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N-CSR 1 d753543dncsr.htm FRANKLIN STRATEGIC SERIES FRANKLIN STRATEGIC SERIES

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: 4/30/19

Item 1. Reports to Stockholders.

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Internet Delivery of Fund Reports Unless You Request Paper Copies: Effective January 1, 2021, as permitted by the SEC, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request them from the Fund or your financial intermediary. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. If you have not signed up for electronic delivery, we would encourage you to join fellow shareholders who have. You may elect to receive shareholder reports and other communications electronically from the Fund by calling (800) 632-2301 or by contacting your financial intermediary.

You may elect to continue to receive paper copies of all your future shareholder reports free of charge by contacting your financial intermediary or, if you invest directly with a Fund, calling (800) 632-2301 to let the Fund know of your request. Your election to receive reports in paper will apply to all funds held in your account.

Franklin Templeton

Successful investing begins with ambition. And achievement only comes when you reach for it. That’s why we continually strive to deliver better outcomes for investors. No matter what your goals are, our deep, global investment expertise allows us to offer solutions that can help.

During our more than 70 years of experience, we’ve managed through all kinds of markets—up, down and those in between. We’re always preparing for what may come next. It’s because of this, combined with our strength as one of the world’s largest asset managers that we’ve earned the trust of millions of investors around the world.

Dear Shareholder:

During the 12 months ended April 30, 2019, the U.S. economy continued to grow amid positive economic data and corporate earnings, and the unemployment rate declined.

In April 2019, the Standard & Poor’s 500^® Index (S&P 500^®) reached an all-time high after declining in 2018’s fourth quarter. During the period, markets reflected concerns about the U.S. Federal Reserve’s (Fed’s) interest-rate path, U.S. political uncertainties and U.S.-China trade disputes, but these concerns were mitigated by the Fed’s patient monetary policy stance and investor optimism about a trade deal. Within this environment, U.S. stocks, as measured by the S&P 500, generated a double-digit percentage positive total return for the 12-month period.

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.

We believe active, professional investment management serves investors well. We also recognize the important role of financial advisors in today’s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook should be well positioned for the years ahead.

In addition, Franklin Strategic Series’ annual report includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.

We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs.

Sincerely,

LOGO

Edward Perks, CFA

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

This letter reflects our analysis and opinions as of April 30, 2019, unless otherwise indicated. 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.

CFA^® is a trademark owned by CFA Institute.


		Not FDIC Insured \| May Lose Value \| No Bank Guarantee



franklintempleton.com	Not part of the annual report	1

Contents


Annual Report

Economic and Market Overview			3

Franklin Growth Opportunities Fund			4

Franklin Select U.S. Equity Fund			11

Franklin Small Cap Growth Fund			18

Franklin Small-Mid Cap Growth Fund			25

Financial Highlights and Statements of Investments			32

Financial Statements			65

Notes to Financial Statements			71

Report of Independent Registered Public Accounting Firm			90

Tax Information			91

Board Members and Officers			92

Shareholder Information			96

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.



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Annual Report

Economic and Market Overview

The U.S. economy grew during the 12-month period. The economy expanded at a faster rate in 2019’s first quarter after moderating in the previous two quarters. Growth in consumer spending, inventory investment, exports, state and local government spending and business investment was partly offset by declines in housing investment and federal government spending. The manufacturing and services sectors expanded during the period. The unemployment rate decreased from 3.9% in April 2018 to 3.6% at period-end.¹ The annual inflation rate, as measured by the Consumer Price Index, decreased from 2.5% in April 2018 to 2.0% at period-end.¹

The U.S. Federal Reserve (Fed) raised its target range for the federal funds rate by 0.25% three times during the period, to 2.25%–2.50%, and continued reducing its balance sheet as part of its plan to normalize monetary policy. At its March 2019 meeting, the Fed held its target range for the federal funds rate unchanged and signaled no rate hike in 2019. The Fed also lowered its forecasts for economic growth in 2019 and 2020. Furthermore, the Fed mentioned it would end its balance sheet normalization by the end of September 2019.

U.S. equity markets overall rose during the period, benefiting from upbeat economic data and better U.S. corporate earnings. However, markets reflected concerns about tighter regulation of technology companies, the Fed’s interest-rate path, U.S. political uncertainties, and the impact of U.S. trade disputes with China and other trading partners on global growth and corporate earnings. These concerns were partially alleviated by easing trade tensions and optimism about a potential U.S.-China trade deal. Markets also benefited from the Fed’s indications of a patient approach to its monetary policy decisions. The broad U.S. stock market, as measured by the Standard & Poor’s 500 Index (S&P 500), sold off sharply in 2018’s fourth quarter but rallied in 2019’s first four months, reaching a new all-time high in April 2019. Overall, the S&P 500 posted a +13.49% total return for the 12-month period.²

The foregoing information reflects our analysis and opinions as of April 30, 2019. 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.

2. Source: Morningstar.

See www.franklintempletondatasources.com for additional data provider information.



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Franklin Growth Opportunities Fund

This annual report for Franklin Growth Opportunities Fund covers the fiscal year ended April 30, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation by investing, under normal conditions, predominantly in equity securities of companies demonstrating accelerating growth, increasing profitability, or above-average growth or growth potential as compared with the overall economy.

Performance Overview

The Fund’s Class A shares posted a +15.91% cumulative total return for the 12 months under review. In comparison, the Fund’s narrow benchmark, the Russell 3000^® Growth Index, which measures performance of Russell 3000^® Index companies with relatively higher price-to-book ratios and higher forecasted growth values, posted a +16.61% total return.¹ The Fund’s broad benchmark, the Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, posted a +13.49% total return.¹ You 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

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

Portfolio Composition

Based on Total Net Assets as of 4/30/19

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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, nearly all sectors represented in the Fund’s portfolio posted positive returns and contributed to absolute performance. Relative to the Russell 3000^® Growth Index, key contributors to the Fund’s performance included stock selection and an overweighting in the information technology (IT) sector, stock selection in the

1. Source: Morningstar.

Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell^® is a trademark of Frank Russell Company.

The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. 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 37.



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FRANKLIN GROWTH OPPORTUNITIES FUND

industrials sector, and stock selection and an underweighting in the materials sector.

In the IT sector, our investments in ServiceNow, Mastercard and Zendesk boosted relative results. ServiceNow, a provider of cloud-based services that enable companies to become more automated and efficient, continues to execute well in its large addressable market. A leader in enabling digital transformation, the company is becoming a multi-platform growth business with a strong product line, in our analysis. The recently introduced pro version of a core offering comes at a price premium we believe could drive revenue and billings growth. Payment solutions provider Mastercard continues to perform very well, exceeding expectations and announcing several growth initiatives, partnerships, acquisition of capabilities that expand its global network, investment in emerging regions and expansion into new payment flows. The company has shown an ability to both invest for the long term and deliver solid quarter-to-quarter execution, which we believe is supported by a strong organic growth profile. Customer service platform provider Zendesk saw solid momentum moving upmarket selling into enterprise clients and benefited from increased attach rates of its newer customer support offerings as it began to market the Zendesk Suite in bundle form in 2018’s second quarter. We believe the company’s addition of a sales automation software through an acquisition and its launch of a client relationship management platform for custom app development position the company to expand its total addressable market.

Notable contributors in the industrials and materials sectors included holdings in real estate information and marketing company CoStar Group and specialty chemicals and carbon materials manufacturer Ingevity, respectively.

Elsewhere, our position in MSCI, a provider of investment decision support tools, including indexes and portfolio risk and performance analytics, aided relative results.

In contrast, key detractors from the Fund’s relative performance included stock selection in the consumer staples, communication services and consumer discretionary sectors, as well as an underweighting in the communication services sector.

Within consumer staples, our position in Constellation Brand, which produces, markets and distributes beverage alcohol products, hurt relative results. In communication services, social media company Facebook’s shares advanced, and our underweighted position hindered relative performance. In

Top 10 Holdings

4/30/19


Company *Sector/Industry*	% of Total Net Assets
Amazon.com Inc.		7.8%
Consumer Discretionary
Mastercard Inc.		5.3%
Information Technology
Microsoft Corp.		5.2%
Information Technology
Visa Inc.		4.0%
Information Technology
Alphabet Inc.		3.9%
Communication Services
Apple Inc.		2.9%
Information Technology
ServiceNow Inc.		2.8%
Information Technology
SBA Communications Corp.		2.6%
Real Estate
CoStar Group Inc.		2.2%
Industrials
Adobe Inc.		2.1%
Information Technology

consumer discretionary, our holding in casino resorts operator Wynn Resorts (not held at period-end) dampened relative results.

Other key individual detractors included positions in defense and security solutions manufacturer Raytheon, education technology company 2U and biotechnology firm Heron Therapeutics. Raytheon’s shares declined in 2018 along with other large-capitalization defense stocks after tensions eased between the U.S. and North Korea and as many investors worried about potential defense budget cuts. However, easing defense budget concerns helped drive defense stocks higher in 2019’s first four months. We believe the company has a better portfolio than its peers, with a focus on digital capabilities, and it has a strong position on missile defense. After reaching an all-time high early in the period, 2U’s share price declined due to investor concerns about competition and slowing growth.



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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.


		Grant Bowers Lead Portfolio Manager

		Sara Araghi, CFA

		Portfolio Management Team

The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2019, 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.



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FRANKLIN GROWTH OPPORTUNITIES FUND

Performance Summary as of April 30, 2019

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. 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.

Performance as of 4/30/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


Share Class	Cumulative Total Return²	Average Annual Total Return³
A⁴
1-Year	+15.91%	+9.52%
5-Year	+81.60%	+11.41%
10-Year	+321.57%	+14.82%

Advisor
1-Year	+16.16%	+16.16%
5-Year	+83.97%	+12.97%
10-Year	+333.13%	+15.79%

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.

See page 9 for Performance Summary footnotes.



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FRANKLIN GROWTH OPPORTUNITIES FUND

PERFORMANCE SUMMARY

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

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index.

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See page 9 for Performance Summary footnotes.



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FRANKLIN GROWTH OPPORTUNITIES FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–4/30/19)


Share Class	Long-Term Capital Gain
A		$4.1650
C		$4.1650
R		$4.1650
R6		$4.1650
Advisor		$4.1650

Total Annual Operating Expenses⁶


Share Class	With Fee Waiver		Without Fee Waiver
A		0.99%		0.99%
Advisor		0.74%		0.74%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

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. 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. 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. 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.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the fee waiver; without this waiver, 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. Return for less than one year, if any, has not been annualized.

4. Prior to 9/10/18, these shares were offered at a higher initial sales charge of 5.75%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 5.50%.

5. Source: Morningstar. The Russell 3000 Growth Index is market capitalization weighted and measures performance of those Russell 3000 Index companies with relatively higher price-to-book ratios and higher forecasted growth values. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

6. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.



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FRANKLIN GROWTH OPPORTUNITIES FUND

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below 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 table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

Under the heading “Hypothetical” in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading “Hypothetical” is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher.


		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,148.10	$5.01	$1,020.13	$4.71	0.94%
C	$1,000	$1,144.30	$9.04	$1,016.36	$8.50	1.70%
R	$1,000	$1,146.90	$6.28	$1,018.94	$5.91	1.18%
R6	$1,000	$1,149.40	$3.09	$1,021.92	$2.91	0.58%
Advisor	$1,000	$1,149.10	$3.68	$1,021.37	$3.46	0.69%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period.

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



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Franklin Select U.S. Equity Fund

Formerly, Franklin Focused Core Equity Fund

This annual report for Franklin Select U.S. Equity Fund covers the fiscal year ended April 30, 2019. As previously communicated, effective June 1, 2018, the Fund changed its investment strategy, but its goal remained the same.

Your Fund’s Goal and Main Investments

The Fund seeks capital appreciation by investing, under normal market conditions, at least 80% of its net assets in U.S. equity securities. The Fund 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

The Fund’s Class A shares posted a +10.72% cumulative total return for the 12 months under review. In comparison, the S&P 500, which tracks the broad U.S. stock market, posted a +13.49% total return.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 14.

Investment Strategy

We are research-driven, bottom-up fundamental investors seeking companies that exhibit a combination of growth potential, quality and reasonable valuation. We assess growth potential by considering companies that we believe are positioned for growth in revenue, earnings or assets. In assessing valuation, we consider whether security prices fully reflect the balance of the long-term growth prospects relative to business and financial risks. We place a particular emphasis on quality and assessing downside risk, believing that important attributes of quality include experienced and talented management teams, favorable competitive positioning, and financial strength reflected in metrics including profitability, free cash flow generation and returns on capital employed. This quality analysis generally includes our assessment of the

Portfolio Composition

Based on Total Net Assets as of 4/30/19

LOGO

potential impacts of any material environmental, social and governance (ESG) factors on the long-term risk and return profile of a company. We generally use a team of analysts to help provide in-depth industry expertise and use both qualitative and quantitative analysis to evaluate companies.

Manager’s Discussion

During the 12 months under review, key sector contributors to the Fund’s absolute performance included information technology (IT), health care and consumer discretionary.

In the IT sector, our investments in ServiceNow, Microsoft and Mastercard boosted absolute performance. ServiceNow, a

1. Source: Morningstar.

The index is unmanaged and includes reinvestment of any income or distributions. It does not reflect any fees, expenses or sales charges. 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 45.



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FRANKLIN SELECT U.S. EQUITY FUND

provider of cloud-based services that enable companies to become more automated and efficient, continues to execute well in its large addressable market. A leader in enabling digital transformation, the company is becoming a multi-platform growth business with a strong product line, in our analysis. The recently introduced pro version of a core offering comes at a price premium we believe could drive revenue and billings growth. Software and services company Microsoft is a beneficiary of strong sales execution, a positive enterprise IT spending environment, its status as a critical partner to IT departments in this time of digital transformation, and a large installed base that is successfully moving to higher-value cloud and Service-as-a-Software deployments. The company saw sustained strength in its enterprise cloud computing platform Azure, solid growth in its traditional server products and particularly strong growth in commercial bookings. Furthermore, the company continued to expand gross profit margins and control operational expenses. Payment solutions provider Mastercard continues to perform very well, exceeding expectations and announcing several growth initiatives, partnerships, acquisition of capabilities that expand its global network, investment in emerging regions and expansion into new payment flows. The company has shown an ability to both invest for the long term and deliver solid quarter-to-quarter execution, which we believe is supported by a strong organic growth profile.

In health care, our position in Mettler-Toledo International, which manufactures precision instruments for use in laboratory, industrial and food retailing applications, aided absolute returns.

In consumer discretionary, key contributors included our investments in e-commerce and cloud computing services company Amazon.com and athletic apparel and equipment manufacturer NIKE.

Other key individual contributors included our holding in Walt Disney, a diversified international family entertainment and media enterprise.

In contrast, key sector detractors from the Fund’s absolute performance included energy and financials.

In the energy sector, our position in oil and natural gas exploration and production company Concho Resources hindered absolute results. Concho Resources’ share price declined along with the shares of many oil-focused companies as crude oil prices fell toward the end of 2018, although the rebound in oil prices during 2019’s first four months helped pare earlier losses. Lower natural gas prices, a refinery outage,

Top 10 Holdings

4/30/19


Company *Sector/Industry*	% of Total Net Assets
Amazon.com Inc.		4.3%
Consumer Discretionary
Microsoft Corp.		3.8%
Information Technology
Alphabet Inc.		3.0%
Communication Services
Analog Devices Inc.		3.0%
Information Technology
Mastercard Inc.		2.8%
Information Technology
ServiceNow Inc.		2.6%
Information Technology
NextEra Energy Inc.		2.5%
Utilities
Alibaba Group Holding Ltd.		2.4%
Consumer Discretionary
BlackRock Inc.		2.4%
Financials
Fortive Corp.		2.3%
Industrials

spending concerns, disappointing fourth-quarter 2018 earnings results and lower 2019 guidance pressured the stock further. However, company management has kept the balance sheet strong and oil production well hedged to potentially protect against downside risks to cash flows.

In financials, our holdings in financial services firm Charles Schwab and investment manager BlackRock hurt absolute results. Charles Schwab reported solid quarterly earnings results during the period, with the company delivering healthy net interest margin expansion. However, its share price declined due to investor concerns about pricing pressures coming from new no-fee products introduced by competitors, higher expenses and lower trading revenues.

Other key individual detractors included holdings in transportation, e-commerce and business services provider FedEx, nuclear components and products company BWX Technologies, and defense and security solutions manufacturer Raytheon. FedEx’s share price declined due to weaker-than-expected earnings reports and lower fiscal-year 2019 guidance, as its international revenues weakened, particularly in Europe. The company is mitigating the slowdown by offering voluntary buyouts, reducing international capacity, limiting hiring and reducing discretionary spending.



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FRANKLIN SELECT U.S. EQUITY FUND

Thank you for your continued participation in Franklin Select U.S. Equity Fund. We look forward to serving your future investment needs.


		Serena Perin Vinton, CFA Lead Portfolio Manager

		Chris Anderson

		Portfolio Management Team



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FRANKLIN SELECT U.S. EQUITY FUND

Performance Summary as of April 30, 2019

Performance as of 4/30/19¹


Share Class	Cumulative Total Return²	Average Annual Total Return³
A⁴
1-Year	+10.72%	+4.63%
5-Year	+42.21%	+6.09%
10-Year	+233.31%	+12.17%

Advisor
1-Year	+11.06%	+11.06%
5-Year	+44.20%	+7.60%
10-Year	+242.34%	+13.10%

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.

See page 16 for Performance Summary footnotes.



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FRANKLIN SELECT U.S. EQUITY FUND

PERFORMANCE SUMMARY

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

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

LOGO

See page 16 for Performance Summary footnotes.



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FRANKLIN SELECT U.S. EQUITY FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–4/30/19)

Share Class

Long-Term
Capital Gain

$2.1783

Advisor

$2.1783

Total Annual Operating Expenses⁶


Share Class	With Fee Waiver		Without Fee Waiver
A		1.25%		1.49%
Advisor		1.00%		1.24%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

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 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.

1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the expense reduction and fee waiver; 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. Return for less than one year, if any, has not been annualized.

5. 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.



16	Annual Report	franklintempleton.com

FRANKLIN SELECT U.S. EQUITY FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,106.50	$6.42	$1,018.70	$6.16	1.23%
C	$1,000	$1,103.10	$10.32	$1,014.98	$9.89	1.98%
R	$1,000	$1,105.70	$7.73	$1,017.46	$7.40	1.48%
R6	$1,000	$1,108.70	$4.60	$1,020.43	$4.41	0.88%
Advisor	$1,000	$1,108.60	$5.12	$1,019.93	$4.91	0.98%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



franklintempleton.com	Annual Report	17

Franklin Small Cap Growth Fund

This annual report for Franklin Small Cap Growth Fund covers the fiscal year ended April 30, 2019. At the market close on February 12, 2015, the Fund closed to new investors with limited exceptions. Existing shareholders may add to their accounts. Effective April 28, 2017, the Fund opened Class R6 shares to new investors who are eligible to purchase Class R6 shares. Effective January 17, 2019, all share classes of the Fund re-opened to new investors.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth by investing, under normal market conditions, at least 80% of its net assets in the 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

The Fund’s Class A shares posted a +16.06% cumulative total return for the 12 months under review. In comparison, the Russell 2000^® Growth Index, which measures performance of small-cap companies with relatively higher price-to-book ratios and higher forecasted growth values, posted a +6.91% total return.² The Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, posted a +13.49% total return.² You can find the Fund’s long-term performance data in the Performance Summary beginning on page 21.

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.

Investment Strategy

Portfolio Composition

Based on Total Net Assets as of 4/30/19

LOGO

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 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.

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 52.



18	Annual Report	franklintempleton.com

FRANKLIN SMALL CAP GROWTH FUND

Manager’s Discussion

During the 12 months under review, most sectors represented in the Fund’s portfolio posted positive results and contributed to absolute performance. Relative to the Russell 2000^® Growth Index, key contributors included stock selection and an overweighting in the information technology (IT) sector, stock selection in the industrials sector, and stock selection and an overweighting in the consumer discretionary sector.

Within IT, notable contributors included our investments in communications software and cloud-based platform company Twilio, cloud-based internet security platform firm Zscaler and customer service platform provider Zendesk. Twilio continued to benefit from a growing customer base, expanding customer activity, higher average revenue per customer and its core voice and messaging solutions. Furthermore, Twilio Flex, its new contact center solution, and SendGrid, a recently acquired leading business-to-consumer email messaging company, contributed to revenue growth.

In the industrials sector, key contributors included our investments in Mercury Systems, a provider of secure sensor and safety critical mission processing subsystems, and Spirit Airlines (not part of the index), an ultra low-cost, low-fare airline. Mercury Systems repeatedly raised its fiscal-year 2019 guidance amid strong bookings growth. The company continued to expand its presence in the C41 market by making strategic acquisitions, most recently GECO Avionics, a leading designer of safety critical avionics systems.

In consumer discretionary, our investment in Boot Barn Holdings, which operates retail chain stores specializing in western and work-related footwear, apparel and accessories, aided relative results.

Other notable individual contributors included our position in medical device manufacturer DexCom (not held at period-end).

In contrast, key detractors from the Fund’s relative performance included stock selection and overweightings in the financials and energy sectors, as well as stock selection and an underweighting in the communication services sector.

Within financials, our position in Western Alliance Bancorp (not part of the index), which provides banking products and services for businesses, hampered relative results. Key detractors in the energy sector included holdings in oil and natural gas exploration and production companies Callon Petroleum (not part of the index) and Ring Energy. In communication services, our position in Yelp, which hosts an

Top 10 Holdings

4/30/19


Company *Sector/Industry*		% of Total Net Assets
2U Inc.		1.8%
Information Technology
Silicon Laboratories Inc.		1.6%
Information Technology
Grand Canyon Education Inc.		1.6%
Consumer Discretionary
Mercury Systems Inc.		1.5%
Industrials
Allegiant Travel Co.		1.5%
Industrials
Nevro Corp.		1.4%
Health Care
ViaSat Inc.		1.4%
Information Technology
Monolithic Power Systems		1.4%
Information Technology
Kennametal Inc.		1.4%
Industrials
BWX Technologies Inc.		1.4%
Industrials

online database of user-generated reviews of local businesses, hindered relative results.

Other key individual detractors included holdings in education technology company 2U, financial technology company GreenSky (not part of the index; not held at period-end) and medical devices company Nevro. After reaching an all-time high early in the period, 2U’s share price declined due to investor concerns about competition and slowing growth. GreenSky’s share price declined after the company posted mixed earnings reports that disappointed many investors, who grew concerned about moderating growth and weaker credit quality. Nevro’s share price declined due to weaker-than-expected earnings reports and 2019 revenue guidance.



franklintempleton.com	Annual Report	19

FRANKLIN SMALL CAP GROWTH FUND

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


		Michael P. McCarthy, CFA Lead Portfolio Manager

		Bradley T. Carris, CFA

		Portfolio Management Team



20	Annual Report	franklintempleton.com

FRANKLIN SMALL CAP GROWTH FUND

Performance Summary as of April 30, 2019

Performance as of 4/30/19¹


Share Class	Cumulative Total Return²	Average Annual Total Return³
A⁴
1-Year	+16.06%	+9.67%
5-Year	+59.80%	+8.59%
10-Year	+384.64%	+16.44%

Advisor
1-Year	+16.30%	+16.30%
5-Year	+61.81%	+10.10%
10-Year	+398.20%	+17.42%

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.

See page 23 for Performance Summary footnotes.



franklintempleton.com	Annual Report	21

FRANKLIN SMALL CAP GROWTH FUND

PERFORMANCE SUMMARY

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

LOGO

See page 23 for Performance Summary footnotes.



22	Annual Report	franklintempleton.com

FRANKLIN SMALL CAP GROWTH FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–4/30/19)


Share Class	Short-Term Capital Gain		Long-Term Capital Gain		Total
A		$0.1294		$4.1263		$4.2557

C		$0.1294		$4.1263		$4.2557

R		$0.1294		$4.1263		$4.2557

R6		$0.1294		$4.1263		$4.2557

Advisor		$0.1294		$4.1263		$4.2557

Total Annual Operating Expenses⁶


Share Class	With Fee Waiver		Without Fee Waiver
A		1.09%		1.10%

Advisor		0.84%		0.85%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

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.

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. Return for less than one year, if any, has not been annualized.

5. Source: Morningstar. The Russell 2000 Growth Index is market capitalization weighted and measures performance of those Russell 2000 Index companies with relatively higher price-to-book ratios and higher forecasted growth values. 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.



franklintempleton.com	Annual Report	23

FRANKLIN SMALL CAP GROWTH FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,125.90	$5.64	$1,019.49	$5.36	1.07%
C	$1,000	$1,123.00	$9.58	$1,015.77	$9.10	1.82%
R	$1,000	$1,124.50	$6.95	$1,018.25	$6.61	1.32%
R6	$1,000	$1,127.80	$3.43	$1,021.57	$3.26	0.65%
Advisor	$1,000	$1,126.80	$4.32	$1,020.73	$4.11	0.82%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



24	Annual Report	franklintempleton.com

Franklin Small-Mid Cap Growth Fund

This annual report for Franklin Small-Mid Cap Growth Fund covers the fiscal year ended April 30, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth by investing, under normal market conditions, at least 80% of its net assets in the 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

The Fund’s Class A shares posted a +17.43% cumulative total return for the 12 months under review. In comparison, the Russell Midcap^® Growth Index, which measures performance of companies in the Russell Midcap^® Index with relatively higher price-to-book ratios and higher forecasted growth values, posted a +17.64% total return.² Also in comparison, the Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, posted a +13.49% total return.² You can find the Fund’s long-term performance data in the Performance Summary beginning on page 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.

Investment Strategy

Portfolio Composition

Based on Total Net Assets as of 4/30/19

LOGO

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, nearly all sectors represented in the Fund’s portfolio posted positive returns and

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.

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 61.



franklintempleton.com	Annual Report	25

FRANKLIN SMALL-MID CAP GROWTH FUND

contributed to absolute performance. Relative to the Russell Midcap^® Growth Index, key contributors to the Fund’s performance included stock selection and underweightings in the communication services and materials sectors and stock selection in the information technology (IT) sector.

Within communication services, our investment in photo-sharing website operator Pinterest (not part of the index), which recently completed its initial public offering, contributed to relative results. In materials, our position in specialty chemicals and carbon materials manufacturer Ingevity (not part of the index) aided relative results.

In the IT sector, key contributors to relative results included our investments in finance and human resources enterprise cloud applications company Workday, system-level semiconductor solutions developer Integrated Device Technology (not part of the index; not held at period-end) and Israel-based web development and management solutions provider Wix.com (not part of the index). Workday’s shares advanced as the company reported generally solid quarterly results during the period. The company saw strong human resources business activity and growing traction in financials activity, and we believe the company’s financials offerings are ready for broader adoption.

Other notable individual contributors to relative performance included our investments in Mercury Systems (not part of the index) and Edwards Lifesciences (not held at period-end). Mercury Systems, a provider of secure sensor and safety critical mission processing subsystems, repeatedly raised its fiscal-year 2019 guidance amid strong bookings growth. The company continued to expand its presence in the C41 market by making strategic acquisitions, most recently GECO Avionics, a leading designer of safety critical avionics systems. Edwards Lifesciences, which provides patient-focused medical products for heart disease and critical care monitoring, posted generally solid earnings reports during the period.

In contrast, key detractors from the Fund’s relative performance included stock selection in the consumer discretionary, energy and consumer staples sectors.

Within consumer discretionary, our position in casino resorts operator Wynn Resorts (not held at period-end) hurt relative results.

In the energy sector, our position in oil and natural gas exploration and production company Concho Resources hindered relative performance. Concho Resources’ share price declined along with the shares of many oil-focused companies as crude oil prices fell toward the end of 2018, although the rebound in oil prices during 2019’s first four months helped

Top 10 Holdings

4/30/19


Company *Sector/Industry*		% of Total Net Assets
Microchip Technology Inc.		2.3%
Information Technology
Verisk Analytics Inc.		1.9%
Industrials
SBA Communications Corp.		1.7%
Real Estate
Mettler-Toledo International Inc.		1.7%
Health Care
CoStar Group Inc.		1.6%
Industrials
GoDaddy Inc.		1.6%
Information Technology
MSCI Inc.		1.5%
Financials
Fortive Corp.		1.5%
Industrials
Rockwell Automation Inc.		1.4%
Industrials
IDEX Corp.		1.4%
Industrials

pare earlier losses. Lower natural gas prices, a refinery outage, spending concerns, disappointing fourth-quarter 2018 earnings results and lower 2019 guidance pressured the stock further. However, company management has kept the balance sheet strong and oil production well hedged to potentially protect against downside risks to cash flows.

In consumer staples, our position in baked sweet goods company Hostess Brands (not part of the index; not held at period-end) hindered relative results.

Other key individual detractors from the Fund’s relative performance included positions in education technology company 2U, medical devices company Nevro (not part of the index; not held at period end) and software solutions firm Red Hat (not held at period-end). After reaching all-time highs early in the period, 2U’s share price declined due to investor concerns about competition and slowing growth. Nevro’s share price declined due to weaker-than-expected earnings reports and 2019 revenue guidance.



26	Annual Report	franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH FUND

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


		John P. Scandalios

		Michael P. McCarthy, CFA

		Portfolio Management Team



franklintempleton.com	Annual Report	27

FRANKLIN SMALL-MID CAP GROWTH FUND

Performance Summary as of April 30, 2019

Performance as of 4/30/19¹


Share Class	Cumulative Total Return²		Average Annual Total Return³
A⁴
1-Year		+17.43%		+10.97%
5-Year		+62.58%		+8.97%
10-Year		+290.92%		+13.96%

Advisor
1-Year		+17.67%		+17.67%
5-Year		+64.58%		+10.48%
10-Year		+300.76%		+14.89%

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.

See page 30 for Performance Summary footnotes.



28	Annual Report	franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH FUND

PERFORMANCE SUMMARY

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

LOGO

See page 30 for Performance Summary footnotes.



franklintempleton.com	Annual Report	29

FRANKLIN SMALL-MID CAP GROWTH FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–4/30/19)


Share Class	Short-Term Capital Gain		Long-Term Capital Gain		Total
A		$0.2790		$3.8629		$4.1419
C		$0.2790		$3.8629		$4.1419
R		$0.2790		$3.8629		$4.1419
R6		$0.2790		$3.8629		$4.1419
Advisor		$0.2790		$3.8629		$4.1419

Total Annual Operating Expenses⁶


Share Class	With Fee Waiver		Without Fee Waiver
A		0.93%		0.95%
Advisor		0.68%		0.70%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

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.

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. Return for less than one year, if any, has not been annualized.

5. Source: Morningstar. The Russell Midcap Growth Index is market capitalization weighted and measures performance of those Russell Midcap Index companies with relatively higher price-to-book ratios and higher forecasted growth values. 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.



30	Annual Report	franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,172.00	$4.63	$1,020.53	$4.31	0.86%
C	$1,000	$1,169.10	$8.71	$1,016.76	$8.10	1.62%
R	$1,000	$1,171.00	$5.92	$1,019.34	$5.51	1.10%
R6	$1,000	$1,173.80	$2.64	$1,022.36	$2.46	0.49%
Advisor	$1,000	$1,172.80	$3.29	$1,021.77	$3.06	0.61%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



franklintempleton.com	Annual Report	31

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Growth Opportunities Fund


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class A

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$38.58			$34.81			$30.40			$33.13			$28.48

Income from investment operations^a:

Net investment income (loss)^b		(0.13	)		(0.10	)		(0.09	)		(0.19	)		(0.19	)

Net realized and unrealized gains (losses)		5.29			7.03			5.14			(1.88	)		5.50

Total from investment operations		5.16			6.93			5.05			(2.07	)		5.31

Less distributions from:

Net realized gains		(4.17	)		(3.16	)		(0.64	)		(0.66	)		(0.66	)

Net asset value, end of year		$39.57			$38.58			$34.81			$30.40			$33.13

Total return^c		15.91%			20.43%			16.88%			(6.36)%			18.87%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.94%			1.02%			1.05%			1.11%			1.18%

Expenses net of waiver and payments by affiliates		0.94%	^d,e		0.99%	^d		0.97%	^d		1.10%			1.18%	^e

Net investment income (loss)		(0.32)%			(0.27)%			(0.30)%			(0.58)%			(0.59)%

Supplemental data

Net assets, end of year (000’s)		$2,819,007			$2,428,175			$2,272,831			$548,871			$457,619

Portfolio turnover rate		24.21%			22.68%			47.75%			25.56%			40.64%

^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’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^dBenefit of expense reduction rounds to less than 0.01%.

^eBenefit of waiver and payments by affiliates rounds to less than 0.01%.



32	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,
	2019			2018			2017			2016			2015
Class C

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$32.67			$30.12			$26.59			$29.27			$25.41

Income from investment operations^a:

Net investment income (loss)^b		(0.35	)		(0.33	)		(0.29	)		(0.37	)		(0.36	)

Net realized and unrealized gains (losses)		4.32			6.04			4.46			(1.65	)		4.88

Total from investment operations		3.97			5.71			4.17			(2.02	)		4.52

Less distributions from:

Net realized gains		(4.17	)		(3.16	)		(0.64	)		(0.66	)		(0.66	)

Net asset value, end of year		$32.47			$32.67			$30.12			$26.59			$29.27

Total return^c		15.10%			19.53%			15.98%			(7.03)%			18.04%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.69%			1.77%			1.80%			1.85%			1.88%

Expenses net of waiver and payments by affiliates		1.69%	^d,e		1.74%	^d		1.72%	^d		1.84%			1.88%	^e

Net investment income (loss)		(1.07)%			(1.02)%			(1.05)%			(1.32)%			(1.29)%

Supplemental data

Net assets, end of year (000’s)		$244,574			$400,295			$390,123			$137,882			$110,513

Portfolio turnover rate		24.21%			22.68%			47.75%			25.56%			40.64%

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^dBenefit of expense reduction rounds to less than 0.01%.

^eBenefit of waiver and payments by affiliates rounds to less than 0.01%.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	33

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Growth Opportunities Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$36.93			$33.52			$29.37			$32.10			$27.67

Income from investment operations^a:

Net investment income (loss)^b		(0.21	)		(0.18	)		(0.17	)		(0.26	)		(0.24	)

Net realized and unrealized gains (losses)		5.02			6.75			4.96			(1.81	)		5.33

Total from investment operations		4.81			6.57			4.79			(2.07	)		5.09

Less distributions from:

Net realized gains		(4.17	)		(3.16	)		(0.64	)		(0.66	)		(0.66	)

Net asset value, end of year		$37.57			$36.93			$33.52			$29.37			$32.10

Total return		15.66%			20.14%			16.62%			(6.60)%			18.63%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.19%			1.27%			1.30%			1.35%			1.38%

Expenses net of waiver and payments by affiliates		1.19%	^c,d		1.24%	^c		1.22%	^c		1.34%			1.38%	^d

Net investment income (loss)		(0.57)%			(0.52)%			(0.55)%			(0.82)%			(0.79)%

Supplemental data

Net assets, end of year (000’s)		$37,105			$36,582			$50,429			$39,786			$48,266

Portfolio turnover rate		24.21%			22.68%			47.75%			25.56%			40.64%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.



34	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,
	2019			2018			2017			2016			2015
Class R6

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$41.78			$37.30			$32.39			$35.09			$29.98

Income from investment operations^a:

Net investment income (loss)^b		0.01			0.07			0.05			(0.05	)		(0.03	)

Net realized and unrealized gains (losses)		5.80			7.57			5.50			(1.99	)		5.80

Total from investment operations		5.81			7.64			5.55			(2.04	)		5.77

Less distributions from:

Net realized gains		(4.17	)		(3.16	)		(0.64	)		(0.66	)		(0.66	)

Net asset value, end of year		$43.42			$41.78			$37.30			$32.39			$35.09

Total return		16.26%			20.98%			17.42%			(5.94)%			19.47%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.59%			0.58%			0.59%			0.67%			0.68%

Expenses net of waiver and payments by affiliates		0.58%	^c		0.55%	^c		0.51%	^c		0.66%			0.68%	^d

Net investment income (loss)		0.04%			0.17%			0.16%			(0.14)%			(0.09)%

Supplemental data

Net assets, end of year (000’s)		$418,174			$369,688			$291,825			$235,620			$246,911

Portfolio turnover rate		24.21%			22.68%			47.75%			25.56%			40.64%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dBenefit of waiver and payments by affiliates 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 Growth Opportunities Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Advisor Class

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$41.34			$37.02			$32.20			$34.96			$29.93

Income from investment operations^a:

Net investment income (loss)^b		(0.03	)		(0.01	)		(0.02	)		(0.11	)		(0.10	)

Net realized and unrealized gains (losses)		5.73			7.49			5.48			(1.99	)		5.79

Total from investment operations		5.70			7.48			5.46			(2.10	)		5.69

Less distributions from:

Net realized gains		(4.17	)		(3.16	)		(0.64	)		(0.66	)		(0.66	)

Net asset value, end of year		$42.87			$41.34			$37.02			$32.20			$34.96

Total return		16.16%			20.71%			17.21%			(6.11)%			19.23%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.69%			0.77%			0.80%			0.85%			0.88%

Expenses net of waiver and payments by affiliates		0.69%	^c,d		0.74%	^c		0.72%	^c		0.84%			0.88%	^d

Net investment income (loss)		(0.07)%			(0.02)%			(0.05)%			(0.32)%			(0.29)%

Supplemental data

Net assets, end of year (000’s)		$506,964			$583,509			$537,193			$256,377			$269,887

Portfolio turnover rate		24.21%			22.68%			47.75%			25.56%			40.64%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.



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

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2019

Franklin Growth Opportunities Fund


	Country		Shares		Value
Common Stocks 96.0%
Communication Services 8.1%

^a Alphabet Inc., C		United States		130,483	$	155,076,436
^a Electronic Arts Inc.		United States		265,570		25,136,201
^a Facebook Inc., A		United States		151,743		29,347,096
^a Liberty Broadband Corp., C		United States		387,427		38,242,919
^a Netflix Inc.		United States		91,971		34,078,934
^a Pinterest Inc., A		United States		252,500		7,822,450
The Walt Disney Co.		United States		259,499		35,543,578

						325,247,614

Consumer Discretionary 9.1%

^aAlibaba Group Holding Ltd., ADR		China		109,054		20,237,151
^aAmazon.com Inc.		United States		163,046		314,111,380
Aptiv PLC		United States		301,625		25,849,262
^aLevi Strauss & Co., A		United States		314,900		7,056,909

						367,254,702

Consumer Staples 3.2%

Constellation Brands Inc., A		United States		226,836		48,014,376
Lamb Weston Holdings Inc.		United States		569,028		39,860,411
^aMonster Beverage Corp.		United States		358,876		21,389,010
^aNomad Foods Ltd.		United Kingdom		977,894		20,340,195

						129,603,992

Energy 0.7%

Diamondback Energy Inc.		United States		279,605		29,747,176


Financials 6.6%

^aAthene Holding Ltd., A		United States		403,933		18,241,614
The Charles Schwab Corp.		United States		881,105		40,336,987
Intercontinental Exchange Inc.		United States		511,297		41,594,011
MarketAxess Holdings Inc.		United States		112,201		31,228,904
MSCI Inc.		United States		285,244		64,288,293
S&P Global Inc.		United States		201,040		44,361,487
^aSVB Financial Group		United States		81,870		20,608,316
^aTradeweb Markets Inc.		United States		86,900		3,497,725

						264,157,337

Health Care 13.4%

^aABIOMED Inc.		United States		111,921		31,048,005
^aArray BioPharma Inc.		United States		659,583		14,913,172
^aEdwards Lifesciences Corp.		United States		293,686		51,709,294
^aElanco Animal Health Inc.		United States		380,235		11,977,402
^aGuardant Health Inc.		United States		264,025		17,296,278
^aGW Pharmaceuticals PLC, ADR		United Kingdom		115,603		19,572,744
^aHeron Therapeutics Inc.		United States		1,341,631		29,086,560
^aIDEXX Laboratories Inc.		United States		91,289		21,179,048
^aIllumina Inc.		United States		118,738		37,046,256
^aIntuitive Surgical Inc.		United States		71,090		36,300,687
^aNevro Corp.		United States		501,908		30,972,743
^aPTC Therapeutics Inc.		United States		582,961		21,814,401
^aSage Therapeutics Inc.		United States		193,267		32,513,307
UnitedHealth Group Inc.		United States		315,565		73,548,734
^aVeeva Systems Inc.		United States		403,702		56,465,799
West Pharmaceutical Services Inc.		United States		435,113		53,862,638

						539,307,068



franklintempleton.com	Annual Report	37

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Growth Opportunities Fund (continued)


	Country		Shares		Value
Common Stocks (continued)
Industrials 11.0%

The Boeing Co.		United States		100,153	$	37,826,787
^aCoStar Group Inc.		United States		177,183		87,927,064
Honeywell International Inc.		United States		224,356		38,954,932
^aIHS Markit Ltd.		United States		648,526		37,134,599
Raytheon Co.		United States		331,783		58,921,343
Rockwell Automation Inc.		United States		162,258		29,321,643
Roper Technologies Inc.		United States		131,054		47,140,124
Stanley Black & Decker Inc.		United States		173,302		25,406,073
^aUnivar Inc.		United States		968,887		21,635,247
Verisk Analytics Inc.		United States		427,189		60,293,455

						444,561,267

Information Technology 39.7%

^a2U Inc.		United States		609,097		36,850,368
^aAdobe Inc.		United States		294,590		85,210,157
Analog Devices Inc.		United States		293,641		34,132,830
Apple Inc.		United States		574,257		115,236,152
^aAutodesk Inc.		United States		250,756		44,687,227
^aDocuSign Inc.		United States		174,496		9,888,688
^aFiserv Inc.		United States		372,557		32,501,873
^aGuidewire Software Inc.		United States		205,993		21,938,255
^aInterXion Holding NV		Netherlands		574,065		39,719,557
^a,b,cLegalZoom.comInc		United States		1,673,284		20,473,416
Mastercard Inc., A		United States		831,281		211,344,881
Microsoft Corp.		United States		1,607,258		209,907,895
Monolithic Power Systems		United States		288,836		44,974,654
^aNutanix Inc., A		United States		468,086		20,216,634
NVIDIA Corp.		United States		215,377		38,983,237
^aPagerduty Inc.		United States		33,500		1,571,150
^aPayPal Holdings Inc.		United States		486,854		54,902,526
^aPluralsight Inc., A		United States		470,947		16,713,909
^aPTC Inc.		United States		301,256		27,254,630
^aSalesforce.com Inc.		United States		393,572		65,077,130
^aServiceNow Inc.		United States		421,492		114,439,293
^aTwilio Inc., A		United States		348,697		47,820,307
^aTyler Technologies Inc.		United States		141,050		32,710,906
Visa Inc., A		United States		989,673		162,731,931
Xilinx Inc.		United States		468,455		56,280,184
^aZendesk Inc.		United States		571,236		50,143,096
^aZoom Video Communications Inc., A		United States		42,000		3,043,740

						1,598,754,626

Materials 0.7%

^aIngevity Corp.		United States		234,489		26,968,580


Real Estate 3.5%

American Tower Corp.		United States		176,850		34,538,805
^aSBA Communications Corp., A		United States		514,810		104,882,241

						139,421,046

Total Common Stocks (Cost $1,911,784,488)						3,865,023,408


Preferred Stocks 2.4%
Communication Services 0.1%

^a,b,cTanium Inc., pfd., G		United States		805,800		4,893,610



38	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Growth Opportunities Fund (continued)


	Country		Shares		Value

Preferred Stocks (continued)
Consumer Discretionary 1.6%

^a,b,cClearMotion Inc., pfd., C		United States		2,610,594	$	6,717,996
^a,b,cClearMotion Inc., pfd., D		United States		3,698,772		10,345,480
^a,b,cProterra Inc., pfd., 5, 144A		United States		2,362,202		22,295,471
^a,b,cProterra Inc., pfd., 6, 144A		United States		596,775		5,632,617
^a,b,cProterra Inc., pfd., 7		United States		780,667		7,368,268
^a,b,cSweetgreen Inc., pfd., H		United States		928,488		13,006,896

						65,366,728

Financials 0.4%

^a,b,cBill.com, pfd., H		United States		1,624,999		14,395,754

Industrials 0.3%

^a,b,cOptoro Inc., pfd., E		United States		509,182		12,168,487

Total Preferred Stocks (Cost $75,426,051)						96,824,579


Total Investments before Short Term Investments (Cost $1,987,210,539)						3,961,847,987


Short Term Investments (Cost $69,126,928) 1.7%

Money Market Funds 1.7%

^d,eInstitutional Fiduciary Trust Money Market Portfolio, 2.10%		United States		69,126,928		69,126,928


Total Investments (Cost $2,056,337,467) 100.1%						4,030,974,915
Other Assets, less Liabilities (0.1)%						(5,151,520	)

Net Assets 100.0%					$	4,025,823,395

See Abbreviations on page 89.

^aNon-income producing.

^bFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.

^cSee Note 7 regarding restricted securities.

^dSee Note 3(f) regarding investments in affiliated management investment companies.

^eThe rate shown is the annualized seven-day effective yield at period end.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	39

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Select U.S. Equity Fund


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class A

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$16.32			$15.20			$13.12			$15.29			$13.38

Income from investment operations^a:

Net investment income (loss)^b		(0.04	)		(0.04	)		(0.01	)		0.07	^c		(0.01	)

Net realized and unrealized gains (losses)		1.41			1.16			2.09			(1.83	)		2.23

Total from investment operations		1.37			1.12			2.08			(1.76	)		2.22

Less distributions from:

Net investment income		—			—			—			(0.06	)		—

Net realized gains		(2.18	)		—			—			(0.35	)		(0.31	)

Total distributions		(2.18	)		—			—			(0.41	)		(0.31	)

Net asset value, end of year		$15.51			$16.32			$15.20			$13.12			$15.29

Total return^d		10.72%			7.37%			15.85%			(11.70)%			16.84%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.51%			1.54%			1.47%			1.46%			1.54%

Expenses net of waiver and payments by affiliates		1.23%	^e		1.25%	^e		1.24%	^e		1.25%			1.28%

Net investment income (loss)		(0.22)%			(0.25)%			(0.04)%			0.48%	^c		(0.07)%

Supplemental data

Net assets, end of year (000’s)		$77,230			$65,565			$77,733			$100,483			$92,612

Portfolio turnover rate		4.79%			93.43%			17.45%			35.56%			25.55%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.02%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^eBenefit of expense reduction rounds to less than 0.01%.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class C

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$15.42			$14.46			$12.58			$14.73			$12.98

Income from investment operations^a:

Net investment income (loss)^b		(0.15	)		(0.15	)		(0.10	)		(0.04	)^c		(0.11	)

Net realized and unrealized gains (losses)		1.31			1.11			1.98			(1.76	)		2.17

Total from investment operations		1.16			0.96			1.88			(1.80	)		2.06

Less distributions from:

Net realized gains		(2.18	)		—			—			(0.35	)		(0.31	)

Net asset value, end of year		$14.40			$15.42			$14.46			$12.58			$14.73

Total return^d		9.95%			6.64%			14.94%			(12.31)%			16.12%

Ratios to average net assets

Expenses before waiver and payments by affiliates		2.26%			2.29%			2.21%			2.20%			2.24%

Expenses net of waiver and payments by affiliates		1.98%	^e		2.00%	^e		1.98%	^e		1.99%			1.98%

Net investment income (loss)		(0.97)%			(1.00)%			(0.78)%			(0.26)%	^c		(0.77)%

Supplemental data

Net assets, end of year (000’s)		$15,702			$18,103			$20,341			$25,119			$18,758

Portfolio turnover rate		4.79%			93.43%			17.45%			35.56%			25.55%

^bBased on average daily shares outstanding.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^eBenefit of expense reduction rounds to less than 0.01%.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$16.08			$15.01			$12.98			$15.15			$13.28

Income from investment operations^a:

Net investment income (loss)^b		(0.08	)		(0.06	)		(0.03	)		0.03	^c		(0.04	)

Net realized and unrealized gains (losses)		1.39			1.13			2.06			(1.81	)		2.22

Total from investment operations		1.31			1.07			2.03			(1.78	)		2.18

Less distributions from:

Net investment income		—			—			—			(0.04	)		—

Net realized gains		(2.18	)		—			—			(0.35	)		(0.31	)

Total distributions		(2.18	)		—			—			(0.39	)		(0.31	)

Net asset value, end of year		$15.21			$16.08			$15.01			$12.98			$15.15

Total return		10.50%			7.13%			15.64%			(11.91)%			16.66%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.78%			1.70%			1.64%			1.69%			1.74%

Expenses net of waiver and payments by affiliates		1.50%	^d		1.41%	^d		1.41%	^d		1.48%			1.48%

Net investment income (loss)		(0.49)%			(0.41)%			(0.21)%			0.25%	^c		(0.27)%

Supplemental data

Net assets, end of year (000’s)		$144			$137			$166			$273			$169

Portfolio turnover rate		4.79%			93.43%			17.45%			35.56%			25.55%

^bBased on average daily shares outstanding.

^dBenefit of expense reduction rounds to less than 0.01%.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R6

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$16.64			$15.44			$13.27			$15.46			$13.49

Income from investment operations^a:

Net investment income^b		0.02			0.11			0.05			0.12	^c		0.05

Net realized and unrealized gains (losses)		1.45			1.09			2.12			(1.85	)		2.27

Total from investment operations		1.47			1.20			2.17			(1.73	)		2.32

Less distributions from:

Net investment income		—			—			—			(0.11	)		(0.04	)

Net realized gains		(2.18	)		—			—			(0.35	)		(0.31	)

Total distributions		(2.18	)		—			—			(0.46	)		(0.35	)

Net asset value, end of year		$15.93			$16.64			$15.44			$13.27			$15.46

Total return		11.13%			7.77%			16.35%			(11.32)%			17.45%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.22%			1.12%			1.06%			1.04%			1.09%

Expenses net of waiver and payments by affiliates		0.87%	^d		0.84%	^d		0.84%	^d		0.85%			0.83%

Net investment income		0.14%			0.16%			0.36%			0.88%	^c		0.38%

Supplemental data

Net assets, end of year (000’s)		$971			$939			$20,401			$33,640			$25,739

Portfolio turnover rate		4.79%			93.43%			17.45%			35.56%			25.55%

^bBased on average daily shares outstanding.

^dBenefit of expense reduction rounds to less than 0.01%.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	43

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Advisor Class

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$16.57			$15.39			$13.25			$15.44			$13.48

Income from investment operations^a:

Net investment income^b		0.01			—	^c		0.03			0.10	^d		0.04

Net realized and unrealized gains (losses)		1.44			1.18			2.11			(1.85	)		2.25

Total from investment operations		1.45			1.18			2.14			(1.75	)		2.29

Less distributions from:

Net investment income		—			—			—			(0.09	)		(0.02	)

Net realized gains		(2.18	)		—			—			(0.35	)		(0.31	)

Total distributions		(2.18	)		—			—			(0.44	)		(0.33	)

Net asset value, end of year		$15.84			$16.57			$15.39			$13.25			$15.44

Total return		11.06%			7.67%			16.15%			(11.45)%			17.25%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.26%			1.29%			1.22%			1.20%			1.24%

Expenses net of waiver and payments by affiliates		0.98%	^e		1.00%	^e		0.99%	^e		0.99%			0.98%

Net investment income		0.03%			—%	^f		0.21%			0.74%	^d		0.23%

Supplemental data

Net assets, end of year (000’s)		$28,668			$10,450			$13,077			$10,736			$9,914

Portfolio turnover rate		4.79%			93.43%			17.45%			35.56%			25.55%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dNet investment income per share includes approximately $0.06 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.28%.

^eBenefit of expense reduction rounds to less than 0.01%.

^fRounds to less than 0.01%.



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

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2019

Franklin Select U.S. Equity Fund


	Country	Shares		Value
Common Stocks 94.0%

Communication Services 6.7%

^a Alphabet Inc., A	United States		3,100	$	3,716,776
^a Electronic Arts Inc.	United States		16,700		1,580,655
The Walt Disney Co.	United States		21,100		2,890,067

					8,187,498

Consumer Discretionary 10.0%

^aAlibaba Group Holding Ltd., ADR	China		15,700		2,913,449
^aAmazon.com Inc.	United States		2,720		5,240,134
Aptiv PLC	United States		17,900		1,534,030
NIKE Inc., B	United States		30,200		2,652,466

					12,340,079

Consumer Staples 6.0%

Constellation Brands Inc., A	United States		9,100		1,926,197
Estee Lauder Cos. Inc., A	United States		10,700		1,838,367
Lamb Weston Holdings Inc.	United States		27,000		1,891,350
^aMonster Beverage Corp.	United States		28,500		1,698,600

					7,354,514

Energy 2.5%

Cabot Oil & Gas Corp., A	United States		68,100		1,763,109
Concho Resources Inc.	United States		10,900		1,257,642

					3,020,751

Financials 8.5%

BlackRock Inc.	United States		6,000		2,911,440
The Charles Schwab Corp.	United States		59,300		2,714,754
Intercontinental Exchange Inc.	United States		29,700		2,416,095
S&P Global Inc.	United States		11,000		2,427,260

					10,469,549

Health Care 14.1%

^aABIOMED Inc.	United States		4,900		1,359,309
AstraZeneca PLC, ADR	United Kingdom		60,600		2,282,196
^aIllumina Inc.	United States		6,200		1,934,400
^aMettler-Toledo International Inc.	United States		3,650		2,720,199
Stryker Corp.	United States		12,600		2,380,266
Teleflex Inc.	United States		7,900		2,260,822
UnitedHealth Group Inc.	United States		10,900		2,540,463
^aWaters Corp.	United States		8,300		1,772,382

					17,250,037

Industrials 12.3%

3M Co.	United States		10,950		2,075,135
BWX Technologies Inc.	United States		26,000		1,328,600
FedEx Corp.	United States		8,400		1,591,464
Fortive Corp.	United States		33,600		2,901,024
Raytheon Co.	United States		13,400		2,379,706
Republic Services Inc.	United States		24,300		2,012,526
Verisk Analytics Inc.	United States		20,200		2,851,028

					15,139,483

Information Technology 26.5%

^aAdyen NV	Netherlands		429		349,165
Amphenol Corp., A	United States		18,800		1,871,728
Analog Devices Inc.	United States		31,350		3,644,124



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	45

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Select U.S. Equity Fund (continued)


	Country		Shares		Value
Common Stocks (continued)
Information Technology (continued)

Apple Inc.		United States		12,000	$	2,408,040
Applied Materials Inc.		United States		54,000		2,379,780
Cognex Corp.		United States		32,500		1,638,975
^aInterXion Holding NV		Netherlands		35,100		2,428,569
Mastercard Inc., A		United States		13,700		3,483,088
Microsoft Corp.		United States		35,600		4,649,360
NVIDIA Corp.		United States		10,950		1,981,950
^aSalesforce.com Inc.		United States		16,450		2,720,008
^aServiceNow Inc.		United States		11,900		3,230,969
^aTyler Technologies Inc.		United States		7,300		1,692,943

						32,478,699


Materials 2.9%

Albemarle Corp.		United States		12,000		900,720
Ecolab Inc.		United States		14,600		2,687,568

						3,588,288

Real Estate 2.0%

^aSBA Communications Corp., A		United States		12,200		2,485,506

Utilities 2.5%

NextEra Energy Inc.		United States		15,700		3,052,708

Total Common Stocks (Cost $96,348,998)						115,367,112


Short Term Investments (Cost $7,161,073) 5.8%

Money Market Funds 5.8%

^b,cInstitutional Fiduciary Trust Money Market Portfolio, 2.10%		United States		7,161,073		7,161,073


Total Investments (Cost $103,510,071) 99.8%						122,528,185
Other Assets, less Liabilities 0.2%						187,072

Net Assets 100.0%					$	122,715,257

See Abbreviations on page 89.

^aNon-income producing.

^bSee Note 3(f) regarding investments in affiliated management investment companies.

^cThe rate shown is the annualized seven-day effective yield at period end.



46	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


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class A

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$23.01			$19.60			$16.37			$18.83			$18.20

Income from investment operations^a:

Net investment income (loss)^b		(0.15	)		(0.13	)		(0.11	)		(0.08	)		(0.12	)

Net realized and unrealized gains (losses)		2.86			3.96			3.34			(2.03	)		1.57

Total from investment operations		2.71			3.83			3.23			(2.11	)		1.45

Less distributions from:

Net realized gains		(4.26)			(0.42	)		—			(0.35	)		(0.82	)

Net asset value, end of year		$21.46			$23.01			$19.60			$16.37			$18.83

Total return^c		16.06%			19.71%			19.73%			(11.28)%			8.34%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.07%			1.11%			1.10%			1.13%			1.16%

Expenses net of waiver and payments by affiliates		1.06%	^d		1.10%	^d		1.08%	^d		1.11%	^d		1.16%	^e

Net investment income (loss)		(0.68)%			(0.61)%			(0.61)%			(0.44)%			(0.66)%

Supplemental data

Net assets, end of year (000’s)		$713,442			$665,251			$719,752			$792,072			$1,164,218

Portfolio turnover rate		42.10%			29.82%			29.93%			43.99%			30.15%

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^dBenefit of expense reduction rounds to less than 0.01%.

^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	47

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small Cap Growth Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class C

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$19.41			$16.71			$14.07			$16.36			$16.03

Income from investment operations^a:

Net investment income (loss)^b		(0.28	)		(0.25	)		(0.21	)		(0.18	)		(0.22	)

Net realized and unrealized gains (losses)		2.28			3.37			2.85			(1.76	)		1.37

Total from investment operations		2.00			3.12			2.64			(1.94	)		1.15

Less distributions from:

Net realized gains		(4.26	)		(0.42	)		—			(0.35	)		(0.82	)

Net asset value, end of year		$17.15			$19.41			$16.71			$14.07			$16.36

Total return^c		15.31%			18.79%			18.76%			(11.95)%			7.58%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.82%			1.86%			1.85%			1.88%			1.87%

Expenses net of waiver and payments by affiliates		1.81%	^d		1.85%	^d		1.83%	^d		1.86%	^d		1.87%	^e

Net investment income (loss)		(1.43)%			(1.36)%			(1.36)%			(1.19)%			(1.37)%

Supplemental data

Net assets, end of year (000’s)		$90,513			$132,116			$142,539			$157,175			$225,105

Portfolio turnover rate		42.10%			29.82%			29.93%			43.99%			30.15%

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^dBenefit of expense reduction rounds to less than 0.01%.

^eBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.



48	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,
	2019			2018			2017			2016			2015
Class R

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$21.93			$18.74			$15.70			$18.11			$17.57

Income from investment operations^a:

Net investment income (loss)^b		(0.20	)		(0.17	)		(0.15	)		(0.12	)		(0.16	)

Net realized and unrealized gains (losses)		2.68			3.78			3.19			(1.94	)		1.52

Total from investment operations		2.48			3.61			3.04			(2.06	)		1.36

Less distributions from:

Net realized gains		(4.26	)		(0.42	)		—			(0.35	)		(0.82	)

Net asset value, end of year		$20.15			$21.93			$18.74			$15.70			$18.11

Total return		15.78%			19.37%			19.36%			(11.46)%			8.12%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.32%			1.36%			1.35%			1.38%			1.37%

Expenses net of waiver and payments by affiliates		1.31%	^c		1.35%	^c		1.33%	^c		1.36%	^c		1.37%	^d

Net investment income (loss)		(0.93)%			(0.86)%			(0.86)%			(0.69)%			(0.87)%

Supplemental data

Net assets, end of year (000’s)		$74,634			$71,398			$79,995			$79,929			$92,455

Portfolio turnover rate		42.10%			29.82%			29.93%			43.99%			30.15%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^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	49

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small Cap Growth Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R6

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$24.88			$21.06			$17.52			$20.02			$19.21

Income from investment operations^a:

Net investment income (loss)^b		(0.07	)		(0.03	)		(0.03	)		0.01			(0.03	)

Net realized and unrealized gains (losses)		3.18			4.27			3.57			(2.16	)		1.66

Total from investment operations		3.11			4.24			3.54			(2.15	)		1.63

Less distributions from:

Net realized gains		(4.26	)		(0.42	)		—			(0.35	)		(0.82	)

Net asset value, end of year		$23.73			$24.88			$21.06			$17.52			$20.02

Total return		16.50%			20.23%			20.21%			(10.81)%			8.91%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.67%			0.65%			0.63%			0.63%			0.66%

Expenses net of waiver and payments by affiliates		0.64%	^c		0.63%	^c		0.61%	^c		0.61%	^c		0.66%	^d

Net investment income (loss)		(0.26)%			(0.14)%			(0.14)%			0.06%			(0.16)%

Supplemental data

Net assets, end of year (000’s)		$1,084,442			$935,509			$858,972			$846,724			$844,293

Portfolio turnover rate		42.10%			29.82%			29.93%			43.99%			30.15%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dBenefit of waiver and payments by affiliates and expense reduction rounds to less than 0.01%.



50	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,
	2019			2018			2017			2016			2015
Advisor Class

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$24.61			$20.88			$17.41			$19.94			$19.17

Income from investment operations^a:

Net investment income (loss)^b		(0.10	)		(0.08	)		(0.07	)		(0.04	)		(0.07	)

Net realized and unrealized gains (losses)		3.12			4.23			3.54			(2.14	)		1.66

Total from investment operations		3.02			4.15			3.47			(2.18	)		1.59

Less distributions from:

Net realized gains		(4.26	)		(0.42	)		—			(0.35	)		(0.82	)

Net asset value, end of year		$23.37			$24.61			$20.88			$17.41			$19.94

Total return		16.30%			19.97%			19.93%			(11.06)%			8.65%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.82%			0.86%			0.85%			0.88%			0.87%

Expenses net of waiver and payments by affiliates		0.81%	^c		0.85%	^c		0.83%	^c		0.86%	^c		0.87%	^d

Net investment income (loss)		(0.43)%			(0.36)%			(0.36)%			(0.19)%			(0.37)%

Supplemental data

Net assets, end of year (000’s)		$725,622			$713,135			$805,661			$850,975			$1,077,822

Portfolio turnover rate		42.10%			29.82%			29.93%			43.99%			30.15%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^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	51

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2019

Franklin Small Cap Growth Fund


	Shares		Value
Common Stocks 93.0%
Communication Services 1.7%

^aIMAX Corp.		680,200	$	16,583,276
^aYelp Inc.		766,600		30,709,996

				47,293,272

Consumer Discretionary 13.4%

^aAt Home Group Inc.		1,236,400		29,043,036
^aBoot Barn Holdings Inc.		794,703		22,879,499
Dave & Buster’s Entertainment Inc.		536,500		30,494,660
^a,b,cDraftKings Inc.		9,905,685		25,454,688
^aDuluth Holdings Inc.		773,911		12,320,663
^aFive Below Inc.		175,500		25,691,445
^aGrand Canyon Education Inc.		360,700		41,801,523
Lithia Motors Inc.		272,700		30,956,904
^aM/I Homes Inc.		1,256,976		35,409,014
^aRH		277,100		29,569,341
^a,dSportsman’s Warehouse Holdings Inc.		3,588,200		16,003,372
Steven Madden Ltd.		902,450		32,804,058
Wingstop Inc.		359,829		27,084,329

				359,512,532

Consumer Staples 1.7%

^aHostess Brands Inc., A		908,700		12,176,580
^aNomad Foods Ltd. (United Kingdom)		756,600		15,737,280
^aThe Simply Good Foods Co.		754,600		16,948,316

				44,862,176

Energy 2.3%

^aCallon Petroleum Co.		3,498,500		26,273,735
Liberty Oilfield Services Inc., A		1,399,900		20,872,510
^aRing Energy Inc.		2,634,077		13,644,519

				60,790,764

Financials 7.2%

Chemical Financial Corp.		623,723		27,400,151
Evercore Inc.		180,800		17,615,344
FGL Holdings., A		1,464,200		12,489,626
Houlihan Lokey Inc.		566,400		27,934,848
LegacyTexas Financial Group Inc.		443,160		17,761,853
^aMetropolitan Bank Holding Corp.		318,661		12,717,761
Pinnacle Financial Partners Inc.		586,304		34,046,673
^aPRA Group Inc.		506,500		14,242,780
^aWestern Alliance Bancorp		623,400		29,786,052

				193,995,088

Health Care 21.2%

^aAclaris Therapeutics Inc.		1,259,049		7,932,009
^a,eAllogene Therapeutics Inc.		161,782		4,845,371
^aAmicus Therapeutics Inc.		833,900		11,124,226
^aArgenx SE, ADR (Netherlands)		79,800		10,219,986
^aArray BioPharma Inc.		1,388,900		31,403,029
^aAscendis Pharma AS, ADR (Denmark)		178,900		19,925,882
^aCollegium Pharmaceutical Inc.		698,800		9,734,284
^aDynavax Technologies Corp.		1,116,300		7,423,395
^aEmergent BioSolutions Inc.		254,600		13,157,728



52	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,eFoamix Pharmaceuticals Ltd. (Israel)		586,080	$	1,904,760
^aG1 Therapeutics Inc.		148,800		3,184,320
^aGlobal Blood Therapeutics Inc.		162,500		9,002,500
^aGW Pharmaceuticals PLC, ADR (United Kingdom)		166,100		28,122,391
^aHealthEquity Inc.		341,116		23,110,609
^aHeron Therapeutics Inc.		1,076,588		23,340,428
^aInspire Medical Systems Inc.		311,253		16,088,667
^aInteger Holdings Corp.		369,000		25,494,210
^aIovance Biotherapeutics Inc.		2,248,900		25,637,460
^aiRhythm Technologies Inc.		391,097		29,844,612
^aNeogen Corp.		267,266		16,212,355
^aNeoGenomics Inc.		1,323,000		27,558,090
^aNeos Therapeutics Inc.		646,938		1,559,121
^aNeuronetics Inc.		380,300		6,339,601
^aNevro Corp.		628,600		38,790,906
^a,eOdonate Therapeutics Inc.		383,200		7,533,712
^aPenumbra Inc.		162,100		21,802,450
^aPfenex Inc.		1,552,672		8,989,971
^aPrecision BioSciences Inc.		262,000		3,406,000
^aPTC Therapeutics Inc.		864,500		32,349,590
^a,eRA Medical Systems Inc.		214,500		918,060
^aReata Pharmaceuticals Inc.		307,974		24,163,640
^aRevance Therapeutics Inc.		1,053,592		13,949,558
^aSage Therapeutics Inc.		153,100		25,756,013
^a,eTherapeuticsMD Inc.		2,797,900		12,030,970
^aTivity Health Inc.		1,300,278		28,112,010

				570,967,914

Industrials 18.8%

Allegiant Travel Co.		266,248		39,106,506
Altra Industrial Motion Corp.		589,600		22,104,104
^aBeacon Roofing Supply Inc.		791,800		29,819,188
BWX Technologies Inc.		724,400		37,016,840
Cubic Corp.		582,900		33,097,062
Granite Construction Inc.		673,544		30,235,390
Healthcare Services Group Inc.		832,600		28,183,510
Kennametal Inc.		924,700		37,635,290
^a,dThe KeyW Holding Corp.		2,962,282		33,592,278
Lindsay Corp.		137,521		11,689,285
^aMercury Systems Inc.		558,816		40,804,744
Mobile Mini Inc.		265,800		9,574,116
^aSAIA Inc.		444,424		28,616,461
^aSpirit Airlines Inc.		568,300		30,904,154
^aUnivar Inc.		1,605,332		35,847,064
^aUpwork Inc.		1,343,300		26,852,567
US Ecology Inc.		515,470		31,448,825

				506,527,384

Information Technology 24.6%

^a2U Inc.		814,372		49,269,506
^aAlteryx Inc.		278,500		24,686,240
^aEnvestnet Inc.		405,722		28,802,205
^aGuidewire Software Inc.		192,200		20,469,300



franklintempleton.com	Annual Report	53

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small Cap Growth Fund (continued)


	Shares		Value
Common Stocks (continued)
Information Technology (continued)

^aHubspot Inc.		135,029	$	24,911,500
^aInterXion Holding NV (Netherlands)		390,795		27,039,106
^aLattice Semiconductor Corp.		2,345,900		30,379,405
^a,b,cLegalZoom.comInc.		1,431,280		17,512,383
^aLightspeed POS Inc (Canada)		51,900		968,330
ManTech International Corp., A		515,000		31,924,850
Monolithic Power Systems		244,700		38,102,237
^aNanometrics Inc.		252,400		7,518,996
^aPagerduty Inc.		22,400		1,050,560
^aPaylocity Holding Corp.		288,032		27,809,490
^aPluralsight Inc., A		724,500		25,712,505
^aPure Storage Inc., A		1,035,700		23,676,102
^aQ2 Holdings Inc.		314,600		23,727,132
^aSilicon Laboratories Inc.		392,300		42,235,018
^aTwilio Inc., A		79,602		10,916,618
^a,eUSA Technologies Inc.		646,500		3,665,655
Versum Materials Inc.		648,400		33,833,512
^aViaSat Inc.		421,283		38,260,922
^aViavi Solutions Inc.		2,524,600		33,577,180
^aWix.com Ltd. (Israel)		215,500		28,911,480
^aZendesk Inc.		370,214		32,497,385
^aZscaler Inc.		482,800		32,980,068

				660,437,685

Materials 1.1%

^aIngevity Corp.		249,578		28,703,966


Real Estate 1.0%

Coresite Realty Corp.		244,600		26,761,685

Total Common Stocks (Cost $1,830,573,837)				2,499,852,466


Preferred Stocks 4.5%
Consumer Discretionary 3.5%

^a,b,cClearMotion Inc., pfd., D		3,698,772		10,345,480
^a,b,cPeloton Interactive Inc., pfd., F		1,038,769		24,365,904
^a,b,cProterra Inc., pfd., 5, 144A		1,787,047		16,866,913
^a,b,cProterra Inc., pfd., 6, 144A		1,310,834		12,372,211
^a,b,cProterra Inc., pfd., 7		536,367		5,062,461
^a,b,cRent the Runway Inc., pfd.		596,471		13,333,328
^a,b,cSweetgreen Inc., pfd., H		383,435		5,371,420
^a,b,cTula eTechnology Inc.		361,111		—
^a,b,cTula Technology Inc., E		3,611,111		6,824,476

				94,542,193

Industrials 0.5%

^a,b,cOptoro Inc., pfd., E		508,130		12,143,346



54	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small Cap Growth Fund (continued)


	Shares		Value
Preferred Stocks (continued)
Information Technology 0.5%

^a,b,c Smule Inc., pfd., G, 144A		1,542,673	$	10,805,398
^a,b,c Smule Inc., pfd., H, 144A		352,675		2,746,149

				13,551,547

Total Preferred Stocks (Cost $93,695,716)				120,237,086

Total Investments before Short Term Investments (Cost $1,924,269,553)				2,620,089,552


Short Term Investments 3.3%

Money Market Funds (Cost $70,752,806) 2.6%

^f,gInstitutional Fiduciary Trust Money Market Portfolio, 2.10%		70,752,806		70,752,806


^h Investments from Cash Collateral Received for Loaned Securities (Cost $18,262,684) 0.7%
Money Market Funds 0.7%

^f,gInstitutional Fiduciary Trust Money Market Portfolio, 2.10%		18,262,684		18,262,684


Total Investments (Cost $2,013,285,043) 100.8%				2,709,105,042
Other Assets, less Liabilities (0.8)%				(20,452,753	)

Net Assets 100.0%			$	2,688,652,289

See Abbreviations on page 89.

^aNon-income producing.

^bFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.

^cSee Note 7 regarding restricted securities.

^dSee Note 8 regarding holdings of 5% voting securities.

^eA portion or all of the security is on loan at April 30, 2019. See Note 1(c).

^fSee Note 3(f) regarding investments in affiliated management investment companies.

^gThe rate shown is the annualized seven-day effective yield at period end.

^hSee Note 1(c) regarding securities on loan.



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

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Small-Mid Cap Growth Fund


				Year Ended April 30,
	2019			2018			2017			2016			2015
Class A

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$36.07			$34.35			$31.84			$38.38			$40.42

Income from investment operations^a:

Net investment income (loss)^b		(0.09	)		(0.15	)		(0.11	)		(0.03	)^c		(0.14	)

Net realized and unrealized gains (losses)		5.33			4.97			4.73			(3.37)			5.71

Total from investment operations		5.24			4.82			4.62			(3.40)			5.57

Less distributions from:

Net realized gains		(4.14	)		(3.10	)		(2.11	)		(3.14	)		(7.61	)

Net asset value, end of year		$37.17			$36.07			$34.35			$31.84			$38.38

Total return^d		17.43%			14.28%			15.01%			(9.02)%			15.78%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.88%			1.02%			0.95%			0.96%			0.94%

Expenses net of waiver and payments by affiliates		0.87%	^e		1.00%	^e		0.94%	^e		0.95%	^e		0.94%	^f

Net investment income (loss)		(0.25)%			(0.41)%			(0.34)%			(0.08)%	^c		(0.35)%

Supplemental data

Net assets, end of year (000’s)		$2,684,131			$2,262,471			$2,303,113			$2,231,822			$2,535,853

Portfolio turnover rate		54.28%			38.35%			35.46%			38.72%			47.98%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.11 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been (0.38)%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^eBenefit of expense reduction rounds to less than 0.01%.

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.



56	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,
	2019			2018			2017			2016			2015
Class C

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$25.84			$25.59			$24.40			$30.43			$33.78

Income from investment operations^a:

Net investment income (loss)^b		(0.26	)		(0.31	)		(0.27	)		(0.23	)^c		(0.36	)

Net realized and unrealized gains (losses)		3.54			3.66			3.57			(2.66	)		4.62

Total from investment operations		3.28			3.35			3.30			(2.89	)		4.26

Less distributions from:

Net realized gains		(4.14	)		(3.10	)		(2.11	)		(3.14	)		(7.61	)

Net asset value, end of year		$24.98			$25.84			$25.59			$24.40			$30.43

Total return^d		16.68%			13.39%			14.15%			(9.72)%			14.96%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.63%			1.77%			1.70%			1.71%			1.69%

Expenses net of waiver and payments by affiliates		1.62%	^e		1.75%	^e		1.69%	^e		1.70%	^e		1.69%	^f

Net investment income (loss)		(1.00)%			(1.16)%			(1.09)%			(0.83)%	^c		(1.10)%

Supplemental data

Net assets, end of year (000’s)		$173,334			$334,769			$371,262			$377,024			$448,722

Portfolio turnover rate		54.28%			38.35%			35.46%			38.72%			47.98%

^bBased on average daily shares outstanding.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^eBenefit of expense reduction rounds to less than 0.01%.

^f Benefit of waiver and payments by affiliates 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 Small-Mid Cap Growth Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$33.15			$31.87			$29.75			$36.18			$38.61

Income from investment operations^a:

Net investment income (loss)^b		(0.16	)		(0.22	)		(0.18	)		(0.11	)^c		(0.23	)

Net realized and unrealized gains (losses)		4.81			4.60			4.41			(3.18	)		5.41

Total from investment operations		4.65			4.38			4.23			(3.29	)		5.18

Less distributions from:

Net realized gains		(4.14	)		(3.10	)		(2.11	)		(3.14	)		(7.61	)

Net asset value, end of year		$33.66			$33.15			$31.87			$29.75			$36.18

Total return		17.17%			14.00%			14.70%			(9.24)%			15.52%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.12%			1.26%			1.19%			1.21%			1.19%

Expenses net of waiver and payments by affiliates		1.11%	^d		1.24%	^d		1.18%	^d		1.20%	^d		1.19%	^e

Net investment income (loss)		(0.49)%			(0.65)%			(0.58)%			(0.33)%	^c		(0.60)%

Supplemental data

Net assets, end of year (000’s)		$50,721			$70,692			$81,864			$86,989			$96,593

Portfolio turnover rate		54.28%			38.35%			35.46%			38.72%			47.98%

^bBased 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%.



58	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,
	2019			2018			2017			2016			2015
Class R6

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$39.91			$37.51			$34.43			$41.04			$42.53

Income from investment operations^a:

Net investment income^b		0.05			0.05			0.05			0.15	^c		0.05

Net realized and unrealized gains (losses)		6.01			5.45			5.14			(3.62	)		6.07

Total from investment operations		6.06			5.50			5.19			(3.47	)		6.12

Less distributions from:

Net realized gains		(4.14	)		(3.10	)		(2.11	)		(3.14	)		(7.61	)

Net asset value, end of year		$41.83			$39.91			$37.51			$34.43			$41.04

Total return		17.82%			14.90%			15.51%			(8.54)%			16.32%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.52%			0.50%			0.48%			0.48%			0.48%

Expenses net of waiver and payments by affiliates		0.49%	^d		0.47%	^d		0.47%	^d		0.47%	^d		0.48%	^e

Net investment income		0.13%			0.12%			0.13%			0.40%^c			0.11%

Supplemental data

Net assets, end of year (000’s)		$259,053			$275,835			$222,577			$242,237			$206,548

Portfolio turnover rate		54.28%			38.35%			35.46%			38.72%			47.98%

^bBased 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%.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	59

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small-Mid Cap Growth Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Advisor Class

Per share operating performance
(for a share outstanding throughout the year)

Net asset value, beginning of year		$39.33			$37.11			$34.15			$40.83			$42.44

Income from investment operations^a:

Net investment income (loss)^b		0.01			(0.06	)		(0.03	)		0.06	^c		(0.04	)

Net realized and unrealized gains (losses)		5.89			5.38			5.10			(3.60	)		6.04

Total from investment operations		5.90			5.32			5.07			(3.54	)		6.00

Less distributions from:

Net realized gains		(4.14	)		(3.10	)		(2.11	)		(3.14	)		(7.61	)

Net asset value, end of year		$41.09			$39.33			$37.11			$34.15			$40.83

Total return		17.67%			14.57%			15.28%			(8.79)%			16.09%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.63%			0.77%			0.70%			0.71%			0.69%

Expenses net of waiver and payments by affiliates		0.62%	^d		0.75%	^d		0.69%	^d		0.70%	^d		0.69%	^e

Net investment income (loss)		—%	^f		(0.16)%			(0.09)%			0.17%	^c		(0.10)%

Supplemental data

Net assets, end of year (000’s)		$355,141			$520,842			$584,840			$551,176			$708,617

Portfolio turnover rate		54.28%			38.35%			35.46%			38.72%			47.98%

^bBased 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%.

^fRounds to less than 0.01%.



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

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2019

Franklin Small-Mid Cap Growth Fund


	Shares		Value
Common Stocks 96.3%
Communication Services 1.2%

^aIAC/InterActiveCorp		102,000	$	22,933,680
^aPinterest Inc., A		257,000		7,961,860
^aSpotify Technology SA		73,500		9,979,095

				40,874,635

Consumer Discretionary 15.6%

Aptiv PLC		465,000		39,850,500
^aBurlington Stores Inc.		278,000		46,956,980
^aDollar Tree Inc.		240,000		26,707,200
Domino’s Pizza Inc.		162,000		43,833,960
^a,b,cDraftKings Inc.		7,974,537		20,492,207
Expedia Group Inc.		303,500		39,406,440
^aFive Below Inc.		117,000		17,127,630
^aGrand Canyon Education Inc.		363,000		42,068,070
^aLevi Strauss & Co., A		420,000		9,412,200
MGM Resorts International		973,000		25,910,990
^aNVR Inc.		11,000		34,677,280
^aO’Reilly Automotive Inc.		86,000		32,557,020
Tapestry Inc.		455,000		14,682,850
Tractor Supply Co.		330,000		34,155,000
^aUlta Beauty Inc.		91,000		31,757,180
^aUnder Armour Inc., A		417,000		9,628,530
Vail Resorts Inc.		130,000		29,750,500
VF Corp.		364,000		34,365,240
Wingstop Inc.		204,000		15,355,080

				548,694,857

Consumer Staples 2.2%

Brown-Forman Corp., B		528,000		28,137,120
Church & Dwight Co. Inc.		105,000		7,869,751
Lamb Weston Holdings Inc.		326,000		22,836,300
McCormick & Co. Inc.		112,000		17,244,640

				76,087,811

Energy 1.1%

Concho Resources Inc.		179,700		20,733,786
Diamondback Energy Inc.		178,000		18,937,420

				39,671,206

Financials 6.6%

Arthur J. Gallagher & Co.		226,100		18,906,482
CBOE Global Markets Inc.		303,000		30,787,830
Chemical Financial Corp.		237,000		10,411,410
MarketAxess Holdings Inc.		150,000		41,749,500
MSCI Inc.		235,500		53,076,990
SEI Investments Co.		448,000		24,393,600
^a SVB Financial Group		103,500		26,053,020
^a Tradeweb Markets Inc.		218,000		8,774,500
^a Western Alliance Bancorp		425,000		20,306,500

				234,459,832



franklintempleton.com	Annual Report	61

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small-Mid Cap Growth Fund (continued)


	Shares		Value
Common Stocks (continued)
Health Care 13.5%

^aABIOMED Inc.		132,500	$	36,756,825
^aAlign Technology Inc.		107,500		34,903,100
^aArgenx SE, ADR (Netherlands)		40,000		5,122,800
^aArray BioPharma Inc.		520,000		11,757,200
^aBioMarin Pharmaceutical Inc.		207,666		17,761,673
^aDexCom Inc.		184,414		22,327,003
^aGW Pharmaceuticals PLC, ADR (United Kingdom)		101,000		17,100,310
^aHealthEquity Inc.		264,000		17,886,000
^aHeron Therapeutics Inc.		724,000		15,696,320
^aIDEXX Laboratories Inc.		171,000		39,672,000
^aIncyte Corp.		188,614		14,485,555
^aIonis Pharmaceuticals Inc.		136,000		10,108,880
^aiRhythm Technologies Inc.		186,450		14,228,000
^aJazz Pharmaceuticals PLC		147,000		19,076,190
^aMettler-Toledo International Inc.		79,500		59,248,170
^aNeurocrine Biosciences Inc.		180,042		13,006,234
^aPenumbra Inc.		216,647		29,139,021
^aPrecision BioSciences Inc.		279,400		3,632,200
^aRevance Therapeutics Inc.		493,000		6,527,320
^aSage Therapeutics Inc.		64,100		10,783,543
^aSarepta Therapeutics Inc.		95,500		11,167,770
^aSeattle Genetics Inc.		124,500		8,438,610
^aVeeva Systems Inc.		179,000		25,036,730
^aWaters Corp.		150,000		32,031,000

				475,892,454

Industrials 17.0%

BWX Technologies Inc.		674,000		34,441,400
^aCoStar Group Inc.		117,000		58,061,250
Fortive Corp.		607,500		52,451,550
Harris Corp.		270,500		45,579,250
IDEX Corp.		308,500		48,329,610
^aIHS Markit Ltd.		466,915		26,735,553
^a,dLyft Inc., A		123,000		7,355,400
^aMercury Systems Inc.		294,000		21,467,880
Old Dominion Freight Line Inc.		220,000		32,841,600
Republic Services Inc.		216,000		17,889,120
Rockwell Automation Inc.		268,000		48,430,280
Roper Technologies Inc.		49,530		17,815,941
^aSpirit Airlines Inc.		165,000		8,972,700
Stanley Black & Decker Inc.		212,000		31,079,200
^aTransDigm Group Inc.		52,000		25,091,040
TransUnion		342,000		23,820,300
^aUnivar Inc.		1,085,000		24,228,050
^aUpwork Inc.		344,600		6,888,554
Verisk Analytics Inc.		468,000		66,053,520

				597,532,198

Information Technology 34.8%

^a2U Inc.		745,000		45,072,500
^aAdvanced Micro Devices Inc.		700,000		19,341,000
^aAdyen NV (Netherlands)		28,500		23,196,307
Amphenol Corp., A		355,000		35,343,800



62	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small-Mid Cap Growth Fund (continued)


	Shares		Value
Common Stocks (continued)
Information Technology (continued)

^aArista Networks Inc.		82,500	$	25,763,925
^aAtlassian Corp. PLC		308,000		33,926,200
^aBlack Knight Inc.		548,000		30,918,160
Cognex Corp.		256,000		12,910,080
^aCree Inc.		40,000		2,643,600
^aDocuSign Inc.		455,000		25,784,850
^aElastic NV		263,000		22,499,650
^aEPAM Systems Inc.		203,000		36,410,080
Global Payments Inc.		252,000		36,809,640
^aGoDaddy Inc., A		696,800		56,789,200
^aGuidewire Software Inc.		321,000		34,186,500
Jack Henry & Associates Inc.		200,000		29,812,000
KLA-Tencor Corp.		344,000		43,853,120
Lam Research Corp.		188,000		38,996,840
^aLattice Semiconductor Corp.		398,335		5,158,438
Microchip Technology Inc.		802,000		80,111,780
Monolithic Power Systems		248,000		38,616,080
^aNew Relic Inc.		265,000		27,888,600
^aNutanix Inc., A		170,000		7,342,300
^aPagerduty Inc.		219,000		10,271,100
^aPaylocity Holding Corp.		202,000		19,503,100
^aPluralsight Inc., A		655,000		23,245,950
^aPTC Inc.		408,000		36,911,760
^aQ2 Holdings Inc.		361,000		27,226,620
^aShopify Inc., A (Canada)		56,000		13,637,680
^aSilicon Laboratories Inc.		289,000		31,113,740
^aSquare Inc., A		589,000		42,890,980
^aSynopsys Inc.		288,000		34,871,040
Total System Services Inc.		387,500		39,618,000
^aTrimble Inc.		508,000		20,736,560
^aTwilio Inc., A		264,000		36,204,960
^aViaSat Inc.		415,050		37,694,841
^aWEX Inc.		139,500		29,336,850
^aWix.com Ltd. (Israel)		209,000		28,039,440
^aWorkday Inc., A		178,000		36,602,140
Xilinx Inc.		207,000		24,868,980
^aZscaler Inc.		273,000		18,648,630

				1,224,797,021

Materials 2.6%

^aIngevity Corp.		271,780		31,257,418
Martin Marietta Materials Inc.		145,000		32,175,500
Packaging Corp. of America		305,000		30,243,800

				93,676,718

Real Estate 1.7%

^aSBA Communications Corp., A		298,000		60,711,540

Total Common Stocks (Cost $2,431,628,237)				3,392,398,272


Preferred Stocks 0.6%
Consumer Discretionary 0.4%

^a,b,cProterra Inc., pfd., 5, 144A		1,416,913		13,373,430



franklintempleton.com	Annual Report	63

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small-Mid Cap Growth Fund (continued)


	Shares		Value
Preferred Stocks (continued)
Financials 0.2%

^a,b,cBill.com, pfd., H		866,666	$	7,677,734

Total Preferred Stocks (Cost $14,335,915)				21,051,164

Total Investments before Short Term Investments (Cost $2,445,964,152)				3,413,449,436


Short Term Investments 3.7%

Money Market Funds (Cost $124,157,073) 3.5%

^e,fInstitutional Fiduciary Trust Money Market Portfolio, 2.10%		124,157,073		124,157,073

^g Investments from Cash Collateral Received for Loaned Securities (Cost $6,811,635) 0.2%
Money Market Funds 0.2%

^e,fInstitutional Fiduciary Trust Money Market Portfolio, 2.10%		6,811,635		6,811,635


Total Investments (Cost $2,576,932,860) 100.6%				3,544,418,144
Other Assets, less Liabilities (0.6)%				(22,038,552	)

Net Assets 100.0%			$	3,522,379,592

See Abbreviations on page 89.

^aNon-income producing.

^bFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.

^cSee Note 7 regarding restricted securities.

^dA portion or all of the security is on loan at April 30, 2019. See Note 1(c).

^eSee Note 3(f) regarding investments in affiliated management investment companies.

^fThe rate shown is the annualized seven-day effective yield at period end.

^gSee Note 1(c) regarding securities on loan.



64	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

April 30, 2019


	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers		$1,987,210,539	$	96,348,998	$	1,872,291,491	$	2,445,964,152
Cost - Non-controlled affiliates (Note 3f and 8)		69,126,928		7,161,073		140,993,552		130,968,708


Value - Unaffiliated issuers⁺		$3,961,847,987	$	115,367,112	$	2,570,493,902	$	3,413,449,436
Value - Non-controlled affiliates (Note 3f and 8)		69,126,928		7,161,073		138,611,140		130,968,708
Receivables:
Investment securities sold		—		—		8,982,581		11,962,690
Capital shares sold		2,227,445		405,390		4,191,723		4,193,394
Dividends		680,963		17,150		24,096		30,934
Due from custodian		—		—		246,600		—
Other assets		3,377		94		2,229		3,054


Total assets		4,033,886,700		122,950,819		2,722,552,271		3,560,608,216

Liabilities:
Payables:
Investment securities purchased		—		—		9,462,560		24,628,767
Capital shares redeemed		4,714,033		97,553		3,768,343		3,701,613
Management fees		1,747,480		46,185		1,314,960		1,268,607
Distribution fees		780,907		28,610		247,008		702,971
Transfer agent fees		624,403		16,620		467,214		902,267
Professional fees		50,001		39,248		46,560		55,946
Payable upon return of securities loaned		—		—		18,509,284		6,811,635
Accrued expenses and other liabilities		146,481		7,346		84,053		156,818


Total liabilities		8,063,305		235,562		33,899,982		38,228,624


Net assets, at value		$4,025,823,395	$	122,715,257	$	2,688,652,289	$	3,522,379,592

Net assets consist of:
Paid-in capital		$1,831,459,651	$	103,694,299	$	1,874,740,894	$	2,146,773,480
Total distributable earnings (loss)		2,194,363,744		19,020,958		813,911,395		1,375,606,112


Net assets, at value		$4,025,823,395	$	122,715,257	$	2,688,652,289	$	3,522,379,592


⁺Includes securities loaned.		$ —	$	—	$	17,688,882	$	6,583,980



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

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Assets and Liabilities (continued)

April 30, 2019


	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Class A:
Net assets, at value		$2,819,006,821	$	77,230,465	$	713,441,579	$	2,684,131,272
Shares outstanding		71,249,412		4,978,462		33,246,602		72,218,966
Net asset value per share^a		$39.57		$15.51		$21.46		$37.17
Maximum offering price per share (net asset value per share ÷ 94.50%)		$41.87		$16.41		$22.71		$39.33
Class C:
Net assets, at value		$ 244,573,709	$	15,701,821	$	90,512,560	$	173,333,516
Shares outstanding		7,532,444		1,090,439		5,276,466		6,938,042
Net asset value and maximum offering price per share^a		$32.47		$14.40		$17.15		$24.98
Class R:
Net assets, at value		$ 37,104,937	$	144,367	$	74,633,979	$	50,720,696
Shares outstanding		987,747		9,493		3,703,532		1,507,073
Net asset value and maximum offering price per share		$37.57		$15.21		$20.15		$33.66
Class R6:
Net assets, at value		$ 418,173,766	$	970,982	$	1,084,442,045	$	259,052,789
Shares outstanding		9,629,934		60,945		45,700,423		6,193,640
Net asset value and maximum offering price per share		$43.42		$15.93		$23.73		$41.83
Advisor Class:
Net assets, at value		$ 506,964,162	$	28,667,622	$	725,622,126	$	355,141,319
Shares outstanding		11,825,271		1,810,204		31,046,388		8,643,232
Net asset value and maximum offering price per share		$42.87		$15.84		$23.37		$41.09

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



66	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, 2019


	Franklin Growth Opportunities Fund			Franklin Select U.S. Equity Fund			Franklin Small Cap Growth Fund			Franklin Small-Mid Cap Growth Fund
Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers		$ 23,184,945			$ 934,594			$ 8,392,414			$ 19,588,544
Non-controlled affiliates (Note 3f and 8)		644,989			100,768			751,145			1,923,102
Interest:
Unaffiliated issuers		—			—			—			332
Income from securities loaned:
Unaffiliated issuers (net of fees and rebates)		112,861			—			212,045			19,187
Non-controlled affiliates (Note 3f)		75,547			—			709,059			194,606


Total investment income		24,018,342			1,035,362			10,064,663			21,725,771

Expenses:
Management fees (Note 3a)		21,250,795			976,209			16,236,790			16,066,199
Distribution fees: (Note 3c)
Class A		6,437,543			174,075			1,724,654			6,049,416
Class C		3,218,095			165,465			1,126,807			2,505,936
Class R		179,039			714			370,716			333,533
Transfer agent fees: (Note 3e)
Class A		3,355,825			92,687			1,296,932			3,557,700
Class C		419,389			22,017			212,232			368,843
Class R		46,991			182			139,724			99,988
Class R6		97,801			830			376,295			106,882
Advisor Class		758,794			20,739			1,386,535			748,020
Custodian fees (Note 4)		41,983			1,682			25,760			31,292
Reports to shareholders		320,566			22,127			149,525			325,251
Registration and filing fees		168,544			85,951			117,002			184,337
Professional fees		68,712			58,200			63,830			75,853
Trustees’ fees and expenses		56,123			1,442			38,084			50,985
Other		72,468			11,044			57,365			68,838


Total expenses		36,492,668			1,633,364			23,322,251			30,573,073
Expense reductions (Note 4)		(10,901	)		(103	)		(1,919	)		(77	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(154,146	)		(286,276	)		(499,865	)		(487,359	)


Net expenses		36,327,621			1,346,985			22,820,467			30,085,637


Net investment income (loss)		(12,309,279	)		(311,623	)		(12,755,804	)		(8,359,866	)

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		459,853,047			516,205			392,150,056			651,074,279
Non-controlled affiliates (Note 3f and 8)		—			—			(32,245,954	)		—
Foreign currency transactions		10,524			(589	)		(2,073	)		(48,717	)


Net realized gain (loss)		459,863,571			515,616			359,902,029			651,025,562

Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		124,321,685			11,651,347			(4,595,788	)		(99,480,161	)
Non-controlled affiliates (Note 3f and 8)		—			—			37,884,242			—


Net change in unrealized appreciation (depreciation)		124,321,685			11,651,347			33,288,454			(99,480,161	)


Net realized and unrealized gain (loss)		584,185,256			12,166,963			393,190,483			551,545,401



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	67

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Operations (continued)

for the year ended April 30, 2019


	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Net increase (decrease) in net assets resulting from operations		$571,875,977		$11,855,340		$380,434,679		$543,185,535


*Foreign taxes withheld on dividends		$ 265	$	1,654	$	—	$	435



68	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 Growth Opportunities Fund						Franklin Select U.S. Equity Fund
	Year Ended April 30,						Year Ended April 30,
	2019			2018			2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(12,309,279	)	$	(10,261,563	)	$	(311,623	)	$	(359,541	)
Net realized gain (loss)		459,863,571			289,840,333			515,616			23,070,802
Net change in unrealized appreciation (depreciation)		124,321,685			405,837,652			11,651,347			(15,755,359	)

Net increase (decrease) in net assets resulting from operations		571,875,977			685,416,422			11,855,340			6,955,902
Distributions to shareholders: (Note 1e)
Class A		(270,776,543	)		(189,384,206	)		(9,068,158	)		—
Class C		(29,467,299	)		(36,890,234	)		(2,096,439	)		—
Class R		(3,826,333	)		(3,861,226	)		(17,405	)		—
Class R6		(36,746,123	)		(26,495,718	)		(112,384	)		—
Advisor Class		(56,405,582	)		(42,059,463	)		(1,714,775	)		—

Total distributions to shareholders		(397,221,880	)		(298,690,847	)		(13,009,161	)		—
Capital share transactions: (Note 2)
Class A		274,938,208			(91,864,958	)		13,281,422			(17,113,814	)
Class C		(164,852,400	)		(23,626,956	)		(1,890,912	)		(3,442,504	)
Class R		(765,911	)		(18,366,509	)		11,435			(43,959	)
Class R6		25,388,596			41,353,334			44,676			(19,406,366	)
Advisor Class		(101,787,858	)		(18,372,365	)		17,229,063			(3,475,298	)

Total capital share transactions		32,920,635			(110,877,454	)		28,675,684			(43,481,941	)
Net increase (decrease) in net assets		207,574,732			275,848,121			27,521,863			(36,526,039	)
Net assets:
Beginning of year		3,818,248,663			3,542,400,542			95,193,394			131,719,433

End of year (Note 1e)	$	4,025,823,395		$	3,818,248,663		$	122,715,257		$	95,193,394



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	69

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Changes in Net Assets (continued)


	Franklin Small Cap Growth Fund						Franklin Small-Mid Cap Growth Fund
	Year Ended April 30,						Year Ended April 30,
	2019			2018			2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(12,755,804	)	$	(10,835,341	)	$	(8,359,866	)	$	(14,570,284	)
Net realized gain (loss)		359,902,029			347,278,699			651,025,562			393,654,195
Net change in unrealized appreciation (depreciation)		33,288,454			131,654,453			(99,480,161	)		100,694,860

Net increase (decrease) in net assets resulting from operations		380,434,679			468,097,811			543,185,535			479,778,771
Distributions to shareholders: (Note 1e)
Class A		(119,248,780	)		(13,026,727	)		(273,591,265	)		(188,183,859	)
Class C		(19,107,819	)		(2,968,851	)		(25,744,621	)		(37,764,936	)
Class R		(13,109,783	)		(1,455,647	)		(8,327,251	)		(6,640,970	)
Class R6		(158,804,029	)		(16,214,723	)		(27,160,456	)		(21,566,773	)
Advisor Class		(120,036,837	)		(13,459,989	)		(54,511,212	)		(39,628,357	)

Total distributions to shareholders		(430,307,248	)		(47,125,937	)		(389,334,805	)		(293,784,895	)
Capital share transactions: (Note 2)
Class A		66,793,851			(165,302,683	)		299,393,170			(165,123,618	)
Class C		(37,156,667	)		(30,398,855	)		(163,688,617	)		(43,224,469	)
Class R		5,850,633			(20,277,000	)		(20,982,789	)		(14,958,409	)
Class R6		156,516,510			(75,776,145	)		(34,742,726	)		39,199,957
Advisor Class		29,111,361			(218,726,187	)		(176,059,390	)		(100,935,015	)

Total capital share transactions		221,115,688			(510,480,870	)		(96,080,352	)		(285,041,554	)
Net increase (decrease) in net assets		171,243,119			(89,508,996	)		57,770,378			(99,047,678	)
Net assets:
Beginning of year		2,517,409,170			2,606,918,166			3,464,609,214			3,563,656,892

End of year (Note 1e)	$	2,688,652,289		$	2,517,409,170		$	3,522,379,592		$	3,464,609,214



70	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 (1940 Act) as an open-end management investment company, consisting of eight separate funds, four 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 Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees 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. Effective April 28, 2017, the Fund opened Class R6 shares to new investors who are eligible to purchase Class R6 shares. Effective January 17, 2019, all share classes of the Fund re-opened to new investors.

Effective June 1, 2018, Franklin Focused Core Equity Fund was renamed Franklin Select U.S. Equity Fund.

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 each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. 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 Committee (VC). The Funds may 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 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time 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. Investments in repurchase agreements are valued at cost, which approximates fair value.

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 Funds primarily employ 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.



franklintempleton.com	Annual Report	71

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting
Policies (continued)

a. Financial Instrument Valuation (continued)

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.

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Funds’ NAV is not calculated, 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 or all 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 and/or uninvested cash as included in due from custodian in the Statements of Assets and Liabilities. 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, net of fees paid to the securities lending agent and/or third-party vendor, 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. At April 30, 2019, Franklin Growth Opportunities Fund and Franklin Select U.S. Equity Fund had no securities on loan.

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



72	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

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 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, certain or all 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 may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of April 30, 2019, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

e. Security Transactions, Investment Income, Expenses and Distributions

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 or based on the ratio of number of shareholders of each Fund to the combined number of shareholders 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, excluding 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.

*Effective during the current reporting period, it is no longer required to present certain line items in the Statements of Changes in Net Assets. The below prior period amounts affected by this change are shown as they were in the prior year Statements of Changes in Net Assets.



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1. Organization and Significant Accounting Policies (continued)

For the year ended April 30, 2018, distributions to shareholders were as follows:


	Franklin Growth Opportunities Fund			Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund			Franklin Small-Mid Cap Growth Fund

Distributions from net realized gains:
Class A		$(189,384,206	)		$ —		$(13,026,727	)		$(188,183,859)
Class C		(36,890,234	)		—		(2,968,851	)		(37,764,936)
Class R		(3,861,226	)		—		(1,455,647	)		(6,640,970)
Class R6		(26,495,718	)		—		(16,214,723	)		(21,566,773)
Advisor Class		(42,059,463	)		—		(13,459,989	)		(39,628,357)

For the year ended April 30, 2018, accumulated net investment loss included in net assets was as follows:


Fund	Accumulated net investment loss

Franklin Growth Opportunities Fund		$(4,268,478)
Franklin Select U.S. Equity Fund		$ (243,541)
Franklin Small Cap Growth Fund		$(2,644,648)
Franklin Small-Mid Cap Growth Fund		$ —

2. Shares of Beneficial Interest

At April 30, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:


	Franklin Growth						Franklin Select U.S.
	Opportunities Fund						Equity Fund

	Shares			Amount			Shares			Amount

Class A Shares:
Year ended April 30, 2019
Shares sold^a		11,527,502		$	446,798,931			1,406,734		$	21,698,694
Shares issued in reinvestment of distributions		7,925,459			253,773,429			686,186			9,057,652
Shares redeemed		(11,143,246	)		(425,634,152	)		(1,132,089	)		(17,474,924)


Net increase (decrease)		8,309,715		$	274,938,208			960,831		$	13,281,422


Year ended April 30, 2018
Shares sold		7,166,896		$	269,822,921			503,310		$	8,051,742
Shares issued in reinvestment of distributions		4,805,055			175,240,189			—			—
Shares redeemed		(14,319,505	)		(536,928,068	)		(1,600,612	)		(25,165,556)


Net increase (decrease)		(2,347,554	)	$	(91,864,958	)		(1,097,302	)	$	(17,113,814)



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	Franklin Growth						Franklin Select U.S.
	Opportunities Fund						Equity Fund

	Shares			Amount			Shares			Amount

Class C Shares:
Year ended April 30, 2019
Shares sold		1,419,843		$	46,769,565			246,596		$	3,641,767
Shares issued in reinvestment of distributions		1,096,405			28,890,280			169,618			2,082,903
Shares redeemed^a		(7,237,389	)		(240,512,245	)		(499,994	)		(7,615,582)


Net increase (decrease)		(4,721,141	)	$	(164,852,400	)		(83,780	)	$	(1,890,912)


Year ended April 30, 2018
Shares sold		1,416,968		$	45,670,045			169,798		$	2,570,525
Shares issued in reinvestment of distributions		1,171,816			36,291,145			—			—
Shares redeemed		(3,285,529	)		(105,588,146	)		(401,846	)		(6,013,029)


Net increase (decrease)		(696,745	)	$	(23,626,956	)		(232,048	)	$	(3,442,504)


Class R Shares:
Year ended April 30, 2019
Shares sold		181,946		$	6,761,234			435		$	6,572
Shares issued in reinvestment of distributions		123,799			3,767,199			1,344			17,405
Shares redeemed		(308,476	)		(11,294,344	)		(776	)		(12,542)


Net increase (decrease)		(2,731	)	$	(765,911	)		1,003		$	11,435


Year ended April 30, 2018
Shares sold		184,889		$	6,657,157			5,129		$	77,884
Shares issued in reinvestment of distributions		109,382			3,821,807			—			—
Shares redeemed		(808,089	)		(28,845,473	)		(7,727	)		(121,843)


Net increase (decrease)		(513,818	)	$	(18,366,509	)		(2,598	)	$	(43,959)


Class R6 Shares:
Year ended April 30, 2019
Shares sold		1,593,233		$	65,447,277			14,436		$	230,801
Shares issued in reinvestment of distributions		798,910			28,041,731			8,300			112,384
Shares redeemed		(1,611,469	)		(68,100,412	)		(18,245	)		(298,509)


Net increase (decrease)		780,674		$	25,388,596			4,491		$	44,676


Year ended April 30, 2018
Shares sold		1,719,083		$	70,340,588			85,528		$	1,360,151
Shares issued in reinvestment of distributions		516,029			20,352,194			—			—
Shares redeemed		(1,209,156	)		(49,339,448	)		(1,350,483	)		(20,766,517)


Net increase (decrease)		1,025,956		$	41,353,334			(1,264,955	)	$	(19,406,366)


Advisor Class Shares:
Year ended April 30, 2019
Shares sold		4,826,217		$	192,490,364			1,588,134		$	23,675,471
Shares issued in reinvestment of distributions		1,596,331			55,344,783			111,006			1,494,146
Shares redeemed		(8,711,497	)		(349,623,005	)		(519,636	)		(7,940,554)


Net increase (decrease)		(2,288,949	)	$	(101,787,858	)		1,179,504		$	17,229,063


Year ended April 30, 2018
Shares sold		2,255,020		$	89,869,837			224,083		$	3,543,200
Shares issued in reinvestment of distributions		1,049,408			40,968,889			—			—
Shares redeemed		(3,702,910	)		(149,211,091	)		(442,950	)		(7,018,498)


Net increase (decrease)		(398,482	)	$	(18,372,365	)		(218,867	)	$	(3,475,298)



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2. Shares of Beneficial Interest (continued)


	Franklin Small Cap						Franklin Small-Mid Cap
	Growth Fund						Growth Fund

	Shares			Amount			Shares			Amount

Class A Shares:
Year ended April 30, 2019
Shares sold^a		7,109,392		$	159,713,318			14,858,754		$	536,401,847
Shares issued in reinvestment of distributions		6,425,425			111,866,657			8,741,011			259,433,312
Shares redeemed		(9,200,387	)		(204,786,124	)		(14,104,259	)		(496,441,989)


Net increase (decrease)		4,334,430		$	66,793,851			9,495,506		$	299,393,170


Year ended April 30, 2018
Shares sold		3,189,012		$	67,849,901			10,215,023		$	369,305,768
Shares issued in reinvestment of distributions		547,334			11,920,682			5,062,829			177,806,171
Shares redeemed		(11,554,343	)		(245,073,266	)		(19,601,669	)		(712,235,557)


Net increase (decrease)		(7,817,997	)	$	(165,302,683	)		(4,323,817	)	$	(165,123,618)

Class C Shares:
Year ended April 30, 2019
Shares sold		616,858		$	10,919,327			1,512,688		$	38,650,988
Shares issued in reinvestment of distributions		1,309,694			18,270,229			1,265,311			25,318,892
Shares redeemed^a		(3,457,014	)		(66,346,223	)		(8,796,878	)		(227,658,497)


Net increase (decrease)		(1,530,462	)	$	(37,156,667	)		(6,018,879	)	$	(163,688,617)


Year ended April 30, 2018
Shares sold		279,449		$	5,088,767			1,315,525		$	34,824,098
Shares issued in reinvestment of distributions		156,063			2,874,674			1,482,639			37,392,153
Shares redeemed		(2,157,881	)		(38,362,296	)		(4,350,045	)		(115,440,720)


Net increase (decrease)		(1,722,369	)	$	(30,398,855	)		(1,551,881	)	$	(43,224,469)

Class R Shares:
Year ended April 30, 2019
Shares sold		1,090,360		$	23,643,908			402,799		$	13,332,859
Shares issued in reinvestment of distributions		792,641			12,967,603			300,662			8,087,803
Shares redeemed		(1,435,500	)		(30,760,878	)		(1,329,075	)		(42,403,451)


Net increase (decrease)		447,501		$	5,850,633			(625,614	)	$	(20,982,789)


Year ended April 30, 2018
Shares sold		642,577		$	13,280,250			564,940		$	18,785,330
Shares issued in reinvestment of distributions		69,237			1,438,739			197,203			6,369,651
Shares redeemed		(1,724,856	)		(34,995,989	)		(1,198,049	)		(40,113,390)


Net increase (decrease)		(1,013,042	)	$	(20,277,000	)		(435,906	)	$	(14,958,409)



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	Franklin Small Cap						Franklin Small-Mid Cap
	Growth Fund						Growth Fund

	Shares			Amount			Shares			Amount

Class R6 Shares:
Year ended April 30, 2019
Shares sold		14,008,871		$	340,717,317			2,051,263		$	81,360,684
Shares issued in reinvestment of distributions		7,029,042			135,098,188			733,010			24,453,238
Shares redeemed		(12,935,223	)		(319,298,995	)		(3,502,497	)		(140,556,648)


Net increase (decrease)		8,102,690		$	156,516,510			(718,224	)	$	(34,742,726)


Year ended April 30, 2018
Shares sold		9,126,555		$	210,441,655			2,883,707		$	115,938,495
Shares issued in reinvestment of distributions		599,648			14,103,732			509,486			19,762,976
Shares redeemed		(12,909,982	)		(300,321,532	)		(2,414,377	)		(96,501,514)


Net increase (decrease)		(3,183,779	)	$	(75,776,145	)		978,816		$	39,199,957

Advisor Class Shares:
Year ended April 30, 2019
Shares sold		6,621,879		$	160,225,038			3,117,800		$	123,344,447
Shares issued in reinvestment of distributions		5,738,085			108,679,322			1,592,925			52,232,005
Shares redeemed		(10,287,992	)		(239,792,999	)		(9,309,703	)		(351,635,842)


Net increase (decrease)		2,071,972		$	29,111,361			(4,598,978	)	$	(176,059,390)


Year ended April 30, 2018
Shares sold		5,063,743		$	115,186,325			2,962,038		$	115,876,935
Shares issued in reinvestment of distributions		516,706			12,028,914			979,925			37,482,152
Shares redeemed		(15,186,221	)		(345,941,426	)		(6,459,038	)		(254,294,102)


Net increase (decrease)		(9,605,772	)	$	(218,726,187	)		(2,517,075	)	$	(100,935,015)

^aMay include a portion of Class C shares that were automatically converted to Class A.

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. 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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3. Transactions with Affiliates (continued)

a. Management Fees

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

Franklin Select U.S. 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 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



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Franklin Small-Mid 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
0.625%		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

For the year ended April 30, 2019, each Fund’s gross effective investment management fee rate based on average daily net assets was as follows:

Franklin Growth
Opportunities
Fund

Franklin

Select U.S.

Equity Fund

Franklin

Small Cap

Growth Fund

Franklin

Small-Mid Cap

Growth Fund

0.545%

0.950%

0.616%

0.457%

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. 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 Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Reimbursement Plans:
Class A		0.35%		0.35%		0.35%		0.25%
Compensation Plans:
Class C		1.00%		1.00%		1.00%		1.00%
Class R		0.50%		0.50%		0.50%		0.50%

For Franklin Growth Opportunities Fund, Franklin Select U.S. Equity Fund and Franklin Small Cap Growth Fund, the Board has set the current rate at 0.25% per year for Class A shares until further notice and approval by the Board.



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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 Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Sales charges retained net of commissions paid to unaffiliated brokers/dealers		$390,122		$16,238		$54,637		$495,012
CDSC retained		$ 12,988		$ 532		$ 1,824		$ 22,958

Effective September 10, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A shares. Further details are disclosed in the Funds’ Prospectus.

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder 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, 2019, 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 Growth

Select U.S.

Small Cap

Small-Mid Cap

Opportunities Fund

Equity Fund

Growth Fund

Transfer agent fees

$2,393,702

$81,488

$1,466,237

$2,630,959

f. Investments in Affiliated Management Investment Companies

Certain or all Funds invest in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended April 30, 2019, investments in affiliated management investment companies were as follows:


	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions			Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Franklin Growth Opportunities Fund Non-Controlled Affiliates
													Dividends
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		18,556,305		747,585,794		(697,015,171	)		69,126,928	$	69,126,928	$	644,989	$	—	$	—



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	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions			Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Franklin Growth Opportunities Fund Non-Controlled Affiliates
												Income from securities loaned
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		—		68,172,227		(68,172,227	)		—	$	—	$	75,547	$	—	$	—
Total Affiliated Securities										$	69,126,928	$	720,536	$	—	$	—

Franklin Select U.S. Equity Fund Non-Controlled Affiliates
												Dividends
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		761,261		37,589,949		(31,190,137	)		7,161,073	$	7,161,073	$	100,768	$	—	$	—

Franklin Small Cap Growth Fund Non-Controlled Affiliates
												Dividends
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		15,082,060		703,175,424		(647,504,678	)		70,752,806	$	70,752,806	$	751,145	$	—	$	—
												Income from securities loaned
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		76,587,584		365,223,986		(423,548,886	)		18,262,684		18,262,684		709,059		—		—
Total Affiliated Securities										$	89,015,490	$	1,460,204	$	—	$	—

Franklin Small-Mid Cap Growth Fund Non-Controlled Affiliates
												Dividends
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		114,742,583		945,824,429		(936,409,939	)		124,157,073	$	124,157,073	$	1,923,102	$	—	$	—
												Income from securities loaned
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		28,485,775		239,494,851		(261,168,991	)		6,811,635		6,811,635		194,606		—		—
Total Affiliated Securities										$	130,968,708	$	2,117,708	$	—	$	—

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 Select U.S. 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 of the Fund does not exceed 1.00%, and Class R6 does not exceed 0.88% 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, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to September 1, 2018, expenses (excluding certain fees and expenses as previously disclosed) for Franklin Select U.S. Equity Fund for Class R6 were limited to 0.84% based on the average net assets of the class.



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3. Transactions with Affiliates (continued)

g. Waiver and Expense Reimbursements (continued)

For Franklin Growth Opportunities Fund, Franklin Small Cap Growth Fund and Franklin Small-Mid Cap Growth Fund, Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class. Investor Services may discontinue this waiver in the future.

h. Other Affiliated Transactions

At April 30, 2019, one or more of the funds in Franklin Fund Allocator Series owned 5.6% of the Franklin Growth Opportunities Fund’s outstanding shares.

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, 2019, 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, 2019, the deferred losses were as follows:


	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Late-year ordinary losses		$5,667,880		$119,809		$ —		$3,666,488

The tax character of distributions paid during the years ended April 30, 2019 and 2018, was as follows:


	Franklin Growth Opportunities Fund				Franklin Select U.S. Equity Fund				Franklin Small Cap Growth Fund
	2019		2018		2019		2018		2019		2018
Distributions paid from:
Ordinary income	$	—	$	—	$	—	$	—	$	13,084,020	$	—
Long term capital gain		397,221,880		298,690,847		13,009,161		—		417,223,228		47,125,937
	$	397,221,880	$	298,690,847	$	13,009,161	$	—	$	430,307,248	$	47,125,937


	Franklin Small-Mid Cap Growth Fund
	2019		2018
Distributions paid from:
Ordinary income	$	26,220,410	$	5,968,734
Long term capital gain		363,114,395		287,816,161
	$	389,334,805	$	293,784,895



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At April 30, 2019, 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
	Franklin Growth			Select U.S.			Small Cap			Small-Mid Cap
	Opportunities Fund			Equity Fund			Growth Fund			Growth Fund
Cost of investments		$2,058,224,554			$103,511,269			$2,016,883,510			$2,578,726,165

Unrealized appreciation		$2,006,431,921			$ 22,095,841			$ 835,893,035			$1,010,024,239
Unrealized depreciation		(33,681,560	)		(3,078,925	)		(143,671,503	)		(44,332,260	)

Net unrealized appreciation (depreciation)		$1,972,750,361			$ 19,016,916			$ 692,221,532			$ 965,691,979

Distributable earnings:

Undistributed ordinary income		$ —			$ —			$ 22,658,947			$ —
Undistributed long term capital gains		227,281,269			123,847			99,030,886			413,580,626

Total distributable earnings		$ 227,281,269			$ 123,847			$ 121,689,833			$ 413,580,626

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.

The Funds, except for Franklin Select U.S. Equity Fund, utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as a distribution from realized capital gains.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2019, were as follows:


	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Purchases		$ 938,308,506		$13,337,003		$1,091,314,880		$1,853,670,946
Sales		$1,353,571,634		$ 4,703,189		$1,367,288,700		$2,357,473,441

At April 30, 2019, in connection with securities lending transactions, certain or all Funds loaned investments and received cash collateral as follows:


	Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Securities lending transactions^a:
Equity investments^b		$18,262,684		$6,811,635

^aThe agreements can be terminated at any time.

^bThe gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statements of Assets and Liabilities.

7. Restricted Securities

Certain or all Funds invest in securities that are restricted under the Securities Act of 1933 (1933 Act). 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.



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7. Restricted Securities (continued)

At April 30, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:


Shares		Issuer	Acquisition Date		Cost		Value
	Franklin Growth Opportunities Fund
	1,624,999	Bill.com, pfd., H		12/21/18	$	13,500,004	$	14,395,754
	2,610,594	ClearMotion Inc., pfd., C		11/06/17		5,500,000		6,717,996
	3,698,772	ClearMotion Inc., pfd., D		12/21/18		10,000,000		10,345,480
	1,673,284	LegalZoom.comInc.		7/20/18		16,479,337		20,473,416
	509,182	Optoro Inc., pfd., E		7/24/18		10,020,702		12,168,487
	2,362,202	Proterra Inc., pfd., 5, 144A		9/21/16 - 1/13/17		11,896,616		22,295,471
	596,775	Proterra Inc., pfd., 6, 144A		6/07/17		3,306,052		5,632,617
	780,667	Proterra Inc., pfd., 7		5/21/18 - 9/18/18		5,094,960		7,368,268
	928,488	Sweetgreen Inc., pfd., H		11/09/18		12,107,484		13,006,896
	805,800	Tanium Inc., pfd., G		9/14/15		4,000,233		4,893,610
		Total Restricted Securities (Value is 2.9% of Net Assets)			$	91,905,388	$	117,297,995
	Franklin Small Cap Growth Fund
	3,698,772	ClearMotion Inc., pfd., D		12/21/18	$	10,000,000	$	10,345,480
	9,905,685	DraftKings Inc.		8/07/15 - 3/02/17		26,627,302		25,454,688
	1,431,280	LegalZoom.comInc.		7/20/18		14,095,961		17,512,383
	508,130	Optoro Inc., pfd., E		7/24/18		9,999,999		12,143,346
	1,038,769	Peloton Interactive Inc., pfd., F		8/08/18		15,000,011		24,365,904
	1,787,047	Proterra Inc., pfd., 5, 144A		9/21/16 - 1/13/17		8,999,998		16,866,913
	1,310,834	Proterra Inc., pfd., 6, 144A		6/07/17 - 1/02/18		7,261,842		12,372,211
	536,367	Proterra Inc., pfd., 7		5/21/18		3,500,556		5,062,461
	596,471	Rent the Runway Inc., pfd.		3/21/19		13,333,328		13,333,328
	1,542,673	Smule Inc., pfd., G, 144A		5/31/16		11,099,995		10,805,398
	352,675	Smule Inc., pfd., H, 144A		4/27/17		2,999,995		2,746,149
	383,435	Sweetgreen Inc., pfd., H		11/09/18		4,999,992		5,371,420
	361,111	Tula eTechnology Inc.		11/01/18		—		—
	3,611,111	Tula Technology Inc., E		9/08/17		6,500,000		6,824,476
		Total Restricted Securities (Value is 6.1% of Net Assets)			$	134,418,979	$	163,204,157
	Franklin Small-Mid Cap Growth Fund
	866,666	Bill.com, pfd., H		12/21/18	$	7,200,001	$	7,677,734
	7,974,537	DraftKings Inc.		8/07/15 - 3/02/17		21,380,303		20,492,207
	1,416,913	Proterra Inc., pfd., 5, 144A		9/21/16		7,135,914		13,373,430
		Total Restricted Securities (Value is 1.2% of Net Assets)			$	35,716,218	$	41,543,371

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. During the year ended April 30, 2019, investments in “affiliated companies” were as follows:



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Name of Issuer	Number of Shares Held at Beginning of Year		Gross Additions	Gross Reductions			Number of Shares Held at End of Year		Value at End of Year			Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Franklin Small Cap Growth Fund
Non-Controlled Affiliates
Aratana Therapeutics Inc.		2,697,019	—		(2,697,019	)		—		$ —			$ —		$(26,414,104)		$24,416,933
The KeyW Holding Corp.		3,430,282	—		(468,000	)		2,962,282		33,592,278			—		(692,698)		11,955,895
Pfenex Inc.		1,175,631	611,700		(234,659	)		1,552,672		—	^a		—		(2,128,191)		—	^a
Sportsman’s Warehouse Holdings Inc.		4,162,000	—		(573,800	)		3,588,200		16,003,372			—		(3,010,961)		1,511,414
Total Affiliated Securities (Value is 1.8% of Net Assets)										$49,595,650			$ —		$(32,245,954)		$37,884,242

^aAs of April 30, 2019, no longer an affiliate.

9. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 7, 2020. 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 0.15% 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, 2019, the Funds did not use the Global Credit Facility.

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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10. Fair Value Measurements (continued)

A summary of inputs used as of April 30, 2019, in valuing the Funds’ assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3			Total
Franklin Growth Opportunities Fund
Assets:
Investments in Securities:^a
Equity Investments:^b
Communication Services	$	325,247,614	$	—	$	4,893,610		$	330,141,224
Consumer Discretionary		367,254,702		—		65,366,728			432,621,430
Financials		264,157,337		—		14,395,754			278,553,091
Industrials		444,561,267		—		12,168,487			456,729,754
Information Technology		1,578,281,210		—		20,473,416			1,598,754,626
All Other Equity Investments		865,047,862		—		—			865,047,862
Short Term Investments		69,126,928		—		—			69,126,928

Total Investments in Securities	$	3,913,676,920	$	—	$	117,297,995		$	4,030,974,915

Franklin Select U.S. Equity Fund
Assets:
Investments in Securities:^a
Equity Investments	$	115,367,112	$	—	$	—		$	115,367,112
Short Term Investments		7,161,073		—		—			7,161,073

Total Investments in Securities	$	122,528,185	$	—	$	—		$	122,528,185

Franklin Small Cap Growth Fund
Assets:
Investments in Securities:^a
Equity Investments:^b
Consumer Discretionary	$	334,057,844	$	—	$	119,996,881	^c	$	454,054,725
Industrials		506,527,384		—		12,143,346			518,670,730
Information Technology		642,925,302		—		31,063,930			673,989,232
All Other Equity Investments		973,374,865		—		—			973,374,865
Short Term Investments		89,015,490		—		—			89,015,490

Total Investments in Securities	$	2,545,900,885	$	—	$	163,204,157		$	2,709,105,042

Franklin Small-Mid Cap Growth Fund
Assets:
Investments in Securities:^a
Equity Investments:^b
Consumer Discretionary	$	528,202,650	$	—	$	33,865,637		$	562,068,287
Financials		234,459,832		—		7,677,734			242,137,566
All Other Equity Investments		2,609,243,583		—		—			2,609,243,583
Short Term Investments		130,968,708		—		—			130,968,708

Total Investments in Securities	$	3,502,874,773	$	—	$	41,543,371		$	3,544,418,144

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

^bIncludes common and preferred stocks.

^cIncludes securities determined to have no value at April 30, 2019.



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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 beginning and/or end of the year. At April 30, 2019, the reconciliation of assets are as follows:


	Balance at Beginning of Year			Purchases			Sales			Transfer Into (Out of) Level 3			Cost Basis Adjustments			Net Realized Gain (Loss)			Net Unrealized Appreciation (Depreciation)				Balance at End of Year				Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Year End
Franklin Growth Opportunities Fund
Assets:
Investments in Securities:
Equity Investments:^a
Communication Services		$	5,074,222		$	—		$	—		$	—		$	—		$	—		$	(180,612	)		$	4,893,610			$	(180,612	)
Consumer Discretionary			23,116,412			27,202,444			—			—			—			—			15,047,872				65,366,728				15,047,872
Financials			—			13,500,004			—			—			—			—			895,750				14,395,754				895,750
Industrials			—			10,020,702			—			—			—			—			2,147,785				12,168,487				2,147,785
Information Technology			—			16,479,337			—			—			—			—			3,994,079				20,473,416				3,994,079

Total Investments in Securities		$	28,190,634		$	67,202,487		$	—		$	—		$	—		$	—		$	21,904,874			$	117,297,995			$	21,904,874

Franklin Small Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:^a
Consumer Discretionary		$	40,098,007		$	46,833,887		$	—		$	—		$	—		$	—		$	33,064,987			$	119,996,881	^b		$	33,064,987
Industrials			—			9,999,999			—			—			—			—			2,143,347				12,143,346				2,143,347
Information Technology			16,778,723			14,095,961			—			—			—			—			189,246				31,063,930				189,246

Total Investments in Securities		$	56,876,730		$	70,929,847		$	—		$	—		$	—		$	—		$	35,397,580			$	163,204,157			$	35,397,580
Franklin Small-Mid Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:^a
Consumer Discretionary		$	20,493,825		$	—		$	—		$	—		$	—		$	—		$	13,371,812			$	33,865,637			$	13,371,812
Financials			—			7,200,001			—			—			—			—			477,733				7,677,734				477,733

Total Investments in Securities		$	20,493,825		$	7,200,001		$	—		$	—		$	—		$	—		$	13,849,545			$	41,543,371			$	13,849,545

^aIncludes common and preferred stocks.

^bIncludes securities determined to have no value.

Significant unobservable valuation inputs for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of April 30, 2019, are as follows:

Description

Fair Value at
End of Year

Valuation
Technique

Unobservable
Inputs

Amount/Range
(Weighted
Average^a)

Impact to Fair
Value if Input
Increases^b

Franklin Growth Opportunities Fund

Assets:

Investments in Securities:

Equity Investments:^c

Communication Services

4,893,610

Discounted cash flow

NOPAT multiple

17.4x

Increase

Discount rate

9.8%

Decrease



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10. Fair Value Measurements (continued)

Description

Fair Value at
End of Year

Valuation
Technique

Unobservable
Inputs

Amount/Range
(Weighted
Average^a)

Impact to Fair
Value if Input
Increases^b

Franklin Growth Opportunities Fund

(continued)

Discount for lack of
marketability

11.0%

Decrease^d

Consumer Discretionary

65,366,728

Discounted cash flow

Forward EBITDA
growth rate

4.0%

Increase^e

Free cash flow growth rate

2.0%

Increase^d

Discount rate

9.7% - 15.8%
(11.7%)

Decrease^e

Discount for lack of marketability

5.4% - 18.7%
(10.3%)

Decrease^d

Teminal multiple

27.5x

Increase

Financials

14,395,754

Market comparables

EV / revenue multiple

11.2x

Increase^d

Discount for lack of marketability

8.6%

Decrease^d

Industrials

12,168,487

Market comparables

EV / revenue multiple

11.1x

Increase^e

Discount for lack of marketability

13.3%

Decrease^d

Information Technology

20,473,416

Discounted cash flow

Long term growth
rate

4.0%

Increase^e

Discount rate

11.4%

Decrease^e

Discount for lack of
marketability

5.8%

Decrease^d

Total

117,297,995

Franklin Small Cap Growth Fund

Assets:

Investments in Securities:

Equity Investments:^c

Consumer Discretionary

106,663,553

Discounted cash flow

Forward EBITDA
growth rate

4.0%

Increase^e

Free cash flow growth
rate

2.0%

Increase^d

Discount rate

9.7% - 15.8%
(11.0%)

Decrease^e

Discount for lack of
marketability

5.4% - 18.7% (9.9%)

Decrease^d

Terminal multiple

27.5x

Increase

Market comparables

EV / EBITDA multiple

17.9x - 22.2x

Increase^d

EV / revenue multiple

4.0x - 12.3x (5.0x)

Increase^d

Discount for lack of
marketability

5.3% - 14.4% (7.3%)

Decrease^c

Industrials

12,143,346

Market comparables

EV / revenue multiple

11.1x

Increase^e

Discount for lack of marketability

13.3%

Decrease^d

Information Technology

31,063,930

Market comparables

EV / revenue multiple

3.7x

Increase^d

Discount for lack of
marketability

10.9%

Decrease^d



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Description

Fair Value at
End of Year

Valuation
Technique

Unobservable
Inputs

Amount/
Range
(Weighted
Average^a)

Impact to Fair
Value if Input
Increases^b

Discounted cash flow

Long term growth rate

4.0%

Increase^e

Discount rate

11.4%

Decrease^e

Discount for lack of marketability

5.8%

Decrease^d

All Other Investments^f

13,333,328

Total

163,204,157

Franklin Small-Mid Cap Growth Fund

Assets:

Investments in Securities:

Equity Investments:^c

Consumer Discretionary

33,865,637

Discounted cash flow

Forward EBITDA growth rate

4.0%

Increase^d

Discount rate

9.7%

Decrease^e

Discount for lack of
marketability

5.4%

Decrease^d

Market Comparables

EV /revenue multiple

4.0x

Increase^e

Discount for lack of
marketability

11.7%

Decrease^d

Financials

7,677,734

Market comparables

EV / revenue multiple

11.2x

Increase^d

Discount for lack of
marketability

8.6%

Decrease^d

Total

41,543,371

^aWeighted based on the relative fair value of the financial instruments.

^bRepresents the directional change in the fair value of the Level 3 financial instruments that would result from a significant and reasonable increase in the corresponding input. A significant and reasonable decrease in the input would have the opposite effect. Significant impacts, if any, to fair value and/or net assets have been indicated.

^cIncludes common and preferred stocks.

^dRepresents a significant impact to fair value but not net assets.

^eRepresents a significant impact to fair value and net assets.

^fIncludes financial instruments with values derived using private transaction prices or non-public third party pricing information which is unobservable. May also include fair value of immaterial financial instruments developed using various valuation techniques and unobservable inputs.

^gIncludes securities determined to have no value at April 30, 2019.

Abbreviations List


EBITDA		Earnings before interest, taxes, depreciation and amortization
EV		Enterprise value
NOPAT		Net Operating Profit After Taxes

11. 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 of Franklin Strategic Series and Shareholders of Franklin Growth Opportunities Fund, Franklin Select U.S. Equity Fund, Franklin Small Cap Growth Fund and Franklin Small-Mid Cap Growth Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin Growth Opportunities Fund, Franklin Select U.S. Equity Fund, Franklin Small Cap Growth Fund and Franklin Small-Mid Cap Growth Fund (the “Funds”) as of April 30, 2019, the related statements of operations for the year ended April 30, 2019, the statements of changes in net assets for each of the two years in the period ended April 30, 2019, including the related notes, and the financial highlights for each of the five years in the period ended April 30, 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of April 30, 2019, 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 ended April 30, 2019 and each of the financial highlights for each of the five years in the period ended April 30, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of April 30, 2019 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.

PricewaterhouseCoopers LLP

San Francisco, California

June 17, 2019

We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.



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Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue 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, 2019:


Franklin Growth Opportunities Fund	Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund

$401,999,946		$13,009,161		$422,645,228		$388,292,007

Under Section 871(k)(2)(C) of the Internal Revenue 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 Internal Revenue Code for the fiscal year ended April 30, 2019:


Franklin Growth Opportunities Fund	Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund

$ —		$ —		$13,084,020		$26,220,410

Under Section 854(b)(1)(A) of the Internal Revenue 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, 2019:


Franklin Growth Opportunities Fund	Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund

0.00%		0.00%		54.19%		71.18%

Under Section 854(b)(1)(B) of the Internal Revenue 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 Internal Revenue Code for the fiscal year ended April 30, 2019:


Franklin Growth Opportunities Fund	Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund

$21,630,888		$935,784		$7,090,359		$19,194,951

Distributions, including qualified dividend income, paid during calendar year 2019 will be reported to shareholders on Form 1099-DIV by mid-February 2020. 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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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 U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1991	136	Bar-S Foods (meat packing company) (1981-2010).

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).

Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2017	112	Hess Corporation (exploration of oil and gas) (2014-present).

Principal Occupation During at Least the Past 5 Years: Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).

Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2014	136	Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present).

Principal Occupation During at Least the Past 5 Years: Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); 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) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 1998 and Lead Independent Trustee since March 2019	136	Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) 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) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2009	136	Boeing Capital Corporation (aircraft financing) (2006-2013).

Principal Occupation During at Least the Past 5 Years: Executive Vice President, Counselor and Senior Advisor to Boeing Chairman and Board of Directors, The Boeing Company (aerospace company) (May 2019); and formerly, General Counsel and member of the Executive Council, The Boeing Company (2006-2019); Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).



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Independent Board Members (continued)


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	136	The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012).

Principal Occupation During at Least the Past 5 Years:
Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; 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).

Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2013	150	None

Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director 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 42 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906	Chairman of the Board and Trustee	Chairman of the Board since 2013 and Trustee since 1991	136	None

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.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 40 of the investment companies in Franklin Templeton.

Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.

Sonal Desai, Ph.D. (1963) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since December 2018	Not Applicable	Not Applicable

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 18 of the investment companies in Franklin Templeton.



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Interested Board Members and Officers (continued)


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906	Treasurer, Chief Financial Officer and, Chief Accounting Officer	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting and officer of 28 of the investment companies in Franklin Templeton.

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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.

Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Co- Secretary	Vice President since 2009 and Co-Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton.

Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).

Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton.

Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.

Edward D. Perks (1970) One Franklin Parkway San Mateo, CA 94403-1906	President and Chief Executive Officer – Investment Management	Since December 2018	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
President and Director, Franklin Advisers, Inc.; and officer of nine of the investment companies in Franklin Templeton (since December 2018).



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Interested Board Members and Officers (continued)


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

Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Compliance Officer	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Senior Associate General Counsel, Franklin Templeton (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).


Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.

Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
General Counsel, Executive Vice President and Secretary, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.


Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President and Co-Secretary	Vice President since 2011 and Co-Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton.

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton 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 an officer and director and major shareholder of Resources.

Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.

Note 2: Effective March 12, 2019, John B. Wilson ceased to be a trustee of the Trust.

Note 3: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

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 effective May 21, 2019, designated Mary C. Choksi as its audit committee financial expert. The Board believes that Ms. Choksi qualifies as such an expert in view of her extensive business background and experience. She currently serves as a director of Avis Budget Group, Inc. (2007-present) and formerly, Founder and Senior Advisor, Strategic Investment Group (1987 to 2017). Ms. Choksi has been a Member of the Fund’s Audit Committee since 2014. As a result of such background and experience, the Board believes that Ms. Choksi 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. Ms. Choksi 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 Approval of Investment Management Agreements

FRANKLIN STRATEGIC SERIES

Franklin Select U.S. Equity Fund

Franklin Growth Opportunities Fund

Franklin Small Cap Growth Fund

Franklin Small-Mid Cap Growth Fund

(each a Fund)

At an in-person meeting held on April 16, 2019 (Meeting), the Board of Trustees (Board) of Franklin Strategic Series (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of the investment management agreement between Franklin Advisers, Inc. (Manager) and the Trust, on behalf of each Fund (each a Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of each Management Agreement. Although the Management Agreements for the Funds were considered at the same Board meeting, the Board considered the information provided to it about the Funds together and with respect to each Fund separately as the Board deemed appropriate.

In considering the continuation of each Management Agreement, the Board reviewed and considered information provided by the Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to the Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a telephonic contract renewal meeting at which the Independent Trustees conferred amongst themselves and Independent Trustee counsel about contract renewal matters. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of each Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services provided by the Manager; (ii) the investment performance of each Fund; (iii) the costs of the services provided and profits realized by the Manager and its affiliates from the relationship with each Fund; (iv) the extent to which economies of scale are realized as each Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.

In approving the continuance of each Management Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the Management Agreement are fair and reasonable and that the continuance of such Management Agreement is in the interests of the applicable Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.

Nature, Extent and Quality of Services

The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by the Manager and its affiliates to the Funds and their shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of the Manager; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for each Fund; reports on expenses, shareholder services, marketing support payments made to financial intermediaries and third- party servicing arrangements; legal and compliance matters; risk controls; pricing and other services provided by the Manager and its affiliates; and management fees charged by the Manager and its affiliates to US funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board also reviewed and considered an annual report on payments made by Franklin Templeton Investments (FTI) or the Funds to financial intermediaries, as well as a memorandum relating to third-party servicing arrangements in response to a guidance update in 2016 from the US Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees. The Board noted management’s continuing efforts and expenditures in establishing effective business continuity plans and developing strategies to address areas of heightened concern in the mutual fund industry, such as cybersecurity and liquidity risk management. The Board also recognized management’s commitment to facilitating Board oversight of liquidity through the designation of a liquidity/risk administrator and the development of reports that highlight the amount of illiquid investments for each Fund.



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funds, reassessment of the fund offerings in response to the market environment and project initiatives and capital investments relating to the services provided to the Funds by the FTI organization.

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by the Manager and its affiliates to the Funds and their shareholders.

Fund Performance

The Board reviewed and considered the performance results of each Fund over various time periods ended January 31, 2019. The Board considered the performance returns for each Fund in comparison to the performance returns of mutual funds deemed comparable to the Fund included in a universe (Performance Universe) selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds included in a Performance Universe. The Board also reviewed and considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings throughout the year. A summary of each Fund’s performance results is below.

Franklin Select U.S. Equity Fund - The Performance Universe for this Fund included the Fund and all retail and institutional large-cap growth funds. The Board noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was below the median and in the fifth quintile (worst) of its Performance Universe. The Board discussed this performance with management and management explained that, in late 2017/first half of 2018, there were changes to the Fund’s portfolio management team and the Fund’s portfolio was restructured, resulting in the Fund being reclassified by Lipper and Morningstar from large cap blend/core to large cap growth. Management further explained that it restructured the Fund’s investments with an increased focus on investing in high quality growth businesses for the long term. The Board also noted that, effective June 1, 2018, the Fund changed its name from the Franklin Focused Core Equity Fund to the Franklin Select U.S. Equity Fund. The Board then noted management’s representation that it was further reviewing the Fund and would report back to the Board at an upcoming Board meeting. The Board concluded that the Fund’s Management Agreement should be continued for an additional one-year period, and these changes continued to be monitored.

Franklin Growth Opportunities Fund - The Performance Universe for this Fund included the Fund and all retail and institutional multi-cap growth funds. The Board noted that the Fund’s annualized total return for the three-, five- and 10-year periods was below the median of its Performance Universe, but for the one-year period was above the median of its Performance Universe. The Board discussed this performance with management and management explained that on December 31, 2017, the Fund was moved from its historical multi-cap peer group to the large-cap peer group. Management further explained that since this change and other investment process changes, including a refocus of research efforts in all sectors, the Fund’s recent performance has been strong with the Fund outperforming its benchmark and peer group in both the calendar year 2018 and for the first month of 2019. The Board concluded that the Fund’s performance was satisfactory, noting its positive short-term, second quintile performance, as well as its longer-term three-, five- and 10-year performance that, while below median, had annualized total returns that exceeded 14%, 9% and 15%, respectively.

Franklin Small Cap Growth Fund - The Performance Universe for this Fund included the Fund and all retail and institutional small-cap growth funds. The Board noted that the Fund’s annualized total return for the five-year period was below the median of its Performance Universe, but for the one-, three-and 10-year periods was above the median and in the first (the best) or second quintile of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory.

Franklin Small-Mid Cap Growth Fund - The Performance Universe for this Fund included the Fund and all retail and institutional mid-cap growth funds. The Board noted that the Fund’s annualized total return for the three-, five- and 10-year periods was below the median of its Performance Universe, but for the one-year period was above the median of its Performance Universe. The Board discussed this performance with management and management explained that the Fund’s positions in the healthcare, consumer discretionary, financial and industrial sectors were a primary detractor from relative performance over the three- and five-year periods. Management further explained recent changes to the Fund’s investment process and portfolio management team. The Board concluded that the Fund’s performance was satisfactory, noting its positive short-term, second quintile performance, as well as its longer-term three-, five- and 10-year performance that, while below median, had annualized total returns that exceeded 13%, 7% and 14%, respectively.



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Comparative Fees and Expenses

The Board reviewed and considered information regarding each Fund’s actual total expense ratio and its various components, including, as applicable, management fees; transfer agent expenses; underlying fund expenses; Rule 12b-1 and non-Rule 12b-1 service fees; and other non-management fees. The Board also noted the quarterly and annual reports it receives on all marketing support payments made by FTI to financial intermediaries. The Board considered the actual total expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers, if any (Management Rate) of each Fund in comparison to the median expense ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure to the Fund selected by Broadridge (Expense Group). Broadridge fee and 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 and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges, and the actual total expense ratio, for comparative consistency, was shown for Class A shares for funds with multiple classes of shares. The Board received a description of the methodology used by Broadridge to select the mutual funds included in an Expense Group.

Franklin Select U.S. Equity Fund - The Expense Group for this Fund included the Fund and 14 other large-cap growth funds. The Board noted that the Management Rate for this Fund was above the median of its Expense Group. The Board also noted that the actual total expense ratio for this Fund was slightly above the median of its Expense Group. The Board discussed the Fund’s expenses with management and noted management’s representation that it was further reviewing the Fund and would report back to the Board at an upcoming Board meeting. The Board concluded that the Management Rate charged to the Fund is reasonable. In doing so, the Board noted that the Fund’s actual total expense ratio reflected a fee waiver from management.

Franklin Growth Opportunities Fund, Franklin Small Cap Growth Fund, and Franklin Small-Mid Cap Growth Fund - The Expense Group for the Franklin Growth Opportunities Fund included the Fund and 15 other multi-cap growth funds.

The Expense Group for the Franklin Small Cap Growth Fund included the Fund and 12 other small-cap growth funds. The Expense Group for the Franklin Small-Mid Cap Growth Fund included the Fund and 13 other mid-cap growth funds. The Board noted that the Management Rates and actual total expense ratios for these Funds were below the medians and in the first quintile (least expensive) of their respective Expense Groups. The Board concluded that the Management Rates charged to these Funds are reasonable.

Profitability

The Board reviewed and considered information regarding the profits realized by the Manager and its affiliates in connection with the operation of each Fund. In this respect, the Board considered the Fund profitability analysis provided by the Manager that addresses the overall profitability of FTI’s US fund business, as well as its profits in providing investment management and other services to each of the individual funds during the 12-month period ended September 30, 2018, being the most recent fiscal year-end for FRI. The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product-related changes, the overall methodology has remained consistent with that used in the Funds’ profitability report presentations from prior years. Additionally, PricewaterhouseCoopers LLP, auditor to FRI and certain Franklin Templeton funds, has been engaged by the Manager to periodically review and assess the allocation methodologies to be used solely by the Funds’ Board with respect to the profitability analysis.

The Board noted management’s 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 noted management’s expenditures in improving shareholder services provided to the Funds, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent SEC and other regulatory requirements.



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increased leverage with service providers and counterparties. Based upon its consideration of all these factors, the Board concluded 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, extent and quality of services provided to each Fund.

Economies of Scale

The Board reviewed and considered the extent to which the Manager may realize economies of scale, if any, as each Fund grows larger and whether each Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints, which operate generally to share any economies of scale with a Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered the Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments the Manager incurs across the Franklin Templeton family of funds as a whole. The Board noted that the Franklin Select U.S. Equity Fund has not yet reached an asset size that would likely enable the Fund to achieve economies of scale, but concluded that to the extent economies of scale may be realized by the Manager and its affiliates, each Fund’s management fee structure provided a sharing of benefits with the Fund and its shareholders as the Fund grows.

Conclusion

Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and conclusions, the Board unanimously approved the continuation of each Management Agreement for an additional one-year period.

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 as an exhibit to its report on Form N-PORT. Shareholders may view the filed Form N-PORT 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 and Shareholder Letter
				Franklin Strategic Series
				Investment Manager
				Franklin Advisers, Inc.
				Distributor
				Franklin Templeton Distributors, Inc.
				(800) DIAL BEN^® / 342-5236 franklintempleton.com
				Shareholder Services
				(800) 632-2301

Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing.

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.


^© 2019 Franklin Templeton Investments. All rights reserved.		FSS1 A 06/19

LOGO

Franklin Templeton

Dear Shareholder:

During the 12 months ended April 30, 2019, the U.S. economy continued to grow amid positive economic data and corporate earnings, and the unemployment rate declined.

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.

We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs.

Sincerely,

LOGO

Edward Perks, CFA

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

CFA^® is a trademark owned by CFA Institute.


		Not FDIC Insured \| May Lose Value \| No Bank Guarantee



franklintempleton.com	Not part of the annual report	1

Contents


Annual Report

Economic and Market Overview			3

Franklin Biotechnology Discovery Fund			4

Franklin Natural Resources Fund			10

Financial Highlights and Statements of Investments			18

Financial Statements			32

Notes to Financial Statements			36

Report of Independent Registered Public Accounting Firm			48

Tax Information			49

Board Members and Officers			50

Shareholder Information			54

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.



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Annual Report

Economic and Market Overview

1. Bureau of Labor Statistics.

2. Morningstar.

See www.franklintempletondatasources.com for additional data provider information.



franklintempleton.com	Annual Report	3

Franklin Biotechnology Discovery Fund

This annual report for Franklin Biotechnology Discovery Fund covers the fiscal year ended April 30, 2019.

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 posted a -1.60% cumulative total return for the 12 months under review. In comparison, the NASDAQ Biotechnology Index^®, which tracks U.S. and international-based biotechnology stocks, posted a +3.23% total return.¹ Also in comparison, the Standard & Poor’s 500 Index (S&P 500), which is a broad measure of the U.S. stock market, posted a +13.49% total return.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.

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.

Investment Strategy

We are research-driven, fundamental investors, pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between potential earnings growth, business and financial risk, and valuation. We rely on a team of analysts to help provide in-depth industry expertise and use both qualitative and quantitative analysis to evaluate companies for distinct and sustainable competitive advantages likely to lead to growth in earnings and/or share price. Competitive advantages, such as a particular product niche, proven technology, sound financial position and strong management, are all factors we believe may contribute to strong growth potential.

Portfolio Composition

Based on Total Net Assets as of 4/30/19

LOGO

*Includes common, preferred stocks, escrows and litigation trusts as well as other equity interests.

Manager’s Discussion

During the 12 months under review, the biotechnology industry experienced significant volatility. Please keep in mind that volatility is not uncommon in the biotechnology industry, and we seek to take advantage of short-term volatility by initiating positions or adding to existing holdings in companies we believe are undervalued.

Key detractors from the Fund’s absolute performance included Clovis Oncology (not held at period-end), Nektar Therapeutics (not held at period-end) and Biogen.

Shares of pharmaceutical company Clovis Oncology declined despite a study suggesting Rubraca, currently used for treating ovarian cancer, could be effective for treating prostate cancer. Investor sentiment was hampered by concerns that AstraZeneca’s (not a Fund holding) Lynparza, a competing drug in the same class, would remain the market leader across all diseases treated by that drug type. Pharmaceutical company Nektar Therapeutics was hurt by the release of positive trial data from Roche for a competing drug in development for melanoma and head and neck cancer. Its share price was hurt by investor concerns around competition as well as weaker-than-expected clinical data. Pharmaceutical company Biogen was hurt by investor skepticism about its Alzheimer’s drug Aducanumab, which was confirmed when the company ended development following a trial failure in March 2019. Its share price was further hurt by Biogen’s weak development pipeline, possible near-term generic competition from an

1. Source: Morningstar.

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 22.



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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

existing drug and the coming-to-market of a competitor’s gene therapy drug that is likely superior to Biogen’s existing treatment.

In contrast, key contributors to the Fund’s absolute performance included Array BioPharma, Fate Therapeutics and Alexion Pharmaceuticals.

Array BioPharma is focused on the development and sale of cancer-treatment drugs. Third-quarter 2018 earnings greatly benefited from the U.S. debut of Braftovi + Mektovi, a two-drug treatment for skin cancer, which saw sales well above market expectations. Positive results from more recent trials of Braftovi + Mektovi’s use to treat colorectal cancer also supported the company’s share price. We also believe Array’s drug discovery process has proven highly successful, and could, in our opinion, continue to develop profitable drugs. Biotechnology company Fate Therapeutics develops cell-based therapies for cancer and immune disorders. Shares rose significantly in late 2018 when the company expanded clinical trials for a promising cancer treatment and the Food and Drug Administration (FDA) approved an application to initiate a new clinical study for the first ever stem cell-derived cancer treatment. Alexion Pharmaceuticals is a biopharmaceutical company that focuses on developing treatments for rare disorders. Alexion benefited from its acquisition of a company with a treatment for autoimmune disorders, further diversifying their pipeline, as well as the FDA approval of Ultomiris, a treatment for rare blood disorders the company is hoping will replace its existing treatment Soliris.

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


		Evan McCulloch, CFA Lead Portfolio Manager

		Wendy Lam, Ph.D. Steven Kornfeld, CFA

		Portfolio Management Team

Top 10 Holdings

4/30/19


Company *Sector/Industry*		% of Total Net Assets
Alexion Pharmaceuticals Inc.		7.2%
Biotechnology
Vertex Pharmaceuticals Inc.		5.3%
Biotechnology
Array BioPharma Inc.		5.3%
Biotechnology
Illumina Inc.		5.1%
Life Sciences Tools & Services
Biogen Inc.		4.1%
Biotechnology
GW Pharmaceuticals PLC		3.9%
Pharmaceuticals
Regeneron Pharmaceuticals Inc.		3.8%
Biotechnology
Gilead Sciences Inc.		3.6%
Biotechnology
BioMarin Pharmaceutical Inc.		3.3%
Biotechnology
Amgen Inc.		3.3%
Biotechnology



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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

Performance Summary as of April 30, 2019

Performance as of 4/30/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


Share Class	Cumulative Total Return²	Average Annual Total Return³
A⁴
1-Year	-1.60%	-7.02%
5-Year	+34.79%	+4.96%
10-Year	+333.57%	+15.15%

Advisor⁵
1-Year	-1.36%	-1.36%
5-Year	+36.46%	+6.41%
10-Year	+344.96%	+16.10%

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.

See page 8 for Performance Summary footnotes.



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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

PERFORMANCE SUMMARY

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

Class A (5/1/09-4/30/19)

LOGO

Advisor Class (5/1/09–4/30/19)⁵

LOGO

See page 8 for Performance Summary footnotes.



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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–4/30/19)


Share Class	Short-Term Capital Gain		Long-Term Capital Gain		Total
A		$2.3428		$2.2068		$4.5496
C		$2.3428		$2.2068		$4.5496
R6		$2.3428		$2.2068		$4.5496
Advisor		$2.3428		$2.2068		$4.5496



Total Annual Operating Expenses⁷
Share Class	With Fee Waiver		Without Fee Waiver
A		1.02%		1.04%
Advisor		0.77%		0.79%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

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.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the expense reduction and fee waiver; 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. Return for less than one year, if any, has not been annualized.

5. 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 +288.14% and +15.07% .

6. Source: Morningstar. The NASDAQ Biotechnology Index is a modified capitalization weighted index designed to measure performance of all NASDAQ stocks in the biotechnology sector. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

7. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.



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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

Your Fund’s Expenses

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds


		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,034.30	$5.09	$1,019.79	$5.06	1.01%
C	$1,000	$1,030.50	$8.81	$1,016.12	$8.75	1.75%
R6	$1,000	$1,036.20	$3.23	$1,021.62	$3.21	0.64%
Advisor	$1,000	$1,035.50	$3.84	$1,021.03	$3.81	0.76%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



franklintempleton.com	Annual Report	9

Franklin Natural Resources Fund

This annual report for Franklin Natural Resources Fund covers the fiscal year ended April 30, 2019.

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.

Performance Overview

The Fund’s Class A shares posted a -13.69% cumulative total return for the 12 months under review. In comparison, the Standard & Poor’s (S&P^®) North American Natural Resources Sector Index, which tracks companies involved in industries such as mining, energy, timber and forestry services, and the production of pulp and paper, posted a -9.11% total return.¹ Also in comparison, the Standard & Poor’s 500 Index (S&P 500), which is a broad measure of the U.S. stock market, posted a +13.49% total return.¹ Please 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 we believe 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 and greater commodity price leverage. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 14.

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.

Geographic Composition

Based on Total Net Assets as of 4/30/19

LOGO

Investment Strategy

Sector Overview

Global commodity prices declined during the 12-month period amid U.S.-China trade tensions, a strong U.S. dollar and lukewarm global economic data, particularly in China (the world’s largest consumer of raw materials). Oil prices were particularly volatile, buffeted by global political instability and production swings, though ended the period roughly where they started as export reductions by the Organization of the Petroleum Exporting Countries offset demand headwinds. Most metals declined, with the notable exceptions of iron ore and

1. Source: Morningstar.

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 29.



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FRANKLIN NATURAL RESOURCES FUND

palladium. The overall commodity decline was limited by a rally in 2019 due to optimism about a U.S.-China trade deal, anticipation of an economic recovery in China and signs the U.S. Federal Reserve (Fed) would hold interest rates hikes steady in 2019.

Despite extreme volatility, crude oil prices ended the period at relatively similar levels compared to the start of the period. The U.S. benchmark oil, West Texas Intermediate, dropped slightly, while the international benchmark, Brent crude, increased modestly. Both benchmark oils followed similar trends: prices rallied early in the period due to U.S. sanctions against Iran, plummeting oil output from Venezuela, political turmoil in Libya, declines in U.S. oil stockpiles and healthy global demand growth. After reaching a multi-year high in October, prices declined sharply at the end of 2018 in response to signs of excess supply resulting from increased output by the U.S., Russia and Saudi Arabia. The rise in production was due, in part, to the expected impact of U.S. sanctions on Iran, which were later loosened with the granting of waivers to certain countries. Fears of slowing demand in China and elsewhere also weighed on sentiment. Prices rebounded substantially in 2019 due to supply cuts by the Organization of the Petroleum Exporting Countries and other countries outside the organization, as well as new, unexpected production declines from Venezuela.

U.S. natural gas prices ended the period lower despite continued strong demand as supply growth also remained robust. Prices increased in the first half of the period due to summer heat waves and an extended winter season, which increased demand (for air conditioning and then heating) and set the stage for decreased supplies. Overseas demand for liquefied natural gas increased exports, also helping to absorb excess inventories. In December, these price gains were reversed as investors considered forecasts for above-average temperatures in January and significant increases in U.S. production. The surge in production continued through 2019, leading to further price decreases despite a continued uptrend in demand and below-average gas inventory.

Gold prices declined during the period amid U.S. dollar strength and rising U.S. interest rates, particularly in 2018’s fourth quarter, that drove many investors toward income-producing asset classes. Gold prices partly recovered in the second half of the period due to signals the Fed would hold interest rates steady and challenges on the production side. Silver and platinum prices decreased for similar reasons, while palladium prices rose amid tight global supplies and stronger demand for the metal due to its emissions-control use in gasoline vehicles. Iron ore prices increased significantly,

Portfolio Composition

Based on Total Net Assets as of 4/30/19

LOGO

particularly after a major Brazilian mine shut down in 2019 due to a nearby tailings dam failure. Prices of copper and other metals declined in response to trade tensions and the weak economic outlook for China, the world’s largest consumer of base metals, as its factory activity slowed.

Manager’s Discussion

The global economic environment was not conducive to positive returns for natural resources equities during the period, as the recovery in early 2019 was not enough to offset losses in 2018.

An overweight in oil and gas equipment and services was the biggest detractor from the Fund’s relative performance. The sector as a whole was hurt by its relatively high operating leverage, as overall customer spending is tied to investor expectations around commodity prices and cash flows. Major detractors included overweighted positions in Superior Energy Services, Oil States International and Halliburton, all companies with significant U.S. onshore exposure where activity slowed in response to budget constraints and the decline in oil prices.



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FRANKLIN NATURAL RESOURCES FUND

Underweighted oil and gas storage and transportation positions detracted from relative performance as well. An underweighting in Enbridge and TransCanada detracted from relative results as share prices rose due to the companies’ perceived stability and lower exposure to a weak commodity environment.

The Fund’s lack of exposure to metal and glass containers along with stock selection and an underweighting in integrated oil and gas, two relatively stable sectors, also hurt relative performance. In the latter sector, relative results were hurt by underweights in well-performing U.S.-based Chevron and Exxon Mobil.

In contrast, an overweight and stock selection in diversified metals and mining contributed to relative results. Top contributors included off-benchmark positions in mining companies BHP Group, Rio Tinto and Anglo American, all of which benefited from iron ore supply disruptions in Brazil related to a major mine-related dam failure and subsequent shut-down of other mines believed to also present safety risks.

An underweighted position in oil and gas refining and marketing also contributed to relative returns, as profit margins compressed due to investor concerns about demand and the general economy.

Cash holdings were another relative contributor.

Top 10 Holdings

4/30/19


Company Sector/Industry			% of Total Net Assets

Schlumberger Ltd.			3.9%
Oil & Gas Equipment & Services

Diamondback Energy Inc.			3.3%
Oil & Gas Exploration & Production

Concho Resources Inc.			3.3%
Oil & Gas Exploration & Production

EOG Resources Inc.			3.0%
Oil & Gas Exploration & Production

Pioneer Natural Resources Co.			2.9%
Oil & Gas Exploration & Production

Occidental Petroleum Corp.			2.8%
Integrated Oil & Gas

Royal Dutch Shell PLC			2.8%
Integrated Oil & Gas

TechnipFMC PLC			2.6%
Oil & Gas Equipment & Services

Chevron Corp.			2.5%
Integrated Oil & Gas

Cabot Oil & Gas Corp.			2.5%
Oil & Gas Exploration & Production

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


		Frederick G. Fromm, CFA

		Matthew J. Adams, CFA

		Stephen M. Land, CFA

		Portfolio Management Team



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FRANKLIN NATURAL RESOURCES FUND

Performance Summary as of April 30, 2019

Performance as of 4/30/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.50% and the minimum is 0%. Class A: 5.50% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


Share Class	Cumulative Total Return²	Average Annual Total Return³
A⁴
1-Year	-13.69%	-18.44%
5-Year	-36.76%	-9.78%
10-Year	+16.23%	+0.94%

Advisor
1-Year	-13.50%	-13.50%
5-Year	-35.92%	-8.52%
10-Year	+19.51%	+1.80%

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.

See page 16 for Performance Summary footnotes.



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FRANKLIN NATURAL RESOURCES FUND

PERFORMANCE SUMMARY

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

Class A (5/1/09–4/30/19)

LOGO

Advisor Class (5/1/09–4/30/19)

LOGO

See page 16 for Performance Summary footnotes.



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FRANKLIN NATURAL RESOURCES FUND

PERFORMANCE SUMMARY


Distributions (5/1/18–4/30/19)

Share Class	Net Investment Income
A		$0.4894
C		$0.3949
R6		$0.5348
Advisor		$0.5109



Total Annual Operating Expenses⁶
Share Class	With Fee Waiver		Without Fee Waiver
A		1.06%		1.06%
Advisor		0.81%		0.81%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

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. Growth stock prices may fall dramatically if the company fails to meet projections of earnings or revenue; their prices may be more volatile than other securities, particularly over the short term. 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.

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the expense reduction and fee waiver; 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. Return for less than one year, if any, has not been annualized.

5. Source: Morningstar. The S&P North American Natural Resources Index is a modified capitalization-weighted index that includes companies involved in extractive industries (mining), energy and forestry services, producers of pulp and paper, and owners and operators of timber tracts or plantations. 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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Your Fund’s Expenses

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds


		Actual (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$995.60	$5.24	$1,019.54	$5.31	1.06%
C	$1,000	$991.30	$8.94	$1,015.82	$9.05	1.81%
R6	$1,000	$997.90	$3.02	$1,021.77	$3.06	0.61%
Advisor	$1,000	$996.40	$4.01	$1,020.78	$4.06	0.81%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



franklintempleton.com	Annual Report	17

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Biotechnology Discovery Fund


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class A

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$146.14			$147.22			$128.19			$182.30			$129.27

Income from investment operations^a:

Net investment income (loss)^b		(0.99	)		(0.80	)		(0.79	)		(0.94	)		(1.09	)

Net realized and unrealized gains (losses)		(1.75	)		3.32			25.75			(39.39	)		60.79

Total from investment operations		(2.74	)		2.52			24.96			(40.33	)		59.70

Less distributions from:

Net investment income		—			—			(1.73	)		—			—

Net realized gains		(4.55	)		(3.60	)		(4.20	)		(13.78	)		(6.67	)

Total distributions		(4.55	)		(3.60	)		(5.93	)		(13.78	)		(6.67	)

Net asset value, end of year		$138.85			$146.14			$147.22			$128.19			$182.30

Total return^c		(1.60)%			1.69%			20.02%			(23.55)%			46.81%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.02%			1.05%			1.04%			0.99%			1.00%

Expenses net of waiver and payments by affiliates^d		1.00%			1.03%			1.02%			0.98%			1.00%	^e

Net investment income (loss)		(0.67)%			(0.53)%			(0.58)%			(0.56)%			(0.67)%

Supplemental data

Net assets, end of year (000’s)		$924,611			$1,081,883			$1,176,687			$1,074,903			$1,601,906

Portfolio turnover rate		28.62%			26.95%			34.12%			22.13%			41.43%

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^dBenefit of expense reduction rounds to less than 0.01%.

^eBenefit of waiver and payments by affiliates rounds to less than 0.01%.



18	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,
	2019			2018			2017			2016			2015
Class C

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$141.75			$143.98			$125.99			$180.67			$129.11

Income from investment operations^a:

Net investment income (loss)^b		(2.03	)		(1.90	)		(1.81	)		(2.11	)		(2.38	)

Net realized and unrealized gains (losses)		(1.66	)		3.27			25.29			(38.79	)		60.61

Total from investment operations		(3.69	)		1.37			23.48			(40.90	)		58.23

Less distributions from:

Net investment income		—			—			(1.29	)		—			—

Net realized gains		(4.55	)		(3.60	)		(4.20	)		(13.78	)		(6.67	)

Total distributions		(4.55	)		(3.60	)		(5.49	)		(13.78	)		(6.67	)

Net asset value, end of year		$133.51			$141.75			$143.98			$125.99			$180.67

Total return^c		(2.33)%			0.93%			19.14%			(24.09)%			45.76%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.77%			1.80%			1.79%			1.71%			1.75%

Expenses net of waiver and payments by affiliates^d		1.75%			1.78%			1.77%			1.70%			1.75%	^e

Net investment income (loss)		(1.42)%			(1.28)%			(1.33)%			(1.28)%			(1.42)%

Supplemental data

Net assets, end of year (000’s)		$46,508			$58,433			$53,935			$17,562			$23,051

Portfolio turnover rate		28.62%			26.95%			34.12%			22.13%			41.43%

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^dBenefit of expense reduction rounds to less than 0.01%.

^eBenefit of waiver and payments by affiliates rounds to less than 0.01%.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	19

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Biotechnology Discovery Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R6

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$150.65			$151.03			$131.37			$185.75			$131.09

Income from investment operations^a:

Net investment income (loss)^b		(0.46	)		(0.17	)		(0.25	)		(0.32	)		(0.45	)

Net realized and unrealized gains (losses)		(1.81	)		3.39			26.41			(40.28	)		61.78

Total from investment operations		(2.27	)		3.22			26.16			(40.60	)		61.33

Less distributions from:

Net investment income		—			—			(2.30	)		—			—

Net realized gains		(4.55	)		(3.60	)		(4.20	)		(13.78	)		(6.67	)

Total distributions		(4.55	)		(3.60	)		(6.50	)		(13.78	)		(6.67	)

Net asset value, end of year		$143.83			$150.65			$151.03			$131.37			$185.75

Total return		(1.24)%			2.11%			20.50%			(23.24)%			47.40%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.70%			0.65%			0.63%			0.60%			0.60%

Expenses net of waiver and payments by affiliates^c		0.63%			0.61%			0.61%			0.59%			0.60%	^d

Net investment income (loss)		(0.30)%			(0.11)%			(0.17)%			(0.17)%			(0.27)%

Supplemental data

Net assets, end of year (000’s)		$6,164			$8,307			$8,891			$5,568			$76,436

Portfolio turnover rate		28.62%			26.95%			34.12%			22.13%			41.43%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.



20	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,
	2019			2018			2017			2016			2015
Advisor Class

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$149.54			$150.20			$130.67			$185.12			$130.86

Income from investment operations^a:

Net investment income (loss)^b		(0.63	)		(0.45	)		(0.46	)		(0.55	)		(0.70	)

Net realized and unrealized gains (losses)		(1.80	)		3.39			26.27			(40.12	)		61.63

Total from investment operations		(2.43	)		2.94			25.81			(40.67	)		60.93

Less distributions from:

Net investment income		—			—			(2.08	)		—			—

Net realized gains		(4.55	)		(3.60	)		(4.20	)		(13.78	)		(6.67	)

Total distributions		(4.55	)		(3.60	)		(6.28	)		(13.78	)		(6.67	)

Net asset value, end of year		$142.56			$149.54			$150.20			$130.67			$185.12

Total return		(1.36)%			1.94%			20.32%			(23.36)%			47.17%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.77%			0.80%			0.79%			0.75%			0.75%

Expenses net of waiver and payments by affiliates^c		0.75%			0.78%			0.77%			0.74%			0.75%	^d

Net investment income (loss)		(0.42)%			(0.28)%			(0.33)%			(0.32)%			(0.42)%

Supplemental data

Net assets, end of year (000’s)		$153,874			$180,219			$159,894			$93,263			$167,035

Portfolio turnover rate		28.62%			26.95%			34.12%			22.13%			41.43%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dBenefit of waiver and payments by affiliates rounds to less than 0.01%.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	21

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2019

Franklin Biotechnology Discovery Fund


	Country		Shares/ Warrants		Value
Common Stocks and Other Equity Interests 97.4%
Biotechnology 77.7%
^aAcadia Pharmaceuticals Inc.		United States		294,600	$	7,085,130
^aAcceleron Pharma Inc.		United States		250,900		10,219,157
^aAimmune Therapeutics Inc.		United States		155,700		3,135,798
^a Alder Biopharmaceuticals Inc.		United States		281,700		3,828,303
^aAlector Inc.		United States		194,300		3,858,798
^aAlexion Pharmaceuticals Inc.		United States		598,200		81,432,966
^a,b Allogene Therapeutics Inc., 144A		United States		326,797		9,787,570
^aAlnylam Pharmaceuticals Inc.		United States		77,200		6,897,048
Amgen Inc.		United States		208,000		37,298,560
^a Amicus Therapeutics Inc.		United States		803,900		10,724,026
^aAnaptysBio Inc.		United States		111,900		8,137,368
^a,c ARCA biopharma Inc., wts., 6/16/22		United States		1,338,619		54
^aArgenx SE, ADR		Netherlands		138,825		17,779,318
^a Array BioPharma Inc.		United States		2,639,900		59,688,139
^aAscendis Pharma AS, ADR		Denmark		257,700		28,702,626
^aAudentes Therapeutics Inc.		United States		87,500		3,306,625
^a,d Aurinia Pharmaceuticals Inc.		Canada		570,300		3,518,751
^aBiogen Inc.		United States		201,861		46,274,616
^aBiohaven Pharmaceutical Holding Co. Ltd.		United States		109,600		6,559,560
^aBioMarin Pharmaceutical Inc.		United States		441,556		37,766,285
^aBluebird Bio Inc.		United States		57,800		8,197,774
^aCara Therapeutics Inc.		United States		159,600		3,045,168
^aChemoCentryx Inc.		United States		528,108		7,007,993
^a,d CRISPR Therapeutics AG		Switzerland		166,314		6,684,160
^a,c DelMar Pharmaceuticals Inc., wts., 4/12/22		Canada		291,578		37
^aDynavax Technologies Corp.		United States		771,870		5,132,936
^aFate Therapeutics Inc.		United States		1,260,546		21,177,173
^aG1 Therapeutics Inc.		United States		412,426		8,825,916
Gilead Sciences Inc.		United States		624,500		40,617,480
^aGlobal Blood Therapeutics Inc.		United States		197,500		10,941,500
^aGlycoMimetics Inc.		United States		693,700		8,442,329
^aGossamer Bio Inc.		United States		242,900		4,119,584
^aHeron Therapeutics Inc.		United States		1,436,677		31,147,157
^aHomology Medicines Inc.		United States		138,400		2,978,368
^aImmunomedics Inc.		United States		348,700		5,586,174
^a,c,e Intarcia Therapeutics Inc., DD		United States		80,195		642,536
^a Intercept Pharmaceuticals Inc.		United States		166,700		14,366,206
^aIonis Pharmaceuticals Inc.		United States		102,400		7,611,392
^aIovance Biotherapeutics Inc.		United States		2,233,600		25,463,040
^aKezar Life Sciences Inc.		United States		131,900		2,488,953
^a,d LogicBio Therapeutics Inc.		United States		280,700		3,820,327
^aMacroGenics Inc.		United States		180,200		3,021,954
^aMinerva Neurosciences Inc.		United States		492,400		3,628,988
^aMirati Therapeutics Inc.		United States		162,151		9,646,363
^a,c,e Molecular Templates Inc., wts., 2/28/20		United States		39,954		17
^aMorphoSys AG, ADR		Germany		275,700		6,798,762
^aNeurocrine Biosciences Inc.		United States		292,600		21,137,424
^aPfenex Inc.		United States		870,884		5,042,418
^aPortola Pharmaceuticals Inc.		United States		374,900		13,233,970
^a,c,e Precision Biosciences Inc., 144A		United States		425,322		4,965,280
^aPrincipia Biopharma Inc.		United States		92,600		2,769,666
^aPTC Therapeutics Inc.		United States		586,300		21,939,346



22	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Biotechnology Discovery Fund (continued)


	Country		Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Biotechnology (continued)
^aRegeneron Pharmaceuticals Inc.		United States		125,009	$	42,895,588
^aREGENXBIO Inc.		United States		214,076		10,789,430
^aRocket Pharmaceuticals Inc.		United States		178,571		3,314,278
^a,d Rubius Therapeutics Inc.		United States		174,200		3,046,758
^aSage Therapeutics Inc.		United States		144,470		24,304,188
^aSarepta Therapeutics Inc.		United States		140,100		16,383,294
^auniQure NV		Netherlands		206,000		11,575,140
^aVertex Pharmaceuticals Inc.		United States		355,600		60,089,288
^aXencor Inc.		United States		178,132		5,470,434
^aZymeworks Inc.		Canada		251,920		4,801,595

						879,151,082

Life Sciences Tools & Services 5.1%
^aIllumina Inc.		United States		183,900		57,376,800

Pharmaceuticals 14.6%
^aAclaris Therapeutics Inc.		United States		995,662		6,272,670
^a,b BioPharmX Corp., 144A		United States		77,829		101,178
^a,c BioPharmX Corp., wts., 3/29/21		United States		108,000		993
^a,c BioPharmX Corp., wts., 11/22/23		United States		1,679,900		47,686
^aCollegium Pharmaceutical Inc.		United States		403,450		5,620,058
^aCymabay Therapeutics Inc.		United States		438,356		5,615,340
^aDermira Inc.		United States		538,268		5,969,392
^aFoamix Pharmaceuticals Ltd.		Israel		750,900		2,440,425
^aGW Pharmaceuticals PLC, ADR		United Kingdom		260,500		44,105,255
^a Intra-Cellular Therapies Inc.		United States		236,000		3,108,120
^aIterum Therapeutics PLC		United States		144,737		1,172,370
^aJazz Pharmaceuticals PLC		United States		188,500		24,461,645
^aMarinus Pharmaceuticals Inc.		United States		942,053		4,653,742
^aNeos Therapeutics Inc.		United States		489,765		1,180,334
^a,d Odonate Therapeutics Inc.		United States		404,482		7,952,116
^a,d Optinose Inc.		United States		230,300		2,293,788
^aReata Pharmaceuticals Inc.		United States		242,600		19,034,396
^aRevance Therapeutics Inc.		United States		647,300		8,570,252
^a,d TherapeuticsMD Inc.		United States		2,847,040		12,242,272
^aZogenix Inc.		United States		275,215		10,730,633

						165,572,665

Total Common Stocks and Other Equity Interests (Cost $686,651,080)						1,102,100,547


Preferred Stocks (Cost $2,821,056) 0.2%
Biotechnology 0.2%
^a,c,e Metacrine Inc., pfd., C		United States		1,330,687		1,953,313

Escrows and Litigation Trusts (Cost $2,241,691) 0.1%
^a,c True North Therapeutics Inc., Escrow Account		United States		759,880		997,867


Total Investments before Short Term Investments (Cost $691,713,827)						1,105,051,727



franklintempleton.com	Annual Report	23

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Biotechnology Discovery Fund (continued)


	Country		Shares		Value
Short Term Investments 4.9%

Money Market Funds (Cost $27,393,876) 2.4%
^f,g Institutional Fiduciary Trust Money Market Portfolio, 2.10%		United States		27,393,876	$	27,393,876

^h Investments from Cash Collateral Received for Loaned Securities (Cost $27,827,675) 2.5%
Money Market Funds 2.5%
^f,g Institutional Fiduciary Trust Money Market Portfolio, 2.10%		United States		27,827,675		27,827,675

Total Investments (Cost $746,935,378) 102.6%						1,160,273,278
Other Assets, less Liabilities (2.6)%						(29,115,908	)

Net Assets 100.0%					$	1,131,157,370

See Abbreviations on page 47.

^aNon-income producing.

^bSecurity 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, 2019, the aggregate value of these securities was $9,888,748, representing 0.9% of net assets.

^cFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.

^dA portion or all of the security is on loan at April 30, 2019. See Note 1(c).

^eSee Note 8 regarding restricted securities.

^fSee Note 3(f) regarding investments in affiliated management investment companies.

^gThe rate shown is the annualized seven-day effective yield at period end.

^hSee Note 1(c) regarding securities on loan.



24	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,
	2019			2018			2017			2016			2015
Class A

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$27.96			$25.11			$25.02			$31.46			$39.79

Income from investment operations^a:

Net investment income^b		0.31			0.39	^c		0.20			0.29			0.23

Net realized and unrealized gains (losses)		(4.20	)		2.77			0.17			(6.55	)		(8.27	)

Total from investment operations		(3.89	)		3.16			0.37			(6.26	)		(8.04	)

Less distributions from:

Net investment income		(0.49	)		(0.31	)		(0.28	)		(0.18	)		(0.29	)

Net asset value, end of year		$23.58			$27.96			$25.11			$25.02			$31.46

Total return^d		(13.69)%			12.74%			1.37%			(19.80)%			(20.07)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.03%			1.13%			1.06%			1.14%			1.08%

Expenses net of waiver and payments by affiliates		1.03%	^e,f		1.13%	^e,f		1.05%	^e		1.13%			1.08%	^e,f

Net investment income		1.21%			1.56%	^c		0.79%			1.22%			0.67%

Supplemental data

Net assets, end of year (000’s)		$247,362			$344,695			$398,703			$461,596			$572,518

Portfolio turnover rate		29.83%			29.98%			29.74%			35.77%			30.05%

^bBased on average daily shares outstanding.

^cNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.91%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^eBenefit of expense reduction rounds to less than 0.01%.

^fBenefit of waiver and payments by affiliates rounds to less than 0.01%.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	25

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Natural Resources Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class C

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$27.17			$24.28			$24.25			$30.46			$38.39

Income from investment operations^a:

Net investment income (loss)^b		0.11			0.20	^c		0.01			0.11			(0.01	)

Net realized and unrealized gains (losses)		(4.07	)		2.69			0.15			(6.31	)		(7.91	)

Total from investment operations		(3.96	)		2.89			0.16			(6.20	)		(7.92	)

Less distributions from:

Net investment income		(0.39	)		—			(0.13	)		(0.01	)		(0.01	)

Net asset value, end of year		$22.82			$27.17			$24.28			$24.25			$30.46

Total return^d		(14.37)%			11.90%			0.63%			(20.37)%			(20.63)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.78%			1.88%			1.81%			1.87%			1.78%

Expenses net of waiver and payments by affiliates		1.78%	^e,f		1.88%	^e,f		1.80%	^e		1.86%			1.78%	^e,f

Net investment income (loss)		0.46%			0.81%	^c		0.04%			0.49%			(0.03)%

Supplemental data

Net assets, end of year (000’s)		$49,620			$83,814			$96,835			$107,724			$123,735

Portfolio turnover rate		29.83%			29.98%			29.74%			35.77%			30.05%

^bBased on average daily shares outstanding.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^eBenefit of expense reduction rounds to less than 0.01%.

^fBenefit of waiver and payments by affiliates 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 Natural Resources Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R6

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$29.79			$26.87			$26.73			$33.62			$42.58

Income from investment operations^a:

Net investment income^b		0.45			0.57	^c		0.47			0.51			0.46

Net realized and unrealized gains (losses)		(4.49	)		2.95			0.04			(7.06	)		(8.92	)

Total from investment operations		(4.04	)		3.52			0.51			(6.55	)		(8.46	)

Less distributions from:

Net investment income		(0.53	)		(0.60	)		(0.37	)		(0.34	)		(0.50	)

Net asset value, end of year		$25.22			$29.79			$26.87			$26.73			$33.62

Total return		(13.31)%			13.37%			1.89%			(19.31)%			(19.61)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.62%			0.64%			0.83%			0.60%			0.55%

Expenses net of waiver and payments by affiliates		0.59%	^d		0.57%	^d		0.54%	^d		0.55%			0.54%	^d

Net investment income		1.65%			2.12%	^c		1.30%			1.80%			1.21%

Supplemental data

Net assets, end of year (000’s)		$15,627			$15,866			$218			$15			$439

Portfolio turnover rate		29.83%			29.98%			29.74%			35.77%			30.05%

^bBased on average daily shares outstanding.

^dBenefit of 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 Natural Resources Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Advisor Class

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$29.80			$26.81			$26.71			$33.63			$42.52

Income from investment operations^a:

Net investment income^b		0.40			0.49	^c		0.29			0.36			0.35

Net realized and unrealized gains (losses)		(4.49	)		2.95			0.17			(7.00	)		(8.85	)

Total from investment operations		(4.09	)		3.44			0.46			(6.64	)		(8.50	)

Less distributions from:

Net investment income		(0.51	)		(0.45	)		(0.36	)		(0.28	)		(0.39	)

Net asset value, end of year		$25.20			$29.80			$26.81			$26.71			$33.63

Total return		(13.50)%			13.04%			1.64%			(19.60)%			(19.81)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.78%			0.88%			0.81%			0.87%			0.78%

Expenses net of waiver and payments by affiliates		0.78%	^d,e		0.88%	^d,e		0.80%	^d		0.86%			0.78%	^d,e

Net investment income		1.46%			1.81%	^c		1.04%			1.49%			0.97%

Supplemental data

Net assets, end of year (000’s)		$62,639			$78,443			$94,070			$90,185			$79,307

Portfolio turnover rate		29.83%			29.98%			29.74%			35.77%			30.05%

^bBased 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%.



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

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2019

Franklin Natural Resources Fund


	Country		Shares		Value
Common Stocks 98.9%
Aluminum 0.4%
^aAlcoa Corp.		United States		53,400	$	1,424,712

Commodity Chemicals 0.2%
Dow Inc.		United States		16,000		907,680

Construction Materials 0.5%
^a Cemex SAB de CV, CPO, ADR		Mexico		367,000		1,688,200

Copper 5.3%
Antofagasta PLC		United Kingdom		455,800		5,397,024
First Quantum Minerals Ltd.		Zambia		248,400		2,624,205
Freeport-McMoRan Inc.		United States		429,200		5,283,452
^a Imperial Metals Corp.		Canada		364,500		685,785
Lundin Mining Corp.		Chile		589,900		3,166,627
Sandfire Resources NL		Australia		584,367		2,901,359

						20,058,452

Diversified Chemicals 0.8%
BASF SE		Germany		35,600		2,894,708

Diversified Metals & Mining 9.0%
Anglo American PLC		United Kingdom		139,000		3,591,544
BHP Group PLC, ADR		United Kingdom		153,200		7,220,316
Glencore PLC		Switzerland		1,850,500		7,344,405
Hudbay Minerals Inc.		Canada		216,600		1,442,491
^a,b Nautilus Minerals Inc.		Canada		3,895,831		65,601
Nexa Resources SA		Peru		165,200		1,955,968
Rio Tinto PLC, ADR		Australia		85,700		5,047,730
South32 Ltd.		Australia		981,400		2,311,722
Teck Resources Ltd., B		Canada		202,300		4,784,395

						33,764,172

Fertilizers & Agricultural Chemicals 0.7%
Nutrien Ltd.		Canada		48,900		2,649,402

Gold 4.5%
Agnico Eagle Mines Ltd.		Canada		66,300		2,746,248
Alamos Gold Inc., A		Canada		537,400		2,495,616
^aB2Gold Corp.		Canada		962,100		2,614,636
Barrick Gold Corp.		Canada		248,091		3,155,717
^aGuyana Goldfields Inc.		Canada		1,303,900		905,351
Newcrest Mining Ltd.		Australia		119,800		2,113,069
Newmont Goldcorp Corp.		United States		58,515		1,817,476
OceanaGold Corp.		Australia		402,310		1,129,375

						16,977,488

Integrated Oil & Gas 12.7%
Chevron Corp.		United States		77,900		9,352,674
Exxon Mobil Corp.		United States		71,000		5,699,880
Occidental Petroleum Corp.		United States		176,500		10,392,320
Royal Dutch Shell PLC, A, ADR		United Kingdom		163,521		10,388,489
Suncor Energy Inc.		Canada		247,400		8,160,469
Total SA, B, ADR		France		66,110		3,680,344

						47,674,176



franklintempleton.com	Annual Report	29

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Natural Resources Fund (continued)


	Country		Shares		Value
Common Stocks (continued)
Oil & Gas Drilling 2.0%
Ensco Rowan PLC, A		United States		81,881	$	1,143,878
Patterson-UTI Energy Inc.		United States		324,500		4,409,955
^aPioneer Energy Services Corp.		United States		1,015,946		1,767,746

						7,321,579

Oil & Gas Equipment & Services 18.0%
Baker Hughes a GE Co., A		United States		242,700		5,829,654
^aC&J Energy Services Inc.		United States		72,300		1,015,815
^aCactus Inc.		United States		40,700		1,477,410
^aDril-Quip Inc.		United States		40,400		1,759,824
Halliburton Co.		United States		312,335		8,848,451
Hunting PLC		United Kingdom		137,400		1,055,349
Liberty Oilfield Services Inc., A		United States		129,600		1,932,336
Mammoth Energy Services Inc.		United States		77,943		1,215,131
^aNine Energy Service Inc.		United States		79,650		1,603,355
^aOceaneering International Inc.		United States		127,400		2,446,080
^a Oil States International Inc.		United States		209,366		4,044,951
^aProPetro Holding Corp.		United States		73,600		1,628,768
^aRanger Energy Services Inc.		United States		163,422		1,197,066
RPC Inc.		United States		137,800		1,417,962
Schlumberger Ltd.		United States		347,347		14,824,770
Schoeller-Bleckmann Oilfield Equipment AG		Austria		20,700		1,936,481
^aSelect Energy Services Inc.		United States		222,200		2,559,744
^aSuperior Energy Services Inc.		United States		722,700		2,594,493
TechnipFMC PLC		United Kingdom		405,700		9,976,163
^aWeatherford International PLC		United States		511,300		282,902

						67,646,705

Oil & Gas Exploration & Production 31.3%
Anadarko Petroleum Corp.		United States		117,100		8,530,735
Cabot Oil & Gas Corp., A		United States		359,200		9,299,688
^aCairn Energy PLC		United Kingdom		1,679,700		3,749,987
^aCallon Petroleum Co.		United States		841,100		6,316,661
Canadian Natural Resources Ltd.		Canada		253,500		7,612,192
Concho Resources Inc.		United States		106,200		12,253,356
ConocoPhillips		United States		94,800		5,983,776
Diamondback Energy Inc.		United States		116,000		12,341,240
EOG Resources Inc.		United States		115,700		11,112,985
EQT Corp.		United States		230,700		4,717,815
Hess Corp.		United States		112,200		7,194,264
^aJagged Peak Energy Inc.		United States		557,216		5,889,773
Noble Energy Inc.		United States		327,600		8,864,856
Pioneer Natural Resources Co.		United States		66,600		11,086,236
^aRing Energy Inc.		United States		497,800		2,578,604

						117,532,168

Oil & Gas Refining & Marketing 3.4%
HollyFrontier Corp.		United States		31,500		1,503,495
Marathon Petroleum Corp.		United States		82,500		5,021,775
Phillips 66		United States		42,800		4,034,756
Valero Energy Corp.		United States		22,900		2,076,114

						12,636,140



30	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Natural Resources Fund (continued)


	Country		Shares		Value
Common Stocks (continued)
Oil & Gas Storage & Transportation 7.1%
Enbridge Inc.		Canada		77,647	$	2,868,280
Kinder Morgan Inc.		United States		191,400		3,803,118
ONEOK Inc.		United States		64,200		4,361,106
Targa Resources Corp.		United States		167,100		6,709,065
TransCanada Corp.		Canada		67,800		3,238,128
The Williams Cos. Inc.		United States		195,700		5,544,181

						26,523,878

Paper Packaging 0.6%
Packaging Corp. of America		United States		24,100		2,389,756

Pharmaceuticals 0.2%
^aElanco Animal Health Inc.		United States		17,600		554,400

Specialty Chemicals 1.7%
Albemarle Corp.		United States		44,700		3,355,182
DowDuPont Inc.		United States		48,000		1,845,600
Umicore SA		Belgium		32,200		1,246,097

						6,446,879

Trading Companies & Distributors 0.5%
^aUnivar Inc.		United States		82,900		1,851,157

Total Common Stocks (Cost $330,432,245)						370,941,652


Short Term Investments (Cost $788,220) 0.2%

Money Market Funds 0.2%
^c,d Institutional Fiduciary Trust Money Market Portfolio, 2.10%		United States		788,220		788,220

Total Investments (Cost $331,220,465) 99.1%						371,729,872
Other Assets, less Liabilities 0.9%						3,518,636

Net Assets 100.0%					$	375,248,508

See Abbreviations on page 47.

^aNon-income producing.

^bFair valued using significant unobservable inputs. See Note 10 regarding fair value measurements.

^cSee Note 3(f) regarding investments in affiliated management investment companies.

^dThe rate shown is the annualized seven-day effective yield at period end.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	31

FRANKLIN STRATEGIC SERIES

Financial Statements

Statements of Assets and Liabilities

April 30, 2019


	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	691,713,827	$	330,432,245
Cost - Non-controlled affiliates (Note 3f)		55,221,551		788,220

Value - Unaffiliated issuers⁺	$	1,105,051,727	$	370,941,652
Value - Non-controlled affiliates (Note 3f)		55,221,551		788,220
Cash		—		32,194
Receivables:
Investment securities sold **		151,328		3,411,099
Capital shares sold		994,449		234,654
Dividends and interest		35,825		827,709
Other assets		1,066		343

Total assets		1,161,455,946		376,235,871

Liabilities:
Payables:
Capital shares redeemed		1,293,533		527,744
Management fees		559,398		163,115
Distribution fees		236,888		94,663
Transfer agent fees		260,829		121,466
Payable upon return of securities loaned		27,827,675		—
Accrued expenses and other liabilities		120,253		80,375


Total liabilities		30,298,576		987,363

Net assets, at value	$	1,131,157,370	$	375,248,508

Net assets consist of:
Paid-in capital	$	665,468,509	$	489,848,499
Total distributable earnings (loss)		465,688,861		(114,599,991	)

Net assets, at value	$	1,131,157,370	$	375,248,508



⁺Includes securities loaned	$	26,306,665	$	—
^**Includes securities loaned	$	151,328	$	—



32	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, 2019


	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund

Class A:
Net assets, at value		$924,611,188		$247,362,445

Shares outstanding		6,659,165		10,491,818

Net asset value per share^a		$138.85		$23.58

Maximum offering price per share (net asset value per share ÷ 94.50%)		$146.93		$24.95

Class C:
Net assets, at value		$ 46,507,938		$ 49,619,977

Shares outstanding		348,357		2,174,155

Net asset value and maximum offering price per share^a		$133.51		$22.82

Class R6:
Net assets, at value		$ 6,164,398		$ 15,626,986

Shares outstanding		42,860		619,736

Net asset value and maximum offering price per share		$143.83		$25.22

Advisor Class:
Net assets, at value		$153,873,846		$ 62,639,100

Shares outstanding		1,079,360		2,485,694

Net asset value and maximum offering price per share		$142.56		$25.20

^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	33

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Operations

for the year ended April 30, 2019


	Franklin Biotechnology Discovery Fund			Franklin Natural Resources Fund

Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers		$ 2,817,526			$ 9,643,674
Non-controlled affiliates (Note 3f)		625,895			98,998
Interest:
Unaffiliated issuers		5,958			—
Income from securities loaned:
Unaffiliated issuers (net of fees and rebates)		398,001			45,857
Non-controlled affiliates (Note 3f)		402,641			50,493

Total investment income		4,250,021			9,839,022

Expenses:
Management fees (Note 3a)		7,552,466			2,226,164
Distribution fees: (Note 3c)
Class A		2,596,536			720,496
Class C		551,321			644,452
Transfer agent fees: (Note 3e)
Class A		1,539,586			638,911
Class C		82,016			143,206
Class R6		5,697			9,376
Advisor Class		267,073			154,590
Custodian fees (Note 4)		22,568			10,985
Reports to shareholders		141,605			89,468
Registration and filing fees		88,834			89,453
Professional fees		59,398			50,029
Trustees’ fees and expenses		19,398			6,740
Other		34,305			24,945

Total expenses		12,960,803			4,808,815
Expense reductions (Note 4)		(973	)		(504	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(224,405	)		(37,935	)

Net expenses		12,735,425			4,770,376

Net investment income (loss)		(8,485,404	)		5,068,646

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		59,100,885			3,219,999
Foreign currency transactions		—			(432	)

Net realized gain (loss)		59,100,885			3,219,567

Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(69,695,618	)		(76,621,703	)
Translation of other assets and liabilities denominated in foreign currencies		—			7,499

Net change in unrealized appreciation (depreciation)		(69,695,618	)		(76,614,204	)

Net realized and unrealized gain (loss)		(10,594,733	)		(73,394,637	)

Net increase (decrease) in net assets resulting from operations		$(19,080,137	)		$(68,325,991	)


*Foreign taxes withheld on dividends		$ —			$ 379,718



34	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 Biotechnology						Franklin Natural
	Discovery Fund						Resources Fund

	Year Ended April 30,						Year Ended April 30,

	2019			2018			2019			2018

Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(8,485,404	)	$	(7,400,442	)	$	5,068,646		$	7,807,287
Net realized gain (loss)		59,100,885			54,362,893			3,219,567			(12,640,009	)
Net change in unrealized appreciation (depreciation)		(69,695,618	)		(22,596,221	)		(76,614,204	)		63,514,023

Net increase (decrease) in net assets resulting from operations		(19,080,137	)		24,366,230			(68,325,991	)		58,681,301

Distributions to shareholders: (Note 1e)
Class A		(31,140,117	)		(27,114,653	)		(5,445,964	)		(4,171,579	)
Class C		(1,654,793	)		(1,417,301	)		(929,534	)		—
Class R6		(198,908	)		(199,407	)		(313,292	)		(26,407	)
Advisor Class		(5,381,467	)		(4,208,617	)		(1,289,908	)		(1,426,444	)

Total distributions to shareholders		(38,375,285	)		(32,939,978	)		(7,978,698	)		(5,624,430	)

Capital share transactions: (Note 2)
Class A		(112,026,697	)		(88,622,240	)		(46,670,690	)		(89,055,299	)
Class C		(9,069,507	)		5,540,101			(22,834,504	)		(22,010,700	)
Class R6		(1,820,119	)		(555,474	)		2,159,944			14,973,208
Advisor Class		(17,313,109	)		21,646,333			(3,919,165	)		(23,972,393	)

Total capital share transactions		(140,229,432	)		(61,991,280	)		(71,264,415	)		(120,065,184	)

Net increase (decrease) in net assets		(197,684,854	)		(70,565,028	)		(147,569,104	)		(67,008,313	)
Net assets:
Beginning of year		1,328,842,224			1,399,407,252			522,817,612			589,825,925

End of year (Note 1e)	$	1,131,157,370		$	1,328,842,224		$	375,248,508		$	522,817,612



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

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 (1940 Act) as an open-end management investment company, consisting of eight 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 Funds offer four classes of shares: Class A, Class C, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

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 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time 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.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Funds’ business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC 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.



36	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

b. Foreign Currency Translation

c. Securities Lending

Certain or all 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 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, net of fees paid to the securities lending agent and/or third-party vendor, 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. At April 30, 2019, the Franklin Natural Resources Fund had no securities on loan.

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.



franklintempleton.com	Annual Report	37

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting

Policies (continued)

d. Income and Deferred Taxes (continued)

statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

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 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. Distributable earnings are determined according to income tax regulations (tax basis) and 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 or based on the ratio of number

of shareholders of each Fund to the combined number of shareholders 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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For the year ended April 30, 2018, distributions to shareholders were as follows:


	Franklin Biotechnology Discovery Fund			Franklin Natural Resources Fund
Distributions from net investment income:
Class A		$ —			$(4,171,579	)
Class R6		—			(26,407	)
Advisor Class		—			(1,426,444	)
Distributions from net realized gains:
Class A		(27,114,653	)		—
Class C		(1,417,301	)		—
Class R6		(199,407	)		—
Advisor Class		(4,208,617	)		—

For the year ended April 30, 2018, undistributed net investment income(loss) included in net assets were as follows:


Fund	Undistributed net investment income (loss)
Franklin Biotechnology Discovery Fund		$(8,318,907	)
Franklin Natural Resources Fund		$4,345,619

2. Shares of Beneficial Interest

At April 30, 2019, 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, 2019
Shares sold^a		721,089		$	106,972,540			1,281,103		$	32,532,375
Shares issued in reinvestment of distributions		232,391			29,692,637			256,254			5,342,901
Shares redeemed		(1,697,525	)		(248,691,874	)		(3,371,926	)		(84,545,966)


Net increase (decrease)		(744,045	)	$	(112,026,697	)		(1,834,569	)	$	(46,670,690)


Year ended April 30, 2018
Shares sold		1,057,237		$	160,996,348			1,583,808		$	40,230,459
Shares issued in reinvestment of distributions		175,206			25,819,984			164,031			4,090,940
Shares redeemed		(1,821,677	)		(275,438,572	)		(5,298,641	)		(133,376,698)


Net increase (decrease)		(589,234	)	$	(88,622,240	)		(3,550,802	)	$	(89,055,299)


Class C Shares:
Year ended April 30, 2019
Shares sold		72,561		$	10,442,091			324,962		$	7,969,298
Shares issued in reinvestment of distributions		13,364			1,646,340			45,232			915,493
Shares redeemed^a		(149,801	)		(21,157,938	)		(1,280,715	)		(31,719,295)


Net increase (decrease)		(63,876	)	$	(9,069,507	)		(910,521	)	$	(22,834,504)


Year ended April 30, 2018
Shares sold		142,042		$	21,098,664			388,443		$	9,522,328
Shares issued in reinvestment of distributions		9,827			1,408,701			—			—
Shares redeemed		(114,253	)		(16,967,264	)		(1,292,254	)		(31,533,028)


Net increase (decrease)		37,616		$	5,540,101			(903,811	)	$	(22,010,700)



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NOTES TO FINANCIAL STATEMENTS

2. Shares of Beneficial Interest (continued)


	Franklin Biotechnology						Franklin Natural
	Discovery Fund						Resources Fund
	Shares			Amount			Shares			Amount
Class R6 Shares:
Year ended April 30, 2019
Shares sold		14,632		$	2,320,850			331,245		$	8,552,092
Shares issued in reinvestment of distributions		1,505			198,908			14,066			313,109
Shares redeemed		(28,420	)		(4,339,877	)		(258,140	)		(6,705,257)


Net increase (decrease)		(12,283	)	$	(1,820,119	)		87,171		$	2,159,944


Year ended April 30, 2018
Shares sold		18,257		$	2,841,320			544,711		$	15,552,699
Shares issued in reinvestment of distributions		1,314			199,406			995			26,408
Shares redeemed		(23,294	)		(3,596,200	)		(21,257	)		(605,899)


Net increase (decrease)		(3,723	)	$	(555,474	)		524,449		$	14,973,208


Advisor Class Shares:
Year ended April 30, 2019
Shares sold		338,870		$	52,338,943			757,766		$	19,842,560
Shares issued in reinvestment of distributions		36,842			4,828,793			57,021			1,269,854
Shares redeemed		(501,477	)		(74,480,845	)		(961,445	)		(25,031,579)


Net increase (decrease)		(125,765	)	$	(17,313,109	)		(146,658	)	$	(3,919,165)


Year ended April 30, 2018
Shares sold		444,625		$	68,532,853			1,055,556		$	28,419,344
Shares issued in reinvestment of distributions		24,690			3,720,072			52,254			1,387,336
Shares redeemed		(328,722	)		(50,606,592	)		(1,984,254	)		(53,779,073)


Net increase (decrease)		140,593		$	21,646,333			(876,444	)	$	(23,972,393)

^aMay include a portion of Class C shares that were automatically converted to Class A.

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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NOTES TO FINANCIAL STATEMENTS

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

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

For the year ended April 30, 2019, each Fund’s gross effective investment management fee rate based on average daily net assets was as follows:

Franklin

Biotechnology

Discovery Fund

Franklin Natural

Resources Fund

0.589%

0.507%

b. Administrative Fees

Under an agreement with Advisers, FT Services provides administrative services to the Funds. The fee is paid by Advisers based on 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. 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 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



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NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates (continued)

c. Distribution Fees (continued)

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 Biotechnology Discovery Fund			Franklin Natural Resources Fund
Reimbursement Plans:
Class A		0.35	%		0.35	%
Class C		1.00	%		1.00	%

The Board has set the current rate at 0.25% per year for Class A shares until further notice and approval by the Board.

d. Sales Charges/Underwriting Agreements


	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Sales charges retained net of commissions paid to unaffiliated brokers/dealers		$184,267		$36,839
CDSC retained		$ 52,257		$ 3,183

Effective September 10, 2018, the Board approved changes to certain front-end sales charges and dealer commissions on Class A shares. Further details are disclosed in the Funds’ Prospectus.

e. Transfer Agent Fees

For the year ended April 30, 2019, 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 Discovery Fund		Franklin Natural Resources Fund
Transfer agent fees		$736,649		$398,953



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NOTES TO FINANCIAL STATEMENTS

f. Investments in Affiliated Management Investment Companies


	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions			Number of Shares Held at End of Year		Value at End of Year		Investment Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Franklin Biotechnology Discovery Fund Non-Controlled Affiliates
													Dividends
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		48,671,129		304,094,093		(325,371,346	)		27,393,876	$	27,393,876		$ 625,895		$ —		$ —

													Income from securities loaned
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		31,355,415		223,576,934		(227,104,674	)		27,827,675		27,827,675		402,641		—		—

Total Affiliated Securities										$	55,221,551		$ 1,028,536		$ —		$ —


Franklin Natural Resources Fund Non-Controlled Affiliates
													Dividends
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		11,815,239		85,287,366		(96,314,385	)		788,220	$	788,220		$ 98,998		$ —		$ —

													Income from securities loaned
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		5,473,225		59,545,277		(65,018,502	)		—		—		50,493		—		—

Total Affiliated Securities										$	788,220		$ 149,491		$ —		$ —

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 0.03% based on the average net assets of the class until August 31, 2019.

4. Expense Offset Arrangement

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

5. Income Taxes (continued)

At April 30, 2019, the capital loss carryforwards were as follows:


	Franklin Natural Resources Fund
Capital loss carryforwards not subject to expiration:
Short term		$ 10,086,801
Long term		135,396,222
Total capital loss carryforwards		$145,483,023

For tax purposes, the Fund 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, 2019, Franklin Biotechnology Discovery Fund deferred late-year ordinary losses of $2,803,664.

The tax character of distributions paid during the years ended April 30, 2019 and 2018, was as follows:


	Franklin Biotechnology				Franklin Natural
	Discovery Fund				Resources Fund
	2019		2018		2019		2018
Distributions paid from:
Ordinary income	$	19,760,629	$	9,966,331	$	7,978,698	$	5,624,430
Long term capital gain		18,614,656		22,973,647		—		—
	$	38,375,285	$	32,939,978	$	7,978,698	$	5,624,430


	Franklin Biotechnology Discovery Fund			Franklin Natural Resources Fund
Cost of investments		$749,005,156			$344,971,645

Unrealized appreciation		$469,365,854			$ 82,049,236
Unrealized depreciation		(58,097,732	)		(55,291,009	)

Net unrealized appreciation (depreciation)		$411,268,122			$ 26,758,227

Distributable earnings:
Undistributed ordinary income		$ —			$ 4,122,622
Undistributed long term capital gains		55,405,644			—

Total distributable earnings		$ 55,405,644			$ 4,122,622

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.



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NOTES TO FINANCIAL STATEMENTS

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2019, were as follows:


	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Purchases		$355,829,444		$128,911,999
Sales		$521,623,188		$195,822,705

At April 30, 2019, in connection with securities lending transactions, certain or all Funds loaned investments and received cash collateral as follows:


	Franklin Biotechnology Discovery Fund
Securities lending transactions^a:
Equity Investments^b		$27,827,675

^aThe agreements can be terminated at any time.

^bThe gross amount of recognized liability for such transactions is included in payable upon return of securities loaned in the Statements of Assets and Liabilities.

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. Current political and financial uncertainty surrounding the European Union may increase market volatility and the economic risk of investing in securities in Europe. In addition, certain foreign securities may not be as liquid as U.S. securities.

8. Restricted Securities

At April 30, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:


Shares		Issuer	Acquisition Date		Cost		Value
	Franklin Biotechnology Discovery Fund
	80,195	Intarcia Therapeutics Inc., DD		3/26/14	$	2,597,516	$	642,536
	1,330,687	Metacrine Inc., pfd., C		6/04/18		2,821,056		1,953,313
	39,954	Molecular Templates Inc., wts., 2/28/20		2/12/15		—		17
	425,322	Precision Biosciences Inc., 144A		5/25/18 - 3/01/19		4,758,467		4,965,280
		Total Restricted Securities (Value is 0.7% of Net Assets)			$	10,177,039	$	7,561,146



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NOTES TO FINANCIAL STATEMENTS

9. Credit Facility

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.

A summary of inputs used as of April 30, 2019, 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:^a
Equity Investments:^b
Biotechnology	$	873,543,158	$	—	$	7,561,237	$	881,104,395
Pharmaceuticals		165,523,986		—		48,679		165,572,665
All Other Equity Investments		57,376,800		—		—		57,376,800
Escrows and Litigation Trusts		—		—		997,867		997,867
Short Term Investments		55,221,551		—		—		55,221,551
Total Investments in Securities	$	1,151,665,495	$	—	$	8,607,783	$	1,160,273,278

Franklin Natural Resources Fund
Assets:
Investments in Securities:^a
Equity Investments:^b
Diversified Metals & Mining	$	33,698,571	$	—	$	65,601	$	33,764,172
All Other Equity Investments		337,177,480		—		—		337,177,480
Short Term Investments		788,220		—		—		788,220
Total Investments in Securities	$	371,664,271	$	—	$	65,601	$	371,729,872



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NOTES TO FINANCIAL STATEMENTS

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

^bIncludes common and preferred stocks as well as other equity interests.

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 beginning and/or end of the year.

11. 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
CPO		Certificate of Ordinary Participation (usually Mexico)



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FRANKLIN STRATEGIC SERIES

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Strategic Series and Shareholders of Franklin Biotechnology Discovery Fund and Franklin Natural Resources Fund

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities, including the statements of investments, of Franklin Biotechnology Discovery Fund and Franklin Natural Resources Fund (the “Funds”) as of April 30, 2019, the related statements of operations for the year ended April 30, 2019, the statements of changes in net assets for each of the two years in the period ended April 30, 2019, including the related notes, and the financial highlights for each of the five years in the period ended April, 30 2019 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of April 30, 2019, 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 ended April 30, 2019 and each of the financial highlights for each of the five years in the period ended April, 30 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of April 30, 2019 by correspondence with the custodian and transfer agent. We believe that our audits provide a reasonable basis for our opinions.

PricewaterhouseCoopers LLP

San Francisco, California

June 17, 2019

We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.



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Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, Franklin Biotechnology Discovery Fund hereby reports the maximum amount allowable but no less than $18,614,656 as long term capital gain dividends for the fiscal year ended April 30, 2019.

Under Section 871(k)(2)(C) of the Internal Revenue Code, Franklin Biotechnology Discovery Fund hereby reports the maximum amount allowable but no less than $19,760,629 as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended April 30, 2019.


Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
	14.26%		52.84%


Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
	$2,817,526		$9,076,798



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Board Members and Officers

Independent Board Members


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1991	136	Bar-S Foods (meat packing company) (1981-2010).

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).

Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2017	112	Hess Corporation (exploration of oil and gas) (2014-present).

Principal Occupation During at Least the Past 5 Years:
Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present);member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).

Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2014	136	Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present).

Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); 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) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 1998 and Lead Independent Trustee since March 2019	136	Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) 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) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2009	136	Boeing Capital Corporation (aircraft financing) (2006-2013).

Principal Occupation During at Least the Past 5 Years:
Executive Vice President, Counselor and Senior Advisor to Boeing Chairman and Board of Directors, The Boeing Company (aerospace company) (May 2019); and formerly, General Counsel and member of the Executive Council, The Boeing Company (2006-2019); Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).



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Independent Board Members (continued)


Name,Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	136	The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012).

Principal Occupation During at Least the Past 5 Years:
Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; 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).
Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2013	150	None

Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director 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 42 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906	Chairman of the Board and Trustee	Chairman of the Board since 2013 and Trustee since 1991	136	None

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.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 40 of the investment companies in Franklin Templeton.

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; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.

Sonal Desai, Ph.D. (1963) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since December 2018	Not Applicable	Not Applicable

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 18 of the investment companies in Franklin Templeton.



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FRANKLIN STRATEGIC SERIES

Interested Board Members and Officers (continued)


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906	Treasurer, Chief Financial Officer and, Chief Accounting Officer	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting and officer of 28 of the investment companies in Franklin Templeton.

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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.

Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Co- Secretary	Vice President since 2009 and Co-Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton.

Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).

Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton.

Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.

Edward D. Perks (1970) One Franklin Parkway San Mateo, CA 94403-1906	President and Chief Executive Officer – Investment Management	Since December 2018	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
President and Director, Franklin Advisers, Inc.; and officer of nine of the investment companies in Franklin Templeton (since December 2018).



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FRANKLIN STRATEGIC SERIES

Interested Board Members and Officers (continued)


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Compliance Officer	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Senior Associate General Counsel, Franklin Templeton (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.

Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
General Counsel, Executive Vice President and Secretary, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.

Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President and Co-Secretary	Vice President since 2011 and Co- Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton.

*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.

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.



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FRANKLIN STRATEGIC SERIES

Shareholder Information

Board Approval of Investment Management Agreements

FRANKLIN STRATEGIC SERIES

Franklin Biotechnology Discovery Fund

Franklin Natural Resources Fund

(each a Fund)

In approving the continuance of each Management Agreement, the Board, including a majority of the Independent Trustees,

determined that the terms of the Management Agreement are fair and reasonable and that the continuance of such Management Agreement is in the interests of the applicable Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.

Nature, Extent and Quality of Services

The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the Franklin Templeton family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Manager’s parent, and its commitment to the mutual fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to the market environment and project initiatives and capital



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FRANKLIN STRATEGIC SERIES

SHAREHOLDER INFORMATION

investments relating to the services provided to the Funds by the FTI organization.

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by the Manager and its affiliates to the Funds and their shareholders.

Fund Performance

Franklin Biotechnology Discovery Fund - The Performance Universe for this Fund included the Fund and all retail and institutional health/biotechnology funds. The Board noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was below the median and in the fifth (worst) or fourth quintile of its Performance Universe. The Board discussed this performance with management and management explained that the Fund focuses on biotechnology, while the Performance Universe is comprised of mostly general healthcare funds. The Board noted management’s explanation that the Fund underperformed its biotechnology-only peers due to individual stock selection. The Board further noted a number of changes implemented/being implemented by management to address the Fund’s below median annualized total return, in particular, changes to the Fund’s portfolio management team and portfolio construction. The Board concluded that the Fund’s Management Agreement should be continued for an additional one-year period, and these changes monitored.

Franklin Natural Resources Fund - The Performance Universe for this Fund included the Fund and all retail and institutional global natural resources funds. The Board noted that the Fund’s annualized total return for the one- and five-year periods was below the median of its Performance Universe, but for the three- and 10-year periods was above the median of its Performance Universe. The Board discussed this performance

with management and management explained that the Fund’s relative performance over the past five years was negatively impacted by its overweight position in the weak-performing energy sector as compared to its peers. Management further explained that several funds in the Performance Universe had no exposure to the energy sector and the average weighting to the energy sector for the Performance Universe was 50% as compared to 60-80% for most diversified natural resources funds. The Board further noted management’s explanation that management has sought to focus more heavily on company-specific risk factors such as size and operating leverage and to continue to diversify Fund exposure by adding several non-energy positions. The Board concluded that the Fund’s performance was acceptable, noting the Fund’s longer term performance.

Comparative Fees and Expenses

The Expense Group for the Franklin Biotechnology Discovery Fund included the Fund and eight other health/biotechnology



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FRANKLIN STRATEGIC SERIES

SHAREHOLDER INFORMATION

funds. The Expense Group for the Franklin Natural Resources Fund included the Fund and nine other global natural resources funds. The Board noted that the Management Rates and actual total expense ratios for these Funds were below the medians and in the first quintile (least expensive) of their respective Expense Groups. The Board concluded that the Management Rates charged to these Funds are reasonable.

Profitability

concluded 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, extent and quality of services provided to each Fund.

Economies of Scale

The Board reviewed and considered the extent to which the Manager may realize economies of scale, if any, as each Fund grows larger and whether each Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints, which operate generally to share any economies of scale with a Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered the Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments the Manager incurs across the Franklin Templeton family of funds as a whole. The Board noted that the Franklin Biotechnology Discovery Fund had experienced a decrease in assets and would not be expected to demonstrate additional economies of scale in the near term, but concluded that to the extent economies of scale may be realized by the Manager and its affiliates, each Fund’s management fee structure provided a sharing of benefits with the Fund and its shareholders as the Fund grows.

Conclusion

Proxy Voting Policies and Procedures



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FRANKLIN STRATEGIC SERIES

SHAREHOLDER INFORMATION

Quarterly Statement of Investments

Householding of Reports and Prospectuses



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Annual Report and Shareholder Letter

Franklin Strategic Series

Investment Manager

Franklin Advisers, Inc.

Distributor

Franklin Templeton Distributors, Inc.

(800) DIAL BEN^® / 342-5236

franklintempleton.com

Shareholder Services

(800) 632-2301

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.


^© 2019 Franklin Templeton Investments. All rights reserved.		FSS2 A 06/19

LOGO

Franklin Templeton

Dear Shareholder:

During the 12 months ended April 30, 2019, the U.S. economy grew, while annual inflation decreased, prompting the U.S. Federal Reserve (Fed) to raise its target range for the federal funds rate 0.25% at its June, September and December 2018 meetings. The 10-year Treasury yield, which moves inversely to price, decreased by period-end but rose to multi-year highs in 2018 amid a healthy U.S. economy and investor concerns about inflation, Fed actions and potentially decreased monetary stimulus by major central banks. However, the yield declined at times during the period and overall due to worries about slower global economic growth and political uncertainties, including turmoil in Italy and U.S.-China trade tensions. The U.S. dollar rose against its major trading partners during the period. In this environment, global government bonds, as measured by the FTSE World Government Bond Index, had slight losses in U.S. dollar terms.

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.

CFA^® is a trademark owned by CFA Institute.

In addition, Franklin Flexible Alpha Bond Fund’s annual report includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.

We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your investment needs in the years ahead.

Sincerely,

LOGO

Edward Perks, CFA

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

Not FDIC Insured | May Lose Value | No Bank Guarantee



franklintempleton.com	Not part of the annual report	1

Contents


Annual Report

Franklin Flexible Alpha Bond Fund			3

Performance Summary			7

Your Fund’s Expenses			10

Financial Highlights and Statement of Investments			11

Financial Statements			37

Notes to Financial Statements			42

Report of Independent Registered Public Accounting Firm			57

Tax Information			58

Board Members and Officers			59

Shareholder Information			63


Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.



2	Annual Report	franklintempleton.com

Annual Report

Franklin Flexible Alpha Bond Fund

This annual report for Franklin Flexible Alpha Bond Fund covers the fiscal year ended April 30, 2019.

Your Fund’s Goal and Main Investments

The Fund seeks to provide total return through a combination of current income and capital appreciation by investing at least 80% of its net assets in bonds and investments that provide exposure to bonds, including debt obligations of any credit quality, maturity or duration, all varieties of fixed income, variable rate and floating-rate debt securities and investments, money market instruments and derivatives. The Fund aims to provide attractive risk-adjusted total returns over a full market cycle. A full market cycle is a period of time that spans a full business and economic cycle, which may include periods of rising and declining interest rates.

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.

Performance Overview

For the 12 months under review, the Fund’s Class A shares posted a +2.18% cumulative total return. In comparison, the LIBOR USD 3-Month Rate Index posted a +2.53% total return.¹ The index tracks the interest rate at which banks offer to lend to one another in the wholesale money markets in London and is used to set the cost of various variable-rate loans. You can find more of the Fund’s 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Sector Exposure*

4/30/19

% of Total

Net Assets


Collateralized Loan Obligations	32.0	%
Residential Mortgage-Backed Securities	24.8	%
International Bonds	8.8	%
Floating-Rate Loans	7.7	%
Investment-Grade Corporates	4.2	%
Commercial Mortgage-Backed Securities	4.1	%
Covered Bonds	3.2	%
Treasury Inflation-Protected Securities	3.0	%
Municipal Bonds	2.9	%
High-Yield Corporates Securities	2.3	%
Other	0.3	%
Interest-Rate Derivatives	-21.4	%
Cash & Cash Equivalents	17.7	%

*Sector Exposure is intended to estimate the portfolio’s exposure to various sectors, including any hedged or increased exposure through 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. Interest-Rate Derivatives sector consists of Treasury, interest rate and other derivatives that are primarily used for duration management; a negative number indicates that the Fund is seeking to hedge interest-rate risk.

Economic and Market Overview

The U.S. economy grew during the 12-month period. The economy expanded at a faster rate in 2019’s first quarter after moderating in the previous two quarters. Growth in consumer spending, inventory investment, exports, state and local government spending and business investment was partly offset by declines in housing investment and federal government spending. The manufacturing and services sectors expanded during the period. The unemployment rate decreased from 3.9% in April 2018 to 3.6% at period-end.² The annual inflation rate, as measured by the Consumer Price Index, decreased from 2.5% in April 2018 to 2.0% at period-end.²

1. Source: Bloomberg LP.

2. 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 16.



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FRANKLIN FLEXIBLE ALPHA BOND FUND

Dividend Distributions*

5/1/18–4/30/19


	Dividend per Share (cents)
Month	Class A		Class C		Class R		Class R6		Advisor Class
May		1.2601		1.1178		1.4491		1.8198		1.9819
June		1.3402		1.2697		1.1372		1.4877		1.3418
July		1.5761		1.4688		1.5959		2.2257		1.9702
August		1.7712		1.4283		1.5541		2.1787		1.9776
September		1.3435		1.0819		1.1739		1.6741		1.5259
October		2.4119		2.3123		2.3735		2.1809		2.8921
November		1.6017		1.5295		1.5735		2.0028		1.9455
December**		4.2708		3.9167		4.0767		4.5955		4.4699
January		2.0163		1.7095		1.8316		2.3030		2.2009
February		2.0238		1.7256		1.8438		2.3209		2.2181
March		1.8829		1.5592		1.6940		2.1975		2.0406
April		3.1506		2.6354		2.8092		2.7517		3.2235
Total		24.6491		21.7547		23.1125		27.7383		27.7880

*The distribution amount is the sum of all net investment income distributions for the period shown. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

**Includes an additional 2.11 cent per share distribution to meet excise tax requirements.

The 10-year Treasury yield, which moves inversely to its price, decreased during the period. The yield rose to multi-year highs several times in 2018 amid investor concerns about higher inflation and the Fed’s interest-rate path. Concerns that other central banks might scale back monetary stimulus, several better-than-expected U.S. economic reports and optimism surrounding trade talks between the U.S. and China also pushed the yield higher. However, some factors weighed on the Treasury yield at certain points during the period, including concerns about political turmoil in Italy, political uncertainties in the U.S., tensions between the U.S. and North Korea, U.S. trade disputes with China and other trading partners, slower domestic and global economic growth, and the Fed’s indications of a patient approach to its monetary policy

decisions. Overall, the 10-year Treasury yield declined from 2.95% at the beginning of the period to 2.51% at period-end.

Currency Composition*

4/30/19


	% of Total Net Assets

North America		100.0%


U.S. Dollar		100.4%


Mexican Peso		0.3%


Canadian Dollar		-0.7%


Asia		0.4%


Japanese Yen		0.6%


Indonesian Rupiah		0.3%


South Korean Won		-0.2%


Chinese Renminbi		-0.3%


Latin America & Caribbean		0.3%


Columbian Peso		0.2%


Uruguayan Peso		0.1%


Middle East & Africa		0.1%


South African Rand		0.1%


Europe		0.0%	**


Turkish Lira		0.1%


British Pound		0.0%	**


Euro		-0.1%


Australia & New Zealand		-0.9%


Australian Dollar		-0.9%

*Currency Composition is intended to estimate the portfolio’s exposure to various currencies, including any hedged or increased exposure through 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.

**Rounds to less than 0.1%.

Investment Strategy

The Fund seeks to generate returns from various sources, other than solely from interest income, by allocating its portfolio across various risks (such as credit, currency and duration risks). In employing this strategy, the Fund has the flexibility to invest across all debt asset classes without regard to country, sector, quality, maturity or duration and without reference to a benchmark index.

The Fund may engage in active and frequent trading as part of its investment strategies and, at any given time, may have a substantial amount of its assets invested in any class of debt



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FRANKLIN FLEXIBLE ALPHA BOND FUND

securities, including, but not limited to: U.S. government and agency securities; foreign government and supranational debt securities; corporate bonds; corporate loans (and loan participations); collateralized debt and loan obligations; preferred securities; various types of mortgage-backed securities and other asset-backed securities (including covered bonds); municipal securities; and derivatives and other instruments with similar economic characteristics, or that provide exposure, to such debt securities.

Manager’s Discussion

Over the 12-month period, the Fund posted a positive total return and outperformed its benchmark on a gross basis. The Fund’s yield curve and duration positioning was the primary source of positive alpha, driven primarily by duration exposure in the U.S. The Fund’s spread-sector exposure also enhanced results, driven primarily by the Fund’s exposure to floating-rate bank loans, sovereign emerging market bonds, residential mortgage-backed securities (RMBS) and basis trade positions (taking opposing long and short positions in two securities to profit from the convergence of their values). Additionally, the Fund’s active currency positioning also contributed to returns, driven primarily by our Mexican peso, Australian dollar and Canadian dollar positions. In contrast, the Fund’s exposure to collateralized loan obligations (CLOs) and covered bonds were the primary detractors from performance. Duration exposure in Europe also hurt returns over the period.

What is the yield curve?

A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.

At period-end, we continued to invest in a broad set of global fixed income sectors, with a goal of achieving more consistent positive alpha with a risk-diversified portfolio. Additionally, we maintained the Fund’s risk profile at a conservative level. We remained overweighted in CLOs as well as RMBS. In contrast, we sought to reduce the amount of risk in our portfolio over the period by reducing our exposure to investment-grade corporate securities. We continued to find what we considered value in credit-hedged corporate positions. We sought to hedge all of the high-yield corporate beta (or risk) in the Fund, although we retained exposure to select corporate loans and CLOs. We also retained positions in Treasury Inflation-Protected Securities as well as covered bonds. Overall, portfolio duration remained relatively neutral toward U.S. interest-rate and non-U.S. duration positions. The portfolio held an overweight exposure to the U.S. dollar versus a basket of developed market and commodity-related

currencies for most of the period. Overall currency allocation did not represent a significant portion of the Fund’s risk allocation.

The Fund utilized derivatives, including credit default and currency swaps, currency forwards, futures, interest rate swaps, total return swaps and inflation index swaps, principally as a tool for efficient portfolio management and to manage overall portfolio risk. These derivative transactions may provide the same, or similar, net long or short exposure to select currencies, interest rates, countries, duration or credit risks in a less expensive way than by directly purchasing securities. In those markets where portfolio securities are readily available, the cost difference in normal market conditions may be small. Overall the portfolio continued to meet its risk-adjusted return target and remained in the lower end of our explicitly targeted risk range. Much of the Fund’s derivatives positioning was to hedge various risks in the portfolio and achieve the goal of a stable return profile.

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.

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 in exchange for another currency at a specific exchange rate on a future date. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.

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.



franklintempleton.com	Annual Report	5

FRANKLIN FLEXIBLE ALPHA BOND FUND

Thank you for your continued participation in Franklin Flexible Alpha Bond Fund. We look forward to serving your future investment needs.




		David Yuen, CFA, FRM Co-Lead Portfolio Manager



		Michael J. Materasso Co-Lead Portfolio Manager Sonal Desai, Ph.D. Portfolio Management Team

CFA^® is a trademark owned by CFA Institute.



6	Annual Report	franklintempleton.com

FRANKLIN FLEXIBLE ALPHA BOND FUND

Performance Summary as of April 30, 2019

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. 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.

Performance as of 4/30/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 3.75% and the minimum is 0%. Class A: 3.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.


Share Class	Cumulative Total Return	²	Average Annual Total Return	³
A⁴
1-Year	+2.18	%⁵	-1.64	%
3-Year	+5.19	%	+0.43	%
Since Inception (8/3/15)	+4.83	%	+0.24	%

Advisor
1-Year	+2.20	%	+2.20	%
3-Year	+5.57	%	+1.82	%
Since Inception (8/3/15)	+5.24	%	+1.37	%


	Distribution		30-Day Standardized Yield⁷
Share Class	Rate⁶		(with fee waiver)		(without fee waiver)
A		3.59%		2.82%	2.47%
Advisor		3.87%		3.18%	2.81%

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.

See page 9 for Performance Summary footnotes.



franklintempleton.com	Annual Report	7

FRANKLIN FLEXIBLE ALPHA BOND FUND

PERFORMANCE SUMMARY

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

Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged index includes reinvestment of any income or distributions. It differs from the Fund in composition and does not pay management fees or expenses. One cannot invest directly in an index.

Class A (8/3/15–4/30/19)

LOGO

Advisor Class (8/3/15–4/30/19)

LOGO

See page 9 for Performance Summary footnotes.



8	Annual Report	franklintempleton.com

FRANKLIN FLEXIBLE ALPHA BOND FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–4/30/19)


Share Class	Net Investment Income		Short-Term Capital Gain		Long-Term Capital Gain		Total
A		$0.246491		$0.0022		$0.0105		$0.259191
C		$0.217547		$0.0022		$0.0105		$0.230247
R		$0.231125		$0.0022		$0.0105		$0.243825
R6		$0.277383		$0.0022		$0.0105		$0.290083
Advisor		$0.277880		$0.0022		$0.0105		$0.290580

Total Annual Operating Expenses⁹

With Fee

Without Fee

Share Class

Waiver

1.19%

1.24%

Advisor

0.94%

0.99%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

All investments involve risks, including possible loss of principal. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. Interest rate movements and mortgage prepayments will affect the Fund’s share price and yield. During periods of declining interest rates, principal prepayments tend to increase as borrowers refinance their mortgages at lower rates; therefore the Fund may be forced to reinvest returned principal at lower interest rates, reducing income. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund may be affected by issuers that fail to make interest payments and repay principal when due. The risks associated with higher-yielding, lower-rated securities (commonly called junk bonds) include higher risk of default and loss of principal. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as enable 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 intended. 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.

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. Return for less than one year, if any, has not been annualized.

4. Prior to 3/1/19, these shares were offered at a higher initial sales charge of 4.25%, thus actual returns would have differed. Total returns with sales charges have been restated to reflect the current maximum initial sales charge of 3.75%.

5. Total return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the net assets of the Fund at 4/30/18 for financial reporting purposes, and as a result, the total returns based on those net asset values differ from the adjusted total returns reported in the Financial Highlights.

6. Distribution rate is based on an annualization of the sum of the respective class’s past 30 days’ daily distributions and the maximum offering price (NAV for Advisor Class) per share on 4/30/19.

7. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

8. Source: Bloomberg LP. The LIBOR USD 3-Month Rate Index tracks the interest rate at which banks offer to lend to one another in the wholesale money markets in London and is used to set the cost of various variable-rate loans.

9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown.

See www.franklintempletondatasources.com for additional data provider information.



franklintempleton.com	Annual Report	9

FRANKLIN FLEXIBLE ALPHA BOND FUND

Your Fund’s Expenses

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. 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): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds


		Actual		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,011.70	$5.59	$1,019.24	$5.61	1.12%
C	$1,000	$1,009.90	$7.57	$1,017.26	$7.60	1.52%
R	$1,000	$1,010.60	$6.83	$1,018.00	$6.85	1.37%
R6	$1,000	$1,014.10	$3.00	$1,021.82	$3.01	0.60%
Advisor	$1,000	$1,013.00	$4.34	$1,020.48	$4.36	0.87%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



10	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Flexible Alpha Bond Fund


	Year Ended April 30,
	2019			2018			2017			2016^a
Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.79			$ 9.86			$ 9.88			$ 10.00

Income from investment operations^b:

Net investment income		0.249	^c		0.166	^c		0.180			0.099

Net realized and unrealized gains (losses)		(0.080	)		(0.066	)		0.017			(0.123	)

Total from investment operations		0.169			0.100			0.197			(0.024	)

Less distributions from:

Net investment income		(0.246	)		(0.160	)		(0.217	)		(0.096	)

Net realized gains		(0.013	)		(0.010	)		—			—

Total distributions		(0.259	)		(0.170	)		(0.217	)		(0.096	)

Net asset value, end of year		$ 9.70			$ 9.79			$ 9.86			$ 9.88

Total return^d		1.76%			1.02%			2.22%			(0.34)%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		1.19%			0.97%			3.17%			3.47%

Expenses net of waiver and payments by affiliates^f		1.04%			0.79%			0.67%			0.84%

Net investment income		2.60%			1.80%			1.83%			1.37%

Supplemental data

Net assets, end of year (000’s)		$1,458			$1,132			$10,443			$10,200

Portfolio turnover rate		24.74%			48.04%			90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^g		24.00%			19.40%			57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^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, and is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

^gSee Note 1(f) regarding mortgage dollar rolls.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	11

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Flexible Alpha Bond Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016^a
Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.73			$ 9.80			$ 9.86			$ 10.00

Income from investment operations^b:

Net investment income		0.212	^c		0.120			0.130			0.072

Net realized and unrealized gains (losses)		(0.071	)		(0.062	)		(0.006	)		(0.131	)

Total from investment operations		0.141			0.058			0.124			(0.059	)

Less distributions from:

Net investment income		(0.218	)		(0.118	)		(0.184	)		(0.081	)

Net realized gains		(0.013	)		(0.010	)		—			—

Total distributions		(0.231	)		(0.128	)		(0.184	)		(0.081	)

Net asset value, end of year		$ 9.64			$ 9.73			$ 9.80			$ 9.86

Total return^d		1.58%			0.49%			1.47%			(0.69)%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		1.55%			1.58%			3.88%			3.98%

Expenses net of waiver and payments by affiliates^f		1.40%			1.40%			1.38%			1.34%

Net investment income		2.24%			1.19%			1.12%			0.87%

Supplemental data

Net assets, end of year (000’s)		$368			$279			$245			$204

Portfolio turnover rate		24.74%			48.04%			90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^g		24.00%			19.40%			57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^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, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

^gSee Note 1(f) regarding mortgage dollar rolls.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Flexible Alpha Bond Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016^a
Class R

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.78			$ 9.86			$ 9.86			$ 10.00

Income from investment operations^b:

Net investment income		0.230	^c		0.112			0.112			0.072

Net realized and unrealized gains (losses)		(0.076	)		(0.058	)		0.095			(0.127	)

Total from investment operations		0.154			0.054			0.207			(0.055	)

Less distributions from:

Net investment income		(0.231	)		(0.124	)		(0.207	)		(0.085	)

Net realized gains		(0.013	)		(0.010	)		—			—

Total distributions		(0.244	)		(0.134	)		(0.207	)		(0.085	)

Net asset value, end of year		$ 9.69			$ 9.78			$ 9.86			$ 9.86

Total return^d		1.71%			0.54%			2.21%			(0.65)%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		1.41%			1.47%			3.36%			3.84%

Expenses net of waiver and payments by affiliates^f		1.26%			1.29%			0.86%			1.22%

Net investment income		2.38%			1.30%			1.64%			0.99%

Supplemental data

Net assets, end of year (000’s)		$83			$51			$60			$10

Portfolio turnover rate		24.74%			48.04%			90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^g		24.00%			19.40%			57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^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, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

^gSee Note 1(f) regarding mortgage dollar rolls.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	13

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Flexible Alpha Bond Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016^a
Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.79			$ 9.86			$ 9.88			$ 10.00

Income from investment operations^b:

Net investment income		0.296	^c		0.204			0.177			0.108

Net realized and unrealized gains (losses)		(0.086	)		(0.088	)		0.022			(0.124	)

Total from investment operations		0.210			0.116			0.199			(0.016	)

Less distributions from:

Net investment income		(0.277	)		(0.176	)		(0.219	)		(0.104	)

Net realized gains		(0.013	)		(0.010	)		—			—

Total distributions		(0.290	)		(0.186	)		(0.219	)		(0.104	)

Net asset value, end of year		$ 9.71			$ 9.79			$ 9.86			$ 9.88

Total return^d		2.30%			1.18%			2.03%			(0.15)%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		0.65%			0.86%			5.23%			3.72%

Expenses net of waiver and payments by affiliates^f		0.59%			0.71%			0.71%			0.71%

Net investment income		3.05%			1.88%			1.79%			1.50%

Supplemental data

Net assets, end of year (000’s)		$504,875			$210,808			$10			$10

Portfolio turnover rate		24.74%			48.04%			90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^g		24.00%			19.40%			57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^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, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

^gSee Note 1(f) regarding mortgage dollar rolls.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Flexible Alpha Bond Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016^a
Advisor Class

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.79			$ 9.85			$ 9.88			$ 10.00

Income from investment operations^b:

Net investment income		0.275	^c		0.194			0.166			0.107

Net realized and unrealized gains (losses)		(0.074	)		(0.072	)		0.023			(0.129	)

Total from investment operations		0.201			0.122			0.189			(0.022	)

Less distributions from:

Net investment income		(0.278	)		(0.172	)		(0.219	)		(0.098	)

Net realized gains		(0.013	)		(0.010	)		—			—

Total distributions		(0.291	)		(0.182	)		(0.219	)		(0.098	)

Net asset value, end of year		$ 9.70			$ 9.79			$ 9.85			$ 9.88

Total return^d		2.20%			1.14%			2.13%			(0.31)%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		0.90%			0.93%			3.22%			3.34%

Expenses net of waiver and payments by affiliates^f		0.75%			0.75%			0.72%			0.71%

Net investment income		2.89%			1.84%			1.78%			1.50%

Supplemental data

Net assets, end of year (000’s)		$433			$425			$232			$344

Portfolio turnover rate		24.74%			48.04%			90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^g		24.00%			19.40%			57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^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, except for non-recurring expenses, if any.

^fBenefit of expense reduction rounds to less than 0.01%.

^gSee Note 1(f) regarding mortgage dollar rolls.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	15

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2019

Franklin Flexible Alpha Bond Fund


	Country		Shares			Value
Management Investment Companies (Cost $4,549,803) 0.9%
Diversified Financials 0.9%

Invesco Senior Loan ETF		United States		196,765		$	4,519,692


			Principal Amount*


Corporate Bonds 18.7%
Automobiles & Components 0.2%

Aptiv Corp., senior bond, 4.15%, 3/15/24		United States		900,000			929,539


Banks 5.2%
^aBanca Monte dei Paschi di Siena SpA,
secured note, Reg S, 2.875%, 7/16/62		Italy		1,500,000	EUR		1,792,908
secured note, Reg S, 2.125%, 11/26/63		Italy		2,000,000	EUR		2,288,930
^aBanca Popolare di Milano Scarl,
secured note, Reg S, 0.875%, 9/14/23		Italy		900,000	EUR		1,020,297
secured note, Reg S, 0.625%, 6/08/24		Italy		2,800,000	EUR		3,137,289
^aBanco BPM SpA, secured note, Reg S, 0.75%, 3/31/23		Italy		1,700,000	EUR		1,922,202
Bank of America Corp.,
senior bond, 5.50%, 12/04/19		United States		75,000	GBP		100,515
senior note, 3.55% to 3/05/23, FRN thereafter, 3/05/24		United States		1,400,000			1,422,999
^aBank of China Ltd., senior note, Reg S, 2.875%, 4/20/22		China		1,000,000			993,090
Bank of Nova Scotia, secured note, 1.875%, 4/26/22		Canada		100,000			98,769
^aChina Construction Bank Corp., senior note, Reg S, 2.75%, 12/04/20		China		1,000,000			994,200
Citigroup Inc., senior note, 2.65%, 10/26/20		United States		1,050,000			1,048,886
HSBC Holdings PLC,
senior note, 4.30%, 3/08/26		United Kingdom		800,000			834,176
senior note, 3.262% to 3/13/22, FRN thereafter, 3/13/23		United Kingdom		1,400,000			1,409,681
Industrial & Commercial Bank of China Ltd., senior note, 2.452%, 10/20/21		China		1,900,000			1,867,595
JPMorgan Chase & Co.,
senior bond, 3.30%, 4/01/26		United States		800,000			800,603
senior note, 2.40%, 6/07/21		United States		400,000			397,542
^bKookmin Bank, secured note, 144A, 2.25%, 2/03/22		South Korea		1,800,000			1,780,852
PHH Corp., senior note, 7.375%, 9/01/19		United States		200,000			200,625
Royal Bank of Canada, secured note, 2.10%, 10/14/21		Canada		100,000			99,372
^bThe Toronto-Dominion Bank, secured note, 144A, 2.25%, 3/15/22		Canada		200,000			198,975
^aTurkiye Vakiflar Bankasi TAO, secured note, Reg S, 2.375%, 11/04/22		Turkey		3,800,000	EUR		4,138,124


							26,547,630


Consumer Durables & Apparel 0.0%^†
KB Home, senior note, 8.00%, 3/15/20		United States		100,000			104,250


Consumer Services 0.1%
^bWynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		525,000			531,400


Diversified Financials 2.1%
Capital One Financial Corp., senior note, 3.05%, 3/09/22		United States		1,200,000			1,205,171
^cDeutsche Bank AG, senior note, FRN, 3.954%, (3-month USD LIBOR + 1.31%), 8/20/20		Germany		100,000			100,117
^bDexia Credit Local SA, senior note, 144A, 2.375%, 9/20/22		France		250,000			248,370
The Goldman Sachs Group Inc.,
senior note, 3.75%, 5/22/25		United States		2,000,000			2,029,888
^csenior note, FRN, 3.811%, (3-month USD LIBOR + 1.20%), 9/15/20		United States		500,000			505,444



16	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Corporate Bonds (continued)
Diversified Financials (continued)
^b ICBCIL Finance Co. Ltd., senior note, 144A, 2.50%, 9/29/21		China		500,000	$	490,167
Morgan Stanley, senior note, 3.70%, 10/23/24		United States		1,400,000		1,438,551
Navient Corp., senior bond, 8.00%, 3/25/20		United States		4,660,000		4,840,575

						10,858,283

Energy 1.9%
CNOOC Finance 2015 USA LLC, senior note, 3.50%, 5/05/25		China		1,700,000		1,712,673
^bCNPC General Capital Ltd., senior note, 144A, 3.40%, 4/16/23		China		2,100,000		2,110,731
Energy Transfer Operating LP, senior note, 7.50%, 10/15/20		United States		750,000		798,022
Enterprise Products Operating LLC, senior note, 3.35%, 3/15/23		United States		850,000		861,737
^bHarvest Operations Corp., senior note, 144A, 4.20%, 6/01/23		South Korea		1,000,000		1,042,818
Oceaneering International Inc., senior note, 4.65%, 11/15/24		United States		50,000		47,735
^b Sinopec Group Overseas Development 2015 Ltd.,
senior note, 144A, 2.50%, 4/28/20		China		1,800,000		1,793,493
senior note, 144A, 3.25%, 4/28/25		China		1,000,000		989,098


						9,356,307


Food, Beverage & Tobacco 0.6%
^bImperial Brands Finance PLC, senior note, 144A, 4.25%, 7/21/25		United Kingdom		1,695,000		1,732,761
Kraft Heinz Foods Co.,
senior bond, 3.00%, 6/01/26		United States		600,000		566,428
senior note, 3.50%, 7/15/22		United States		350,000		354,227
Reynolds American Inc., senior note, 4.45%, 6/12/25		United Kingdom		100,000		103,247

						2,756,663


Health Care Equipment & Services 1.0%
Anthem Inc., senior note, 2.95%, 12/01/22		United States		600,000		599,817
CVS Health Corp., senior note, 3.70%, 3/09/23		United States		1,700,000		1,724,045
Edwards Lifesciences Corp., senior note, 4.30%, 6/15/28		United States		300,000		313,105
HCA Inc., senior note, 7.50%, 2/15/22		United States		2,050,000		2,260,125

						4,897,092


Insurance 0.2%
^bAthene Global Funding, secured note, 144A, 3.00%, 7/01/22		United States		950,000		949,611
^bJackson National Life Global Funding,
secured note, 144A, 2.25%, 4/29/21		United States		50,000		49,548
secured note, 144A, 2.10%, 10/25/21		United States		25,000		24,590

						1,023,749


Materials 0.4%
Freeport-McMoRan Inc., senior note, 4.00%, 11/14/21		United States		915,000		927,581
^bSealed Air Corp., senior bond, 144A, 5.25%, 4/01/23		United States		950,000		992,750

						1,920,331


Media & Entertainment 0.3%
Baidu Inc., senior note, 4.375%, 5/14/24		China		500,000		521,557
^bTencent Holdings Ltd., senior note, 144A, 2.985%, 1/19/23		China		1,200,000		1,192,890

						1,714,447


Pharmaceuticals, Biotechnology & Life Sciences 0.4%
Allergan Funding SCS, senior bond, 3.80%, 3/15/25		United States		600,000		606,517
Amgen Inc., senior note, 2.60%, 8/19/26		United States		850,000		807,101
^bBayer U.S. Finance II LLC, senior note, 144A, 3.875%, 12/15/23		Germany		400,000		403,704
^bSABIC Capital II BV, senior note, 144A, 4.50%, 10/10/28		Saudi Arabia		400,000		423,046

						2,240,368



franklintempleton.com	Annual Report	17

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Corporate Bonds (continued)
Real Estate 0.6%
American Tower Corp., senior bond, 3.375%, 10/15/26		United States		700,000	$	689,712
^aChina Overseas Finance Cayman VII Ltd., senior note, Reg S, 4.25%, 4/26/23		China		2,500,000		2,571,712


						3,261,424

Retailing 0.3%
Alibaba Group Holding Ltd., senior note, 2.80%, 6/06/23		China		1,100,000		1,088,340
^bPetSmart Inc., senior note, 144A, 7.125%, 3/15/23		United States		550,000		489,500


						1,577,840


Semiconductors & Semiconductor Equipment 0.2%
Maxim Integrated Products Inc., senior note, 3.45%, 6/15/27		United States		800,000		777,109


Software & Services 0.2%
Fiserv Inc., senior bond, 3.85%, 6/01/25		United States		800,000		824,460


Technology Hardware & Equipment 0.0%^†
^b Sanmina Corp., senior note, first lien, 144A, 4.375%, 6/01/19		United States		100,000		100,188


Telecommunication Services 1.1%
CenturyLink Inc., senior note, Series S, 6.45%, 6/15/21		United States		4,700,000		4,911,500
Verizon Communications Inc., senior note, 2.45%, 11/01/22		United States		850,000		843,265


						5,754,765


Transportation 0.4%
^bAmerican Airlines Group Inc., senior note, 144A, 5.50%, 10/01/19		United States		530,000		535,300
American Airlines Pass Through Trust, first lien, 2016-2, AA, 3.20%, 12/15/29		United States		44,975		44,067
FedEx Corp., senior bond, 3.20%, 2/01/25		United States		850,000		858,148
^bKazakhstan Temir Zholy Finance BV, senior bond, 144A, 6.95%, 7/10/42		Kazakhstan		200,000		237,158
^a,d RZD Capital PLC, (Russian Railways), loan participation, senior bond, Reg S, 5.70%, 4/05/22		Russia		200,000		209,167

						1,883,840


Utilities 3.5%
AES Corp., senior note, 4.00%, 3/15/21		United States		2,750,000		2,784,375
^aCGNPC International Ltd., senior note, Reg S, 3.75%, 12/11/27		China		2,100,000		2,094,383
Dominion Energy Inc., senior bond, 2.85%, 8/15/26		United States		1,300,000		1,246,565
Duke Energy Indiana Inc., senior secured bond, 3.75%, 7/15/20		United States		100,000		101,310
^b,e EDF SA, junior sub. bond, 144A, 5.625% to 1/22/24, FRN thereafter, Perpetual		France		2,200,000		2,224,915
^bIsrael Electric Corp. Ltd., secured bond, 144A, 4.25%, 8/14/28		Israel		1,400,000		1,418,753
^bKorea East-West Power Co. Ltd., senior note, 144A, 3.875%, 7/19/23		South Korea		1,500,000		1,548,015
The Southern Co., senior bond, 3.25%, 7/01/26		United States		850,000		839,662
^bState Grid Overseas Investment 2016 Ltd., senior note, 144A, 3.50%, 5/04/27		China		3,500,000		3,492,527
^bThree Gorges Finance I Cayman Islands Ltd., senior note, 144A, 3.70%, 6/10/25		China		2,100,000		2,140,583

						17,891,088


Total Corporate Bonds (Cost $94,285,723)						94,950,773



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STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*			Value
Foreign Government and Agency Securities 2.8%
^bAngolan Government International Bond, senior note, 144A, 8.25%, 5/09/28		Angola		700,000		$	734,023
^aBanque Centrale de Tunisie International Bond, senior note, Reg S, 5.625%, 2/17/24		Tunisia		300,000	EUR		328,398
^bDominican Republic, senior note, 144A, 8.90%, 2/15/23		Dominican Republic		8,000,000	DOP		158,310
^bThe Export-Import Bank of China,
senior note, 144A, 2.50%, 7/31/19		China		200,000			199,869
senior note, 144A, 3.625%, 7/31/24		China		2,100,000			2,141,706
^bThe Export-Import Bank of India, senior note, 144A, 3.875%, 2/01/28		India		3,400,000			3,365,764
The Export-Import Bank of Korea, senior note, 2.875%, 1/21/25		South Korea		2,000,000			1,988,090
Government of Colombia, senior bond, 9.85%, 6/28/27		Colombia		1,935,000,000	COP		741,303
^bGovernment of Gabon, 144A, 6.375%, 12/12/24		Gabon		500,000			483,265
Government of Indonesia, senior bond, FR70, 8.375%, 3/15/24		Indonesia		263,000,000	IDR		19,252
^bGovernment of Iraq, 144A, 5.80%, 1/15/28		Iraq		800,000			779,216
^bGovernment of Kazakhstan, senior bond, 144A, 4.875%, 10/14/44		Kazakhstan		300,000			322,998
Government of South Africa, senior bond, 7.00%, 2/28/31		South Africa		11,100,000	ZAR		653,064
^bGovernment of Ukraine, senior bond, 144A, 7.375%, 9/25/32		Ukraine		800,000			705,840
^fGovernment of Uruguay, senior bond, Index Linked, 3.70%, 6/26/37		Uruguay		21,486,098	UYU		634,725
The Korea Development Bank, senior note, 3.375%, 3/12/23		South Korea		600,000			609,960
Republic of Colombia, senior bond, 5.00%, 6/15/45		Colombia		600,000			627,981

Total Foreign Government and Agency Securities (Cost $14,329,477)							14,493,764

U.S. Government and Agency Securities 1.5%
^fU.S. Treasury Note,
Index Linked, 0.25%, 1/15/25		United States		1,429,878			1,415,177
Index Linked, 0.625%, 1/15/26		United States		3,084,649			3,113,820
Index Linked, 0.125%, 7/15/26		United States		2,952,314			2,884,516

Total U.S. Government and Agency Securities (Cost $7,276,462)							7,413,513

Asset-Backed Securities and Commercial Mortgage-Backed Securities 62.0%
Banks 0.3%
^b,g DBCG Mortgage Trust, 2017-BBG, A, 144A, FRN, 3.173%, (1-month USD LIBOR + 0.70%), 6/15/34		United States		1,500,000			1,499,611
^gImpac Secured Assets Corp., 2004-4, M1, FRN, 3.242%, (1-month USD LIBOR + 0.765%), 2/25/35		United States		4,831			4,852


							1,504,463

Diversified Financials 61.5%
^b,g Alinea CLO Ltd., 2018-1A, B, 144A, FRN, 4.242%, (3-month USD LIBOR + 1.65%), 7/20/31		United States		2,300,000			2,250,757
^b,h AMMC CLO 15 Ltd.,
2014-15A, ARR, 144A, FRN, 3.857%, 1/15/32		United States		1,000,000			995,930
2014-15A, BRR, 144A, FRN, 4.397%, 1/15/32		United States		439,516			438,505
^b,g AMMC CLO 21 Ltd., 2017-21A, C, 144A, FRN, 4.838%, (3-month USD LIBOR + 2.10%), 11/02/30		United States		400,000			389,896
^b,h AMMC CLO XI Ltd., 2012-11A, A1R2, 144A, FRN, 3.593%, 4/30/31		United States		5,350,000			5,270,552
^b,g Antares CLO Ltd., 2018-1A, B, 144A, FRN, 4.242%, (3-month USD LIBOR + 1.65%), 4/20/31		United States		600,000			585,558
^b,h ARES L CLO Ltd., 2018-50A, B, 144A, FRN, 4.478%, 1/15/32		United States		2,000,000			1,994,780



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STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^b,h ARES LII CLO Ltd.,
2019-52A, A2, 144A, FRN, 4.259%, 4/22/31		United States		345,528	$	344,329
2019-52A, C, 144A, FRN, 5.289%, 4/22/31		United States		500,000		499,175
2019-52A, D, 144A, FRN, 6.559%, 4/22/31		United States		851,852		848,555
^b,h Atrium XII, 2012A, CR, 144A, FRN, 3.422%, 4/22/27		United States		7,000,000		6,979,350
^b,g Atrium XIII,
2013A, B, 144A, FRN, 4.092%, (3-month USD LIBOR + 1.50%), 11/21/30		United States		2,000,000		1,971,300
2013A, C, 144A, FRN, 4.392%, (3-month USD LIBOR + 1.80%), 11/21/30		United States		600,000		584,268
^b,h Atrium XV, 15A, D, 144A, FRN, 5.592%, 1/23/31		United States		1,666,667		1,629,084
^bBAMLL Commercial Mortgage Securities Trust,
2012-PARK, A, 144A, 2.959%, 12/10/30		United States		100,000		101,245
2015-200P, A, 144A, 3.218%, 4/14/33		United States		600,000		608,006
Banc of America Commercial Mortgage Trust, 2015-UBS7, A4, 3.705%, 9/15/48		United States		100,000		103,686
^b,g Bellemeade Re Ltd., 2018-1A, M1B, 144A, FRN, 4.077%, (1-month USD LIBOR + 1.60%), 4/25/28		Bermuda		1,320,000		1,326,646
^b,g Betony CLO 2 Ltd., 2018-1A, C, 144A, FRN, 5.483%, (3-month USD LIBOR + 2.90%), 4/30/31		United States		500,000		478,915
^b,h BlueMountain CLO Ltd.,
2012-2A, BR2, 144A, FRN, 4.094%, 11/20/28		United States		918,083		915,577
2012-2A, DR2, 144A, FRN, 5.544%, 11/20/28		United States		2,000,000		1,960,440
2018-3A, B, 144A, FRN, 4.35%, 10/25/30		United States		3,000,000		2,986,200
2018-3A, C, 144A, FRN, 4.78%, 10/25/30		United States		1,428,570		1,398,299
^b,h BlueMountain CLO XXIII Ltd.,
2018-23A, B, 144A, FRN, 4.292%, 10/20/31		United States		1,000,000		987,820
2018-23A, C, 144A, FRN, 4.742%, 10/20/31		United States		694,444		677,659
^b,h BlueMountain CLO XXIV Ltd.,
2019-24A, A2, 144A, FRN, 4.224%, 4/20/31		United States		1,562,500		1,561,000
2019-24A, D, 144A, FRN, 6.524%, 4/20/31		United States		1,000,000		997,070
^b,g BlueMountain Fuji U.S. CLO I Ltd., 2017-1A, C, 144A, FRN, 4.942%, (3-month USD LIBOR + 2.35%), 7/20/29		United States		60,000		60,026
^b,g BlueMountain Fuji U.S. CLO II Ltd., 2017-2A, A1A, 144A, FRN, 3.792%, (3-month USD LIBOR + 1.20%), 10/20/30		United States		250,000		250,190
^b,g BlueMountain Fuji U.S. CLO III Ltd., 2017-3A, C, 144A, FRN, 4.297%, (3-month USD LIBOR + 1.70%), 1/15/30		United States		1,900,000		1,833,025
^bBRAVO Residential Funding Trust, 2019-1, A1C, 144A, 3.50%, 3/25/58		United States		1,270,000		1,270,648
^b,h Burnham Park CLO Ltd.,
2016-1A, BR, 144A, FRN, 4.092%, 10/20/29		United States		3,000,000		2,959,830
2016-1A, CR, 144A, FRN, 4.742%, 10/20/29		United States		2,000,000		1,968,060
2016-1A, DR, 144A, FRN, 5.442%, 10/20/29		United States		2,000,000		1,968,840
^b,h BX Commercial Mortgage Trust, 2018-IND, A, 144A, FRN, 3.223%, 11/15/35		United States		833,511		834,137
^bBXP Trust, 2017-GM, A, 144A, 3.379%, 6/13/39		United States		2,000,000		2,028,203
^b,g Carlyle Global Market Strategies CLO Ltd.,
2014-4RA, A1B, 144A, FRN, 3.947%, (3-month USD LIBOR + 1.35%), 7/15/30		United States		2,750,000		2,688,565
2014-4RA, C, 144A, FRN, 5.497%, (3-month USD LIBOR + 2.90%), 7/15/30		United States		750,000		713,438



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STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^b,h Carlyle GMS Finance MM CLO LLC, 2015-1A, A2R, 144A, FRN, 4.797%, 10/15/31		United States		800,000	$	769,832
^b,g Carlyle U.S. CLO Ltd.,
2017-2A, B, 144A, FRN, 4.992%, (3-month USD LIBOR + 2.40%), 7/20/31		United States		60,000		60,028
2017-4A, B, 144A, FRN, 4.447%, (3-month USD LIBOR + 1.85%), 1/15/30		United States		1,107,000		1,078,727
2017-4A, C, 144A, FRN, 5.397%, (3-month USD LIBOR + 2.80%), 1/15/30		United States		400,000		384,000
^b,h Cent CLO,
2018-28A, B, 144A, FRN, 4.889%, 11/07/30		United States		2,025,000		1,975,914
2018-28A, C, 144A, FRN, 6.009%, 11/07/30		United States		2,500,000		2,456,275
^b,h CGRBS Commercial Mortgage Trust, 2013-VN05, C, 144A, FRN, 3.703%, 3/13/35		United States		450,000		456,494
^b,h CIM Trust,
2018-INV1, A4, 144A, FRN, 4.00%, 8/25/48		United States		1,226,386		1,249,414
2019-INV1, A1, 144A, FRN, 4.00%, 2/25/49		United States		1,908,462		1,943,998
^b,h Cole Park CLO Ltd., 2015-1A, BR, 144A, FRN, 4.192%, 10/20/28		United States		857,143		853,217
^b,h Colombia Cent CLO 27 Ltd., 2018-27A, A2A, 144A, FRN, 4.18%, 10/25/28		United States		769,231		761,846
^bCOMM Mortgage Trust,
^h2014-277P, A, 144A, FRN, 3.732%, 8/10/49		United States		900,000		934,052
2015-3BP, A, 144A, 3.178%, 2/10/35		United States		600,000		606,912
^hConseco Finance Securitizations Corp., 2002-2, M1, FRN, 7.424%, 3/01/33		United States		59,838		64,845
^bCore Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34		United States		28,460		28,822
^b,g Dorchester Park CLO Ltd., 2015-1A, CR, 144A, FRN, 4.342%, (3-month USD LIBOR + 1.75%), 4/20/28		United States		1,350,000		1,341,576
^b,h Dryden 38 Senior Loan Fund, 2015-38A, CR, 144A, FRN, 4.597%, 7/15/30		United States		2,500,000		2,454,275
^b,h Dryden 45 Senior Loan Fund,
2016-45A, A2R, 144A, FRN, 3.997%, 10/15/30		United States		1,000,000		995,160
2016-45A, BR, 144A, FRN, 4.297%, 10/15/30		United States		1,000,000		995,030
2016-45A, CR, 144A, FRN, 4.797%, 10/15/30		United States		1,250,000		1,243,313
^b,g Dryden 49 Senior Loan Fund, 2017-49A, C, 144A, FRN, 4.951%, (3-month USD LIBOR + 2.35%), 7/18/30		United States		60,000		60,013
^b,g Dryden 53 CLO Ltd.,
2017-53A, B, 144A, FRN, 3.997%, (3-month USD LIBOR + 1.40%), 1/15/31		United States		6,000,000		5,873,280
2017-53A, C, 144A, FRN, 4.297%, (3-month USD LIBOR + 1.70%), 1/15/31		United States		1,000,000		963,210
^b,h Dryden 61 CLO Ltd., 61A, A2, FRN, 3.988%, 1/17/32		United States		2,000,000		1,989,340
^b,g Dryden 64 CLO Ltd.,
2018-64A, A, 144A, FRN, 3.571%, (3-month USD LIBOR + 0.97%), 4/18/31		United States		3,000,000		2,957,220
2018-64A, C, 144A, FRN, 4.351%, (3-month USD LIBOR + 1.75%), 4/18/31		United States		750,000		724,253



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STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^b,h Dryden 70 CLO Ltd., 2018-70A, B, 144A, FRN, 4.54%, 1/16/32		United States		280,290	$	278,995
^b,h Eleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.673%, 9/10/35		United States		2,005,000		2,066,789
^b,g Ellington CLO III Ltd., 2018-3A, A1, 144A, FRN, 4.242%, (3-month USD LIBOR + 1.65%) 7/20/30		United States		500,000		496,330
FHLMC Structured Agency Credit Risk Debt Notes,
^g 2013-DN2, M2, FRN, 6.727%, (1-month USD LIBOR + 4.25%), 11/25/23		United States		2,406,155		2,627,827
^g 2014-DN1, M2, FRN, 4.677%, (1-month USD LIBOR + 2.20%), 2/25/24		United States		372,222		378,554
^g 2014-DN2, M3, FRN, 6.077%, (1-month USD LIBOR + 3.60%), 4/25/24		United States		2,645,000		2,849,461
^g 2014-DN3, M3, FRN, 6.477%, (1-month USD LIBOR + 4.00%), 8/25/24		United States		2,093,650		2,263,217
^g 2014-DN4, M3, FRN, 7.027%, (1-month USD LIBOR + 4.55%), 10/25/24		United States		1,584,919		1,737,440
^g 2014-HQ1, M3, FRN, 6.577%, (1-month USD LIBOR + 4.10%), 8/25/24		United States		973,871		1,056,646
^g 2014-HQ2, M2, FRN, 4.677%, (1-month USD LIBOR + 2.20%), 9/25/24		United States		371,678		378,838
^g 2014-HQ2, M3, FRN, 6.227%, (1-month USD LIBOR + 3.75%), 9/25/24		United States		2,500,000		2,770,758
^g 2014-HQ3, M3, FRN, 7.227%, (1-month USD LIBOR + 4.75%), 10/25/24		United States		248,604		273,426
^g 2015-DN1, M3, FRN, 6.627%, (1-month USD LIBOR + 4.15%), 1/25/25		United States		612,692		654,891
^g 2015-DNA1, M2, FRN, 4.327%, (1-month USD LIBOR + 1.85%), 10/25/27		United States		178,904		180,786
^g 2015-DNA1, M3, FRN, 5.777%, (1-month USD LIBOR + 3.30%), 10/25/27		United States		2,000,000		2,167,460
^g 2015-DNA2, M2, FRN, 5.077%, (1-month USD LIBOR + 2.60%), 12/25/27		United States		95,439		96,596
^g 2015-DNA2, M3, FRN, 6.377%, (1-month USD LIBOR + 3.90%), 12/25/27		United States		2,850,000		3,071,614
^g 2015-DNA3, M2, FRN, 5.327%, (1-month USD LIBOR + 2.85%), 4/25/28		United States		362,426		370,925
^g 2015-DNA3, M3, FRN, 7.177%, (1-month USD LIBOR + 4.70%), 4/25/28		United States		2,500,000		2,872,231
^g 2015-HQ1, M3, FRN, 6.277%, (1-month USD LIBOR + 3.80%), 3/25/25		United States		528,843		557,902
^g 2015-HQ2, M3, FRN, 5.727%, (1-month USD LIBOR + 3.25%), 5/25/25		United States		1,500,000		1,621,215
^g 2015-HQA1, M3, FRN, 7.177%, (1-month USD LIBOR + 4.70%), 3/25/28		United States		2,000,000		2,244,665
^g 2015-HQA2, M2, FRN, 5.277%, (1-month USD LIBOR + 2.80%), 5/25/28		United States		217,719		222,169
^g 2015-HQA2, M3, FRN, 7.277%, (1-month USD LIBOR + 4.80%), 5/25/28		United States		2,000,000		2,266,168
^g 2016-DNA1, M3, FRN, 8.027%, (1-month USD LIBOR + 5.55%), 7/25/28		United States		1,550,000		1,814,415



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STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
FHLMC Structured Agency Credit Risk Debt Notes, (continued)
^g 2016-DNA2, M2, FRN, 4.677%, (1-month USD LIBOR + 2.20%), 10/25/28		United States		180,362	$	181,463
^g 2016-DNA2, M3, FRN, 7.127%, (1-month USD LIBOR + 4.65%), 10/25/28		United States		3,600,000		4,010,214
^g 2016-DNA3, M2, FRN, 4.477%, (1-month USD LIBOR + 2.00%), 12/25/28		United States		229,809		231,629
^g 2016-HQA2, M2, FRN, 4.727%, (1-month USD LIBOR + 2.25%), 11/25/28		United States		372,566		378,382
^g 2016-HQA2, M3, FRN, 7.627%, (1-month USD LIBOR + 5.15%), 11/25/28		United States		2,000,000		2,321,638
^g 2016-HQA3, M2, FRN, 3.827%, (1-month USD LIBOR + 1.35%), 3/25/29		United States		2,349,454		2,363,826
^g 2016-HQA4, M2, FRN, 3.777%, (1-month USD LIBOR + 1.30%), 4/25/29		United States		700,000		703,764
^h2017-DNA1, M2, FRN, 5.727%, 7/25/29		United States		2,600,000		2,785,226
^h2017-DNA2, M2, FRN, 5.927%, 10/25/29		United States		3,000,000		3,252,438
^g 2017-DNA3, M2, FRN, 4.977%, (1-month USD LIBOR + 2.50%), 3/25/30		United States		2,000,000		2,063,995
^h2017-HQA1, M2, FRN, 6.027%, 8/25/29		United States		2,350,000		2,524,355
^b,g Flagship CLO VIII Ltd., 2014-8A, CRR, 144A, FRN, 4.401%, (3-month USD LIBOR + 1.80%), 1/16/26		United States		1,400,000		1,370,992
^b,h Flagstar Mortgage Trust, 2018-6RR, 1A3, 144A, FRN, 4.00%, 10/25/48		United States		1,306,788		1,325,096
FNMA Connecticut Avenue Securities,
^g 2013-C01, M2, FRN, 7.727%, (1-month USD LIBOR + 5.25%), 10/25/23		United States		2,863,669		3,228,967
^g 2014-C01, M2, FRN, 6.877%, (1-month USD LIBOR + 4.40%), 1/25/24		United States		3,300,000		3,681,188
^g 2014-C02, 1M2, FRN, 5.077%, (1-month USD LIBOR + 2.60%), 5/25/24		United States		1,820,000		1,909,840
^g 2014-C02, 2M2, FRN, 5.077%, (1-month USD LIBOR + 2.60%), 5/25/24		United States		2,619,410		2,735,511
^g 2014-C03, 1M2, FRN, 5.477%, (1-month USD LIBOR + 3.00%), 7/25/24		United States		1,241,633		1,327,894
^g 2014-C03, 2M2, FRN, 5.377%, (1-month USD LIBOR + 2.90%), 7/25/24		United States		2,465,276		2,593,214
^g 2014-C04, 1M1, FRN, 7.377%, (1-month USD LIBOR + 4.90%), 11/25/24		United States		2,935,436		3,306,820
^g 2014-C04, 2M2, FRN, 7.477%, (1-month USD LIBOR + 5.00%), 11/25/24		United States		458,320		510,032
^g 2015-C01, 1M2, FRN, 6.777%, (1-month USD LIBOR + 4.30%), 2/25/25		United States		30,021		32,632
^g 2015-C01, 2M2, FRN, 7.027%, (1-month USD LIBOR + 4.55%), 2/25/25		United States		115,804		124,582
^g 2015-C02, 1M2, FRN, 6.477%, (1-month USD LIBOR + 4.00%), 5/25/25		United States		439,437		473,544
^g 2015-C02, 2M2, FRN, 6.477%, (1-month USD LIBOR + 4.00%), 5/25/25		United States		132,918		141,654
^g 2015-C03, 1M2, FRN, 7.477%, (1-month USD LIBOR + 5.00%), 7/25/25		United States		2,598,421		2,889,164



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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
FNMA Connecticut Avenue Securities, (continued)
^g 2015-C03, 2M2, FRN, 7.477%, (1-month USD LIBOR + 5.00%), 7/25/25		United States		666,066	$	733,329
^g 2016-C01, 1M2, FRN, 9.227%, (1-month USD LIBOR + 6.75%), 8/25/28		United States		2,588,159		3,004,251
^h2016-C04, 1M2, FRN, 6.727%, 1/25/29		United States		2,000,000		2,202,776
^g 2017-C01, 1B1, FRN, 8.227%, (1-month USD LIBOR + 5.75%), 7/25/29		United States		33,000		39,241
^g 2017-C01, 1M2, FRN, 6.027%, (1-month USD LIBOR + 3.55%), 7/25/29		United States		890,000		956,401
^h2017-C03, 1M2, FRN, 5.477%, 10/25/29		United States		2,780,000		2,955,722
^h2017-C03, 2M2, FRN, 5.327%, 11/25/29		United States		570,000		593,548
^h2017-C07, 1M1, FRN, 3.127%, 5/25/30		United States		1,639,834		1,638,139
^g 2018-C04, 2M1, FRN, 3.227%, (1-month USD LIBOR + 0.75%), 12/25/30		United States		613,539		613,291
^hC02, 1M2, FRN, 8.477%, 9/25/28		United States		244,994		278,678
^b,h FREMF Mortgage Trust, 2018-K72, B, 144A, FRN, 4.117%, 12/25/50		United States		450,000		456,809
^b,h Galaxy XXVI CLO Ltd.,
2018-26A, A, 144A, FRN, 3.852%, 11/22/31		United States		685,921		681,456
2018-26A, B, 144A, FRN, 4.352%, 11/22/31		United States		600,000		594,732
^b,g Galaxy XXVII CLO Ltd.,
2018-27A, A, 144A, FRN, 3.703%, (3-month USD LIBOR + 1.02%), 5/16/31		United States		2,500,000		2,458,675
2018-27A, C, 144A, FRN, 4.483%, (3-month USD LIBOR + 1.80%), 5/16/31		United States		1,450,000		1,380,415
2018-27A, C, 144A, FRN, 5.433%, (3-month USD LIBOR + 2.75%), 5/16/31		United States		300,000		287,262
^b,g Gilbert Park CLO Ltd.,
2017-1A, B, 144A, FRN, 4.197%, (3-month USD LIBOR + 1.60%), 10/15/30		United States		3,000,000		2,964,870
2017-1A, D, 144A, FRN, 5.547%, (3-month USD LIBOR + 2.95%), 10/15/30		United States		400,000		390,432
GS Mortgage Securities Trust,
2016-GS3, A4, 2.85%, 10/10/49		United States		600,000		590,890
2017-GS5, A4, 3.674%, 3/10/50		United States		2,600,000		2,697,368
2017-GS6, A3, 3.433%, 5/10/50		United States		2,000,000		2,028,206
^b,g Halcyon Loan Advisors Funding Ltd., 2018-1A, A2, 144A, FRN, 4.392%, (3-month USD LIBOR + 1.80%), 7/21/31		United States		400,000		393,012
^b,h Harbor Park CLO Ltd.,
1A, B1, 144A, FRN, 4.539%, 1/20/31		United States		1,333,333		1,326,666
1A, D, 144A, FRN, 5.739%, 1/20/31		United States		1,296,296		1,242,785
^bInvitation Homes Trust,
^g 2017-SFR2, A, 144A, FRN, 3.324%, (1-month USD LIBOR + 0.85%), 12/17/36		United States		3,242,428		3,225,370
^g 2018-SFR1, A, 144A, FRN, 3.174%, (1-month USD LIBOR + 0.70%), 3/17/37		United States		1,560,914		1,546,466
^g 2018-SFR3, A, 144A, FRN, 3.474%, (1-month USD LIBOR + 1.00%), 7/17/37		United States		1,114,394		1,117,371
^h2018-SFR4, A, 144A, FRN, 3.574%, 1/17/38		United States		1,360,632		1,367,424



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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^b,h J.P. Morgan Chase Commercial Mortgage Securities Trust, 2016-NINE, A, 144A, FRN, 2.949%, 10/06/38		United States		600,000	$	589,040
JPMBB Commercial Mortgage Securities Trust,
2015-C30, A5, 3.822%, 7/15/48		United States		1,500,000		1,564,184
^h2015-C30, AS, FRN, 4.226%, 7/15/48		United States		450,000		473,085
2016-C1, A5, 3.576%, 3/15/49		United States		1,500,000		1,549,017
^h,i JPMDB Commercial Mortgage Securities Trust, 2017-C5, XA, IO, FRN, 1.143%, 3/15/50		United States		195,805		11,489
^b,g LCM 26 Ltd., 26A, C, 144A, FRN, 4.392%, (3-month USD LIBOR + 1.80%), 1/20/31		United States		400,000		386,452
^b,h LCM 28 Ltd.,
28A, B, 144A, FRN, 4.192%, 10/20/30		United States		1,000,000		987,970
28A, C, 144A, FRN, 4.742%, 10/20/30		United States		500,000		487,140
^b,h LCM XVI LP, 2016A, BR2, 144A, FRN, 4.347%, 10/15/31		United States		878,301		877,546
^b,h LCM XXII Ltd.,
22A, A2R, 144A, FRN, 4.042%, 10/20/28		United States		3,500,000		3,438,995
22A, BR, 144A, FRN, 4.592%, 10/20/28		United States		1,500,000		1,469,265
22A, CR, 144A, FRN, 5.392%, 10/20/28		United States		2,000,000		1,930,720
^b,g LCM XXV Ltd., 25A, A, 144A, FRN, 3.802%, (3-month USD LIBOR + 1.21%), 7/20/30		United States		250,000		249,920
^b,g Long Point Park CLO Ltd.,
2017-1A, A2, 144A, FRN, 3.963%, (3-month USD LIBOR + 1.375%), 1/17/30		United States		1,000,000		979,620
2017-1A, B, 144A, FRN, 4.288%, (3-month USD LIBOR + 1.70%), 1/17/30		United States		1,000,000		964,850
^b,h Madison Park Funding XIV Ltd.,
2014-14A, A2RR, 144A, FRN, 3.992%, 10/22/30		United States		1,000,000		1,002,930
2014-14A, BRR, 144A, FRN, 4.292%, 10/22/30		United States		1,500,000		1,496,805
2014-14A, CRR, 144A, FRN, 4.792%, 10/22/30		United States		562,500		560,649
^b,h Madison Park Funding XXIX Ltd.,
2018-29A, A2, 144A, FRN, 4.051%, 10/18/30		United States		1,468,182		1,457,450
2018-29A, B, 144A, FRN, 4.351%, 10/18/30		United States		3,000,000		2,994,360
2018-29A, C, 144A, FRN, 4.801%, 10/18/30		United States		766,129		753,756
2018-29A, D, 144A, FRN, 5.601%, 10/18/30		United States		600,000		576,486
^b,g Madison Park Funding XXVI Ltd., 07-4A, AR, 144A, FRN, 3.782%, (3-month USD LIBOR + 1.20%), 7/29/30		United States		2,500,000		2,496,875
^b,h Madison Park Funding XXXI Ltd.,
2018-31A, A2A, 144A, FRN, 4.092%, 1/23/31		United States		750,000		746,123
2018-31A, B, 144A, FRN, 4.292%, 1/23/31		United States		3,000,000		2,984,940
2018-31A, C, 144A, FRN, 4.742%, 1/23/31		United States		1,950,000		1,920,536
^b,h Mill City Mortgage Loan Trust,
2017-1, A1, 144A, FRN, 2.75%, 11/25/58		United States		1,168,017		1,161,025
2018-1, A1, 144A, FRN, 3.25%, 5/25/62		United States		2,847,455		2,854,964
2018-4, A1B, 144A, FRN, 3.50%, 4/25/66		United States		1,660,000		1,673,131
^bMorgan Stanley Capital I Trust, 2014-150E, A, 144A, 3.912%, 9/09/32		United States		450,000		469,595
^b,h Neuberger Berman CLO XVIII Ltd.,
2014-18A, A1BR, 144A, FRN, 3.992%, 10/21/30		United States		2,550,000		2,554,564
2014-18A, A2R2, 144A, FRN, 4.292%, 10/21/30		United States		545,455		540,579



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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^b Neuberger Berman Loan Advisers CLO Ltd.,
^g 2017-26A, B, 144A, FRN, 4.101%, (3-month USD LIBOR + 1.50%), 10/18/30		United States		539,475	$	530,056
^h 2019-32A, B, 144A, FRN, 4.417%, 1/19/32		United States		2,800,000		2,797,172
^h2019-32A, C, 144A, FRN, 5.217%, 1/19/32		United States		2,000,000		2,005,740
^h2019-32A, D, 144A, FRN, 6.368%, 1/19/32		United States		710,526		709,929
^b,g Newark BSL CLO 2 Ltd., 2017-1A, B, 144A, FRN, 4.93%, (3-month USD LIBOR + 2.35%), 7/25/30		United States		2,000,000		2,000,600
^b,g Octagon Investment Partners 18-R Ltd., 2018-18A, C, 144A, FRN, 5.301%, (3-month USD LIBOR + 2.70%), 4/16/31		United States		350,000		333,312
^b,h Octagon Investment Partners 27 Ltd., 2016-1A, CR, 144A, FRN, 4.697%, 7/15/30		United States		1,565,000		1,547,128
^b,h Octagon Investment Partners 28 Ltd., 2016-1A, BR, 144A, FRN, 4.381%, 10/24/30		United States		593,141		594,434
^b,g Octagon Investment Partners 33 Ltd.,
2017-1A, A2, 144A, FRN, 4.092%, (3-month USD LIBOR + 1.50%), 1/20/31		United States		2,000,000		1,970,220
2017-1A, B, 144A, FRN, 4.442%, (3-month USD LIBOR + 1.85%), 1/20/31		United States		500,000		492,720
2017-1A, C, 144A, FRN, 5.342%, (3-month USD LIBOR + 2.75%), 1/20/31		United States		250,000		240,130
^b,g Octagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 3.828%, (3-month USD LIBOR + 1.13%), 8/12/26		United States		370,831		371,306
^b,g Octagon Investment Partners XXIII Ltd.,
2015-1A, BR, 144A, FRN, 3.797%, (3-month USD LIBOR + 1.20%), 7/15/27		United States		1,200,000		1,193,568
2015-1A, CR, 144A, FRN, 4.447%, (3-month USD LIBOR + 1.85%), 7/15/27		United States		2,000,000		1,989,660
2015-1A, DR, 144A, FRN, 5.147%, (3-month USD LIBOR + 2.55%), 7/15/27		United States		300,000		296,100
^b,h Octagon Loan Funding Ltd., 2014-1A, DRR, 144A, FRN, 5.583%, 11/18/31		United States		1,333,333		1,277,160
^bProgress Residential Trust, 2018-SFR2, A, 144A, 3.712%, 8/17/35		United States		290,000		295,821
^b,h Race Point X CLO Ltd., 2016-10A, C1R, 144A, FRN, 4.58%, 7/25/31		United States		1,700,000		1,641,452
^b,g Radnor RE Ltd., 2018-1, M1, 144A, FRN, 3.877%, (1-month USD LIBOR + 1.40%), 3/25/28		United States		630,000		631,935
^b,h Sequoia Mortgage Trust, 2016-2, A4, 144A, FRN, 3.50%, 8/25/46		United States		1,953,713		1,956,144
^b TCI-Flatiron CLO Ltd.,
^h2017-1A, A, 144A, FRN, 3.883%, 11/18/30		United States		2,000,000		1,995,220
^g 2017-1A, B, 144A, FRN, 4.243%, (3-month USD LIBOR + 1.56%), 11/18/30		United States		2,000,000		1,969,060
^g 2017-1A, C, 144A, FRN, 4.533%, (3-month USD LIBOR + 1.85%), 11/18/30		United States		1,200,000		1,149,336
^g 2017-1A, D, 144A, FRN, 5.433%, (3-month USD LIBOR + 2.75%), 11/18/30		United States		250,000		237,428
^hThornburg Mortgage Securities Trust, 2005-1, A3, FRN, 4.576%, 4/25/45		United States		20,104		20,432
^bTowd Point Mortgage Trust,
^h2015-2, 2A1, 144A, FRN, 3.75%, 11/25/57		United States		314,692		316,610
^h2016-3, A1, 144A, FRN, 2.25%, 4/25/56		United States		1,676,063		1,656,325
^h2016-4, A1, 144A, FRN, 2.25%, 7/25/56		United States		1,078,787		1,063,262
^h2016-5, A1, 144A, FRN, 2.50%, 10/25/56		United States		422,464		416,462



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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^bTowd Point Mortgage Trust, (continued)
^h2017-1, A1, 144A, FRN, 2.75%, 10/25/56		United States		1,289,554	$	1,275,859
^h2017-2, A1, 144A, FRN, 2.75%, 4/25/57		United States		1,264,161		1,250,635
^h2017-4, A1, 144A, FRN, 2.75%, 6/25/57		United States		2,186,825		2,162,467
^g 2017-5, A1, 144A, FRN, 3.077%, (1-month USD LIBOR + 0.60%), 2/25/57		United States		134,479		133,946
^h2018-1, A1, 144A, FRN, 3.00%, 1/25/58		United States		559,039		555,321
^h2018-2, A1, 144A, FRN, 3.25%, 3/25/58		United States		279,909		281,315
^h2018-4, A1, 144A, FRN, 3.00%, 6/25/58		United States		1,874,615		1,854,017
^h2018-5, A1A, 144A, FRN, 3.25%, 7/25/58		United States		607,990		608,419
^h2019-1, A1, 144A, FRN, 3.75%, 3/25/58		United States		2,470,984		2,521,569
^bVoya CLO Ltd.,
^g 2013-2A, A1R, 144A, FRN, 3.55%, (3-month USD LIBOR + 0.97%), 4/25/31		United States		7,300,000		7,200,355
^g 2013-2A, BR, 144A, FRN, 4.43%, (3-month USD LIBOR + 1.85%), 4/25/31		United States		2,000,000		1,929,920
^g 2014-1A, BR2, 144A, FRN, 4.501%, (3-month USD LIBOR + 1.90%), 4/18/31		United States		2,750,000		2,673,467
^h2016-3A, A2R, 144A, FRN, 4.001%, 10/18/31		United States		1,636,364		1,643,760
^g 2017-2A, B, 144A, FRN, 4.947%, (3-month USD LIBOR + 2.35%), 6/07/30		United States		1,000,000		1,000,320
^h2018-4A, B, 144A, FRN, 4.554%, 1/15/32		United States		474,026		475,524
^b,g Webster Park CLO Ltd., 2015-1A, BR, 144A, FRN, 4.392%, (3-month USD LIBOR + 1.80%), 7/20/30		United States		2,000,000		1,937,520
Wells Fargo Commercial Mortgage Trust, 2016-NXS6, A4, 2.918%, 11/15/49		United States		1,500,000		1,479,282
^b,h Wells Fargo Mortgage Backed Securities, 2018-1, A3, 144A, FRN, 3.50%, 7/25/47		United States		867,924		875,032
^b,g West CLO Ltd., 2014-1A, A2R, 144A, FRN, 3.951%, (3-month USD LIBOR + 1.35%), 7/18/26		United States		170,000		169,471

						312,164,555

Real Estate 0.2%
^bAmerican Homes 4 Rent, 2014-SFR3, A, 144A, 3.678%, 12/17/36		United States		747,409		764,720

Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $317,117,678)						314,433,738


Municipal Bonds 0.2%
Cincinnati GO, Various Purpose, Improvement and Refunding, Series A, 5.00%, 12/01/25		United States		100,000		118,552
Citizens Property Insurance Corp. Revenue, Coastal Account, senior secured, Series A-1, 5.00%, 6/01/22		United States		125,000		135,045
Colorado State Board of Governors University Enterprise System Revenue, Green Bonds, Series E-2, 5.00%, 3/01/25		United States		100,000		118,157
Orlando Health Obligated Group, 3.777%, 10/01/28		United States		105,000		106,475
Providence St. Joseph Health Obligated Group, 2.746%, 10/01/26		United States		15,000		14,345
San Jose RDA Successor Agency Tax Allocation, Senior, Refunding, Series A-T, 3.226%, 8/01/27		United States		190,000		192,580
Teays Valley Local School District GO, Pickaway Fairfield and Franklin Counties, Refunding, 4.00%, 12/01/26		United States		100,000		108,758



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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value
Municipal Bonds (continued)
Texas State GO, Transportation Commission Highway Improvement, Series A, 5.00%, 4/01/21		United States		5,000	$	5,319


Total Municipal Bonds (Cost $778,837)						799,231


	Number of Contracts		Notional Amount*
Options Purchased 0.0%^†
Puts - Over-the-Counter
Credit Default Swaptions 0.0%^†
Buy protection on CDX.NA.HY.31, Premium Rate 5.00%, Strike Price $105, Counterparty JPHQ, Expires 6/19/19		1		9,800,000		16,797
Buy Protection on CDX.NA.HY.32, Premium Rate 5.00%, Strike Price $106, Counterparty JPHQ, Expires 7/17/19		1		8,000,000		50,752
Buy protection on CDX.NA.IG.31, Premium Rate 1.00%, Strike Price $67.50, Counterparty CITI, Expires 5/15/19		1		10,000,000		470
Buy protection on CDX.NA.IG.31, Premium Rate 1.00%, Strike Price $72.50, Counterparty JPHQ, Expires 6/19/19		1		10,000,000		1,890
Buy Protection on CDX.NA.IG.32, Premium Rate 1.00%, Strike Price $62.50, Counterparty BNDP, Expires 7/17/19		1		24,000,000		41,376


						111,285

Interest Rate Swaptions 0.0%^†
Receive float 3 month USD LIBOR, pay fixed 2.25%, Counterparty CITI, Expires 6/28/19		1		17,400,000		26,239

Total Options Purchased (Cost $335,689)						137,524

Total Investments before Short Term Investments (Cost $438,673,669)						436,748,235


	Country		Shares
Short Term Investments (Cost $77,861,898) 15.4%

Money Market Funds 15.4%
^j,k Institutional Fiduciary Trust Money Market Portfolio, 2.10%		United States		77,861,898		77,861,898


Total Investments (Cost $516,535,567) 101.5%						514,610,133
Options Written (0.0)%^†						(30,265	)
Other Assets, less Liabilities (1.5)%						(7,363,083	)

Net Assets 100.0%					$	507,216,785



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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Number of Contracts		Notional Amount*		Value
^lOptions Written (0.0)%^†
Puts - Over-the-Counter
Credit Default Swaptions (0.0)%^†
Buy protection on CDX.NA.HY.31, Premium Rate 5.00%, Strike Price $101.50, Counterparty JPHQ, Expires 6/19/19		1		9,800,000	$	(6,017	)
Buy Protection on CDX.NA.HY.32, Premium Rate 5.00%, Strike Price $102, Counterparty JPHQ, Expires 7/17/19		1		8,000,000		(14,192	)
Buy Protection on CDX.NA.IG.32, Premium Rate 1.00%, Strike Price $85, Counterparty BNDP, Expires 7/17/19		1		24,000,000		(10,056	)


Total Options Written (Premiums received $57,620)					$	(30,265	)

^†Rounds to less than 0.1% of net assets.

*The principal/notional 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, 2019, the aggregate value of these securities was $21,490,700, representing 4.2% of net assets.

^cThe coupon rate shown represents the rate at period end.

^dSee Note 1(e) regarding loan participation notes.

^ePerpetual security with no stated maturity date.

^fPrincipal amount of security is adjusted for inflation. See Note 1(h).

^gThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.

^hAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.

ⁱInvestment in an interest-only security entitles holders to receive only the interest payment on the underlying instruments. The principal amount shown is the notional amount of the underlying instruments.

^jSee Note 3(f) regarding investments in affiliated management investment companies.

^kThe rate shown is the annualized seven-day effective yield at period end.

^lSee Note 1(c) regarding written options.



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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

At April 30, 2019, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts


Description	Type		Number of Contracts		Notional Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)

Interest Rate Contracts
Australian 10 Yr. Bond		Long		79	$	7,704,233		6/17/19		$ 130,906
Canadian 10 Yr. Bond		Long		70		7,221,592		6/19/19		98,154
Euro BOBL		Short		40		5,964,303		6/06/19		(30,095	)
Euro-Bund		Short		5		927,141		6/06/19		(10,156	)
U.S. Treasury 10 Yr. Note		Short		80		9,893,750		6/19/19		(90,110	)
U.S. Treasury 2 Yr. Note		Short		106		22,578,828		6/28/19		(68,035	)
U.S. Treasury 30 Yr. Bond		Short		13		1,917,094		6/19/19		(11,268	)
U.S. Treasury 5 Yr. Note		Short		349		40,358,578		6/28/19		(278,553	)
Ultra 10 Yr. U.S. Treasury Note		Short		71		9,356,469		6/19/19		(112,144	)


Total Futures Contracts										$(371,301	)

*As of period end.

At April 30, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(c).

Forward Exchange Contracts


Currency	Counterparty^a		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation

OTC Forward Exchange Contracts
Chinese Yuan Renminbi		JPHQ		Buy		8,800,000		1,312,181			5/06/19	$	—	$	(5,826	)
Chinese Yuan Renminbi		JPHQ		Sell		8,800,000		1,307,772			5/06/19		1,417		—
Canadian Dollar		UBSW		Sell		26,000		27,537	AUD		5/14/19		9		—
Indonesian Rupiah		JPHQ		Buy		22,436,500,000		1,576,261			5/28/19		—		(5,781	)
South Korean Won		JPHQ		Sell		1,174,000,000		1,052,726			6/03/19		43,346		—
Swedish Krona		UBSW		Buy		16,135,000		1,739,660			6/04/19		—		(35,344	)
Swedish Krona		UBSW		Sell		16,135,000		1,749,810			6/04/19		45,494		—
Canadian Dollar		UBSW		Sell		3,347,000		2,512,763			6/05/19		11,456		—
Mexican Peso		RBS		Buy		35,708,000		1,806,628			6/10/19		64,712		—
Mexican Peso		RBS		Sell		10,700,000		555,487			6/10/19		—		(5,265	)
Japanese Yen		JPHQ		Buy		172,000,000		1,561,054			6/12/19		—		(11,076	)
Japanese Yen		JPHQ		Buy		173,000,000		1,553,176			6/12/19		5,814		—
Polish Zloty		RBS		Buy		1,930,000		512,616			6/19/19		—		(6,754	)
Polish Zloty		RBS		Sell		1,930,000		511,326			6/19/19		5,463		—
Mexican Peso		JPHQ		Buy		4,800,000		247,365			6/21/19		3,755		—
Australian Dollar		UBSW		Sell		5,050,000		3,580,097			7/01/19		13,207		—
Euro		UBSW		Sell		1,427,000		1,615,100			7/01/19		5,636		—
Norwegian Krone		UBSW		Buy		2,320,000		273,169			7/15/19		—		(3,454	)
Norwegian Krone		UBSW		Sell		2,320,000		273,795			7/15/19		4,081		—
Chinese Yuan Renminbi		JPHQ		Sell		8,700,000		1,292,719			7/24/19		1,311		—
British Pound		JPHQ		Sell		86,300		115,081			8/15/19		1,916		—
Canadian Dollar		JPHQ		Sell		1,700,000		1,278,396			9/18/19		4,904		—
Euro		DBAB		Sell		120,000		137,078			9/18/19		816		—
Euro		JPHQ		Sell		400,000		450,690			9/18/19		—		(3,516	)



30	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

Forward Exchange Contracts (continued)


							Contract		Settlement		Unrealized		Unrealized
Currency	Counterparty^a		Type		Quantity		Amount*		Date		Appreciation		Depreciation

OTC Forward Exchange Contracts (continued)
Euro		JPHQ		Sell		4,550,000		5,196,328		9/18/19	$	29,738	$	—
Australian Dollar		JPHQ		Sell		1,520,000		1,093,575		10/11/19		17,082		—
Turkish Lira		JPHQ		Buy		2,600,000		399,969		10/18/19		—		(9,688	)
Euro		DBAB		Buy		100,000		117,270		12/13/19		—		(2,901	)
Euro		DBAB		Sell		800,000		934,000		12/13/19		19,049		—

Total Forward Exchange Contracts											$	279,206	$	(89,605	)

Net unrealized appreciation (depreciation)											$	189,601

*In U.S. dollars unless otherwise indicated.

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

At April 30, 2019, the Fund had the following credit default swap contracts outstanding. See Note 1(c).

Credit Default Swap Contracts


Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amount^a		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Rating^b

OTC Swap Contracts
Contracts to Buy Protection^c
Single Name
The AES Corp.		(5.00)%		Quarterly		CITI		3/20/21	$	2,750,000	$	(260,197	)	$	(222,571	)	$	(37,626	)
Ally Financial Inc.		(5.00)%		Quarterly		JPHQ		6/20/24		2,600,000		(487,286	)		(422,995	)		(64,291	)
American Airlines Group Inc.		(5.00)%		Quarterly		BZWS		12/20/19		400,000		(14,309	)		(10,688	)		(3,621	)
American Airlines Group Inc.		(5.00)%		Quarterly		CITI		12/20/19		130,000		(4,650	)		(3,429	)		(1,221	)
Boyd Gaming Corp.		(5.00)%		Quarterly		BZWS		6/20/22		525,000		(75,103	)		(62,211	)		(12,892	)
Centurylink Inc.		(5.00)%		Quarterly		BZWS		6/20/21		4,700,000		(406,052	)		(238,403	)		(167,649	)
Dish DBS Corp.		(5.00)%		Quarterly		BZWS		12/20/20		175,000		(11,017	)		(8,354	)		(2,663	)
Dish DBS Corp.		(5.00)%		Quarterly		JPHQ		6/20/21		470,000		(34,071	)		(14,741	)		(19,330	)
Energy Transfer LP		(5.00)%		Quarterly		MSCO		12/20/20		750,000		(63,058	)		(51,857	)		(11,201	)
Government of Italy		(1.00)%		Quarterly		BZWS		6/20/23		700,000		(1,700	)		6,314			(8,014	)
Government of Turkey		(1.00)%		Quarterly		BZWS		12/20/19		166,667		2,483			4,990			(2,507	)
HCA Inc.		(5.00)%		Quarterly		FBCO		3/20/22		2,050,000		(271,640	)		(216,960	)		(54,680	)
KB Home		(5.00)%		Quarterly		JPHQ		3/20/20		100,000		(4,797	)		(3,169	)		(1,628	)
Nabors Industries Inc.		(1.00)%		Quarterly		CITI		12/20/21		805,000		26,610			32,434			(5,824	)
Nabors Industries Inc.		(1.00)%		Quarterly		CITI		12/20/21		245,000		8,098			7,935			163
Navient Corp.		(5.00)%		Quarterly		GSCO		3/20/20		1,800,000		(83,781	)		(62,910	)		(20,871	)
Navient Corp.		(5.00)%		Quarterly		JPHQ		3/20/20		2,860,000		(133,119	)		(100,019	)		(33,100	)
PHH Corp.		(5.00)%		Quarterly		BZWS		9/20/19		200,000		(4,906	)		(351	)		(4,555	)
Sanmina Corp.		(5.00)%		Quarterly		BZWS		6/20/19		100,000		(1,240	)		(601	)		(639	)
Universal Health Services Inc.		(5.00)%		Quarterly		BZWS		9/20/19		50,000		(1,252	)		(813	)		(439	)
Contracts to Sell Protection^c,d
Single Name
American Tower Corp.		1.00%		Quarterly		GSCO		3/20/21	$	100,000	$	130		$	(708	)	$	838			BBB-
Dish DBS Corp.		5.00%		Quarterly		BZWS		12/20/22		175,000		7,358			6,579			779			B-



franklintempleton.com	Annual Report	31

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

Credit Default Swap Contracts (continued)


Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amount^a		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Rating^b

OTC Swap Contracts (continued)
Contracts to Sell Protection^c,d (continued)
Single Name (continued)
Dish DBS Corp.		5.00%		Quarterly		JPHQ		6/20/23	$	470,000	$	11,635		$	(5,150	)	$	16,785			B-
Goldman Sachs Group Inc.		1.00%		Quarterly		JPHQ		6/20/24		2,600,000		34,257			18,335			15,922			BBB+
Government of Argentina		5.00%		Quarterly		BZWS		6/20/23		330,000		(66,222	)		(69,163	)		2,941			B
Government of Argentina		5.00%		Quarterly		CITI		12/20/23		630,000		(132,289	)		(33,119	)		(99,170	)		B
Government of Indonesia		1.00%		Quarterly		CITI		6/20/24		1,025,000		3,682			(3,436	)		7,118			BBB-
Government of Italy		1.00%		Quarterly		BZWS		6/20/23		700,000		(17,272	)		(27,688	)		10,416			NR
Government of Russia		1.00%		Quarterly		BNDP		6/20/24		620,000		(6,546	)		(8,268	)		1,722			BBB-
Morgan Stanley		1.00%		Quarterly		JPHQ		6/20/24		2,600,000		48,093			36,908			11,185			BBB+
Nabors Industries Inc.		1.00%		Quarterly		CITI		12/20/23		1,050,000		(134,372	)		(145,854	)		11,482			BB
Sprint Communications Inc.		5.00%		Quarterly		JPHQ		9/20/20		12,000		724			—			724			B
Traded Index
^eBNP Paribas Bespoke Bordeaux Index, Mezzanine Tranche 7-10%		2.10%		Quarterly		BNDP		6/20/20		300,000		4,371			—			4,371			Non-
																					Invest-
																					ment
																					Grade
^eBNP Paribas Bespoke Rodez
Index, Mezzanine Tranche
5-7%		2.00%		Quarterly		BNDP		12/20/20		500,000		4,096			—			4,096			Non-
																					Invest-
																					ment
																					Grade
^eBNP Paribas Bespoke Rodez2
Index, Mezzanine Tranche
5-7%		3.20%		Quarterly		BNDP		12/20/20		340,000		10,225			—			10,225			Non-
																					Invest-
																					ment
																					Grade
^eCitibank Bespoke Bogota
Index, Mezzanine Tranche
7-10%		1.35%		Quarterly		CITI		6/20/20		1,650,000		15,378			—			15,378			Non-
																					Invest-
																					ment
																					Grade
^eCitibank Bespoke Boulder
Index, Mezzanine Tranche
5-10%		1.18%		Quarterly		CITI		12/20/19		3,000,000		7,718			—			7,718			Non-
																					Invest-
																					ment
																					Grade



32	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

Credit Default Swap Contracts (continued)

Description

Periodic
Payment Rate
Received
(Paid)

Payment
Frequency

Counter-
party

Maturity
Date

Notional
Amount^a

Value

Unamortized
Upfront
Payments
(Receipts)

Unrealized
Appreciation
(Depreciation)

Rating^b

OTC Swap Contracts (continued)

Contracts to Sell Protection^c,d (continued)

Traded Index (continued)

^eCitibank Bespoke Boulder

Index, Mezzanine Tranche

5-15%

1.24%

Quarterly

CITI

12/20/19

1,600,000

8,064

—

8,064

Non-

Invest-

ment

Grade

^eCitibank Bespoke Broker

Index, Mezzanine Tranche

3-7%

1.30%

Quarterly

CITI

6/20/19

1,900,000

6,231

—

6,231

Non-

Invest-

ment

Grade

^eCitibank Bespoke Broker

Index, Mezzanine Tranche

3-7%

1.40%

Quarterly

CITI

6/20/19

1,500,000

5,298

—

5,298

Non-

Invest-

ment

Grade

^eCitibank Bespoke Cambridge

Index, Equity Tranche 0-3%

0.00%

Quarterly

CITI

12/20/19

500,000

(65,919

)

(26,239

)

(39,680

)

Non-

Invest-

ment

Grade

^eCitibank Bespoke Lima Index,

Mezzanine Tranche 5-7%

2.13%

Quarterly

CITI

12/20/19

650,000

2,116

—

2,116

Non-

Invest-

ment

Grade

^eCitibank Bespoke Lisbon

Index, Equity Tranche 0-3%

0.00%

Quarterly

CITI

6/20/19

10,000

(289

)

(166

)

(123

)

Non-

Invest-

ment

Grade

^eCitibank Bespoke Lisbon

Index, Mezzanine Tranche

3-7%

0.79%

Quarterly

CITI

6/20/19

1,100,000

397

—

397

Non-

Invest-

ment

Grade

^eCitibank Bespoke Palma Index,

Mezzanine Tranche 5-7%

2.30%

Quarterly

CITI

6/20/21

710,000

5,122

—

5,122

Non-

Invest-

ment

Grade



franklintempleton.com	Annual Report	33

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

Credit Default Swap Contracts (continued)


Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amount^a		Value			Unamortized Upfront Payments (Receipts)		Unrealized Appreciation (Depreciation)		Rating^b

OTC Swap Contracts (continued)
Contracts to Sell Protection^c,d (continued)
Traded Index (continued)
^eCitibank Bespoke Singapore
Index, Equity Tranche 0-3%		0.00%		Quarterly		CITI		6/20/20	$	770,000	$	(86,748)		$	(122,747)	$	35,999		Non-
																			Invest-
																			ment
																			Grade
^eCitibank Bespoke Verona
Index, Equity Tranche 0-3%		0.00%		Quarterly		CITI		12/20/19		15,000		(1,711)			(966)		(745)		Non-
																			Invest-
																			ment
																			Grade
^eCitibank Bespoke Verona
Index, Mezzanine Tranche
7-15%		0.40%		Quarterly		CITI		12/20/19		280,000		581			—		581		Non-
																			Invest-
																			ment
																			Grade
MCDX.NA.30		1.00%		Quarterly		CITI		6/20/28		2,000,000		48,430			18,445		29,985		Invest- ment
																			Grade
																			Invest-
MCDX.NA.31		1.00%		Quarterly		CITI		12/20/23		12,200,000		215,260			116,790		98,470		ment Grade


Total Credit Default Swap Contracts											$	(1,893,189	)	$	(1,614,846)	$	(278,343)

^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 Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps, and failure to pay or bankruptcy of the underlying securities for traded index swaps.

^dThe Fund enters contracts to sell protection to create a long credit position.

^eRepresents a custom index comprised of a basket of underlying instruments.

At April 30, 2019, the Fund had the following cross-currency swap contracts outstanding. See Note 1(c).

Cross-Currency Swap Contracts

Description

Payment
Frequency

Counter-
party

Maturity
Date

Notional
Amount

Value/
Unrealized
Appreciation
(Depreciation)

OTC Swap Contracts

Receive Floating 3-month USD LIBOR + 1.894%

Quarterly

2,460,000

USD

Pay Fixed 1.50%

Annual

CITI

5/04/21

2,000,000

EUR

$209,322



34	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

Cross-Currency Swap Contracts (continued)

Description

Payment
Frequency

Counter-
party

Maturity
Date

Notional
Amount

Value/
Unrealized
Appreciation
(Depreciation)

OTC Swap Contracts (continued)

Receive Floating 3-month USD LIBOR + 1.850%

Quarterly

617,500

USD

Pay Fixed 1.50%

Annual

CITI

5/04/21

500,000

EUR

$ 54,260

Receive Floating 3-month USD LIBOR + 2.87%

Quarterly

232,400

USD

Pay Fixed 2.50%

Annual

CITI

5/04/21

200,000

EUR

6,059

Receive Floating 3-month USD LIBOR + 1.303%

Quarterly

496,000

USD

Pay Fixed 1.00%

Annual

JPHQ

5/04/21

400,000

EUR

46,274

Receive Floating 3-month USD LIBOR + 0.849%

Quarterly

3,472,000

USD

Pay Fixed 0.75%

Annual

DBAB

9/14/22

2,800,000

EUR

344,512

Total Cross Currency Swap Contracts

$660,427

At April 30, 2019, the Fund had the following interest rate swap contracts outstanding. See Note 1(c).

Interest Rate Swap Contracts


Description	Payment Frequency		Maturity Date		Notional Amount		Value			Unamortized Upfront Payments (Receipts)		Unrealized Appreciation (Depreciation)

Centrally Cleared Swap Contracts
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.788%		Semi-Annual		3/26/23	$	7,900,000	$	(144,366	)		$ —		$(144,366	)
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.79%		Semi-Annual		3/28/23		7,900,000		(145,283	)		—		(145,283	)
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.713%		Semi-Annual		3/29/23		4,700,000		(71,897	)		—		(71,897	)
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.806%		Semi-Annual		4/17/23		5,800,000		(110,967	)		—		(110,967	)
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.00%		Semi-Annual		6/20/25		11,100,000		180,018			553,194		(373,176	)
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 3.082%		Semi-Annual		9/28/25		8,000,000		(345,523	)		—		(345,523	)
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 3.225%		Semi-Annual		11/13/25		5,500,000		(337,171	)		—		(337,171	)


Total Interest Rate Swap Contracts							$	(975,189	)		$553,194		$(1,528,383	)

At April 30, 2019, the Fund had the following inflation index swap contracts outstanding. See Note 1(c).

Inflation Index Swap Contracts

Description

Payment

Frequency

Maturity
Date

Notional
Amount

Value/
Unrealized
Appreciaton
(Depreciation)

Centrally Cleared Swap Contracts

Receive variable change in USA-CPI-U

At maturity

Pay Fixed 2.079%

At maturity

9/18/24

1,770,000

1,002



franklintempleton.com	Annual Report	35

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

Inflation Index Swap Contracts (continued)

Description

Payment

Frequency

Maturity
Date

Notional
Amount

Value/
Unrealized
Appreciaton
(Depreciation)

Centrally Cleared Swap Contracts (continued)

Receive variable change in USA-CPI-U

At maturity

Pay Fixed 2.35%

At maturity

9/20/26

$5,200,000

$(138,120)

Receive variable change in USA-CPI-U

At maturity

Pay Fixed 2.313%

At maturity

6/01/28

1,400,000

(31,216)

Total Inflation Index Swap Contracts

$(168,334)

At April 30, 2019, the Fund had the following total return swap contracts outstanding. See Note 1(c).

Total Return Swap Contracts

Underlying Instruments

Financing Rate

Payment
Frequency

Counterparty

Maturity
Date

Notional
Value

Value/
Unrealized
Appreciation
(Depreciation)

OTC Swap Contracts

Long^a

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

JPHQ

6/20/19

17,550,000

$ 505,566

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

MSCO

6/20/19

630,000

18,937

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

CITI

9/20/19

4,200,000

94,235

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

GSCO

9/20/19

3,300,000

70,224

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

JPHQ

9/20/19

9,030,000

367,121

Total Total Return Swap Contracts

$1,056,083

^aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.

See Note 8 regarding other derivative information.

See Abbreviations on page 56.



36	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, 2019

Franklin Flexible Alpha Bond Fund


Assets:
Investments in securities:
Cost - Unaffiliated issuers	$438,673,669
Cost - Non-controlled affiliates (Note 3f)	77,861,898


Value - Unaffiliated issuers	$436,748,235
Value - Non-controlled affiliates (Note 3f)	77,861,898
Restricted cash for OTC derivative contracts (Note 1d)	350,000
Foreign currency, at value (cost $176,361)	176,872
Receivables:
Investment securities sold	29,631
Capital shares sold	13,556
Interest	1,792,680
Deposits with brokers for:
OTC derivative contracts	680,000
Futures contracts	820,859
Centrally cleared swap contracts	1,249,016
OTC swap contracts (upfront payments $212,485)	248,730
Unrealized appreciation on OTC forward exchange contracts	279,206
Unrealized appreciation on OTC swap contracts	2,030,636
Other assets	1,126


Total assets	522,282,445

Liabilities:
Payables:
Investment securities purchased	162,028
Capital shares redeemed	9,872,838
Management fees	208,439
Distribution fees	523
Transfer agent fees	6,924
Distributions to shareholders	1,430,678
Variation margin on futures contracts	105,401
Variation margin on centrally cleared swap contracts	74,037
Deposits from brokers for:
OTC derivative contracts	350,000
OTC swap contracts (upfront receipts $1,856,384)	1,863,576
Funds advanced by custodian	185,709
Options written, at value (premiums received $57,620)	30,265
Unrealized depreciation on OTC forward exchange contracts	89,605
Unrealized depreciation on OTC swap contracts	592,469
Accrued expenses and other liabilities	93,168


Total liabilities	15,065,660


Net assets, at value	$507,216,785


Net assets consist of:
Paid-in capital	$510,708,346
Total distributable earnings (loss)	(3,491,561	)


Net assets, at value	$507,216,785



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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

April 30, 2019

Franklin Flexible Alpha Bond Fund


Class A:
Net assets, at value			$ 1,457,621

Shares outstanding			150,249

Net asset value per share^a			$9.70

Maximum offering price per share (net asset value per share ÷ 96.25%)			$10.08

Class C:
Net assets, at value			$ 368,100

Shares outstanding			38,195

Net asset value and maximum offering price per share^a			$9.64

Class R:
Net assets, at value			$ 83,197

Shares outstanding			8,586

Net asset value and maximum offering price per share			$9.69

Class R6:
Net assets, at value			$504,874,698

Shares outstanding			51,989,012

Net asset value and maximum offering price per share			$9.71

Advisor Class:
Net assets, at value			$ 433,169

Shares outstanding			44,672

Net asset value and maximum offering price per share			$9.70

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



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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Operations

for the year ended April 30, 2019

Franklin Flexible Alpha Bond Fund


Investment income:
Dividends:
Unaffiliated issuers	$ 209,204
Non-controlled affiliates (Note 3f)	1,286,983
Interest: (net of foreign taxes)~
Unaffiliated issuers	12,686,283


Total investment income	14,182,470


Expenses:
Management fees (Note 3a)	2,134,980
Distribution fees: (Note 3c)
Class A	4,259
Class C	1,913
Class R	338
Transfer agent fees: (Note 3e)
Class A	4,034
Class C	797
Class R	178
Class R6	77,410
Advisor Class	1,076
Custodian fees (Note 4)	14,219
Reports to shareholders	5,299
Registration and filing fees	81,512
Professional fees	96,105
Trustees’ fees and expenses	3,703
Other	135,451

Total expenses	2,561,274
Expense reductions (Note 4)	(1,692	)
Expenses waived/paid by affiliates (Note 3f and 3g)	(245,137	)


Net expenses	2,314,445


Net investment income	11,868,025


Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers	(1,067,398	)
Written options	45,360
Foreign currency transactions	(114,146	)
Forward exchange contracts	474,291
Futures contracts	(991,042	)
TBA sale commitments	(2,027	)
Swap contracts	711,463


Net realized gain (loss)	(943,499	)


Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers	(294,296	)
Translation of other assets and liabilities denominated in foreign currencies	2,504
Forward exchange contracts	213,188
Written options	22,575
Futures contracts	(494,189	)



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	39

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Operations (continued)

for the year ended April 30, 2019

Franklin Flexible Alpha Bond Fund


TBA sale commitments	2,227
Swap contracts	(541,588	)


Net change in unrealized appreciation (depreciation)	(1,089,579	)


Net realized and unrealized gain (loss)	(2,033,078	)


Net increase (decrease) in net assets resulting from operations	$ 9,834,947



^~Foreign taxes withheld on interest	$	238



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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Flexible Alpha Bond Fund


	Year Ended April 30,
	2019			2018
Increase (decrease) in net assets:
Operations:
Net investment income		$ 11,868,025			$ 1,642,692
Net realized gain (loss)		(943,499	)		1,033,175
Net change in unrealized appreciation (depreciation)		(1,089,579	)		(1,558,393	)


Net increase (decrease) in net assets resulting from operations		9,834,947			1,117,474


Distributions to shareholders: (Note 1h)
Class A		(41,958	)		(103,600	)
Class C		(7,107	)		(3,159	)
Class R		(1,752	)		(745	)
Class R6		(12,371,974	)		(1,711,598	)
Advisor Class		(11,924	)		(6,239	)


Total distributions to shareholders		(12,434,715	)		(1,825,341	)


Capital share transactions: (Note 2)
Class A		351,865			(9,288,308	)
Class C		91,704			35,861
Class R		33,323			(9,156	)
Class R6		296,632,582			211,478,984
Advisor Class		11,647			195,749


Total capital share transactions		297,121,121			202,413,130


Net increase (decrease) in net assets		294,521,353			201,705,263
Net assets:
Beginning of year		212,695,432			10,990,169


End of year (Note 1h)		$507,216,785			$212,695,432



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

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements

Franklin Flexible Alpha Bond Fund

1. Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eight separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Flexible Alpha Bond Fund (Fund) is included in this report. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees 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 each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. 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 Committee (VC). The Fund may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities, exchange traded funds and derivative financial instruments 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. 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.

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 4 p.m. Eastern time 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.

Certain derivative financial instruments are centrally cleared or 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.

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 Fund 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.



42	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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. Derivative Financial Instruments

The Fund invested in derivative financial instruments 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 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 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 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 counterparty under the ISDA agreement.

Collateral requirements differ by type of derivative. Collateral or initial margin requirements are set by the broker or exchange clearing house for exchange traded and centrally cleared derivatives. Initial margin deposited is held at the exchange and can be in the form of cash and/or securities. 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 the next business day, or within a few business days. Collateral pledged and/or received by the Fund for OTC derivatives, 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



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

1. Organization and Significant Accounting Policies (continued)

c. Derivative Financial Instruments (continued)

according to the Fund’s investment objectives. To the extent that the amounts due to the Fund from its counterparties are not subject to collateralization or are not fully collateralized, the Fund bears the risk of loss from counterparty non-performance.

The Fund entered into exchange traded futures contracts primarily to manage and/or gain exposure to interest rate risk. A futures contract is an agreement between the Fund and a counterparty to buy or sell an asset at a specified price on a future date. 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.

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 and/or gain 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, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. 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. Upfront payments and receipts are reflected in the Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.

The Fund entered into OTC cross currency swap contracts primarily to manage and/or gain exposure to interest rate risk and certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.

The Fund entered into inflation index swap contracts primarily to manage and/or gain exposure to inflation risk. An inflation index swap is an agreement between the Fund and a counterparty to exchange cash flows whereby one party makes payments based on the percentage change in an index that serves as a measure of inflation and the other party makes a regular payment based on a compounded fixed rate, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC inflation index swap) or may be executed on a registered exchange (centrally cleared inflation index swap). For centrally cleared inflation index 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. Over the term of the contract, contractually required payments to be paid and to be received



44	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Typically, an inflation index swap has payment obligations netted and exchanged upon maturity.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate 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, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.

The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to interest rate risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.

The Fund purchased or wrote exchange traded and/or OTC option contracts primarily to manage and/or gain exposure to interest rate, foreign exchange rate and credit risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an

option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss.

See Note 8 regarding other derivative information.

d. Restricted Cash

At April 30, 2019, 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.

e. 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.

f. 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 where the Fund sells (or buys) mortgage-backed securities for delivery on a specified date and simultaneously contracts to repurchase (or sell) substantially similar (same type, coupon, and maturity) securities at a future date and at a predetermined price. 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. Transactions in mortgage dollar rolls are accounted for as purchases and sales



franklintempleton.com	Annual Report	45

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

f. Mortgage Dollar Rolls (continued)

and may result in an increase to the Fund’s portfolio turnover rate. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

g. 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.

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of April 30, 2019, the has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

h. 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. Dividend income is recorded on the ex-dividend date. Dividends from net investment income are

normally declared daily; these dividends may be reinvested or paid monthly to shareholders. Distributions from realized capital gains and other distributions, if any, are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and 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.*

Net investment income, excluding class specific expenses, is allocated daily to each class of shares based upon the relative value of the settled shares of each class. Realized and unrealized gains and losses 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.

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.

i. Accounting Estimates

j. 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.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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.

For the year ended April 30, 2018, distributions to shareholders were as follows:


Distributions from net investment income:
Class A	$	(102,670	)
Class C		(2,927	)
Class R		(695	)
Class R6		(1,603,614	)
Advisor Class		(5,822	)
Distributions from net realized gains:
Class A		(930	)
Class C		(232	)
Class R		(50	)
Class R6		(107,984	)
Advisor Class		(417	)

For the year ended April 30, 2018, undistributed net investment income included in net assets was $58,013.

2. Shares of Beneficial Interest

At April 30, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Year Ended April 30,
	2019						2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold^a		146,054		$	1,426,571			71,706		$	705,410
Shares issued in reinvestment of distributions		4,309			41,654			2,584			25,433
Shares redeemed		(115,764	)		(1,116,360	)		(1,017,579	)		(10,019,151	)

Net increase (decrease)		34,599		$	351,865			(943,289	)	$	(9,288,308	)

Class C Shares:
Shares sold		21,517		$	208,316			28,772		$	281,596
Shares issued in reinvestment of distributions		735			7,066			318			3,106
Shares redeemed^a		(12,740	)		(123,678	)		(25,418	)		(248,841	)

Net increase (decrease)		9,512		$	91,704			3,672		$	35,861

Class R Shares:
Shares sold		3,238		$	31,606			—		$	—
Shares issued in reinvestment of distributions		181			1,752			71			695
Shares redeemed		(3	)		(35	)		(1,001	)		(9,851	)

Net increase (decrease)		3,416		$	33,323			(930	)	$	(9,156	)



franklintempleton.com	Annual Report	47

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

2. Shares of Beneficial Interest (continued)


	Year Ended April 30,
	2019						2018
	Shares			Amount			Shares			Amount
Class R6 Shares:
Shares sold		31,582,771		$	307,592,000			21,649,534		$	212,625,650
Shares issued in reinvestment of distributions		29,382			284,707			9,792			96,166
Shares redeemed		(1,157,235	)		(11,244,125	)		(126,232	)		(1,242,832	)

Net increase (decrease)		30,454,918		$	296,632,582			21,533,094		$	211,478,984

Advisor Class Shares:

Shares sold		4,301		$	41,736			19,425		$	191,301
Shares issued in reinvestment of distributions		1,232			11,923			635			6,240
Shares redeemed		(4,298	)		(42,012	)		(181	)		(1,792	)

Net increase (decrease)		1,235		$	11,647			19,879		$	195,749

^aMay include a portion of Class C shares that were automatically converted to Class A.

3. Transactions with Affiliates


Subsidiary		Affiliation
Franklin Advisers, Inc. (Advisers)		Investment manager
Franklin Templeton Institutional, LLC (FT Institutional)		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 Advisers based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.550%		Up to and including $1 billion
0.500%		Over $1 billion, up to and including $5 billion
0.450%		Over $5 billion, up to and including $10 billion
0.445%		Over $10 billion, up to and including $15 billion
0.440%		Over $15 billion, up to and including $20 billion
0.435%		In excess of $20 billion

Under a subadvisory agreement, FT Instituitional, an affiliate of Advisers, provides subadvisory services to the Fund. The subadvisory fee is paid by Advisers based on the Fund’s average daily net assets, and is not an additional expense of the Fund.

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.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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. 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 brokers/dealers	$	181
CDSC retained	$	546

Effective March 1, 2019, certain front-end sales charges on Class A shares, if any, were lowered. Further details are disclosed in the Fund’s Prospectus.

e. Transfer Agent Fees

For the year ended April 30, 2019, the Fund paid transfer agent fees of $83,495, of which $83,233 was retained by Investor Services.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

3. Transactions with Affiliates (continued)

f. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended April 30, 2019, the Fund held investments in affiliated management investment companies as follows:


	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions			Number of Shares Held at End of Year		Value at End of Year		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		44,846,991		362,467,562		(329,452,655	)		77,861,898		$77,861,898		$1,286,983		$ —		$ —

g. Waiver and Expense Reimbursements

Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, acquired fund fees and expenses and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for Class A, Class C, Class R and Advisor Class of the Fund do not exceed 0.85% and for Class R6 do not exceed 0.81%, based on the average net assets of each class until August 31, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to September 1, 2018, expenses (excluding certain fees and expenses as previously disclosed) for Class R6 were limited to 0.85% based on the average net assets of the class.

Investor Services has voluntarily agreed in advance to waive or limit its fees so that the new transfer agent fee arrangement effective November 1, 2017 will not increase the fees retained by more than 0.02% based on the average net assets of the class. Investor Services discontinued the waiver effective October 31, 2018.

h. Other Affiliated Transactions

At April 30, 2019, the shares of the Fund were owned by the following entities/investment companies:


	Shares		Percentage of Outstanding Shares^a
Franklin Resources, Inc		41,816,072		80.0%
Franklin Total Return Fund		10,172,940		19.5%
		51,989,012		99.5%

^aInvestment activities of significant shareholders could have a material impact on the Fund.

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, 2019, the custodian fees were reduced as noted in the Statement of Operations.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains.

At April 30, 2019, the capital loss carryforwards were as follows:


Capital loss carryforwards not subject to expiration:
Short term	$	1,069,279
Long term		2,264,409

Total capital loss carryforwards	$	3,333,688

The tax character of distributions paid during the years ended April 30, 2019 and 2018, was as follows:


	2019		2018
Distributions paid from:
Ordinary income	$	11,879,347	$	1,715,728
Long term capital gain		555,368		109,613
	$	12,434,715	$	1,825,341

At April 30, 2019, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:


Cost of investments	$	516,432,581

Unrealized appreciation	$	6,937,414
Unrealized depreciation		(10,007,284	)

Net unrealized appreciation (depreciation)	$	(3,069,870	)

Distributable earnings-undistributed ordinary income	$	4,596,603

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of paydown losses, swaps and financial futures transactions.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2019, aggregated $348,007,267 and $78,955,568, respectively.

7. Credit Risk

At April 30, 2019, the Fund had 12.7% of its portfolio invested in high yield securities, or other securities rated below investment grade and unrated securities, if any. 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.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

8. Other Derivative Information

At April 30, 2019, the 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

Hedging Instruments

Statement of

Assets and Liabilities

Location

Fair Value

Statement of

Assets and Liabilities

Location

Fair Value

Interest rate contracts

Investments in securities, at value

$ 26,239

Options written, at value

$ —

Variation margin on futures contracts

229,060

Variation margin on futures contracts

600,361

Variation margin on centrally cleared swap contracts

—

Variation margin on centrally cleared swap contracts

1,528,383

Unrealized appreciation on OTC swap contracts

1,716,510

Unrealized depreciation on OTC swap contracts

—

Foreign exchange contracts

Unrealized appreciation on OTC forward exchange contracts

279,206

Unrealized depreciation on OTC forward exchange contracts

89,605

Credit contracts

Investments in securities, at value

111,285

Options written, at value

30,265

OTC swap contracts (upfront payments)

248,730

OTC swap contracts (upfront receipts)

1,863,576

Unrealized appreciation on OTC swap contracts

314,126

Unrealized depreciation on OTC swap contracts

592,469

Inflation contracts

Variation margin on centrally cleared swap contracts

1,002

Variation margin on centrally cleared swap contracts

169,336

Totals

$ 2,926,158

$4,873,995

^aPurchased option contracts are included in investments in securities, at value in the Statement of Assets and Liabilities.

^bThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Statement of Investments. Only the variation margin receivable/payable at year end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

For the year ended April 30, 2019, the effect of derivative contracts in the Statement of Operations was as follows:

Derivative Contracts

Not Accounted for as

Hedging Instruments

Statement of

Operations Location

Net Realized

Gain (Loss) for

the Year

Statement of

Operations Location

Net Change

in Unrealized

Appreciation

(Depreciation)

for the Year

Net realized gain (loss) from:

Net change in unrealized

appreciation (depreciation) on:

Interest rate contracts

Investments

$(172,796)

Investments

$ (133,922)

Written options

15,180

Written options

(1,380)

Futures contracts

(991,042)

Futures contracts

(494,189)

Swap contracts

(67,416)

Swap contracts

(131,781)

Foreign exchange contracts

Forward exchange contracts

474,291

Forward exchange contracts

213,188

Credit contracts

Investments

5,719

Investments

(96,299)

Written options

30,180

Written options

23,955

Swap contracts

778,919

Swap contracts

(202,065)

Inflation contracts

Swap contracts

(40)

Swap contracts

(207,742)

Totals

$ 72,995

$(1,030,235)

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.



52	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

For the year ended April 30, 2019, the average month end notional amount of futures contracts, options and swap contracts and the average month end contract value for forward exchange contracts, were as follows:


Futures contracts	$	106,181,424
Options		74,964,462	shares
Swap contracts		158,507,557
Forward exchange contracts		25,527,325

At April 30, 2019, OTC derivative assets and liabilities are as follows:


	Gross Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
	Assets^a		Liabilities^a
Derivatives
Forward exchange contracts		$ 279,206		$ 89,605
Options purchased		137,524		—
Options written		—		30,265
Swap contracts		2,279,366		2,456,045
Total		$2,696,096		$2,575,915

^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, 2019, OTC derivative assets, which may be offset against OTC derivative liabilities and collateral received from the counterparty, are as follows:


			Amounts Not Offset in the
			Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received^a			Cash Collateral Received			Net Amount (Not less than zero)
Counterparty
BNDP		$ 61,790		$ (18,324	)		$ —			$ —			$ 43,466
BZWS		32,019		(32,019	)		—			—			—
CITI		800,311		(742,917	)		—			—			57,394
DBAB		364,377		(2,901	)		—			(350,000	)		11,476
FBCO		—		—			—			—			—
GSCO		71,062		(71,062	)		—			—			—
JPHQ		1,197,542		(720,519	)		(267,634	)		—			209,389
MSCO		18,937		(18,937	)		—			—			—
RBS		70,175		(12,019	)		—			—			58,156
UBSW		79,883		(38,798	)		—			—			41,085
Total		$2,696,096		$(1,657,496	)		$(267,634	)		$(350,000	)		$420,966

^aAt April 30, 2019, the Fund received U.S. Treasury Bonds and Notes as collateral for derivatives.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

8. Other Derivative Information (continued)

At April 30, 2019, OTC derivative liabilities, which may be offset against OTC derivative assets and collateral pledged to the counterparty, are as follows:


			Amounts Not Offset in the
			Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged		Cash Collateral Pledged			Net Amount (Not less than zero)
Counterparty
BNDP		$ 18,324		$ (18,324	)		$ —		$ —			$ —
BZWS		621,250		(32,019	)		—		(440,000	)		149,231
CITI		742,917		(742,917	)		—		—			—
DBAB		2,901		(2,901	)		—		—			—
FBCO		271,640		—			—		(240,000	)		31,640
GSCO		84,489		(71,062	)		—		—			13,427
JPHQ		720,519		(720,519	)		—		—			—
MSCO		63,058		(18,937	)		—		—			44,121
RBS		12,019		(12,019	)		—		—			—
UBSW		38,798		(38,798	)		—		—			—
Total		$2,575,915		$(1,657,496	)		$ —		$(680,000	)		$238,419

See Note 1(c) regarding derivative financial instruments.

See Abbreviations on page 56.

9. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 7, 2020. 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 0.15% 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, 2019, the Fund did not use the Global Credit Facility.

10. 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.)



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

•

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.

A summary of inputs used as of April 30, 2019, 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:^a
Management Investment Companies	$	4,519,692	$	—	$	—	$	4,519,692
Corporate Bonds		—		94,950,773		—		94,950,773
Foreign Government and Agency Securities		—		14,493,764		—		14,493,764
U.S. Government and Agency Securities		—		7,413,513		—		7,413,513
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		314,433,738		—		314,433,738
Municipal Bonds		—		799,231		—		799,231
Options Purchased		—		137,524		—		137,524
Short Term Investments		77,861,898		—		—		77,861,898
Total Investments in Securities	$	82,381,590	$	432,228,543	$	—	$	514,610,133

Other Financial Instruments:
Futures Contracts	$	229,060	$	—	$	—	$	229,060
Forward Exchange Contracts		—		279,206		—		279,206
Swap Contracts		—		2,031,638		—		2,031,638
Total Other Financial Instruments	$	229,060	$	2,310,844	$	—	$	2,539,904

Liabilities:
Other Financial Instruments:
Options Written	$	—	$	30,265	$	—	$	30,265
Futures Contracts		600,361		—		—		600,361
Forward Exchange Contracts		—		89,605		—		89,605
Swap Contracts		—		2,290,188		—		2,290,188
Total Other Financial Instruments	$	600,361	$	2,410,058	$	—	$	3,010,419

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

11. 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.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

Abbreviations


Counterparty/Exchange		Currency		Selected Portfolio
BNDP	BNP Paribas	AUD	Australian Dollar	CLO	Collateralized Loan Obligation
BZWS	Barclays Bank PLC	COP	Colombian Peso	CPI	Consumer Price Index
CITI	Citigroup, Inc.	DOP	Dominican Peso	ETF	Exchange Traded Fund
DBAB	Deutsche Bank AG	EUR	Euro	FHLMC	Federal Home Loan Mortgage Corp.
FBCO	Credit Suisse International	GBP	British Pound	FNMA	Federal National Mortgage Association
GSCO	The Goldman Sachs Group, Inc.	IDR	Indonesian Rupiah	FRN	Floating Rate Note
JPHQ	JP Morgan Chase & Co.	USD	United States Dollar	GO	General Obligation
MSCO	Morgan Stanley	UYU	Uruguayan Peso	IO	Interest Only
RBS	Royal Bank of Scotland PLC	ZAR	South African Rand	LIBOR	London InterBank Offered Rate
UBSW	UBS AG			RDA	Redevelopment Agency/Authority
				SFR	Single Family Revenue


Index
CDX.EM.Series number		CDX Emerging Markets Index
CDX.NA.HY.Series number		CDX North America High Yield Index
CDX.NA.IG.Series number		CDX North America Investment Grade Index
MCDX.NA.Series number		MCDX North America Index



56	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Strategic Series and Shareholders of Franklin Flexible Alpha Bond Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Franklin Flexible Alpha Bond Fund (the “Fund”) as of April 30, 2019, the related statement of operations for the year ended April 30, 2019, the statement of changes in net assets for each of the two years in the period ended April 30, 2019, including the related notes, and the financial highlights for each of the periods indicated therein (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of April 30, 2019, 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 ended April 30, 2019 and the financial highlights for each of the periods indicated therein in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of April 30, 2019 by correspondence with the custodian, transfer agent, and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

June 17, 2019

We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.



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FRANKLIN STRATEGIC SERIES

Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $555,368 as a long term capital gain dividend for the fiscal year ended April 30, 2019.

Under Section 871(k)(2)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $115,922 as a short term capital gain dividend for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended April 30, 2019.

Under Section 871(k)(1)(C) of the Internal Revenue Code, the Fund hereby reports the maximum amount allowable but no less than $9,731,236 as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Internal Revenue Code for the fiscal year ended April 30, 2019.



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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 Fund, principal occupations during at least the past five years and number of U.S. registered portfolios overseen in the Franklin Templeton fund complex, are shown below. Generally, each board member serves until that person’s successor is elected and qualified.

Independent Board Members


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

Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1991	136	Bar-S Foods (meat packing company) (1981-2010).

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).


Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2017	112	Hess Corporation (exploration of oil and gas) (2014-present).

Principal Occupation During at Least the Past 5 Years:
Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present);member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).


Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2014	136	Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present).

Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); 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) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 1998 and Lead Independent Trustee since March 2019	136	Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) 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) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2009	136	Boeing Capital Corporation (aircraft financing) (2006-2013).

Principal Occupation During at Least the Past 5 Years:
Executive Vice President, Counselor and Senior Advisor to Boeing Chairman and Board of Directors, The Boeing Company (aerospace company) (May 2019); and formerly, General Counsel and member of the Executive Council, The Boeing Company (2006-2019); 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)


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

Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	136	The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012).

Principal Occupation During at Least the Past 5 Years:
Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; 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).

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

**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2013	150	None

Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director 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 42 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).


**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906	Chairman of the Board and Trustee	Chairman of the Board since 2013 and Trustee since 1991	136	None

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.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 40 of the investment companies in Franklin Templeton.


Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.


Sonal Desai, Ph.D. (1963) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since December 2018	Not Applicable	Not Applicable

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 18 of the investment companies in Franklin Templeton.



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Interested Board Members and Officers (continued)


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

Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906	Treasurer, Chief Financial Officer and, Chief Accounting Officer	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting and officer of 28 of the investment companies in Franklin Templeton.


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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.


Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Co- Secretary	Vice President since 2009 and Co-Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton.


Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).


Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President –AML Compliance	Since 2016	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton.


Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.


Edward D. Perks (1970) One Franklin Parkway San Mateo, CA 94403-1906	President and Chief Executive Officer – Investment Management	Since December 2018	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
President and Director, Franklin Advisers, Inc.; and officer of nine of the investment companies in Franklin Templeton (since December 2018).



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FRANKLIN STRATEGIC SERIES

Interested Board Members and Officers (continued)


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

Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Compliance Officer	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Senior Associate General Counsel, Franklin Templeton (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).


Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.


Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
General Counsel, Executive Vice President and Secretary, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.


Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President and Co-Secretary	Vice President since 2011 and Co-Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton.

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.



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Shareholder Information

Board Approval of Investment Management Agreements

FRANKLIN STRATEGIC SERIES

Franklin Flexible Alpha Bond Fund

(Fund)

At an in-person meeting held on April 16, 2019 (Meeting), the Board of Trustees (Board) of Franklin Strategic Series (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of the investment management agreement between Franklin Advisers, Inc. (FAI) and the Trust, on behalf of the Fund and the investment sub-advisory agreement between FAI and Franklin Templeton Institutional, LLC (Sub-Adviser), an affiliate of FAI, on behalf of the Fund (each a Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of each Management Agreement. FAI and the Sub-Adviser are each referred to herein as a Manager.

In considering the continuation of each Management Agreement, the Board reviewed and considered information provided by each Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to each Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a telephonic contract renewal meeting at which the Independent Trustees conferred amongst themselves and Independent Trustee counsel about contract renewal matters. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of each Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services provided by each Manager; (ii) the investment performance of the Fund; (iii) the costs of the services provided and profits realized by each Manager and its affiliates from the relationship with the Fund; (iv) the extent to which economies of scale are realized as the Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.

Management Agreement is in the interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses some primary factors relevant to the Board’s determination.

Nature, Extent and Quality of Services

The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by each Manager and its affiliates to the Fund and its shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of each Manager; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for the Fund; reports on expenses, shareholder services, marketing support payments made to financial intermediaries and third party servicing arrangements; legal and compliance matters; risk controls; pricing and other services provided by each Manager and its affiliates; and management fees charged by each Manager and its affiliates to US funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board also reviewed and considered an annual report on payments made by Franklin Templeton Investments (FTI) or the Fund to financial intermediaries, as well as a memorandum relating to third-party servicing arrangements in response to a guidance update in 2016 from the US Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees. The Board noted management’s continuing efforts and expenditures in establishing effective business continuity plans and developing strategies to address areas of heightened concern in the mutual fund industry, such as cybersecurity and liquidity risk management. The Board also recognized management’s commitment to facilitating Board oversight of liquidity through the designation of a liquidity/risk administrator and the development of reports that highlight the amount of illiquid investments for the Fund.

The Board also reviewed and considered the benefits provided to Fund shareholders of investing in a fund that is part of the Franklin Templeton family of funds. The Board noted the financial position of Franklin Resources, Inc. (FRI), the Managers’ parent, and its commitment to the mutual fund business as evidenced by its continued introduction of new funds, reassessment of the fund offerings in response to the market environment and project initiatives and capital investments relating to the services provided to the Fund by the FTI organization.



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FRANKLIN FLEXIBLE ALPHA BOND FUND

SHAREHOLDER INFORMATION

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by each Manager and its affiliates to the Fund and its shareholders.

Fund Performance

The Board reviewed and considered the performance results of the Fund over various time periods ended January 31, 2019. The Board considered the performance returns for the Fund in comparison to the performance returns of mutual funds deemed comparable to the Fund included in a universe (Performance Universe) selected by Broadridge Financial Solutions, Inc. (Broadridge), an independent provider of investment company data. The Board received a description of the methodology used by Broadridge to select the mutual funds included in a Performance Universe. The Board also reviewed and considered Fund performance reports provided and discussions that occurred with portfolio managers at Board meetings throughout the year. A summary of the Fund’s performance results is below.

The Performance Universe for the Fund included the Fund and all retail and institutional alternative credit focus funds. The Fund commenced operations on August 3, 2015, and thus has been in operation for less than five years. The Board noted that the Fund’s annualized income return for the one- and three-year periods was below the median of its Performance Universe. The Board noted that the Fund’s annualized total return for the three-year period was below the median of its Performance Universe, but for the one-year period was above the median and in the second quintile of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory, especially given its short period of operation.

Comparative Fees and Expenses

The Board reviewed and considered information regarding the Fund’s actual total expense ratio and its various components, including, as applicable, management fees; transfer agent expenses; underlying fund expenses; Rule 12b-1 and non-Rule 12b-1 service fees; and other non-management fees. The Board also noted the quarterly and annual reports it receives on all marketing support payments made by FTI to financial intermediaries. The Board considered the actual total expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers, if any (Management Rate) of the Fund in comparison to the median expense ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure to the Fund selected by Broadridge (Expense Group).

Broadridge fee and 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 and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges, and the actual total expense ratio, for comparative consistency, was shown for Class A shares for funds with multiple classes of shares. The Board received a description of the methodology used by Broadridge to select the mutual funds included in an Expense Group.

The Expense Group for the Fund included the Fund and 12 other alternative credit focus funds. The Board noted that the Management Rate and actual total expense ratio for the Fund were below the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable. In doing so, the Board noted that the Fund’s actual total expense ratio reflected a fee waiver from management and that the Sub-Adviser was paid by FAI out of the management fee FAI received from the Fund.

Profitability

The Board reviewed and considered information regarding the profits realized by each Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board considered the Fund profitability analysis that addresses the overall profitability of FTI’s US fund business, as well as its profits in providing investment management and other services to each of the individual funds during the 12-month period ended September 30, 2018, being the most recent fiscal year-end for FRI. The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product-related changes, the overall methodology has remained consistent with that used in the Fund’s profitability report presentations from prior years. Additionally, Pricewaterhouse-Coopers LLP, auditor to FRI and certain Franklin Templeton funds, has been engaged to periodically review and assess the allocation methodologies to be used solely by the Fund’s Board with respect to the profitability analysis.

The Board noted management’s belief that costs incurred in establishing the infrastructure necessary for the type of mutual fund operations conducted by each Manager and its affiliates



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FRANKLIN FLEXIBLE ALPHA BOND FUND

SHAREHOLDER INFORMATION

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 noted management’s expenditures in improving shareholder services provided to the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent SEC and other regulatory requirements.

The Board also considered the extent to which each 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 service providers and counterparties. Based upon its consideration of all these factors, the Board concluded that the level of profits realized by each Manager and its affiliates from providing services to the Fund was not excessive in view of the nature, extent and quality of services provided to the Fund.

Economies of Scale

The Board reviewed and considered the extent to which each Manager may realize economies of scale, if any, as the Fund grows larger and whether the Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints, which operate generally to share any economies of scale with the Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered each Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments each Manager incurs across the Franklin Templeton family of funds as a whole. The Board concluded that to the extent economies of scale may be realized by each Manager and its affiliates, the Fund’s management fee structure provided a sharing of benefits with the Fund and its shareholders as the Fund grows.

Conclusion

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 Trust, on behalf of 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 as an exhibit to its report on Form N-PORT. Shareholders may view the filed Form N-PORT 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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		Annual Report and Shareholder Letter
		Franklin Flexible Alpha Bond Fund
		Investment Manager
		Franklin Advisers, Inc.
		Subadvisor
		Franklin Templeton Institutional, LLC
		Distributor
		Franklin Templeton Distributors, Inc.
		(800) DIAL BEN^®/ 342-5236
		franklintempleton.com
		Shareholder Services
		(800) 632-2301

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.


© 2019 Franklin Templeton Investments. All rights reserved.		953 A 06/19

LOGO

Franklin Templeton

Dear Shareholder:

During the 12 months ended April 30, 2019, the U.S. economy continued to grow amid positive economic data and corporate earnings, and the unemployment rate declined.

During the period, markets reflected concerns about the U.S. Federal Reserve’s (Fed’s) interest-rate path, U.S. political uncertainties and U.S.-China trade disputes, but these concerns were mitigated by the Fed’s patient monetary policy stance and investor optimism about a trade deal. Within this environment, investment-grade bonds, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, had a positive total return for the 12-month period.

We are committed to our long-term perspective and disciplined investment approach as we conduct a rigorous, fundamental analysis of securities with a regular emphasis on investment risk management.

In addition, Franklin Strategic Income Fund’s annual report includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices.

We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs

Sincerely,

LOGO

Edward Perks, CFA

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

CFA^® is a trademark owned by CFA Institute.


		Not FDIC Insured \| May Lose Value \| No Bank Guarantee



franklintempleton.com	Not part of the annual report	1


Contents

Annual Report

Franklin Strategic Income Fund			3

Performance Summary			7

Your Fund’s Expenses			10

Consolidated Financial Highlights and Consolidated Statement of Investments			11

Consolidated Financial Statements			43

Notes to Consolidated Financial Statements			48

Report of Independent Registered Public Accounting Firm			67

Board Members and Officers			68

Shareholder Information			72

Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools.



2	Annual Report	franklintempleton.com

Annual Report

Franklin Strategic Income Fund

This annual report for Franklin Strategic Income Fund covers the fiscal year ended April 30, 2019.

Your Fund’s Goal 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, variable and floating rate income securities, including bonds, U.S. and foreign government and agency securities, corporate loans (and loan participations), mortgage-backed securities and other asset-backed securities and convertible securities.

Performance Overview

The Fund’s Class A shares posted a +4.52% cumulative total return for the 12 months under review. In comparison, the Bloomberg Barclays U.S. Aggregate Bond Index, which represents the U.S. investment-grade fixed rate taxable bond market, posted a +5.29% total return.¹ The 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, posted a +3.93% total return.² You can find more of the Fund’s 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. For most recent month-end performance, go to franklintempleton.com or call (800) 342-5236.

Economic and Market Overview

The U.S. economy grew during the 12-month period. The economy expanded at a faster rate in 2019’s first quarter after moderating in the previous two quarters. Growth in consumer spending, inventory investment, exports, state and local government spending and business investment was partly offset by declines in housing investment and federal government spending. The manufacturing and services sectors expanded during the period. The unemployment rate decreased from 3.9% in April 2018 to 3.6% at period-end.³ The annual inflation rate, as measured by the Consumer Price Index, decreased from 2.5% in April 2018 to 2.0% at period-end.³

1. Source: Morningstar.

2. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended 4/30/19, this category consisted of 328 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.

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 Consolidated Statement of Investments (SOI). The Consolidated SOI begins on page 16.



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FRANKLIN STRATEGIC INCOME FUND

decisions. Overall, the 10-year Treasury yield declined from 2.95% at the beginning of the period to 2.51% at period-end.

Portfolio Composition*

Based on Consolidated Net Assets



	4/30/19

High-Yield Corporate Bonds		26.2%

Mortgage-Backed Securities		20.9%

Floating-Rate Loans		19.3%

Investment-Grade Corporate Bonds		11.3%

International Government & Agency Bonds		9.8%

Collateralized Loan Obligations		9.4%

Interest-Rate Derivatives		6.4%

U.S. Treasuries		3.3%

Commercial Mortgage-Backed Securities		2.7%

Treasury Inflation-Protected Securities		2.5%

Municipal Bonds		2.3%

Asset-Backed Securities		2.1%

Other		1.2%

Marketplace Loans		0.5%

Covered Bonds		0.1%

Short-Term Investments & Other Net Assets		-3.6%

*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 composition may not match the SOI.

Investment Strategy

We use an active asset allocation strategy to try to achieve the Fund’s investment goals. We employ a top-down analysis of macroeconomic trends combined with a bottom-up fundamental analysis of market sectors, industries and issuers to try to take advantage of varying sector reactions to economic events. We regularly enter into various currency-related transactions involving derivative instruments, including currency and cross currency forwards, currency swaps, currency and currency index futures contracts and currency options. We may also enter into interest-rate and credit-related transactions involving derivative instruments, including interest-rate, fixed income total return and credit default swaps and interest rate and/or bond futures contracts.

What is a currency forward contract?

What is a futures contract?

What are swap agreements?

What is an option?

An option is a contract to buy or sell a specific financial product known as the option’s underlying instrument at a specific price. The buyer of an option has the right, but not the obligation, to buy or sell the underlying instrument at or until a specified expiration date. Conversely, the seller (“writer”) of an option who opens a transaction is obligated to buy or sell the underlying instrument should the option holder exercise that right.

Manager’s Discussion

For global fixed income markets, the first half of the 12 months under review were generally characterized by low levels of volatility, strong risk appetite and relatively low interest rates. The Fed raised its rates three times during the period in June, September and December of 2018 citing continued strength in the economy and strong labor conditions. Volatility and a generally pessimistic market tone in the last few months of 2018 gave way to improved market conditions in the first quarter of 2019. Global financial markets responded favorably to a dovish tilt in policy outlook by global central banks. Additionally, anticipation of an eventual U.S. trade deal with China, broad equity market recoveries and further restoration of risk appetite among global financial market participants contributed toward positive market sentiments as spreads across fixed income sectors generally trended lower during the first quarter of 2019. Outside the U.S., many major economies kept their interest rates unchanged.



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FRANKLIN STRATEGIC INCOME FUND

In this environment, high-yield corporate credit outpaced U.S. Treasuries on a duration-matched basis. Senior secured floating-rate loans, non-agency residential mortgage-backed securities (RMBS), investment-grade corporate credit and commercial mortgage-backed securities (CMBS) also delivered strong performance.

What is duration?

Dividend Distributions*

5/1/18–4/30/19


			Dividend per Share (cents)
Month	Class A		Class C		Class R		Class R6		Advisor Class
May		3.11		2.79		2.92		3.39		3.31
June		3.46		3.12		3.25		3.79		3.67
July		3.61		3.29		3.41		3.92		3.81
August		3.61		3.27		3.40		3.94		3.82
September		3.61		3.31		3.43		3.90		3.79
October		3.62		3.14		3.38		3.97		3.84
November		3.53		3.22		3.33		3.82		3.72
December		3.53		3.23		3.34		3.82		3.72
January		3.54		3.20		3.32		3.86		3.75
February		3.49		3.18		3.30		3.78		3.68
March		3.50		3.20		3.32		3.79		3.67
April		3.50		3.19		3.32		3.80		3.69
Total		42.11		38.14		39.72		45.78		44.47

*The distribution amount is the sum of all net investment income distributions for the period shown. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

During the period, the Fund’s U.S. duration exposure was a significant boost to performance. Additionally, our exposure to high-yield corporate credit also added to results. Senior secured floating rate loans, tax-exempt municipal bonds and investment-grade corporate credit also benefited returns. In contrast, our exposure to foreign currencies, fixed-rate agency mortgage-backed securities (MBS) and sovereign emerging markets securities detracted from performance.

What is the yield curve?

A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.

Our largest allocation is in corporate credit inclusive of high-yield and investment-grade corporate credit, senior

secured floating rate bank loans and collateralized loan obligations (CLOs), with most of the exposure in below investment-grade corporate securities. We pared our investment-grade and high-yield corporate credit exposures over the period, while increasing our allocation to CLOs and senior secured floating-rate loans. We increased our RMBS allocation as we prefer to remain allocated to the seasoned credit risk transfer where fundamental and technical forces remain positive.

Our foreign currency exposure was held through a basket of developed-market shorts with major positions in the Australian dollar, Canadian dollar and South Korean won versus a basket of emerging market long positions with major positions in Indonesian rupiah, Brazilian Real and Mexican peso.

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



		Sonal Desai, Ph.D.


		Roger A. Bayston, CFA

		Patricia O’Connor, CFA Portfolio Management Team



franklintempleton.com	Annual Report	5

FRANKLIN STRATEGIC INCOME FUND



6	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC INCOME FUND

Performance Summary as of April 30, 2019

Performance as of 4/30/19¹

Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 3.75% and the minimum is 0%. Class A: 3.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com.



Share Class	Cumulative Total Return²	Average Annual Total Return³
A⁴

1-Year	+4.52%	+0.65%

5-Year	+10.80%	+1.30%

10-Year	+74.56%	+5.33%

Advisor

1-Year	+4.88%	+4.88%

5-Year	+12.18%	+2.33%

10-Year	+78.89%	+5.99%


	Distribution			30-Day Standardized Yield⁶
Share Class	Rate⁵			(with fee waiver)			(without fee waiver)
A		4.22	%		4.33	%		4.31	%

Advisor		4.62	%		4.76	%		4.72	%

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.


See page 9 for Performance Summary footnotes.



franklintempleton.com	Annual Report	7

FRANKLIN STRATEGIC INCOME FUND

PERFORMANCE SUMMARY

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

Class A (5/1/09–4/30/19)

LOGO

Advisor Class (5/1/09–4/30/19)

LOGO

See page 9 for Performance Summary footnotes.



8	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC INCOME FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–4/30/19)


Share Class	Net Investment Income
A		$0.4211
C		$0.3814
R		$0.3972
R6		$0.4578
Advisor		$0.4447

Total Annual Operating Expenses⁹


	With Fee			Without Fee
Share Class	Waiver			Waiver
A		0.88	%		0.93	%
Advisor		0.63	%		0.68	%

Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus.

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.

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. Return for less than one year, if any, has not been annualized.

5. 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 Advisor Class) per share on 4/30/19.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. Source: Morningstar. The Bloomberg 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.

8. 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 4/30/19, there were 328 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.

9. Figures are as stated in the Fund’s current prospectus and may differ from the expense ratios disclosed in the Your Fund’s Expenses and Consolidated Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown. See www.franklintempletondatasources.com for additional data provider information.



franklintempleton.com	Annual Report	9

FRANKLIN STRATEGIC INCOME FUND

Your Fund’s Expenses

Actual Fund Expenses

Hypothetical Example for Comparison with Other Funds


		Actual		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
Share Class	Beginning Account Value 11/1/18	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Ending Account Value 4/30/19	Expenses Paid During Period 11/1/18–4/30/19^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,040.90	$4.25	$1,020.63	$4.21	0.84%
C	$1,000	$1,038.90	$6.27	$1,018.65	$6.21	1.24%
R	$1,000	$1,039.80	$5.51	$1,019.39	$5.46	1.09%
R6	$1,000	$1,043.90	$2.28	$1,022.56	$2.26	0.45%
Advisor	$1,000	$1,042.10	$2.99	$1,021.87	$2.96	0.59%

2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses.



10	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

Consolidated Financial Highlights

Franklin Strategic Income Fund


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class A

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.61			$ 9.84			$ 9.32			$10.04			$10.57

Income from investment operations^a:

Net investment income^b		0.42			0.39			0.39			0.42			0.42

Net realized and unrealized gains (losses)		—	^c		(0.32	)		0.30			(0.74	)		(0.30	)

Total from investment operations		0.42			0.07			0.69			(0.32	)		0.12

Less distributions from:

Net investment income and net foreign currency gains		(0.42	)		(0.30	)		(0.17	)		(0.40	)		(0.55	)

Net realized gains		—			—			—			—			(0.10	)

Total distributions		(0.42	)		(0.30	)		(0.17	)		(0.40	)		(0.65	)

Net asset value, end of year		$ 9.61			$ 9.61			$ 9.84			$ 9.32			$10.04

Total return^d		4.52%			0.64%			7.50%			(3.14	)%		1.16%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.89%			0.90%			0.88%			0.88%			0.86%

Expenses net of waiver and payments by affiliates^e		0.84%			0.85%			0.82%			0.84%			0.85%

Net investment income		4.39%			3.93%			4.08%			4.44%			4.03%

Supplemental data

Net assets, end of year (000’s)		$3,131,799			$3,291,002			$3,833,786			$4,500,752			$5,242,844

Portfolio turnover rate		116.21%	^f		115.94%			140.83%			88.04%			72.51%

Portfolio turnover rate excluding mortgage dollar rolls^g		39.01%	^f		47.40%			87.33%			48.33%			49.36%

^aThe amount shown for a share outstanding throughout the period may not correlate with the Consolidated 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.

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^eBenefit of expense reduction rounds to less than 0.01%.

^fExcludes the value of portfolio activity as a result of in-kind transactions. See Note 6.

^gSee Note 1(i) regarding mortgage dollar rolls.



franklintempleton.com	The accompanying notes are an integral part of these consolidated financial statements. \| Annual Report	11

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class C

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.60			$ 9.84			$ 9.31			$10.04			$10.57

Income from investment operations^a:
Net investment income^b		0.38			0.35			0.35			0.38			0.38
Net realized and unrealized gains (losses)		0.01			(0.33	)		0.31			(0.75	)		(0.30	)

Total from investment operations		0.39			0.02			0.66			(0.37	)		0.08

Less distributions from:
Net investment income and net foreign currency gains		(0.38	)		(0.26	)		(0.13	)		(0.36	)		(0.51	)
Net realized gains		—			—			—			—			(0.10	)

Total distributions		(0.38	)		(0.26	)		(0.13	)		(0.36	)		(0.61	)

Net asset value, end of year		$ 9.61			$ 9.60			$ 9.84			$ 9.31			$10.04

Total return^c		4.19%			0.14%			7.19%			(3.64	)%		0.76%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.29%			1.30%			1.28%			1.28%			1.26%

Expenses net of waiver and payments by affiliates^d		1.24%			1.25%			1.22%			1.24%			1.25%

Net investment income		3.99%			3.53%			3.68%			4.04%			3.63%

Supplemental data

Net assets, end of year (000’s)		$716,327			$1,078,890			$1,385,981			$1,645,852			$2,070,739

Portfolio turnover rate		116.21%	^e		115.94%			140.83%			88.04%			72.51%

Portfolio turnover rate excluding mortgage dollar rolls^f		39.01%	^e		47.40%			87.33%			48.33%			49.36%

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable.

^dBenefit of expense reduction rounds to less than 0.01%.

^eExcludes the value of portfolio activity as a result of in-kind transactions. See Note 6.

^fSee Note 1(i) regarding mortgage dollar rolls.



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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.57			$ 9.81			$ 9.28			$10.01			$10.54

Income from investment operations^a:

Net investment income^b		0.39			0.36			0.37			0.39			0.39

Net realized and unrealized gains (losses)		0.01			(0.33	)		0.31			(0.74	)		(0.29	)

Total from investment operations		0.40			0.03			0.68			(0.35	)		0.10

Less distributions from:

Net investment income and net foreign currency gains		(0.40	)		(0.27	)		(0.15	)		(0.38	)		(0.53	)

Net realized gains		—			—			—			—			(0.10	)

Total distributions		(0.40	)		(0.27	)		(0.15	)		(0.38	)		(0.63	)

Net asset value, end of year		$ 9.57			$ 9.57			$ 9.81			$ 9.28			$10.01

Total return		4.28%			0.29%			7.38%			(3.50	)%		0.91%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.14%			1.15%			1.13%			1.13%			1.11%

Expenses net of waiver and payments by affiliates^c		1.09%			1.10%			1.07%			1.09%			1.10%

Net investment income		4.14%			3.68%			3.83%			4.19%			3.78%

Supplemental data

Net assets, end of year (000’s)		$85,458			$105,692			$146,552			$181,671			$223,758

Portfolio turnover rate		116.21%	^d		115.94%			140.83%			88.04%			72.51%

Portfolio turnover rate excluding mortgage dollar rolls^e		39.01%	^d		47.40%			87.33%			48.33%			49.36%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dExcludes the value of portfolio activity as a result of in-kind transactions. See Note 6.

^eSee Note 1(i) regarding mortgage dollar rolls.



franklintempleton.com	The accompanying notes are an integral part of these consolidated financial statements. \| Annual Report	13

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income Fund (continued)


	Year Ended April 30,
	2019			2018			2017			2016			2015
Class R6

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.62			$ 9.86			$ 9.33			$10.05			$10.58

Income from investment operations^a:
Net investment income^b		0.45			0.43			0.43			0.46			0.46
Net realized and unrealized gains (losses)		0.02			(0.34	)		0.31			(0.74	)		(0.30	)

Total from investment operations		0.47			0.09			0.74			(0.28	)		0.16

Less distributions from:
Net investment income and net foreign currency gains		(0.46	)		(0.33	)		(0.21	)		(0.44	)		(0.59	)
Net realized gains		—			—			—			—			(0.10	)

Total distributions		(0.46	)		(0.33	)		(0.21	)		(0.44	)		(0.69	)

Net asset value, end of year		$ 9.63			$ 9.62			$ 9.86			$ 9.33			$10.05

Total return		5.03%			0.95%			8.03%			(2.76	)%		1.54%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.51%			0.50%			0.48%			0.49%			0.48%

Expenses net of waiver and payments by affiliates^c		0.45%			0.45%			0.42%			0.45%			0.47%

Net investment income		4.78%			4.33%			4.48%			4.83%			4.41%

Supplemental data

Net assets, end of year (000’s)		$307,287			$433,068			$369,106			$286,503			$253,929

Portfolio turnover rate		116.21%	^d		115.94%			140.83%			88.04%			72.51%

Portfolio turnover rate excluding mortgage dollar rolls^e		39.01%	^d		47.40%			87.33%			48.33%			49.36%

^bBased on average daily shares outstanding.

^cBenefit of expense reduction rounds to less than 0.01%.

^dExcludes the value of portfolio activity as a result of in-kind transactions. See Note 6.

^eSee Note 1(i) regarding mortgage dollar rolls.



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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income Fund (continued)


	Year Ended April 30,
	2019			2018		2017		2016		2015
Advisor Class

Per share operating performance (for a share outstanding throughout the year)

Net asset value, beginning of year		$9.62			$ 9.85		$ 9.33		$10.05		$10.58

Income from investment operations^a:

Net investment income^b		0.44			0.41		0.42		0.44		0.44

Net realized and unrealized gains (losses)		—	^c		(0.32)		0.30		(0.74)		(0.29	)

Total from investment operations		0.44			0.09		0.72		(0.30)		0.15

Less distributions from:

Net investment income and net foreign currency gains		(0.44)			(0.32)		(0.20)		(0.42)		(0.58)

Net realized gains		—			—		—		—		(0.10)

Total distributions		(0.44)			(0.32)		(0.20)		(0.42)		(0.68)

Net asset value, end of year		$ 9.62			$ 9.62		$ 9.85		$ 9.33		$10.05

Total return		4.88%			0.79%		7.76%		(2.89)%		1.41%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.64%			0.65%		0.63%		0.63%		0.61%

Expenses net of waiver and payments by affiliates^d		0.59%			0.60%		0.57%		0.59%		0.60%

Net investment income		4.64%			4.18%		4.33%		4.69%		4.28%

Supplemental data

Net assets, end of year (000’s)		$608,317			$933,747		$1,070,103		$904,899		$1,130,796

Portfolio turnover rate		116.21%	^e		115.94%		140.83%		88.04%		72.51%

Portfolio turnover rate excluding mortgage dollar rolls^f		39.01%^e			47.40%		87.33%		48.33%		49.36%

^bBased on average daily shares outstanding.

^cAmount rounds to less than $0.01 per share.

^dBenefit of expense reduction rounds to less than 0.01%.

^eExcludes the value of portfolio activity as a result of in-kind transactions. See Note 6.

^fSee Note 1(i) regarding mortgage dollar rolls.



franklintempleton.com	The accompanying notes are an integral part of these consolidated financial statements. \| Annual Report	15

FRANKLIN STRATEGIC SERIES

Consolidated Statement of Investments, April 30, 2019

Franklin Strategic Income Fund


	Country		Shares/ Warrants		Value
Common Stocks and Other Equity Interests 0.5%
Commercial & Professional Services 0.1%
^a,aaRemington Outdoor Co. Inc.		United States		1,322,439	$ 2,909,366

Consumer Services 0.0%^†
^a,ab,bTurtle Bay Resort		United States		5,579,940	122,759

Energy 0.3%
^aBirch Permian Holdings Inc.		United States		831,762	9,565,263
^aChaparral Energy Inc., A		United States		94,305	656,363
^a,cChaparral Energy Inc., A, 144A		United States		3,418	23,789
^aHalcon Resources Corp.		United States		955,276	1,241,859
^aHalcon Resources Corp., wts., 9/09/20		United States		75,770	591
^aMidstates Petroleum Co. Inc.		United States		5,125	65,446
^a,bMidstates Petroleum Co. Inc., wts., 4/21/20		United States		49,552	2
^aRiviera Resources Inc.		United States		88,309	1,324,635
^aRoan Resources Inc.		United States		88,309	500,712


					13,378,660


Materials 0.1%
^a,b,dAppvion Operations Inc.		United States		331,325	4,615,489
^aVerso Corp., A		United States		38,905	868,360
^aVerso Corp., wts., 7/25/23		United States		4,095	17,813


					5,501,662


Retailing 0.0%^†
^a,b,dK2016470219 South Africa Ltd., A		South Africa		125,940,079	88,110
^a,b,dK2016470219 South Africa Ltd., B		South Africa		12,532,821	8,768


					96,878

Software & Services 0.0%^†
^a,bWorkCapital BSD SARL, wts., 2/13/26		Brazil		6,000,000	750,000


Total Common Stocks and Other Equity Interests (Cost $64,996,831)					22,759,325


Management Investment Companies (Cost $218,117,419) 4.0%
Diversified Financials 4.0%
^eFranklin Middle Tier Floating Rate Fund		United States		21,833,687	194,101,482


			Principal Amount*
Corporate Bonds 36.2%
Automobiles & Components 0.2%
Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		10,000,000	10,449,650

Banks 2.0%
^cAkbank T.A.S., senior note, 144A, 5.125%, 3/31/25		Turkey		6,300,000	5,450,098
Bank of America Corp.,
senior bond, 3.248%, 10/21/27		United States		5,000,000	4,908,581
senior note, 3.50%, 4/19/26		United States		29,800,000	30,098,426
Citigroup Inc.,
senior note, 3.20%, 10/21/26		United States		20,000,000	19,641,924
sub. bond, 5.50%, 9/13/25		United States		10,000,000	11,048,024
sub. note, 4.05%, 7/30/22		United States		5,000,000	5,164,961



16	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value
Corporate Bonds (continued)
Banks (continued)
^cIntesa Sanpaolo SpA, senior note, 144A, 6.50%, 2/24/21		Italy		1,400,000		$ 1,467,130
JPMorgan Chase & Co.,
senior bond, 3.30%, 4/01/26		United States		3,200,000		3,202,411
sub. note, 3.875%, 9/10/24		United States		10,000,000		10,307,768
^fTurkiye Vakiflar Bankasi TAO, secured note, Reg S, 2.375%, 11/04/22		Turkey		3,900,000	EUR	4,247,022


						95,536,345

Capital Goods 1.1%
^cBeacon Roofing Supply Inc., senior note, 144A, 4.875%, 11/01/25		United States		15,000,000		14,475,000
CNH Industrial NV, senior bond, 3.85%, 11/15/27		United Kingdom		6,600,000		6,331,842
Legrand France SA, senior bond, 8.50%, 2/15/25		France		200,000		247,903
^gOnsite Rental Group Operations Pty. Ltd., secured note, PIK, 6.10%, 10/26/23		Australia		4,655,177		3,607,762
^cTerex Corp., senior note, 144A, 5.625%, 2/01/25		United States		14,600,000		14,800,750
^cVertiv Group Corp., senior note, 144A, 9.25%, 10/15/24		United States		14,000,000		13,755,000


						53,218,257


Commercial & Professional Services 0.7%
United Rentals North America Inc., senior bond, 5.875%, 9/15/26		United States		18,000,000		18,855,000
^cWest Corp., senior note, 144A, 8.50%, 10/15/25		United States		19,300,000		17,104,625


						35,959,625


Consumer Durables & Apparel 1.0%
^cHanesbrands Inc., senior bond, 144A, 4.875%, 5/15/26		United States		19,000,000		19,118,750
KB Home,
senior bond, 7.50%, 9/15/22		United States		5,000,000		5,512,500
senior note, 7.00%, 12/15/21		United States		10,000,000		10,737,500
PulteGroup Inc., senior bond, 5.00%, 1/15/27		United States		12,000,000		12,210,000


						47,578,750

Consumer Services 1.6%
^c1011778 BC ULC/New Red Finance Inc.,
secured note, second lien, 144A, 5.00%, 10/15/25		Canada		11,500,000		11,428,125
senior secured note, first lien, 144A, 4.25%, 5/15/24		Canada		4,000,000		3,952,180
^cGolden Nugget Inc., senior note, 144A, 6.75%, 10/15/24		United States		13,200,000		13,530,000
^cInternational Game Technology PLC, senior secured bond, 144A, 6.50%, 2/15/25		United States		11,200,000		11,942,000
^cKFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC,
senior note, 144A, 5.00%, 6/01/24		United States		7,000,000		7,175,000
senior note, 144A, 5.25%, 6/01/26		United States		9,100,000		9,407,125
^cStars Group Holdings BV/Stars Group U.S. Co-Borrower LLC, senior note, 144A, 7.00%, 7/15/26		Canada		6,600,000		6,938,250
^cWynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		13,700,000		13,867,003


						78,239,683



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Corporate Bonds (continued)
Diversified Financials 2.1%
Capital One Financial Corp., senior note, 3.20%, 2/05/25		United States		11,900,000	$ 11,779,744
The Goldman Sachs Group Inc.,
senior note, 3.50%, 1/23/25		United States		23,000,000	23,125,714
senior note, 3.75%, 2/25/26		United States		15,000,000	15,125,686
Morgan Stanley,
senior bond, 3.591% to 7/22/27, FRN thereafter, 7/22/28		United States		10,000,000	10,003,784
senior note, 3.875%, 1/27/26		United States		32,300,000	33,121,711
Navient Corp., senior note, 6.125%, 3/25/24		United States		8,000,000	8,240,000


					101,396,639

Energy 4.4%
^cCalifornia Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		7,852,000	6,036,225
Cheniere Corpus Christi Holdings LLC,
senior secured note, first lien, 7.00%, 6/30/24		United States		8,800,000	9,889,000
senior secured note, first lien, 5.875%, 3/31/25		United States		8,200,000	8,856,000
Cheniere Energy Partners LP, senior secured note, first lien, 5.25%, 10/01/25		United States		11,900,000	12,182,625
CONSOL Energy Inc., senior note, 5.875%, 4/15/22		United States		11,076,000	11,089,845
Energy Transfer Operating LP,
senior bond, 5.20%, 2/01/22		United States		8,000,000	8,418,527
senior bond, 4.05%, 3/15/25		United States		1,300,000	1,321,475
senior note, 7.50%, 10/15/20		United States		11,000,000	11,704,316
Energy Transfer Partners LP/Regency Energy Finance Corp., senior note, 5.00%, 10/01/22		United States		10,000,000	10,531,277
^c,gEnQuest PLC, senior note, 144A, PIK, 7.00%, 4/15/22		United Kingdom		12,855,122	10,744,697
Exxon Mobil Corp., senior note, 2.222%, 3/01/21		United States		3,000,000	2,990,233
^c,hGaz Capital SA, (OJSC Gazprom), loan participation, senior note, 144A, 3.85%, 2/06/20		Russia		20,000,000	20,146,300
Kinder Morgan Inc.,
senior bond, 4.30%, 6/01/25		United States		17,000,000	17,820,473
senior note, 3.15%, 1/15/23		United States		9,000,000	9,021,965
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21		United States		19,000,000	18,715,000
Oceaneering International Inc., senior note, 4.65%, 11/15/24		United States		2,100,000	2,004,870
Sabine Pass Liquefaction LLC,
senior secured note, first lien, 5.625%, 2/01/21		United States		20,000,000	20,757,146
senior secured note, first lien, 5.625%, 3/01/25		United States		5,000,000	5,485,713
Sanchez Energy Corp., senior note, 6.125%, 1/15/23		United States		6,000,000	832,500
Sunoco LP/Sunoco Finance Corp., senior note, 4.875%, 1/15/23		United States		5,900,000	6,010,625
Weatherford International Ltd.,
senior note, 7.75%, 6/15/21		United States		9,000,000	7,965,000
senior note, 8.25%, 6/15/23		United States		7,000,000	4,865,000
^cWoodside Finance Ltd., senior note, 144A, 3.70%, 9/15/26		Australia		5,400,000	5,316,945


					212,705,757

Food & Staples Retailing 0.6%
^cAramark Services Inc., senior bond, 144A, 5.00%, 2/01/28		United States		7,600,000	7,754,280
Walgreens Boots Alliance Inc., senior note, 3.80%, 11/18/24		United States		21,900,000	22,145,663


					29,899,943



18	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Corporate Bonds (continued)
Food, Beverage & Tobacco 1.2%
Bunge Ltd. Finance Corp., senior note, 3.25%, 8/15/26		United States		2,000,000	$ 1,847,198
^cImperial Brands Finance PLC, senior note, 144A, 3.50%, 2/11/23		United Kingdom		20,400,000	20,458,528
^cLamb Weston Holdings Inc., senior note, 144A, 4.875%, 11/01/26		United States		16,500,000	16,830,000
^cPost Holdings Inc.,
senior bond, 144A, 5.625%, 1/15/28		United States		10,000,000	10,155,600
senior note, 144A, 5.50%, 3/01/25		United States		8,000,000	8,220,000
Reynolds American Inc., senior note, 4.45%, 6/12/25		United Kingdom		1,900,000	1,961,699


					59,473,025

Health Care Equipment & Services 1.6%
^cAvantor Inc., senior secured note, first lien, 144A, 6.00%, 10/01/24		United States		15,000,000	15,689,063
Centene Corp.,
senior note, 4.75%, 5/15/22		United States		10,000,000	10,229,100
^csenior note, 144A, 5.375%, 6/01/26		United States		8,600,000	8,997,750
CHS/Community Health Systems Inc.,
senior note, 6.875%, 2/01/22		United States		7,223,000	4,762,666
senior secured note, first lien, 6.25%, 3/31/23		United States		3,900,000	3,812,250
CVS Health Corp., senior bond, 4.30%, 3/25/28		United States		5,800,000	5,847,761
DaVita Inc.,
senior bond, 5.125%, 7/15/24		United States		10,000,000	10,025,000
senior bond, 5.00%, 5/01/25		United States		6,000,000	5,893,140
Edwards Lifesciences Corp., senior note, 4.30%, 6/15/28		United States		2,700,000	2,817,940
HCA Inc., senior bond, 5.875%, 2/15/26		United States		3,000,000	3,231,570
^cMEDNAX Inc., senior note, 144A, 6.25%, 1/15/27		United States		6,300,000	6,441,750


					77,747,990

Materials 5.1%
ArcelorMittal,
senior note, 5.50%, 3/01/21		France		17,600,000	18,404,408
senior note, 6.125%, 6/01/25		France		2,700,000	3,016,406
^gARD Finance SA, secured note, PIK, 7.125%, 9/15/23		Luxembourg		1,300,000	1,306,500
^cArdagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., senior note, 144A, 6.00%, 2/15/25		Luxembourg		11,500,000	11,643,750
^cBWAY Holding Co., senior note, 144A, 7.25%, 4/15/25		United States		15,000,000	14,662,500
^cCemex SAB de CV,
senior secured bond, first lien, 144A, 5.70%, 1/11/25		Mexico		15,000,000	15,444,075
senior secured bond, first lien, 144A, 6.125%, 5/05/25		Mexico		4,000,000	4,168,220
The Chemours Co., senior note, 6.625%, 5/15/23		United States		10,860,000	11,291,142
Crown Americas LLC/Crown Americas Capital Corp. VI, senior note, 4.75%, 2/01/26		United States		7,100,000	7,233,125
^cFirst Quantum Minerals Ltd.,
senior note, 144A, 7.00%, 2/15/21		Zambia		2,144,000	2,188,220
senior note, 144A, 7.25%, 4/01/23		Zambia		7,200,000	7,137,000
^cFMG Resources (August 2006) Pty. Ltd.,
senior note, 144A, 5.125%, 3/15/23		Australia		3,600,000	3,690,000
senior note, 144A, 5.125%, 5/15/24		Australia		7,700,000	7,837,060
Freeport-McMoRan Inc., senior note, 4.55%, 11/14/24		United States		15,000,000	14,943,750
^cGlencore Funding LLC,
senior note, 144A, 4.125%, 5/30/23		Switzerland		5,000,000	5,110,597
senior note, 144A, 4.625%, 4/29/24		Switzerland		2,500,000	2,593,130



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Corporate Bonds (continued)
Materials (continued)
^cINVISTA Finance LLC, senior secured note, 144A, 4.25%, 10/15/19		United States		10,000,000	$ 10,082,000
^cNew Gold Inc., senior note, 144A, 6.375%, 5/15/25		Canada		6,900,000	5,554,500
^cNorthwest Acquisitions ULC/Dominion Finco Inc., secured note, second lien, 144A, 7.125%, 11/01/22		Canada		3,800,000	3,201,500
^cNovelis Corp., senior bond, 144A, 5.875%, 9/30/26		United States		14,000,000	14,262,500
^cOwens-Brockway Glass Container Inc.,
senior note, 144A, 5.00%, 1/15/22		United States		7,800,000	8,014,500
senior note, 144A, 5.875%, 8/15/23		United States		10,000,000	10,500,000
Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/ Reynolds Group Issuer Luxembourg SA,
senior secured note, first lien, 5.75%, 10/15/20		United States		5,427,003	5,450,068
^csenior secured note, first lien, 144A, 5.125%, 7/15/23		United States		5,900,000	5,992,984
^c,isenior secured note, first lien, 144A, FRN, 6.097%, (3-month USD LIBOR + 3.50%), 7/15/21		United States		6,500,000	6,540,625
^cSealed Air Corp.,
senior bond, 144A, 5.125%, 12/01/24		United States		11,300,000	11,780,250
senior note, 144A, 4.875%, 12/01/22		United States		5,000,000	5,181,250
^cSociedad Quimica y Minera de Chile SA, senior note, 144A, 3.625%, 4/03/23		Chile		1,500,000	1,518,420
Steel Dynamics Inc.,
senior bond, 5.50%, 10/01/24		United States		9,700,000	10,039,500
senior note, 5.125%, 10/01/21		United States		5,000,000	5,037,500
^cSunCoke Energy Partners LP/SunCoke Energy Partners Finance Corp., senior note, 144A, 7.50%, 6/15/25		United States		12,000,000	12,150,000

					245,975,480

Media & Entertainment 4.1%
^cAltice Financing SA, secured bond, 144A, 7.50%, 5/15/26		Luxembourg		3,000,000	3,041,250
CCO Holdings LLC/CCO Holdings Capital Corp.,
senior bond, 5.25%, 9/30/22		United States		8,500,000	8,654,062
^csenior bond, 144A, 5.375%, 5/01/25		United States		13,000,000	13,487,500
Clear Channel Worldwide Holdings Inc.,
senior note, 6.50%, 11/15/22		United States		3,000,000	3,075,000
senior note, 6.50%, 11/15/22		United States		5,000,000	5,137,500
^csenior sub. note, 144A, 9.25%, 2/15/24		United States		1,600,000	1,726,000
^cCSC Holdings LLC, senior secured note, first lien, 144A, 5.50%, 5/15/26		United States		16,000,000	16,470,000
DISH DBS Corp.,
senior bond, 5.00%, 3/15/23		United States		8,000,000	7,360,000
senior note, 5.875%, 11/15/24		United States		8,000,000	6,930,000
^jiHeartCommunications Inc.,
senior secured bond, first lien, 9.00%, 3/01/21		United States		8,000,000	5,960,000
senior secured note, first lien, 9.00%, 9/15/22		United States		3,100,000	2,325,000
Netflix Inc.,
senior bond, 5.875%, 2/15/25		United States		5,000,000	5,403,125
senior bond, 4.375%, 11/15/26		United States		11,800,000	11,711,500
^cNexstar Broadcasting Inc., senior note, 144A, 5.625%, 8/01/24		United States		17,000,000	17,300,900
Tegna Inc., senior note, 5.125%, 7/15/20		United States		4,000,000	4,025,000
Time Warner Inc., senior bond, 2.95%, 7/15/26		United States		25,400,000	24,382,757
^cUnitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25		Germany		16,000,000	16,640,000



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value
Corporate Bonds (continued)
Media & Entertainment (continued)
^cUnivision Communications Inc., senior secured note, first lien, 144A, 5.125%, 2/15/25		United States		18,000,000		$ 16,942,500
^cVirgin Media Finance PLC, senior bond, 144A, 6.375%, 10/15/24		United Kingdom		9,600,000	GBP	13,198,216
^cVirgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25		United Kingdom		14,000,000		14,332,500


						198,102,810

Pharmaceuticals, Biotechnology & Life Sciences 1.8%
Allergan Funding SCS, senior bond, 3.80%, 3/15/25		United States		25,000,000		25,271,562
^cBausch Health Cos. Inc.,
senior bond, 144A, 6.125%, 4/15/25		United States		3,100,000		3,146,500
senior note, 144A, 4.50%, 5/15/23		United States		8,000,000	EUR	9,076,347
senior note, 144A, 8.50%, 1/31/27		United States		5,000,000		5,459,375
senior note, first lien, 144A, 7.00%, 3/15/24		United States		2,100,000		2,218,125
^cBayer U.S. Finance II LLC, senior bond, 144A, 4.375%, 12/15/28		Germany		11,700,000		11,752,698
^c,gEagle Holdings Co. II LLC, senior note, 144A, PIK, 7.625%, 5/15/22		United States		3,300,000		3,320,625
^cEndo DAC/Endo Finance LLC/Endo Finco Inc.,
senior bond, 144A, 6.00%, 2/01/25		United States		11,000,000		8,442,500
senior note, 144A, 6.00%, 7/15/23		United States		1,637,000		1,342,340
^cJaguar Holding Co. II/Pharmaceutical Product Development LLC, senior note, 144A, 6.375%, 8/01/23		United States		10,000,000		10,225,000
^cSABIC Capital II BV, senior note, 144A, 4.50%, 10/10/28		Saudi Arabia		5,500,000		5,816,883


						86,071,955

Real Estate 1.2%
American Tower Corp., senior bond, 3.375%, 10/15/26		United States		28,900,000		28,475,238
Equinix Inc., senior bond, 5.375%, 4/01/23		United States		17,000,000		17,419,900
MPT Operating Partnership LP/MPT Finance Corp.,
senior bond, 5.25%, 8/01/26		United States		4,200,000		4,294,500
senior bond, 5.00%, 10/15/27		United States		5,700,000		5,728,500


						55,918,138

Retailing 0.3%
^b,d,gK2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22		South Africa		9,834,030		12,171
^b,d,gK2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22		South Africa		2,108,028		77,835
^cParty City Holdings Inc., senior note, 144A, 6.625%, 8/01/26		United States		5,300,000		5,266,981
^cPetSmart Inc., senior note, 144A, 7.125%, 3/15/23		United States		12,500,000		11,125,000


						16,481,987

Semiconductors & Semiconductor Equipment 0.2%
Maxim Integrated Products Inc., senior note, 3.375%, 3/15/23		United States		1,800,000		1,808,728
^cQorvo Inc., senior note, 144A, 5.50%, 7/15/26		United States		5,600,000		5,852,000


						7,660,728

Software & Services 0.4%
Fiserv Inc., senior bond, 3.85%, 6/01/25		United States		8,400,000		8,656,826
^cSymantec Corp., senior note, 144A, 5.00%, 4/15/25		United States		9,500,000		9,695,054


						18,351,880



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Corporate Bonds (continued)
Technology Hardware & Equipment 0.7%
^cCommScope Technologies LLC, senior bond, 144A, 6.00%, 6/15/25		United States		16,600,000	$ 16,932,000
^cDell International LLC/EMC Corp.,
senior note, 144A, 5.875%, 6/15/21		United States		2,500,000	2,546,806
senior note, 144A, 7.125%, 6/15/24		United States		12,600,000	13,330,246
Juniper Networks Inc., senior bond, 5.95%, 3/15/41		United States		1,200,000	1,266,505
Tech Data Corp., senior bond, 4.95%, 2/15/27		United States		1,900,000	1,928,434


					36,003,991

Telecommunication Services 1.8%
^cDigicel Group Two Ltd.,
senior note, 144A, 8.25%, 9/30/22		Bermuda		2,427,000	961,881
^gsenior note, 144A, PIK, 9.125%, 4/01/24		Bermuda		3,012,833	949,660
^cDigicel Ltd., senior note, 144A, 6.00%, 4/15/21		Bermuda		10,000,000	8,815,500
Hughes Satellite Systems Corp., senior bond, 6.625%, 8/01/26		United States		13,000,000	13,178,750
Sprint Communications Inc.,
senior note, 6.00%, 11/15/22		United States		10,000,000	10,087,500
^csenior note, 144A, 7.00%, 3/01/20		United States		5,000,000	5,150,000
T-Mobile USA Inc.,
senior bond, 6.50%, 1/15/24		United States		5,000,000	5,187,500
senior bond, 6.375%, 3/01/25		United States		13,000,000	13,548,730
senior note, 5.125%, 4/15/25		United States		6,000,000	6,202,500
Verizon Communications Inc., senior note, 5.15%, 9/15/23		United States		22,000,000	24,097,715


					88,179,736

Transportation 0.5%
^cDAE Funding LLC,
senior note, 144A, 4.50%, 8/01/22		United Arab Emirates		4,000,000	4,060,000
senior note, 144A, 5.00%, 8/01/24		United Arab Emirates		14,000,000	14,525,000
^cKazakhstan Temir Zholy Finance BV, senior bond, 144A, 6.95%, 7/10/42		Kazakhstan		3,900,000	4,624,581
^f,hRZD Capital PLC, (Russian Railways), loan participation, senior bond, Reg S, 5.70%, 4/05/22		Russia		3,300,000	3,451,255


					26,660,836

Utilities 3.6%
Calpine Corp.,
senior bond, 5.75%, 1/15/25		United States		9,000,000	8,932,500
senior note, 5.375%, 1/15/23		United States		6,000,000	6,060,000
^cClearway Energy Operating LLC, senior note, 144A, 5.75%, 10/15/25		United States		12,800,000	13,136,000
Dominion Energy Inc., senior bond, 2.85%, 8/15/26		United States		11,400,000	10,931,418
^c,kEDF SA,
junior sub. bond, 144A, 5.625% to 1/22/24, FRN thereafter, Perpetual		France		5,000,000	5,056,625
junior sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual		France		25,000,000	25,490,750
Exelon Corp., senior bond, 3.95%, 6/15/25		United States		18,500,000	19,250,607
^cInterGen NV, secured bond, 144A, 7.00%, 6/30/23		Netherlands		4,800,000	4,434,000
^cIsrael Electric Corp. Ltd., secured bond, 144A, 4.25%, 8/14/28		Israel		9,200,000	9,323,234
The Southern Co., senior bond, 3.25%, 7/01/26		United States		24,200,000	23,905,678
^cState Grid Overseas Investment 2016 Ltd., senior note, 144A, 3.50%, 5/04/27		China		12,800,000	12,772,672



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Corporate Bonds (continued)
Utilities (continued)
^cTalen Energy Supply LLC,
senior note, 144A, 9.50%, 7/15/22		United States		15,900,000	$	17,410,500
senior note, 144A, 10.50%, 1/15/26		United States		3,000,000		3,142,500
^cThree Gorges Finance I Cayman Islands Ltd., senior note, 144A, 3.15%, 6/02/26		China		12,800,000		12,498,304
Virginia Electric & Power Co., senior bond, 6.35%, 11/30/37		United States		820,000		1,057,823


						173,402,611


Total Corporate Bonds (Cost $1,773,816,259)						1,755,015,816


^i,lSenior Floating Rate Interests 11.9%
Automobiles & Components 0.1%
Allison Transmission Inc., Initial Term Loans, 4.479%, (1-month USD LIBOR + 2.00%), 3/29/26		United States		1,423,206		1,436,675
Thor Industries Inc., Initial USD Term Loans, 6.313%, (1-month USD LIBOR + 3.75%), 2/01/26		United States		2,590,592		2,550,114


						3,986,789

Capital Goods 0.3%
Altra Industrial Motion Corp., Term Loan, 4.483%, (1-month USD LIBOR + 2.00%), 10/01/25		United States		733,182		733,176
Doncasters U.S. Finance LLC, Second Lien Term Loan, 10.851%, (3-month USD LIBOR + 8.25%), 10/09/20		United States		12,543,188		3,867,441
Harsco Corp., Term Loan B-2, 4.75%, (1-month USD LIBOR + 2.25%), 12/10/24		United States		4,259,330		4,277,965
Onsite Rental Group Operations Pty. Ltd., Term Loan, 6.983%, (1-month USD LIBOR + 4.50%), 10/25/22		Australia		3,404,855		3,353,782


						12,232,364

Commercial & Professional Services 0.2%
KAR Auction Services Inc., Tranche B-5 Term Loans, 5.125%, (3-month USD LIBOR + 2.50%), 3/09/23		United States		7,269,575		7,284,660
United Rentals North America Inc., Initial Term Loans, 4.233%, (1-month USD LIBOR + 1.75%), 10/30/25		United States		3,583,762		3,594,065
Ventia Pty. Ltd., Term B Loans (USD), 6.101%, (3-month USD LIBOR + 3.50%), 5/21/22		Australia		832,033		832,033


						11,710,758

Consumer Services 0.2%
Aristocrat Technologies Inc., Term B-3 Loans, 4.342%, (3-month USD LIBOR + 1.75%), 10/19/24		United States		1,556,965		1,556,271
Avis Budget Car Rental LLC, Tranche B Term Loans, 4.49%, (1-month USD LIBOR + 2.00%), 2/13/25		United States		6,327,748		6,272,412
Eldorado Resorts Inc., Initial Term Loan, 4.75%, (1-month USD LIBOR + 2.25%), 4/17/24		United States		3,508,477		3,512,132


						11,340,815



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
^i,l Senior Floating Rate Interests (continued)
Diversified Financials 0.2%
Asurion LLC, Second Lien Replacement B-2 Term Loans, 8.983%, (1-month USD LIBOR + 6.50%), 8/04/25		United States		636,940	$ 651,204
First Eagle Holdings Inc., Initial Term Loans, 5.351%, (3-month USD LIBOR + 2.75%), 12/01/24		United States		5,164,853	5,186,375
Trans Union LLC, 2017 Replacement Term A-2 Loans, 4.233%, (1-month USD LIBOR + 1.75%), 8/09/22		United States		3,408,400	3,408,400


					9,245,979

Energy 2.8%
Fieldwood Energy LLC, Closing Date Loans, 7.749%, (1-month USD LIBOR + 5.25%), 4/11/22		United States		74,097,871	71,844,035
Foresight Energy LLC, Term Loans, 8.379%, (3-month USD LIBOR + 5.75%), 3/28/22		United States		15,900,922	15,026,371
Utex Industries Inc.,
First Lien Initial Term Loan, 6.483%, (1-month USD LIBOR + 4.00%), 5/21/21		United States		9,216,822	8,963,360
Second Lien Initial Term Loan, 9.733%, (1-month USD LIBOR + 7.25%), 5/20/22		United States		955,410	907,640
Wolverine Fuels Holding LLC,
First Lien Initial Term Loan, 8.379%, (3-month USD LIBOR + 5.75%), 8/14/20		United States		19,455,394	19,127,084
Second Lien Initial Term Loan, 13.379%, (3-month USD LIBOR + 10.75%), 2/16/21		United States		22,488,412	21,307,770


					137,176,260

Food & Staples Retailing 0.5%
Aramark Corp., U.S. Term B-3 Loan, 4.233%, (1-month USD LIBOR + 1.75%), 3/11/25		United States		3,656,382	3,657,907
Smart & Final Stores LLC, First Lien Term Loan, 6.129%, (3-month USD LIBOR + 3.50%), 11/15/22		United States		18,228,779	18,268,663


					21,926,570

Food, Beverage & Tobacco 1.1%
CSM Bakery Supplies LLC,
Second Lien Term Loan, 10.34%, (3-month USD LIBOR + 7.75%), 7/03/21		United States		16,940,234	15,225,035
Term Loans, 6.59%, (3-month USD LIBOR + 4.00%), 7/03/20		United States		1,830,000	1,746,126
JBS USA Lux SA,
New Initial Term Loans, 4.98%, (1-month USD LIBOR + 2.50%), 10/30/22		United States		22,313,354	22,351,197
^m,nTerm Loan, TBD, 5/01/26		United States		14,729,802	14,779,780


					54,102,138

Health Care Equipment & Services 0.0%^†
IQVIA Inc., Term B-3 Dollar Loans, 4.233%, (1-month USD LIBOR + 1.75%), 6/11/25		United States		1,451,686	1,448,446
U.S. Renal Care Inc., Initial Term Loan, 6.851%, (3-month USD LIBOR + 4.25%), 12/31/22		United States		978,473	980,552


					2,428,998



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CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
^i,l Senior Floating Rate Interests (continued)
Household & Personal Products 0.9%
^bFGI Operating Co. LLC (Freedom Group),
DDTL FILO, 10.129%, (3-month USD LIBOR + 7.50%), 5/15/21		United States		2,605,664	$ 2,598,419
^gTerm Loan, PIK, 12.684%, (3-month USD LIBOR + 10.00%), 5/15/22		United States		13,951,317	13,526,354
Term Loan FILO, 10.184%, (3-month USD LIBOR + 7.50%), 5/15/21		United States		26,056,641	25,984,191


					42,108,964

Materials 1.1%
Appvion Operations Inc., Term Loan, 8.60%, (3-month USD LIBOR + 6.00%), 6/15/26		United States		7,533,445	7,561,696
Ashland LLC, Term B Loan, 4.227% - 4.233%, (1-month USD LIBOR + 1.75%), 5/17/24		United States		3,998,772	4,001,272
Axalta Coating Systems U.S. Holdings Inc., Term B-3 Dollar Loan, 4.351%, (3-month USD LIBOR + 1.75%), 6/01/24		United States		4,800,670	4,781,539
Chemours Co., Tranche B-2 US$ Term Loan, 4.24%, (1-month USD LIBOR + 1.75%), 4/03/25		United States		11,443,554	11,413,457
Crown Americas LLC, Dollar Term B Loan, 4.482%, (1-month USD LIBOR + 2.00%), 4/03/25		United States		530,376	534,810
Oxbow Carbon LLC,
Second Lien Term Loan, 9.983%, (1-month USD LIBOR + 7.50%), 1/04/24		United States		6,631,974	6,681,713
Tranche A Term Loan, 4.733%, (1-month USD LIBOR + 2.25%), 1/04/22		United States		11,921,875	11,862,265
Tranche B Term Loan, 5.983%, (1-month USD LIBOR + 3.50%), 1/04/23		United States		7,340,625	7,395,680


					54,232,432

Media & Entertainment 0.5%
Charter Communications Operating LLC, Term A-2 Loan, 3.99%, (1-month USD LIBOR + 1.50%), 3/31/23		United States		8,732,121	8,721,206
CSC Holdings LLC, March 2017 Incremental Term Loans, 4.723%, (1-month USD LIBOR + 2.25%), 7/17/25		United States		12,699,430	12,683,556
Gray Television Inc., Term C Loan, 4.977%, (1-month USD LIBOR + 2.50%), 1/02/26		United States		398,804	400,100
Lions Gate Capital Holdings LLC, Term A Loan, 4.483%, (1-month USD LIBOR + 2.00%), 3/22/23		Canada		2,541,660	2,506,712


					24,311,574

Pharmaceuticals, Biotechnology & Life Sciences 0.7%
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 6.75%, (1-month USD LIBOR + 4.25%), 4/29/24		United States		9,661,003	9,600,507
Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 4.674%, (1-week USD LIBOR + 2.25%), 1/31/25		United States		12,791,599	12,825,752
Syneos Health Inc., Initial Term B Loans, 4.483%, (1-month USD LIBOR + 2.00%), 8/01/24		United States		7,058,773	7,058,279
Valeant Pharmaceuticals International, Initial Term Loans, 5.474%, (1-month USD LIBOR + 3.00%), 6/02/25		United States		2,980,641	2,992,984


					32,477,522



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
^i,l Senior Floating Rate Interests (continued)
Retailing 1.2%
^g99 Cents Only Stores,
First Lien Term Loan, PIK, 9.129%, (3-month USD LIBOR + 6.50%), 1/13/22		United States		3,766,144	$ 3,253,007
First Lien Term Loan, PIK, 9.151%, (6-month USD LIBOR + 6.50%), 1/13/22		United States		4,594,050	3,968,111
First Lien Term Loan, PIK, 11.00%, (Prime + 7.00%), 1/13/22		United States		1,774	1,532
Ascena Retail Group Inc., Tranche B Term Loan, 7.00%, (1-month USD LIBOR + 4.50%), 8/21/22		United States		34,153,335	29,554,930
General Nutrition Centers Inc.,
FILO Term Loan (ABL), 9.49%, (1-month USD LIBOR + 7.00%), 12/31/22		United States		2,706,793	2,739,275
Tranche B-2 Term Loans, 11.24%, (1-month USD LIBOR + 8.75%), 3/04/21		United States		10,168,853	9,700,628
Jo-Ann Stores Inc., Initial Loans, 7.592%, (3-month USD LIBOR + 5.00%), 10/23/23		United States		7,080,483	7,076,058
PETCO Animal Supplies Stores Inc., Second Amendment Term Loans, 5.833%, (3-month USD LIBOR + 3.25%), 1/26/23		United States		1,896,122	1,548,657
^mPetSmart Inc., Amended Loan, 6.73%, (1-month USD LIBOR + 3.00%), 3/11/22		United States		630,374	609,449


					58,451,647

Semiconductors & Semiconductor Equipment 0.3%
MKS Instruments Inc.,
Tranche B-4 Term Loan, 4.483%, (1-month USD LIBOR + 2.00%), 4/29/23		United States		2,722,325	2,727,429
Tranche B-5 Term Loans, 4.733%, (1-month USD LIBOR + 2.25%), 2/01/26		United States		1,428,456	1,432,473
ON Semiconductor Corp., 2018 New Replacement Term B-3 Loans, 4.233%, (1-month USD LIBOR + 1.75%), 3/31/23		United States		11,425,542	11,395,196


					15,555,098

Software & Services 0.5%
LegalZoom.com Inc., 2018 Term Loans, 6.977%, (1-month USD LIBOR + 4.50%), 11/21/24		United States		1,094,702	1,101,517
Wex Inc., Term B-2 Loan, 4.733%, (1-month USD LIBOR + 2.25%), 7/01/23		United States		1,853,348	1,860,298
^bWorkCapital BSD SARL, Loan, 18.688%, (3-month USD LIBOR + 16.00%), 11/29/21		Luxembourg		20,000,000	19,883,394


					22,845,209

Technology Hardware & Equipment 0.0%^†
CommScope Inc., Initial Term Loans, 5.733%, (1-month USD LIBOR + 3.25%), 4/04/26		United States		380,922	384,779

Telecommunication Services 0.3%
Global Tel*Link Corp., Second Lien Term Loan, 10.733%, (1-month USD LIBOR + 8.25%), 11/29/26		United States		3,245,755	3,193,687
Securus Technologies Holdings Inc., Second Lien Initial Loan, 10.733%, (1-month USD LIBOR + 8.25%), 11/01/25		United States		10,588,688	10,359,263


					13,552,950



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*				Value
^i,l Senior Floating Rate Interests (continued)
Transportation 0.7%
Air Canada, Term Loan, 4.479%, (1-month USD LIBOR + 2.00%), 10/06/23		Canada		410,166			$ 411,274
Allegiant Travel Co., Class B Term Loans, 7.233%, (3-month USD LIBOR + 4.50%), 2/05/24		United States		2,916,146			2,919,791
Hertz Corp., Tranche B-1 Term Loan, 5.24%, (1-month USD LIBOR + 2.75%), 6/30/23		United States		8,905,975			8,904,861
International Seaways Operating Corp., Initial Term Loans, 8.49%, (1-month USD LIBOR + 6.00%), 6/22/22		United States		7,758,516			7,826,403
Navios Maritime Midstream Partners LP, Initial Term Loan, 7.14%, (3-month USD LIBOR + 4.50%), 6/18/20		Marshall Islands		13,027,190			12,620,091


							32,682,420

Utilities 0.3%
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.86%, (3-month USD LIBOR + 3.25%), 6/28/23		United States		6,084,502			6,058,515
NRG Energy Inc., Term Loan B, 4.233%, (1-month USD LIBOR + 1.75%), 6/30/23		United States		8,392,675			8,402,159


							14,460,674

Total Senior Floating Rate Interests (Cost $582,626,074)							575,213,940


Foreign Government and Agency Securities 5.7%
^cAngolan Government International Bond, senior note, 144A, 8.25%, 5/09/28		Angola		16,800,000			17,616,564
^fBanque Centrale de Tunisie International Bond, senior note, Reg S, 5.625%, 2/17/24		Tunisia		6,300,000		EUR	6,896,353
Brazil Notas do Tesouro Nacional,
10.00%, 1/01/21		Brazil		97,200	^o	BRL	25,872,242
10.00%, 1/01/23		Brazil		34,402	^o	BRL	9,275,594
^pIndex Linked, 6.00%, 5/15/23		Brazil		19,500	^o	BRL	17,269,542
^cDominican Republic, senior note, 144A, 8.90%, 2/15/23		Dominican Republic		40,700,000		DOP	805,402
^cThe Export-Import Bank of India, senior note, 144A, 3.875%, 2/01/28		India		16,000,000			15,838,888
Government of Colombia, senior bond, 9.85%, 6/28/27		Colombia		42,750,000,000		COP	16,377,615
^cGovernment of Gabon, 144A, 6.375%, 12/12/24		Gabon		10,750,000			10,390,198
Government of Indonesia,
senior bond, FR34, 12.80%, 6/15/21		Indonesia		169,210,000,000		IDR	13,267,248
senior bond, FR36, 11.50%, 9/15/19		Indonesia		35,400,000,000		IDR	2,536,378
senior bond, FR39, 11.75%, 8/15/23		Indonesia		29,150,000,000		IDR	2,379,765
senior bond, FR44, 10.00%, 9/15/24		Indonesia		8,340,000,000		IDR	649,174
senior bond, FR56, 8.375%, 9/15/26		Indonesia		363,988,000,000		IDR	26,398,703
^cGovernment of Iraq, 144A, 5.80%, 1/15/28		Iraq		17,000,000			16,558,340
^cGovernment of Kazakhstan, senior bond, 144A, 4.875%, 10/14/44		Kazakhstan		7,600,000			8,182,616
Government of Mexico, senior bond, M, 6.50%, 6/10/21		Mexico		3,990,000	^q	MXN	20,465,981
Government of South Africa, senior bond, 7.00%, 2/28/31		South Africa		260,000,000		ZAR	15,297,007
^cGovernment of Ukraine,
144A, 7.75%, 9/01/22		Ukraine		2,200,000			2,164,910
144A, 7.75%, 9/01/23		Ukraine		4,355,000			4,214,442
144A, 7.75%, 9/01/24		Ukraine		4,355,000			4,169,455
^a,r144A, VRI, GDP Linked Security, 5/31/40		Ukraine		9,990,000			6,406,038



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value
Foreign Government and Agency Securities (continued)
^cGovernment of Ukraine, (continued)
senior bond, 144A, 7.375%, 9/25/32		Ukraine		6,000,000		$ 5,293,800
^sGovernment of Uruguay, senior bond, Index Linked, 3.70%, 6/26/37		Uruguay		471,212,345	UYU	13,920,174
Republic of Colombia, senior bond, 5.00%, 6/15/45		Colombia		13,500,000		14,129,572

Total Foreign Government and Agency Securities (Cost $295,397,045)						276,376,001


U.S. Government and Agency Securities 5.8%
U.S. Treasury Bond,
7.125%, 2/15/23		United States		3,000,000		3,526,875
6.25%, 8/15/23		United States		4,000,000		4,646,250
6.875%, 8/15/25		United States		1,000,000		1,261,426
5.25%, 2/15/29		United States		1,750,000		2,165,317
3.00%, 11/15/45		United States		26,900,000		27,328,719
U.S. Treasury Note,
2.375%, 8/15/24		United States		5,000,000		5,018,360
3.125%, 11/15/28		United States		111,000,000		116,870,859
^sIndex Linked, 0.625%, 1/15/24		United States		24,859,130		25,136,291
^sIndex Linked, 0.125%, 7/15/24		United States		96,371,948		95,402,855

Total U.S. Government and Agency Securities (Cost $281,613,782)						281,356,952


Asset-Backed Securities and Commercial Mortgage-Backed Securities 26.2%
Banks 0.5%
Citigroup Commercial Mortgage Trust, 2006-C5, AJ, 5.482%, 10/15/49		United States		2,706,225		2,621,620
^tCommercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.855%, 7/10/38		United States		7,193,000		6,550,068
CSAIL Commercial Mortgage Trust, 2015-C1, A4, 3.505%, 4/15/50		United States		10,050,000		10,353,006
^tCWABS Asset-Backed Certificates Trust, 2005-11, AF4, FRN, 5.21%, 3/25/34		United States		2,200,739		2,215,780
^uMerrill Lynch Mortgage Investors Trust, 2005-A6, 2A3, FRN, 2.857%, (1-month USD LIBOR + 0.38%), 8/25/35		United States		1,178,678		1,185,971


						22,926,445

Diversified Financials 25.7%
^uAmerican Express Credit Account Master Trust, 2017-2, A, FRN, 2.923%, (1-month USD LIBOR + 0.45%), 9/16/24		United States		9,170,000		9,233,152
^c,uAMMC CLO XI Ltd.,
2012-11A, BR2, 144A, FRN, 4.183%, (3-month USD LIBOR + 1.60%), 4/30/31		United States		3,000,000		2,958,930
2012-11A, CR2, 144A, FRN, 4.483%, (3-month USD LIBOR + 1.90%), 4/30/31		United States		1,000,000		961,740
2012-11A, DR2, 144A, FRN, 5.433%, (3-month USD LIBOR + 2.85%), 4/30/31		United States		1,450,000		1,381,981



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^c,uAntares CLO Ltd., 2018-1A, B, 144A, FRN, 4.242%, (3-month USD LIBOR + 1.65%), 4/20/31		United States		17,500,000	$ 17,078,775
^c,uAres CLO Ltd., 2018-48A, D, 144A, FRN, 5.292%, (3-month USD LIBOR + 2.70%), 7/20/30		United States		3,550,000	3,398,415
^c,tARES L CLO Ltd., 2018-50A, B, 144A, FRN, 4.478%, 1/15/32		United States		15,700,000	15,659,023
^c,tARES LII CLO Ltd.,
2019-52A, A2, 144A, FRN, 4.259%, 4/22/31		United States		2,522,358	2,513,605
2019-52A, B, 144A, FRN, 4.459%, 4/22/31		United States		3,500,000	3,487,155
2019-52A, C, 144A, FRN, 5.289%, 4/22/31		United States		1,000,000	998,350
2019-52A, D, 144A, FRN, 6.559%, 4/22/31		United States		1,703,704	1,697,111
^c,uAres XLIII CLO Ltd., 2017-43A, A, 144A, FRN, 3.817%, (3-month USD LIBOR + 1.22%), 10/15/29		United States		3,870,000	3,867,214
^c,tAtrium XIV LLC, 14A, D, 144A, FRN, 5.551%, 8/23/30		United States		3,750,000	3,580,988
Banc of America Commercial Mortgage Trust,
2015-UBS7, A3, 3.441%, 9/15/48		United States		10,920,000	11,165,466
2015-UBS7, A4, 3.705%, 9/15/48		United States		12,450,000	12,908,914
^t2015-UBS7, B, FRN, 4.507%, 9/15/48		United States		6,740,000	7,148,572
^c,tBBC Middle Market CLO LLC, 2018-1A, A2, 144A, FRN, 4.742%, 10/20/30		United States		6,300,000	6,092,919
^c,tBCAP LLC Trust, 2009-RR1, 2A2, 144A, FRN, 4.831%, 5/26/35		United States		6,191,781	6,043,097
^cBetony CLO 2 Ltd.,
^t2018-1A, A1, 144A, FRN, 3.663%, 4/30/31		United States		15,300,000	15,185,250
^u2018-1A, C, 144A, FRN, 5.483%, (3-month USD LIBOR + 2.90%), 4/30/31		United States		4,000,000	3,831,320
^c,tBlueMountain CLO Ltd.,
2012-2A, BR2, 144A, FRN, 4.094%, 11/20/28		United States		6,710,000	6,691,682
2012-2A, CR2, 144A, FRN, 4.644%, 11/20/28		United States		2,730,000	2,715,176
2014-2A, CR2, 144A, FRN, 4.792%, 10/20/30		United States		3,800,000	3,759,758
2018-1A, D, 144A, FRN, 5.633%, 7/30/30		United States		5,000,000	4,883,700
^c,uBlueMountain Fuji U.S. CLO II Ltd., 2017-2A, A1A, 144A, FRN, 3.792%, (3-month USD LIBOR + 1.20%), 10/20/30		United States		4,200,000	4,203,192
^c,uBlueMountain Fuji U.S. CLO III Ltd., 2017-3A, A2, 144A, FRN, 3.747%, (3-month USD LIBOR + 1.15%), 1/15/30		United States		4,600,000	4,504,412
^cBRAVO Residential Funding Trust, 2019-1, A1C, 144A, 3.50%, 3/25/58		United States		12,000,000	12,006,120
^cBurnham Park CLO Ltd.,
^u2016-1A, A, 144A, FRN, 4.022%, (3-month USD LIBOR + 1.43%), 10/20/29		United States		4,590,000	4,607,442
^t2016-1A, BR, 144A, FRN, 4.092%, 10/20/29		United States		3,500,000	3,453,135
^t2016-1A, CR, 144A, FRN, 4.742%, 10/20/29		United States		4,000,000	3,936,120
^c,tButtermilk Park CLO Ltd., 2018-1A, C, 144A, FRN, 4.697%, 10/15/31		United States		9,730,950	9,455,856
^uCapital One Multi-Asset Execution Trust,
2016-A2, A2, FRN, 3.103%, (1-month USD LIBOR + 0.63%), 2/15/24		United States		44,033,000	44,408,553
2016-A7, A7, FRN, 2.983%, (1-month USD LIBOR + 0.51%), 9/16/24		United States		4,400,000	4,436,176



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Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^c,uCarlyle Global Market Strategies CLO Ltd., 2014-4RA, C, 144A, FRN, 5.497%, (3-month USD LIBOR + 2.90%), 7/15/30		United States		3,000,000	$ 2,853,750
^c,tCarlyle GMS Finance MM CLO LLC, 2015-1A, A2R, 144A, FRN, 4.797%, 10/15/31		United States		12,000,000	11,547,480
^c,uCarlyle U.S. CLO Ltd., 2017-2A, A1B, 144A, FRN, 3.812%, (3-month USD LIBOR + 1.22%), 7/20/31		United States		8,500,000	8,483,850
^c,uCatamaran CLO Ltd., 2014-2A, BR, 144A, FRN, 5.551%, (3-month USD LIBOR + 2.95%), 10/18/26		United States		11,770,000	11,773,884
^c,tCGRBS Commercial Mortgage Trust, 2013-VN05, C, 144A, FRN, 3.703%, 3/13/35		United States		7,700,000	7,811,122
^c,tCIM Trust, 2019-INV1, A1, 144A, FRN, 4.00%, 2/25/49		United States		17,904,129	18,237,503
^tCitibank Credit Card Issuance Trust,
2016-A3, A3, FRN, 2.964%, 12/07/23		United States		4,800,000	4,835,859
2017-A7, A7, FRN, 2.844%, 8/08/24		United States		36,060,000	36,162,627
^c,tCole Park CLO Ltd., 2015-1A, BR, 144A, FRN, 4.192%, 10/20/28		United States		3,530,000	3,513,833
^tCOMM Mortgage Trust, 2014-CR19, B, FRN, 4.703%, 8/10/47		United States		7,700,000	8,094,148
^c,tConsumer Loan Underlying Bond CLUB Certificate Issuer Trust I,
2018-29, PT, 144A, FRN, 23.67%, 12/15/43		United States		3,230,233	2,713,086
2019-S1, PT, 144A, FRN, 17.91%, 4/15/44		United States		9,354,058	8,753,905
2019-S2, PT, 144A, FRN, 13.852%, 5/16/44		United States		6,394,719	6,081,243
2018-14, PT, 144A, FRN, 9.61%, 9/16/41		United States		7,861,776	7,873,607
^cCore Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34		United States		14,291,733	14,473,393
^tDiscover Card Execution Note Trust, 2017-A7, A7, FRN, 2.833%, 4/15/25		United States		5,360,000	5,367,314
^c,tDryden 38 Senior Loan Fund,
2015-38A, CR, 144A, FRN, 4.597%, 7/15/30		United States		7,186,000	7,054,568
2015-38A, DR, 144A, FRN, 5.597%, 7/15/30		United States		4,556,000	4,446,519
^c,uDryden 42 Senior Loan Fund, 2016-42A, DR, 144A, FRN, 5.527%, (3-month USD LIBOR + 2.93%), 7/15/30		United States		8,400,000	8,125,068
^c,uDryden 55 CLO Ltd.,
2018-55A, A1, 144A, FRN, 3.617%, (3-month USD LIBOR + 1.02%), 4/15/31		United States		6,000,000	5,934,840
2018-55A, D, 144A, FRN, 5.447%, (3-month USD LIBOR + 2.85%), 4/15/31		United States		3,000,000	2,880,270
^c,uDryden 64 CLO Ltd.,
2018-64A, A, 144A, FRN, 3.571%, (3-month USD LIBOR + 0.97%), 4/18/31		United States		5,070,000	4,997,702
2018-64A, D, 144A, FRN, 5.251%, (3-month USD LIBOR + 2.65%), 4/18/31		United States		2,200,000	2,128,500
^c,tEaton Vance CLO Ltd.,
2014-1RA, C, 144A, FRN, 4.697%, 7/15/30		United States		1,972,575	1,905,823
2014-1RA, D, 144A, FRN, 5.647%, 7/15/30		United States		3,653,850	3,557,461



30	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^c,t Eleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.673%, 9/10/35		United States		14,920,000	$	15,379,794
FHLMC Structured Agency Credit Risk Debt Notes,
^u2013-DN2, M2, FRN, 6.727%, (1-month USD LIBOR + 4.25%), 11/25/23		United States		13,084,231		14,289,648
^u2014-DN1, M2, FRN, 4.677%, (1-month USD LIBOR + 2.20%), 2/25/24		United States		7,444,438		7,571,085
^u2014-DN2, M3, FRN, 6.077%, (1-month USD LIBOR + 3.60%), 4/25/24		United States		21,379,000		23,031,620
^u2014-DN3, M3, FRN, 6.477%, (1-month USD LIBOR + 4.00%), 8/25/24		United States		1,181,806		1,277,522
^u2014-DN4, M3, FRN, 7.027%, (1-month USD LIBOR + 4.55%), 10/25/24		United States		15,408,935		16,891,774
^u2014-HQ1, M3, FRN, 6.577%, (1-month USD LIBOR + 4.10%), 8/25/24		United States		3,564,368		3,867,324
^u2014-HQ2, M2, FRN, 4.677%, (1-month USD LIBOR + 2.20%), 9/25/24		United States		9,044,165		9,218,402
^u2014-HQ3, M3, FRN, 7.227%, (1-month USD LIBOR + 4.75%), 10/25/24		United States		7,038,601		7,741,379
^u2015-DNA1, M3, FRN, 5.777%, (1-month USD LIBOR + 3.30%), 10/25/27		United States		2,830,000		3,066,956
^u2015-DNA3, M3, FRN, 7.177%, (1-month USD LIBOR + 4.70%), 4/25/28		United States		18,411,581		21,152,925
^u2015-HQ1, M3, FRN, 6.277%, (1-month USD LIBOR + 3.80%), 3/25/25		United States		9,211,480		9,717,630
^u2015-HQA1, M3, FRN, 7.177%, (1-month USD LIBOR + 4.70%), 3/25/28		United States		18,830,000		21,133,521
^u2016-DNA2, M3, FRN, 7.127%, (1-month USD LIBOR + 4.65%), 10/25/28		United States		17,820,000		19,850,559
^t2017-DNA1, M2, FRN, 5.727%, 7/25/29		United States		7,300,000		7,820,056
^t2017-DNA2, M2, FRN, 5.927%, 10/25/29		United States		5,868,312		6,362,107
^u2017-DNA3, M2, FRN, 4.977%, (1-month USD LIBOR + 2.50%), 3/25/30		United States		26,312,269		27,154,193
^t2017-HQA1, M2, FRN, 6.027%, 8/25/29		United States		28,226,000		30,320,191
^c,uFlagship CLO VIII Ltd.,
2014-8A, ARR, 144A, FRN, 3.451%, (3-month USD LIBOR + 0.85%), 1/16/26		United States		6,392,792		6,382,308
2014-8A, DR, 144A, FRN, 5.651%, (3-month USD LIBOR + 3.05%), 1/16/26		United States		3,000,000		2,982,690
FNMA Connecticut Avenue Securities,
^u2013-C01, M2, FRN, 7.727%, (1-month USD LIBOR + 5.25%), 10/25/23		United States		16,098,592		18,152,176
^u2014-C01, M2, FRN, 6.877%, (1-month USD LIBOR + 4.40%), 1/25/24		United States		17,420,000		19,432,210
^u2014-C02, 1M2, FRN, 5.077%, (1-month USD LIBOR + 2.60%), 5/25/24		United States		14,572,000		15,291,309
^u2014-C03, 1M2, FRN, 5.477%, (1-month USD LIBOR + 3.00%), 7/25/24		United States		32,953,958		35,243,388
^u2014-C03, 2M2, FRN, 5.377%, (1-month USD LIBOR + 2.90%), 7/25/24		United States		4,386,698		4,614,349



franklintempleton.com	Annual Report	31

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
FNMA Connecticut Avenue Securities, (continued)
^u2015-C01, 1M2, FRN, 6.777%, (1-month USD LIBOR + 4.30%), 2/25/25		United States		8,812,977	$	9,579,582
^u2015-C01, 2M2, FRN, 7.027%, (1-month USD LIBOR + 4.55%), 2/25/25		United States		11,589,457		12,467,952
^u2015-C02, 1M2, FRN, 6.477%, (1-month USD LIBOR + 4.00%), 5/25/25		United States		25,268,655		27,229,907
^u2015-C02, 2M2, FRN, 6.477%, (1-month USD LIBOR + 4.00%), 5/25/25		United States		13,181,668		14,048,092
^u2015-C03, 1M2, FRN, 7.477%, (1-month USD LIBOR + 5.00%), 7/25/25		United States		30,408,863		33,811,372
^u2015-C03, 2M2, FRN, 7.477%, (1-month USD LIBOR + 5.00%), 7/25/25		United States		16,336,499		17,986,243
^t2016-C04, 1M2, FRN, 6.727%, 1/25/29		United States		9,910,000		10,914,757
^u2017-C01, 1M2, FRN, 6.027%, (1-month USD LIBOR + 3.55%), 7/25/29		United States		22,910,000		24,619,269
^t2017-C03, 1M2, FRN, 5.477%, 10/25/29		United States		9,290,000		9,877,213
^t2017-C03, 2M2, FRN, 5.327%, 11/25/29		United States		5,225,499		5,441,379
^cGalaxy XVIII CLO Ltd.,
^t2018-28A, A2, 144A, FRN, 3.667%, 7/15/31		United States		9,500,000		9,453,260
^u2018-28A, C, 144A, FRN, 4.547%, (3-month USD LIBOR + 1.95%), 7/15/31		United States		3,070,000		2,965,313
^c,tGalaxy XXV CLO Ltd., 2018-25A, D, 144A, FRN, 5.68%, 10/25/31		United States		4,734,850		4,591,952
^c,tGalaxy XXVI CLO Ltd., 2018-26A, A, 144A, FRN, 3.852%, 11/22/31		United States		7,600,000		7,550,524
^c,uGalaxy XXVII CLO Ltd., 2018-27A, C, 144A, FRN, 5.433%, (3-month USD LIBOR + 2.75%), 5/16/31		United States		5,750,000		5,505,855
GS Mortgage Securities Trust,
^t2016-GS3, B, FRN, 3.395%, 10/10/49		United States		8,037,000		8,003,085
2017-GS6, B, 3.869%, 5/10/50		United States		7,700,000		7,865,060
^c,tHPS Loan Management Ltd., 2013A-18, C, 144A, FRN, 4.747%, 10/15/30		United States		4,950,000		4,808,381
^c,tJ.P. Morgan Chase Commercial Mortgage Securities Trust, 2016-NINE, B, 144A, FRN, 2.949%, 10/06/38		United States		9,600,000		9,058,669
JPMCC Commercial Mortgage Securities Trust, 2017-JP6, B, 3.946%, 7/15/50		United States		9,250,000		9,454,194
^c,t LCM XVI LP,
2016A, A2R, 144A, FRN, 3.777%, 10/15/31		United States		7,655,557		7,610,236
2016A, BR2, 144A, FRN, 4.347%, 10/15/31		United States		13,525,832		13,514,200
^c,t LCM XVII LP,
2017A, BRR, 144A, FRN, 4.197%, 10/15/31		United States		4,590,000		4,540,933
2017A, CRR, 144A, FRN, 4.697%, 10/15/31		United States		4,240,000		4,159,737



32	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^c,uLCM XVIII LP, 2018A, DR, 144A, FRN, 5.392%, (3-month USD LIBOR + 2.80%), 4/20/31		United States		6,860,000	$	6,587,384
^c,uLCM XXIV Ltd., 24A, A, 144A, FRN, 3.902%, (3-month USD LIBOR + 1.31%), 3/20/30		United States		4,300,000		4,310,793
^c,u Madison Park Funding XXIII Ltd.,
2017-23A, B, 144A, FRN, 4.282%, (3-month USD LIBOR + 1.70%), 7/27/30		United States		2,400,000		2,397,288
2017-23A, C, 144A, FRN, 4.932%, (3-month USD LIBOR + 2.35%), 7/27/30		United States		5,000,000		5,006,850
^c,tMagnetite Ltd., 2015-14RA, A1, 144A, FRN, 3.721%, 10/18/31		United States		2,000,000		1,982,880
^c,tMill City Mortgage Loan Trust, 2018-4, A1B, 144A, FRN, 3.50%, 4/25/66		United States		16,720,000		16,852,256
^u MortgageIT Trust,
2004-1, A2, FRN, 3.377%, (1-month USD LIBOR + 0.90%), 11/25/34		United States		1,888,004		1,892,722
2005-5, A1, FRN, 2.997%, (1-month USD LIBOR + 0.26%), 12/25/35		United States		1,734,780		1,725,400
^c,tMountain View Funding CLO XIV Ltd.,
2019-1A, A1, 144A, FRN, 4.058%, 4/15/29		United States		5,000,000		5,007,600
2019-1A, C, 144A, FRN, 5.518%, 4/15/29		United States		4,500,000		4,468,770
^c,t Neuberger Berman CLO Ltd., 2016-22A, CR, 144A, FRN, 4.788%, 10/17/30		United States		2,129,630		2,095,705
^c,uNZCG Funding Ltd., 2015-1A, A2R, 144A, FRN, 4.196%, (3-month USD LIBOR + 1.55%), 2/26/31		United States		15,500,000		15,033,760
^c,tOctagon Investment Partners 24 Ltd., 2015-1A, BS, 144A, FRN, 4.529%, 4/21/31		United States		4,485,000		4,477,151
^c,t Octagon Investment Partners 28 Ltd.,
2016-1A, A2R, 144A, FRN, 4.031%, 10/24/30		United States		10,000,000		10,020,600
2016-1A, BR, 144A, FRN, 4.381%, 10/24/30		United States		3,914,730		3,923,264
^c,uOctagon Investment Partners 30 Ltd., 144A, FRN, 3.912%, (3-month USD LIBOR + 1.32%), 3/17/30		United States		4,300,000		4,293,550
^c,uOctagon Investment Partners 37 Ltd., 2018-2A, C, 144A, FRN, 5.43%, (3-month USD LIBOR + 2.85%), 7/25/30		United States		4,000,000		3,847,880
^c,tOctagon Investment Partners 38 Ltd., 2018-1A, C, 144A, FRN, 5.542%, 7/20/30		United States		5,000,000		4,844,400
^c,uOctagon Investment Partners XVI Ltd., 2013-1A, DR, 144A, FRN, 5.588%, (3-month USD LIBOR + 3.00%), 7/17/30		United States		6,000,000		5,833,260
^c,uOctagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 3.828%, (3-month USD LIBOR + 1.13%), 8/12/26		United States		4,524,140		4,529,931
^c,u Octagon Investment Partners XXIII Ltd.,
2015-1A, BR, 144A, FRN, 3.797%, (3-month USD LIBOR + 1.20%), 7/15/27		United States		4,590,000		4,565,398
2015-1A, DR, 144A, FRN, 5.147%, (3-month USD LIBOR + 2.55%), 7/15/27		United States		6,400,000		6,316,800
^uOpteum Mortgage Acceptance Corp. Trust, 2005-4, 1APT, FRN, 2.787%, (1-month USD LIBOR + 0.31%), 11/25/35		United States		2,060,638		2,055,612
^c,tStrata CLO I Ltd., 2018-1A, B, 144A, FRN, 5.016%, 1/15/31		United States		14,100,000		14,209,275
^uStructured Asset Securities Corp., 2005-2XS, 2A2, FRN, 4.002%, (1-month USD LIBOR + 1.50%), 2/25/35		United States		1,942,657		1,941,992
^tThornburg Mortgage Securities Trust, 2005-1, A3, FRN, 4.576%, 4/25/45		United States		2,521,594		2,562,688



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
^c Voya CLO Ltd.,
^t2013-2A, A2AR, 144A, FRN, 3.98%, 4/25/31		United States		2,200,000	$	2,147,354
^u2013-2A, BR, 144A, FRN, 4.43%, (3-month USD LIBOR + 1.85%), 4/25/31		United States		5,770,000		5,567,819
^u2014-1A, CR2, 144A, FRN, 5.401%, (3-month USD LIBOR + 2.80%), 4/18/31		United States		8,000,000		7,674,640
^t2015-2A, BR, 144A, FRN, 4.092%, 7/23/27		United States		9,290,000		9,239,927
^t2016-3A, A1R, 144A, FRN, 3.791%, 10/18/31		United States		10,000,000		9,955,300
^u2017-2A, B, 144A, FRN, 4.947%, (3-month USD LIBOR + 2.35%), 6/07/30		United States		19,200,000		19,206,144
^u2018-2A, D, 144A, FRN, 5.347%, (3-month USD LIBOR + 2.75%), 7/15/31		United States		2,900,000		2,773,270
Wells Fargo Mortgage Backed Securities Trust,
^t2004-W, A9, FRN, 4.845%, 11/25/34		United States		990,234		1,025,930
2007-3, 3A1, 5.50%, 4/25/22		United States		163,357		166,199


						1,249,402,727

Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $1,282,799,916)						1,272,329,172


Mortgage-Backed Securities 9.4%
^v Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%^†
FHLMC, 4.929%, (US 1 Year CMT T-Note +/- MBS Margin), 1/01/33		United States		17,487		18,066

Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 4.6%
FHLMC Gold 15 Year, 4.50%, 6/01/19 - 9/01/19		United States		6,143		6,273
FHLMC Gold 15 Year, 5.00%, 6/01/19 - 7/01/22		United States		49,166		50,593
FHLMC Gold 30 Year, 3.50%, 12/01/47		United States		13,898,119		14,073,340
^wFHLMC Gold 30 Year, 3.50%, 4/01/49		United States		59,600,000		60,186,233
^wFHLMC Gold 30 Year, 4.00%, 4/01/49		United States		117,450,000		120,647,468
FHLMC Gold 30 Year, 4.50%, 10/01/40		United States		146,926		156,330
^wFHLMC Gold 30 Year, 4.50%, 4/01/49		United States		23,000,000		23,973,906
FHLMC Gold 30 Year, 5.00%, 5/01/27 - 2/01/38		United States		1,141,747		1,219,618
FHLMC Gold 30 Year, 5.50%, 6/01/33 - 6/01/36		United States		799,234		869,588
FHLMC Gold 30 Year, 6.00%, 6/01/33 - 6/01/37		United States		269,796		295,547
FHLMC Gold 30 Year, 6.50%, 10/01/21 - 6/01/36		United States		126,003		139,796
FHLMC Gold 30 Year, 7.00%, 9/01/21 - 8/01/32		United States		22,951		23,837
FHLMC Gold 30 Year, 7.50%, 1/01/26 - 1/01/31		United States		5,534		6,398
FHLMC Gold 30 Year, 8.00%, 11/01/25 - 1/01/26		United States		72		72
FHLMC Gold 30 Year, 9.00%, 12/01/24		United States		64		70


						221,649,069

^v Federal National Mortgage Association (FNMA) Adjustable Rate 0.0%^†
FNMA, 4.622%, (US 1 Year CMT T-Note +/- MBS Margin), 12/01/34		United States		119,260		125,344



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value
Mortgage-Backed Securities (continued)
Federal National Mortgage Association (FNMA) Fixed Rate 3.3%
FNMA 15 Year, 2.50%, 7/01/27		United States		268,938	$	267,724
FNMA 15 Year, 4.50%, 3/01/20		United States		7,054		7,182
FNMA 15 Year, 5.50%, 3/01/21 - 4/01/22		United States		29,812		30,051
FNMA 30 Year, 3.00%, 9/01/48		United States		41,532,980		41,128,192
FNMA 30 Year, 3.50%, 11/01/47		United States		14,556,136		14,711,880
^wFNMA 30 Year, 3.50%, 4/01/49		United States		62,320,000		62,895,053
FNMA 30 Year, 4.50%, 3/01/28 - 2/01/41		United States		455,864		481,876
^wFNMA 30 Year, 4.50%, 4/01/49		United States		36,000,000		37,462,108
FNMA 30 Year, 5.00%, 9/01/23 - 10/01/35		United States		1,226,499		1,308,092
FNMA 30 Year, 5.50%, 9/01/33 - 12/01/35		United States		1,096,223		1,200,557
FNMA 30 Year, 6.00%, 6/01/34 - 5/01/38		United States		2,302,292		2,546,608
FNMA 30 Year, 6.50%, 3/01/28 - 10/01/37		United States		320,753		362,080
FNMA 30 Year, 7.50%, 10/01/29		United States		5,229		6,092
FNMA 30 Year, 8.00%, 1/01/25 - 5/01/26		United States		2,792		3,091


						162,410,586

Government National Mortgage Association (GNMA) Fixed Rate 1.5%
GNMA I SF 30 Year, 4.50%, 9/20/48		United States		29,010,876		30,182,729
GNMA I SF 30 Year, 5.00%, 6/15/34 - 7/15/34		United States		151,466		162,555
GNMA I SF 30 Year, 5.50%, 2/15/33 - 6/15/36		United States		363,608		392,855
GNMA I SF 30 Year, 6.00%, 8/15/36		United States		22,978		25,484
GNMA I SF 30 Year, 6.50%, 2/15/29 - 3/15/32		United States		39,310		42,841
GNMA I SF 30 Year, 7.00%, 11/15/27 - 5/15/28		United States		10,194		10,411
GNMA I SF 30 Year, 7.50%, 9/15/23 - 5/15/27		United States		707		728
GNMA I SF 30 Year, 8.00%, 2/15/25 - 9/15/27		United States		3,646		3,911
GNMA I SF 30 Year, 8.50%, 8/15/24		United States		47		49
GNMA I SF 30 Year, 9.00%, 1/15/25		United States		203		203
GNMA I SF 30 Year, 9.50%, 6/15/25		United States		405		406
^wGNMA II SF 30 Year, 4.50%, 4/01/49		United States		19,000,000		19,703,387
GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33		United States		204,845		218,980
^wGNMA II SF 30 Year, 5.00%, 4/01/49		United States		22,500,000		23,472,510
GNMA II SF 30 Year, 5.50%, 6/20/34		United States		104,028		113,966
GNMA II SF 30 Year, 6.00%, 11/20/34		United States		99,252		112,524
GNMA II SF 30 Year, 6.50%, 7/20/28 - 12/20/31		United States		56,187		63,232
GNMA II SF 30 Year, 7.50%, 4/20/32		United States		16,398		18,195


						74,524,966

Total Mortgage-Backed Securities (Cost $457,522,279)						458,728,031


Municipal Bonds 1.8%
California State GO, Various Purpose, Refunding, 5.00%, 9/01/29		United States		17,200,000		20,839,004
New York City HDC Capital Fund Grant Program Revenue, New York City Housing Authority Program, Series B1, 5.00%, 7/01/33		United States		3,500,000		3,817,205
Orlando Health Obligated Group, 3.777%, 10/01/28		United States		3,870,000		3,924,358
Port Authority of New York and New Jersey Revenue, Consolidated, One Hundred Ninety-First Series, 4.823%, 6/01/45		United States		14,165,000		15,195,788



franklintempleton.com	Annual Report	35

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

Country

Principal

Amount*

Value

Municipal Bonds (continued)

^jPuerto Rico Electric Power Authority Power Revenue,

Series A, 6.75%, 7/01/36

United States

30,900,000

$ 25,338,000

Series XX, 5.25%, 7/01/40

United States

15,000,000

12,187,500

San Jose RDA Successor Agency Tax Allocation, Senior, Refunding,
Series A-T, 3.25%, 8/01/29

United States

5,675,000

5,678,575

Total Municipal Bonds (Cost $84,331,665)

86,980,430

Shares/

Units

Escrows and Litigation Trusts 0.0%^†

^a,bMidstates Petroleum Co. Inc./Midstates Petroleum Co. LLC, Escrow Account

United States

15,000,000

—

^a,bNewPage Corp., Litigation Trust

United States

14,000,000

—

^a,aa,b,dRemington Outdoor Co. Inc., Litigation Units

United States

124,500

—

^a,bT-Mobile USA Inc., Escrow Account

United States

29,900,000

—

^aVistra Energy Corp., Escrow Account

United States

30,000,000

75,000

Total Escrows and Litigation Trusts
(Cost $878,370)

75,000

Total Investments before Short Term
Investments (Cost $5,042,099,640)

4,922,936,149

Shares

Short Term Investments 3.3%

Money Market Funds (Cost $63,183,777) 1.3%

^e,xInstitutional Fiduciary Trust Money Market Portfolio, 2.10%

United States

63,183,777

Principal

Amount*

Repurchase Agreements (Cost $97,392,171) 2.0%

^yJoint Repurchase Agreement, 2.702%, 5/01/19 (Maturity Value $97,399,481)

BNP Paribas Securities Corp. (Maturity Value $73,729,459)

Deutsche Bank Securities Inc. (Maturity Value $19,456,520)

HSBC Securities (USA) Inc. (Maturity Value $4,213,502)

Collateralized by U.S. Government Agency Securities, 2.50% -
4.50%, 9/08/31 - 3/20/49; ^zU.S. Treasury Bills, 7/05/19;
U.S. Treasury Notes, 1.375% - 3.375%, 5/15/19 - 5/15/21;
and U.S. Treasury Strips, 2/15/35 - 5/15/47 (valued at 99,428,023)

United States

97,392,171

Total Investments (Cost $5,202,675,588) 104.8%

5,083,512,097

Other Assets, less Liabilities (4.8)%

(234,323,304

)

Net Assets 100.0%

$4,849,188,793



36	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

^†Rounds to less than 0.1% of net assets.

*The principal amount is stated in U.S. dollars unless otherwise indicated.

^aNon-income producing.

^aaSee Note 10 regarding holdings of 5% voting securities.

^abThe security is owned by FT Holdings Corporation ll, a wholly-owned subsidiary of the Fund. See Note 1(h).

^bFair valued using significant unobservable inputs. See Note 12 regarding fair value measurements.

^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, 2019, the aggregate value of these securities was $1,522,931,224, representing 31.4% of net assets.

^dSee Note 8 regarding restricted securities.

^eSee Note 3(f) regarding investments in affiliated management investment companies.

^fSecurity 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, 2019, the aggregate value of these securities was $14,594,630, representing 0.3% of net assets.

^gIncome may be received in additional securities and/or cash.

^hSee Note 1(g) regarding loan participation notes.

ⁱThe coupon rate shown represents the rate at period end.

^jSee Note 7 regarding defaulted securities.

^kPerpetual security with no stated maturity date.

^lSee Note 1(j) regarding senior floating rate interests.

^mSecurity purchased on a delayed delivery basis. See Note 1(d).

ⁿA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.

^oPrincipal amount is stated in 1,000 Brazilian Real Units.

^pRedemption price at maturity and coupon payment is adjusted for inflation. See Note 1(l).

^qPrincipal amount is stated in 100 Mexican Peso Units.

^rThe principal represents the notional amount. See Note 1(e) regarding value recovery instruments.

^sPrincipal amount of security is adjusted for inflation. See Note 1(l).

^tAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.

^uThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.

^vAdjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).

^wSecurity purchased on a to-be-announced (TBA) basis. See Note 1(d).

^xThe rate shown is the annualized seven-day effective yield at period end.

^ySee Note 1(c) regarding joint repurchase agreement.

^zThe security was issued on a discount basis with no stated coupon rate.



franklintempleton.com	Annual Report	37

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

At April 30, 2019, the Fund had the following futures contracts outstanding. See Note 1(e).

Futures Contracts

Description

Type

Number of
Contracts

Notional
Amount*

Expiration
Date

Value/
Unrealized
Appreciation

(Depreciation)

Interest Rate Contracts

U.S. Treasury 30 Yr. Bond

Long

310

45,715,312

6/19/19

$ 492,352

Ultra 10 Yr. U.S. Treasury Note

Long

2,027

267,120,594

6/19/19

3,353,208

Total Futures Contracts

$3,845,560

*As of period end.

At April 30, 2019, the Fund had the following forward exchange contracts outstanding. See Note 1(e).

Forward Exchange Contracts


Currency	Counterparty^a		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Australian Dollar		JPHQ		Buy		6,900,000	$	4,894,860		5/10/19		$ —	$	(27,380	)
Australian Dollar		JPHQ		Sell		19,500,000		13,949,266		5/10/19		193,344		—
Norwegian Krone		JPHQ		Buy		137,300,000		15,944,907		5/20/19		—		(17,807	)
Norwegian Krone		JPHQ		Sell		137,300,000		16,187,659		5/20/19		260,559		—
Indonesian Rupiah		JPHQ		Buy		40,000,000,000		2,772,003		6/20/19		19,490		—
Indonesian Rupiah		JPHQ		Sell		246,000,000,000		17,030,114		6/20/19		—		(137,567	)
Indian Rupee		DBAB		Buy		1,326,000,000		18,317,447		6/21/19		586,342		—
Indian Rupee		DBAB		Sell		417,000,000		5,962,253		6/21/19		17,397		—
Indian Rupee		DBAB		Sell		909,000,000		12,937,660		6/21/19		—		(21,272	)
Indian Rupee		JPHQ		Buy		442,000,000		6,090,671		6/21/19		210,592		—
Indian Rupee		JPHQ		Sell		442,000,000		6,325,581		6/21/19		24,318		—
Mexican Peso		JPHQ		Buy		273,200,000		14,079,208		6/21/19		213,731		—
Mexican Peso		JPHQ		Sell		75,000,000		3,939,076		6/21/19		15,319		—
Mexican Peso		JPHQ		Sell		198,200,000		10,340,798		6/21/19		—		(28,384	)
South Korean Won		JPHQ		Sell		18,600,000,000		16,696,589		6/21/19		694,799		—
Brazilian Real		JPHQ		Sell		30,400,000		8,105,370		6/24/19		379,830		—
Australian Dollar		DBAB		Sell		3,000,000		2,149,200		7/26/19		28,876		—
Canadian Dollar		JPHQ		Sell		15,200,000		11,492,428		7/26/19		119,298		—
British Pound		JPHQ		Sell		10,000,000		13,144,300		9/18/19		10,288		—
Canadian Dollar		JPHQ		Buy		6,500,000		4,855,812		9/18/19		13,422		—
Canadian Dollar		JPHQ		Sell		16,900,000		12,708,764		9/18/19		48,754		—
Canadian Dollar		JPHQ		Sell		27,000,000		20,192,653		9/18/19		—		(33,399	)
Euro		JPHQ		Buy		31,213,600		35,689,419		9/18/19		—		(245,931	)
Euro		JPHQ		Sell		6,400,000		7,211,040		9/18/19		—		(56,251	)
Euro		JPHQ		Sell		40,125,400		45,825,213		9/18/19		262,250		—
Swedish Krona		JPHQ		Buy		143,700,000		15,448,872		9/18/19		—		(143,553	)
Swedish Krona		JPHQ		Sell		143,700,000		15,691,199		9/18/19		385,880		—
Swiss Franc		JPHQ		Sell		1,600,000		1,616,145		9/18/19		23,830		—
Chinese Yuan Renminbi		JPHQ		Buy		78,000,000		11,622,207		9/27/19		—		(48,505	)
Chinese Yuan Renminbi		JPHQ		Sell		143,000,000		21,284,830		9/27/19		66,376		—
Brazilian Real		JPHQ		Sell		95,000,000		24,209,990		10/10/19		294,006		—



38	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

Forward Exchange Contracts (continued)


Currency	Counterparty^a		Type		Quantity		Contract Amount		Settlement Date		Unrealized Appreciation		Unrealized Depreciation

OTC Forward Exchange Contracts (continued)
Australian Dollar		JPHQ		Sell		55,850,000	$	39,994,958		10/11/19		$ 440,930		$ —
Turkish Lira		JPHQ		Buy		62,000,000		9,537,728		10/18/19		—		(231,015	)

Total Forward Exchange Contracts												$ 4,309,631		$ (991,064	)

Net unrealized appreciation (depreciation)												$ 3,318,567

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

At April 30, 2019, the Fund had the following credit default swap contracts outstanding. See Note 1(e).

Credit Default Swap Contracts


Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amount^a		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Rating^b
Centrally Cleared Swap Contracts
Contracts to Sell Protection^c,d
Traded Index
CDX.EM.30		1.00%		Quarterly				12/20/23	$	43,150,000	$	(1,562,243	)	$	(1,717,492	)		$ 155,249			Investment

																					Grade

OTC Swap Contracts
Contracts to Buy Protection^c
Single Name
Ally Financial Inc.		(5.00)%		Quarterly		JPHQ		6/20/24	$	19,800,000	$	(3,710,868	)	$	(3,221,267	)		$ (489,601	)
Government of Italy		(1.00)%		Quarterly		BZWS		6/20/23		14,200,000		(34,492	)		128,085			(162,577	)
Government of Turkey		(1.00)%		Quarterly		BZWS		12/20/19		9,100,000		135,584			272,457			(136,873	)

Contracts to Sell Protection^c,d
Single Name
Government of Argentina		5.00%		Quarterly		MSCO		6/20/23		48,600,000		(9,752,680	)		4,019,049			(13,771,729	)		B
Government of Indonesia		1.00%		Quarterly		CITI		6/20/24		24,700,000		88,732			(82,782	)		171,514			BBB-
Government of Italy		1.00%		Quarterly		BZWS		6/20/23		14,200,000		(350,372	)		(561,671	)		211,299			NR
Government of Russia		1.00%		Quarterly		BNDP		6/20/24		13,500,000		(142,538	)		(180,023	)		37,485			BBB-
Traded Index
^eBNP Paribas Bespoke
Bordeaux Index,
Mezzanine Tranche 7-10%		2.10%		Quarterly		BNDP		6/20/20		6,850,000		99,814			—			99,814			Non-
																					Investment
																					Grade
^eBNP Paribas Bespoke
Rodez2 Index,
Mezzanine Tranche 5-7%		3.20%		Quarterly		BNDP		12/20/20		3,300,000		99,244			—			99,244			Non-
																					Investment
																					Grade



franklintempleton.com	Annual Report	39

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

Credit Default Swap Contracts (continued)


Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amount^a		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Rating^b
OTC Swap Contracts (continued)
Contracts to Sell Protection^c,d (continued)
Traded Index (continued)
^eCitibank Bespoke Bogota
Index, Mezzanine
Tranche 7-10%		1.35%		Quarterly		CITI		6/20/20	$	7,000,000	$	65,242		$	—		$	65,242			Non-
																					Investment
																					Grade
^eCitibank Bespoke Broker
Index, Mezzanine Tranche 3-7%		1.30%		Quarterly		CITI		6/20/19		16,200,000		53,129			—			53,129			Non-
																					Investment
																					Grade
^eCitibank Bespoke Broker
Index, Mezzanine Tranche 3-7%		1.40%		Quarterly		CITI		6/20/19		13,200,000		46,620			—			46,620			Non-
																					Investment
																					Grade
^eCitibank Bespoke
Cambridge Index, Equity
Tranche 0-3%		0.00%		Quarterly		CITI		12/20/19		27,300,000		(3,599,163	)		(1,432,615	)		(2,166,548	)		Non-
																					Investment
																					Grade
^eCitibank Bespoke Lisbon
Index, Equity Tranche 0-3%		0.00%		Quarterly		CITI		6/20/19		5,440,000		(157,050	)		(89,926	)		(67,124	)		Non-
																					Investment
																					Grade
^eCitibank Bespoke Palma
Index, Mezzanine
Tranche 5-7%		2.30%		Quarterly		CITI		6/20/21		6,700,000		48,332			—			48,332			Non-
																					Investment
																					Grade
^eCitibank Bespoke
Singapore Index, Equity
Tranche 0-3%		0.00%		Quarterly		CITI		6/20/20		7,000,000		(788,618	)		(1,115,885	)		327,267			Non-
																					Investment
																					Grade
^eCitibank Bespoke
Sydney Index, Equity
Tranche 0-3%		0.00%		Quarterly		CITI		6/20/20		5,500,000		(1,029,744	)		(1,000,944	)		(28,800	)		Non-
																					Investment
																					Grade



40	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

Credit Default Swap Contracts (continued)


Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amount^a		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Rating^b
OTC Swap Contracts (continued)
Contracts to Sell Protection^c,d (continued)
Traded Index (continued)
^eCitibank Bespoke Verona
Index, Equity Tranche 0-3%		0.00%		Quarterly		CITI		12/20/19	$	10,900,000	$	(1,243,167	)	$	(702,131	)	$	(541,036	)		Non-
																					Investment
																					Grade
^eCitibank Bespoke Verona
Index, Mezzanine
Tranche 7-15%		0.40%		Quarterly		CITI		12/20/19		31,000,000		64,333			—			64,333			Non-
																					Investment
																					Grade
MCDX.NA.31		1.00%		Quarterly		CITI		12/20/23		23,060,000		406,877			216,800			190,077			Investment

																					Grade
Total OTC Swap Contracts											$	(19,700,785	)	$	(3,750,853)		$	(15,949,932)


Total Credit Default Swap Contracts											$	(21,263,028	)	$	(5,468,345)		$	(15,794,683)

^aFor 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 Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps and failure to pay or bankruptcy of the underlying securities for traded index swaps.

^dThe Fund enters contracts to sell protection to create a long credit position.

^eRepresents a custom index comprised of a basket of underlying issuers.

At April 30, 2019, the Fund had the following cross-currency swap contracts outstanding. See Note 1(e).

Cross-Currency Swap Contracts

Description

Payment
Frequency

Counter-
party

Maturity
Date

Notional
Amount

Value/
Unrealized
Appreciation
(Depreciation)

OTC Swap Contracts

Receive Floating 3-month USD LIBOR + 2.87%

Quarterly

3,834,600

USD

Pay Fixed 2.50%

Annual

CITI

5/04/21

3,300,000

EUR

$99,462



franklintempleton.com	Annual Report	41

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

At April 30, 2019, the Fund had the following total return swap contracts outstanding. See Note 1(e).

Total Return Swap Contracts

Underlying Instruments

Financing Rate

Payment
Frequency

Counterparty

Maturity
Date

Notional
Value

Value/
Unrealized
Appreciation
(Depreciation)

OTC Swap Contracts

Long^a

iBoxx USD Liquid High Yield Index

3-month USD LIBOR

Quarterly

BOFA

6/20/19

14,000,000

$ 970,858

iBoxx USD Liquid High Yield Index

3-month USD LIBOR

Quarterly

CITI

6/20/19

38,000,000

2,546,646

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

GSCO

6/20/19

170,000,000

6,805,392

Total Total Return Swap Contracts

$10,322,896

^aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.

See Note 9 regarding other derivative information.

See Abbreviations on page 66.



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

FRANKLIN STRATEGIC SERIES

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

April 30, 2019

Franklin Strategic Income Fund


Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	4,822,296,112
Cost - Controlled affiliates (Note 3f and 10)		218,117,419
Cost - Non-controlled affiliates (Note 3f and 10)		64,869,886
Cost - Unaffiliated repurchase agreements		97,392,171


Value - Unaffiliated issuers	$	4,725,925,301
Value - Controlled affiliates (Note 3f and 10)		194,101,482
Value - Non-controlled affiliates (Note 3f and 10)		66,093,143
Value - Unaffiliated repurchase agreements		97,392,171
Cash		23,688,023
Restricted cash for OTC derivative contracts (Note 1f)		7,650,000
Foreign currency, at value (cost $1,658,796)		1,660,457
Receivables:
Investment securities sold		54,198,072
Capital shares sold		7,379,638
Dividends and interest		40,317,595
Deposits with brokers for:
OTC derivative contracts		13,655,000
Futures contracts		3,628,300
Centrally cleared swap contracts		6,985,197
Variation margin on futures contracts		756,756
OTC swap contracts (upfront payments $6,063,118)		4,636,391
Unrealized appreciation on OTC forward exchange contracts		4,309,631
Unrealized appreciation on OTC swap contracts		11,836,714
FT Subsidiary deferred tax benefit (Note 1h)		532,014
Other assets		4,534


Total assets		5,264,750,419


Liabilities:
Payables:
Investment securities purchased		364,051,986
Capital shares redeemed		11,504,686
Management fees		1,705,390
Distribution fees		1,063,831
Transfer agent fees		1,052,121
Distributions to shareholders		1,300,928
Variation margin on centrally cleared swap contracts		11,468
Deposits from brokers for:
OTC derivative contracts		7,650,000
OTC swap contracts (upfront receipts $15,459,060)		8,387,244
Unrealized depreciation on OTC forward exchange contracts		991,064
Unrealized depreciation on OTC swap contracts		17,364,288
Deferred tax		80,365
Accrued expenses and other liabilities		398,255


Total liabilities		415,561,626


Net assets, at value	$	4,849,188,793


Net assets consist of:
Paid-in capital	$	5,462,247,550
Total distributable earnings (loss)		(613,058,757	)



franklintempleton.com	The accompanying notes are an integral part of these consolidated financial statements. \| Annual Report	43

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

April 30, 2019

Franklin Strategic Income Fund


Net assets, at value			$ 4,849,188,793


Class A:
Net assets, at value			$ 3,131,799,335

Shares outstanding			325,800,344

Net asset value per share^a			$9.61

Maximum offering price per share (net asset value per share ÷ 96.25%)			$9.98


Class C:
Net assets, at value			$ 716,326,834

Shares outstanding			74,525,777

Net asset value and maximum offering price per share^a			$9.61


Class R:
Net assets, at value			$ 85,457,789

Shares outstanding			8,925,682

Net asset value and maximum offering price per share			$9.57


Class R6:
Net assets, at value			$ 307,287,406

Shares outstanding			31,922,933

Net asset value and maximum offering price per share			$9.63


Advisor Class:
Net assets, at value			$ 608,317,429

Shares outstanding			63,208,451

Net asset value and maximum offering price per share			$9.62

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



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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the year ended April 30, 2019

Franklin Strategic Income Fund


Investment income:
Dividends:
Unaffiliated issuers	$	890,188
Controlled affiliates (Note 3f and 10)		36,824,034
Non-controlled affiliates (Note 3f and 10)		1,736,770
Interest: (net of foreign taxes)~
Unaffiliated issuers		239,738,955
Other income (Note 1h)		1,070,873


Total investment income		280,260,820

Expenses:
Management fees (Note 3a)		24,390,811
Distribution fees: (Note 3c)
Class A		7,867,315
Class C		5,672,646
Class R		471,129
Transfer agent fees: (Note 3e)
Class A		4,945,053
Class C		1,376,550
Class R		148,468
Class R6		116,356
Advisor Class		1,329,184
Custodian fees (Note 4)		140,938
Reports to shareholders		454,273
Registration and filing fees		177,089
Professional fees		372,464
Trustees’ fees and expenses		80,307
Other		231,883


Total expenses		47,774,466
Expense reductions (Note 4)		(128,191	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(2,803,479	)


Net expenses		44,842,796


Net investment income		235,418,024

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:^#
Unaffiliated issuers		(45,475,779	)
Controlled affiliates (Note 3f and 10)		(34,375,561	)
Foreign currency transactions		(1,764,067	)
Forward exchange contracts		2,758,198
Futures contracts		7,842,483
Swap contracts		9,636,494


Net realized gain (loss)		(61,378,232	)

Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		63,832,844
Controlled affiliates (Note 3f and 10)		(12,445,202	)
Non-controlled affiliates (Note 3f and 10)		1,223,257
Translation of other assets and liabilities denominated in foreign currencies		(23,059	)
Forward exchange contracts		3,007,356



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations (continued)

for the year ended April 30, 2019

Franklin Strategic Income Fund


Futures contracts		2,810,354
Swap contracts		(4,159,859	)
Change in FT Subsidiary deferred tax benefit (Note 1h)		(858,525	)
Change in deferred taxes on unrealized appreciation		239,363


Net change in unrealized appreciation (depreciation)		53,626,529


Net realized and unrealized gain (loss)		(7,751,703	)


Net increase (decrease) in net assets resulting from operations	$	227,666,321


^~Foreign taxes withheld on interest	$	359,552
^#Net of foreign taxes	$	21,122



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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets

Franklin Strategic Income Fund


	Year Ended April 30,
	2019			2018

Increase (decrease) in net assets:
Operations:
Net investment income	$	235,418,024		$	249,545,798
Net realized gain (loss)		(61,378,232	)		(113,213,321	)
Net change in unrealized appreciation (depreciation)		53,626,529			(92,950,330	)


Net increase (decrease) in net assets resulting from operations		227,666,321			43,382,147


Distributions to shareholders: (Note 1l)
Class A		(138,743,800	)		(106,537,907	)
Class C		(34,243,715	)		(31,329,580	)
Class R		(3,918,092	)		(3,355,206	)
Class R6		(18,669,569	)		(13,824,604	)
Advisor Class		(38,939,889	)		(32,910,570	)


Total distributions to shareholders		(234,515,065	)		(187,957,867	)


Capital share transactions: (Note 2)
Class A		(160,333,285	)		(461,379,634	)
Class C		(360,085,250	)		(280,427,839	)
Class R		(19,998,642	)		(38,252,437	)
Class R6		(123,669,688	)		75,196,883
Advisor Class		(322,273,887	)		(113,689,921	)


Total capital share transactions		(986,360,752	)		(818,552,948	)


Net increase (decrease) in net assets		(993,209,496	)		(963,128,668	)
Net assets:
Beginning of year		5,842,398,289			6,805,526,957


End of year (Note 1l)	$	4,849,188,793		$	5,842,398,289



franklintempleton.com	The accompanying notes are an integral part of these consolidated financial statements. \|	Annual Report	47

FRANKLIN STRATEGIC SERIES

Notes to Consolidated 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 (1940 Act) as an open-end management investment company, consisting of eight 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 Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Equity securities and derivative financial instruments 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 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time 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. Investments in repurchase agreements are valued at cost, which approximates fair value.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

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.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 4 p.m. Eastern time. In addition, trading in certain foreign markets may not take place on every Fund’s business day. Occasionally, events occur between the time at which trading in a foreign security is completed and 4 p.m. Eastern time 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 4 p.m. Eastern time. In order to minimize the potential for these differences, the VC 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 Fund’s NAV is not calculated, 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

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. Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any



franklintempleton.com	Annual Report	49

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

c. Joint Repurchase Agreement (continued)

other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at year end, as indicated in the Consolidated Statement of Investments, had been entered into on on April 30, 2019.

d. Securities Purchased on a Delayed Delivery and TBA Basis

The Fund purchases securities on a 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.

e. Derivative Financial Instruments

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 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 Consolidated 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.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

future date. 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 Consolidated Statement of Assets and Liabilities.

The Fund entered into credit default swap contracts primarily to manage and/or gain 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, a basket of issuers or indices, or a tranche of a credit index or basket of issuers or indices. 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 Consolidated 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. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

The Fund entered into OTC cross currency swap contracts primarily to manage and/or gain exposure to interest rate risk and certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

The Fund invests in value recovery instruments (VRI) primarily to gain exposure to economic growth. Periodic payments from VRI are dependent on established benchmarks for underlying variables. VRI has a notional amount, which is used to calculate amounts of payments to holders. Payments are recorded upon receipt as realized gains in the Consolidated Statement of Operations. The risks of investing in VRI include growth risk, liquidity, and the potential loss of investment.

See Note 9 regarding other derivative information.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

f. Restricted Cash

g. Loan Participation Notes

h. FT Holdings Corporation II (FT Subsidiary)

The Fund invests in certain financial instruments through its investment in 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, 2019, FT Subsidiary’s investment, Turtle Bay Resort, as well as any other assets and liabilities of FT Subsidiary are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities.

During the year ended April 30, 2019, Turtle Bay Resort paid a distribution to FT Subsidiary. The distribution received is reflected as other income in the Consolidated Statement of Operations. At April 30, 2019, FT Subsidiary, which is a tax paying entity, recognized an unrealized loss on its Turtle Bay investment. An estimated deferred tax asset based on such unrealized loss is reflected as FT Subsidiary deferred tax benefit in the Consolidated Statement of Assets and Liabilities. The estimated benefit was calculated using a federal rate of 21%.

When the Turtle Bay investment liquidates, the FT Subsidiary will recognize a capital loss which can be carried-back to offset prior year capital gains, resulting in a tax refund which will relieve the deferred tax asset.

The financial statements have been consolidated and include the accounts of the Fund and FT Subsidiary. All intercompany transactions and balances have been eliminated. At April 30, 2019, the net assets of FT Subsidiary were $18,615,261, representing less than 1% of the Fund’s consolidated net assets. The Fund’s investment in FT Subsidiary is limited to 25% of consolidated assets.

i. Mortgage Dollar Rolls

j. 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.



52	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

k. Income and Deferred Taxes

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of April 30, 2019, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

l. 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 except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These

m. Accounting Estimates

n. 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.



franklintempleton.com	Annual Report	53

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

1. Organization and Significant Accounting Policies (continued)

*Effective during the current reporting period, it is no longer required to present certain line items in the Statements of Changes

in Net Assets. The below prior period amounts affected by this change are shown as they were in the prior year Statements of

Changes in Net Assets.

For the year ended April 30, 2018, distributions to shareholders were as follows:


Distributions from net investment income:
Class A	$	(106,537,907	)
Class C		(31,329,580	)
Class R		(3,355,206	)
Class R6		(13,824,604	)
Advisor Class		(32,910,570	)

For the year ended April 30, 2018, distributions in excess of net investment income included in net assets was $(39,100,421).

2. Shares of Beneficial Interest

At April 30, 2019, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were

as follows:


	Year Ended April 30,
	2019						2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold^a		50,096,209		$	476,428,245			43,921,154		$	432,817,045
Shares issued in reinvestment of distributions		13,459,738			127,947,689			10,060,731			98,645,567
Shares redeemed		(80,356,291	)		(764,709,219	)		(100,902,437	)		(992,842,246	)

Net increase (decrease)		(16,800,344	)	$	(160,333,285	)		(46,920,552	)	$	(461,379,634	)

Class C Shares:
Shares sold		4,597,179		$	43,711,512			8,181,686		$	80,552,705
Shares issued in reinvestment of distributions		3,342,536			31,796,374			2,971,594			29,122,692
Shares redeemed^a		(45,752,627	)		(435,593,136	)		(39,654,519	)		(390,103,236	)

Net increase (decrease)		(37,812,912	)	$	(360,085,250	)		(28,501,239	)	$	(280,427,839	)

Class R Shares:
Shares sold		1,437,455		$	13,630,121			2,109,693		$	20,673,849
Shares issued in reinvestment of distributions		405,340			3,838,586			334,005			3,263,282
Shares redeemed		(3,962,132	)		(37,467,349	)		(6,343,188	)		(62,189,568	)

Net increase (decrease)		(2,119,337	)	$	(19,998,642	)		(3,899,490	)	$	(38,252,437	)

Class R6 Shares:
Shares sold		10,323,576		$	98,464,071			16,787,902		$	165,966,032
Shares issued in reinvestment of distributions		1,882,797			17,913,831			1,355,636			13,298,999
Shares redeemed		(25,303,121	)		(240,047,590	)		(10,569,929	)		(104,068,148	)

Net increase (decrease)		(13,096,748	)	$	(123,669,688	)		7,573,609		$	75,196,883

Advisor Class Shares:
Shares sold		18,952,628		$	180,567,542			27,736,896		$	273,558,768
Shares issued in reinvestment of distributions		3,899,671			37,096,165			3,187,566			31,290,077
Shares redeemed		(56,752,457	)		(539,937,594	)		(42,428,324	)		(418,538,766	)

Net increase (decrease)		(33,900,158	)	$	(322,273,887	)		(11,503,862	)	$	(113,689,921	)

^aMay include a portion of Class C shares that were automatically converted to Class A.



54	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton. 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

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

For the year ended April 30, 2019, the gross effective investment management fee rate was 0.455% of the Fund’s average daily net assets.

b. Administrative Fees

c. Distribution Fees



franklintempleton.com	Annual Report	55

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

3. Transactions with Affiliates (continued)

c. Distribution Fees (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 brokers/dealers	$	222,236

CDSC retained	$	25,401

Effective March 1, 2019, certain front-end sales charges on Class A and A1 shares, if any, were lowered. Further details are disclosed in the Fund’s Prospectus.

e. Transfer Agent Fees

For the year ended April 30, 2019, the Fund paid transfer agent fees of $7,915,611, of which $3,441,566 was retained by Investor Services.

f. Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Consolidated Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the year ended April 30, 2019, the Fund held investments in affiliated management investment companies as follows:


	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions			Number of Shares Held at End of Year		Value at End of Year		Dividend Income		Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)
Controlled Affiliates
Franklin Lower Tier Floating Rate Fund		25,361,119		—		(25,361,119	)^a		—	$	—	$	21,162,839	$	(34,375,561	)	$	—
Franklin Middle Tier Floating Rate Fund		21,833,687		—		—			21,833,687		194,101,482		15,661,195		—			(12,445,202	)


Total Controlled Affiliates										$	194,101,482	$	36,824,034	$	(34,375,561	)	$	(12,445,202	)



56	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)


	Number of Shares Held at Beginning of Year		Gross Additions		Gross Reductions			Number of Shares Held at End of Year		Value at End of Year		Dividend Income		Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 2.10%		200,193,361		284,937,373		(421,946,957	)		63,183,777	$	63,183,777	$	1,736,770	$	—		$	—


Total Affiliated Securities										$	257,285,259	$	38,560,804	$	(34,375,561	)	$	(12,445,202	)

^aThe Fund sold shares of the affiliate through an in-kind transfer of common stocks and other equity interests, corporate bonds and senior floating rate interests securities and cash. See Note 6.

g. Waiver and Expense Reimbursements

Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class. Investor Services may discontinue this waiver in the future.

h. Interfund Transactions

The Fund engaged in purchases and sales of investments with funds or other accounts that have common investment managers (or affiliated investment managers), directors, trustees or officers. During the year ended April 30, 2019, these purchase and sale transactions (excluding in-kind transactions) aggregated $589,399 and $0, respectively. See Note 3(f).

4. Expense Offset Arrangement

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At April 30, 2019, the capital loss carryforwards were as follows:


Capital loss carryforwards not subject to expiration:
Short term	$	33,032,070
Long term		441,662,444


Total capital loss carryforwards	$	474,694,514

The tax character of distributions paid during the years ended April 30, 2019 and 2018, was as follows:


	2019		2018

Distributions paid from ordinary income	$	234,515,065	$	187,957,867



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

5. Income Taxes (continued)

At April 30, 2019, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income

tax purposes were as follows:


Cost of investments	$	5,227,364,068


Unrealized appreciation	$	79,689,821
Unrealized depreciation		(227,603,542	)

Net unrealized appreciation (depreciation)	$	(147,913,721	)


Distributable earnings-undistributed ordinary income	$	2,304,402

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of paydown losses, bond discounts and premiums, swaps and financial futures transactions.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2019, aggregated $6,423,784,686 and $7,399,557,434, respectively. Purchases and sales of investments exclude in-kind transactions of $182,139,208 and $218,465,749, respectively.

7. Credit Risk and Defaulted Securities

At April 30, 2019, the Fund had 43.5% of its portfolio invested in high yield, senior secured floating rate loans, or other securities rated below investment grade and unrated securities, if any. 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, 2019, the aggregate value of these securities was $45,810,500, representing 0.9% 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 Consolidated Statement of Investments.

8. Restricted Securities

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). 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 Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At April 30, 2019, investments in restricted securities, excluding securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:


Principal Amount/ Shares/ Units	Issuer	Acquisition Date		Cost		Value
331,325	^aAppvion Operations Inc.		4/12/19	$	4,481,262	$	4,615,489
125,940,079	K2016470219 South Africa Ltd., A		2/08/13 - 2/01/17		977,122		88,110
12,532,821	K2016470219 South Africa Ltd., B		2/01/17		9,305		8,768



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)


Principal Amount/ Shares/ Units	Issuer	Acquisition Date		Cost		Value
9,834,030	K2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22		2/08/13 -12/31/18	$	14,330,270	$	12,171
2,108,028	K2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22		2/01/17 - 12/31/18		1,683,618		77,835
124,500	^bRemington Outdoor Co. Inc., Litigation Units		4/12/19		—		—


	Total Restricted Securities (Value is 0.1% of Net Assets)			$	21,481,577	$	4,802,373

^aThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $7,561,696 as of April 30, 2019.

^bThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $2,909,366 as of April 30, 2019.

9. Other Derivative Information

At April 30, 2019, the investments in derivative contracts are reflected in the Consolidated Statement of Assets and Liabilities as follows:


	Asset Derivatives				Liability Derivatives

Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Assets and Liabilities Location	Fair Value			Consolidated Statement of Assets and Liabilities Location	Fair Value
Interest rate contracts	Variation margin on futures contracts	$	3,845,560	^a	Variation margin on futures contracts	$	—

	Unrealized appreciation on OTC swap contracts		10,422,358		Unrealized depreciation on OTC swap contracts		—

Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		4,309,631		Unrealized depreciation on OTC forward exchange contracts		991,064

Credit contracts	Variation margin on centrally cleared swap contracts		155,249	^a	Variation margin on centrally cleared swap contracts		—

	OTC swap contracts (upfront payments)		4,636,391		OTC swap contracts (upfront receipts)		8,387,244

	Unrealized appreciation on OTC swap contracts		1,414,356		Unrealized depreciation on OTC swap contracts		17,364,288

Value recovery instruments	Investments in securities, at value		6,406,038	^b


Totals		$	31,189,583			$	26,742,596

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Consolidated Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Consolidated Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

^bVRI are included in investments in securities, at value in the Consolidated Statement of Assets and Liabilities.

For the year ended April 30, 2019, the effect of derivative contracts in the Consolidated Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Consolidated Statement of Operations Location	Net Realized Gain (Loss) for the Year			Consolidated Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Year
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Interest rate contracts	Futures contracts		$ 7,842,483		Futures contracts	$ 2,810,354
	Swap contracts		(2,928,599	)	Swap contracts	10,422,358
Foreign exchange contracts	Forward exchange contracts		2,758,198		Forward exchange contracts	3,007,356



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

9. Other Derivative Information (continued)

Derivative Contracts
Not Accounted for as
Hedging Instruments

Consolidated Statement of
Operations Location

Net Realized
Gain (Loss) for
the Year

Consolidated Statement of
Operations Location

Net Change in
Unrealized
Appreciation
(Depreciation)
for the Year

Net realized gain (loss) from:

Net change in unrealized appreciation (depreciation) on:

Credit contracts

Swap contracts

$12,565,093

Swap contracts

$(14,582,217)

Value recovery instruments

Investments

2,235,000

Investments

(3,340,936)^a

Totals

$22,472,175

$ (1,683,085)

^aVRI are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations.

For the year ended April 30, 2019, the average month end notional amount of futures contracts and swap contracts, the average month end contract value for forward exchange contracts and average month end fair value of VRI, were as follows:

At April 30, 2019, the Fund’s OTC derivative assets and liabilities are as follows:


	Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities

	Assets^a		Liabilities^a

Derivatives
Forward exchange contracts		$ 4,309,631		$ 991,064
Swap contracts		16,473,105		25,751,532


Total		$20,782,736		$26,742,596

^aAbsent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

At April 30, 2019, the Fund’s OTC derivative assets, which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, are as follows:


			Amounts Not Offset in the
			Consolidated Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received^a,b			Cash Collateral Received			Net Amount (Not less than zero)
Counterparty
BNDP		$ 236,543		$ (180,023	)		$ (56,520	)		$ —			$ —
BOFA		970,858		—			—			(890,000	)		80,858
BZWS		611,841		(611,841	)		—			—			—
CITI		3,829,422		(3,829,422	)		—			—			—
DBAB		632,615		(21,272	)		(611,343	)		—			—
GSCO		6,805,392		—			—			(6,760,000	)		45,392
JPHQ		3,677,016		(3,677,016	)		—			—			—
MSCO		4,019,049		(4,019,049	)		—			—			—

Total		$20,782,736		$(12,338,623	)		$(667,863	)		$(7,650,000	)		$126,250
At April 30, 2019, the Fund’s OTC derivative liabilities, which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, are as follows:
			Amounts Not Offset in the
			Consolidated Statement of Assets and Liabilities
	Gross Amounts of Liabilities Presented in the Consolidated Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Pledged			Cash Collateral Pledged^b			Net Amount (Not less than zero)
Counterparty
BNDP		$ 180,023		$ (180,023	)		$ —			$ —			$ —
BZWS		861,121		(611,841	)		—			(249,280	)		—
CITI		7,227,791		(3,829,422	)		—			(3,260,000	)		138,369
DBAB		21,272		(21,272	)		—			—			—
JPHQ		4,680,660		(3,677,016	)		—			(325,000	)		678,644
MSCO		13,771,729		(4,019,049	)		—			(9,752,680	)		—

Total		$26,742,596		$(12,338,623	)		$ —			$(13,586,960	)		$ 817,013

^aAt April 30, 2019, the Fund received 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 collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

See Note 1(e) regarding derivative financial instruments.

See Abbreviations on page 66.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

10. Holdings of 5% Voting Securities of Portfolio Companies


Name of Issuer	Number of Shares Held at Beginning of Year		Gross Additions			Gross Reductions		Number of Shares Held at End of Year		Value at End of Year		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)

Non-Controlled Affiliates
Remington Outdoor Co. Inc.		—		1,322,439	^a		—		1,322,439	$	2,909,366		$ —		$ —		$1,223,257
Remington Outdoor Co. Inc., Litigation Units		—		124,500	^a		—		124,500		—		—		—		—

Total Affiliated Securities (Value is 0.1% of Net Assets)										$	2,909,366		$ —		$ —		$1,223,257

^aGross addition was the result of an in-kind transfer of securities.

11. Credit Facility

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 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the year ended April 30, 2019, the Fund did not use the Global Credit Facility.

12. 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.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

A summary of inputs used as of April 30, 2019, 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:^a
Equity Investments:^b
Commercial & Professional Services	$	—	$	2,909,366	$	—		$	2,909,366
Consumer Services		—		—		122,759			122,759
Energy		3,813,395		9,565,263		2			13,378,660
Materials		886,173		—		4,615,489			5,501,662
Retailing		—		—		96,878			96,878
Software & Services		—		—		750,000			750,000
All Other Equity Investments		194,101,482		—		—			194,101,482
Corporate Bonds:
Retailing		—		16,391,981		90,006			16,481,987
All Other Corporate Bonds		—		1,738,533,829		—			1,738,533,829
Senior Floating Rate Interests:
Household & Personal Products		—		—		42,108,964			42,108,964
Software & Services		—		2,961,815		19,883,394			22,845,209
All Other Senior Floating Rate Interests		—		510,259,767		—			510,259,767
Foreign Government and Agency Securities		—		276,376,001		—			276,376,001
U.S. Government and Agency Securities		—		281,356,952		—			281,356,952
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		1,272,329,172		—			1,272,329,172
Mortgage-Backed Securities		—		458,728,031		—			458,728,031
Municipal Bonds		—		86,980,430		—			86,980,430
Escrows and Litigation Trusts		—		75,000		—	^c		75,000
Short Term Investments		63,183,777		97,392,171		—			160,575,948

Total Investments in Securities	$	261,984,827	$	4,753,859,778	$	67,667,492		$	5,083,512,097

Other Financial Instruments:
Futures Contracts	$	3,845,560	$	—	$	—		$	3,845,560
Forward Exchange Contracts		—		4,309,631		—			4,309,631
Swap Contracts		—		11,991,963		—			11,991,963

Total Other Financial Instruments	$	3,845,560	$	16,301,594	$	—		$	20,147,154


Liabilities:
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	991,064	$	—		$	991,064
Swap Contracts		—		17,364,288		—			17,364,288

Total Other Financial Instruments	$	—	$	18,355,352	$	—		$	18,355,352

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

^bIncludes common stocks and management investment companies as well as other equity interests.

^cIncludes securities determined to have no value at April 30, 2019.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

12. Fair Value Measurements (continued)


	Balance at Beginning of Year			Purchases			Sales			Transfer Into Level 3^a		Transfer Out of Level 3		Cost Basis Adjustments		Net Realized Gain (Loss)			Net Unrealized Appreciation (Depreciation)			Balance at End of Year			Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Year End

Assets:
Investments in Securities:
Equity Investments:^b
Consumer Services		$1,009,115			$ —			$ —			$ —		$—		$—		$ —			$ (886,356	)		$ 122,759			$(886,356	)
Energy		1,083			—			—			—		—		—		—			(1,081	)		2			(1,081	)
Materials		—			4,481,262	^c		—			—		—		—		—			134,227			4,615,489			134,227
Retailing		111,118			—			—			—		—		—		—			(14,240	)		96,878			(14,240	)
Software & Services		—			750,000			—			—		—		—		—			—			750,000			—
Transportation		1,895,749			—			(1,512,758	)		—		—		—		(5,977,606	)		5,594,615			—			—
Corporate Bonds:
Retailing		230,474			—			—			12,081		—		—		—			(152,549	)		90,006			(152,549	)
Senior Floating Rate Interests:
Household & Personal Products		—			42,008,717	^c		—			—		—		—		—			100,247			42,108,964			100,247
Software & Services		—			20,000,000	^c		—			—		—		—		—			(116,606	)		19,883,394			(116,606	)
Escrows and Litigation Trusts		—	^d		—	^c,d		—			—		—		—		—			—			—	^d		—

Total Investments in Securities		$ 3,247,539			$67,239,979			$(1,512,758	)		$12,081		$—		$—		$(5,977,606	)		$4,658,257			$67,667,492			$(936,358	)

^aThe investments were transferred into Level 3 as a result of the unavailability of a quoted market price in an active market for identical securities and other significant observable valuation inputs.

^bIncludes common stocks as well as other equity interests.

^cIncludes securities received as a result of an in-kind transfer.

^dIncludes securities determined to have no value.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)


Description	Fair Value at End of Year	Valuation Technique	Unobservable Input	Amount/ Range (Weighted Average^a)	Impact to Fair Value if Input Increases^b

Assets:
Investments in Securities:
Senior Floating Rate Interests:
Household & Personal Products	$39,510,545	Discounted cash flow	Free cash flow	$18.9 - $32.4 mil	Increase^c


			Discount rate	11.4% - 12.3% (11.7%)	Decrease


Software & Services	19,883,394	Discounted cash flow	Free cash flow	$28.7 mil	Increase^c


			Discount rate	20.0%	Decrease^d


All other investments^e	8,273,553^f


Total	$67,667,492

^aWeighted based on the relative fair value of the financial instruments.

^cRepresents a significant impact to fair value and net assets.

^dRepresents a significant impact to fair value but not net assets.

^eIncludes fair value of immaterial financial instruments developed using various valuation techniques and unobservable inputs. May also include financial instruments with values derived using private transaction prices or non-public third party pricing information which is unobservable.

^fIncludes securities determined to have no value at April 30, 2019.

13. 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.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

Abbreviations


Counterparty		Currency		Selected Portfolio

BNDP	BNP Paribas	BRL	Brazilian Real	ARM	Adjustable Rate Mortgage
BOFA	Bank of America Corp.	COP	Colombian Peso	CLO	Collateralized Loan Obligation
BZWS	Barclays Bank PLC	DOP	Dominican Peso	CMT	Constant Maturity Treasury Index
CITI	Citigroup, Inc.	EUR	Euro	FRN	Floating Rate Note
DBAB	Deutsche Bank AG	GBP	British Pound	GDP	Gross Domestic Product
GSCO	The Goldman Sachs Group, Inc.	IDR	Indonesian Rupiah	GO	General Obligation
JPHQ	JP Morgan Chase & Co.	MXN	Mexican Peso	HDC	Housing Development Corp.
MSCO	Morgan Stanley	USD	United States Dollar	LIBOR	London InterBank Offered Rate
		UYU	Uruguayan Peso	MBS	Mortgage-Backed Security
		ZAR	South African Rand	PIK	Payment-In-Kind
				RDA	Redevelopment Agency/Authority
				SF	Single Family
				TBD	To be determined
				T-Note	Treasury Note
				VRI	Value Recovery Instruments


Index
CDX.EM.30		CDX Emerging Markets Index
MCDX.NA.31		MCDX North America Index



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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Strategic Series and Shareholders of Franklin Strategic Income Fund

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated statement of investments, of Franklin Strategic Income Fund and its subsidiary (the “Fund”) as of April 30, 2019, the related consolidated statements of operations for the year ended April 30, 2019, the consolidated statement of changes in net assets for each of the two years in the period ended April 30, 2019, including the related notes, and the consolidated financial highlights for each of the five years in the period ended April 30, 2019 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Fund as of April 30, 2019, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period ended April 30, 2019 and the consolidated financial highlights for each of the five years in the period ended April 30, 2019 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our procedures included confirmation of securities owned as of April 30, 2019 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

June 17, 2019

We have served as the auditor of one or more investment companies in the Franklin Templeton Group of Funds since 1948.



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Board Members and Officers

Independent Board Members


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Harris J. Ashton (1932) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 1991	136	Bar-S Foods (meat packing company) (1981-2010).

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).

Terrence J. Checki (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2017	112	Hess Corporation (exploration of oil and gas) (2014-present).

Principal Occupation During at Least the Past 5 Years: Member of the Council on Foreign Relations (1996-present); Member of the National Committee on U.S.-China Relations (1999-present); member of the Board of Trustees of the Economic Club of New York (2013-present); member of the Board of Trustees of the Foreign Policy Association (2005-present) and member of various other boards of trustees and advisory boards; and formerly, Executive Vice President of the Federal Reserve Bank of New York and Head of its Emerging Markets and Internal Affairs Group and Member of Management Committee (1995-2014); and Visiting Fellow at the Council on Foreign Relations (2014).

Mary C. Choksi (1950) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2014	136	Avis Budget Group Inc. (car rental) (2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and White Mountains Insurance Group, Ltd. (holding company) (2017-present).

Principal Occupation During at Least the Past 5 Years: Director of various companies; and formerly, Founder and Senior Advisor, Strategic Investment Group (investment management group) (2015-2017); Founding Partner and Senior Managing Director, Strategic Investment Group (1987-2015); 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) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 1998 and Lead Independent Trustee since March 2019	136	Hess Corporation (exploration of oil and gas) (1993-present), Canadian National Railway (railroad) (2001-present), White Mountains Insurance Group, Ltd. (holding company) (2004-present), Santander Consumer USA Holdings, Inc. (consumer finance) (2016-present), RTI International Metals, Inc. (manufacture and distribution of titanium) (1999-2015) 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) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2009	136	Boeing Capital Corporation (aircraft financing) (2006-2013).

Principal Occupation During at Least the Past 5 Years: Executive Vice President, Counselor and Senior Advisor to Boeing Chairman and Board of Directors, The Boeing Company (aerospace company) (May 2019); and formerly, General Counsel and member of the Executive Council, The Boeing Company (2006-2019); Federal Appeals Court Judge, U.S. Court of Appeals for the Fourth Circuit (1991-2006).



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Independent Board Members (continued)


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Larry D. Thompson (1945) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2007	136	The Southern Company (energy company) (2014-present; previously 2010-2012), Graham Holdings Company (education and media organization) (2011-present) and Cbeyond, Inc. (business communications provider) (2010-2012).

Principal Occupation During at Least the Past 5 Years:
Director of various companies; Counsel, Finch McCranie, LLP (law firm) (2015-present); Independent Compliance Monitor and Auditor, Volkswagen AG (manufacturer of automobiles and commercial vehicles) (2017-present); John A. Sibley Professor of Corporate and Business Law, University of Georgia School of Law (2015-present; 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).
Interested Board Members and Officers
Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
**Gregory E. Johnson (1961) One Franklin Parkway San Mateo, CA 94403-1906	Trustee	Since 2013	150	None

Principal Occupation During at Least the Past 5 Years:
Chairman of the Board, Member – Office of the Chairman, Director 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 42 of the investment companies in Franklin Templeton; Vice Chairman, Investment Company Institute; and formerly, President, Franklin Resources, Inc. (1994-2015).

**Rupert H. Johnson, Jr. (1940) One Franklin Parkway San Mateo, CA 94403-1906	Chairman of the Board and Trustee	Chairman of the Board since 2013 and Trustee since 1991	136	None

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.; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 40 of the investment companies in Franklin Templeton.

Alison E. Baur (1964) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2012	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.

Sonal Desai, Ph.D. (1963) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since December 2018	Not Applicable	Not Applicable

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 18 of the investment companies in Franklin Templeton.



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Interested Board Members and Officers (continued)


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Gaston Gardey (1967) One Franklin Parkway San Mateo, CA 94403-1906	Treasurer, Chief Financial Officer and, Chief Accounting Officer	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Treasurer, U.S. Fund Administration & Reporting and officer of 28 of the investment companies in Franklin Templeton.

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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.

Steven J. Gray (1955) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Co- Secretary	Vice President since 2009 and Co-Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Vice President, Franklin Templeton Distributors, Inc. and FASA, LLC; and officer of 44 of the investment companies in Franklin Templeton.

Matthew T. Hinkle (1971) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2017	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Vice President, Global Tax (2012-April 2017) and Treasurer/Assistant Treasurer, Franklin Templeton (2009-2017).

Robert Lim (1948) One Franklin Parkway San Mateo, CA 94403-1906	Vice President – AML Compliance	Since 2016	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Vice President, Franklin Templeton Companies, LLC; Chief Compliance Officer, Franklin Templeton Distributors, Inc. and Franklin Templeton Investor Services, LLC; and officer of 44 of the investment companies in Franklin Templeton.

Kimberly H. Novotny (1972) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel, Franklin Templeton; Vice President and Corporate Secretary, Fiduciary Trust International of the South; Vice President, Templeton Investment Counsel, LLC; Assistant Secretary, Franklin Resources, Inc.; and officer of 44 of the investment companies in Franklin Templeton.

Edward D. Perks (1970) One Franklin Parkway San Mateo, CA 94403-1906	President and Chief Executive Officer – Investment Management	Since December 2018	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
President and Director, Franklin Advisers, Inc.; and officer of nine of the investment companies in Franklin Templeton (since December 2018).



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Interested Board Members and Officers (continued)


Name, Year of Birth and Address	Position	Length of Time Served	Number of Portfolios in Fund Complex Overseen by Board Member*	Other Directorships Held During at Least the Past 5 Years
Robert C. Rosselot (1960) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Chief Compliance Officer	Since 2013	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Director, Global Compliance, Franklin Templeton; Vice President, Franklin Templeton Companies, LLC; officer of 44 of the investment companies in Franklin Templeton; and formerly, Senior Associate General Counsel, Franklin Templeton (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Navid J. Tofigh (1972) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2015	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Associate General Counsel and officer of 44 of the investment companies in Franklin Templeton.

Craig S. Tyle (1960) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2005	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
General Counsel, Executive Vice President and Secretary, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 44 of the investment companies in Franklin Templeton.

Lori A. Weber (1964) 300 S.E. 2nd Street Fort Lauderdale, FL 33301-1923	Vice President and Co-Secretary	Vice President since 2011 and Co-Secretary since January 2019	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 44 of the investment companies in Franklin Templeton.

Note 1: Rupert H. Johnson, Jr. is the uncle of Gregory E. Johnson.

Note 2: Effective March 12, 2019, John B. Wilson ceased to be a trustee of the Trust.

Note 3: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.



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FRANKLIN STRATEGIC INCOME FUND

Shareholder Information

Board Approval of Investment Management Agreements

FRANKLIN STRATEGIC SERIES

Franklin Strategic Income Fund

(Fund)

At an in-person meeting held on April 16, 2019 (Meeting), the Board of Trustees (Board) of Franklin Strategic Series (Trust), including a majority of the trustees who are not “interested persons” as defined in the Investment Company Act of 1940 (Independent Trustees), reviewed and approved the continuance of the investment management agreement between Franklin Advisers, Inc. (Manager) and the Trust, on behalf of the Fund (Management Agreement) for an additional one-year period. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of the Management Agreement.

In considering the continuation of the Management Agreement, the Board reviewed and considered information provided by the Manager at the Meeting and throughout the year at meetings of the Board and its committees. The Board also reviewed and considered information provided in response to a detailed set of requests for information submitted to the Manager by Independent Trustee counsel on behalf of the Independent Trustees in connection with the annual contract renewal process. In addition, prior to the Meeting, the Independent Trustees held a telephonic contract renewal meeting at which the Independent Trustees conferred amongst themselves and Independent Trustee counsel about contract renewal matters. The Board reviewed and considered all of the factors it deemed relevant in approving the continuance of the Management Agreement, including, but not limited to: (i) the nature, extent and quality of the services provided by the Manager; (ii) the investment performance of the Fund; (iii) the costs of the services provided and profits realized by the Manager and its affiliates from the relationship with the Fund; (iv) the extent to which economies of scale are realized as the Fund grows; and (v) whether fee levels reflect these economies of scale for the benefit of Fund investors.

In approving the continuance of the Management Agreement, the Board, including a majority of the Independent Trustees, determined that the terms of the Management Agreement are fair and reasonable and that the continuance of such Management Agreement is in the interests of the Fund and its shareholders. While attention was given to all information

furnished, the following discusses some primary factors relevant to the Board’s determination.

Nature, Extent and Quality of Services

The Board reviewed and considered information regarding the nature, extent and quality of investment management services provided by the Manager and its affiliates to the Fund and its shareholders. This information included, among other things, the qualifications, background and experience of the senior management and investment personnel of the Manager; the structure of investment personnel compensation; oversight of third-party service providers; investment performance reports and related financial information for the Fund; reports on expenses, shareholder services, marketing support payments made to financial intermediaries and third party servicing arrangements; legal and compliance matters; risk controls; pricing and other services provided by the Manager and its affiliates; and management fees charged by the Manager and its affiliates to US funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board also reviewed and considered an annual report on payments made by Franklin Templeton Investments (FTI) or the Fund to financial intermediaries, as well as a memorandum relating to third-party servicing arrangements in response to a guidance update in 2016 from the US Securities and Exchange Commission (SEC) relating to mutual fund distribution and sub-accounting fees. The Board noted management’s continuing efforts and expenditures in establishing effective business continuity plans and developing strategies to address areas of heightened concern in the mutual fund industry, such as cybersecurity and liquidity risk management. The Board also recognized management’s commitment to facilitating Board oversight of liquidity through the designation of a liquidity/risk administrator and the development of reports that highlight the amount of illiquid investments for the Fund.



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SHAREHOLDER INFORMATION

Following consideration of such information, the Board was satisfied with the nature, extent and quality of services provided by the Manager and its affiliates to the Fund and its shareholders.

Fund Performance

The Performance Universe for the Fund included the Fund and all retail and institutional multi-sector income funds. The Board noted that the Fund’s annualized income return for the three-year period was below the median of its Performance Universe, but for the one-, five- and 10-year periods was above the median of its Performance Universe. The Board also noted that the Fund’s annualized total return for the one-, three-, five- and 10-year periods was below the median of its Performance Universe. The Board discussed the performance of the Fund with management and noted that the Fund’s annualized total return for the one- and three-year periods was only slightly below the median of its Performance Universe and that such relative underperformance was due to a shorter duration profile of its portfolio holdings. The Board also noted management’s continued enhancements to the Fund’s investment team and process. Given the Fund’s income-oriented investment objective and the considerations noted above, the Board concluded that the Fund’s performance was satisfactory.

Comparative Fees and Expenses

expense ratio and, separately, the contractual management fee rate, without the effect of fee waivers, if any (Management Rate) of the Fund in comparison to the median expense ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure to the Fund selected by Broadridge (Expense Group). Broadridge fee and 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 and Management Rates generally increase as assets decline and decrease as assets grow, the Board believed the independent analysis conducted by Broadridge to be an appropriate measure of comparative fees and expenses. The Broadridge Management Rate includes administrative charges, and the actual total expense ratio, for comparative consistency, was shown for Class A shares for the Fund and Class A and Class M shares for the other funds in the Expense Group with multiple classes of shares. The Board received a description of the methodology used by Broadridge to select the mutual funds included in an Expense Group.

The Expense Group for the Fund included the Fund and ten other multi-sector income funds. The Board noted that the Management Rate and actual total expense ratio for the Fund were below the medians of its Expense Group. The Board concluded that the Management Rate charged to the Fund is reasonable.

Profitability

The Board reviewed and considered information regarding the profits realized by the Manager and its affiliates in connection with the operation of the Fund. In this respect, the Board considered the Fund profitability analysis provided by the Manager that addresses the overall profitability of FTI’s US fund business, as well as its profits in providing investment management and other services to each of the individual funds during the 12-month period ended September 30, 2018, being the most recent fiscal year-end for FRI. The Board noted that although management continually makes refinements to its methodologies used in calculating profitability in response to organizational and product-related changes, the overall methodology has remained consistent with that used in the Fund’s profitability report presentations from prior years. Additionally, PricewaterhouseCoopers LLP, auditor to FRI and certain Franklin Templeton funds, has been engaged by the Manager to periodically review and assess the allocation



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SHAREHOLDER INFORMATION

methodologies to be used solely by the Fund’s Board with respect to the profitability analysis.

The Board noted management’s 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 noted management’s expenditures in improving shareholder services provided to the Fund, as well as the need to implement systems and meet additional regulatory and compliance requirements resulting from recent SEC and other regulatory requirements.

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 service providers and counterparties. Based upon its consideration of all these factors, the Board concluded 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, extent and quality of services provided to the Fund.

Economies of Scale

The Board reviewed and considered the extent to which the Manager may realize economies of scale, if any, as the Fund grows larger and whether the Fund’s management fee structure reflects any economies of scale for the benefit of shareholders. With respect to possible economies of scale, the Board noted the existence of management fee breakpoints, which operate generally to share any economies of scale with the Fund’s shareholders by reducing the Fund’s effective management fees as the Fund grows in size. The Board considered the Manager’s view that any analyses of potential economies of scale in managing a particular fund are inherently limited in light of the joint and common costs and investments the Manager incurs across the Franklin Templeton family of funds as a whole. The Board concluded that to the extent economies of scale may be realized by the Manager and its affiliates, the Fund’s management fee structure provided a sharing of benefits with the Fund and its shareholders as the Fund grows.

Conclusion

Based on its review, consideration and evaluation of all factors it believed relevant, including the above-described factors and

conclusions, the Board unanimously approved the continuation of the Management Agreement for an additional one-year period.

Proxy Voting Policies and Procedures

Quarterly Statement of Investments

Householding of Reports and Prospectuses



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				Annual Report and Shareholder Letter
				Franklin Strategic Income Fund
				Investment Manager
				Franklin Advisers, Inc.
				Distributor
				Franklin Templeton Distributors, Inc.
				(800) DIAL BEN^®/ 342-5236 franklintempleton.com
				Shareholder Services
				(800) 632-2301

To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.


© 2019 Franklin Templeton Investments. All rights reserved.		194 A 06/19

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 13(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 Mary C. Choksi 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 $403,045 for the fiscal year ended April 30, 2019 and $407,625 for the fiscal year ended April 30, 2018.

(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 $204,500 for the fiscal year ended April 30, 2019 and $16,250 for the fiscal year ended April 30, 2018. The services for which these fees were paid included tax compliance services related to year-end, professional fees in connection with an Indonesia withholding tax refund claim and tax consulting services related to the operating agreement and term sheet for the launch of a new fund.

(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, 2019 and $6,535 for the fiscal year ended April 30, 2018. The services for which these fees were paid include 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 not reported in paragraphs (a)-(c) of Item 4 were $36,500 for the fiscal year ended April 30, 2019 and $65,225 for the fiscal year ended April 30, 2018. The services for which these fees were paid included the issuance of an Auditor’s Certificate for South Korean regulatory shareholders disclosures, assets under management certification, compliance examination for Investment Advisor Act rule 204-2 and 206-4(2), account maintenance project, training on partnership tax accounting and capital account maintenance and benchmarking services in connection with the ICI TA survey.

(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 $241,000 for the fiscal year ended April 30, 2019 and $88,010 for the fiscal year ended April 30, 2018.

(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 provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, 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-CSRS, 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: Effective November 1, 2018, the Registrant’s controls were enhanced through the implementation of a daily secondary review of market events following the close of trading on foreign stock markets to ensure the appropriate application of market level fair value.

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A

Item 13. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, 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 Matthew T. Hinkle, 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/ MATTHEW T. HINKLE
		Matthew T. Hinkle
		Chief Executive Officer –
		Finance and Administration

Date June 26, 2019

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/ MATTHEW T. HINKLE
		Matthew T. Hinkle
		Chief Executive Officer –
		Finance and Administration

Date June 26, 2019


By		/s/ GASTON GARDEY
		Gaston Gardey
		Chief Financial Officer and
		Chief Accounting Officer

Date June 26, 2019