Income Fund

1. Organization And Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of nine separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Strategic Income Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share at the close of the New York Stock Exchange (NYSE), generally at 4 p.m. Eastern time (NYSE close) on each day the NYSE is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides administration and oversight of the Fund’s valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Debt securities generally trade in the OTC market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the date that the values of the foreign debt securities are determined.

Certain derivative financial instruments (derivatives) trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before the daily NYSE close. In addition, trading in certain foreign markets may not take place on every NYSE business day. Occasionally, events occur between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC 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 Depositary 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 that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert 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 Board.

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Statement of Operations.

c. Securities Purchased on a When-Issued, Delayed Delivery and TBA Basis

The Fund purchases securities on a when-issued, delayed delivery and to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities and collateral has been pledged and/or received for open TBA trades.

d. Derivative Financial Instruments

The Fund invested in derivatives in order to manage risk or gain exposure to various other investments or markets.

franklintempleton.com Annual Report | 47

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

d. Derivative Financial Instruments (continued)

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 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/or the potential for market movements which expose the Fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterparties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterpar-ties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counter-party include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one coun-terparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the fund or the applicable coun-terparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of fund business each day and any additional collateral required due to changes in derivative values may be delivered by the fund or the counterparty within a few business days. Collateral pledged and/or received by the fund, if any, is held in segregated accounts with the fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund entered into OTC forward exchange contracts primarily to manage and/or 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 at a specific exchange rate on a future date.

The Fund entered into credit default swap contracts primarily to manage exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (“OTC credit default swaps”) or may be executed in a multilateral trade facility platform, such as a registered exchange (“centrally cleared credit default swaps”). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, or a tranche of a credit index. In the event of a default of the underlying referenced debt obligation, the buyer is entitled to receive the notional amount of the credit default swap contract from the seller in exchange for the referenced debt obligation, a net settlement amount equal to the notional amount of the credit default swap less the recovery value of the referenced debt obligation, or other agreed upon amount. For centrally cleared credit default swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at which time they are realized. Payments received or paid to initiate a credit default swap contract are reflected in the Statement of Assets and Liabilities and represent compensating factors between

48 | Annual Report

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.

See Note 9 regarding other derivative information.

e. Restricted Cash

At April 30, 2015, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statement of Assets and Liabilities.

f. Loan Participation Notes

The Fund invests in loan participation notes (“Participations”). Participations are loans originally issued to a borrower by one or more financial institutions (the “Lender”) and subsequently sold to other investors, such as the Fund. Participations typically result in the Fund having a contractual relationship only with the Lender and not with the borrower. The Fund has the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Fund generally has no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.

g. FT Holdings Corporation II (FT Subsidiary)

The Fund invests in certain financial instruments through its investment in the FT Subsidiary. FT Subsidiary is a Delaware Corporation, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments consistent with the investment objective of the Fund. At April 30, 2015, FT subsidiary’s investment, Turtle Bay Resort, as well as any other assets and liabilities of FT subsidiary are reflected in the Fund’s Statement of Investments and Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and FT subsidiary. All intercompany transactions and balances have been eliminated.

h. Mortgage Dollar Rolls

The Fund enters into mortgage dollar rolls, typically on a TBA basis. Mortgage dollar rolls are agreements between the Fund and a financial institution to simultaneously sell and repurchase mortgage-backed securities at a future date. Gains or losses are realized on the initial sale, and the difference between the repurchase price and the sale price is recorded as an unrealized gain or loss to the Fund upon entering into the mortgage dollar roll. In addition, the Fund may invest the cash proceeds that are received from the initial sale. During the period between the sale and repurchase, the Fund is not entitled to principal and interest paid on the mortgage backed securities. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

i. Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale.

j. Income and Deferred Taxes

It is the Fund’s policy to qualify as a regulated investment company under the Internal Revenue Code. The Fund intends to distribute to shareholders substantially all of its taxable income and net realized gains to relieve it from federal income and excise taxes. As a result, no provision for U.S. federal income taxes is required.

The Fund may be subject to foreign taxation related to income received, capital gains on the sale of securities and certain foreign currency transactions in the foreign jurisdictions in which it invests. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which the Fund invests. When a capital gain tax is determined to apply, the Fund records an estimated deferred tax liability in an amount that would be payable if the securities were disposed of on the valuation date.

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Annual Report

| 49

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

j. Income and Deferred Taxes (continued)

The Fund recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. As of April 30, 2015, and for all open tax years, the Fund has determined that no liability for unrecognized tax benefits is required in the Fund’s financial statements related to uncertain tax positions taken on a tax return (or expected to be taken on future tax returns). Open tax years are those that remain subject to examination and are based on each tax jurisdiction’s statute of limitation.

k. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security’s interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income in the Statement of Operations.

l. Accounting Estimates

m. Guarantees and Indemnifications

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

50 | Annual Report

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

2. Shares of Beneficial Interest

At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


				Year Ended April 30,
				2015					2014
	Shares			Amount		Shares			Amount

Class A Shares:
Shares sold	124,483,941		$	1,289,844,127		149,694,277		$	1,580,320,735
Shares issued in reinvestment of distributions	29,780,955			304,820,710		22,409,597			235,187,078
Shares redeemed	(122,508,169	)		(1,262,720,864	)	(139,329,102	)		(1,467,672,675	)
Net increase (decrease)	31,756,727		$	331,943,973		32,774,772		$	347,835,138
Class C Shares:
Shares sold	41,144,532		$	426,954,807		52,213,238		$	551,561,530
Shares issued in reinvestment of distributions	10,833,393			110,798,384		8,492,709			89,117,411
Shares redeemed	(45,307,787	)		(467,109,496	)	(55,445,492	)		(583,656,673	)
Net increase (decrease)	6,670,138		$	70,643,695		5,260,455		$	57,022,268
Class R Shares:
Shares sold	5,069,436		$	52,401,676		5,437,437		$	57,142,615
Shares issued in reinvestment of distributions	1,312,515			13,385,323		1,059,135			11,083,038
Shares redeemed	(5,603,123	)		(57,644,559	)	(9,001,828	)		(94,611,706	)
Net increase (decrease)	778,828		$	8,142,440		(2,505,256	)	$	(26,386,053	)
Class R6 Shares^a:
Shares sold^b	4,582,309		$	47,822,000		22,906,764		$	238,472,675
Shares issued in reinvestment of distributions	1,591,380			16,309,141		984,342			10,336,351
Shares redeemed	(4,262,404	)		(43,609,686	)	(547,593	)		(5,766,333	)
Net increase (decrease)	1,911,285		$	20,521,455		23,343,513		$	243,042,693
Advisor Class Shares:
Shares sold	43,912,372		$	455,843,462		43,658,699		$	460,708,567
Shares issued in reinvestment of distributions	6,465,928			66,243,350		4,404,969			46,277,451
Shares redeemed^b	(33,425,788	)		(343,099,240	)	(40,514,204	)		(427,552,846	)
Net increase (decrease)	16,952,512		$	178,987,572		7,549,464		$	79,433,172
^aFor the year May 1, 2013 (effective date) to April 30, 2014.
^bEffective May 1, 2013, a portion of Advisor Class shares were exchanged into Class R6.

3. Transactions with Affiliates


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

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

3. Transactions with Affiliates (continued)

a. Management Fees

The Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.625	%	Up to and including $100 million
0.500	%	Over $100 million, up to and including $250 million
0.450	%	Over $250 million, up to and including $7.5 billion
0.440	%	Over $7.5 billion, up to and including $10 billion
0.430	%	Over $10 billion, up to and including $12.5 billion
0.420	%	Over $12.5 billion, up to and including $15 billion
0.400	%	Over $15 billion, up to and including $17.5 billion
0.380	%	Over $17.5 billion, up to and including $20 billion
0.360	%	Over $20 billion, up to and including $35 billion
0.355	%	Over $35 billion, up to and including $50 billion
0.350	%	In excess of $50 billion

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Fund. The fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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


Class A	0.25	%
Class C	0.65	%
Class R	0.50	%

d. Sales Charges/Underwriting Agreements

Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. These charges are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. Distributors has advised the Fund of the following commission transactions related to the sales and redemptions of the Fund’s shares for the year:


Sales charges retained net of commissions paid to unaffiliated
broker/dealers	$	2,919,437
CDSC retained	$	275,193

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

e. Transfer Agent Fees

For the year ended April 30, 2015, the Fund paid transfer agent fees of $11,086,875, of which $4,578,160 was retained by Investor Services.

f. Investments in Institutional Fiduciary Trust Money Market Portfolio

The Fund invests in Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an affiliated open-end management investment company. Management fees paid by the Fund are waived on assets invested in the Sweep Money Fund, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Sweep Money Fund. Prior to May 1, 2013, the waiver was accounted for as a reduction to management fees.

g. Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until August 31, 2015. There were no Class R6 transfer agent fees waived during the year ended April 30, 2015.

4. Expense Offset Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the year ended April 30, 2015, the custodian fees were reduced as noted in the Statement of Operations.

5. Income Taxes

For tax purposes, the Fund may elect to defer any portion of a post-October capital loss to the first day of the following fiscal year. At April 30, 2015, the Fund deferred post-October capital losses of $18,092,766.

The tax character of distributions paid during the years ended April 30, 2015 and 2014, was as follows:


		2015		2014
Distributions paid from:
Ordinary income	$	482,780,216	$	359,348,855
Long term capital gain		76,948,016		72,095,694
	$	559,728,232	$	431,444,549

At April 30, 2015, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:


Cost of investments	$	9,384,312,400
Unrealized appreciation	$	202,018,796
Unrealized depreciation		(437,580,120	)
Net unrealized appreciation (depreciation)	$	(235,561,324	)
Distributable earnings - undistributed ordinary income	$	45,453,181

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions and bond discounts and premiums.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2015, aggregated $6,529,183,779 and $5,837,948,104, respectively.

7. Credit Risk and Defaulted Securities

At April 30, 2015, the Fund had 56.85% of its portfolio invested in high yield, senior secured floating rate notes, or other securities rated below investment grade. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At April 30, 2015, the aggregate value of these securities was $46,340,000, representing 0.52% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified in the accompanying Statement of Investments.

8. Unfunded Loan Commitments

The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented in the Statement of Investments.


At April 30, 2015, unfunded commitments were as follows:
		Unfunded
Borrower		Commitment
Patriot Coal Corp., L/C Facility, 9.25%, 12/18/18	$	2,394,670

Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and the Statement of Operations.

9. Other Derivative Information

At April 30, 2015, the Fund’s investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:


	Asset Derivatives			Liability Derivatives
Derivative Contracts
Not Accounted for as	Statement of Assets and			Statement of Assets and
Hedging Instruments	Liabilities Location		Fair Value	Liabilities Location		Fair Value
Foreign exchange contracts	Unrealized appreciation on			Unrealized depreciation on
	forward exchange contracts	$	66,873,290	forward exchange contracts	$	5,873,670
Credit contracts	Unrealized appreciation on OTC			Unrealized depreciation on
	swap contracts		267,030	OTC swap contracts		—

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

For the year ended April 30, 2015, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:


						Change in
						Unrealized
Derivative Contracts				Realized		Appreciation
Not Accounted for as				Gain (Loss)		(Depreciation)
Hedging Instruments		Statement of Operations Locations		for the Year		for the Year
Foreign exchange contracts		Net realized gain (loss) from foreign currency
		transactions / Net change in unrealized appreciation
		(depreciation) on translation of other assets and
		liabilities denominated in foreign currencies	$	120,973,074	$	74,295,083
Credit contracts		Net realized gain (loss) from swap contracts / Net
		change in unrealized appreciation (depreciation)
		on investments		7,700,340		(5,222,660	)

At April 30, 2015, the Fund’s OTC derivative assets and liabilities are as follows:

		Gross and Net Amounts of Assets and Liabilities
		Presented in the Statement of Assets and Liabilities
		Assets^a		Liabilities^a
Derivatives
Forward exchange contracts	$	66,873,290	$	5,873,670
Swap Contracts		507,929				—
Total	$	67,381,219	$	5,873,670

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.

At April 30, 2015, the Fund’s OTC derivative assets which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, is as follows:


				Amounts Not Offset in the
				Statement of Assets and Liabilities
		Gross and
		Net Amounts of		Financial				Financial
		Assets Presented in		Instruments			Instruments				Cash			Net Amount
		the Statement of		Available for				Collateral			Collateral			(Not less
		Assets and Liabilities		Offset				Received^a,b			Received^b			than zero)
Counterparty
BZWS	$	4,989,670	$	—			$	—		$	(4,989,670	)	$	—
CITI		2,490,798		(106,521	)			(2,384,277	)		—			—
DBAB		47,508,824		(4,349,842	)			—			(43,158,982	)		—
GSCO		1,807,219		—				—			(1,807,219	)		—
HSBC		1,193,695		(628,861	)			(564,834	)		—			—
JPHQ		9,141,715		(788,446	)			(8,353,269	)		—			—
MSCO		249,298		—				—			(249,298	)		—
Total	$	67,381,219	$	(5,873,670	)	$	(11,302,380		)	$	(50,205,169	)	$	—

^aAt April 30,2015, the Fund received U.S. Government Agency Securities and U.S. Treasury Bonds and Notes as collateral for derivatives.
^bIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of
overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

9. Other Derivative Information (continued)

At April 30, 2015, the Fund’s OTC derivative liabilities which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, is as follows:


				Amounts Not Offset in the
				Statement of Assets and Liabilities
		Gross and
		Net Amounts of		Financial			Financial
		Liabilities Presented in		Instruments			Instruments		Cash		Net Amount
		the Statement of		Available for			Collateral		Collateral		(Not less
		Assets and Liabilities		Offset			Pledged		Pledged		than zero)
Counterparty
BZWS	$	—	$	—		$	—	$	—	$	—
CITI		106,521		(106,521	)		—		—		—
DBAB		4,349,842		(4,349,842	)		—		—		—
GSCO		—		—			—		—		—
HSBC		628,861		(628,861	)		—		—		—
JPHQ		788,446		(788,446	)		—		—		—
MSCO		—		—			—		—		—
Total	$	5,873,670	$	(5,873,670	)	$	—	$	—	$	—

For the year ended April 30, 2015, the average month end fair value of derivatives represented 1.22% of average month end net assets. The average month end number of open derivative contracts for the year was 237.

See Note 1(d) regarding derivative financial instruments.

10. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 12, 2016. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.07% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the year ended April 30, 2015, the Fund did not use the Global Credit Facility.

11. Fair Value Measurements

The Fund follows a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Fund’s own market assumptions (unobservable inputs). These inputs are used in determining the value of the Fund’s financial instruments and are summarized in the following fair value hierarchy:

Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

A summary of inputs used as of April 30, 2015, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


		Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Equity Investments:^a
Consumer Services	$	—	$	11,076,180	$	—	$	11,076,180
Transportation		—		3,791,498		—		3,791,498
All Other Equity Investments^b		73,942		—		—		73,942
Corporate Bonds		—		3,427,981,048		—		3,427,981,048
Senior Floating Rate Interests		—		1,672,197,303		992,074		1,673,189,377
Foreign Government and Agency Securities		—		1,544,116,015		—		1,544,116,015
U.S. Government and Agency Securities		—		200,957,325		—		200,957,325
Asset-Backed Securities and Commercial
Mortgage-Backed Securities		—		499,914,034		—		499,914,034
Mortgage-Backed Securities		—		397,090,217		—		397,090,217
Municipal Bonds		—		360,100,226		—		360,100,226
Escrows and Litigation Trusts		—		—		—^c		—
Short Term Investments		1,030,461,214		—		—		1,030,461,214
Total Investments in Securities	$	1,030,535,156	$	8,117,223,846	$	992,074	$	9,148,751,076
Other Financial Instruments
Forward Exchange Contracts	$	—	$	66,873,290	$	—	$	66,873,290
Swap Contracts		—		267,030		—		267,030
Total Other Financial Instruments	$	—	$	67,140,320	$	—	$	67,140,320
Liabilities:
Other Financial Instruments
Forward Exchange Contracts	$	—	$	5,873,670	$	—	$	5,873,670
Unfunded Loan Commitments		—		226,252		—		226,252
Total Other Financial Instruments	$	—	$	6,099,922	$	—	$	6,099,922

^aIncludes common and convertible preferred stocks.
^bFor detailed categories, see accompanying Statement of Investments.
^cIncludes securities determined to have no value at April 30,2015.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the year.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

12. Subsequent Events

The Fund has evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


Abbreviations
Counterparty		Currency		Selected Portfolio
BZWS	Barclays Bank PLC	BRL	Brazilian Real	AGMC	Assured Guaranty Municipal Corp.
CITI	Citigroup, Inc.	EUR	Euro	CDO	Collateralized Debt Obligation
DBAB	Deutsche Bank AG	GBP	British Pound	CLO	Collateralized Loan Obligation
GSCO	The Goldman Sachs Group, Inc.	HUF	Hungarian Forint	EDA	Economic Development Authority
HSBC	HSBC Bank USA, N.A.	IDR	Indonesian Rupiah	FICO	Financing Corp.
JPHQ	JP Morgan Chase & Co.	KRW	South Korean Won	FRN	Floating Rate Note
MSCO	Morgan Stanley	LKR	Sri Lankan Rupee	GO	General Obligation
		MXN	Mexican Peso	HDC	Housing Development Corp.
		MYR	Malaysian Ringgit	ISD	Independent School District
		PHP	Philippine Peso	NATL	National Public Financial Guarantee Corp.
		PLN	Polish Zloty	PIK	Payment-In-Kind
		SGD	Singapore Dollar	PSF	Permanent School Fund
		UYU	Uruguayan Peso

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FRANKLIN STRATEGIC SERIES

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Franklin Strategic Income Fund

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Strategic Income Fund (one of the funds constituting the Franklin Strategic Series, hereafter referred to as the “Fund”) at April 30, 2015, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at April 30, 2015 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
June 15, 2015

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FRANKLIN STRATEGIC SERIES

Board Members and Officers


Independent Board Members

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Harris J. Ashton (1932)	Trustee	Since 1991	145	Bar-S Foods (meat packing company)
One Franklin Parkway				(1981-2010).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950)	Trustee	Since	119	Avis Budget Group Inc. (car rental)
One Franklin Parkway		October 2014		(2007-present), Omnicom Group Inc.
San Mateo, CA 94403-1906				(advertising and marketing communi-
				cations services) (2011-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1998-2006).

Principal Occupation During at Least the Past 5 Years:
Founding Partner and Senior Managing Director, Strategic Investment Group (investment management group) (1987-present); director of
various companies; and formerly, Founding Partner and Managing Director, Emerging Markets Management LLC (investment management
firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial
institution) (1977-1987).

Edith E. Holiday (1952)	Trustee	Since 1998	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1993-present),
San Mateo, CA 94403-1906				RTI International Metals, Inc. (manu-
				facture and distribution of titanium)
				(1999-present), Canadian National
				Railway (railroad) (2001-present),
				White Mountains Insurance Group, Ltd.
				(holding company) (2004-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1994-2013).
Principal Occupation During at Least the Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant
Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989).

J. Michael Luttig (1954)	Trustee	Since 2009	145	Boeing Capital Corporation
One Franklin Parkway				(aircraft financing) (2006-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company); and
formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

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FRANKLIN STRATEGIC SERIES




Independent Board Members (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Frank A. Olson (1932)	Trustee	Since 2007	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1998-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June-December 1987).

Larry D. Thompson (1945)	Trustee	Since 2007	145	Cbeyond, Inc. (business commu-
One Franklin Parkway				nications provider) (2010-2012),
San Mateo, CA 94403-1906				The Southern Company (energy
				company) (December 2014;
				previously 2010-2012) and Graham
				Holdings Company (education and
				media organization) (2011-present).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (January 2015;
previously 2011-2012); and formerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo,
Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc.
(2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and
Deputy Attorney General, U.S. Department of Justice (2001-2003).

John B. Wilson (1959)	Lead	Trustee since	119	None
One Franklin Parkway	Independent	2006 and Lead
San Mateo, CA 94403-1906	Trustee	Independent
		Trustee since 2008

Principal Occupation During at Least the Past 5 Years:
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail)
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President –
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).




Interested Board Members and Officers

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Gregory E. Johnson (1961)	Trustee	Since June 2013	162	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment
companies in Franklin Templeton Investments; and Vice Chairman, Investment Company Institute.

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FRANKLIN STRATEGIC SERIES


Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Rupert H. Johnson, Jr. (1940) Chairman of		Chairman of	145	None
One Franklin Parkway	the Board and	the Board since
San Mateo, CA 94403-1906	Trustee	2013 and Trustee
		since 1991
Principal Occupation During at Least the Past 5 Years:
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments.

Alison E. Baur (1964)	Vice President	Since 2012	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments.

Laura F. Fergerson (1962)	Chief Executive Since 2009		Not Applicable	Not Applicable
One Franklin Parkway	Officer –
San Mateo, CA 94403-1906	Finance and
	Administration
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Gaston Gardey (1967)	Treasurer,	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway	Chief Financial
San Mateo, CA 94403-1906	Officer and
	Chief
	Accounting
	Officer
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Products and Client Services, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.

Aliya S. Gordon (1973)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton
Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

Steven J. Gray (1955)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin
Alternative Strategies Advisers, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

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FRANKLIN STRATEGIC SERIES




Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Selena L. Holmes (1965)	Vice President	Since 2012	Not Applicable	Not Applicable
100 Fountain Parkway	– AML
St. Petersburg, FL 33716-1205	Compliance
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance Monitoring; Chief Compliance Officer, Franklin Alternative Strategies Advisers, LLC; Vice President, Franklin
Templeton Companies, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Edward B. Jamieson (1948)	President and	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway	Chief Executive
San Mateo, CA 94403-1906	Officer –
	Investment
	Management

Principal Occupation During at Least the Past 5 Years:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC;
and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment
companies in Franklin Templeton Investments.

Christopher J. Molumphy (1962) Vice President		Since 2000	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director and Executive Vice President, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.

Kimberly H. Novotny (1972)	Vice President	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice
President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies
in Franklin Templeton Investments.

Robert C. Rosselot (1960)	Chief	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street	Compliance
Fort Lauderdale, FL 33301-1923	Officer
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 46 of the
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952)	Vice President	Since 2006	Not Applicable	Not Applicable
One Franklin Parkway	and Secretary
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin Templeton
Investments.

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FRANKLIN STRATEGIC SERIES


Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Craig S. Tyle (1960)	Vice President	Since 2005	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.

Lori A. Weber (1964)	Vice President	Since 2011	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment
companies in Franklin Templeton Investments.

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FRANKLIN STRATEGIC SERIES FRANKLIN STRATEGIC INCOME FUND

Shareholder Information

Board Review of Investment Management Agreement

At a meeting held April 14, 2015, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the separate funds within the Trust, including Franklin Strategic Income Fund (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for the Funds, along with periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also noted that at the February meetings each year, it receives an annual report on all marketing support payments made by FTI to financial intermediaries.

NATURE, EXTENT AND QUALITY OF SERVICE. The Board was satisfied with the nature and quality of the overall services provided by the Manager and its affiliates to the Fund and its shareholders, as noted later in the discussion of investment performance and expenses. The Board’s opinion was based, in part, upon periodic reports furnished it showing that the investment policies and restrictions for the Fund were consistently complied with as well as other reports periodically furnished the Board covering matters such as the compliance of portfolio managers and other management personnel with the code of ethics adopted throughout the Franklin Templeton fund complex, the adherence to fair value pricing procedures established by the Board, and the accuracy of net asset value calculations. The Board also noted the extent of benefits provided Fund shareholders from being part of the Franklin Templeton family of funds, including the right to exchange investments between the same class of shares of different funds without a sales charge, the ability to reinvest Fund dividends into other funds and the right to combine holdings in other funds to obtain a reduced sales charge. Favorable consideration was given to management’s continual efforts and expenditures in establishing effective business continuity plans and developing strategies to address cybersecurity threats. Among other factors taken into account by the Board were the Manager’s best execution trading policies, including a favorable report by an independent portfolio trading analytical firm that also covered FOREX transactions. Consideration was also given to the experience of the Fund’s portfolio management team, the number of accounts managed and general method of compensation. In this latter respect, the Board noted that a primary factor in management’s determination of a portfolio manager’s bonus compensation was the relative investment performance of the funds he or she managed and that a portion of such bonus was required to be invested in a predesignated list of funds within such person’s fund management area so as to be aligned with the interests of shareholders. The Board also took into account the quality of transfer agent and shareholder services provided Fund shareholders by an affiliate of the Manager, noting the

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FRANKLIN STRATEGIC INCOME FUND

SHAREHOLDER INFORMATION

changes taking place in the nature of transfer agency services throughout the industry and regulatory initiatives in this area, and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Fund and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.

INVESTMENT PERFORMANCE. The Board placed significant emphasis on the investment performance of the Fund in view of its importance to shareholders. While consideration was given to performance reports and discussions with portfolio managers at Board meetings throughout the year, particular attention in assessing performance was given to the Lipper reports furnished for the agreement renewal. The Lipper reports prepared for the Fund showed the investment performance of its Class A shares in comparison to a performance universe selected by Lipper. Comparative performance for the Fund was shown for the one-year period ended January 31, 2015, and previous periods ended that date of up to 10 years. The performance universe for the Fund consisted of the Fund and all retail and institutional multi-sector income funds as selected by Lipper. The Lipper report comparison showed the Fund’s income return for the one-year period to be in the highest quin-tile of its Lipper performance universe, and on an annualized basis to also be in the highest quintile of such universe for the previous three-year period, and in the second-highest quintile of such universe during the previous five- and 10-year periods. The Lipper report showed the Fund’s total return for the one-year period to be in the second-lowest performing quintile of its performance universe, and on an annualized basis to also be in the middle performing quintile of such universe for the previous three- and five-year periods, and the second-highest performing quintile of such universe for the previous 10-year period. The Board was satisfied with the Fund’s investment performance as set forth in the Lipper report and noted its income oriented investment objective.

COMPARATIVE EXPENSES. Consideration was given to a comparative analysis of the management fees and total expense ratio of the Fund compared with those of a group of other funds selected by Lipper as its appropriate Lipper expense group. Lipper expense data is based upon information taken from each fund’s most recent annual report, which reflects historical asset levels that may be quite different from those currently existing, particularly in a period of market volatility. While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on the Fund’s contractual investment management fee in comparison with the investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges as being part of the investment management fee, and actual total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares. The results of such expense comparisons showed the contractual investment management fee rates and actual total expense ratio for the Fund to be in the least expensive quintile of its Lipper expense group. The Board was satisfied with the contractual management fee rate and total expense ratio of the Fund in comparison to its expense group as shown in the Lipper report.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with

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FRANKLIN STRATEGIC SERIES FRANKLIN STRATEGIC INCOME FUND SHAREHOLDER INFORMATION

Board Review of Investment Management

Agreement (continued)

that used in the Fund’s profitability report presentations from prior years. Additionally, the Fund’s independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Fund’s Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with the service providers and counterparties. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, quality and extent of services provided.

ECONOMIES OF SCALE. The Board also considered whether economies of scale are realized by the Manager as the Fund grows larger and the extent to which this is reflected in the level of management fees charged. While recognizing that any precise determination is inherently subjective, the Board noted that based upon the Fund profitability analysis, it appears that as some funds get larger, at some point economies of scale do result in the Manager realizing a larger profit margin on management services provided such a fund. The Board noted that economies of scale were shared with the Fund and its shareholders through management fee breakpoints so that as a fund grows in size, its effective management fee rate declines. The fee structure under the investment management agreement for the Fund contains breakpoints that continued to asset levels that exceeded its asset size at December 31, 2014. In view of such fee structure and the favorable expense comparisons of the Fund within its expense group, the Board believed that to the extent economies of scale may be realized by the Manager of the Fund and its affiliates, that there was a sharing of benefits with the Fund and its shareholders.

Proxy Voting Policies and Procedures

The Fund’s investment manager has established Proxy Voting Policies and Procedures (Policies) that the Fund uses to determine how to vote proxies relating to portfolio securities. Shareholders may view the Fund’s complete Policies online at franklintempleton.com. Alternatively, shareholders may request copies of the Policies free of charge by calling the Proxy Group collect at (954) 527-7678 or by sending a written request to: Franklin Templeton Companies, LLC, 300 S.E. 2nd Street, Fort Lauderdale, FL 33301, Attention: Proxy Group. Copies of the Fund’s proxy voting records are also made available online at franklintempleton.com and posted on the U.S. Securities and Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

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

Householding of Reports and Prospectuses

You will receive the Fund’s financial reports every six months as well as an annual updated summary prospectus (prospectus available upon request). To reduce Fund expenses, we try to identify related shareholders in a household and send only one copy of the financial reports and summary prospectus. This process, called “householding,” will continue indefinitely unless you instruct us otherwise. If you prefer not to have these documents householded, please call us at (800) 632-2301. At any time you may view current prospectuses/summary prospectuses and financial reports on our website. If you choose, you may receive these documents through electronic delivery.

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Franklin Templeton Investments

Gain From Our Perspective®

Focus on Investment Excellence

Global Perspective Shaped by Local Expertise

Strength and Experience

1. As of 12/31/14. Clients are represented by the total number of shareholder accounts.

Not FDIC Insured | May Lose Value | No Bank Guarantee

Annual Report

Franklin Global Government Bond Fund

This annual report for Franklin Global Government Bond Fund covers the fiscal year ended April 30, 2015.

Your Fund’s Goal and Main Investments

The Fund seeks total return, consisting of interest income and capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in government bonds of issuers located around the world. Government bonds include floating and fixed-rate debt securities of any maturity, such as bonds, notes, bills and debentures, issued or guaranteed by governments, government agencies or instrumentalities, including government-sponsored entities, supranational entities and public-private partnerships.

*Figures reflect certain derivatives held in the portfolio (or their underlying reference
assets) and may not total 100% or may be negative due to rounding, use of any
derivatives, unsettled trades or other factors.

Performance Overview

For the 12 months under review, the Fund’s Class A shares had a -0.64% cumulative total return. In comparison, global government bonds, as measured by the Fund’s benchmark, the Citigroup World Government Bond Index (WGBI), had a -5.50% cumulative total return for the same period.¹You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

*Figures reflect certain derivatives held in the portfolio (or their underlying reference
assets) and may not total 100% or may be negative due to rounding, use of any
derivatives, unsettled trades or other factors.

Economic and Market Overview

Global bonds, as measured by the Citigroup WGBI, lost value in U.S. dollar terms for the 12-month reporting period, resulting largely from the negative effect of U.S. dollar strength on local currency-denominated bonds. U.S. dollar appreciation and oil price volatility were two of the main factors that impacted global markets starting in mid-2014. Toward period-end, the U.S. dollar reached its highest level in more than a decade against the currencies of major U.S. trading partners, aided by market expectations for U.S. interest rate increases.

1. Source: Morningstar.
The index is unmanaged and includes reinvested interest. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.
See www.franklintempletondatasources.com for additional data provider information.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI).
The SOI begins on page 19.

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FRANKLIN GLOBAL GOVERNMENT BOND FUND

Oil prices, meanwhile, ended 2014 at a multi-year low, after the Organization of the Petroleum Exporting Countries maintained production levels despite a global oversupply caused largely by growing U.S. oil production. After reaching a six-year low in March amid rising U.S. oil inventories, crude oil prices began to recover in April.

Various data in the second half of 2014, including improved labor market conditions, indicated a strengthening U.S. economy, which led the U.S. Federal Reserve Board to end its quantitative easing (QE) program in October. However, investors’ fears about slowing global economic growth —which were partly responsible for the oil price plunge —proved to be a major influence on the U.S. Treasury market. Yields on 10-year U.S. Treasury notes moved sharply lower during the 12-month period, reaching a 21-month low at the end of January 2015, before reversing some of the decline over the rest of the period.

Part of the reason for mounting concerns about global growth was economic weakness in the eurozone, where expansion remained anemic and inflation eventually turned negative at the end of 2014. The European Central Bank responded by cutting interest rates in September and announcing an extensive QE program in January 2015. Core and most peripheral eurozone bond yields fell to historically low levels near period-end, while the euro fell to multi-year lows against many major currencies.

In Asia, Japanese government bond yields fell during most of the 12-month period, ending significantly lower after the Bank of Japan (BOJ) announced another sizable round of its QE program in October 2014. The BOJ’s unexpected monetary expansion also weakened the Japanese yen against many major currencies. During the period, China’s central bank reduced its benchmark interest rate twice and implemented other stimulus measures in an effort to support growth as the Chinese economy moderated.

Among other fixed income asset classes, global investment-grade corporate credit generally performed well, as larger companies appeared to be likely beneficiaries of lower energy costs. U.S. dollar-denominated emerging market debt generally delivered positive returns, but local currency-denominated emerging market debt declined in U.S. dollar terms, as a result of the strong U.S. dollar.


Dividend Distributions*
5/1/14–4/30/15
		Dividend per Share (cents)
					Advisor
Month	Class A	Class C	Class R	Class R6	Class
May	2.47	1.71	2.32	2.00	3.88
June	2.44	1.96	2.10	2.53	2.53
July	2.36	1.98	1.77	2.43	2.43
August	2.35	1.83	2.05	2.46	2.46
September	2.26	1.79	1.91	2.37	2.34
October	3.48	2.90	3.12	3.52	3.52
November	4.12	3.60	3.72	4.20	4.14
December	14.04	13.44	13.54	13.99	13.97
January	1.63	1.16	1.26	1.70	1.69
February	1.61	1.07	1.21	1.68	1.68
March	1.55	1.13	1.21	1.60	1.60
April	2.15	1.67	1.74	2.16	2.16
Total	40.46	34.24	35.95	40.64	42.40

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

Investment Strategy

We invest selectively in bonds around the world based upon our assessment of changing market, political and economic conditions. While seeking opportunities, we consider various factors including interest rates, currency exchange rates and credit risks. We use top-down macroeconomic research, bottom-up sector-specific research and quantitative analysis to identify and to seek to exploit market inefficiencies while employing a disciplined risk management process. We may use various currency-related derivative instruments, including currency forward and currency futures contracts, as well as various interest rate/bond-related derivative instruments, including interest rate/bond futures contracts and swap agreements.

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency at a specific exchange rate on a future date.

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FRANKLIN GLOBAL GOVERNMENT BOND FUND

What is a futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

What are swap agreements?

Swap agreements, such as interest rate, currency and credit default swaps, are contracts between the Fund and another party (the swap counterparty). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) earned or realized on a particular “notional amount” of underlying instruments. The notional amount is the set amount selected by the parties as the basis on which to calculate the obligations that they have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given instruments or at given interest rates.


Currency Breakdown*
4/30/15
	% of Total
	Net Assets

North America	76.4	%
U.S. Dollar	74.1	%
Canadian Dollar	2.3	%

Europe	17.3	%
Euro	17.6	%
British Pound	-0.1	%
Polish Zloty	-0.2	%

Latin America & Caribbean	3.7	%
Mexican Peso	3.7	%

Asia	2.4	%
Singapore Dollar	2.3	%
Malaysian Ringgit	0.1	%

Australia & New Zealand	0.2	%
Australian Dollar	0.2	%

*Figures reflect certain derivatives held in the portfolio (or their underlying reference
assets) and may not total 100% or may be negative due to rounding, use of any
derivatives, unsettled trades or other factors.

Manager’s Discussion

For the 12 months ended April 30, 2015, the Fund performed better than its benchmark, the Citigroup WGBI. Currency allocation was a major contributor to performance relative to the index. Positions denominated in currencies other than the U.S. dollar, euro, Japanese yen and British pound also had a positive effect on relative performance. However, security selection among government bonds detracted from the Fund’s relative results.

Regarding the Fund’s currency positioning, an overweighted exposure to the stronger U.S. dollar and underweighted allocations to the weaker euro and Japanese yen supported relative performance. Among the Fund’s other currency positions that contributed to relative performance was an overweighted allocation during the period to local currency-denominated Polish sovereign bonds. Polish interest rates fell to record lows during the period, as policymakers responded to weakness in the neighboring eurozone.

The Fund’s exposures to and selection among emerging market sovereign bonds further added to relative returns, though to a lesser extent, as did the Fund’s duration and yield curve positioning.

What is duration?

What is the yield curve?

The yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit but differing maturity dates. The most frequently reported yield curve compares three-month, two-year and 30-year U.S. Treasury debt.

In contrast, the Fund’s security selection and sector allocation weighed slightly on relative returns, resulting from positioning in government bonds.

During the period, the Fund invested in bonds without the use of interest rate-related derivatives.

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FRANKLIN GLOBAL GOVERNMENT BOND FUND

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

CFA^®is a trademark owned by CFA Institute.

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FRANKLIN GLOBAL GOVERNMENT BOND FUND

Performance Summary as of April 30, 2015

Your dividend income will vary depending on dividends or interest paid by securities in the Fund’s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. The performance tables and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund’s dividends and capital gain distributions, if any, and any unrealized gains or losses.


Net Asset Value
Share Class (Symbol)		4/30/15		4/30/14		Change
A (FGGAX)	$	9.81	$	10.45	-$	0.64
C (N/A)	$	9.79	$	10.44	-$	0.65
R (N/A)	$	9.80	$	10.44	-$	0.64
R6 (N/A)	$	9.81	$	10.45	-$	0.64
Advisor (N/A)	$	9.83	$	10.49	-$	0.66


Distributions (5/1/14–4/30/15)
		Dividend		Short-Term		Long-Term
Share Class		Income		Capital Gain		Capital Gain		Total
A	$	0.4046	$	0.1302	$	0.0443	$	0.5791
C	$	0.3424	$	0.1302	$	0.0443	$	0.5169
R	$	0.3595	$	0.1302	$	0.0443	$	0.5340
R6	$	0.4064	$	0.1302	$	0.0443	$	0.5809
Advisor	$	0.4240	$	0.1302	$	0.0443	$	0.5985

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FRANKLIN GLOBAL GOVERNMENT BOND FUND
PERFORMANCE SUMMARY

Performance as of 4/30/15¹


							Total Annual Operating Expenses⁵
	Cumulative		Average Annual		Average Annual
Share Class	Total Return²		Total Return³		Total Return (3/31/15)⁴		(with waiver)		(without waiver)
A							0.86	%	3.42	%
1-Year	-0.64	%	-4.83	%	-3.52	%
Since Inception (9/6/13)	+5.13	%	+0.43	%	+0.63	%
C							1.26	%	3.82	%
1-Year	-1.34	%	-2.28	%	-0.80	%
Since Inception (9/6/13)	+4.05	%	+2.44	%	+2.86	%
R							1.11	%	3.67	%
1-Year	-1.07	%	-1.07	%	+0.32	%
Since Inception (9/6/13)	+4.38	%	+2.64	%	+3.00	%
R6							0.61	%	3.79	%
1-Year	-0.62	%	-0.62	%	+0.79	%
Since Inception (9/6/13)	+5.26	%	+3.16	%	+3.52	%
Advisor							0.61	%	3.17	%
1-Year	-0.65	%	-0.65	%	+0.94	%
Since Inception (9/6/13)	+5.55	%	+3.34	%	+3.71	%


			30-Day Standardized Yield⁷
	Distribution
Share Class	Rate⁶		(with waiver)		(without waiver)
A	2.52	%	0.93	%	-0.65	%
C	2.05	%	0.40	%	-1.24	%
R	2.13	%	0.54	%	-1.10	%
R6	2.64	%	1.03	%	-0.57	%
Advisor	2.64	%	1.04	%	-0.61	%

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

8 | Annual Report

franklintempleton.com

FRANKLIN GLOBAL GOVERNMENT BOND FUND
PERFORMANCE SUMMARY

Total Return Index Comparison for a Hypothetical $10,000 Investment¹(continued)

All investments involve risks, including possible loss of principal. Special risks are associated with investing in foreign securities, including risks associated with political and economic developments, trading practices, availability of information, limited markets and currency exchange rate fluctuations and policies. Sovereign debt securities are subject to various risks in addition to those relating to debt securities and foreign securities generally, including, but not limited to, the risk that a governmental entity may be unwilling or unable to pay interest and repay principal on its sovereign debt. Investments in emerging market countries are subject to all of the risks of foreign investing generally and have additional heightened risks due to a lack of established legal, political, business and social frameworks to support securities markets. Changes in interest rates will affect the value of the Fund’s portfolio and its share price and yield. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. The market values of securities owned by the Fund will go up or down, sometimes rapidly or unpredictably. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio that may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. The Fund may not achieve the anticipated benefits and may realize losses when a counterparty fails to perform as promised. The Fund is also non-diversified, which involves the risk of greater price fluctuation than a more diversified portfolio. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.


Class C:	These shares have higher annual fees and expenses than Class A shares.
Class R:	Shares are available to certain eligible investors as described in the prospectus. These shares have higher annual fees and expenses than Class A shares.
Class R6:	Shares are available to certain eligible investors as described in the prospectus.
Advisor Class:	Shares are available to certain eligible investors as described in the prospectus.

1. The Fund has an expense reduction contractually guaranteed through at least 8/31/15 and a fee waiver associated with its investments in a Franklin Templeton money
fund, contractually guaranteed through at least its current fiscal year-end. Fund investment results reflect the expense reduction and fee waiver, to the extent applicable;
without these reductions, the results would have been lower.
2. Cumulative total return represents the change in value of an investment over the periods indicated.
3. Average annual total return represents the average annual change in value of an investment over the periods indicated.
4. In accordance with SEC rules, we provide standardized average annual total return information through the latest calendar quarter.
5. Figures are as stated in the Fund’s current prospectus. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to
become higher than the figures shown.
6. Distribution rate is based on an annualization of the respective class’s April dividend and the maximum offering price (NAV for Classes C, R, R6 and Advisor) per share
on 4/30/15.
7. The 30-day standardized yield for the 30 days ended 4/30/15 reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity). It should be
regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate (which reflects the Fund’s past dividends
paid to shareholders) or the income reported in the Fund’s financial statements.
8. Source: Morningstar. The Citigroup WGBI is a market capitalization-weighted index consisting of investment-grade world government bond markets.
See www.franklintempletondatasources.com for additional data provider information.

franklintempleton.com

Annual Report

| 11

FRANKLIN GLOBAL GOVERNMENT BOND FUND

Your Fund’s Expenses

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

Transaction costs, including sales charges (loads) on Fund purchases; and
Ongoing Fund costs, including management fees, distribu- tion and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses.

Actual Fund Expenses

You can estimate the expenses you paid during the period by following these steps. Of course, your account value and expenses will differ from those in this illustration:

1.	Divide your account value by $1,000.
	If an account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6.
2.	Multiply the result by the number under the heading “Expenses Paid During Period.”
	If Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50.

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

Hypothetical Example for Comparison with Other Funds

12 | Annual Report

franklintempleton.com

FRANKLIN GLOBAL GOVERNMENT BOND FUND
YOUR FUND’S EXPENSES


		Beginning Account		Ending Account		Expenses Paid During
Share Class		Value 11/1/14		Value 4/30/15		*Period 11/1/14–4/30/15**
A
Actual	$	1,000	$	990.60	$	3.36
Hypothetical (5% return before expenses)	$	1,000	$	1,021.42	$	3.41
C
Actual	$	1,000	$	987.50	$	6.16
Hypothetical (5% return before expenses)	$	1,000	$	1,018.60	$	6.26
R
Actual	$	1,000	$	988.20	$	5.42
Hypothetical (5% return before expenses)	$	1,000	$	1,019.34	$	5.51
R6
Actual	$	1,000	$	990.80	$	2.96
Hypothetical (5% return before expenses)	$	1,000	$	1,021.82	$	3.01
Advisor
Actual	$	1,000	$	990.70	$	2.96
Hypothetical (5% return before expenses)	$	1,000	$	1,021.82	$	3.01

*Expenses are calculated using the most recent six-month expense ratio, net of expense waivers, annualized for each class (A: 0.68%;
C: 1.25%; R: 1.10%; R6: 0.60%; and Advisor: 0.60%), multiplied by the average account value over the period, multiplied by 181/365
to reflect the one-half year period.

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Annual Report

| 13


FRANKLIN STRATEGIC SERIES


Financial Highlights
Franklin Global Government Bond Fund
		Year Ended
		April 30,
		2015			2014	^a
Class A
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.45		$	10.00
Income from investment operations^b:
Net investment income^c		0.17			0.11
Net realized and unrealized gains (losses)		(0.24	)		0.47
Total from investment operations		(0.07	)		0.58
Less distributions from:
Net investment income and net realized foreign currency gains		(0.40	)		(0.13	)
Net realized gains		(0.17	)		—
Total distributions		(0.57	)		(0.13	)
Net asset value, end of year	$	9.81		$	10.45

Total return^d		(0.64	)%		5.81	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		2.37	%		3.22	%
Expenses net of waiver and payments by affiliates		0.64	%		0.57	%
Net investment income		1.63	%		1.62	%

Supplemental data
Net assets, end of year (000’s)	$	11,487		$	11,232
Portfolio turnover rate		60.28	%		13.24	%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.

14 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS


Franklin Global Government Bond Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class C
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.44		$	10.00
Income from investment operations^b:
Net investment income^c		0.10			0.08
Net realized and unrealized gains (losses)		(0.24	)		0.46
Total from investment operations		(0.14	)		0.54
Less distributions from:
Net investment income and net realized foreign currency gains		(0.34	)		(0.10	)
Net realized gains		(0.17	)		—
Total distributions		(0.51	)		(0.10	)
Net asset value, end of year	$	9.79		$	10.44

Total return^d		(1.34	)%		5.46	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		2.95	%		3.81	%
Expenses net of waiver and payments by affiliates		1.22	%		1.16	%
Net investment income		1.05	%		1.03	%

Supplemental data
Net assets, end of year (000’s)	$	292		$	156
Portfolio turnover rate		60.28	%		13.24	%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 15

FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS


Franklin Global Government Bond Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.44		$	10.00
Income from investment operations^b:
Net investment income^c		0.12			0.08
Net realized and unrealized gains (losses)		(0.23	)		0.47
Total from investment operations		(0.11	)		0.55
Less distributions from:
Net investment income and net realized foreign currency gains		(0.36	)		(0.11	)
Net realized gains		(0.17	)		—
Total distributions		(0.53	)		(0.11	)
Net asset value, end of year	$	9.80		$	10.44

Total return^d		(1.07	)%		5.52	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		2.82	%		3.66	%
Expenses net of waiver and payments by affiliates		1.09	%		1.01	%
Net investment income		1.18	%		1.18	%

Supplemental data
Net assets, end of year (000’s)	$	10		$	10
Portfolio turnover rate		60.28	%		13.24	%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.

16 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS


Franklin Global Government Bond Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Class R6
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.45		$	10.00
Income from investment operations^b:
Net investment income^c		0.18			0.11
Net realized and unrealized gains (losses)		(0.24	)		0.48
Total from investment operations		(0.06	)		0.59
Less distributions from:
Net investment income and net realized foreign currency gains		(0.41	)		(0.14	)
Net realized gains		(0.17	)		—
Total distributions		(0.58	)		(0.14	)
Net asset value, end of year	$	9.81		$	10.45

Total return^d		(0.62	)%		5.91	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		3.04	%		3.78	%
Expenses net of waiver and payments by affiliates		0.57	%		0.51	%
Net investment income		1.70	%		1.68	%

Supplemental data
Net assets, end of year (000’s)	$	10		$	10
Portfolio turnover rate		60.28	%		13.24	%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.

franklintempleton.com The accompanying notes are an integral part of these financial statements. | Annual Report | 17

FRANKLIN STRATEGIC SERIES
FINANCIAL HIGHLIGHTS


Franklin Global Government Bond Fund (continued)
		Year Ended
		April 30,
		2015			2014	^a
Advisor Class
Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year	$	10.49		$	10.00
Income from investment operations^b:
Net investment income^c		0.17			0.10
Net realized and unrealized gains (losses)		(0.24	)		0.52
Total from investment operations		(0.07	)		0.62
Less distributions from:
Net investment income and net realized foreign currency gains		(0.42	)		(0.13	)
Net realized gains		(0.17	)		—
Total distributions		(0.59	)		(0.13	)
Net asset value, end of year	$	9.83		$	10.49

Total return^d		(0.65	)%		6.24	%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		2.30	%		3.16	%
Expenses net of waiver and payments by affiliates		0.57	%		0.51	%
Net investment income		1.70	%		1.68	%

Supplemental data
Net assets, end of year (000’s)	$	10		$	10
Portfolio turnover rate		60.28	%		13.24	%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.
^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and
repurchases of the Fund shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.
^cBased on average daily shares outstanding.
^dTotal return is not annualized for periods less than one year.
^eRatios are annualized for periods less than one year.

18 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES


Statement of Investments, April 30, 2015

Franklin Global Government Bond Fund
		Principal
	Country	Amount*			Value
Foreign Government and Agency Securities 67.8%
Government of Canada, 2.75%, 6/01/22	Canada	300,000	CAD	$	273,541
Government of Chile, 3.875%, 8/05/20	Chile	100,000			110,158
^aGovernment of Finland, senior bond, Reg S, 2.00%, 4/15/24	Finland	350,000	EUR		447,346
Government of France,
2.25%, 5/25/24	France	150,000	EUR		193,771
1.75%, 11/25/24	France	290,000	EUR		360,230
Government of Germany, 1.50%, 2/15/23	Germany	375,000	EUR		462,574
^aGovernment of Indonesia, Reg S, 4.875%, 5/05/21	Indonesia	200,000			218,273
^aGovernment of Lithuania, senior note, Reg S, 6.625%, 2/01/22	Lithuania	200,000			246,661
Government of Malaysia,
3.197%, 10/15/15	Malaysia	800,000	MYR		224,653
senior bond, 4.24%, 2/07/18	Malaysia	650,000	MYR		186,915
senior note, 3.654%, 10/31/19	Malaysia	550,000	MYR		155,448
Government of Mexico,
7.75%, 12/14/17	Mexico	30,000^bMXN			211,571
8.00%, 12/07/23	Mexico	30,000^bMXN			223,560
senior bond, 5.95%, 3/19/19	Mexico	100,000			114,231
Government of Peru, senior bond, 6.55%, 3/14/37	Peru	200,000			265,919
Government of Poland,
4.00%, 10/25/23	Poland	650,000	PLN		200,515
3.25%, 7/25/25	Poland	900,000	PLN		263,633
5.75%, 4/25/29	Poland	800,000	PLN		297,874
Government of Singapore, 2.375%, 4/01/17	Singapore	350,000	SGD		271,040
^aGovernment of Spain, senior note, Reg S, 5.15%, 10/31/28	Spain	200,000	EUR		310,555
^aGovernment of the Netherlands, Reg S, 2.50%, 1/15/33	Netherlands	120,000	EUR		173,571
Italy Treasury Bond,
^aReg S, 3.50%, 3/01/30	Italy	400,000	EUR		538,135
senior bond, 5.50%, 9/01/22	Italy	250,000	EUR		365,347
^asenior bond, Reg S, 5.00%, 8/01/34	Italy	300,000	EUR		481,731
^aQueensland Treasury Corp.,
senior bond, Reg S, 5.75%, 7/22/24	Australia	350,000	AUD		335,146
senior note, Reg S, 6.00%, 7/21/22	Australia	300,000	AUD		285,736
^aUnited Kingdom Treasury Bond, Reg S, 4.00%, 9/07/16	United Kingdom	300,000	GBP		482,774
^aUnited Kingdom Treasury Note, Reg S, 2.00%, 7/22/20	United Kingdom	195,000	GBP		308,352
Total Foreign Government and Agency Securities
(Cost $8,291,425)					8,009,260
U.S. Government and Agency Securities 27.1%
U.S. Treasury Bond,
4.375%, 11/15/39	United States	500,000			651,758
^cIndex Linked, 3.375%, 4/15/32	United States	158,662			233,321
U.S. Treasury Note,
0.375%, 1/15/16	United States	200,000			200,281
1.00%, 8/31/16	United States	600,000			604,781
1.875%, 8/31/17	United States	500,000			513,477
2.625%, 11/15/20	United States	600,000			633,375

franklintempleton.com Annual Report | 19

FRANKLIN STRATEGIC SERIES
STATEMENT OF INVESTMENTS


Franklin Global Government Bond Fund (continued)
		Principal
	Country	Amount*		Value
U.S. Government and Agency Securities (continued)
U.S. Treasury Note, (continued)
^cIndex Linked, 2.00%, 1/15/16	United States	177,366	$	181,842
^cIndex Linked, 1.25%, 7/15/20	United States	161,420		175,796
Total U.S. Government and Agency Securities
(Cost $3,123,293)				3,194,631
Total Investments before Short Term Investments
(Cost $11,414,718)				11,203,891
Short Term Investments 5.2%
U.S. Government and Agency Securities (Cost $400,697) 3.4%
U.S. Treasury Note, 2.125%, 5/31/15	United States	400,000		400,703
Total Investments before Money Market Funds
(Cost $11,815,415)				11,604,594

		Shares
Money Market Funds (Cost $221,129) 1.8%
^d,eInstitutional Fiduciary Trust Money Market Portfolio	United States	221,129		221,129
Total Investments (Cost $12,036,544) 100.1%				11,825,723
Other Assets, less Liabilities (0.1)%				(17,406	)
Net Assets 100.0%			$	11,808,317

*The principal amount is stated in U.S. dollars unless otherwise indicated.
^aSecurity 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 April 30, 2015, the aggregate value of these
securities was $3,828,280, representing 32.42% of net assets.
^bPrincipal amount is stated in 100 Mexican Peso Units.
^cPrincipal amount of security is adjusted for inflation. See Note 1(e).
^dNon-income producing.
^eSee Note 3(f) regarding investments in Institutional Fiduciary Trust Money Market Portfolio.


At April 30, 2015, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts
					Contract	Settlement		Unrealized		Unrealized
Currency	Counterparty^a	Type	Quantity		Amount	Date		Appreciation		Depreciation
Australian Dollar	BZWS	Sell	760,000	$	592,906	6/09/15	$	—	$	(7,149	)
British Pound	RBCCM	Sell	520,000		767,480	6/09/15		—		(30,959	)
Euro	CITI	Sell	1,120,000		1,248,520	6/09/15		—		(8,847	)
Malaysian Ringgit	BZWS	Sell	2,000,000		542,962	6/09/15		—		(16,855	)
Polish Zloty	BZWS	Sell	2,900,000		771,174	6/09/15		—		(32,685	)
Net unrealized appreciation (depreciation)									$	(96,495	)
^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

See Abbreviations on page 33.

20 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES

Financial Statements

Statement of Assets and Liabilities
April 30, 2015


Franklin Global Government Bond Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	11,815,415
Cost - Sweep Money Fund (Note 3f)		221,129
Total cost of investments	$	12,036,544
Value - Unaffiliated issuers	$	11,604,594
Value - Sweep Money Fund (Note 3f)		221,129
Total value of investments		11,825,723
Foreign currency, at value (cost $15,354)		15,589
Receivables:
Capital shares sold		18
Interest		99,700
Other assets		7
Total assets		11,941,037
Liabilities:
Payables:
Distribution fees		932
Affiliates		25,858
Unrealized depreciation on forward exchange contracts		96,495
Accrued expenses and other liabilities		9,435
Total liabilities		132,720
Net assets, at value	$	11,808,317
Net assets consist of:
Paid-in capital	$	12,082,710
Undistributed net investment income		37,696
Net unrealized appreciation (depreciation)		(307,163	)
Accumulated net realized gain (loss)		(4,926	)
Net assets, at value	$	11,808,317

franklintempleton.com

The accompanying notes are an integral part of these financial statements. | Annual Report | 21

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Operations
for the year ended April 30, 2015


Franklin Global Government Bond Fund

Investment income:
Interest	$	274,134
Expenses:
Management fees (Note 3a)		78,411
Distribution fees: (Note 3c)
Class A		8,278
Class C		1,561
Class R		53
Transfer agent fees: (Note 3e)
Class A		2,901
Class C		59
Class R		3
Class R6		78
Advisor Class		3
Custodian fees (Note 4)		2,696
Reports to shareholders		13,102
Registration and filing fees		65,515
Professional fees		55,216
Amortization of offering costs		58,771
Other		996
Total expenses		287,643
Expenses waived/paid by affiliates (Note 3g)		(208,788	)
Net expenses		78,855
Net investment income		195,279
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		159,743
Foreign currency transactions		363,958
Net realized gain (loss)		523,701
Net change in unrealized appreciation (depreciation) on:
Investments		(745,463	)
Translation of other assets and liabilities denominated in foreign currencies		(71,279	)
Net change in unrealized appreciation (depreciation)		(816,742	)
Net realized and unrealized gain (loss)		(293,041	)
Net increase (decrease) in net assets resulting from operations	$	(97,762	)

franklintempleton.com

The accompanying notes are an integral part of these financial statements. | Annual Report | 23


FRANKLIN STRATEGIC SERIES
FINANCIAL STATEMENTS


Statements of Changes in Net Assets


Franklin Global Government Bond Fund

		Year Ended April 30,
		2015			2014	^a
Increase (decrease) in net assets:
Operations:
Net investment income	$	195,279		$	111,150
Net realized gain (loss) from investments and foreign currency transactions		523,701			(11,529	)
Net change in unrealized appreciation (depreciation) on investments and translation of other assets and
liabilities denominated in foreign currencies		(816,742	)		509,579
Net increase (decrease) in net assets resulting from operations		(97,762	)		609,200
Distributions to shareholders from:
Net investment income and net realized foreign currency gains:
Class A		(471,147	)		(132,443	)
Class C		(8,576	)		(625	)
Class R		(360	)		(109	)
Class R6		(406	)		(138	)
Advisor Class		(433	)		(454	)
Net realized gains:
Class A		(208,054	)		—
Class C		(5,007	)		—
Class R		(174	)		—
Class R6		(174	)		—
Advisor Class		(174	)		—
Total distributions to shareholders		(694,505	)		(133,769	)
Capital share transactions: (Note 2)
Class A		1,027,141			10,760,752
Class C		154,015			152,968
Class R		—			10,000
Class R6		—			10,000
Advisor Class		30			10,247
Total capital share transactions		1,181,186			10,943,967
Net increase (decrease) in net assets		388,919			11,419,398
Net assets:
Beginning of year		11,419,398			—
End of year	$	11,808,317		$	11,419,398
Undistributed net investment income (distributions in excess of net investment income) included in
net assets:
End of year	$	37,696		$	(9,958	)

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.

24 | Annual Report | The accompanying notes are an integral part of these financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements

Franklin Global Government Bond Fund

1. Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940, as amended, (1940 Act) as an open-end management investment company, consisting of nine separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Global Government Bond Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares differs by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at the NYSE close on the date that the values of the foreign debt securities are determined. Investments in open-end mutual funds are valued at the closing NAV.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VLOC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

a. Financial Instrument Valuation (continued)

between the time at which trading in a foreign security is completed and the close of the NYSE that might call into question the reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between the value of the Fund’s portfolio securities as determined at the foreign market close and the latest indications of value at the close of the NYSE. In order to minimize the potential for these differences, the VLOC 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 Depositary 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 that may call into question the reliability of the values of the foreign securities held by the Fund. If such an event occurs, the securities may be valued using fair value procedures, which may include the use of independent pricing services.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the NYSE is closed, which could result in differences between the value of the Fund’s portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Fund for financial reporting purposes.

b. Foreign Currency Translation

Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies against U.S. dollars on the date of valuation. The Fund may enter into foreign currency exchange contracts to facilitate transactions denominated in a foreign currency. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert 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 Board.

c. Derivative Financial Instruments

The Fund invested in 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 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/or the potential for market movements which expose the fund to gains or losses in excess of the amounts shown in the Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Statement of Operations.

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counterpar-ties. The Fund attempts to reduce its exposure to counterparty credit risk on OTC derivatives, whenever possible, by entering into International Swaps and Derivatives Association (ISDA) master agreements with certain counterparties. These agreements contain various provisions, including but not limited to collateral requirements, events of default, or early termination. Termination events applicable to the counterparty include certain deteriorations in the credit quality of the counterparty. Termination events applicable to the Fund include failure of

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

the Fund to maintain certain net asset levels and/or limit the decline in net assets over various periods of time. In the event of default or early termination, the ISDA master agreement gives the non-defaulting party the right to net and close-out all transactions traded, whether or not arising under the ISDA agreement, to one net amount payable by one counterparty to the other. However, absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities. Early termination by the counterparty may result in an immediate payment by the Fund of any net liability owed to that counter-party under the ISDA agreement. At April 30, 2015, the Fund had OTC derivatives in a net liability position for such contracts of $96,495.

Collateral requirements differ by type of derivative. Collateral terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of fund business each day and any additional collateral required due to changes in derivative values may be delivered by the fund or the counterparty within a few business days. Collateral pledged and/or received by the fund, if any, is held in segregated accounts with the fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives.

The Fund entered into OTC forward exchange contracts primarily to manage 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 at a specific exchange rate on a future date.

See Note 8 regarding other derivative information.

d. Income and Deferred Taxes

e. Security Transactions, Investment Income, Expenses and Distributions

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

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

e. Security Transactions, Investment Income, Expenses and Distributions (continued)

f. Offering Costs

Offering costs are amortized on a straight line basis over twelve months.

g. Accounting Estimates

h. Guarantees and Indemnifications

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

2. Shares of Beneficial Interest

At April 30, 2015, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


				Year Ended April 30,
				2015					2014	^a
	Shares			Amount		Shares					Amount

Class A Shares:
Shares sold	170,918		$	1,766,228		1,077,037		$	10,788,066
Shares issued in reinvestment of distributions	10,173			102,381		520					5,353
Shares redeemed	(84,154	)		(841,468	)	(3,189	)				(32,667	)
Net increase (decrease)	96,937		$	1,027,141		1,074,368		$	10,760,752
Class C Shares:
Shares sold	28,174		$	290,140		14,871			$		152,447
Shares issued in reinvestment of distributions	1,297			13,025		51					521
Shares redeemed	(14,615	)		(149,150	)	—					—
Net increase (decrease)	14,856		$	154,015		14,922			$		152,968
Class R Shares^b:
Shares sold						1,000			$		10,000
Class R6 Shares^b:
Shares sold						1,000			$		10,000

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				FRANKLIN STRATEGIC SERIES
				NOTES TO FINANCIAL STATEMENTS



Franklin Global Government Bond Fund (continued)

				Year Ended April 30,
				2015				2014	^a
	Shares			Amount		Shares				Amount
Advisor Class Shares:
Shares sold	280		$	2,800		5,902		$		60,000
Shares issued in reinvestment of distributions	1			9		32				323
Shares redeemed	(281	)		(2,779	)	(4,934	)			(50,076	)
Net increase (decrease)	—		$	30		1,000		$		10,247

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.
^bDuring the year Class R and Class R6 did not report any share transactions.

3. Transactions with Affiliates

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


Subsidiary	Affiliation
Franklin Templeton Investment Management Limited (FTIML)	Investment manager
Franklin Templeton Services, LLC (FT Services)	Administrative manager
Franklin Templeton Distributors, Inc. (Distributors)	Principal underwriter
Franklin Templeton Investor Services, LLC (Investor Services)	Transfer agent

a. Management Fees

The Fund pays an investment management fee to FTIML based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.650	%	Up to and including $1 billion
0.600	%	Over $1 billion up to and including $5 billion
0.550	%	Over $5 billion up to and including $10 billion
0.545	%	Over $10 billion up to and including $15 billion
0.540	%	Over $15 billion up to and including $20 billion
0.535	%	Over $20 billion

b. Administrative Fees

Under an agreement with FTIML, FT Services provides administrative services to the Fund. The fee is paid by FTIML based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

c. Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Distribution fees are not charged on shares held by affiliates. Under the Fund’s Class A reimbursement distribution plan, the Fund reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate. Under the Class A reimbursement distribution plan, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Fund’s Class C and R compensation distribution plans, the Fund pays Distributors for costs incurred in connection with the servicing, sale and distribution of the Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

3. Transactions with Affiliates (continued)

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


Class A	0.25	%
Class C	0.65	%
Class R	0.50	%

d. Sales Charges/Underwriting Agreements


Sales charges retained net of commissions paid to unaffiliated broker/dealers	$	4,547
CDSC retained	$	94

e. Transfer Agent Fees

For the year ended April 30, 2015, the Fund paid transfer agent fees of $3,044, of which $2,245 was retained by Investor Services.

f. Investments in Institutional Fiduciary Trust Money Market Portfolio

The Fund invests in Institutional Fiduciary Trust Money Market Portfolio (Sweep Money Fund), an affiliated open-end management investment company. Management fees paid by the Fund are waived on assets invested in the Sweep Money Fund, in an amount not to exceed the management and administrative fees paid directly or indirectly by the Sweep Money Fund.

g. Waiver and Expense Reimbursements

FTIML and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for each class of the Fund do not exceed 0.60% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until August 31, 2015.

h. Other Affiliated Transactions

At April 30, 2015, Franklin Resources, Inc., an affiliate of FTIML, owned 83.05% of the Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.

4. Expense Offset Arrangement

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any.

During the year ended April 30, 2015, the Fund utilized $1,540 of capital loss carryforwards.

The tax character of distributions paid during the years ended April 30, 2015 and 2014, was as follows:


		2015		2014
Distributions paid from:
Ordinary income	$	640,218	$	133,769
Long term capital gain		54,287		—
	$	694,505	$	133,769


Cost of investments	$	12,132,689

Unrealized appreciation	$	175,488
Unrealized depreciation		(482,454	)
Net unrealized appreciation (depreciation)	$	(306,966	)

Undistributed ordinary income	$	67,367
Undistributed long term capital gains		8,510
Distributable earnings	$	75,877

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatment of bond discounts and premiums, foreign currency transactions, and offering costs.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2015, aggregated $8,283,113 and $6,832,595, respectively.

7. Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

8. Other Derivative Information

At April 30, 2015, the Fund’s investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:


	Asset Derivatives		Liability Derivatives
Derivative Contracts
Not Accounted for as	Statement of Assets and		Statement of Assets and
Hedging Instruments	Liabilities Location	Fair Value	Liabilities Location		Fair Value
Foreign exchange contracts	Unrealized appreciation on forward		Unrealized depreciation on forward
	exchange contracts	$ —	exchange contracts	$	96,495

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

8. Other Derivative Information (continued)

For the year ended April 30, 2015, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:


					Change in
					Unrealized
Derivative Contracts			Realized		Appreciation
Not Accounted for as			Gain (Loss)		(Depreciation)
Hedging Instruments	Statement of Operations Locations		for the Year		for the Year
Foreign exchange contracts	Net realized gain (loss) from foreign currency
	transactions / Net change in unrealized appreciation
	(depreciation) on translation of other assets and
	liabilities denominated in foreign currencies	$	395,824	$	(71,121	)

For the year ended April 30, 2015, the average month end fair value of derivatives represented 0.73% of average month end net assets. The average month end number of open derivative contracts for the year was 4.

See Note 1(c) regarding derivative financial instruments.

9. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which, matures on February 12, 2016. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

10. Fair Value Measurements

Level 1 – quoted prices in active markets for identical financial instruments
Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing the transfers as of the date of the underlying event which caused the movement.

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FRANKLIN STRATEGIC SERIES
NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

A summary of inputs used as of April 30, 2015, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


		Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Foreign Government and Agency Securities	$	—	$	8,009,260	$	—	$	8,009,260
U.S. Government and Agency Securities		—		3,194,631		—		3,194,631
Short Term Investments		221,129		400,703		—		621,832
Total Investments in Securities	$	221,129	$	11,604,594	$	—	$	11,825,723
Liabilities:
Other Financial Instruments
Forward Exchange Contracts	$	—	$	96,495	$	—	$	96,495

11. New Accounting Pronouncements

12. Subsequent Events

The Fund evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure.


Abbreviations
Counterparty		Currency
BZWS	Barclays Bank PLC	AUD	Australian Dollar
CITI	Citigroup, Inc.	CAD	Canadian Dollar
RBCCM	Royal Bank of Canada	EUR	Euro
		GBP	British Pound
		MXN	Mexican Peso
		MYR	Malaysian Ringgit
		PLN	Polish Zloty
		SGD	Singapore Dollar

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FRANKLIN STRATEGIC SERIES

Report of Independent Registered Public Accounting Firm

To the Board of Trustees and Shareholders of Franklin Global Government Bond Fund

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Franklin Global Government Bond Fund (the “Fund”) at April 30, 2015, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at April 30, 2015 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California
June 15, 2015

34 | Annual Report

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FRANKLIN STRATEGIC SERIES

Board Members and Officers


Independent Board Members

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Harris J. Ashton (1932)	Trustee	Since 1991	145	Bar-S Foods (meat packing company)
One Franklin Parkway				(1981-2010).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950)	Trustee	Since	119	Avis Budget Group Inc. (car rental)
One Franklin Parkway		October 2014		(2007-present), Omnicom Group Inc.
San Mateo, CA 94403-1906				(advertising and marketing communi-
				cations services) (2011-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1998-2006).

Principal Occupation During at Least the Past 5 Years:
Founding Partner and Senior Managing Director, Strategic Investment Group (investment management group) (1987-present); director of
various companies; and formerly, Founding Partner and Managing Director, Emerging Markets Management LLC (investment management
firm) (1987-2011); and Loan Officer/Senior Loan Officer/Senior Pension Investment Officer, World Bank Group (international financial
institution) (1977-1987).

Edith E. Holiday (1952)	Trustee	Since 1998	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1993-present),
San Mateo, CA 94403-1906				RTI International Metals, Inc. (manu-
				facture and distribution of titanium)
				(1999-present), Canadian National
				Railway (railroad) (2001-present),
				White Mountains Insurance Group, Ltd.
				(holding company) (2004-present) and
				H.J. Heinz Company (processed foods
				and allied products) (1994-2013).
Principal Occupation During at Least the Past 5 Years:
Director or Trustee of various companies and trusts; and formerly, Assistant to the President of the United States and Secretary of the
Cabinet (1990-1993); General Counsel to the United States Treasury Department (1989-1990); and Counselor to the Secretary and Assistant
Secretary for Public Affairs and Public Liaison – United States Treasury Department (1988-1989).

J. Michael Luttig (1954)	Trustee	Since 2009	145	Boeing Capital Corporation
One Franklin Parkway				(aircraft financing) (2006-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Executive Vice President, General Counsel and member of the Executive Council, The Boeing Company (aerospace company); and
formerly, Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).

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FRANKLIN STRATEGIC SERIES


Independent Board Members (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Frank A. Olson (1932)	Trustee	Since 2007	145	Hess Corporation (exploration and
One Franklin Parkway				refining of oil and gas) (1998-2013).
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Chairman of the Board, The Hertz Corporation (car rental) (1980-2000) and Chief Executive
Officer (1977-1999); and Chairman of the Board, President and Chief Executive Officer, UAL Corporation (airlines) (June-December 1987).

Larry D. Thompson (1945)	Trustee	Since 2007	145	Cbeyond, Inc. (business commu-
One Franklin Parkway				nications provider) (2010-2012),
San Mateo, CA 94403-1906				The Southern Company (energy
				company) (December 2014;
				previously 2010-2012) and Graham
				Holdings Company (education and
				media organization) (2011-present).
Principal Occupation During at Least the Past 5 Years:
Director of various companies; John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (January 2015;
previously 2011-2012); and formerly, Executive Vice President – Government Affairs, General Counsel and Corporate Secretary, PepsiCo,
Inc. (consumer products) (2012-2014); Senior Vice President – Government Affairs, General Counsel and Secretary, PepsiCo, Inc.
(2004-2011); Senior Fellow of The Brookings Institution (2003-2004); Visiting Professor, University of Georgia School of Law (2004); and
Deputy Attorney General, U.S. Department of Justice (2001-2003).

John B. Wilson (1959)	Lead	Trustee since	119	None
One Franklin Parkway	Independent	2006 and Lead
San Mateo, CA 94403-1906	Trustee	Independent
		Trustee since 2008

Principal Occupation During at Least the Past 5 Years:
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity
investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail)
(1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President –
Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm)
(1986-1990).




Interested Board Members and Officers

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Gregory E. Johnson (1961)	Trustee	Since June 2013	162	None
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director, President and Chief Executive Officer, Franklin Resources, Inc.; officer
and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 46 of the investment
companies in Franklin Templeton Investments; and Vice Chairman, Investment Company Institute.

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FRANKLIN STRATEGIC SERIES




Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

**Rupert H. Johnson, Jr. (1940) Chairman of		Chairman of	145	None
One Franklin Parkway	the Board and	the Board since
San Mateo, CA 94403-1906	Trustee	2013 and Trustee
		since 1991
Principal Occupation During at Least the Past 5 Years:
Vice Chairman, Member – Office of the Chairman and Director, Franklin Resources, Inc.; Director, Franklin Advisers, Inc.; Senior Vice
President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries
of Franklin Resources, Inc. and of 43 of the investment companies in Franklin Templeton Investments.

Alison E. Baur (1964)	Vice President	Since 2012	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of
46 of the investment companies in Franklin Templeton Investments.

Laura F. Fergerson (1962)	Chief Executive Since 2009		Not Applicable	Not Applicable
One Franklin Parkway	Officer –
San Mateo, CA 94403-1906	Finance and
	Administration
Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Gaston Gardey (1967)	Treasurer,	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway	Chief Financial
San Mateo, CA 94403-1906	Officer and
	Chief
	Accounting
	Officer
Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Products and Client Services, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin
Templeton Investments.

Aliya S. Gordon (1973)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; officer of 46 of the investment companies in Franklin Templeton
Investments; and formerly, Litigation Associate, Steefel, Levitt & Weiss, LLP (2000-2004).

Steven J. Gray (1955)	Vice President	Since 2009	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc. and Franklin
Alternative Strategies Advisers, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

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FRANKLIN STRATEGIC SERIES


Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Selena L. Holmes (1965)	Vice President	Since 2012	Not Applicable	Not Applicable
100 Fountain Parkway	– AML
St. Petersburg, FL 33716-1205	Compliance
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance Monitoring; Chief Compliance Officer, Franklin Alternative Strategies Advisers, LLC; Vice President, Franklin
Templeton Companies, LLC; and officer of 46 of the investment companies in Franklin Templeton Investments.

Edward B. Jamieson (1948)	President and	Since 2010	Not Applicable	Not Applicable
One Franklin Parkway	Chief Executive
San Mateo, CA 94403-1906	Officer –
	Investment
	Management

Principal Occupation During at Least the Past 5 Years:
President, Chief Investment Officer and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC;
and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment
companies in Franklin Templeton Investments.

Christopher J. Molumphy (1962) Vice President		Since 2000	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Director and Executive Vice President, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer
of some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.

Kimberly H. Novotny (1972)	Vice President	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923
Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton Investments; Vice President and Secretary, Fiduciary Trust International of the South; Vice
President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 46 of the investment companies
in Franklin Templeton Investments.

Robert C. Rosselot (1960)	Chief	Since 2013	Not Applicable	Not Applicable
300 S.E. 2nd Street	Compliance
Fort Lauderdale, FL 33301-1923	Officer
Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton Investments; Vice President, Franklin Templeton Companies, LLC; officer of 46 of the
investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments
(2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952)	Vice President	Since 2006	Not Applicable	Not Applicable
One Franklin Parkway	and Secretary
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 46 of the investment companies in Franklin Templeton
Investments.

franklintempleton.com Annual Report | 39

FRANKLIN STRATEGIC SERIES


Interested Board Members and Officers (continued)

			Number of Portfolios in
Name, Year of Birth		Length of	Fund Complex Overseen	Other Directorships Held
and Address	Position	Time Served	by Board Member*	During at Least the Past 5 Years

Craig S. Tyle (1960)	Vice President	Since 2005	Not Applicable	Not Applicable
One Franklin Parkway
San Mateo, CA 94403-1906
Principal Occupation During at Least the Past 5 Years:
General Counsel and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources,
Inc. and of 46 of the investment companies in Franklin Templeton Investments.

Lori A. Weber (1964)	Vice President	Since 2011	Not Applicable	Not Applicable
300 S.E. 2nd Street
Fort Lauderdale, FL 33301-1923

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and
Secretary, Templeton Investment Counsel, LLC; Vice President, Fiduciary Trust International of the South; and officer of 46 of the investment
companies in Franklin Templeton Investments.

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FRANKLIN STRATEGIC SERIES

FRANKLIN GLOBAL GOVERNMENT BOND FUND

Shareholder Information

Board Review of Investment Management Agreement

At a meeting held April 14, 2015, the Board of Trustees (Board), including a majority of non-interested or independent Trustees, approved renewal of the investment management agreement for each of the separate funds within the Trust, including Franklin Global Government Bond Fund (Fund(s)). In reaching this decision, the Board took into account information furnished throughout the year at regular Board meetings, as well as information prepared specifically in connection with the annual renewal review process. Information furnished and discussed throughout the year included investment performance reports and related financial information for the Funds, along with periodic reports on expenses, shareholder services, legal and compliance matters, pricing, brokerage commissions and execution and other services provided by the Investment Manager (Manager) and its affiliates, as well as marketing support payments made to financial intermediaries. Information furnished specifically in connection with the renewal process included a report for each Fund prepared by Lipper, Inc. (Lipper), an independent organization, as well as additional material, including a Fund profitability analysis prepared by management. The Lipper reports compared each Fund’s investment performance and expenses with those of other mutual funds deemed comparable to the Fund as selected by Lipper. The Fund profitability analysis discussed the profitability to Franklin Templeton Investments (FTI) from its overall U.S. fund operations, as well as on an individual fund-by-fund basis. Additional material accompanying such profitability analysis included information on a fund-by-fund basis listing portfolio managers and other accounts they manage, as well as information on management fees charged by the Manager and its affiliates to U.S. mutual funds and other accounts, including management’s explanation of differences where relevant. Such material also included a memorandum prepared by management describing project initiatives and capital investments relating to the services provided to the Funds by the FTI organization, as well as a memorandum relating to economies of scale and an analysis concerning transfer agent fees charged by an affiliate of the Manager. The Board also noted that at the February meetings each year, it receives an annual report on all marketing support payments made by FTI to financial intermediaries.

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Annual Report

| 41

FRANKLIN STRATEGIC SERIES

FRANKLIN GLOBAL GOVERNMENT BOND FUND

SHAREHOLDER INFORMATION

Board Review of Investment Management

Agreement (continued) changes taking place in the nature of transfer agency services throughout the industry and regulatory initiatives in this area, and the continual enhancements to the Franklin Templeton website. Particular attention was given to management’s conservative approach and diligent risk management procedures, including continual monitoring of counterparty credit risk and attention given to derivatives and other complex instruments, including expanded collateralization requirements. The Board also took into account, among other things, management’s efforts in establishing a global credit facility for the benefit of the Fund and other accounts managed by FTI to provide a source of cash for temporary and emergency purposes or to meet unusual redemption requests as well as the strong financial position of the Manager’s parent company and its commitment to the mutual fund business as evidenced by its continued subsidization of money market funds.

While recognizing such inherent limitation and the fact that expense ratios generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Lipper to be an appropriate measure of comparative expenses. In reviewing comparative costs, Lipper provides information on the Fund’s contractual investment management fee in comparison with the investment management fee that would have been charged by other funds within its Lipper expense group assuming they were similar in size to the Fund, as well as the actual total expense ratio of the Fund in comparison with those of its Lipper expense group. The Lipper contractual investment management fee analysis includes administrative charges as being part of the investment management fee, and actual total expenses, for comparative consistency, are shown by Lipper for Fund Class A shares. The results of such expense comparisons showed the contractual investment management fee rate for the Fund was in the second most expensive quintile of its Lipper expense group, while its actual total expense ratio was in the least expensive quintile of such expense group. The Board found the contractual management fee rate and total expense ratio of the Fund to be acceptable, noting that the total expenses were subsidized by management.

MANAGEMENT PROFITABILITY. The Board also considered the level of profits realized by the Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board reviewed the Fund profitability analysis that addresses the overall profitability of Franklin Templeton’s U.S. fund business, as well as its profits in providing management and other services to each of the individual funds during the 12-month period ended September 30, 2014, being the most recent fiscal year-end for Franklin Resources, Inc., the Manager’s parent. In reviewing the analysis, the Board recognized that allocation methodologies are inherently subjective and various allocation methodologies may be reasonable while producing different results. In this respect, the Board noted that while management continually makes refinements to its methodologies in response to organizational and product related changes, the overall approach as defined by the primary drivers and activity measurements has remained consistent with that used in the Fund’s profitability report presentations from prior years. Additionally, the Fund’s independent registered public accounting firm had been engaged by the Manager to periodically review the reasonableness of the allocation methodologies to be used solely by the Fund’s Board in reference to the profitability analysis. In reviewing and discussing such analysis, management discussed with the Board its belief that costs incurred in establishing the infrastructure necessary

42 | Annual Report

franklintempleton.com

FRANKLIN STRATEGIC SERIES

FRANKLIN GLOBAL GOVERNMENT BOND FUND

SHAREHOLDER INFORMATION

for the type of mutual fund operations conducted by the Manager and its affiliates may not be fully reflected in the expenses allocated to the Fund in determining its profitability, as well as the fact that the level of profits, to a certain extent, reflected operational cost savings and efficiencies initiated by management. The Board also took into account management’s expenditures in improving shareholder services provided the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from statutes such as the Sarbanes-Oxley and Dodd-Frank Acts and recent SEC and other regulatory requirements. In addition, the Board considered a third-party study comparing the profitability of the Manager’s parent on an overall basis to other publicly held managers broken down to show profitability from management operations exclusive of distribution expenses, as well as profitability including distribution expenses. The Board also considered the extent to which the Manager and its affiliates might derive ancillary benefits from fund operations, including revenues generated from transfer agent services, potential benefits resulting from personnel and systems enhancements necessitated by fund growth, as well as increased leverage with the service providers and counterparties. Based upon its consideration of all these factors, the Board determined that the level of profits realized by the Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, quality and extent of services provided.

Proxy Voting Policies and Procedures

Quarterly Statement of Investments

Householding of Reports and Prospectuses

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| 43

Item 2. Code of Ethics.

(a) The Registrant has adopted a code of ethics that applies to its principal executive officers and principal financial and accounting officer.

(d) N/A

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

Item 3. Audit Committee Financial Expert.

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

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

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $452,420 for the fiscal year ended April 30, 2015 and $418,227 for the fiscal year ended April 30, 2014.

(b) Audit-Related Fees

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4.

There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.

There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning were $0 for the fiscal year ended April 30, 2015 and $6,930 for the fiscal year ended April 30, 2014. The services for which these fees were paid included technical tax consultation for capital gain tax and withholding tax reporting for foreign governments and requirements on local country’s self-certification forms.

(d) All Other Fees

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant not reported in paragraphs (a)-(c) of Item 4 were $0 for the fiscal year ended April 30, 2015 and $6,258 for the fiscal year ended April 30, 2014. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process.

The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant other than services reported in paragraphs (a)-(c) of Item 4 were $3,519 for the fiscal year ended April 30, 2015 and $155,553 for the fiscal year ended April 30, 2014. The services for which these fees were paid included review of materials provided to the fund Board in connection with the investment management contract renewal process and XBRL tagging on financial statements.

(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:

(i) pre-approval of all audit and audit related services;

(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;

(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and

(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.

(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.

(f) No disclosures are required by this Item 4(f).

(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $3,519 for the fiscal year ended April 30, 2015 and $168,741 for the fiscal year ended April 30, 2014.

(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants. N/A

Item 6. Schedule of Investments. N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.

Item 11. Controls and Procedures.

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

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

(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Laura F. Fergerson, Chief Executive Officer - Finance and Administration, and Gaston Gardey, Chief Financial Officer and 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 June 25, 2015

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 June 25, 2015

By /s/Gaston Gardey

Gaston Gardey

Chief Financial Officer and

Chief Accounting Officer

Date June 25, 2015


Contents

Shareholder Letter	1
Annual Report
Economic and Market Overview	3
Franklin Flex Cap Growth Fund	4
Franklin Focused Core
Equity Fund	14
Franklin Growth Opportunities Fund	24
Franklin Small Cap Growth Fund	34
Franklin Small-Mid Cap
Growth Fund	44
Financial Highlights and
Statements of Investments	54
Financial Statements	94
Notes to Financial Statements	103
Report of Independent Registered
Public Accounting Firm	118
Tax Information	119
Board Members and Officers	120
Shareholder Information	125


Contents

Annual Report
Franklin Global
Government Bond Fund	3
Performance Summary	7
Your Fund’s Expenses	12
Financial Highlights and
Statement of Investments	14
Financial Statements	21
Notes to Financial Statements	25
Report of Independent Registered
Public Accounting Firm	34
Tax Information	35
Board Members and Officers	36
Shareholder Information	41