FRANKLIN STRATEGIC SERIES

Share Class

With Waiver

Without Waiver

Advisor

N-CSR 1 d416864dncsr.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: 4/30/17

Item 1. Reports to Stockholders.

LOGO

Franklin Templeton Investments

Gain From Our Perspective^®

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

Dear Shareholder:

During the 12 months ended April 30, 2017, mostly upbeat economic data, improved U.S. corporate earnings and supportive monetary policies were positives for the securities markets. After maintaining its target interest rate in the 0.25%–0.50% range for nearly a year, the U.S. Federal Reserve increased its target range for the federal funds rate twice, in December 2016 and March 2017, to 0.75%–1.00%, noting improved employment and hints of higher inflation. The 10-year U.S. Treasury yield began the period at 1.83% and ended the period at 2.29%. In this environment, U.S. stocks, as measured by the Standard & Poor’s 500^® Index, generated a +17.92% total return for the 12-month period.¹

In all economic environments, we are committed to our long-term perspective and disciplined investment approach as we conduct a diligent, 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 B. Jamieson

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

This letter reflects our analysis and opinions as of April 30, 2017, 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.

1. Source: Morningstar.

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


		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 Focused Core Equity Fund			4

Franklin Growth Opportunities Fund			11

Franklin Small Cap Growth Fund			18

Franklin Small-Mid Cap Growth Fund			25

Financial Highlights and Statements of Investments			33

Financial Statements			66

Notes to Financial Statements			71

Report of Independent Registered Public Accounting Firm			88

Tax Information			89

Board Members and Officers			90

Shareholder Information			95

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 expanded during the 12 months under review. The economy strengthened in 2016’s second and third quarters, but moderated in the next two quarters, largely due to declines in private inventory investment and government spending. The manufacturing sector generally expanded and the services sector also continued to grow. The unemployment rate decreased from 5.0% in April 2016 to 4.4% at period-end.¹Monthly retail sales were volatile, but grew during most of the period. Annual inflation, as measured by the Consumer Price Index, increased from 1.1% to 2.2% during the period.

After maintaining its target interest rate in the 0.25%–0.50% range for nearly a year, the U.S. Federal Reserve (Fed), at its December meeting, increased its target range for the federal funds rate to 0.50%–0.75%, as policymakers noted improvement in the U.S. labor market and inflation. The Fed kept its interest rate unchanged at its February meeting, but incoming economic data, along with statements by Fed officials in late February and early March, heightened many investors’ expectations for a March interest-rate hike. The Fed, at its March meeting, made the widely anticipated increase in its federal funds target rate to 0.75%–1.00%.

U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Ongoing expansionary monetary policies from key central banks, investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the results of the first round of presidential elections in France also helped U.S. equities. However, the U.K.’s historic vote to leave the European Union (also known as “Brexit”), global growth concerns and geopolitical tensions in the Middle East and Korean peninsula weighed on market sentiment. The broad U.S. stock market, as measured by the Standard & Poor’s 500 Index, generated a +17.92% total return for the 12-month period.²

The foregoing information reflects our analysis and opinions as of April 30, 2017. 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 Focused Core Equity Fund

This annual report for Franklin Focused Core Equity Fund covers the fiscal year ended April 30, 2017.

Your Fund’s Goal and Main Investments

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

Performance Overview

The Fund’s Class A shares delivered a +15.85% cumulative total return for the 12 months under review. In comparison, the S&P 500, which tracks the broad U.S. stock market, generated a +17.92% total return.¹ 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.

Investment Strategy

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

Portfolio Composition

Based on Total Net Assets as of 4/30/17

LOGO

Manager’s Discussion

During the 12 months under review, key contributors to the Fund’s absolute performance included holdings in the information technology (IT), financials and real estate sectors.

In IT, the Fund’s positions in Microsoft, a software and IT services company, and Alphabet, parent company of search engine Google, helped results. Microsoft performed well during the period due to a more resilient personal computer spending environment, continued growth in enterprise Office 365 adoption, a rebound in growth of its legacy server business and sustained growth of its Azure cloud offering. We remain positive on Microsoft as the company transitions to the cloud and expands its share of IT spending. Google parent company Alphabet continued to nurture the businesses it helped found, including online advertising and cloud computing. During the period, Alphabet reported a significant net profit growth in 2017’s first quarter, with no indications of any negative impact from a well-publicized backlash that began late in the period from advertisers worried about their brands appearing near objectionable content.

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 38.



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FRANKLIN FOCUSED CORE EQUITY FUND

In financials, banking and financial services providers Charles Schwab and JPMorgan Chase helped results. In general, banks outperformed the broader equity market following the Republican victory in the November 2016 U.S. elections. Investor optimism increased due to hopes that economic growth would improve, which could benefit pro-cyclical bank stocks and drive stronger loan growth and lower credit costs. In addition, many observers believe interest rates will rise and improve bank net interest income because of higher inflation and stronger economic growth. Investors also believe the regulatory burden could decrease, which could reduce expenses and free up capital to return to shareholders, as well as potentially create new revenue opportunities. In addition, corporate tax rates could fall and benefit banks more than the broader markets because of their higher relative tax rates and more domestic focus.

In the real estate sector, data center provider Equinix contributed to results as it continued to benefit from a strong demand environment where cloud adoption is driving the need for interconnection-rich colocation space. We believe that as one of the highest-quality, most highly-interconnected data center companies, Equinix benefits significantly from this trend.

Elsewhere, Netherlands-based media company Altice contributed to results in the consumer discretionary sector. Altice has been performing well, in part because its U.S. business has continued to perform strongly, with solid revenue growth and outsized profit growth led by continued cost synergies achieved through recent acquisitions. In addition, the company’s French business has stabilized after a few weak quarters. The company plans to spin off its U.S. business in an initial public offering in the coming months, which we believe could help unlock additional value.

In contrast, key detractors from the Fund’s absolute performance included the Fund’s only holding in the consumer staples sector, retailer and pharmacy benefits manager CVS Health. Its shares declined during the reporting period due to increasing scrutiny on the business model of pharmacy benefits managers and uncertainty regarding the drug pricing environment. We believe the vertically integrated business model of CVS as a retailer and pharmacy benefits manager offers competitive advantages that could enable the company to capture an increasing share of health care spending in the long term.

Top 10 Holdings

4/30/17


Company *Sector/Industry*		% of Total Net Assets
Alphabet Inc.		6.2%
Information Technology
Microsoft Corp.		5.5%
Information Technology
Allergan PLC		5.0%
Health Care
Altice NV		4.9%
Consumer Discretionary
The Charles Schwab Corp.		4.6%
Financials
Genesee & Wyoming Inc.		4.4%
Industrials
Anadarko Petroleum Corp.		4.2%
Energy
CBRE Group Inc.		3.8%
Real Estate
Twenty-First Century Fox Inc.		3.8%
Consumer Discretionary
Equinix Inc.		3.7%
Real Estate

Elsewhere, in the health care sector, Valeant Pharmaceuticals International (no longer held at period-end) hindered results. Declining earnings and cash flow raised questions about the company’s ability to properly resource its business and repay its debt obligations. Managed care and pharmacy benefits managers limited Valeant’s ability to get reimbursed for expensive drugs, and political pressure on aggressive pricing tactics exposed the company’s tactics and forced policy changes, which increased costs and decreased revenues. In energy, oilfield services company Schlumberger detracted from performance. The period began with oilfield services stocks, including Schlumberger, at a near-term peak after the industry recovered from the depths of the commodity crisis, which the company reached in January. Although shares of Schlumberger and other oilfield services continued to perform well through mid-January, with the rig count up more than 50% from the lows in late May 2016 to mid-January 2017 and continuing to climb through period-end, investors became increasingly concerned with the potential impact of a resurgence in U.S. production growth and the possibility that the agreement by major oil producers to cut production will not be extended at a meeting on May 25. As a result, Schlumberger’s share price pulled back sharply from mid-January through period-end as investors began to question the longevity of the recovery and the ability of the company to meet earnings projections. In IT, travel industry technology services provider Sabre detracted from performance.



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FRANKLIN FOCUSED CORE EQUITY FUND

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


		Brent Loder Lead Portfolio Manager

		Chris Anderson

		Portfolio Management Team

The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2017, 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 FOCUSED CORE EQUITY FUND

Performance Summary as of April 30, 2017

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 4/30/17¹

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 5.75% and the minimum is 0%. Class A: 5.75% 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

A
1-Year	+15.85%	+9.27%
5-Year	+73.13%	+10.28%
Since Inception (12/13/07)	+79.91%	+5.79%

Advisor
1-Year	+16.15%	+16.15%
5-Year	+75.51%	+11.91%
Since Inception (12/13/07)	+84.47%	+6.75%

See page 9 for Performance Summary footnotes.



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FRANKLIN FOCUSED CORE 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.

Class A (12/13/07–4/30/17)

LOGO

Advisor Class (12/13/07–4/30/17)

LOGO

See page 9 for Performance Summary footnotes.



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PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵


Share Class	With Waiver		Without Waiver
A		1.25%		1.45%
Advisor		1.00%		1.20%

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 8/31/17. 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.

4. Source: Morningstar. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.

5. 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 FOCUSED CORE EQUITY 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 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,113.60	$6.45	$1,018.70	$6.16	1.23%
C	$1,000	$1,108.90	$10.25	$1,015.08	$9.79	1.96%
R	$1,000	$1,112.70	$7.23	$1,017.95	$6.90	1.38%
R6	$1,000	$1,115.60	$4.46	$1,020.58	$4.26	0.85%
Advisor	$1,000	$1,114.40	$5.14	$1,019.93	$4.91	0.98%

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 Growth Opportunities Fund

This annual report for Franklin Growth Opportunities Fund covers the fiscal year ended April 30, 2017. We welcome the former shareholders of Franklin Flex Cap Growth Fund who now own shares of Franklin Growth Opportunities Fund as a result of Franklin Flex Cap Growth Fund’s reorganization that took effect on August 26, 2016.

Your Fund’s Goal and Main Investments

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

Performance Overview

The Fund’s Class A shares delivered a +16.88% 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 higher price-to-book ratios and higher forecasted growth values, generated a +19.83% 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, produced a +17.92% total return.¹ 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.

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

Portfolio Composition

Based on Total Net Assets as of 4/30/17

LOGO

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 had positive returns and contributed to absolute performance. Relative to the Russell 3000^® Growth Index, stock selection and an underweighting in the consumer staples sector contributed to the Fund’s

1. Source: Morningstar.

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.

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 GROWTH OPPORTUNITIES FUND

performance. Stock selection in the real estate and telecommunication services sectors also boosted relative results.

In the consumer staples sector, shares of packaged food and beverage company WhiteWave Foods² surged as Danone announced in July 2016 its intention to acquire WhiteWave in an all-cash transaction.

In real estate, shares of data center provider Equinix advanced as the company continued to benefit from a strong demand environment where cloud adoption is driving the need for interconnection-rich colocation space. We believe that as one of the highest-quality, most highly-interconnected data center companies, Equinix benefits significantly from this trend.

In telecommunication services, wireless company T-Mobile U.S. benefited performance as it continued to gain market share in the U.S. wireless market. Further boosting shares were speculations about potential merger-and-acquisition activity as consolidation in the industry makes sense, and T-Mobile, in our assessment, is a well-run valuable asset for a number of industry participants.

Other key contributors included video game maker Electronic Arts and graphics processor semiconductor company NVIDIA in the information technology (IT) sector and Amazon.com in the consumer discretionary sector. Electronic Arts’ strong performance during this period was largely driven by the success of its holiday title releases, and through the continuation of its profit margin expansion story as new game releases move toward high-margin digital distribution. NVIDIA performed well during the period as growth accelerated, driven by a strong product cycle in its traditional graphics market. The company also benefited from significant growth with its products targeting data center growth, advanced driver assistance systems and artificial intelligence, which benefited from high-speed parallel processing, NVIDIA’s core competency. Amazon.com helped the Fund’s results amid consistent and profitable growth of its Amazon Web Service, a leader in cloud computing, which has a significantly higher profit margin than its retail business and accounts for about half of the company’s overall profits. The company invested in its retail business to constantly improve its Prime subscription service in the U.S. and offer benefits globally. It also invested in fulfillment centers and logistics to achieve faster shipping

Top 10 Holdings

4/30/17


Company *Sector/Industry*	% of Total Net Assets
Amazon.com Inc.		5.3	%
Consumer Discretionary
Apple Inc.		5.1	%
Information Technology
Facebook Inc.		4.9	%
Information Technology
Mastercard Inc.		3.9	%
Information Technology
Alphabet Inc.		3.7	%
Information Technology
Microsoft Corp.		3.5	%
Information Technology
Celgene Corp.		3.5	%
Health Care
Visa Inc.		3.3	%
Information Technology
Adobe Systems Inc.		2.2	%
Information Technology
Broadcom Ltd.		2.1	%
Information Technology

times for a widening selection of products, including third-party merchandise fulfilled by the company.

In contrast, key detractors from the Fund’s relative performance included stock selection in the IT sector. An overweighted position in the energy sector also hindered relative results, as did security selection in the industrials sector.

In IT, shares of technology hardware and software provider Apple performed well. As a result, the Fund’s underweighted position in the company detracted from relative results. Security solutions platform provider Palo Alto Networks struggled with sale execution during the year as a sales reorganization impacted results. Paylocity Holding, a provider of cloud-based payroll and human resources software solutions, also hindered results. The company benefited from new employer reporting requirements related to the Affordable Care Act (ACA), resulting in accelerated revenue growth, but underperformed in the second half of the period, in our view due to President Donald Trump’s victory and Republicans’ goal to repeal and replace the ACA. The potential passage of a new legislation would effectively eliminate the employer mandate and penalty for non-compliance.

2. No longer held at period-end.

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



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FRANKLIN GROWTH OPPORTUNITIES FUND

In energy, shares of Cabot Oil & Gas declined slightly over the 12-month period, despite a significant increase in natural gas prices.² A mild winter weather in the northern U.S. reduced heating demand for natural gas during the winter of 2016–2017 and affected Cabot’s revenues. In the industrials sector, Fortune Brands & Security, which provides home and security products, detracted from relative performance.² The company increased promotional activity for its cabinet products throughout 2016, which compressed profit margins.

Elsewhere, beverages maker Monster Beverage hindered results in the consumer staples sector, as did asset manager Affiliated Managers Group² in the financials sector. Monster Beverage experienced a challenging production environment in the U.S. Additionally, its new product innovation has been slower than expected. Shares of Affiliated Managers Group declined as asset managers in general struggled amid weaker industry-wide investor flows.

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

CFA^® is a trademark owned by CFA Institute.



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FRANKLIN GROWTH OPPORTUNITIES FUND

Performance Summary as of April 30, 2017

Performance as of 4/30/17¹


Share Class	Cumulative Total Return²	Average Annual Total Return³

A
1-Year	+16.88%	+10.17%
5-Year	+69.43%	+9.82%
10-Year	+126.10%	+7.86%

Advisor
1-Year	+17.21%	+17.21%
5-Year	+71.84%	+11.44%
10-Year	+132.78%	+8.82%

See page 16 for Performance Summary footnotes.



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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.

Class A (5/1/07–4/30/17)

LOGO

Advisor Class (5/1/07–4/30/17)

LOGO

See page 16 for Performance Summary footnotes.



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FRANKLIN GROWTH OPPORTUNITIES FUND

PERFORMANCE SUMMARY

Distributions (5/1/16–4/30/17)


Share Class	Long-Term Capital Gain
A	$	0.6413
C	$	0.6413
R	$	0.6413
R6	$	0.6413
Advisor	$	0.6413

Total Annual Operating Expenses⁵


Share Class	With Waiver		Without Waiver
A		0.94%	1.03%
Advisor		0.69%	0.78%

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. 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. Source: Morningstar. The Russell 3000 Growth Index is market capitalization weighted and measures performance of those Russell 3000 Index companies with 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.



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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 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,130.50	$4.97	$1,020.13	$4.71	0.94%
C	$1,000	$1,126.30	$8.86	$1,016.46	$8.40	1.68%
R	$1,000	$1,129.30	$6.23	$1,018.94	$5.91	1.18%
R6	$1,000	$1,133.30	$2.54	$1,022.41	$2.41	0.48%
Advisor	$1,000	$1,132.30	$3.65	$1,021.37	$3.46	0.69%

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



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Franklin Small Cap Growth Fund

This annual report for Franklin Small Cap Growth Fund covers the fiscal year ended April 30, 2017. 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.

Your Fund’s Goal and Main Investments

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

Performance Overview

The Fund’s Class A shares delivered a +19.73% cumulative total return for the 12 months under review. In comparison, the Russell 2000^® Growth Index, which measures performance of small cap companies with higher price-to-book ratios and higher forecasted growth values, generated a +24.06% total return.² The Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, produced a +17.92% total return.² You can find the Fund’s long-term performance data in the Performance Summary beginning on page 21.

Investment Strategy

Portfolio Composition

Based on Total Net Assets as of 4/30/17

LOGO

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

Manager’s Discussion

During the 12 months under review, most sectors represented in the Fund’s portfolio posted positive returns and contributed to absolute performance. Relative to the Russell 2000^® Growth Index, key contributors to the Fund’s relative performance included stock selection and an overweighting in the

1. The Russell 2000 Index is market capitalization weighted and measures performance of the 2,000 smallest companies in the Russell 3000 Index, which represent a small amount of the total market capitalization of the Russell 3000 Index.

2. Source: Morningstar.

The indexes are unmanaged and include reinvested dividends. 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.

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 53.



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information technology (IT) sector. Stock selection and an underweighting in the real estate sector also boosted relative results, as did stock selection in the financials sector.

In the IT sector, shares of software technology company Demandware³ rose as the company was acquired by Salesforce.com in July 2016 at a significant premium. 2U, which provides cloud-based software-as-a-service solutions for non-profit colleges and universities, has continued to exceed consensus earnings estimates and raise expectations every quarter since it went public in mid-2014. In March, 2U announced its planned domestic graduate program launch schedule through 2020, which implied faster growth than was broadly expected and provided high visibility into expectations of strong growth for upcoming years. Programs the company launched in the past two years have been scaling faster and with higher profit margins than many observers expected. In addition, the company continued to announce additional programs, with both new and existing partners. Our off-benchmark investment in Intersil, a high-performance analog semiconductor company with expertise in power and voltage management, also helped the Fund’s results.³ Since installing a new management team in 2013, the company has streamlined its product focus, which led to strong growth and profitability. In September, Renesas Electronics announced its intention to acquire Intersil. Given Intersil’s solid execution and the subsequent acquisition bid from Renesas, its shares advanced significantly during the reporting period.

In the real estate sector, data center company CoreSite Realty aided relative performance amid accelerated growth driven by both cloud and enterprise data center deployments. The company successfully managed through a rather abrupt chief executive officer transition during the past year and emerged with a newfound focus on organic growth. Additionally, CoreSite continued to perform well in a strong demand environment where cloud adoption at enterprises is driving a re-architecture of a company’s data center needs, which appears to favor interconnection-rich colocation spaces that CoreSite offers.

In the financials sector, independent investment banking advisory company Evercore Partners contributed to the Fund’s results. The company benefited from strong earnings growth, as well as many investors’ belief that economic growth and lighter regulation would stimulate merger and acquisition activity.

Top 10 Holdings

4/30/17


Company *Sector/Industry*	% of Total Net Assets
2U Inc.		2.6	%
Information Technology
Zendesk Inc.		1.9	%
Information Technology
Nevro Corp.		1.8	%
Health Care
Ingevity Corp.		1.8	%
Materials
Alarm.com Holdings Inc.		1.7	%
Information Technology
US Ecology Inc.		1.7	%
Industrials
TreeHouse Foods Inc.		1.7	%
Consumer Staples
Paylocity Holding Corp.		1.6	%
Information Technology
Callidus Software Inc.		1.6	%
Information Technology
The Spectranetics Corp.		1.5	%
Health Care

Other key contributors included HeartWare International3 and Grand Canyon Education. Medical devices company HeartWare International announced in June 2016 that it would be acquired by Medtronic at a significant premium. Post-secondary education services provider Grand Canyon Education helped results in the consumer discretionary sector. Online new enrollment growth began accelerating sequentially in the second quarter of 2016 and has continued to be strong through the first quarter of 2017. The company has been benefiting from a combination of targeted new program launches, an improving regional brand and an attractive price point. Grand Canyon’s free cash flow generation is poised to improve in 2017, in our analysis, and company management has been signaling the beginning of a share repurchase program later this year, which follows many years of heavy capital investment. Overall sentiment regarding for-profit education companies, as well as their valuation multiples, improved following the U.S. election outcome, as the prior administration was seen as much more critical of the industry.

In contrast, key detractors from the Fund’s relative performance included stock selection in the health care sector. Within the sector, emergency room operator Adeptus Health

3. No longer held at period-end.

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



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FRANKLIN SMALL CAP GROWTH FUND

hurt the Fund’s relative performance as the company suffered from delays in payer collections and growing its footprint too aggressively.³ Specialty pharmaceuticals firm Impax Laboratories also hindered results.³ The company repeatedly reduced earnings guidance and reported declining results during the period as competitive dynamics worsened. Customer consolidation and new competition led to lower prices for generic drugs. The company acquired a portfolio of products from Teva Pharmaceutical Industries that dramatically underperformed after the transaction closed, due to the above-cited challenges. Impax did not receive important approvals for key generic drugs that have been awaiting Food and Drug Administration approval for several years. During the period, the company’s chief executive officer was fired without a replacement identified.

Stock selection in the consumer staples sector also hindered relative performance. Warehouse grocery store operator Smart & Final Stores was negatively impacted by persistent food price deflation, as well as increased competition between its existing stores and an acquisition it made last year.

The consumer discretionary sector detracted from the Fund’s relative results due to stock selection and an underweighted allocation. Within the sector, outdoor sporting goods retailer Sportsman’s Warehouse Holdings detracted from performance. Its shares fell significantly as the outlook for its key firearm segment appeared to decline after the November elections. Shares of casual restaurant operator Zoe’s Kitchen declined amid generally sluggish sales within the restaurant industry as retail traffic declined and consumer spending weakened. The company’s financial results have suffered from negative traffic trends and inefficiencies in new stores. Additionally, unexpected elevated technology investments, as well as labor and rent headwinds, negatively impacted profitability, which caused Zoe’s Kitchen to miss market expectations. Global Eagle Entertainment, a provider of content, connectivity and digital media solutions to the global travel industry, also hindered results in the sector. During the period, the company took on considerable debt to make a large acquisition, and the acquisition almost immediately disappointed after the company missed early targets. In addition, Global Eagle then announced a delay in filing financial results and fired its chief executive officer and chief financial officer. During this time, the company’s communications were poor, causing many investors to worry that there might be some issues that could potentially lead the company to breach its debt agreements.

Elsewhere, data platform provider Pure Storage detracted from results in the IT sector. Despite generally improving earnings per share and mostly steady revenue for the reporting period,

shares of Pure Storage fell as investors worried about growing competition from legacy incumbents, such as NetApp, and the negative impact of increased costs for NAND flash, a key input for the company. We remain confident that Pure Storage’s differentiation is high and improving and that the growth in NAND prices may moderate over the next year.

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



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FRANKLIN SMALL CAP GROWTH FUND

Performance Summary as of April 30, 2017

Performance as of 4/30/17¹


Share Class	Cumulative Total Return²	Average Annual Total Return³

A

1-Year	+19.73%	+12.78%

5-Year	+74.14%	+10.42%

10-Year	+112.57%	+7.19%

Advisor
1-Year	+19.93%	+19.93%

5-Year	+76.53%	+12.04%

10-Year	+118.91%	+8.15%

See page 23 for Performance Summary footnotes.



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FRANKLIN SMALL CAP GROWTH 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.

Class A (5/1/07–4/30/17)

LOGO

Advisor Class (5/1/07–4/30/17)

LOGO

See page 23 for Performance Summary footnotes.



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FRANKLIN SMALL CAP GROWTH FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

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.

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 8/31/17. 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. Source: Morningstar. The Russell 2000 Growth Index is market capitalization weighted and measures performance of those Russell 2000 Index companies with 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.



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FRANKLIN SMALL CAP GROWTH 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 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,123.30	$5.42	$1,019.69	$5.16	1.03%
C	$1,000	$1,119.20	$9.35	$1,015.97	$8.90	1.78%
R	$1,000	$1,122.20	$6.68	$1,018.50	$6.36	1.27%
R6	$1,000	$1,125.60	$3.16	$1,021.82	$3.01	0.60%
Advisor	$1,000	$1,124.40	$4.11	$1,020.93	$3.91	0.78%

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, 2017.

Your Fund’s Goal and Main Investments

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

Performance Overview

The Fund’s Class A shares delivered a +15.01% 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 higher price-to-book ratios and higher forecasted growth values, generated a +15.83% total return.² Also in comparison, the Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, produced a total return of +17.92% total return.² You can find the Fund’s long-term performance data in the Performance Summary beginning on

page 29.

Investment Strategy

Portfolio Composition

Based on Total Net Assets as of 4/30/17

LOGO

Manager’s Discussion

During the 12 months under review, contributors to the Fund’s performance relative to the Russell Midcap^® Growth Index included investments in the consumer staples, information technology (IT) and materials sectors, largely due to stock selection. In consumer staples, shares of packaged food 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.

The indexes are unmanaged and include reinvested dividends. They do not reflect any fees, expense or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund’s portfolio.

The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund’s Statement of Investments (SOI). The SOI begins on page 62.



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beverage company WhiteWave Foods3 surged as Danone announced in July 2016 its intention to acquire WhiteWave in an all-cash transaction. We decided to exit our position as the deal was not expected to close until the end of 2016, and we did not anticipate a competitive bidding process.

In IT, machine vision products provider Cognex performed well during the reporting period, due to incremental new business from a large consumer electronics customer, as well as continued strong growth in logistics and automotive end markets. The company experienced significant positive earnings revisions in 2016, and some expansion in valuation multiples, which drove shares higher. Further boosting shares were additional new business outside the large consumer electronics customer base and continued growth in its eRetailer customer base, combined with strong operating leverage amid strong sales growth. Our off-benchmark position in Intersil (no longer held at period-end), a high-performance analog semiconductor company with expertise in power and voltage management, also helped the Fund’s results. Since installing a new management team in 2013, the company has streamlined its product focus, which led to strong growth and profitability. In September 2016, Renesas Electronics announced its intention to acquire Intersil. Given Intersil’s solid execution and the subsequent acquisition bid from Renesas, its shares advanced significantly during the reporting period. 2U, which provides cloud-based software-as-a-service solutions for non-profit colleges and universities, has continued to exceed consensus earnings estimates and raise expectations every quarter since it went public in mid-2014. In March, 2U announced its planned domestic graduate program launch schedule through 2020, which implied faster growth than was broadly expected and provided high visibility into strong growth for upcoming years. Programs the company launched in the past two years have been scaling faster and with higher margins than most observers expected. In addition, the company continued to announce additional programs, with both new and existing partners.

In materials, aggregates and heavy building materials provider Martin Marietta Materials contributed to performance. The company experienced increased visibility resulting from the passage of a five-year federal highway bill, which led to stronger sales volumes for infrastructure projects. Several state-level highway funding initiatives in key states where the company operates drove higher aggregates and cement demand for highway construction, notably Texas, North Carolina, Iowa

Top 10 Holdings

4/30/17


Company *Sector/Industry*		% of Total Net Assets
Roper Technologies Inc.		2.2%
Industrials
Equinix Inc.		1.9%
Real Estate
CoStar Group Inc.		1.6%
Information Technology
Affiliated Managers Group Inc.		1.5%
Financials
Axalta Coating Systems Ltd.		1.5%
Materials
Edwards Lifesciences Corp.		1.5%
Health Care
Vantiv Inc.		1.4%
Information Technology
Martin Marietta Materials Inc.		1.4%
Materials
IHS Markit Ltd.		1.3%
Industrials
Norwegian Cruise Line Holdings Ltd.		1.3%
Consumer Discretionary

and Georgia. Additionally, the company benefited from strong housing and non-residential construction activity in Colorado and parts of Texas. Optimism for a major infrastructure stimulus package and tax reform further boosted its share price.

Elsewhere, post-secondary education services provider Grand Canyon Education helped results in the consumer discretionary sector. Online new enrollment growth began accelerating sequentially in the second quarter of 2016 and continued to be strong through the first quarter of 2017. The company has been benefiting from a combination of targeted new program launches, an improving regional brand and an attractive price point. Grand Canyon’s free cash flow generation is poised to improve in 2017, in our analysis, and company management has been signaling the beginning of a share repurchase program later this year, which follows many years of heavy capital investment. Overall sentiment regarding for-profit education companies, as well as their and valuation multiples, improved following the U.S. election outcome, as the prior administration was seen as much more critical of the industry.

In contrast, key detractors from the Fund’s relative results for the period included the health care, energy and consumer discretionary sectors, primarily due to stock selection. In health

3. No longer held at period-end.

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



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FRANKLIN SMALL-MID CAP GROWTH FUND

care, specialty pharmaceuticals firm Impax Laboratories hindered results.³ The company repeatedly reduced earnings guidance and reported declining results during the period as competitive dynamics worsened. Customer consolidation and new competition led to lower prices for generic drugs. The company acquired a portfolio of products from Teva Pharmaceutical Industries that dramatically underperformed after the transaction closed, due to the above-cited challenges. Impax did not receive important approvals for key generic drugs that have been awaiting Food and Drug Administration approval for several years. During the period, the company’s chief executive officer was fired without a replacement identified. Pharmaceuticals firm Mallinckrodt also hindered results in the sector.³ Challenges to the company’s generic pharmaceutical unit, which accounts for about one quarter of earnings, continued due to price declines and lower demand. Increased scrutiny on drug pricing brought attention to Mallinckrodt due to the high price of its salvage therapy, Acthar Gel. The company’s underlying strong business performance was overshadowed by the pricing and political pressures on specialty pharmaceutical companies.

In energy, specialized oilfield services and equipment provider Superior Energy Services detracted from performance. Energy stocks generally performed poorly in the first four months of 2017 due to a decline in oil prices tied to high inventory levels, resurgent U.S. production and fears the Organization of the Petroleum Exporting Countries will not renew its output reduction targets. As with many oilfield services companies, Superior has struggled to regain profitability, despite recently strong revenue growth, as input costs have also risen and pressured margins. We believe this dynamic could see some relief by the second half of this year, and our outlook for oil prices also remains constructive longer term.

In consumer discretionary, specialty retailer L Brands and casual restaurant operator Zoe’s Kitchen declined. L Brands experienced volatility recently, driven by a strategic initiative early last year to exit non-core categories at Victoria’s Secret. The initiative has driven negative comparable-store sales and a focus on core categories, with the goal of driving market share in the short term. This move has led to potential customer demand disruptions during a time when the environment has become more competitive and mall traffic continued to suffer. In April, there was also an Easter timing issue that drove March comparable-store sales lower, which, when coupled with declining overall mall traffic, led to a decline in the stock. However, we have seen recovery in most segments of the company’s business. We continue to believe L Brands is a high-quality company that is going through a transition that has

driven volatility but should benefit the business longer term. Shares of casual restaurant operator Zoe’s Kitchen declined amid generally sluggish sales within the restaurant industry as retail traffic declined and consumer spending weakened. The company’s financial results have suffered from negative traffic trends and inefficiencies in new stores. Additionally, unexpected elevated technology investments, as well as labor and rent headwinds, negatively impacted profitability, which caused Zoe’s Kitchen to miss market expectations.

Elsewhere, our underweighting in graphics processor company NVIDIA hampered the Fund’s results. The company’s shares performed particularly well during the period as growth accelerated and led to significant expansion in valuation multiples based on higher earnings per share than the market expected. The Fund’s underweighted position in the company relative to the benchmark index detracted from relative results.

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

LOGO

Edward B. Jamieson

Lead Portfolio Manager

LOGO

John P. Scandalios

Michael P. McCarthy, CFA

James Cross, CFA

Portfolio Management Team



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FRANKLIN SMALL-MID CAP GROWTH FUND

Performance Summary as of April 30, 2017

Performance as of 4/30/17¹


Share Class	Cumulative Total Return²	Average Annual Total Return³

A
1-Year	+15.01%	+8.40%
5-Year	+61.01%	+8.70%
10-Year	+87.21%	+5.84%

Advisor
1-Year	+15.28%	+15.28%
5-Year	+63.04%	+10.27%
10-Year	+92.01%	+6.74%

See page 31 for Performance Summary footnotes.



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FRANKLIN SMALL-MID CAP GROWTH 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.

Class A (5/1/07–4/30/17)

LOGO

Advisor Class (5/1/07–4/30/17)

LOGO

See page 31 for Performance Summary footnotes.



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PERFORMANCE SUMMARY

Distributions (5/1/16–4/30/17)


Share Class	Short-Term Capital Gain		Long-Term Capital Gain		Total

A		$0.1470		$1.9639		$2.1109

C		$0.1470		$1.9639		$2.1109

R		$0.1470		$1.9639		$2.1109

R6		$0.1470		$1.9639		$2.1109

Advisor		$0.1470		$1.9639		$2.1109

Total Annual Operating Expenses⁵

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.

4. Source: Morningstar. The Russell Midcap Growth Index is market capitalization weighted and measures performance of those Russell Midcap Index companies with 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	31

FRANKLIN SMALL-MID CAP GROWTH 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 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,113.70	$4.87	$1,020.18	$4.66	0.93%
C	$1,000	$1,109.60	$8.79	$1,016.46	$8.40	1.68%
R	$1,000	$1,112.30	$6.13	$1,018.99	$5.86	1.17%
R6	$1,000	$1,116.20	$2.47	$1,022.46	$2.36	0.47%
Advisor	$1,000	$1,115.30	$3.57	$1,021.42	$3.41	0.68%

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



32	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Focused Core Equity Fund


				Year Ended April 30,
	2017			2016			2015			2014			2013
Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$13.12			$15.29			$13.38			$10.63			$9.47

Income from investment operations^a:

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

Net realized and unrealized gains (losses)		2.09			(1.83	)		2.23			2.92			1.16

Total from investment operations		2.08			(1.76	)		2.22			2.95			1.23

Less distributions from:

Net investment income		—			(0.06	)		—			(0.07	)		—

Net realized gains		—			(0.35	)		(0.31	)		(0.13	)		(0.07	)

Total distributions		—			(0.41	)		(0.31	)		(0.20	)		(0.07	)

Net asset value, end of year		$15.20			$13.12			$15.29			$13.38			$10.63

Total return^d		15.85%			(11.70)%			16.84%			28.00%			13.08%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.47%			1.46%			1.54%			1.73%			1.89%

Expenses net of waiver and payments by affiliates		1.24%	^e		1.25%			1.28%			1.22%			1.19%

Net investment income (loss)		(0.04)%			0.48%	^c		(0.07)%			0.23%			0.76%

Supplemental data

Net assets, end of year (000’s)		$77,733			$100,483			$92,612			$40,372			$19,029

Portfolio turnover rate		17.45%			35.56%			25.55%			43.30%			74.50%

^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.

^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%.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Focused Core Equity Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014			2013
Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$12.58			$14.73			$12.98			$10.36			$9.29

Income from investment operations^a:

Net investment income (loss)^b		(0.10	)		(0.04	)^c		(0.11	)		(0.06	)		0.01

Net realized and unrealized gains (losses)		1.98			(1.76	)		2.17			2.84			1.13

Total from investment operations		1.88			(1.80	)		2.06			2.78			1.14

Less distributions from:

Net investment income		—			—			—			(0.03	)		—

Net realized gains		—			(0.35	)		(0.31	)		(0.13	)		(0.07	)

Total distributions		—			(0.35	)		(0.31	)		(0.16	)		(0.07	)

Net asset value, end of year		$14.46			$12.58			$14.73			$12.98			$10.36

Total return^d		14.94%			(12.31)%			16.12%			26.99%			12.36%

Ratios to average net assets

Expenses before waiver and payments by affiliates		2.21%			2.20%			2.24%			2.43%			2.59%

Expenses net of waiver and payments by affiliates		1.98%	^e		1.99%			1.98%			1.92%			1.89%

Net investment income (loss)		(0.78)%			(0.26)%	^c		(0.77)%			(0.47)%			0.06%

Supplemental data

Net assets, end of year (000’s)		$20,341			$25,119			$18,758			$6,666			$2,502

Portfolio turnover rate		17.45%			35.56%			25.55%			43.30%			74.50%

^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%.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Focused Core Equity Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014			2013
Class R

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$12.98			$15.15			$13.28			$10.56			$9.43

Income from investment operations^a:

Net investment income (loss)^b		(0.03	)		0.03	^c		(0.04	)		0.01			0.05

Net realized and unrealized gains (losses)		2.06			(1.81	)		2.22			2.90			1.15

Total from investment operations		2.03			(1.78	)		2.18			2.91			1.20

Less distributions from:

Net investment income		—			(0.04	)		—			(0.06	)		—

Net realized gains		—			(0.35	)		(0.31	)		(0.13	)		(0.07	)

Total distributions		—			(0.39	)		(0.31	)		(0.19	)		(0.07	)

Net asset value, end of year		$15.01			$12.98			$15.15			$13.28			$10.56

Total return		15.64%			(11.91)%			16.66%			27.70%			12.81%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.64%			1.69%			1.74%			1.93%			2.09%

Expenses net of waiver and payments by affiliates		1.41%^d			1.48%			1.48%			1.42%			1.39%

Net investment income (loss)		(0.21)%			0.25%	^c		(0.27)%			0.03%			0.56%

Supplemental data

Net assets, end of year (000’s)		$166			$273			$169			$124			$76

Portfolio turnover rate		17.45%			35.56%			25.55%			43.30%			74.50%

^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	35

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Focused Core Equity Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014^a
Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$13.27			$15.46			$13.49			$10.54

Income from investment operations^b:

Net investment income^c		0.05			0.12	^d		0.05			0.07

Net realized and unrealized gains (losses)		2.12			(1.85	)		2.27			3.11

Total from investment operations		2.17			(1.73	)		2.32			3.18

Less distributions from:

Net investment income		—			(0.11	)		(0.04	)		(0.10	)

Net realized gains		—			(0.35	)		(0.31	)		(0.13	)

Total distributions		—			(0.46	)		(0.35	)		(0.23	)

Net asset value, end of year		$15.44			$13.27			$15.46			$13.49

Total return		16.35%			(11.32)%			17.45%			30.43%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.06%			1.04%			1.09%			2.28%

Expenses net of waiver and payments by affiliates		0.84%	^e		0.85%			0.83%			0.77%

Net investment income		0.36%			0.88%	^d		0.38%			0.68%

Supplemental data

Net assets, end of year (000’s)		$20,401			$33,640			$25,739			$14

Portfolio turnover rate		17.45%			35.56%			25.55%			43.30%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund.

^cBased on average daily shares outstanding.

^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 0.42%.

^eBenefit of expense reduction 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

FINANCIAL HIGHLIGHTS

Franklin Focused Core Equity Fund (continued)


				Year Ended April 30,
	2017			2016			2015			2014			2013
Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$13.25			$15.44			$13.48			$10.70			$9.50

Income from investment operations^a:

Net investment income^b		0.03			0.10	^c		0.04			0.07			0.10

Net realized and unrealized gains (losses)		2.11			(1.85	)		2.25			2.93			1.17

Total from investment operations		2.14			(1.75	)		2.29			3.00			1.27

Less distributions from:

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

Net realized gains		—			(0.35	)		(0.31	)		(0.13	)		(0.07	)

Total distributions		—			(0.44	)		(0.33	)		(0.22	)		(0.07	)

Net asset value, end of year		$15.39			$13.25			$15.44			$13.48			$10.70

Total return		16.15%			(11.45)%			17.25%			28.27%			13.46%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.22%			1.20%			1.24%			1.43%			1.59%

Expenses net of waiver and payments by affiliates		0.99%	^d		0.99%			0.98%			0.92%			0.89%

Net investment income		0.21%			0.74%	^c		0.23%			0.53%			1.06%

Supplemental data

Net assets, end of year (000’s)		$13,077			$10,736			$9,914			$6,990			$4,347

Portfolio turnover rate		17.45%			35.56%			25.55%			43.30%			74.50%

^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	37

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Focused Core Equity Fund


	Country	Shares		Value
Common Stocks 98.5%
Consumer Discretionary 8.7%
^aAltice NV, A	Netherlands		257,870	$	6,405,874
Twenty-First Century Fox Inc., B	United States		168,110		5,019,765

					11,425,639

Consumer Staples 2.4%
CVS Health Corp.	United States		38,930		3,209,389

Energy 9.6%
Anadarko Petroleum Corp.	United States		97,250		5,545,196
Pioneer Natural Resources Co.	United States		16,020		2,771,300
Schlumberger Ltd.	United States		60,190		4,369,192

					12,685,688

Financials 23.4%
^aAthene Holding Ltd., A	United States		59,850		3,190,604
Bank of America Corp.	United States		137,630		3,212,284
BlackRock Inc.	United States		3,067		1,179,476
The Charles Schwab Corp.	United States		155,360		6,035,736
The Hartford Financial Services Group Inc.	United States		13,760		665,434
JPMorgan Chase & Co.	United States		53,053		4,615,611
Moody’s Corp.	United States		23,910		2,829,031
SunTrust Banks Inc.	United States		26,140		1,485,013
Synchrony Financial	United States		112,235		3,120,133
Willis Towers Watson PLC	United States		34,000		4,509,080

					30,842,402

Health Care 12.8%
Aetna Inc.	United States		32,890		4,442,452
Allergan PLC	United States		27,224		6,638,845
^aHorizon Pharma PLC	United States		142,260		2,187,959
Medtronic PLC	United States		42,510		3,532,156

					16,801,412

Industrials 9.1%
General Dynamics Corp.	United States		11,620		2,251,840
^aGenesee & Wyoming Inc.	United States		85,640		5,802,966
^aIHS Markit Ltd.	United States		90,393		3,923,056

					11,977,862

Information Technology 25.0%
^aAdobe Systems Inc.	United States		14,830		1,983,364
^aAlphabet Inc., A	United States		4,340		4,012,417
^aAlphabet Inc., C	United States		4,550		4,122,118
^aBlackhawk Network Holdings Inc.	United States		58,630		2,371,583
Mastercard Inc., A	United States		41,540		4,831,933
Microsoft Corp.	United States		105,030		7,190,354
Motorola Solutions Inc.	United States		20,220		1,738,313
QUALCOMM Inc.	United States		65,720		3,531,793
Sabre Corp.	United States		133,270		3,119,851

					32,901,726



38	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Focused Core Equity Fund (continued)


	Country	Shares		Value
Common Stocks (continued)
Real Estate 7.5%
^aCBRE Group Inc.	United States		140,910	$	5,045,987
Equinix Inc.	United States		11,651		4,866,623

					9,912,610

Total Common Stocks (Cost $106,634,602)					129,756,728


Short Term Investments (Cost $2,075,737) 1.6%
Money Market Funds 1.6%
^b,cInstitutional Fiduciary Trust Money Market Portfolio, 0.37%	United States		2,075,737		2,075,737

Total Investments (Cost $108,710,339) 100.1%					131,832,465
Other Assets, less Liabilities (0.1)%					(113,032	)

Net Assets 100.0%				$	131,719,433

^aNon-income producing.

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

^cThe rate shown is the annualized seven-day 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 Growth Opportunities Fund


	Year Ended April 30,
	2017			2016			2015			2014			2013

Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$30.40			$33.13			$28.48			$24.29			$23.02

Income from investment operations^a:

Net investment income (loss)^b		(0.09	)		(0.19	)		(0.19	)		(0.19	)		(0.12	)

Net realized and unrealized gains (losses)		5.14			(1.88	)		5.50			5.11			1.95

Total from investment operations		5.05			(2.07	)		5.31			4.92			1.83

Less distributions from net realized gains		(0.64	)		(0.66	)		(0.66	)		(0.73	)		(0.56	)

Net asset value, end of year		$34.81			$30.40			$33.13			$28.48			$24.29

Total return^c		16.88%			(6.36)%			18.87%			20.26%			8.29%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.05%			1.11%			1.18%			1.17%			1.25%

Expenses net of waiver and payments by affiliates		0.97%	^d		1.10%			1.18%	^e		1.17%	^d,e		1.25%

Net investment income (loss)		(0.30)%			(0.58)%			(0.59)%			(0.70)%			(0.56)%

Supplemental data

Net assets, end of year (000’s)		$2,272,831			$548,871			$457,619			$349,343			$213,639

Portfolio turnover rate		47.75%			25.56%			40.64%			36.64%			58.76%

^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%.



40	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,
	2017			2016			2015			2014			2013

Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$26.59			$29.27			$25.41			$21.89			$20.95

Income from investment operations^a:

Net investment income (loss)^b		(0.29	)		(0.37	)		(0.36	)		(0.35	)		(0.26	)

Net realized and unrealized gains (losses)		4.46			(1.65	)		4.88			4.60			1.76

Total from investment operations		4.17			(2.02	)		4.52			4.25			1.50

Less distributions from net realized gains		(0.64	)		(0.66	)		(0.66	)		(0.73	)		(0.56	)

Net asset value, end of year		$30.12			$26.59			$29.27			$25.41			$21.89

Total return^c		15.98%			(7.03)%			18.04%			19.42%			7.47%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.80%			1.85%			1.88%			1.87%			1.97%

Expenses net of waiver and payments by affiliates		1.72%	^d		1.84%			1.88%	^e		1.87%	^d,e		1.97%

Net investment income (loss)		(1.05)%			(1.32)%			(1.29)%			(1.40)%			(1.28)%

Supplemental data

Net assets, end of year (000’s)		$390,123			$137,882			$110,513			$85,883			$51,719

Portfolio turnover rate		47.75%			25.56%			40.64%			36.64%			58.76%

^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	41

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Growth Opportunities Fund (continued)


	Year Ended April 30,
	2017		2016			2015		2014			2013
Class R

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$29.37		$32.10			$27.67		$23.67			$22.49

Income from investment operations^a:

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

Net realized and unrealized gains (losses)		4.96		(1.81	)		5.33		4.97			1.91

Total from investment operations		4.79		(2.07	)		5.09		4.73			1.74

Less distributions from net realized gains		(0.64)		(0.66	)		(0.66)		(0.73)			(0.56)

Net asset value, end of year		$33.52		$29.37			$32.10		$27.67			$23.67

Total return		16.62%		(6.60)%			18.63%		19.99%			8.03%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.30%		1.35%			1.38%		1.37%			1.47%

Expenses net of waiver and payments by affiliates		1.22%^c		1.34%			1.38%^d		1.37%	^c,d		1.47%

Net investment income (loss)		(0.55)%		(0.82)%			(0.79)%		(0.90)%			(0.78)%

Supplemental data

Net assets, end of year (000’s)		$50,429		$39,786			$48,266		$42,953			$34,399

Portfolio turnover rate		47.75%		25.56%			40.64%		36.64%			58.76%

^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%.



42	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,
	2017		2016		2015		2014^a
Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$32.39		$35.09		$29.98		$24.99

Income from investment operations^b:

Net investment income (loss)^c		0.05		(0.05)		(0.03)		(0.07)

Net realized and unrealized gains (losses)		5.50		(1.99)		5.80		5.79

Total from investment operations		5.55		(2.04)		5.77		5.72

Less distributions from net realized gains		(0.64)		(0.66)		(0.66)		(0.73)

Net asset value, end of year		$37.30		$32.39		$35.09		$29.98

Total return		17.42%		(5.94)%		19.47%		22.90%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.59%		0.67%		0.68%		0.71%

Expenses net of waiver and payments by affiliates		0.51%^d		0.66%		0.68%^e		0.71%	^d,e

Net investment income (loss)		0.16%		(0.14)%		(0.09)%		(0.24)%

Supplemental data

Net assets, end of year (000’s)		$291,825		$235,620		$246,911		$180,843

Portfolio turnover rate		47.75%		25.56%		40.64%		36.64%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.

^cBased on average daily shares outstanding.

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

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



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Growth Opportunities Fund (continued)


	Year Ended April 30,
	2017		2016		2015		2014			2013
Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$32.20		$34.96		$29.93		$25.43			$23.99

Income from investment operations^a:

Net investment income (loss)^b		(0.02)		(0.11)		(0.10)		(0.13)			(0.06)

Net realized and unrealized gains (losses)		5.48		(1.99)		5.79		5.36			2.06

Total from investment operations		5.46		(2.10)		5.69		5.23			2.00

Less distributions from net realized gains		(0.64)		(0.66)		(0.66)		(0.73)			(0.56)

Net asset value, end of year		$37.02		$32.20		$34.96		$29.93			$25.43

Total return		17.21%		(6.11)%		19.23%		20.58%			8.62%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.80%		0.85%		0.88%		0.87%			0.97%

Expenses net of waiver and payments by affiliates		0.72%^c		0.84%		0.88%^d		0.87%	^c,d		0.97%

Net investment income (loss)		(0.05)%		(0.32)%		(0.29)%		(0.40)%			(0.28)%

Supplemental data

Net assets, end of year (000’s)		$537,193		$256,377		$269,887		$224,469			$182,954

Portfolio turnover rate		47.75%		25.56%		40.64%		36.64%			58.76%

^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%.



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

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Growth Opportunities Fund


	Country		Shares		Value
Common Stocks 98.5%
Consumer Discretionary 14.8%
^a Amazon.com Inc.		United States		204,170	$	188,855,208
^a Charter Communications Inc., A		United States		172,592		59,571,855
Comcast Corp., A		United States		958,038		37,545,509
Delphi Automotive PLC		United Kingdom		80,705		6,488,682
^a,bGlobal Eagle Entertainment Inc.		United States		395,223		1,225,191
Las Vegas Sands Corp.		United States		422,523		24,924,632
Newell Brands Inc.		United States		370,348		17,680,414
NIKE Inc., B		United States		492,096		27,267,039
^aThe Priceline Group Inc.		United States		29,009		53,574,401
Starbucks Corp.		United States		606,695		36,438,102
The Walt Disney Co.		United States		595,858		68,881,185

						522,452,218

Consumer Staples 3.1%
Constellation Brands Inc., A		United States		167,668		28,929,437
^a,cHostess Brands Inc., A		United States		816,343		13,992,119
^aMonster Beverage Corp.		United States		791,289		35,908,695
Pinnacle Foods Inc.		United States		529,363		30,782,458

						109,612,709

Energy 3.0%
Anadarko Petroleum Corp.		United States		697,871		39,792,604
^aDiamondback Energy Inc.		United States		113,534		11,335,235
Halliburton Co.		United States		883,418		40,531,218
^a,bResolute Energy Corp.		United States		380,751		14,259,125

						105,918,182

Financials 7.0%
^a Athene Holding Ltd., A		United States		738,554		39,372,314
BlackRock Inc.		United States		26,607		10,232,254
The Charles Schwab Corp.		United States		1,233,025		47,903,021
Intercontinental Exchange Inc.		United States		437,687		26,348,757
MarketAxess Holdings Inc.		United States		225,350		43,384,382
S&P Global Inc.		United States		135,492		18,181,672
^aSignature Bank		United States		248,126		34,353,045
^aSVB Financial Group		United States		161,783		28,464,101

						248,239,546

Health Care 14.4%
^a,d Acerta Pharma BV		Netherlands		35,601,435		1,377,989
Allergan PLC		United States		296,770		72,370,332
^aBiogen Inc.		United States		112,287		30,453,357
Bristol-Myers Squibb Co.		United States		761,821		42,700,067
^aCelgene Corp.		United States		995,846		123,534,696
^aEdwards Lifesciences Corp.		United States		380,596		41,739,964
Eli Lilly & Co.		United States		444,918		36,509,971
^a,bHeron Therapeutics Inc.		United States		872,964		13,399,998
^aIncyte Corp.		United States		322,377		40,065,014
Medtronic PLC		United States		220,100		18,288,109
^aNevro Corp.		United States		222,045		20,921,080
^aRevance Therapeutics Inc.		United States		242,812		5,281,161
^aTesaro Inc.		United States		243,490		35,936,689
UnitedHealth Group Inc.		United States		155,539		27,200,660

						509,779,087



franklintempleton.com	Annual Report	45

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Growth Opportunities Fund (continued)


	Country		Shares		Value

Common Stocks (continued)
Industrials 6.1%
Allegiant Travel Co.		United States		45,773	$	6,655,394
^aAzul SA, ADR		Brazil		400,900		9,104,439
Honeywell International Inc.		United States		282,542		37,052,558
^aIHS Markit Ltd.		United States		1,082,351		46,974,033
Raytheon Co.		United States		337,915		52,447,787
Rockwell Automation Inc.		United States		113,124		17,800,061
Roper Technologies Inc.		United States		99,758		21,817,075
^aUnivar Inc.		United States		812,994		24,267,871

						216,119,218

Information Technology 41.3%
^a Adobe Systems Inc.		United States		576,686		77,125,986
^aAlphabet Inc., C		United States		145,139		131,490,128
Analog Devices Inc.		United States		310,630		23,670,006
Apple Inc.		United States		1,248,186		179,301,919
^aAutodesk Inc.		United States		412,175		37,124,602
Broadcom Ltd.		United States		335,201		74,015,733
^aCavium Inc.		United States		242,812		16,717,606
^aCoStar Group Inc.		United States		141,904		34,183,255
^aElectronic Arts Inc.		United States		308,673		29,268,374
^aFacebook Inc., A		United States		1,164,741		175,002,335
^aFiserv Inc.		United States		247,117		29,441,519
^aMACOM Technology Solutions Holdings Inc.		United States		183,465		8,967,769
Mastercard Inc., A		United States		1,174,305		136,595,158
Microsoft Corp.		United States		1,827,209		125,090,728
^a,bMuleSoft Inc.		United States		74,700		1,721,088
NVIDIA Corp.		United States		319,803		33,355,453
^aPalo Alto Networks Inc.		United States		171,387		18,580,065
^aPaylocity Holding Corp.		United States		473,700		18,682,728
^aSalesforce.com Inc.		United States		754,936		65,015,088
^aServiceNow Inc.		United States		606,347		57,287,665
^aTyler Technologies Inc.		United States		114,597		18,746,923
Visa Inc., A		United States		1,273,628		116,180,346
Xilinx Inc.		United States		441,225		27,845,710
^aZendesk Inc.		United States		927,203		26,657,086

						1,462,067,270

Materials 2.5%
^a Axalta Coating .Systems Ltd.		United States		413,701		12,977,800
Ecolab Inc.		United States		209,400		27,031,446
^aIngevity Corp.		United States		220,504		13,942,468
Martin Marietta Materials Inc.		United States		161,958		35,661,532

						89,613,246

Real Estate 5.0%
American Tower Corp.		United States		412,587		51,961,207
Equinix Inc.		United States		133,081		55,587,934
^aSBA Communications Corp.		United States		559,919		70,824,154

						178,373,295

Telecommunication Services 1.3%
^a T-Mobile U.S. Inc.		United States		685,996		46,146,951

Total Common Stocks (Cost $2,043,755,415)						3,488,321,722



46	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Growth Opportunities Fund (continued)


	Country		Shares		Value

Preferred Stocks 0.4%
Consumer Discretionary 0.3%
^a,dProterra Inc., pfd., 5, 144A		United States		2,362,202	$	11,896,616

Information Technology 0.1%
^a,dTanium Inc., pfd., G		United States		805,800		3,996,768

Total Preferred Stocks (Cost $15,896,849)						15,893,384

Total Investments before Short Term Investments (Cost $2,059,652,264)						3,504,215,106


Short Term Investments 1.6%
Money Market Funds (Cost $45,233,287) 1.3%
^e,f Institutional Fiduciary Trust Money Market Portfolio, 0.37%		United States		45,233,287		45,233,287

^g Investments from Cash Collateral Received for Loaned Securities (Cost $10,394,075) 0.3%
Money Market Funds 0.3%
^e,f Institutional Fiduciary Trust Money Market Portfolio, 0.37%		United States		10,394,075		10,394,075

Total Investments (Cost $2,115,279,626) 100.5%						3,559,842,468
Other Assets, less Liabilities (0.5)%						(17,441,926	)

Net Assets 100.0%					$	3,542,400,542

^aNon-income producing.

^bA portion or all of the security is on loan at April 30, 2017. See Note 1(d).

^cA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).

^dSee Note 7 regarding restricted securities.

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

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

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



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


	Year Ended April 30,
	2017			2016			2015			2014			2013

Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$16.37			$18.83			$18.20			$14.26			$12.84

Income from investment operations^a:

Net investment income (loss)^b		(0.11	)		(0.08	)		(0.12	)		(0.15	)		(0.09	)

Net realized and unrealized gains (losses)		3.34			(2.03	)		1.57			4.75			1.87

Total from investment operations		3.23			(2.11	)		1.45			4.60			1.78

Less distributions from net realized gains		—			(0.35	)		(0.82	)		(0.66	)		(0.36	)

Net asset value, end of year		$19.60			$16.37			$18.83			$18.20			$14.26

Total return^c		19.73%			(11.28)%			8.34%			32.40%			14.35%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.10%			1.13%			1.16%			1.20%			1.33%

Expenses net of waiver and payments by affiliates		1.08%	^d		1.11%	^d		1.16%	^e		1.20%	^e		1.33%

Net investment income (loss)		(0.61)%			(0.44)%			(0.66)%			(0.85)%			(0.68)%

Supplemental data

Net assets, end of year (000’s)		$719,752			$792,072			$1,164,218			$851,317			$327,882

Portfolio turnover rate		29.93%			43.99%			30.15%			40.35%			41.02%

^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,
	2017			2016			2015			2014			2013

Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$14.07			$16.36			$16.03			$12.70			$11.57

Income from investment operations^a:

Net investment income (loss)^b		(0.21	)		(0.18	)		(0.22	)		(0.24	)		(0.16	)

Net realized and unrealized gains (losses)		2.85			(1.76	)		1.37			4.23			1.65

Total from investment operations		2.64			(1.94	)		1.15			3.99			1.49

Less distributions from net realized gains		—			(0.35	)		(0.82	)		(0.66	)		(0.36	)

Net asset value, end of year		$16.71			$14.07			$16.36			$16.03			$12.70

Total return^c		18.76%			(11.95)%			7.58%			31.57%			13.41%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.85%			1.88%			1.87%			1.90%			2.03%

Expenses net of waiver and payments by affiliates		1.83%	^d		1.86%	^d		1.87%	^e		1.90%	^e		2.03%

Net investment income (loss)		(1.36)%			(1.19)%			(1.37)%			(1.55)%			(1.38)%

Supplemental data

Net assets, end of year (000’s)		$142,539			$157,175			$225,105			$187,271			$77,644

Portfolio turnover rate		29.93%			43.99%			30.15%			40.35%			41.02%

^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	49

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small Cap Growth Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014			2013

Class R

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$15.70			$18.11			$17.57			$13.81			$12.48

Income from investment operations^a:

Net investment income (loss)^b		(0.15	)		(0.12	)		(0.16	)		(0.18	)		(0.11	)

Net realized and unrealized gains (losses)		3.19			(1.94	)		1.52			4.60			1.80

Total from investment operations		3.04			(2.06	)		1.36			4.42			1.69

Less distributions from net realized gains		—			(0.35	)		(0.82	)		(0.66	)		(0.36	)

Net asset value, end of year		$18.74			$15.70			$18.11			$17.57			$13.81

Total return		19.36%			(11.46)%			8.12%			32.15%			14.04%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.35%			1.38%			1.37%			1.40%			1.53%

Expenses net of waiver and payments by affiliates		1.33%	^c		1.36%	^c		1.37%	^d		1.40%	^d		1.53%

Net investment income (loss)		(0.86)%			(0.69)%			(0.87)%			(1.05)%			(0.88)%

Supplemental data

Net assets, end of year (000’s)		$79,995			$79,929			$92,455			$51,190			$15,783

Portfolio turnover rate		29.93%			43.99%			30.15%			40.35%			41.02%

^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,
	2017			2016			2015			2014^a

Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$17.52			$20.02			$19.21			$14.64

Income from investment operations^b:

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

Net realized and unrealized gains (losses)		3.57			(2.16	)		1.66			5.29

Total from investment operations		3.54			(2.15	)		1.63			5.23

Less distributions from net realized gains		—			(0.35	)		(0.82	)		(0.66	)

Net asset value, end of year		$21.06			$17.52			$20.02			$19.21

Total return		20.21%			(10.81)%			8.91%			35.80%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.63%			0.63%			0.66%			0.72%

Expenses net of waiver and payments by affiliates		0.61%	^d		0.61%	^d		0.66%	^e		0.72%	^e

Net investment income (loss)		(0.14)%			0.06%			(0.16)%			(0.37)%

Supplemental data

Net assets, end of year (000’s)		$858,972			$846,724			$844,293			$87,777

Portfolio turnover rate		29.93%			43.99%			30.15%			40.35%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.

^cBased on average daily shares outstanding.

^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	51

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small Cap Growth Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014			2013

Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$17.41			$19.94			$19.17			$14.94			$13.41

Income from investment operations^a:

Net investment income (loss)^b		(0.07	)		(0.04	)		(0.07	)		(0.11	)		(0.05	)

Net realized and unrealized gains (losses)		3.54			(2.14	)		1.66			5.00			1.94

Total from investment operations		3.47			(2.18	)		1.59			4.89			1.89

Less distributions from net realized gains		—			(0.35	)		(0.82	)		(0.66	)		(0.36	)

Net asset value, end of year		$20.88			$17.41			$19.94			$19.17			$14.94

Total return		19.93%			(11.06)%			8.65%			32.87%			14.56%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.85%			0.88%			0.87%			0.90%			1.03%

Expenses net of waiver and payments by affiliates		0.83%	^c		0.86%	^c		0.87%	^d		0.90%	^d		1.03%

Net investment income (loss)		(0.36)%			(0.19)%			(0.37)%			(0.55)%			(0.38)%

Supplemental data

Net assets, end of year (000’s)		$805,661			$850,975			$1,077,822			$427,406			$91,687

Portfolio turnover rate		29.93%			43.99%			30.15%			40.35%			41.02%

^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%.



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

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Small Cap Growth Fund


	Shares		Value
Common Stocks 96.9%
Consumer Discretionary 15.2%
^aAt Home Group Inc.		1,326,200	$	23,221,762
^aBoot Barn Holdings Inc.		1,288,939		13,675,643
^aBuffalo Wild Wings Inc.		144,200		22,718,710
^a,bDuluth Holdings Inc.		564,842		12,511,250
^aFive Below Inc.		496,700		24,397,904
^aFloor & Decor Holdings Inc.		44,900		1,454,760
^aGlobal Eagle Entertainment Inc.		2,049,456		6,353,314
^aGrand Canyon Education Inc.		528,700		39,737,092
^aThe Habit Restaurants Inc., A		858,700		16,229,430
^aIMAX Corp.		947,600		28,901,800
KB Home		989,400		20,381,640
^aLaureate Education Inc., A		700,051		9,667,704
Lithia Motors Inc.		297,600		28,435,680
^aM/I Homes Inc.		1,014,976		27,566,748
^a,bNord Anglia Education Inc. (Hong Kong)		491,836		15,837,119
^aShutterfly Inc.		230,200		11,947,380
^a,cSportsman’s Warehouse Holdings Inc.		3,944,700		16,133,823
Tenneco Inc.		210,600		13,274,118
Tile Shop Holdings Inc.		1,187,200		25,346,720
Wingstop Inc.		982,529		28,915,829
^aZoe’s Kitchen Inc.		512,100		9,243,405

				395,951,831

Consumer Staples 3.4%
^a Hostess Brands Inc., A		1,003,000		17,191,420
^aSmart & Final Stores Inc.		2,439,100		28,781,380
^aTreeHouse Foods Inc.		497,900		43,616,040

				89,588,840

Energy 3.3% ^aMatador Resources Co.		1,236,839		26,814,669
^aResolute Energy Corp.		612,000		22,919,400
^aSRC Energy Inc.		2,559,100		19,295,614
^aSuperior Energy Services Inc.		1,452,700		17,548,616

				86,578,299

Financials 6.4% ^aCadence BanCorp.		273,900		6,157,272
Chemical Financial Corp.		469,023		22,255,141
Evercore Partners Inc.		265,200		19,558,500
Houlihan Lokey Inc.		429,700		14,412,138
MB Financial Inc.		478,700		20,349,537
Pinnacle Financial Partners Inc.		499,804		31,987,456
^aPRA Group Inc.		641,200		20,646,640
^aWestern Alliance Bancorp		648,700		31,072,730

				166,439,414

Health Care 17.2% ^aAclaris Therapeutics Inc.		412,716		11,601,447
^aAmerican Renal Associates Holdings Inc.		472,500		8,131,725
^a,cAratana Therapeutics Inc.		2,697,019		16,721,518
^aArray BioPharma Inc.		2,007,400		17,404,158
^aAveXis Inc.		234,293		18,860,586
^aCelldex Therapeutics Inc.		1,719,100		5,724,603



franklintempleton.com	Annual Report	53

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small Cap Growth Fund (continued)


	Shares		Value
Common Stocks (continued)
Health Care (continued) ^a,bCollegium Pharmaceutical Inc.		899,800	$	8,827,038
^aCorium International Inc.		760,450		3,429,630
^aDexCom Inc.		317,100		24,721,116
^aEdge Therapeutics Inc.		636,900		6,611,022
^a,bFoamix Pharmaceuticals Ltd. (Israel)		457,580		1,926,412
^aHealthEquity Inc.		442,216		20,129,672
^aHeron Therapeutics Inc.		1,185,993		18,204,993
^aInteger Holdings Corp.		1,006,100		36,974,175
^aiRhythm Technologies Inc.		662,097		23,365,403
^aKaryopharm Therapeutics Inc.		1,277,686		13,057,951
^aLion Biotechnologies Inc.		1,422,800		9,746,180
^aLoxo Oncology Inc.		154,958		7,137,365
^aNeogen Corp.		452,500		28,204,325
^a,bNeos Therapeutics Inc.		479,738		3,406,140
^aNevro Corp.		493,200		46,469,304
^aPenumbra Inc.		138,300		11,817,735
^a,cPfenex Inc.		1,175,631		5,654,785
^aRevance Therapeutics Inc.		1,085,600		23,611,800
^aSage Therapeutics Inc.		212,800		15,108,800
^aThe Spectranetics Corp.		1,407,200		40,245,920
^a,bTG Therapeutics Inc.		756,400		8,358,220
^a,bTherapeuticsMD Inc.		2,627,000		13,397,700

				448,849,723

Industrials 18.7%
Allegiant Travel Co.		218,548		31,776,879
Altra Industrial Motion Corp.		666,400		29,421,560
^aAstronics Corp.		1,054,299		34,275,261
^aBeacon Roofing Supply Inc.		674,100		33,415,137
Cubic Corp.		547,400		28,410,060
^aDigitalGlobe Inc.		524,200		16,879,240
^aEcho Global Logistics Inc.		1,006,625		18,874,219
Granite Construction Inc.		219,400		11,564,574
Interface Inc.		324,200		6,451,580
Kennametal Inc.		852,000		35,426,160
^a,cThe KeyW Holding Corp.		3,006,882		28,535,310
^aMercury Systems Inc.		1,029,893		38,497,400
Mobile Mini Inc.		1,021,200		29,308,440
^aSpirit Airlines Inc.		702,300		40,220,721
Steelcase Inc., A		1,141,223		19,457,852
^aUnivar Inc.		1,317,832		39,337,285
US Ecology Inc.		938,690		44,259,234

				486,110,912

Information Technology 29.3% ^a2U Inc.		1,510,852		68,592,681
^aAlarm.com Holdings Inc.		1,373,222		44,780,769
^aBazaarvoice Inc.		3,288,150		15,454,305
^aBottomline Technologies (de) Inc.		1,354,304		31,555,283
^aBroadSoft Inc.		846,974		32,523,802
^aCallidus Software Inc.		1,965,300		41,369,565
^aCavium Inc.		554,900		38,204,865
^aCloudera Inc.		54,800		991,880



54	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small Cap Growth Fund (continued)


	Shares		Value
Common Stocks (continued)
Information Technology (continued)
Cognex Corp.		215,300	$	18,373,702
^aEnvestnet Inc.		953,022		33,165,166
^aFARO Technologies Inc.		371,400		13,611,810
^aGuidewire Software Inc.		510,700		31,402,943
^aHubspot Inc.		523,929		35,129,439
^aIntegrated Device Technology Inc.		1,564,300		37,527,557
^aInterXion Holding NV (Netherlands)		287,400		11,973,084
^aLattice Semiconductor Corp.		5,134,200		35,220,612
^aMACOM Technology Solutions Holdings Inc.		573,000		28,008,240
^aNanometrics Inc.		616,200		19,444,191
^aPaylocity Holding Corp.		1,060,432		41,823,438
^aProofpoint Inc.		435,300		32,808,561
^aPure Storage Inc., A		2,627,900		27,882,019
^aQ2 Holdings Inc.		566,900		21,627,235
^aShoretel Inc.		1,261,800		8,264,790
^a,bTwilio Inc., A		745,802		24,648,756
^aViaSat Inc.		293,383		18,785,313
^aZendesk Inc.		1,749,414		50,295,653

				763,465,659

Materials 2.0%
H.B. Fuller Co.		123,400		6,519,222
^aIngevity Corp.		727,500		45,999,825

				52,519,047

Real Estate 1.4%
Coresite Realty Corp.		383,700		37,545,045

Total Common Stocks (Cost $1,990,740,820)				2,527,048,770


Preferred Stocks 1.7%
Consumer Discretionary 1.1% ^a,dDraftKings Inc., pfd., D		825,201		3,261,689
^a,dDraftKings Inc., pfd., D-1		2,029,318		11,411,464
^a,dDraftKings Inc., pfd., E		4,179,808		4,406,620
^a,dProterra Inc., pfd., 5, 144A		1,787,047		8,999,998

				28,079,771

Information Technology 0.6% ^a,dSmule Inc., pfd., G, 144A		1,542,673		13,122,593
^a,d,eSmule Inc., pfd., H		352,675		2,999,995

				16,122,588

Total Preferred Stocks (Cost $49,633,217)				44,202,359

Total Investments before Short Term Investments (Cost $2,040,374,037)				2,571,251,129


Short Term Investments 4.1%
Money Market Funds (Cost $44,495,628) 1.7% ^f,gInstitutional Fiduciary Trust Money Market Portfolio, 0.37%		44,495,628		44,495,628



franklintempleton.com	Annual Report	55

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small Cap Growth Fund (continued)


	Shares		Value
^hInvestments from Cash Collateral Received for Loaned Securities (Cost $62,071,100) 2.4%
Money Market Funds 2.4% ^f,gInstitutional Fiduciary Trust Money Market Portfolio, 0.37%		62,071,100	$	62,071,100

Total Investments (Cost $2,146,940,765) 102.7%				2,677,817,857
Other Assets, less Liabilities (2.7)%				(70,899,691	)

Net Assets 100.0%			$	2,606,918,166

^aNon-income producing.

^bA portion or all of the security is on loan at April 30, 2017. See Note 1(d).

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

^dSee Note 7 regarding restricted securities.

^eSecurity purchased on a delayed delivery basis. See Note 1(c).

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

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

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



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


	Year Ended April 30,
	2017			2016			2015			2014			2013
Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$31.84			$38.38			$40.42			$38.01			$38.51

Income from investment operations^a:

Net investment income (loss)^b		(0.11	)		(0.03	)^c		(0.14	)		(0.20	)		(0.10	)

Net realized and unrealized gains (losses)		4.73			(3.37	)		5.71			8.39			3.08

Total from investment operations		4.62			(3.40	)		5.57			8.19			2.98

Less distributions from net realized gains		(2.11	)		(3.14	)		(7.61	)		(5.78	)		(3.48	)

Net asset value, end of year		$34.35			$31.84			$38.38			$40.42			$38.01

Total return^d		15.01%			(9.02)%			15.78%			21.99%			8.95%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.95%			0.96%			0.94%			0.96%			0.98%

Expenses net of waiver and payments by affiliates		0.94%	^e		0.95%	^e		0.94%	^f		0.96%	^e,f		0.98%

Net investment income (loss)		(0.34)%			(0.08)%	^c		(0.35)%			(0.48)%			(0.27)%

Supplemental data

Net assets, end of year (000’s)	$	2,303,113		$	2,231,822		$	2,535,853		$	2,371,448		$	2,355,507

Portfolio turnover rate		35.46%			38.72%			47.98%			40.82%			43.72%

^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.

^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%.



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,
	2017			2016			2015			2014			2013

Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$24.40			$30.43			$33.78			$32.80			$33.97

Income from investment operations^a:

Net investment income (loss)^b		(0.27	)		(0.23	)^c		(0.36	)		(0.43	)		(0.32	)

Net realized and unrealized gains (losses)		3.57			(2.66	)		4.62			7.19			2.63

Total from investment operations		3.30			(2.89	)		4.26			6.76			2.31

Less distributions from net realized gains		(2.11	)		(3.14	)		(7.61	)		(5.78	)		(3.48	)

Net asset value, end of year		$25.59			$24.40			$30.43			$33.78			$32.80

Total return^d		14.15%			(9.72)%			14.96%			21.04%			8.11%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.70%			1.71%			1.69%			1.71%			1.73%

Expenses net of waiver and payments by affiliates		1.69%	^e		1.70%	^e		1.69%	^f		1.71%	^e,f		1.73%

Net investment income (loss)		(1.09)%			(0.83)%	^c		(1.10)%			(1.23)%			(1.02)%

Supplemental data

Net assets, end of year (000’s)	$	371,262		$	377,024		$	448,722		$	404,923		$	348,144

Portfolio turnover rate		35.46%			38.72%			47.98%			40.82%			43.72%

^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.

^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%.



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,
	2017			2016			2015			2014			2013

Class R

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$29.75			$36.18			$38.61			$36.61			$37.32

Income from investment operations^a:

Net investment income (loss)^b		(0.18	)		(0.11	)^c		(0.23	)		(0.29	)		(0.18	)

Net realized and unrealized gains (losses)		4.41			(3.18	)		5.41			8.07			2.95

Total from investment operations		4.23			(3.29	)		5.18			7.78			2.77

Less distributions from net realized gains		(2.11	)		(3.14	)		(7.61	)		(5.78	)		(3.48	)

Net asset value, end of year		$31.87			$29.75			$36.18			$38.61			$36.61

Total return		14.70%			(9.24)%			15.52%			21.66%			8.66%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.19%			1.21%			1.19%			1.21%			1.23%

Expenses net of waiver and payments by affiliates		1.18%	^d		1.20%	^d		1.19%	^e		1.21%	^d,e		1.23%

Net investment income (loss)		(0.58)%			(0.33)%	^c		(0.60)%			(0.73)%			(0.52)%

Supplemental data

Net assets, end of year (000’s)		$81,864			$86,989			$96,593			$85,921			$65,397

Portfolio turnover rate		35.46%			38.72%			47.98%			40.82%			43.72%

^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,
	2017			2016			2015			2014^a
Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$34.43			$41.04			$42.53			$38.96

Income from investment operations^b:

Net investment income^c		0.05			0.15	^d		0.05			0.01

Net realized and unrealized gains (losses)		5.14			(3.62	)		6.07			9.34

Total from investment operations		5.19			(3.47	)		6.12			9.35

Less distributions from net realized gains		(2.11	)		(3.14	)		(7.61	)		(5.78	)

Net asset value, end of year		$37.51			$34.43			$14.04			$42.53

Total return		15.51%			(8.54)%			16.32%			24.43%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.48%			0.48%			0.48%			0.47%

Expenses net of waiver and payments by affiliates		0.47%	^e		0.47%	^e		0.48%	^f		0.47%	^e,f

Net investment income		0.13%			0.40%	^d		0.11%			0.01%

Supplemental data

Net assets, end of year (000’s)	$	222,577		$	242,237		$	206,548		$	157,153

Portfolio turnover rate		35.46%			38.72%			47.98%			40.82%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.

^cBased on average daily shares outstanding.

^dNet 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 0.10%.

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

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



60	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,
	2017			2016			2015			2014			2013

Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$34.15			$40.83			$42.44			$39.56			$39.83

Income from investment operations^a:

Net investment income (loss)^b		(0.03	)		0.06	^c		(0.04	)		(0.10	)		(0.01	)

Net realized and unrealized gains (losses)		5.10			(3.60	)		6.04			8.76			3.22

Total from investment operations		5.07			(3.54	)		6.00			8.66			3.21

Less distributions from net realized gains		(2.11	)		(3.14	)		(7.61	)		(5.78	)		(3.48	)

Net asset value, end of year		$37.11			$34.15			$40.83			$42.44			$39.56

Total return		15.28%			(8.79)%			16.09%			22.30%			9.21%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.70%			0.71%			0.69%			0.71%			0.73%

Expenses net of waiver and payments by affiliates		0.69%	^d		0.70%	^d		0.69%	^e		0.71%	^d,e		0.73%

Net investment income (loss)		(0.09)%			0.17%	^c		(0.10)%			(0.23)%			(0.02)%

Supplemental data

Net assets, end of year (000’s)	$	584,840		$	551,176		$	708,617		$	650,426		$	909,895

Portfolio turnover rate		35.46%			38.72%			47.98%			40.82%			43.72%

^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	61

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Small-Mid Cap Growth Fund


	Shares		Value
Common Stocks 96.2%
Consumer Discretionary 18.1%
Advance Auto Parts Inc.		150,400	$	21,377,856
^aBuffalo Wild Wings Inc.		164,000		25,838,200
Delphi Automotive PLC (United Kingdom)		525,200		42,226,080
Dick’s Sporting Goods Inc.		692,600		35,010,930
^aDollar Tree Inc.		506,600		41,931,282
Dominos Pizza Inc.		90,000		16,325,100
Expedia Inc.		224,500		30,020,140
^a,bGlobal Eagle Entertainment Inc.		1,126,784		3,493,031
^aGrand Canyon Education Inc.		543,200		40,826,912
Hanesbrands Inc.		837,500		18,265,875
^aIMAX Corp.		956,200		29,164,100
L Brands Inc.		355,000		18,747,550
^aLaureate Education Inc., A		530,300		7,323,443
^aLiberty Broadband Corp., C		413,500		37,694,660
Marriott International Inc., A		391,800		36,993,756
Newell Brands Inc.		812,776		38,801,926
^aNorwegian Cruise Line Holdings Ltd.		880,100		47,463,793
^aNVR Inc.		18,100		38,213,625
^aO’Reilly Automotive Inc.		139,300		34,567,295
Ross Stores Inc.		614,300		39,929,500
Thor Industries Inc.		96,500		9,281,370
Tractor Supply Co.		481,400		29,803,474
^a,bZoe’s Kitchen Inc.		85,800		1,548,690

				644,848,588

Consumer Staples 5.1%
Church & Dwight Co. Inc.		315,000		15,601,950
^aHostess Brands Inc., A		508,500		8,715,690
Molson Coors Brewing Co., B		255,000		24,451,950
^aMonster Beverage Corp.		538,900		24,455,282
Pinnacle Foods Inc.		780,000		45,357,000
^aPost Holdings Inc.		441,400		37,161,466
^aTreeHouse Foods Inc.		296,500		25,973,400

				181,716,738

Energy 2.6%
Cabot Oil & Gas Corp., A		1,189,510		27,644,212
^aJagged Peak Energy Inc.		1,710,000		19,049,400
Noble Energy Inc.		641,400		20,736,462
^aOil States International Inc.		110,000		3,272,500
^bRPC Inc.		250,000		4,542,500
^aSuperior Energy Services Inc.		1,417,500		17,123,400

				92,368,474

Financials 8.0%
Affiliated Managers Group Inc.		328,800		54,445,992
Arthur J. Gallagher & Co.		659,000		36,778,790
Lazard Ltd., A		476,300		20,452,322
MarketAxess Holdings Inc.		144,200		27,761,384
Moody’s Corp.		315,000		37,270,800
^aSignature Bank		342,500		47,419,125
^aSVB Financial Group		185,100		32,566,494



62	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small-Mid Cap Growth Fund (continued)


	Shares		Value
Common Stocks (continued)
Financials (continued)
Willis Towers Watson PLC		205,200	$	27,213,624

				283,908,531

Health Care 14.2%
^aAcadia Pharmaceuticals Inc.		322,349		11,066,241
^aBioMarin Pharmaceutical Inc.		156,066		14,957,365
^aCerner Corp.		348,502		22,565,504
The Cooper Cos. Inc.		140,200		28,086,266
^aDaVita Inc.		489,900		33,807,999
^aDexCom Inc.		295,314		23,022,679
^aEdwards Lifesciences Corp.		474,600		52,049,382
^a,bHeron Therapeutics Inc.		492,411		7,558,509
^aHologic Inc.		810,000		36,571,500
^aIllumina Inc.		127,000		23,477,220
^aIncyte Corp.		230,614		28,660,708
^aInsulet Corp.		284,217		12,337,860
^aIntuitive Surgical Inc.		31,600		26,413,492
^aiRhythm Technologies Inc.		191,450		6,756,271
^aJazz Pharmaceuticals PLC		128,000		20,387,840
^aMednax Inc.		128,500		7,756,260
^aMettler-Toledo International Inc.		88,000		45,180,960
^aNeurocrine Biosciences Inc.		199,842		10,671,563
^aNevro Corp.		198,800		18,730,936
^aPatheon NV		343,000		9,230,130
^aPenumbra Inc.		168,647		14,410,886
^aRevance Therapeutics Inc.		344,100		7,484,175
^aTesaro Inc.		143,145		21,126,771
^aWaters Corp.		135,000		22,935,150

				505,245,667

Industrials 15.4%
Acuity Brands Inc.		137,000		24,125,700
Allegiant Travel Co.		107,109		15,573,649
BWX Technologies Inc.		108,400		5,330,028
^aDigitalGlobe Inc.		251,600		8,101,520
Dun & Bradstreet Corp.		310,100		33,990,061
Equifax Inc.		145,000		19,619,950
Fortive Corp.		233,000		14,739,580
^aGenesee & Wyoming Inc.		680,200		46,090,352
^aHD Supply Holdings Inc.		798,068		32,162,140
Hexcel Corp.		756,709		39,159,691
^aIHS Markit Ltd.		1,094,015		47,480,251
J.B. Hunt Transport Services Inc.		285,700		25,615,862
Robert Half International Inc.		653,600		30,098,280
Rockwell Automation Inc.		201,000		31,627,350
Roper Technologies Inc.		360,530		78,847,911
Stanley Black & Decker Inc.		205,000		27,910,750
Textron Inc.		443,800		20,707,708
^aUnivar Inc.		456,100		13,614,585
^aVerisk Analytics Inc.		402,800		33,355,868

				548,151,236



franklintempleton.com	Annual Report	63

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small-Mid Cap Growth Fund (continued)


	Shares		Value
Common Stocks (continued)
Information Technology 24.6%
^a2U Inc.		1,036,800	$	47,070,720
^aAlarm.com Holdings Inc.		302,000		9,848,220
Alliance Data Systems Corp.		79,600		19,870,548
Analog Devices Inc.		358,500		27,317,700
^aANSYS Inc.		272,100		29,974,536
^aAtlassian Corp. PLC (Australia)		625,000		21,550,000
^aAutodesk Inc.		297,000		26,750,790
^aBottomline Technologies (de) Inc.		750,200		17,479,660
^aCavium Inc.		152,500		10,499,625
^aCloudera Inc.		74,700		1,352,070
Cognex Corp.		511,800		43,677,012
^aCoStar Group Inc.		242,600		58,439,914
CSRA Inc.		1,165,347		33,888,291
^aElectronic Arts Inc.		243,100		23,050,742
Fidelity National Information Services Inc.		500,900		42,170,771
^aFleetCor Technologies Inc.		243,800		34,409,932
^aGoDaddy Inc., A		981,800		38,211,656
^aInphi Corp.		246,000		10,189,320
^aIntegrated Device Technology Inc.		607,000		14,561,930
KLA-Tencor Corp.		295,000		28,974,900
Lam Research Corp.		261,000		37,805,850
Microchip Technology Inc.		439,800		33,240,084
Monolithic Power Systems		75,000		6,862,500
NVIDIA Corp.		294,500		30,716,350
^aPalo Alto Networks Inc.		270,000		29,270,700
^aProofpoint Inc.		225,000		16,958,250
^aQ2 Holdings Inc.		181,700		6,931,855
^aServiceNow Inc.		479,600		45,312,608
Skyworks Solutions Inc.		113,000		11,270,620
^aSquare Inc., A		563,000		10,269,120
^aVantiv Inc., A		818,700		50,792,148
^aViaSat Inc.		348,050		22,285,641
^aWorkday Inc., A		290,000		25,346,000
^aZendesk Inc.		401,500		11,543,125

				877,893,188

Materials 4.2%
^aAxalta Coating Systems Ltd.		1,689,603		53,002,846
^aIngevity Corp.		406,700		25,715,641
International Flavors & Fragrances Inc.		165,000		22,867,350
Martin Marietta Materials Inc.		223,300		49,168,427

				150,754,264

Real Estate 4.0%
American Campus Communities Inc.		264,200		12,520,438
^aCBRE Group Inc.		677,100		24,246,951
Equinix Inc.		164,178		68,577,151
^aSBA Communications Corp.		282,000		35,670,180

				141,014,720

Total Common Stocks (Cost $2,453,654,335)				3,425,901,406



64	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Small-Mid Cap Growth Fund (continued)


	Shares		Value
Preferred Stocks 0.6%
Consumer Discretionary 0.6%
^a,cDraftKings Inc., pfd., D		660,161	$	2,609,352
^a,cDraftKings Inc., pfd., D-1		1,623,455		9,129,175
^a,cDraftKings Inc., pfd., E		3,388,624		3,572,503
^a,cProterra Inc., pfd., 5, 144A		1,416,913		7,135,914

Total Preferred Stocks (Cost $28,423,430)				22,446,944

Total Investments before Short Term Investments (Cost $2,482,077,765)				3,448,348,350


Short Term Investments 3.7%
Money Market Funds (Cost $128,167,885) 3.6%
^d,eInstitutional Fiduciary Trust Money Market Portfolio, 0.37%		128,167,885		128,167,885

^fInvestments from Cash Collateral Received for Loaned Securities (Cost $5,704,575) 0.1%
Money Market Funds 0.1%
^d,eInstitutional Fiduciary Trust Money Market Portfolio, 0.37%		5,704,575		5,704,575

Total Investments (Cost $2,615,950,225) 100.5%				3,582,220,810
Other Assets, less Liabilities (0.5)%				(18,563,918	)

Net Assets 100.0%			$	3,563,656,892

^aNon-income producing.

^bA portion or all of the security is on loan at April 30, 2017. See Note 1(d).

^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 yield at period end.

^fSee Note 1(d) regarding securities on loan.



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

April 30, 2017


	Franklin Focused Core Equity Fund			Franklin Growth Opportunities Fund			Franklin Small Cap Growth Fund			Franklin Small-Mid Cap Growth Fund
Assets:
Investments in securities:
Cost - Unaffiliated issuers		$106,634,602			$2,059,652,264			$1,926,567,835			$2,482,077,765
Cost - Non-controlled affiliates (Note 3f and 8)		2,075,737			55,627,362			220,372,930			133,872,460

Total cost of investments		$108,710,339			$2,115,279,626			$2,146,940,765			$2,615,950,225

Value - Unaffiliated issuers		$129,756,728			$3,504,215,106			$2,504,205,693			$3,448,348,350
Value - Non-controlled affiliates (Note 3f and 8)		2,075,737			55,627,362			173,612,164			133,872,460

Total value of investments*		131,832,465			3,559,842,468			2,677,817,857			3,582,220,810
Receivables:
Investment securities sold		611,233			3,028,181			1,197,596			455,670
Capital shares sold		44,451			2,194,088			1,396,790			3,953,859
Dividends and interest		61,250			840,961			306,618			157,047
Due from custodian		—			6,158,250			1,549,075			3,099,600
Other assets		116			2,829			2,340			2,863

Total assets		132,549,515			3,572,066,777			2,682,270,276			3,589,889,849

Liabilities:
Payables:
Investment securities purchased		451,047			2,147,322			6,533,980			3,850,742
Capital shares redeemed		190,196			7,862,236			2,604,712			10,058,804
Management fees		101,810			1,317,865			1,283,788			1,297,213
Distribution fees		31,741			786,401			304,638			795,612
Transfer agent fees		10,936			828,803			805,070			1,196,261
Payable upon return of securities loaned		—			16,552,325			63,620,175			8,804,175
Accrued expenses and other liabilities		44,352			171,283			199,747			230,150

Total liabilities		830,082			29,666,235			75,352,110			26,232,957

Net assets, at value		$131,719,433			$3,542,400,542			$2,606,918,166			$3,563,656,892

Net assets consist of:
Paid-in capital		$117,827,567			$1,924,602,590			$2,170,296,698			$2,506,546,275
Undistributed net investment income (loss)		(57,895	)		(3,796,709	)		(4,025,448	)		(2,048,836	)
Net unrealized appreciation (depreciation)		23,122,126			1,444,478,111			530,877,092			966,270,585
Accumulated net realized gain (loss)		(9,172,365	)		177,116,550			(90,230,176	)		92,888,868

Net assets, at value		$131,719,433			$3,542,400,542			$2,606,918,166			$3,563,656,892


*Includes securities loaned		$ —			$ 16,107,079			$ 61,207,818			$ 8,537,740



66	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, 2017


	Franklin Focused Core Equity Fund		Franklin Growth Opportunities Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Class A:
Net assets, at value		$77,733,034		$2,272,831,377		$719,751,626		$2,303,113,228
Shares outstanding		5,114,933		65,287,251		36,730,169		67,047,277
Net asset value per share^a		$15.20		$34.81		$19.60		$34.35
Maximum offering price per share (net asset value per share ÷ 94.25%)		$16.13		$36.93		$20.80		$36.45
Class C:
Net assets, at value		$20,341,306		$ 390,123,362		$142,538,850		$ 371,262,318
Shares outstanding		1,406,267		12,950,330		8,529,297		14,508,802
Net asset value and maximum offering price per share^a		$14.46		$30.12		$16.71		$25.59
Class R:
Net assets, at value		$ 166,418		$ 50,428,687		$ 79,994,597		$ 81,863,820
Shares outstanding		11,088		1,504,296		4,269,073		2,568,593
Net asset value and maximum offering price per share		$15.01		$33.52		$18.74		$31.87
Class R6:
Net assets, at value		$20,401,396		$ 291,824,591		$858,972,473		$ 222,577,400
Shares outstanding		1,321,409		7,823,304		40,781,512		5,933,048
Net asset value and maximum offering price per share		$15.44		$37.30		$21.06		$37.51
Advisor Class:
Net assets, at value		$13,077,279		$ 537,192,525		$805,660,620		$ 584,840,126
Shares outstanding		849,567		14,512,702		38,580,188		15,759,285
Net asset value and maximum offering price per share		$15.39		$37.02		$20.88		$37.11

^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	67

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Operations

for the year ended April 30, 2017


	Franklin Focused Core Equity Fund				Franklin Growth Opportunities Fund			Franklin Small Cap Growth Fund			Franklin Small-Mid Cap Growth Fund
Investment income:
Dividends:
Unaffiliated issuers		$	1,715,636			$ 18,310,473		$	9,090,262			$ 20,247,788
Non-controlled affiliates (Note 3f and 8)			1,001			23,166			66,600			64,711
Interest			—			—			296,685			250,231
Income from securities loaned (net of fees and rebates)			—			182,385			3,743,229			382,280

Total investment income			1,716,637			18,516,024			13,196,776			20,945,010

Expenses:
Management fees (Note 3a)			1,357,731			15,661,146			16,944,181			15,963,209
Distribution fees: (Note 3c)
Class A			212,628			4,262,748			1,899,092			5,582,468
Class C			213,604			3,076,819			1,503,192			3,724,196
Class R			670			237,681			397,879			417,390
Transfer agent fees: (Note 3e)
Class A			133,330			3,518,517			1,686,151			5,029,891
Class C			33,703			636,051			332,306			838,859
Class R			250			98,425			176,918			189,637
Class R6			119			615			10,160			2,880
Advisor Class			21,447			854,677			1,834,078			1,259,765
Custodian fees (Note 4)			2,891			26,533			22,770			28,352
Reports to shareholders			19,611			252,727			244,660			410,380
Registration and filing fees			74,652			167,956			115,752			179,212
Professional fees			42,651			51,140			58,091			62,078
Trustees’ fees and expenses			1,556			24,002			27,261			34,668
Other			8,895			162,808			51,312			64,532

Total expenses			2,123,738			29,031,845			25,303,803			33,787,517
Expense reductions (Note 4)			(12	)		(504	)		(720	)		(316	)
Expenses waived/paid by affiliates (Note 3f and 3g)			(316,498	)		(2,205,850	)		(522,463	)		(474,426	)

Net expenses			1,807,228			26,825,491			24,780,620			33,312,775

Net investment income (loss)			(90,591	)		(8,309,467	)		(11,583,844	)		(12,367,765	)

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments :
Unaffiliated issuers			(313,407	)		270,071,985			84,638,612			296,127,318
Non-controlled affiliates (Note 3f and 8)			—			—			26,606,892			—
Foreign currency transactions			(717	)		12,159			6,188			9,876

Net realized gain (loss)			(314,124	)		270,084,144			111,251,692			296,137,194

Net change in unrealized appreciation (depreciation) on:
Investments			20,899,832			141,378,056			397,379,604			204,507,795
Translation of other assets and liabilities denominated in foreign currencies			—			12,435			—			—

Net change in unrealized appreciation (depreciation)			20,899,832			141,390,491			397,379,604			204,507,795

Net realized and unrealized gain (loss)			20,585,708			411,474,635			508,631,296			500,644,989

Net increase (decrease) in net assets resulting from operations		$	20,495,117			$403,165,168		$	497,047,452			$488,277,224



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 Focused Core Equity Fund						Franklin Growth Opportunities Fund
	Year Ended April 30,						Year Ended April 30,
	2017			2016			2017			2016
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(90,591	)	$	865,847		$	(8,309,467	)	$	(6,485,092	)
Net realized gain (loss)		(314,124	)		(6,954,510	)		270,084,144			(7,640,390	)
Net change in unrealized appreciation (depreciation)		20,899,832			(20,401,231	)		141,390,491			(70,395,108	)
Net increase (decrease) in net assets resulting from operations		20,495,117			(26,489,894	)		403,165,168			(84,520,590	)
Distributions to shareholders from:
Net investment income:
Class A		—			(497,875	)		—			—
Class R		—			(953	)		—			—
Class R6		—			(285,880	)		—			—
Advisor Class		—			(75,820	)		—			—
Net realized gains:
Class A		—			(3,097,294	)		(44,859,072	)		(11,684,036	)
Class C		—			(753,648	)		(8,913,159	)		(3,434,327	)
Class R		—			(8,526	)		(1,075,523	)		(919,987	)
Class R6		—			(947,505	)		(5,023,963	)		(4,559,642	)
Advisor Class		—			(303,800	)		(9,033,594	)		(5,175,160	)
Total distributions to shareholders		—			(5,971,301	)		(68,905,311	)		(25,773,152	)
Capital share transactions: (Note 2)
Class A		(35,011,790	)		27,607,644			1,519,824,161			142,478,599
Class C		(7,689,560	)		10,981,811			218,581,841			42,387,168
Class R		(130,011	)		158,571			4,640,014			(4,630,356	)
Class R6		(16,295,505	)		14,106,218			22,457,460			7,201,428
Advisor Class		100,080			2,665,730			224,101,152			8,197,076
Total capital share transactions		(59,026,786	)		55,519,974			1,989,604,628			195,633,915
Net increase (decrease) in net assets		(38,531,669	)		23,058,779			2,323,864,485			85,340,173
Net assets:
Beginning of year		170,251,102			147,192,323			1,218,536,057			1,133,195,884
End of year	$	131,719,433		$	170,251,102		$	3,542,400,542		$	1,218,536,057
Undistributed net investment income (loss) included in net assets:
End of year	$	(57,895	)	$	—		$	(3,796,709	)	$	(2,362,629	)
Distributions in excess of net investment income included in net assets:
End of year	$	—		$	(48,510	)	$	—		$	—



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,
	2017			2016			2017			2016
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(11,583,844	)	$	(8,604,877	)	$	(12,367,765	)	$	(3,590,643	)
Net realized gain (loss)		111,251,692			(195,895,106	)		296,137,194			192,892,797
Net change in unrealized appreciation (depreciation)		397,379,604			(189,905,421	)		204,507,795			(552,669,162	)
Net increase (decrease) in net assets resulting from operations		497,047,452			(394,405,404	)		488,277,224			(363,367,008	)
Distributions to shareholders from:
Net realized gains:
Class A		—			(18,855,133	)		(136,505,889	)		(203,767,135	)
Class C		—			(4,317,704	)		(29,638,216	)		(45,252,717	)
Class R		—			(1,825,810	)		(5,497,412	)		(8,434,665	)
Class R6		—			(16,908,538	)		(12,322,477	)		(20,262,074	)
Advisor Class		—			(17,868,315	)		(31,556,678	)		(49,942,277	)
Total distributions to shareholders		—			(59,775,500	)		(215,520,672	)		(327,658,868	)
Capital share transactions: (Note 2)
Class A		(210,965,256	)		(221,885,481	)		(104,570,061	)		128,177,630
Class C		(40,612,322	)		(37,262,306	)		(25,199,072	)		17,363,176
Class R		(14,134,257	)		564,740			(11,196,875	)		8,280,172
Class R6		(157,322,943	)		124,630,820			(42,853,407	)		75,185,512
Advisor Class		(193,970,739	)		(88,883,508	)		(14,527,511	)		(45,066,011	)
Total capital share transactions		(617,005,517	)		(222,835,735	)		(198,346,926	)		183,940,479
Net increase (decrease) in net assets		(119,958,065	)		(677,016,639	)		74,409,626			(507,085,397	)
Net assets:
Beginning of year		2,726,876,231			3,403,892,870			3,489,247,266			3,996,332,663
End of year	$	2,606,918,166		$	2,726,876,231		$	3,563,656,892		$	3,489,247,266
Undistributed net investment income (loss) included in net assets:
End of year	$	(4,025,448	)	$	(2,532,991	)	$	(2,048,836	)	$	(4,254,714	)



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 nine 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 financial statements of the remaining funds in the Trust are presented separately. The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.

Franklin Small Cap Growth Fund was closed to new investors with limited exceptions effective at the close of market February 12, 2015. Effective April 28, 2017, the fund opened Class R6 shares to new investors who are eligible to purchase Class R6 shares.

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 as of 4 p.m. Eastern time each day the New York Stock Exchange (NYSE) is open for trading. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The VC provides administration and oversight of the Funds’ valuation policies and procedures, which are approved annually by the Board. Among other things, these procedures allow the Funds to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.

Equity securities listed on an exchange or on the NASDAQ National Market System are valued at the last quoted sale price or the official closing price of the day, respectively. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded, or as of 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.

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

Investments in open-end mutual funds are valued at the closing NAV.

The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC 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



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1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 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.

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 Purchased on a Delayed Delivery Basis

Certain or all Funds purchase securities on a delayed delivery 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 Funds will generally purchase these securities with the intention of holding the securities, they may sell the securities before the settlement date. Sufficient assets have been segregated for these securities.



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d. 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.

e. 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.

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, 2017, 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 each tax jurisdiction’s statute of limitation.

f. 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 and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

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

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

g. 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



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1. Organization and Significant Accounting

Policies (continued)

g. Accounting Estimates (continued)

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.

h. Guarantees and Indemnifications

Under the Trust’s organizational documents, its officers and trustees are indemnified by the Trust against certain liabilities arising out of the performance of their duties to the Trust.

Additionally, in the normal course of business, the Trust, on behalf of the 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.

2. Shares of Beneficial Interest

At April 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:


	Franklin Focused Core						Franklin Growth
	Equity Fund						Opportunities Fund

	Shares			Amount			Shares			Amount


Class A Shares:
Year ended April 30, 2017
Shares sold		766,686		$	10,993,989			8,855,024		$	285,856,595
Shares issued in reinvestment of distributions		—			—			1,336,770			41,439,884
Shares issued on reorganization (Note 9)		—			—			55,853,813			1,797,934,327
Shares redeemed		(3,313,236	)		(46,005,779	)		(18,813,942	)		(605,406,645)

Net increase (decrease)		(2,546,550	)	$	(35,011,790	)		47,231,665		$	1,519,824,161

Year ended April 30, 2016
Shares sold		5,194,472		$	76,809,979			8,456,259		$	274,758,449
Shares issued in reinvestment of distributions		264,790			3,590,557			351,747			11,284,114
Shares redeemed		(3,853,385	)		(52,792,892	)		(4,566,206	)		(143,563,964)

Net increase (decrease)		1,605,877		$	27,607,644			4,241,800		$	142,478,599

Class C Shares:
Year ended April 30, 2017
Shares sold		210,816		$	2,860,457			905,877		$	25,435,592
Shares issued in reinvestment of distributions		—			—			320,376			8,618,123
Shares issued on reorganization (Note 9)		—			—			10,841,658			304,433,926
Shares redeemed		(801,361	)		(10,550,017	)		(4,303,742	)		(119,905,800)

Net increase (decrease)		(590,545	)	$	(7,689,560	)		7,764,169		$	218,581,841

Year ended April 30, 2016
Shares sold		1,399,717		$	19,891,883			2,651,152		$	76,378,591
Shares issued in reinvestment of distributions		57,646			751,703			113,685			3,199,097
Shares redeemed		(734,079	)		(9,661,775	)		(1,354,189	)		(37,190,520)

Net increase (decrease)		723,284		$	10,981,811			1,410,648		$	42,387,168



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	Franklin Focused Core						Franklin Growth
	Equity Fund						Opportunities Fund

	Shares			Amount			Shares			Amount


Class R Shares:
Year ended April 30, 2017
Shares sold		1,428		$	19,514			11,331		$	316,184
Shares issued in reinvestment of distributions		—			—			35,650			1,065,216
Shares issued on reorganization (Note 9)		—			—			783,369			24,339,319
Shares redeemed		(11,363	)		(149,525	)		(680,834	)		(21,080,705)

Net increase (decrease)		(9,935	)	$	(130,011	)		149,516		$	4,640,014

Year ended April 30, 2016
Shares sold		25,274		$	366,702			367,541		$	11,531,931
Shares issued in reinvestment of distributions		706			9,480			29,367			910,971
Shares redeemed		(16,124	)		(217,611	)		(545,651	)		(17,073,258)

Net increase (decrease)		9,856		$	158,571			(148,743	)	$	(4,630,356)

Class R6 Shares:
Year ended April 30, 2017
Shares sold		403,349		$	5,673,073			854,113		$	29,053,360
Shares issued in reinvestment of distributions		—			—			113,533			3,764,740
Shares issued on reorganization (Note 9)		—			—			5,075,827			174,304,065
Shares redeemed		(1,616,859	)		(21,968,578	)		(5,495,669	)		(184,664,705)

Net increase (decrease)		(1,213,510	)	$	(16,295,505	)		547,804		$	22,457,460

Year ended April 30, 2016
Shares sold		1,219,631		$	18,751,979			1,320,454		$	42,825,228
Shares issued in reinvestment of distributions		90,028			1,233,386			99,392			3,391,255
Shares redeemed		(439,680	)		(5,879,147	)		(1,180,480	)		(39,015,055)

Net increase (decrease)		869,979		$	14,106,218			239,366		$	7,201,428

Advisor Class Shares:
Year ended April 30, 2017
Shares sold		870,779		$	12,465,363			3,995,406		$	136,490,569
Shares issued in reinvestment of distributions		—			—			268,379			8,837,733
Shares issued on reorganization (Note 9)		—			—			9,066,575			309,442,413
Shares redeemed		(831,228	)		(12,365,283	)		(6,779,384	)		(230,669,563)

Net increase (decrease)		39,551		$	100,080			6,550,976		$	224,101,152

Year ended April 30, 2016
Shares sold		433,979		$	6,439,932			1,484,253		$	49,836,416
Shares issued in reinvestment of distributions		20,306			277,987			149,430			5,073,151
Shares redeemed		(286,239	)		(4,052,189	)		(1,391,763	)		(46,712,491)

Net increase (decrease)		168,046		$	2,665,730			241,920		$	8,197,076



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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, 2017
Shares sold		4,458,478		$	81,421,221			12,398,150		$	412,209,497
Shares issued in reinvestment of distributions		—			—			3,813,303			122,521,421
Shares redeemed		(16,103,736	)		(292,386,477	)		(19,264,077	)		(639,300,979)

Net increase (decrease)		(11,645,258	)	$	(210,965,256	)		(3,052,624	)	$	(104,570,061)

Year ended April 30, 2016
Shares sold		9,355,935		$	164,566,603			12,907,569		$	443,875,701
Shares issued in reinvestment of distributions		1,032,714			17,618,102			5,680,738			183,487,832
Shares redeemed		(23,836,334	)		(404,070,186	)		(14,552,480	)		(499,185,903)

Net increase (decrease)		(13,447,685	)	$	(221,885,481	)		4,035,827		$	128,177,630

Class C Shares:
Year ended April 30, 2017
Shares sold		428,443		$	6,699,404			1,514,724		$	38,005,629
Shares issued in reinvestment of distributions		—			—			1,158,597			27,806,305
Shares redeemed		(3,071,150	)		(47,311,726	)		(3,618,908	)		(91,011,006)

Net increase (decrease)		(2,642,707	)	$	(40,612,322	)		(945,587	)	$	(25,199,072)

Year ended April 30, 2016
Shares sold		849,422		$	12,859,934			2,150,607		$	59,253,003
Shares issued in reinvestment of distributions		266,930			3,923,876			1,699,234			42,175,007
Shares redeemed		(3,707,026	)		(54,046,116	)		(3,139,510	)		(84,064,834)

Net increase (decrease)		(2,590,674	)	$	(37,262,306	)		710,331		$	17,363,176

Class R Shares:
Year ended April 30, 2017
Shares sold		925,913		$	16,178,854			667,776		$	20,604,680
Shares issued in reinvestment of distributions		—			—			177,385			5,293,167
Shares redeemed		(1,749,128	)		(30,313,111	)		(1,200,302	)		(37,094,722)

Net increase (decrease)		(823,215	)	$	(14,134,257	)		(355,141	)	$	(11,196,875)

Year ended April 30, 2016
Shares sold		1,467,096		$	24,818,077			970,177		$	32,177,674
Shares issued in reinvestment of distributions		110,763			1,813,185			271,520			8,205,344
Shares redeemed		(1,590,105	)		(26,066,522	)		(987,525	)		(32,102,846)

Net increase (decrease)		(12,246	)	$	564,740			254,172		$	8,280,172

Class R6 Shares:
Year ended April 30, 2017
Shares sold		13,928,123		$	275,768,482			3,167,526		$	112,096,496
Shares issued in reinvestment of distributions		—			—			337,444			11,820,661
Shares redeemed		(21,481,423	)		(433,091,425	)		(4,607,797	)		(166,770,564)

Net increase (decrease)		(7,553,300	)	$	(157,322,943	)		(1,102,827	)	$	(42,853,407)

Year ended April 30, 2016
Shares sold		16,170,895		$	309,172,532			3,986,227		$	144,238,638
Shares issued in reinvestment of distributions		871,223			15,864,975			486,072			16,949,319
Shares redeemed		(10,882,040	)		(200,406,687	)		(2,469,832	)		(86,002,445)

Net increase (decrease)		6,160,078		$	124,630,820			2,002,467		$	75,185,512



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

	Shares			Amount			Shares			Amount


Advisor Class Shares:
Year ended April 30, 2017
Shares sold		9,430,468		$	185,643,970			4,591,094		$	165,044,336
Shares issued in reinvestment of distributions		—			—			844,407			29,284,034
Shares redeemed		(19,741,159	)		(379,614,709	)		(5,814,226	)		(208,855,881)

Net increase (decrease)		(10,310,691	)	$	(193,970,739	)		(378,725	)	$	(14,527,511)

Year ended April 30, 2016
Shares sold		13,824,812		$	254,897,448			2,777,179		$	103,360,464
Shares issued in reinvestment of distributions		890,640			16,138,402			1,300,049			45,007,699
Shares redeemed		(19,867,945	)		(359,919,358	)		(5,295,143	)		(193,434,174)

Net increase (decrease)		(5,152,493	)	$	(88,883,508	)		(1,217,915	)	$	(45,066,011)

3. Transactions with Affiliates

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


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

a. Management Fees

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


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



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3. Transactions with Affiliates (continued)

a. Management Fees (continued)

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 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

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, 2017, each Fund’s effective investment management fee rate based on average daily net assets was as follows:

Franklin

Focused Core

Equity Fund

Franklin Growth

Opportunities

Fund

Franklin

Small Cap

Growth Fund

Franklin

Small-Mid Cap

Growth Fund

0.950%

0.564%

0.613%

0.457%



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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 Focused Core Equity Fund		Franklin Growth Opportunities 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 Focused Core Equity Fund, Franklin Growth Opportunities 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.

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 Focused Core Equity Fund		Franklin Growth Opportunities Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Sales charges retained net of commissions paid to unaffiliated brokers/dealers		$21,774		$310,784		$41,839		$671,606
CDSC retained		$ 2,714		$ 37,960		$ 5,851		$ 30,822

e. Transfer Agent Fees

Each class of shares, except for Class R6, pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including 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.



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3. Transactions with Affiliates (continued)

e. Transfer Agent Fees (continued)

For the year ended April 30, 2017, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:

Franklin

Focused Core

Franklin Growth

Small Cap

Small-Mid Cap

Equity Fund

Opportunities Fund

Growth Fund

Transfer agent fees

$104,444

$3,007,912

$1,731,988

$3,531,887

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. Prior to May 1, 2013, the waiver was accounted for as a reduction to management fees. During the year ended April 30, 2017, 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)		%of Affiliated Fund Shares Outstanding Held at End of Year
Franklin Focused Core Equity Fund Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%		–		45,428,162		(43,352,425	)		2,075,737		$ 2,075,737		$ 1,001		$—		0.0%^a

Franklin Growth Opportunities Fund Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%		52,116,118		1,155,951,423		(1,152,440,179	)		55,627,362		$ 55,627,362		$23,166		$—		0.3%

Franklin Small Cap Growth
Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%		286,863,418		1,381,008,588		(1,561,305,278	)		106,566,728		$106,566,728		$66,600		$—		0.6%

Franklin Small-Mid Cap
Growth Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%		215,216,548		1,229,066,432		(1,310,410,520	)		133,872,460		$133,872,460		$64,711		$—		0.7%

^aRounds to less than 0.1%



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g. Waiver and Expense Reimbursements

Advisers and Investor Services contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by Franklin Focused Core Equity Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for Class A, Class C, Class R and Advisor Class of the Fund does not exceed 1.00% and Class R6 does not exceed 0.84% 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, 2017. Total expenses waived or paid are not subject to recapture subsequent to the Funds’ fiscal year end.

Additionally, Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees for the Funds, except Franklin Focused Core Equity Fund, do not exceed 0.01% until August 31, 2017. There were no Class R6 transfer agent fees waived during the year ended April 30, 2017.

Effective August 27, 2016, Advisers has contractually agreed to waive or limit its fees so that the management fees paid by Franklin Growth Opportunities Fund do not exceed an annual rate of 0.46% of the fund’s average daily net assets through August 31, 2017.

h. Other Affiliated Transactions

At April 30, 2017, one or more of the funds in Franklin Fund Allocator Series owned a percentage of the Funds’ outstanding shares as follows:


Franklin	Franklin Growth	Franklin
Focused Core	Opportunities	Small Cap
Equity Fund	Fund	Growth Fund
15.18%	5.67%	2.14%

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, 2017, the custodian fees were reduced as noted in the Statements of Operations.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At April 30, 2017, the capital loss carryforwards were as follows:


	Franklin		Franklin
	Focused Core		Small Cap
	Equity Fund		Growth Fund
Capital loss carryforwards:
Short term		$5,899,323		$38,560,351
Long term.		2,295,643		47,722,757

Total capital loss carryforwards		$8,194,966		$86,283,108

During the year ended April 30, 2017, Franklin Growth Opportunities Fund utilized $12,966,224, of capital loss carryforwards.

For tax purposes, the Funds may elect to defer any portion of a late-year ordinary loss to the first day of the following fiscal year. At April 30, 2017, deferred late-year ordinary losses were as follows:

Franklin

Focused Core

Franklin Growth

Franklin Small Cap

Franklin Small-Mid

Equity Fund

Opportunities Fund

Growth Fund

Cap Growth Fund

Late-year ordinary losses

$57,895

$3,796,709

$4,025,448

$2,048,836



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5. Income Taxes (continued)

The tax character of distributions paid during the years ended April 30, 2017 and 2016, was as follows:


	Franklin Focused Core Equity Fund				Franklin Growth Opportunities Fund				Franklin Small Cap Growth Fund
	2017		2016		2017		2016		2017		2016
Distributions paid from:
Ordinary income	$	—	$	2,114,090	$	—	$	—	$	—	$	31,688,531
Long term capital gain		—		3,857,211		68,905,311		25,773,152		—		28,081,216
	$	—	$	5,971,301	$	68,905,311	$	25,773,152	$	—	$	59,769,747


	Franklin Small-Mid Cap Growth Fund
	2017		2016
Distributions paid from:
Ordinary income	$	15,010,212	$	—
Long term capital gain		200,510,460		327,658,868
	$	215,520,672	$	327,658,868

At April 30, 2017, the cost of investments, net unrealized appreciation (depreciation) and undistributed long term capital gains for income tax purposes were as follows:


	Franklin				Franklin			Franklin
	Focused Core		Franklin Growth		Small Cap			Small-Mid Cap
	Equity Fund		Opportunities Fund		Growth Fund			Growth Fund
Cost of investments		$109,687,739		$2,120,464,428		$2,150,887,834			$2,620,418,980

Unrealized appreciation		$ 26,585,878		$1,460,488,901		$ 715,035,547			$1,047,897,676
Unrealized depreciation		(4,441,152)		(21,110,861)		(188,105,524	)		(86,095,846	)
Net unrealized appreciation (depreciation)		$ 22,144,726		$1,439,378,040		$ 526,930,023			$ 961,801,830
Distributable earnings - undistributed long term capital gains		$ —		$ 182,301,352		$ —			$ 97,357,632

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.

Franklin Growth Opportunities Fund utilized a tax accounting practice to treat a portion of the proceeds from capital shares redeemed as distribution from realized capital gains.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2017, were as follows:

Franklin

Focused Core

Franklin Growth

Small Cap

Small-Mid Cap

Equity Fund

Opportunities Fund

Growth Fund

Purchases

$24,745,127

$1,337,023,812

$ 805,180,635

$1,200,889,609

Sales

$87,734,734

$2,011,734,710

$ 1,418,179,057

$1,662,491,220



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At April 30, 2017, in connection with securities lending transactions, certain or all Funds loaned investments and received cash collateral as follows:


	Equity Investments^a
Securities lending transactions^b:
Franklin Growth Opportunities Fund		$16,552,325
Franklin Small Cap Growth Fund.		$63,620,175
Franklin Small-Mid Cap Growth Fund		$ 8,804,175

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

^bThe agreements can be terminated at any time.

7. Restricted Securities

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

At April 30, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:


Principal Amount/ Shares	Issuer	Acquisition Date		Cost		Value
Franklin Growth Opportunities Fund
35,601,435	Acerta Pharma BV		5/06/15	$	2,048,084	$	1,377,989
2,362,202	Proterra Inc., pfd., 5, 144A		9/21/16 - 1/13/17		11,896,616		11,896,616
805,800	Tanium Inc., pfd., G		9/14/15		4,000,233		3,996,768
	Total Restricted Securities (Value is 0.5% of Net Assets)			$	17,944,933	$	17,271,373
Franklin Small Cap Growth Fund
825,201	DraftKings Inc., pfd., D		8/07/15	$	4,444,444	$	3,261,689
2,029,318	DraftKings Inc., pfd., D-1		8/07/15		15,555,553		11,411,464
4,179,808	DraftKings Inc., pfd., E		12/23/15 - 7/20/16		6,533,232		4,406,620
1,787,047	Proterra Inc., pfd., 5, 144A		9/21/16 -1/13/17		8,999,998		8,999,998
1,542,673	Smule Inc., pfd., G, 144A		5/31/16		11,099,995		13,122,593
352,675	Smule Inc., pfd., H		4/27/17		2,999,995		2,999,995
	Total Restricted Securities (Value is 1.7% of Net Assets)			$	49,633,217	$	44,202,359
Franklin Small-Mid Cap Growth Fund
660,161	DraftKings Inc., pfd., D		8/07/15	$	3,555,556	$	2,609,352
1,623,455	DraftKings Inc., pfd., D-1		8/07/15		12,444,447		9,129,175
3,388,624	DraftKings Inc., pfd., E		12/23/15		5,287,513		3,572,503
1,416,913	Proterra Inc., pfd., 5, 144A		9/21/16		7,135,914		7,135,914
	Total Restricted Securities (Value is 0.6% of Net Assets)			$	28,423,430	$	22,446,944



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8. Holdings of 5% Voting Securities of Portfolio Companies

The 1940 Act defines “affiliated companies” to include investments in portfolio companies in which a fund owns 5% or more of the outstanding voting securities. During the year ended April 30, 2017, investments in “affiliated companies” were as follows:


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			Investment Income		Realized Gain (Loss)
Franklin Small Cap Growth Fund
Non-Controlled Affiliates
2U Inc.	2,955,523		431,100		(1,875,771	)		1,510,852	$	—	^a		$—	$	24,082,847
Aratana Therapeutics Inc.	2,697,019		—		—			2,697,019		16,721,518			—		—
The KeyW Holding Corp.	3,851,460		903,500		(1,748,078	)		3,006,882		28,535,310			—		(3,239,759	)
Lattice Semiconductor Corp.	6,466,700		—		(1,332,500	)		5,134,200		—	^a		—		732,130
M/I Homes Inc.	1,385,700		—		(370,724	)		1,014,976		—	^a		—		597,865
Nanometrics Inc.	1,610,800		—		(994,600	)		616,200		—	^a		—		8,820,067
Pfenex Inc.	1,175,631		—		—			1,175,631		5,654,785			—		—
The Spectranetics Corp.	2,276,600		—		(869,400	)		1,407,200		—	^a		—		(4,111,859	)
Sportsman’s Warehouse Holdings Inc.	2,972,800		971,900		—			3,944,700		16,133,823			—		—
US Ecology Inc.	1,119,090		—		(180,400	)		938,690		—	^a		—		(274,399	)
Total Affiliated Securities (Value is 2.6% of Net Assets)									$	67,045,436			$—	$	26,606,892

^aAs of April 30, 2017, no longer an affiliate.

9. Reorganization

On August 26, 2016, Franklin Growth Opportunities Fund (Surviving Fund), pursuant to a plan of reorganization approved on August 5, 2016 by shareholders of Franklin Flex Cap Growth Fund (Acquired Fund), acquired 100% of the Acquired Fund’s net assets, primarily made up of investment securities, which included $1,013,454,475 of unrealized appreciation, through a tax-free exchange of 81,621,242 shares of the Surviving Fund (valued at $2,610,454,049). Immediately after the completion of the reorganization, the combined net assets of the Surviving Fund were $3,936,549,167.

The primary purpose for the reorganization was to combine the Acquired Fund with a fund that has identical investment goals and generally similar principal investment strategies and principal investment risk, better historical investment performance, both on a total return basis and a risk-adjusted basis, and more favorable sales prospects. The estimated cost of the reorganization was $797,000, of which the Surviving Fund and the Acquired Fund each paid 25% and Advisers paid 50%. The allocated portion of the Surviving Fund’s reorganization expenses are included with other expenses in the Statement of Operations.

Assuming the reorganization had been completed on May 1, 2016, the Fund’s pro forma results of operations, would have been as follows:

Period

Net Investment
Income (Loss)

Net Realized
and Unrealized
Gain (Loss)

Net Increase
(Decrease) in Net
Assets from
Operations

For the period May 1, 2016 through April 30, 2017

$(11,383,914)

$575,079,130

$563,695,216

Subsequent to the reorganization, the Surviving Fund has been managed as a single entity. Accordingly, it is impracticable to identify the amounts of investment income and net investment income attributable to the Acquired Fund’s assets after the completion of the reorganization.



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10. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 9, 2018. 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 period ended April 30, 2017, the Funds did not use the Global Credit Facility.

11. 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.

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

A summary of inputs used as of April 30, 2017, in valuing the Funds’ assets carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total
Franklin Focused Core Equity Fund
Assets:
Investments in Securities:
Equity Investments^a	$	129,756,728	$	—	$	—	$	129,756,728
Short Term Investments		2,075,737		—		—		2,075,737
Total Investments in Securities	$	131,832,465	$	—	$	—	$	131,832,465

Franklin Growth Opportunities Fund
Assets:
Investments in Securities:
Equity Investments:^b
Consumer Discretionary	$	522,452,218	$	—	$	11,896,616	$	534,348,834
Health Care		508,401,098		—		1,377,989		509,779,087
Information Technology		1,462,067,270		—		3,996,768		1,466,064,038
All Other Equity Investments^a		994,023,147		—		—		994,023,147
Short Term Investments		55,627,362		—		—		55,627,362
Total Investments in Securities	$	3,542,571,095	$	—	$	17,271,373	$	3,559,842,468

Receivables:
Investment Securities Sold	$	—	$	—	$	3,028,181	$	3,028,181



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11. Fair Value Measurements (continued)


	Level 1		Level 2		Level 3		Total
Franklin Small Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:^b
Consumer Discretionary	$	395,951,831	$	—	$	28,079,771	$	424,031,602
Information Technology		763,465,659		—		16,122,588		779,588,247
All Other Equity Investments^a		1,367,631,280		—		—		1,367,631,280
Short Term Investments		106,566,728		—		—		106,566,728
Total Investments in Securities	$	2,633,615,498	$	—	$	44,202,359	$	2,677,817,857

Franklin Small-Mid Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:^b
Consumer Discretionary	$	644,848,588	$	—	$	22,446,944	$	667,295,532
All Other Equity Investments^a		2,781,052,818		—		—		2,781,052,818
Short Term Investments		133,872,460		—		—		133,872,460
Total Investments in Securities	$	3,559,773,866	$	—	$	22,446,944	$	3,582,220,810

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

^bIncludes common and preferred stocks.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the end of the year. At April 30, 2017, the reconciliation of assets are as follows:


																					Net Change in
																					Unrealized
																					Appreciation
														Net		Net					(Depreciation)
	Balance at						Transfer		Transfer					Realized		Unrealized			Balance		on Assets
	Beginning of						Into		Out of			Cost Basis		Gain		Appreciation			at End		Held at
	Year		Purchases		Sales		Level 3^a		Level 3^b			Adjustments		(Loss)		(Depreciation)			of Year		Year End
Franklin Small Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:^c
Consumer Discretionary		$10,761,537		$ 8,999,998		$—		$9,092,042		$ —			$—		$—		$ (773,806	)		$28,079,771		$ (773,806	)
Information Technology		—		14,099,990		—		—		—			—		—		2,022,598			16,122,588		2,022,598
Convertible Bonds		9,726,750		1,200,000		—		—		(8,758,810	)		—		—		(2,167,940	)		—		—
Total		$20,488,287		$24,299,988		$—		$9,092,042		$(8,758,810	)		$—		$—		$ (919,148	)		$44,202,359		$1,248,792

^aThe investment was transferred into Level 3 as a result of the unavailability of a quoted market price in an active market for identical securities. May include amounts related to a corporate action.

^bThe investment was transferred out of Level 3 as a result of the availability of a quoted price in an active market for identical securities. May include amounts related to a corporate action.

^cIncludes preferred stocks.



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Significant unobservable valuation inputs developed by the VC for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of April 30, 2017, are as follows:

Description

Fair Value at
End of Year

Valuation
Technique

Unobservable Input

Amount

Impact to Fair
Value if Input
Increases^a

Franklin Small Cap Growth Fund

Assets:

Investments in Securities:

Equity Investments:^b

Consumer Discretionary

$19,079,773

Market Approach

Enterprise Value

$775 (mil) - $1,000 (mil)

Increase

Merger Probability

50.0%

Increase

Market Comparables

Discount for lack of
marketability

10.6%-25.0%

Decrease

All Other Investments^d

25,122,586

Total

$44,202,359

^aRepresents 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.

^bIncludes preferred stocks.

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

^dIncludes financial instruments with values derived using prior transaction prices or third party pricing information without adjustment for which such inputs are also unobservable. May also include fair value of immaterial financial instruments developed using various valuation techniques and unobservable inputs.

12. Investment Company Reporting Modernization

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, final rules) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosures about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the Funds’ financial statements and related disclosures.

13. Subsequent Events

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

Abbreviations

Selected Portfolio

ADR American Depositary Receipt



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Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Strategic Series and Shareholders of the Franklin Focused Core Equity Fund, Franklin Growth Opportunities Fund, Franklin Small Cap Growth Fund, and Franklin Small-Mid Cap Growth Fund:

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Focused Core Equity Fund, Franklin Growth Opportunities Fund, Franklin Small Cap Growth Fund, and Franklin Small-Mid Cap Growth Fund (the “Funds”) as of April 30, 2017, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of April 30, 2017 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

June 20, 2017



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Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), the Funds hereby report the maximum amount allowable but no less than the following amounts as long term capital gain dividends for the fiscal year ended April 30, 2017:

Under Section 871(k)(2)(C) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as short term capital gain dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended April 30, 2017:


Franklin Small-Mid Cap Growth Fund

	$15,010,212

Under Section 854(b)(1)(A) of the Code, the Funds hereby report the following percentage amounts of the ordinary income dividends as income qualifying for the dividends received deduction for the fiscal year ended April 30, 2017:


Franklin Small-Mid Cap Growth Fund

	100%

Under Section 854(b)(1)(B) of the Code, the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended April 30, 2017:


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

$1,499,729		$15,023,766		$8,316,794		$19,059,289

Distributions, including qualified dividend income, paid during calendar year 2017 will be reported to shareholders on Form 1099-DIV by mid-February 2018. 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 Investments 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	142	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).


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 H.J. Heinz Company (processed foods and allied products) (1998-2006)

Principal Occupation During at Least the Past 5 Years:
Senior Advisor, Strategic Investment Group (investment management group) (2015-present); director of various companies; and formerly, 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	Trustee	Since 1998	142	Hess Corporation (exploration and refining 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	142	Boeing Capital Corporation (aircraft financing) (2006-2013).

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



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Independent Board Members (continued)


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	142	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; 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).


John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 2006 and Lead Independent Trustee since 2008	116	None

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

Interested Board Members and Officers
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	158	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 44 of the investment companies in Franklin Templeton Investments; 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	142	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.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.


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 Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.



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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


Laura F. Fergerson (1962) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.


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, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments.


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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.


Steven J. Gray (1955) 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, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments.


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

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


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 45 of the investment companies in Franklin Templeton Investments.


Christopher J. Molumphy (1962) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2000	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 some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.



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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


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 Investments; 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 45 of the investment companies in Franklin Templeton Investments.


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 Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).


Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2006	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.


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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.


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 and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.


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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

*We base the number of portfolios on each separate series of the U.S. registered investment companies within the Franklin Templeton Investments fund complex. These portfolios have a common investment manager or affiliated investment managers.

**Gregory E. Johnson is considered to be an interested person of the Fund under the federal securities laws due to his position as an officer and director of Franklin Resources, Inc. (Resources), which is the parent company of the Fund’s investment manager and distributor. Rupert H. Johnson, Jr. is considered to be an interested person of the Fund under the federal securities laws due to his position as officer and director and major shareholder of Resources.

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

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

Note 3; Effective November 1, 2016, Frank Olson ceased to be a trustee of the trust.

The Sarbanes-Oxley Act of 2002 and Rules adopted by the Securities and Exchange Commission require the Fund to disclose whether the Fund’s Audit Committee includes at least one member who is an audit committee financial expert within the meaning of such Act and Rules. The Fund’s Board has determined that there is at least one such financial expert on the Audit Committee and has designated John B. Wilson as its audit committee financial expert. The Board believes that Mr. Wilson qualifies as such an expert in view of his extensive business background and experience, including service as chief financial officer of Staples, Inc. from 1992 to 1996. Mr. Wilson has been a Member and Chairman of the Fund’s Audit Committee since 2006. As a result of such background and



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Interested Board Members and Officers (continued)

experience, the Board believes that Mr. Wilson has acquired an understanding of generally accepted accounting principles and financial statements, the general application of such principles in connection with the accounting estimates, accruals and reserves, and analyzing and evaluating financial statements that present a breadth and level of complexity of accounting issues generally comparable to those of the Fund, as well as an understanding of internal controls and procedures for financial reporting and an understanding of audit committee functions. Mr. Wilson is an independent Board member as that term is defined under the relevant Securities and Exchange Commission Rules and Releases.

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



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Shareholder Information

Board Approval of Investment Management Agreements

FRANKLIN STRATEGIC SERIES

Franklin Focused Core 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 18, 2017 (Meeting), the Board of Trustees (Board) of Franklin Strategic Series, 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 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 existing management fees 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 U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board noted management’s continual 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, derivatives and liquidity risk management.

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 investments relating to the services provided to the Funds by the Franklin Templeton Investments (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.



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SHAREHOLDER INFORMATION

Fund Performance

The Board reviewed and considered the performance results of

each Fund over various time periods ended January 31, 2017. 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 Focused Core Equity Fund - The Performance Universe for this Fund included the Fund and all retail and institutional multi-cap core funds. The Fund has been in operation for less than 10 years. The Board noted that the Fund’s annualized total return for the one-, three- and five-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted management’s explanation that underperformance over the one-and three-year periods was primarily related to a small number of holdings in this concentrated strategy. In particular, management explained that two holdings within the pharmaceutical industry detracted from the Fund’s returns and that the investment team eliminated one of the holdings and retained the other based on its view of relative attractiveness. Management further explained that such industry in general was a poor performing sector due to concerns over drug pricing and the role of specialty pharmacies. The Board also noted management’s explanation that underperformance over the five-year period was due to several portfolio holdings that were holdovers from the former investment team, all of which have been eliminated by the current investment team. The Board further noted that the investment team continues to believe in its focus on intrinsic value, bottom-up fundamental research and a patient/opportunistic approach. In addition, the Board noted that the Fund’s annualized total return for each period was positive and for the one-year period, while below the median, exceeded 17.9%.

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 one-, three- and five-year periods was below the median of its Performance Universe, but for the 10-year period was above the median of its Performance

Universe. The Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted management’s explanation that over the one-year performance period value and cyclical equities outperformed growth equities, which broadly weighed on Fund performance. The Board also noted management’s further explanation that the Fund’s underweight position in the industrial sector additionally detracted from performance as cyclical industries performed well following the presidential election in November 2016. The Board further noted that management explained that the magnitude of underperformance in the one-year time period contributed to a significant portion of the three- and five-year fund underperformance. In addition, the Board noted that the Fund’s annualized total return for the one- and five-year periods, while below the median, each exceeded 11%.

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 one-, five- and 10-year periods was above the median of its Performance Universe, but for the three-year period was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund is currently closed to new investors, except for certain types of investors. The Board also noted that effective on or about April 28, 2017, the Fund will reopen Class R6 shares to new investors who are eligible to purchase Class R6 shares.

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 one-, three-, five- and 10-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was acceptable and that it would continue to closely monitor such performance. In doing so, the Board noted management’s explanation that the Fund’s positioning in the health care sector was a primary detractor from benchmark relative performance over the one-, three-, and five-year periods, particularly as a result of recent pricing pressure and public scrutiny on drug price increases for several holdings within the pharmaceutical industry. The Board also noted management’s explanation that avoiding certain benchmark holdings with high valuations also contributed to underperformance, as those companies ultimately performed better than expected. The Board further noted that the Fund’s annualized total return for each period, while below the median, was positive and for the one-year period exceeded 19%.



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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 that at its February meeting each year, it receives an annual report 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 ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure as 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 Focused Core Equity Fund - The Expense Group for this Fund included the Fund and 12 other multi-cap core funds. The Board noted that the Management Rate for this Fund was above the median of its Expense Group, but its actual total expense ratio was equal to the median of its Expense Group. The Board concluded that the Management Rate charged to the Fund is fair and reasonable. In doing so, the Board noted management’s explanation that the Fund’s assets under management are small relative to a broader group of peers; at $139 million in assets under management as of December 31, 2016, the Fund has not yet achieved the benefits of scale to meet the next breakpoint in its investment manager fee schedule. The Board also 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 14 other small-cap growth funds. The Expense Group for the Franklin Small-Mid Cap Growth Fund included the Fund and 14 other mid-cap growth funds. The Board noted that the Management Rates and actual total expense ratios for these Funds were below the medians of their respective Expense Groups. The Board concluded that the Management Rates charged to these Funds are fair and reasonable. In doing so, the Board noted that the Franklin Growth Opportunities Fund’s actual total expense ratio reflected a fee waiver from management.

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 U.S. 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, 2016, 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, the Funds’ independent registered public accounting firm has been engaged by the Manager to periodically review the reasonableness of 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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SHAREHOLDER INFORMATION

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 each Fund was not excessive in view of the nature, quality and extent 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 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 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 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 on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

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



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Gain From Our Perspective^®

Dear Shareholder:

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 B. Jamieson

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

1. Source: Morningstar

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


		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			33

Notes to Financial Statements			37

Report of Independent Registered Public Accounting Firm			50

Tax Information			51

Board Members and Officers			52

Shareholder Information			57

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 expanded during the 12 months under review. The economy strengthened in 2016’s second and third quarters, but moderated in the next two quarters, largely due to declines in private inventory investment and government spending. The manufacturing sector generally expanded and the services sector also continued to grow. The unemployment rate decreased from 5.0% in April 2016 to 4.4% at period-end.¹ Monthly retail sales were volatile, but grew during most of the period. Annual inflation, as measured by the Consumer Price Index, increased from 1.1% to 2.2% during the period.

1. Source: Bureau of Labor Statistics.

2. Source: Morningstar.

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



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Franklin Biotechnology Discovery Fund

This annual report for Franklin Biotechnology Discovery Fund covers the fiscal year ended April 30, 2017. Effective July 8, 2014, with limited exceptions, the Fund closed to new investors. Effective May 16, 2016, the Fund reopened to new investors.

Your Fund’s Goal and Main Investments

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

Performance Overview

The Fund’s Class A shares delivered a +20.02% cumulative total return for the 12 months under review. In comparison, the NASDAQ Biotechnology Index^®, which tracks U.S. and international-based biotechnology stocks, generated a +11.51% 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, produced a +17.92% total return.¹ Finally, domestic and international-based stocks, as measured by the NASDAQ Composite Index^®, posted a +28.18% total return.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.

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 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

Portfolio Composition

Based on Total Net Assets as of 4/30/17

LOGO

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.

Manager’s Discussion

During the 12 months under review, the biotechnology industry experienced significant volatility in response to increased scrutiny over drug pricing leading up to the U.S. presidential election in November 2016. 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. Overall, the biotechnology industry had strong gains for the reporting period.

Key contributors included TESARO, Incyte and Celgene. Oncology-focused biopharmaceutical company TESARO announced better-than-expected Phase 3 trial results in June 2016 for its PARP inhibitor, niraparib, in ovarian cancer. We believe niraparib may have a best-in-class profile and that the trial results demonstrated a broad market potential for the drug. Oncology therapeutics firm Incyte announced clinical collaborations for epacadostat, an IDO inhibitor to treat various cancers. In addition, the company’s sales of Jakafi, which is used to treat intermediate- or high-risk myelofibrosis, a disorder that affects bone marrow, drove 2016 revenue growth. Biotechnology firm Celgene’s strong performance during the review period was aided by subsiding concerns about government regulation on drug pricing. As an industry, biotechnology had underperformed the broader market leading

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

into the November 2016 election as consensus expectations were for a Hillary Clinton victory. With the election of Donald Trump, and more importantly, the Republican sweep in Congress, investors viewed the risk of government intervention on drug pricing as diminished.

In contrast, key detractors from the Fund’s absolute performance during the reporting period included Gilead Sciences, Heron Therapeutics and Ophthotech (no longer held by period-end). Biopharmaceutical company Gilead Sciences was impacted by slower sales trends in key products. Shares of clinical-stage biotechnology company Heron Therapeutics declined as approval of Sustol, the company’s drug to treat nausea and vomiting associated with chemotherapy, was delayed until August 2016 from an initial expectation of early 2016. Sustol’s early sales have been lower than expected. These negative factors were offset somewhat by positive data for HTX-011 to treat pain. Ophthotech is a biopharmaceutical company that develops treatments for eye diseases. The company’s Phase 3 clinical trial studying Fovista to treat age-related macular degeneration failed and showed little effect, which was surprising to us given the positive effect that was seen in the Phase 2 trial. The stock declined significantly following the trial result.

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


		Evan McCulloch, CFA Lead Portfolio Manager

		Christopher Lee, M.D.
		Steven Kornfeld, CFA

		Portfolio Management Team

Top 10 Holdings

4/30/17


Company *Sector/Industry*		% of Total Net Assets
Celgene Corp.		9.5%
Biotechnology
Biogen Inc.		6.5%
Biotechnology
Alexion Pharmaceuticals Inc.		5.9%
Biotechnology
Incyte Corp.		5.8%
Biotechnology
Tesaro Inc.		5.6%
Biotechnology
Regeneron Pharmaceuticals Inc.		4.6%
Biotechnology
Gilead Sciences Inc.		4.2%
Biotechnology
Illumina Inc.		4.1%
Life Sciences Tools & Services
Neurocrine Biosciences Inc.		3.4%
Biotechnology
Vertex Pharmaceuticals Inc.		3.3%
Biotechnology

CFA^® is a trademark owned by CFA Institute.



franklintempleton.com	Annual Report	5

FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

Performance Summary as of April 30, 2017

Performance as of 4/30/17¹


Share Class	Cumulative Total Return²	Average Annual Total Return³

A
1-Year	+20.02%	+13.12%
5-Year	+144.76%	+18.20%
10-Year	+233.94%	+12.15%

Advisor⁴
1-Year	+20.32%	+20.32%
5-Year	+148.05%	+19.92%
10-Year	+241.02%	+13.05%

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

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.

Class A (5/1/07–4/30/17)

LOGO

Advisor Class (5/1/07–4/30/17)⁴

LOGO

See page 8 for Performance Summary footnotes.



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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

PERFORMANCE SUMMARY

Distributions (5/1/16–4/30/17)

Share Class

Net Investment
Income

Long-Term
Capital Gain

Total

$1.7284

$4.2035

$5.9319

$1.2918

$4.2035

$5.4953

$2.3023

$4.2035

$6.5058

Advisor

$2.0807

$4.2035

$6.2842

Total Annual Operating Expenses⁶


Share Class	With Waiver		Without Waiver
A		0.99%	1.00%
Advisor		0.75%	0.76%

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.

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. 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 +286.01% and +19.28%.

5. 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.

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 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 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,196.00	$5.50	$1,019.79	$5.06	1.01%
C	$1,000	$1,191.70	$9.56	$1,016.07	$8.80	1.76%
R6	$1,000	$1,198.40	$3.33	$1,021.77	$3.06	0.61%
Advisor	$1,000	$1,197.50	$4.14	$1,021.03	$3.81	0.76%

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.



franklintempleton.com	Annual Report	9

Franklin Natural Resources Fund

This annual report for Franklin Natural Resources Fund covers the fiscal year ended April 30, 2017.

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 delivered a +1.37% 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, generated a +2.59% total return.¹ Also in comparison, the S&P 500, which is a broad measure of the U.S. stock market, generated a +17.92% 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 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.

Geographic Composition

Based on Total Net Assets as of 4/30/17

LOGO

Investment Strategy

Sector Overview

Global commodity prices were mixed during the 12 months under review. Despite heightened volatility during the period, energy commodities and industrial metals generally rose as oversupply concerns subsided. However, precious metals, with the exception of palladium, declined due to a strong U.S. dollar, the U.S. Federal Reserve’s (Fed’s) two interest-rate increases and expectations for higher interest rates in 2017.

Crude oil prices ended the period higher despite periods of heightened volatility, especially during the summer and early fall of 2016, aided by an agreement between the Organization

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 30.



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FRANKLIN NATURAL RESOURCES FUND

Portfolio Composition

Based on Total Net Assets as of 4/30/17

LOGO

of the Petroleum Exporting Countries (OPEC) and major non-OPEC producers, including Russia, to curb production, which helped ease concerns about rising oil exports from several members and provided a path to inventory reductions. OPEC and non-OPEC producers’ compliance with production quotas and speculation that OPEC would extend the agreement to curb output at its meeting in May 2017 further supported oil prices. However, investor concerns that growing U.S. production and higher rig counts could offset the continuing effort to reduce global stockpiles restricted price gains.

U.S. natural gas prices rose for the 12 months under review, despite periods of weakness resulting from smaller-than-anticipated seasonal withdrawals from stockpiles due to a mild winter in North America. Despite the long stretch of warm winter conditions in North America, natural-gas supplies ended the first quarter tighter than the prior year due to waning production and rising exports. Although the surplus in early 2017 is smaller than last year, it has persisted, leading some investors to be concerned that production will eventually increase as stronger prices could lead producers to increase rig counts and drilling activity, associated gas produced from newly drilled oil wells in shale plays grows, and pipelines out of Appalachia provide more capacity to higher priced end markets.

Gold prices declined slightly for the 12-month period, as a rally in the first four months of 2017 failed to offset the price plunge in the latter part of 2016 amid the U.S. dollar’s rapid appreciation, the Fed’s December rate increase and lower demand for gold exchange-traded funds. Gold partially recovered amid increased physical demand and investor concerns about U.S. President Donald Trump’s political and economic policies, a slower U.S. economic expansion in the first quarter, the outcome of the French election and geopolitical tensions. Among other precious metals, silver and platinum prices declined, while palladium prices rose, supported by emissions-catalyst demand from automobile manufacturers and tight supplies. Industrial metals performed well after the U.S. presidential election and as the global economy improved. Copper prices rose amid higher demand from China and supply disruptions at some of the world’s major mines. Other industrial metals rose in price, including iron ore, aluminum and zinc.

Manager’s Discussion

The Fund’s fiscal year ended April 30, 2017, was somewhat volatile, including the peaking of a recovery in various commodities and commodity-linked equities followed by a retrenchment driven by growing economic concerns and deflation of the U.S. presidential election mini-bubble. In addition to the usual catalysts that included U.S. dollar strength, supply-and-demand imbalances and China economic worries, new factors also impacted commodities and commodity-linked equities, such as India’s demonetization program to recall large-denominated currency notes to fight corruption. The Fund performed relatively well in this environment, though most of the benefits of the recovery had been realized near the beginning of the 12-month reporting period.

The Fund’s holdings in the diversified metals and mining industry contributed significantly to absolute results, despite a price pullback in industrial metals and related equities in March and April. Stock selection within the industry contributed to performance relative to the S&P North American Natural Resources Index, notably an overweighted position in Teck Resources (Canada) and several off-benchmark holdings that managed to generate robust returns despite the pullback, notably Glencore (Switzerland), BHP Billiton (U.K.), South32 (Australia) and Rio Tinto (U.K.). Overall, the Fund’s overweighted industry holdings significantly outperformed the index’s industry components.

Stock selection and an underweighting in the integrated oil and gas industry contributed to relative performance, as the Fund’s overall industry holdings outperformed the index’s industry



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FRANKLIN NATURAL RESOURCES FUND

Top 10 Holdings

4/30/17

Company

Sector/Industry

% of Total

Net Assets

Schlumberger Ltd.

Oil & Gas Equipment & Services

5.0%

Anadarko Petroleum Corp.

Oil & Gas Exploration & Production

3.6%

Royal Dutch Shell PLC

Integrated Oil & Gas

3.5%

Noble Energy Inc.

Oil & Gas Exploration & Production

3.5%

Halliburton Co.

Oil & Gas Equipment & Services

3.4%

Occidental Petroleum Corp.

Integrated Oil & Gas

3.3%

EOG Resources Inc.

Oil & Gas Exploration & Production

2.9%

Suncor Energy Inc.

Integrated Oil & Gas

2.5%

Kinder Morgan Inc.

Oil & Gas Storage & Transportation

2.5%

Cabot Oil & Gas Corp.

Oil & Gas Exploration & Production

2.5%

components. European integrated oil and gas companies Total (France), Royal Dutch Shell (U.K.) and BP (U.K.), which are not part of the index, outperformed the index holdings and U.S. company Exxon Mobil, which is a large index weighting and declined during the period. Conversely, an underweighted position in Chevron (U.S.), which posted a positive return, detracted from performance.

Stock selection in gold and in oil and gas exploration and production (E&P) also contributed to the Fund’s performance, as the Fund’s holdings in these industries generally outperformed the index’s industry components. In gold, a lack of ownership or underweighted positions in poor performers helped, as did an off-benchmark position in B2Gold (Canada), which posted robust returns. In E&P, off-benchmark investments in Aker BP (Norway) and SRC Energy (U.S.), as well as overweighted positions in Rice Energy (U.S.) and Anadarko Petroleum (U.S.), benefited absolute and relative performance. Avoidance of several index components that posted negative returns also helped Fund performance.

In contrast, an underweighting in oil and gas storage and transportation was a major detractor from the Fund’s relative performance as the industry performed well amid a recovery in oil and natural gas prices, increased drilling activity and expected production growth, which led to increased throughput in pipelines and expectations of more to come. Although the

Fund’s overall industry holdings outperformed the index’s industry components, a lack of ownership in several index components that performed well hurt relative performance.

Oilfield services also detracted from relative performance, due to the Fund’s overweighted position and weak relative performance, with losses concentrated in offshore-focused companies, which suffered from continued fundamental weakness in offshore markets and the stalled-out recovery in oil prices. Investor concerns that increased drilling activity and related production would drive oil prices lower and hurt spending also weighed on the industry, including several companies with an onshore focus, though some of the largest detractors are hybrid companies with onshore and offshore exposure. Key detractors included overweighted holdings in hybrid company Superior Energy Services (U.S.) and offshore-focused company Oceaneering International (U.S.), as well as an off-benchmark position in offshore-focused company Hornbeck Offshore Services (U.S.; no longer held by period-end).

A lack of exposure to the paper and packaging industry and an underweighting in the construction materials industry, which are both economically sensitive, also detracted from relative performance.

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



franklintempleton.com	Annual Report	13

FRANKLIN NATURAL RESOURCES FUND

Performance Summary as of April 30, 2017

Performance as of 4/30/17¹


Share Class	Cumulative Total Return²	Average Annual Total Return³

A
1-Year	+1.37%	-4.47%
5-Year	-27.63%	-7.36%
10-Year	-17.18%	-2.45%

Advisor
1-Year	+1.64%	+1.64%
5-Year	-26.60%	-6.00%
10-Year	-14.76%	-1.58%

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

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.

Class A (5/1/07–4/30/17)

LOGO

Advisor Class (5/1/07–4/30/17)

LOGO

See page 16 for Performance Summary footnotes.



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FRANKLIN NATURAL RESOURCES FUND

PERFORMANCE SUMMARY

Distributions (5/1/16–4/30/17)

Share Class

Net Investment

Income

$0.2765

$0.1336

$0.3748

Advisor

$0.3587

Total Annual Operating Expenses⁵


Share Class	With Waiver		Without Waiver
A		1.14%	1.15%
Advisor		0.87%	0.88%

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. 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.

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. 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 Index is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance.



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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 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,012.50	$5.09	$1,019.74	$5.11	1.02%
C	$1,000	$1,008.80	$8.82	$1,016.02	$8.85	1.77%
R6	$1,000	$1,014.70	$2.65	$1,022.17	$2.66	0.53%
Advisor	$1,000	$1,013.80	$3.84	$1,020.98	$3.86	0.77%

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



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FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Biotechnology Discovery Fund


	Year Ended April 30,
	2017			2016			2015			2014			2013

Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$128.19			$182.30			$129.27			$105.95			$ 76.22

Income from investment operations^a:

Net investment income (loss)^b		(0.79	)		(0.94	)		(1.09	)		(1.07	)		(0.76	)

Net realized and unrealized gains (losses)		25.75			(39.39	)		60.79			33.18			30.56

Total from investment operations		24.96			(40.33	)		59.70			32.11			29.80

Less distributions from:

Net investment income		(1.73	)		—			—			—			(0.07	)

Net realized gains		(4.20	)		(13.78	)		(6.67	)		(8.79	)		—

Total distributions		(5.93	)		(13.78	)		(6.67	)		(8.79	)		(0.07	)

Net asset value, end of year		$147.22			$128.19			$182.30			$129.27			$105.95

Total return^c		20.02%			(23.55)%			46.81%			30.60%			39.12%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.04%			0.99%			1.00%			1.10%			1.20%

Expenses net of waiver and payments by affiliates		1.02%	^d		0.98%	^d		1.00%	^d,e		1.10%	^d,e		1.20%

Net investment income (loss)		(0.58)%			(0.56)%			(0.67)%			(0.82)%			(0.88)%

Supplemental data

Net assets, end of year (000’s)		$1,176,687			$1,074,903			$1,601,906			$1,141,890			$653,718

Portfolio turnover rate		34.12%			22.13%			41.43%			48.70%			33.64%

^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%.



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,
	2017			2016			2015			2014^a

Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$125.99			$180.67			$129.11			$159.15

Income from investment operations^b:

Net investment income (loss)^c		(1.81	)		(2.11	)		(2.38	)		(0.34	)

Net realized and unrealized gains (losses)		25.29			(38.79	)		60.61			(29.70	)

Total from investment operations		23.48			(40.90	)		58.23			(30.04	)

Less distributions from:

Net investment income		(1.29	)		—			—			—

Net realized gains		(4.20	)		(13.78	)		(6.67	)		—

Total distributions		(5.49	)		(13.78	)		(6.67	)		—

Net asset value, end of year		$143.98			$125.99			$180.67			$129.11

Total return^d		19.14%			(24.09)%			45.76%			(18.88)%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		1.79%			1.71%			1.75%			1.82%

Expenses net of waiver and payments by affiliates^f		1.77%			1.70%			1.75%	^g		1.82%	^g

Net investment income (loss)		(1.33)%			(1.28)%			(1.42)%			(1.52)%

Supplemental data

Net assets, end of year (000’s)		$53,935			$17,562			$23,051			$5,486

Portfolio turnover rate		34.12%			22.13%			41.43%			48.70%

^aFor the period March 4, 2014 (effective date) to April 30, 2014.

^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.

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

^gBenefit 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,
	2017			2016			2015			2014^a

Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$131.37			$185.75			$131.09			$104.56

Income from investment operations^b:

Net investment income (loss)^c		(0.25	)		(0.32	)		(0.45	)		(0.49	)

Net realized and unrealized gains (losses)		26.41			(40.28	)		61.78			35.81

Total from investment operations		26.16			(40.60	)		61.33			35.32

Less distributions from:

Net investment income		(2.30	)		—			—			—

Net realized gains		(4.20	)		(13.78	)		(6.67	)		(8.79	)

Total distributions		(6.50	)		(13.78	)		(6.67	)		(8.79	)

Net asset value, end of year		$151.03			$131.37			$185.75			$131.09

Total return^d		20.50%			(23.24)%			47.40%			34.10%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		0.63%			0.60%			0.60%			0.63%

Expenses net of waiver and payments by affiliates^f		0.61%			0.59%			0.60%	^g		0.63%	^g

Net investment income (loss)		(0.17)%			(0.17)%			(0.27)%			(0.35)%

Supplemental data

Net assets, end of year (000’s)		$8,891			$5,568			$76,436			$50,846

Portfolio turnover rate		34.12%			22.13%			41.43%			48.70%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.

^cBased on average daily shares outstanding.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

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

^gBenefit 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,
	2017			2016			2015			2014			2013

Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$130.67			$185.12			$130.86			$106.86			$ 76.65

Income from investment operations^a:

Net investment income (loss)^b		(0.46	)		(0.55	)		(0.70	)		(0.69	)		(0.52	)

Net realized and unrealized gains (losses)		26.27			(40.12	)		61.63			33.48			30.80

Total from investment operations		25.81			(40.67	)		60.93			32.79			30.28

Less distributions from:

Net investment income		(2.08	)		—			—			—			(0.07	)

Net realized gains		(4.20	)		(13.78	)		(6.67	)		(8.79	)		—

Total distributions		(6.28	)		(13.78	)		(6.67	)		(8.79	)		(0.07	)

Net asset value, end of year		$150.20			$130.67			$185.12			$130.86			$106.86

Total return		20.32%			(23.36)%			47.17%			31.02%			39.51%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.79%			0.75%			0.75%			0.80%			0.91%

Expenses net of waiver and payments by affiliates		0.77%	^c		0.74%	^c		0.75%	^c,d		0.80%	^c,d		0.91%

Net investment income (loss)		(0.33)%			(0.32)%			(0.42)%			(0.52)%			(0.59)%

Supplemental data

Net assets, end of year (000’s)		$159,894			$93,263			$167,035			$91,012			$25,744

Portfolio turnover rate		34.12%			22.13%			41.43%			48.70%			33.64%

^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	21

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Biotechnology Discovery Fund


	Country		Shares/ Warrants		Value
Common Stocks and Other Equity Interests 97.5%
Biotechnology 83.9%
^aAcadia Pharmaceuticals Inc.		United States		949,600	$	32,599,768
^aAcceleron Pharma Inc.		United States		186,700		6,164,834
^a,bADMA Biologics Inc.		United States		135,600		611,556
^aAlder Biopharmaceuticals Inc.		United States		94,400		1,892,720
^aAlexion Pharmaceuticals Inc.		United States		641,300		81,945,314
Amgen Inc.		United States		253,900		41,466,948
^aAmicus Therapeutics Inc.		United States		736,100		5,653,248
^a,bAnaptysBio, Inc.		United States		102,470		2,733,900
^a,b,cAptose Biosciences Inc., 144A		Canada		189,431		165,157
^a,bAquinox Pharmaceuticals Inc.		Canada		469,500		6,892,260
^a,b,dARCA biopharma Inc.		United States		478,077		1,290,808
^a,d,eARCA biopharma Inc., wts., 6/16/22		United States		1,338,619		61,040
^aArray BioPharma Inc.		United States		1,270,100		11,011,767
^aAudentes Therapeutics Inc.		United States		139,400		2,077,060
^a,bAurinia Pharmaceuticals Inc.		Canada		459,100		3,218,291
^aAveXis Inc.		United States		237,118		19,087,999
^a,bAxovant Sciences Ltd.		United States		589,582		14,291,468
^aBellicum Pharmaceuticals Inc.		United States		257,000		3,436,090
^aBiogen Inc.		United States		334,761		90,790,531
^aBioMarin Pharmaceutical Inc.		United States		410,256		39,318,935
^aBioverativ Inc.		United States		134,280		7,897,007
^aBluebird Bio Inc.		United States		190,000		16,900,500
^aBlueprint Medicines Corp.		United States		76,400		3,558,712
^a,bCalithera Biosciences Inc.		United States		275,500		2,989,175
^a,bCara Therapeutics Inc.		United States		202,400		3,216,136
^aCascadian Therapeutics Inc.		United States		457,783		1,945,578
^aCelgene Corp.		United States		1,076,900		133,589,444
^aCelldex Therapeutics Inc.		United States		1,265,929		4,215,544
^a,bCellectis SA, ADR		France		97,200		2,343,492
^aChemoCentryx Inc.		United States		817,508		5,918,758
^aClovis Oncology Inc.		United States		359,000		20,782,510
^aConcert Pharmaceuticals Inc.		United States		263,800		4,186,506
^a,bCRISPR Therapeutics AG		Switzerland		136,300		2,319,826
^a,fCRISPR Therapeutics AG, Reg S		Switzerland		137,714		2,241,261
^aCytomX Therapeutics Inc.		United States		125,100		1,965,321
^a,bDelMar Pharmaceuticals Inc.		Canada		388,770		1,045,791
^a,eDelMar Pharmaceuticals Inc., wts., 2/01/49		Canada		291,578		149,989
^a,bDynavax Technologies Corp.		United States		368,070		2,042,788
^aEdge Therapeutics Inc.		United States		702,846		7,295,541
^aEpizyme Inc.		United States		450,800		8,136,940
^aExelixis Inc.		United States		765,100		17,138,240
^a,dFate Therapeutics Inc.		United States		2,373,777		10,895,636
^a,bGenocea Biosciences Inc.		United States		1,133,200		7,241,148
Gilead Sciences Inc.		United States		854,100		58,548,555
^aGlycoMimetics Inc.		United States		379,800		1,633,140
^aHeron Therapeutics Inc.		United States		1,700,356		26,100,465
^aImmune Design Corp.		United States		241,427		1,581,347
^aIncyte Corp.		United States		653,200		81,179,696
^a,fIntarcia Therapeutics Inc., DD		United States		80,195		4,811,700
^a,bIntellia Therapeutics Inc.		United States		112,400		1,637,668
^aKaryopharm Therapeutics Inc.		United States		652,554		6,669,102
^aKite Pharma Inc.		United States		88,844		7,292,315



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)
^a La Jolla Pharmaceutical Co.		United States		296,900	$	8,610,100
^aLion Biotechnologies Inc.		United States		1,378,100		9,439,985
^aLoxo Oncology Inc.		United States		162,200		7,470,932
^aMacroGenics Inc.		United States		223,000		4,819,030
^a,bMerrimack Pharmaceuticals Inc.		United States		1,402,187		4,669,283
^aMerus BV		Netherlands		240,506		5,339,233
^aMinerva Neurosciences Inc.		United States		321,900		2,446,440
^a,bMirna Therapeutics Inc.		United States		545,947		1,146,489
^aNatera Inc.		United States		392,629		3,553,292
^aNeurocrine Biosciences Inc.		United States		898,400		47,974,560
^aNewLink Genetics Corp.		United States		205,300		3,837,057
^a,eNorthwest Biotherapeutics Inc., wts., 2/20/19		United States		223,880		2,516
^aOncoMed Pharmaceuticals Inc.		United States		376,800		1,484,592
^aOvaScience Inc.		United States		250,154		377,733
^aPfenex Inc.		United States		532,384		2,560,767
^aProQR Therapeutics NV		Netherlands		123,300		604,170
^aProteostasis Therapeutics Inc.		United States		88,600		535,587
^aRa Pharmaceuticals Inc.		United States		140,500		3,315,800
^aRadius Health Inc.		United States		157,400		6,149,618
^aRegeneron Pharmaceuticals Inc.		United States		167,009		64,881,326
^aREGENXBIO Inc.		United States		345,200		7,214,680
^aRetrophin Inc.		United States		376,194		7,369,640
^aSage Therapeutics Inc.		United States		135,770		9,639,670
^aSeattle Genetics Inc.		United States		12,069		824,313
^aStemline Therapeutics Inc.		United States		548,004		4,877,236
^aTesaro Inc.		United States		528,344		77,978,291
^a,bTG Therapeutics Inc.		United States		504,000		5,569,200
^aThreshold Pharmaceuticals Inc., wts., 2/12/20		United States		439,500		—
^aTocagen Inc.		United States		108,400		1,515,432
^a,bTracon Pharmaceuticals Inc.		United States		333,860		1,185,203
^a,bTrillium Therapeutics Inc.		Canada		158,100		972,315
^a,bVascular Biogenics Ltd.		Israel		340,900		1,943,130
^aVertex Pharmaceuticals Inc.		United States		388,800		45,995,040
^avTv Therapeutics Inc., A		United States		370,900		2,043,659
^aXencor Inc.		United States		230,332		5,912,622

						1,174,438,466

Life Sciences Tools & Services 4.1%
^a Illumina Inc.		United States		309,700		57,251,142

Pharmaceuticals 9.5%
^a,fAcerta Pharma BV		Netherlands		107,297,280		4,153,049
^aAclaris Therapeutics Inc.		United States		349,062		9,812,133
^a,bAgile Therapeutics Inc.		United States		846,353		3,038,407
^a,b,dAlcobra Ltd.		Israel		1,737,306		1,997,902
^aAratana Therapeutics Inc.		United States		904,000		5,604,800
^a,b,dBioPharmX Corp.		United States		1,900,375		1,570,470
^a,c,dBioPharmX Corp., 144A		United States		1,945,737		1,607,957
^a,d,eBioPharmX Corp., wts., 3/29/21		United States		108,000		39,908
^a,d,eBioPharmX Corp., wts., 11/22/23		United States		1,259,925		544,390
^aCollegium Pharmaceutical Inc.		United States		442,700		4,342,887
^a,bEgalet Corp.		United States		1,032,677		3,944,826
^aFlex Pharma Inc.		United States		170,200		585,488



franklintempleton.com	Annual Report	23

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Biotechnology Discovery Fund (continued)


	Country		Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Pharmaceuticals (continued)
^a Foamix Pharmaceuticals Ltd.		Israel		371,100	$	1,562,331
^aGW Pharmaceuticals PLC, ADR		United Kingdom		106,767		12,676,446
^aJazz Pharmaceuticals PLC		United States		97,900		15,593,512
^a,bMarinus Pharmaceuticals Inc.		United States		831,820		1,197,821
^aThe Medicines Co.		United States		405,700		20,009,124
^a,bNabriva Therapeutics AG, ADR		Austria		140,100		1,503,273
^a,bNeos Therapeutics Inc.		United States		614,800		4,365,080
^aNeuroderm Ltd.		Israel		232,600		6,716,325
^a,b,gNovan Inc.		United States		120,969		658,071
^aParatek Pharmaceuticals Inc.		United States		107,993		2,316,450
^aRevance Therapeutics Inc.		United States		377,100		8,201,925
^a,bTherapeuticsMD Inc.		United States		2,700,640		13,773,264
^a,bZogenix Inc.		United States		246,315		2,709,465
^aZymeworks Inc.		Canada		296,400		3,853,200

						132,378,504

Total Common Stocks and Other Equity Interests
(Cost $858,410,734)						1,364,068,112


Preferred Stocks 0.3%
Biotechnology 0.1%
^a,f True North Therapeutics Inc., pfd., Series D, 144A		United States		759,880		1,900,004

Pharmaceuticals 0.2%
^a,f G1 Therapeutics Inc., pfd.		United States		942,380		3,028,056

Total Preferred Stocks
(Cost $4,700,003)						4,928,060

Total Investments before Short Term Investments
(Cost $863,110,737)						1,368,996,172


Short Term Investments 6.1%
Money Market Funds (Cost $26,158,969) 1.9%
^h,i Institutional Fiduciary Trust Money Market Portfolio, 0.37%		United States		26,158,969		26,158,969

^j Investments from Cash Collateral Received for Loaned
Securities (Cost $59,514,173) 4.2%
Money Market Funds 4.2%
^h,i Institutional Fiduciary Trust Money Market Portfolio, 0.37%		United States		59,514,173		59,514,173

Total Investments (Cost $948,783,879) 103.9%						1,454,669,314
Other Assets, less Liabilities (3.9)%						(55,262,062	)

Net Assets 100.0%					$	1,399,407,252



24	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Biotechnology Discovery Fund (continued)

See Abbreviations on page 49.

^aNon-income producing.

^bA portion or all of the security is on loan at April 30, 2017. See Note 1(c).

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At April 30, 2017, the aggregate value of these securities was $1,773,114, representing 0.1% of net assets.

^dSee regarding holdings of 5% voting securities.

^eSecurity has been deemed illiquid because it may not be able to be sold within seven days. At April 30, 2017, the aggregate value of these securities was $797,843, representing 0.1% of net assets.

^fSee Note 7 regarding restricted securities.

^gAt April 30, 2017, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading this security at year end.

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

ⁱThe rate shown is the annualized seven-day yield at period end.

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



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


	Year Ended April 30,
	2017			2016			2015			2014			2013

Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$25.02			$31.46			$39.79			$33.03			$35.81

Income from investment operations^a:

Net investment income^b		0.20			0.29			0.23			0.19			0.08

Net realized and unrealized gains (losses)		0.17			(6.55	)		(8.27	)		6.65			(2.86	)

Total from investment operations		0.37			(6.26	)		(8.04	)		6.84			(2.78	)

Less distributions from net investment income		(0.28	)		(0.18	)		(0.29	)		(0.08	)		—

Net asset value, end of year		$25.11			$25.02			$31.46			$39.79			$33.03

Total return^c		1.37%			(19.80)%			(20.07)%			20.74%			(7.76)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.06%			1.14%			1.08%			1.07%			1.08%

Expenses net of waiver and payments by affiliates		1.05%	^d		1.13%			1.08%	^d,e		1.07%	^d,e		1.08%

Net investment income		0.79%			1.22%			0.67%			0.53%			0.26%

Supplemental data

Net assets, end of year (000’s)		$398,703			$461,596			$572,518			$624,250			$628,722

Portfolio turnover rate		29.74%			35.77%			30.05%			21.03%			20.40%

^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%.



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,
	2017			2016			2015			2014			2013

Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$24.25			$30.46			$38.39			$32.02			$34.96

Income from investment operations^a:

Net investment income (loss)^b		0.01			0.11			(0.01	)		(0.06	)		(0.14	)

Net realized and unrealized gains (losses)		0.15			(6.31	)		(7.91	)		6.43			(2.80	)

Total from investment operations		0.16			(6.20	)		(7.92	)		6.37			(2.94	)

Less distributions from net investment income		(0.13	)		(0.01	)		(0.01	)		—			—

Net asset value, end of year		$24.28			$24.25			$30.46			$38.39			$32.02

Total return^c		0.63%			(20.37)%			(20.63)%			19.89%			(8.41)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.81%			1.87%			1.78%			1.76%			1.77%

Expenses net of waiver and payments by affiliates		1.80%	^d		1.86%			1.78%	^d,e		1.76%	^d,e		1.77%

Net investment income (loss)		0.04%			0.49%			(0.03)%			(0.16)%			(0.43)%

Supplemental data

Net assets, end of year (000’s)		$96,835			$107,724			$123,735			$126,651			$130,424

Portfolio turnover rate		29.74%			35.77%			30.05%			21.03%			20.40%

^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	27

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Natural Resources Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014^a

Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$26.73			$33.62			$42.58			$38.28

Income from investment operations^b:

Net investment income^c		0.47			0.51			0.46			0.19

Net realized and unrealized gains (losses)		0.04			(7.06	)		(8.92	)		4.31

Total from investment operations		0.51			(6.55	)		(8.46	)		4.50

Less distributions from net investment income		(0.37	)		(0.34	)		(0.50	)		(0.20	)

Net asset value, end of year		$26.87			$26.73			$33.62			$42.58

Total return^d		1.89%			(19.31)%			(19.61)%			11.83%

Ratios to average net assets^e

Expenses before waiver and payments by affiliates		0.83%			0.60%			0.55%			0.55%

Expenses net of waiver and payments by affiliates		0.54%^f			0.55%			0.54%^f			0.53%^f

Net investment income		1.30%			1.80%			1.21%			1.07%

Supplemental data

Net assets, end of year (000’s)		$218			$15			$439			$939

Portfolio turnover rate		29.74%			35.77%			30.05%			21.03%

^aFor the period September 20, 2013 (effective date) to April 30, 2014.

^cBased on average daily shares outstanding.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.

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



28	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,
	2017			2016			2015			2014			2013

Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$26.71			$33.63			$42.52			$35.31			$38.17

Income from investment operations^a:

Net investment income^b		0.29			0.36			0.35			0.31			0.21

Net realized and unrealized gains (losses)		0.17			(7.00	)		(8.85	)		7.10			(3.07	)

Total from investment operations		0.46			(6.64	)		(8.50	)		7.41			(2.86	)

Less distributions from net investment income		(0.36	)		(0.28	)		(0.39	)		(0.20	)		—

Net asset value, end of year		$26.81			$26.71			$33.63			$42.52			$35.31

Total return		1.64%			(19.60)%			(19.81)%			21.07%			(7.49)%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.81%			0.87%			0.78%			0.77%			0.78%

Expenses net of waiver and payments by affiliates		0.80%	^c		0.86%			0.78%	^c,d		0.77%	^c,d		0.78%

Net investment income		1.04%			1.49%			0.97%			0.83%			0.56%

Supplemental data

Net assets, end of year (000’s)		$94,070			$90,185			$79,307			$94,651			$117,087

Portfolio turnover rate		29.74%			35.77%			30.05%			21.03%			20.40%

^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	29

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Natural Resources Fund


	Country		Shares		Value
Common Stocks 97.0%
Coal & Consumable Fuels 0.0%
^a,bEnergy Coal Resources, 144A		United States		199,375	$	—

Copper 4.2%
Antofagasta PLC		United Kingdom		598,500		6,496,487
First Quantum Minerals Ltd.		Canada		293,800		2,800,453
^aFreeport-McMoRan Inc.		United States		440,300		5,613,825
^aImperial Metals Corp.		Canada		380,700		1,693,054
Lundin Mining Corp.		Canada		543,100		2,896,745
Sandfire Resources NL		Australia		1,194,967		5,180,495

						24,681,059

Diversified Metals & Mining 5.4%
BHP Billiton PLC, ADR		United Kingdom		364,700		11,207,231
^aGlencore PLC		Switzerland		1,583,400		6,227,795
Hudbay Minerals Inc.		Canada		245,800		1,467,704
^aNautilus Minerals Inc.		Canada		3,895,831		727,846
Rio Tinto PLC, ADR		United Kingdom		154,200		6,140,244
South32 Ltd.		Australia		1,314,600		2,736,373
Teck Resources Ltd., B		Canada		159,600		3,310,104

						31,817,297

Fertilizers & Agricultural Chemicals 0.4%
The Mosaic Co.		United States		88,200		2,375,226

Gold 6.2%
Agnico Eagle Mines Ltd.		Canada		72,000		3,442,011
Alamos Gold Inc., A		Canada		470,100		3,364,992
^aB2Gold Corp.		Canada		1,829,800		4,598,296
Barrick Gold Corp.		Canada		318,900		5,332,008
Goldcorp Inc.		Canada		389,300		5,434,628
^aGuyana Goldfields Inc.		Canada		758,600		3,762,709
Newcrest Mining Ltd.		Australia		184,000		2,915,213
OceanaGold Corp.		Australia		473,310		1,543,138
Randgold Resources Ltd., ADR		United Kingdom		31,700		2,789,283
Tahoe Resources Inc.		Canada		398,500		3,229,108

						36,411,386

Integrated Oil & Gas 17.1%
BP PLC, ADR		United Kingdom		182,000		6,246,240
Chevron Corp.		United States		115,500		12,323,850
Exxon Mobil Corp.		United States		148,600		12,133,190
Occidental Petroleum Corp.		United States		318,300		19,588,182
^aPetroleo Brasileiro SA, ADR		Brazil		206,400		1,859,664
Royal Dutch Shell PLC, A		United Kingdom		48,347		1,254,043
Royal Dutch Shell PLC, A, ADR		United Kingdom		371,800		19,404,242
Suncor Energy Inc.		Canada		476,000		14,919,247
Total SA, B, ADR		France		261,810		13,396,818

						101,125,476

Oil & Gas Drilling 1.5%
Ensco PLC, A		United States		317,319		2,503,647
^aPioneer Energy Services Corp.		United States		931,943		2,842,426
^aRowan Cos. PLC		United States		265,900		3,741,213

						9,087,286



30	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Natural Resources Fund (continued)


	Country		Shares		Value
Common Stocks (continued)
Oil & Gas Equipment & Services 20.4%
Baker Hughes Inc.		United States		203,500	$	12,081,795
^aDril-Quip Inc.		United States		80,200		4,134,310
Halliburton Co.		United States		437,135		20,055,754
Hunting PLC		United Kingdom		253,600		1,847,745
^aKeane Group Inc.		United States		152,200		2,103,404
^aMammoth Energy Services Inc.		United States		82,800		1,598,040
Oceaneering International Inc.		United States		317,000		8,365,630
^aOil States International Inc.		United States		179,000		5,325,250
^aPHI Inc., non-voting		United States		117,900		1,382,967
^aProPetro Holding Corp.		United States		156,200		2,116,510
RPC Inc.		United States		178,000		3,234,260
Schlumberger Ltd.		United States		408,147		29,627,391
^aSuperior Energy Services Inc.		United States		923,900		11,160,712
^aTechnipFMC PLC		United Kingdom		403,000		12,142,390
^aWeatherford International PLC		United States		960,100		5,539,777

						120,715,935

Oil & Gas Exploration & Production 33.2%
Aker BP ASA		Norway		181,000		3,072,210
Anadarko Petroleum Corp.		United States		370,800		21,143,016
Cabot Oil & Gas Corp., A		United States		624,400		14,511,056
^aCairn Energy PLC		United Kingdom		1,670,300		4,203,758
^aCallon Petroleum Co.		United States		344,000		4,072,960
Canadian Natural Resources Ltd.		Canada		326,800		10,410,480
Cimarex Energy Co.		United States		27,500		3,208,700
^aCobalt International Energy Inc.		United States		693,200		271,111
^aConcho Resources Inc.		United States		73,500		9,309,510
ConocoPhillips		United States		244,100		11,694,831
^aDiamondback Energy Inc.		United States		32,300		3,224,832
EOG Resources Inc.		United States		184,500		17,066,250
EQT Corp.		United States		197,100		11,459,394
^aGran Tierra Energy Inc.		Colombia		1,266,000		3,190,320
^aGulfport Energy Corp.		United States		185,700		2,948,916
Hess Corp.		United States		200,300		9,780,649
^aJagged Peak Energy Inc.		United States		385,900		4,298,926
^aMatador Resources Co.		United States		281,246		6,097,413
Noble Energy Inc.		United States		637,200		20,600,676
^aOphir Energy PLC		United Kingdom		1,750,000		1,949,427
Pioneer Natural Resources Co.		United States		67,500		11,676,825
^aResolute Energy Corp.		United States		109,600		4,104,520
^aRice Energy Inc.		United States		144,200		3,070,018
^aSanchez Energy Corp.		United States		8,960		69,350
SM Energy Co.		United States		315,900		7,136,181
^aSRC Energy Inc.		United States		938,600		7,077,044

						195,648,373

Oil & Gas Refining & Marketing 3.9%
HollyFrontier Corp.		United States		178,400		5,020,176
Marathon Petroleum Corp.		United States		111,000		5,654,340
Phillips 66		United States		78,900		6,277,284
Valero Energy Corp.		United States		92,600		5,982,886

						22,934,686



franklintempleton.com	Annual Report	31

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Natural Resources Fund (continued)


	Country		Shares		Value
Common Stocks (continued)
Oil & Gas Storage & Transportation 4.4%
Enbridge Inc.		Canada		163,147	$	6,762,443
Kinder Morgan Inc.		United States		704,400		14,531,772
Targa Resources Corp.		United States		82,800		4,564,764

						25,858,979

Steel 0.3%
United States Steel Corp.		United States		73,700		1,644,984

Total Common Stocks (Cost $511,803,627)						572,300,687


Convertible Preferred Stocks 1.3%
Oil & Gas Exploration & Production 1.3%
Hess Corp., 8.00%, cvt. pfd.		United States		52,900		3,155,485
^aSanchez Energy Corp., 4.875%, cvt. pfd., A		United States		84,500		2,392,195
Sanchez Energy Corp., 6.50%, cvt. pfd., B		United States		56,000		1,893,360

Total Convertible Preferred Stocks (Cost $9,744,127)						7,441,040

Preferred Stocks (Cost $2,376,164) 0.0%
Coal & Consumable Fuels 0.0% ^a,b Energy Coal Resources, 144A, pfd.		United States		29,847		—


			Principal Amount
Convertible Bonds (Cost $3,631,941) 0.2%
Oil & Gas Exploration & Production 0.2%
Cobalt International Energy Inc., cvt., senior bond, 3.125%, 5/15/24		United States	$	4,787,000		1,424,132

Total Investments before Short Term Investments
(Cost $527,555,859)						581,165,859

			Shares
Short Term Investments (Cost $7,627,816) 1.3%
Money Market Funds 1.3% ^c,dInstitutional Fiduciary Trust Money Market Portfolio, 0.37%		United States		7,627,816		7,627,816

Total Investments (Cost $535,183,675) 99.8%						588,793,675
Other Assets, less Liabilities 0.2%						1,032,250

Net Assets 100.0%					$	589,825,925

See Abbreviations on page 49.

^aNon-income producing.

^bSee Note 7 regarding restricted securities.

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

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



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

April 30, 2017


	Franklin Biotechnology Discovery Fund			Franklin Natural Resources Fund


Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	841,649,269		$	527,555,859
Cost - Non-controlled affiliates (Note 3f and 8)		107,134,610			7,627,816

Total cost of investments	$	948,783,879		$	535,183,675

Value - Unaffiliated issuers	$	1,350,988,061		$	581,165,859
Value - Non-controlled affiliates (Note 3f and 8)		103,681,253			7,627,816

Total value of investments*		1,454,669,314			588,793,675
Cash		—			820
Receivables
Investment securities sold **		9,561,067			3,653,315
Capital shares sold		2,414,264			696,734
Dividends and interest		291,116			652,335
Other assets		1,082			569

Total assets		1,466,936,843			593,797,448

Liabilities:
Payables:
Investment securities purchased		3,945,640			1,431,096
Capital shares redeemed		2,676,308			1,791,827
Management fees		635,550			246,660
Distribution fees		277,935			168,259
Transfer agent fees		356,420			238,779
Payable upon return of securities loaned		59,514,173			—
Accrued expenses and other liabilities		123,565			94,902

Total liabilities		67,529,591			3,971,523

Net assets, at value	$	1,399,407,252		$	589,825,925

Net assets consist of:
Paid-in capital	$	873,365,302		$	693,915,775
Undistributed net investment income		—			1,804,541
Distributions in excess of net investment income		(6,168,715	)		—
Net unrealized appreciation (depreciation)		505,629,739			53,611,777
Accumulated net realized gain (loss)		26,580,926			(159,506,168	)

Net assets, at value	$	1,399,407,252		$	589,825,925


*Includes securities loaned	$	55,292,623		$	—
^**Includes securities loaned	$	311,010		$	—



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

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Assets and Liabilities (continued)

April 30, 2017


	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund

Class A:
Net assets, at value		$1,176,686,814		$398,702,669

Shares outstanding		7,992,444		15,877,189

Net asset value per share^a		$147.22		$25.11

Maximum offering price per share (net asset value per share ÷ 94.25%)		$156.20		$26.64

Class C:
Net assets, at value		$53,935,492		$96,834,929

Shares outstanding		374,617		3,988,487

Net asset value and maximum offering price per share^a		$143.98		$24.28

Class R6:
Net assets, at value		$8,890,640		$218,074

Shares outstanding		58,866		8,116

Net asset value and maximum offering price per share		$151.03		$26.87

Advisor Class:
Net assets, at value		$159,894,306		$94,070,253

Shares outstanding		1,064,532		3,508,796

Net asset value and maximum offering price per share		$150.20		$26.81

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



34	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, 2017


	Franklin Biotechnology Discovery Fund			Franklin Natural Resources Fund

Investment income:
Dividends:
Unaffiliated issuers	$	3,785,964		$	11,700,015
Non-controlled affiliates (Note 3f)		21,264			11,363
Interest		—			268,899
Income from securities loaned (net of fees and rebates)		1,964,855			4,928

Total investment income		5,772,083			11,985,205

Expenses:
Management fees (Note 3a)		7,709,832			3,195,138
Distribution fees: (Note 3c)
Class A		2,853,355			1,127,818
Class C		384,546			1,083,154
Transfer agent fees: (Note 3e)
Class A		1,917,529			1,215,359
Class C		64,474			291,810
Class R6		778			184
Advisor Class		200,537			253,154
Custodian fees (Note 4)		16,103			18,934
Reports to shareholders		181,279			155,102
Registration and filing fees		105,124			80,634
Professional fees		56,080			43,474
Trustees’ fees and expenses		12,642			6,153
Other		47,727			19,450

Total expenses		13,550,006			7,490,364
Expense reductions (Note 4)		(678	)		(65	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(312,387	)		(79,018	)

Net expenses		13,236,941			7,411,281

Net investment income (loss)		(7,464,858	)		4,573,924

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		98,014,012			(16,230,263	)
Foreign currency transactions		4,244			(46,449	)

Net realized gain (loss)		98,018,256			(16,276,712	)

Net change in unrealized appreciation (depreciation) on:
Investments		145,053,480			23,237,758
Translation of other assets and liabilities denominated in foreign currencies		37,144			5,291

Net change in unrealized appreciation (depreciation)		145,090,624			23,243,049

Net realized and unrealized gain (loss)		243,108,880			6,966,337

Net increase (decrease) in net assets resulting from operations	$	235,644,022		$	11,540,261



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

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,

	2017			2016			2017			2016

Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(7,464,858	)	$	(8,934,186	)	$	4,573,924		$	6,662,268
Net realized gain (loss)		98,018,256			41,508,062			(16,276,712	)		(105,823,288	)
Net change in unrealized appreciation (depreciation)		145,090,624			(443,061,045	)		23,243,049			(46,797,418	)

Net increase (decrease) in net assets resulting from operations		235,644,022			(410,487,169	)		11,540,261			(145,958,438	)

Distributions to shareholders from:
Net investment income:
Class A		(14,076,436	)		—			(4,756,117	)		(3,065,832	)
Class C		(408,909	)		—			(577,641	)		(21,423	)
Class R6		(126,292	)		—			(212	)		(5,056	)
Advisor Class		(1,688,739	)		—			(1,234,610	)		(880,846	)
Net realized gains:
Class A		(34,234,146	)		(115,150,452	)		—			—
Class C		(1,330,584	)		(1,868,138	)		—			—
Class R6		(230,582	)		(555,624	)		—			—
Advisor Class		(3,411,647	)		(11,496,430	)		—			—

Total distributions to shareholders		(55,507,335	)		(129,070,644	)		(6,568,580	)		(3,973,157	)

Capital share transactions: (Note 2)
Class A		(55,488,311	)		(51,384,188	)		(66,989,230	)		1,840,165
Class C		31,398,641			2,640,554			(11,600,701	)		7,417,245
Class R6		2,002,691			(63,450,822	)		222,601			(222,058	)
Advisor Class		50,061,306			(25,379,192	)		3,702,378			24,416,177

Total capital share transactions		27,974,327			(137,573,648	)		(74,664,952	)		33,451,529

Net increase (decrease) in net assets		208,111,014			(677,131,461	)		(69,693,271	)		(116,480,066	)
Net assets:
Beginning of year		1,191,296,238			1,868,427,699			659,519,196			775,999,262

End of year	$	1,399,407,252		$	1,191,296,238		$	589,825,925		$	659,519,196

Undistributed net investment income (loss) included in net assets:
End of year	$	—		$	(7,964,127	)	$	1,804,541		$	3,830,515

Distributions in excess of net investment income included in net assets:
End of year	$	(6,168,715	)	$	—		$	—		$	—



36	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 nine separate funds, two of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The financial statements of the remaining funds in the Trust are presented separately. The Funds offer four classes of shares: Class A, Class C, Class R6, and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees. Franklin Biotechnology Discovery Fund was closed to new investors with limited exceptions effective at the close of market July 8, 2014. Effective May 16, 2016, the Fund reopened to new investors.

The following summarizes the Funds’ significant accounting policies.

a. Financial Instrument Valuation

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.



franklintempleton.com	Annual Report	37

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies (continued)

a. Financial Instrument Valuation (continued)

review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

b. Foreign Currency Translation

expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Portfolio securities and assets and liabilities denominated in foreign currencies contain risks that those currencies will decline in value relative to the U.S. dollar. Occasionally, events may impact the availability or reliability of foreign exchange rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

c. 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



38	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the open market using the collateral received. The securities lending agent has agreed to indemnify the Fund in the event of default by a third party borrower.

d. Income and Deferred Taxes

e. Security Transactions, Investment Income, Expenses and Distributions

the Funds. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

f. Accounting Estimates

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

g. Guarantees and Indemnifications

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



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

2. Shares of Beneficial Interest

At April 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:


	Franklin Biotechnology Discovery Fund						Franklin Natural Resources Fund
	Shares			Amount			Shares			Amount
Class A Shares:
Year ended April 30, 2017
Shares sold		2,141,244		$	293,440,540			3,407,729		$	87,917,703
Shares issued in reinvestment of distributions		347,251			45,878,780			168,961			4,629,546
Shares redeemed		(2,881,393	)		(394,807,631	)		(6,146,306	)		(159,536,479	)
Net increase (decrease)		(392,898	)	$	(55,488,311	)		(2,569,616	)	$	(66,989,230	)
Year ended April 30, 2016
Shares sold		994,554		$	169,501,230			5,741,950		$	131,553,976
Shares issued in reinvestment of distributions		691,137			108,930,097			143,948			2,979,717
Shares redeemed		(2,087,610	)		(329,815,515	)		(5,636,208	)		(132,693,528	)
Net increase (decrease)		(401,919	)	$	(51,384,188	)		249,690		$	1,840,165
Class C Shares:
Year ended April 30, 2017
Shares sold		314,992		$	42,287,943			801,399		$	19,979,661
Shares issued in reinvestment of distributions		13,374			1,732,743			21,022			558,336
Shares redeemed		(93,143	)		(12,622,045	)		(1,275,577	)		(32,138,698	)
Net increase (decrease)		235,223		$	31,398,641			(453,156	)	$	(11,600,701	)
Year ended April 30, 2016
Shares sold		35,382		$	6,172,232			1,548,932		$	34,012,781
Shares issued in reinvestment of distributions		12,007			1,864,389			1,031			20,756
Shares redeemed		(35,581	)		(5,396,067	)		(1,170,096	)		(26,616,292	)
Net increase (decrease)		11,808		$	2,640,554			379,867		$	7,417,245
Class R6 Shares:
Year ended April 30, 2017
Shares sold		38,854		$	5,153,854			7,779		$	228,431
Shares issued in reinvestment of distributions		2,637			356,874			7			211
Shares redeemed		(25,011	)		(3,508,037	)		(222	)		(6,041	)
Net increase (decrease)		16,480		$	2,002,691			7,564		$	222,601
Year ended April 30, 2016
Shares sold		21,331		$	3,581,555			2,400		$	64,684
Shares issued in reinvestment of distributions		3,445			555,624			229			5,056
Shares redeemed		(393,884	)		(67,588,001	)		(15,127	)		(291,798	)
Net increase (decrease)		(369,108	)	$	(63,450,822	)		(12,498	)	$	(222,058	)



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NOTES TO FINANCIAL STATEMENTS


	Franklin Biotechnology Discovery Fund						Franklin Natural Resources Fund
	Shares			Amount			Shares			Amount
Advisor Class Shares:
Year ended April 30, 2017
Shares sold		662,833		$	93,724,820			1,645,341		$	45,812,950
Shares issued in reinvestment of distributions		31,641			4,260,757			40,400			1,180,483
Shares redeemed		(343,647	)		(47,924,271	)		(1,553,855	)		(43,291,055	)
Net increase (decrease)		350,827		$	50,061,306			131,886		$	3,702,378
Year ended April 30, 2016
Shares sold		208,936		$	35,072,346			2,472,344		$	59,834,181
Shares issued in reinvestment of distributions		58,123			9,330,443			37,248			822,065
Shares redeemed		(455,659	)		(69,781,981	)		(1,490,983	)		(36,240,069	)
Net increase (decrease)		(188,600	)	$	(25,379,192	)		1,018,609		$	24,416,177

3. Transactions with Affiliates


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

a. Management Fees

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


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



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NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates (continued)

a. Management Fees (continued)

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, 2017, each Fund’s effective investment management fee rate based on average daily net assets was as follows:


Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund

0.588%		0.488%

b. Administrative Fees

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

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 reimburses Distributors for costs incurred in connection with the servicing, sale and distribution of the Funds’ shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C compensation distribution plans, the Funds pay Distributors for costs incurred in connection with the servicing, sale and distribution of each Funds’ shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.

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


Class A	0.35	%
Class C	1.00	%

The Board has set the current rate at 0.25% per year for Class A shares until further notice and approval by the Board.



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NOTES TO FINANCIAL STATEMENTS

d. Sales Charges/Underwriting Agreements


	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Sales charges retained net of commissions paid to unaffiliated brokers/dealers		$687,533		$186,707
CDSC retained		$ 29,320		$ 26,043

e. Transfer Agent Fees

Each class of shares, except for Class R6 pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations and reimburses Investor Services for out of pocket expenses incurred, including 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, 2017, 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

$959,743

$808,338

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)		%of Affiliated Fund Shares Outstanding Held at End of Year
Franklin Biotechnology Discovery Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%		82,758,981		702,589,588		(699,675,427	)		85,673,142	$	85,673,142		$21,264		$ —	0.4%

Franklin Natural Resources Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%		43,909,680		159,016,084		(195,297,948	)		7,627,816	$	7,627,816		$11,363		$ —	—%^a

^aRounds to less than 0.1%.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

3. Transactions with Affiliates (continued)

g. Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until August 31, 2017.

4. Expense Offset Arrangement

5. Income Taxes

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

At April 30, 2017, the capital loss carryforwards were as follows:


	Franklin Natural Resources Fund
Capital loss carryforwards subject to expiration:
2018	$	12,737,677
Capital loss carryforwards not subject to expiration:
Short term		10,125,851
Long term		121,921,833

Total capital loss carryforwards	$	144,785,361

The tax character of distributions paid during the years ended April 30, 2017 and 2016, was as follows:


	Franklin Biotechnology Discovery Fund				Franklin Natural Resources Fund

	2017		2016		2017		2016

Distributions paid from:
Ordinary income	$	16,300,376	$	35,788,633	$	6,568,580	$	3,973,157
Long term capital gain		39,206,959		93,282,011		—		—

	$	55,507,335	$	129,070,644	$	6,568,580	$	3,973,157

At April 30, 2017, the cost of investments, net unrealized appreciation (depreciation), undistributed ordinary income and undistributed long term capital gains for income tax purposes were as follows:



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NOTES TO FINANCIAL STATEMENTS


	Franklin Biotechnology Discovery Fund			Franklin Natural Resources Fund


Cost of investments	$	958,801,208		$	552,582,388


Unrealized appreciation	$	606,614,957		$	108,496,752
Unrealized depreciation		(110,746,851	)		(72,285,465)

Net unrealized appreciation (depreciation)	$	495,868,106		$	36,211,287


Undistributed ordinary income		7,456,013			4,482,452
Undistributed long term capital gains		22,973,524			—

Distributable earnings	$	30,429,537		$	4,482,452

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 companies and wash sales.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2017, were as follows:


	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Purchases	$	433,555,021		$186,374,004
Sales	$	483,607,147		$236,500,147

At April 30, 2017, 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		$59,514,173

^aThe agreements open at year end can be terminated at any time.

^bGross amount of recognized liabilities for securities lending transactions is included in payable upon return of securities loaned in the Statements of Assets and Liabilities.

7. Restricted Securities



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NOTES TO FINANCIAL STATEMENTS

7. Restricted Securities (continued)

At April 30, 2017, investments in restricted securities, excluding certain 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
107,297,280	Acerta Pharma BV		5/06/15	$	6,172,605	$	4,153,049
137,714	CRISPR Therapeutics AG, Reg S		6/10/16		1,850,041		2,241,261
942,380	G1 Therapeutics Inc., pfd.		4/26/16		2,799,999		3,028,056
80,195	Intarcia Therapeutics Inc., DD		3/26/14		2,597,516		4,811,700
759,880	True North Therapeutics Inc., pfd., Series D, 144A		10/05/16		1,900,004		1,900,004

	Total Restricted Securities (Value is 1.2% of Net Assets)			$	15,320,165	$	16,134,070

Franklin Natural Resources Fund
199,375	Energy Coal Resources, 144A		11/16/05 - 5/05/06	$	741,939	$	—
29,847	Energy Coal Resources, 144A, pfd.		3/17/09		2,376,164		—

	Total Restricted Securities (Value is —% of Net Assets)			$	3,118,103	$	—

8. Holdings of 5% Voting Securities of Portfolio Companies


Name of Issuer	Number of Shares/ Warrants Held at Beginning of Year		Gross Additions			Gross Reductions		Number of Shares/ Warrants Held at End of Year		Value at End of Year		Investment Income		Realized Gain (Loss)
Franklin Biotechnology Discovery Fund
Non-Controlled Affiliates
Alcobra Ltd.		1,367,755		369,551			—		1,737,306	$	1,997,902	$	—	$	—
ARCA biopharma Inc.		478,077		—			—		478,077		1,290,808		—		—
ARCA biopharma Inc., wts., 6/16/22		1,338,619		—			—		1,338,619		61,040		—		—
BioPharmX Corp.		216,000		1,684,375			—		1,900,375		1,570,470		—		—
BioPharmX Corp., 144A		1,600,000		345,737			—		1,945,737		1,607,957		—		—
BioPharmX Corp., wts., 3/29/21		108,000		—			—		108,000		39,908		—		—
BioPharmX Corp., wts., 11/22/23		—		1,259,925			—		1,259,925		544,390		—		—
Fate Therapeutics Inc.		195,700		2,178,077	^a		—		2,373,777		10,895,636		—		—

Total Affiliated Securities (Value is 1.3% of Net Assets)										$	18,008,111	$	—	$	—

^aGross addition was the result of a corporate action.

9. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) matures on February 9, 2018. 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.



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NOTES TO FINANCIAL STATEMENTS

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, 2017, the Funds did not use the Global Credit Facility.

10. Fair Value Measurements

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the 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.

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

A summary of inputs used as of April 30, 2017, in valuing the Funds’ assets carried at fair value, is as follows:


	Level 1		Level 2			Level 3			Total
Franklin Biotechnology Discovery Fund
Assets:
Investments in Securities:
Equity Investments:^a
Biotechnology	$	1,167,171,960	$	—	^b	$	9,166,510		$	1,176,338,470
Pharmaceuticals		127,641,157		—			7,765,403			135,406,560
All Other Equity Investments^c		57,251,142		—			—			57,251,142
Short Term Investments		85,673,142		—			—			85,673,142
Total Investments in Securities	$	1,437,737,401	$	—		$	16,931,913		$	1,454,669,314
Receivables:
Investment Securities Sold	$	—	$	—		$	9,126,475		$	9,126,475

Franklin Natural Resources Fund
Assets:
Investments in Securities:
Equity Investments:^a
Oil & Gas Exploration & Production	$	198,803,858	$	4,285,555		$	—		$	203,089,413
All Other Equity Investments^c		376,652,314		—			—	^b		376,652,314
Convertible Bonds		—		1,424,132			—			1,424,132
Short Term Investments		7,627,816		—			—			7,627,816
Total Investments in Securities	$	583,083,988	$	5,709,687		$	—		$	588,793,675



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NOTES TO FINANCIAL STATEMENTS

10. Fair Value Measurements (continued)

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

^bIncludes securities determined to have no value at April 30, 2017.

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


																		Net Change in
																		Unrealized
																		Appreciation
											Net		Net					(Depreciation)
	Balance at Beginning of Year		Purchases		Sales		Transfer Into/(Out of) Level 3		Cost Basis Adjustments^a		Realized Gain (Loss)		Unrealized Appreciation (Depreciation)			Balance at End of Year		on Assets Held at Year End
Franklin Biotechnology Discovery Fund
Assets:
Investments in Securities:^b
Equity Investments:
Biotechnology		$ 3,195,479		$3,750,045		$—		$—		$—		$—		$2,220,986			$ 9,166,510		$ 2,220,986
Pharmaceuticals		8,460,560		—		—		—		—		—		(695,157	)		7,765,403		(695,157	)
Total Investments in Securities		$11,656,039		$3,750,045		$—		$—		$—		$—		$1,525,829			$16,931,913		$1,525,829
Receivables:
Investment Securities Sold		$ 9,089,004		$ —		$—		$—		$—		$—		$ 37,471			$ 9,126,475		$ 37,471

^aMay include accretion, amortization, partnership adjustments, and/or other cost basis adjustments.

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

Impact to Fair

Fair Value at

Valuation

Amount/

Value if Input

Description

End of Year

Technique

Unobservable Inputs

Range

Increases^a

Franklin Biotechnology Discovery Fund

Assets:

Investments in Securities:

Equity Investments:^b

Biotechnology

$2,241,261

Market Comparables

Discount for lack of marketability

4.4%

Decrease

Pharmaceutical

7,181,105

Probability Weighted

Free Cash Flow

$3,000(mil)

Increase

Discounted Cash Flow Model^c

Discount Rate

12.5%

Decrease

Discounted Cash Flow

Free Cash Flow

$193.3(mil)

Increase

Model

Discount for lack of marketability

35.0%

Decrease

Discount Rate

12.5%

Decrease

All Other Investments^e

7,509,547

Total

$16,931,913

Receivables:

Investment Securities Sold

$ 9,126,475

Discounted Cash Flow Model

Discount Rate

1.7%

Decrease



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NOTES TO FINANCIAL STATEMENTS

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

^cIncludes probability assumptions for various outcomes of contingent payments for clinical trials and regulatory approvals.

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

^eIncludes financial instruments with values derived using prior transaction prices or third party pricing information without adjustment for which such inputs are also unobservable. May also include fair value of immaterial financial instruments developed using various valuation techniques and unobservable inputs.

11. Investment Company Reporting Modernization

12. Subsequent Events

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

Abbreviations

Selected Portfolio

ADR American Depositary Receipt



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FRANKLIN STRATEGIC SERIES

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Franklin Strategic Series and Shareholders of the Franklin Biotechnology Discovery Fund and Franklin Natural Resources Fund:

In our opinion, the accompanying statements of assets and liabilities, including the statements of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Biotechnology Discovery Fund and Franklin Natural Resources Fund (the “Funds”) as of April 30, 2017, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of April 30, 2017 by correspondence with the custodian, transfer agent, and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

June 20, 2017



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Tax Information (unaudited)

Under Section 852(b)(3)(C) of the Internal Revenue Code (Code), Franklin Biotechnology Discovery Fund hereby reports the maximum amount allowable but no less than $39,206,959 as long term capital gain dividends for the fiscal year ended April 30, 2017.

Franklin

Biotechnology

Discovery Fund

Franklin Natural

Resources Fund

23.23%

94.40%

Under Section 854(b)(1)(B) of the Code , the Funds hereby report the maximum amount allowable but no less than the following amounts as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended April 30, 2017:

Franklin

Biotechnology

Discovery Fund

Franklin Natural

Resources Fund

$3,785,991

$11,543,526



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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	Trustee	Since 1991	142	Bar-S Foods (meat packing company) (1981-2010).
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950)	Trustee	Since 2014	136	Avis Budget Group Inc. (car rental)
One Franklin Parkway San Mateo, CA 94403-1906				(2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011- present) and H.J. Heinz Company (processed foods and allied products) (1998-2006)
Principal Occupation During at Least the Past 5 Years: Senior Advisor, Strategic Investment Group (investment management group) (2015-present); director of various companies; and formerly, 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)	Trustee	Since 1998	142	Hess Corporation (exploration and
One Franklin Parkway San Mateo, CA 94403-1906				refining 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)	Trustee	Since 2009	142	Boeing Capital Corporation (aircraft
One Franklin Parkway				financing) (2006-2013).
San Mateo, CA 94403-1906

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



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FRANKLIN STRATEGIC SERIES

Independent Board Members (continued)


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		142	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; 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).

John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 2006 and Lead Independent Trustee since 2008		116	None
Principal Occupation During at Least the Past 5 Years:
President, Staples Europe (office supplies) (2012-present); President and Founder, Hyannis Port Capital, Inc. (real estate and private equity investing); serves on private and non-profit boards; and formerly, Chief Operating Officer and Executive Vice President, Gap, Inc. (retail) (1996-2000); Chief Financial Officer and Executive Vice President – Finance and Strategy, Staples, Inc. (1992-1996); Senior Vice President – Corporate Planning, Northwest Airlines, Inc. (airlines) (1990-1992); and Vice President and Partner, Bain & Company (consulting firm) (1986-1990).
Interested Board Members and Officers
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		158	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 44 of the investment companies in Franklin Templeton Investments; 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		142	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.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.

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

Principal Occupation During at Least the Past 5 Years:
Deputy General Counsel, Franklin Templeton Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.



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FRANKLI N 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

Laura F. Fergerson (1962)

One Franklin Parkway

San Mateo, CA 94403-1906

Chief Executive Officer – Finance and Administration

Since 2009

Not Applicable

Principal Occupation During at Least the Past 5 Years:

Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

Gaston Gardey (1967)

One Franklin Parkway

San Mateo, CA 94403-1906

Treasurer, Chief Financial

Officer and Chief Accounting Officer

Since 2009

Not Applicable

Principal Occupation During at Least the Past 5 Years:

Treasurer, U.S. Fund Administration & Reporting, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments.

Aliya S. Gordon (1973)

One Franklin Parkway

San Mateo, CA 94403-1906

Vice President

Since 2009

Not Applicable

Principal Occupation During at Least the Past 5 Years:

Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

Steven J. Gray (1955)

One Franklin Parkway

San Mateo, CA 94403-1906

Vice President

Since 2009

Not Applicable

Principal Occupation During at Least the Past 5 Years:

Senior Associate General Counsel, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments.

Edward B. Jamieson (1948)

One Franklin Parkway

San Mateo, CA 94403-1906

President and

Chief Executive Officer – Investment Management

Since 2010

Not Applicable

Principal Occupation During at Least the Past 5 Years:

President and Director, Franklin Advisers, Inc.; Executive Vice President, Franklin Templeton Institutional, LLC; and officer and/or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 10 of the investment companies in Franklin Templeton Investments.

Robert Lim (1948)

One Franklin Parkway

San Mateo, CA 94403-1906

Vice President

– AML

Compliance

Since 2016

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 45 of the investment companies in Franklin Templeton Investments.

Christopher J. Molumphy

(1962)

One Franklin Parkway

San Mateo, CA 94403-1906

Vice President

Since 2000

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 some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.



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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

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 Investments; 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 45 of the investment companies in Franklin Templeton Investments.

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 Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2006	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

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 and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.

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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

Note 3: Effective November 1, 2016, Frank Olson ceased to be a trustee of the trust.



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FRANKLIN STRATEGIC SERIES

Interested Board Members and Officers (continued)



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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 existing management fees 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

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, 2017. The Board considered the performance returns for each Fund in



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FRANKLIN STRATEGIC SERIES

SHAREHOLDER INFORMATION

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 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-, five- and 10-year periods was above the median of its Performance Universe, but for the three-year period was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that at the Fund opened to new investors on May 16, 2016.

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 10-year periods was above the median of its Performance Universe, but for the three- and five-year periods was below the median of its Performance Universe. The Board concluded that the Fund’s performance was satisfactory. In doing so, the Board noted that the Fund’s annualized total return for the one-year period exceeded 44% and was in the second quintile of its Performance Universe.

Comparative Fees and Expenses

structure as 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 Franklin Biotechnology Discovery Fund included the Fund and six other health/biotechnology funds. The Expense Group for the Franklin Natural Resources Fund included the Fund and seven other global natural resources funds. The Board noted that the Management Rates and actual total expense ratios for these Funds were below the medians of their respective Expense Groups. The Board concluded that the Management Rates charged to these Funds are fair and reasonable.

Profitability



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SHAREHOLDER INFORMATION

Economies of Scale

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

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.



© 2017 Franklin Templeton Investments. All rights reserved.				FSS2 A 06/17

LOGO

Franklin Templeton Investments

Gain From Our Perspective^®

Dear Shareholder:

During the 12 months ended April 30, 2017, the global economy expanded amid a stronger recovery in several developed markets and encouraging economic data in certain emerging markets. Improving growth expectations led to higher interest rates. In this environment, global government bonds, as measured by the Citigroup World Government Bond Index, recorded modest losses in U.S. dollar and local currency terms.

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 B. Jamieson

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			8

Your Fund’s Expenses			11

Financial Highlights and Statement of Investments			12

Financial Statements			26

Notes to Financial Statements			30

Report of Independent Registered Public Accounting Firm			45

Tax Information			46

Board Members and Officers			47

Shareholder Information			52

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

We are pleased to bring you Franklin Flexible Alpha Bond Fund’s annual report for the fiscal year ended April 30, 2017.

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 global debt obligations of any credit quality, maturity or duration, all varieties of fixed income, variable rate and floating rate debt securities and investments, 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 delivered a +2.22% cumulative total return. In comparison, the LIBOR USD 3-Month Rate Index posted a +0.39% 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 8.

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*

4/30/17


	% of Total Net Assets
Investment-Grade Corporate Securities		25.5%
Residential Mortgage-Backed Securities		22.2%
Collateralized Loan Obligations		9.7%
Municipal Bonds		6.6%
Commercial Mortgage-Backed Securities		6.6%
Cash & Cash Equivalents		6.6%
Covered Bonds		5.8%
U.S. Treasuries		4.9%
Asset-Backed Securities		4.1%
Floating Rate Loans		3.9%
International Bonds		2.6%
High Yield Corporate Securities		1.3%
Other		-0.1%
Interest-Rate Derivatives		-40.0%

*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 expanded during the 12 months under review. The economy strengthened in 2016’s third quarter, but moderated in the next two quarters, largely due to declines in private inventory investment and government spending. The manufacturing sector generally expanded and the services sector also continued to grow. The unemployment rate decreased from 5.0% in April 2016 to 4.4% at period-end.² Monthly retail sales were volatile, but grew during most of the period. Annual inflation as measured by the Consumer Price Index, generally increased during the period.

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 17.



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FRANKLIN FLEXIBLE ALPHA BOND FUND

Distributions*

5/1/16–4/30/17


	Distributions per Share (cents)
Month	Class A		Class C		Class R		Class R6		Advisor Class
May		1.0180		0.6150		0.6960		1.0770		1.0342
June		0.3727		0.2379		0.2670		0.3790		0.3793
July		0.3835		0.2480		0.2780		0.3900		0.3900
August		0.3873		0.2338		0.2730		0.3980		0.3941
September		0.6832		0.3944		0.4640		0.6990		0.6964
October		0.4992		0.2583		0.5080		0.5100		0.5080
November		0.7502		0.4642		1.2610		0.7500		0.7444
December^**		12.6841		12.5626		12.6920		12.6920		12.6889
January		1.2636		0.8202		1.2751		1.2840		1.2793
February		1.2238		0.8307		1.2340		1.2400		1.2379
March		1.6597		1.1970		1.6711		1.6850		1.6763
April		0.8000		0.5174		0.0370		0.8290		0.8217
Total		21.7253		18.3795		20.6562		21.9330		21.8505

*The distribution amount is the sum of all distributions to shareholders for the period shown and includes only net investment income. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

**Includes an additional 12.37 cent per share distribution to meet excise tax requirements.

After maintaining its target interest rate in the 0.25%–0.50% range for nearly a year, the U.S. Federal Reserve (Fed), at its December meeting, increased its target range for the federal funds rate to 0.50%–0.75%, as policymakers noted improvement in U.S. labor market and inflation. The Fed kept its interest rate unchanged at its February meeting, but incoming economic data, along with statements by Fed officials in late February and early March, heightened many investors’ expectations for a March interest-rate hike. The Fed, at its March meeting, made the widely anticipated increase in its federal funds target rate to 0.75%–1.00%.

The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period. Treasury yields declined earlier in the period due to negative interest rates in Japan and Europe, central banks’ purchases of government bonds and the U.K.’s historic referendum to leave the European Union in June 2016 (also known as “Brexit”). Geopolitical tensions in the Middle East and the Korean peninsula pulled the yield further down. However, the yield rose in October due to positive economic data and signals from the Fed about the possibility of an increase in interest rates in the near term. The yield further increased in November and December, amid a bond market sell-off, based on investor expectations that possible expansionary fiscal policies under new U.S. President Donald Trump could lead to a stronger economy and higher inflation.

Overall, the U.S. Treasury yield rose from 1.83% at the beginning of the period to 2.29% at period-end.

Currency Composition*

4/30/17


	% of Total Net Assets
North America		102.6%
U.S. Dollar		103.2%
Canadian Dollar		-0.6%
Latin America & Caribbean		0.4%
Mexican Peso		0.6%
Chilean Peso		-0.2%
Asia		-0.8%
Indian Rupee		0.5%
Indonesian Rupiah		0.2%
Japanese Yen		-0.3%
Singapore Dollar		-0.5%
South Korean Won		-0.7%
Europe		-1.3%
Norwegian Krone		0.2%
Swedish Krona		0.0%**
Euro		-1.0%
British Pound		-0.5%
Australia & New Zealand		-1.0%
Australian Dollar		-1.0%

*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% of total net assets.

During the period under review, global financial markets were broadly influenced by accommodative monetary policies of various global central banks, improved commodity prices and generally encouraging economic data across regions. Investor optimism about pro-growth policies in the U.S. as well as hopes of tax reforms under the Trump administration, the results of the first round of presidential elections in France, encouraging corporate earnings reports, and a deal by major oil producing countries in December to curb oil production also supported global equity markets. However, investors expressed concerns about the timing and economic effects of Brexit and the U.S. executive order banning entry from some Muslim-majority countries. Other headwinds included the



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health of European banks; elections in Europe, particularly in France; and geopolitical tensions in certain regions.

Investment Strategy

The Fund seeks to generate returns from various sources, other than solely from interest rates, 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 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; municipal securities; and derivatives and other instruments with similar economic characteristics, or that provide exposure, to such debt securities.

Manager’s Discussion

During the period under review, the Fund posted a positive total return. The Fund’s spread sector exposure was the primary contributor to performance, driven mainly by the Fund’s exposure to residential mortgage-backed securities (RMBS), investment-grade corporate bonds, floating rate bank loans (including collateralized loan obligations), commercial mortgage-backed securities (CMBS) and the Fund’s exposure to Treasury inflation-protected securities (TIPS). The Fund’s basis trade positions (taking opposing long and short positions in the two securities to profit from the convergence of their values) was another positive source of alpha (excess return). In addition, the Fund’s yield curve and duration positioning, as well as foreign currency exposure, also contributed to results. In contrast, the Fund’s exposure to the corporate high yield sector was the primary detractor from performance over the period.

What is the yield curve?

The yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares three-month, two-year and 30-year U.S. Treasury debt.

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, the Fund’s risk profile was maintained at a conservative level. We remained overweighted to the investment-grade corporate bond sector as well as securitized sectors including RMBS and CMBS. We continued to find what we considered value in credit hedged corporate positions as well. 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 collateralized loan obligations. We also retained positions in TIPS and municipal bonds. Overall, portfolio duration remained relatively neutral toward U.S. interest-rate and non-U.S. duration positions. The portfolio maintained an overweighting to the U.S. dollar versus a basket of developed market and commodity-related currencies, although its various currency positions did not represent a significant portion of the Fund’s risk allocation.

The Fund utilized derivatives, including currency forward contracts, government bond futures, credit default swaps, total return swaps and options, principally as a tool for efficient portfolio management and to manage overall portfolio risk. A majority of the exposures were used to hedge various beta risks including interest rates, credit and currency. Additionally, derivatives were used to more efficiently achieve various exposures including expressing directional currency views and select credit exposures. 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. Furthermore, the option positions may provide a tail-risk (the risk of an investment moving more than three standard deviations from its current price) hedge in the portfolio to help minimize lower performance during more extreme market environments, when investors seek to reduce risk. Overall, the portfolio continued to meet its risk-adjusted return target and remained in the lower end of our targeted risk range.

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.



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FRANKLIN FLEXIBLE ALPHA BOND FUND

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 futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

What 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.

Thank you for your participation in Franklin Flexible Alpha Bond Fund. We look forward to serving your future investment needs.


		David Yuen, CFA, FRM

		Michael J. Materasso

		Portfolio Management Team

CFA^® is a trademark owned by CFA Institute.



6	Annual Report	franklintempleton.com

FRANKLIN FLEXIBLE ALPHA BOND FUND



franklintempleton.com	Annual Report	7

FRANKLIN FLEXIBLE ALPHA BOND FUND

Performance Summary as of April 30, 2017

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 4/30/171

Cumulative total return excludes sales charges. Average annual total return include maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 4.25% and the minimum is 0%. Class A: 4.25% 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

A
1-Year	+2.22%	-2.14%
Since Inception (8/3/15)	+1.87%	-1.40%

Advisor
1-Year	+2.13%	+2.13%
Since Inception (8/3/15)	+1.81%	+1.03%


	Distribution Rate⁴		30-Day Standardized Yield⁵
Share Class	Distribution Rate⁴		(with waiver)		(without waiver)
A		0.94%		1.66%		-0.47%
Advisor		1.01%		1.77%		-0.47%

See page 10 for Performance Summary footnotes.



8	Annual Report	franklintempleton.com

FRANKLIN FLEXIBLE ALPHA BOND FUND

PERFORMANCE SUMMARY

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

Class A (8/3/15–4/30/17)

LOGO

Advisor Class (8/3/15–4/30/17)

LOGO

See page 10 for Performance Summary footnotes.



franklintempleton.com	Annual Report	9

FRANKLIN FLEXIBLE ALPHA BOND FUND

PERFORMANCE SUMMARY

Distributions (5/1/16–4/30/17)


Share Class	Net Investment Income
A		$0.217253
C		$0.183795
R		$0.206562
R6		$0.219330
Advisor		$0.218505

Total Annual Operating Expenses⁷


Share Class	With Waiver		Without Waiver
A		1.12%	4.13%
Advisor		0.87%	3.88%

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. 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 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. Investments in foreign securities involve risks such as currency fluctuations, and political and economic 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.

2. Cumulative total return represents the change in value of an investment over the period 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. 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 4/30/17.

5. 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.

6. 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.

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.



10	Annual Report	franklintempleton.com

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 (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,010.60	$3.69	$1,021.12	$3.71	0.74%
C	$1,000	$1,006.50	$6.82	$1,018.00	$6.85	1.37%
R	$1,000	$1,010.30	$4.49	$1,020.33	$4.51	0.90%
R6	$1,000	$1,009.60	$3.54	$1,021.27	$3.56	0.71%
Advisor	$1,000	$1,009.60	$3.59	$1,021.22	$3.61	0.72%

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



franklintempleton.com	Annual Report	11

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Flexible Alpha Bond Fund


	Year Ended April 30,
	2017			2016^a
Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.88			$10.00

Income from investment operations^b:

Net investment income		0.180			0.099

Net realized and unrealized gains (losses)		0.017			(0.123	)

Total from investment operations		0.197			(0.024	)

Less distributions from net investment income		(0.217	)		(0.096	)

Net asset value, end of year		$ 9.86			$ 9.88

Total return^c		2.22%			(0.34)%

Ratios to average net assets^d

Expenses before waiver and payments by affiliates		3.17%			3.47%

Expenses net of waiver and payments by affiliates^e		0.67%			0.84%

Net investment income		1.83%			1.37%

Supplemental data

Net assets, end of year (000’s)		$10,443			$10,200

Portfolio turnover rate		90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^f		57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^fSee Note 1(d) 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,
	2017			2016^a
Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.86			$ 10.00

Income from investment operations^b:

Net investment income		0.130			0.072

Net realized and unrealized gains (losses)		(0.006	)		(0.131	)

Total from investment operations		0.124			(0.059	)

Less distributions from net investment income		(0.184	)		(0.081	)

Net asset value, end of year		$ 9.80			$ 9.86

Total return^c		1.47%			(0.69)%

Ratios to average net assets^d

Expenses before waiver and payments by affiliates		3.88%			3.98%

Expenses net of waiver and payments by affiliates^e		1.38%			1.34%

Net investment income		1.12%			0.87%

Supplemental data

Net assets, end of year (000’s)		$245			$204

Portfolio turnover rate		90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^f		57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^fSee Note 1(d) 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,
	2017			2016^a
Class R

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$9.86			$10.00

Income from investment operations^b:

Net investment income		0.112			0.072

Net realized and unrealized gains (losses)		0.095			(0.127	)

Total from investment operations		0.207			(0.055	)

Less distributions from net investment income		(0.207	)		(0.085	)

Net asset value, end of year		$9.86			$9.86

Total return^c		2.21%			(0.65)%

Ratios to average net assets^d

Expenses before waiver and payments by affiliates		3.36%			3.84%

Expenses net of waiver and payments by affiliates^e		0.86%			1.22%

Net investment income		1.64%			0.99%

Supplemental data

Net assets, end of year (000’s)		$60			$10

Portfolio turnover rate		90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^f		57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^cTotal return is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^fSee Note 1(d) 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,
	2017			2016^a
Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$ 9.88			$10.00

Income from investment operations^b:

Net investment income		0.177			0.108

Net realized and unrealized gains (losses)		0.022			(0.124	)

Total from investment operations		0.199			(0.016	)

Less distributions from net investment income		(0.219	)		(0.104	)

Net asset value, end of year		$ 9.86			$ 9.88

Total return^c		2.03%			(0.15)%

Ratios to average net assets^d

Expenses before waiver and payments by affiliates		5.23%			3.72%

Expenses net of waiver and payments by affiliates^e		0.71%			0.71%

Net investment income		1.79%			1.50%

Supplemental data

Net assets, end of year (000’s)		$10			$10

Portfolio turnover rate		90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^f		57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^cTotal return is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^fSee Note 1(d) regarding mortgage dollar rolls.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \|	Annual Report	15

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Flexible Alpha Bond Fund (continued)


	Year Ended April 30,
	2017			2016^a
Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$9.88			$10.00

Income from investment operations^b:

Net investment income		0.166			0.107

Net realized and unrealized gains (losses)		0.023			(0.129	)

Total from investment operations		0.189			(0.022	)

Less distributions from net investment income		(0.219	)		(0.098	)

Net asset value, end of year		$9.85			$9.88

Total return^c		2.13%			(0.31)%

Ratios to average net assets^d

Expenses before waiver and payments by affiliates		3.22%			3.34%

Expenses net of waiver and payments by affiliates^e		0.72%			0.71%

Net investment income		1.78%			1.50%

Supplemental data

Net assets, end of year (000’s)		$232			$344

Portfolio turnover rate		90.37%			40.12%

Portfolio turnover rate excluding mortgage dollar rolls^f		57.79%			30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

^cTotal return is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^fSee Note 1(d) regarding mortgage dollar rolls.



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

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Flexible Alpha Bond Fund


	Country		Shares			Value

Management Investment Companies (Cost $195,215) 1.8%
Diversified Financials 1.8%
PowerShares Senior Loan Portfolio ETF		United States		8,265		$	192,409


			Principal
			Amount*
Corporate Bonds 38.4%
Banks 11.8%
^aBanco Popular Espanol SA, secured note, Reg S, 1.00%, 3/03/22		Spain		100,000	EUR		110,822
Bank of America Corp., senior bond, 5.50%, 12/04/19		United States		75,000	GBP		108,328
Bank of Nova Scotia, secured note, 1.875%, 4/26/21		Canada		100,000			98,726
Citigroup Inc., senior note, 2.65%, 10/26/20		United States		50,000			50,469
HSBC USA Inc., senior note, 2.00%, 8/07/18		United States		100,000			100,280
Intesa Sanpaolo SpA, senior note, 3.875%, 1/15/19		Italy		200,000			204,613
JPMorgan Chase & Co., senior note, 2.25%, 1/23/20		United States		100,000			100,457
PHH Corp., senior note, 7.375%, 9/01/19		United States		200,000			217,500
Royal Bank of Canada, secured note, 2.10%, 10/14/20		Canada		100,000			100,026
^bThe Toronto-Dominion Bank, secured note, 144A, 2.25%, 3/15/21		Canada		200,000			200,366

							1,291,587

Consumer Durables & Apparel 3.4%
CalAtlantic Group Inc., senior note, 8.375%, 5/15/18		United States		250,000			265,625
KB Home, senior note, 8.00%, 3/15/20		United States		100,000			113,125

							378,750

Diversified Financials 6.8%
^b AIG Global Funding,
secured note, 144A, 1.90%, 10/06/21		United States		50,000			48,570
secured note, 144A, 2.70%, 12/15/21		United States		100,000			99,859
American Airlines Pass Through Trust, first lien, 2016-2, AA, 3.20%, 6/15/28		United States		50,000			49,063
^bAthene Global Funding, secured note, 144A, 2.75%, 4/20/20		United States		50,000			50,066
Capital One Financial Corp., senior note, 3.20%, 2/05/25		United States		100,000			97,181
^cDeutsche Bank AG, senior note, FRN, 2.362%, 8/20/20		Germany		100,000			100,361
^cThe Goldman Sachs Group Inc., senior note, FRN, 2.331%, 9/15/20		United States		100,000			101,579
Morgan Stanley, senior note, 2.65%, 1/27/20		United States		100,000			101,387
Springleaf Finance Corp., senior note, 6.00%, 6/01/20		United States		100,000			102,750

							750,816

Energy 1.0%
Anadarko Petroleum Corp., senior bond, 3.45%, 7/15/24		United States		50,000			49,436
Sabine Pass Liquefaction LLC, first lien, 5.625%, 4/15/23		United States		50,000			55,209

							104,645

Food & Staples Retailing 1.4%
The Kroger Co., senior note, 3.40%, 4/15/22		United States		50,000			51,423
Walgreen Co., senior bond, 3.10%, 9/15/22		United States		100,000			101,733

							153,156


Food, Beverage & Tobacco 0.9%
Altria Group Inc., senior bond, 4.25%, 8/09/42		United States		100,000			100,309

Health Care Equipment & Services 2.3%
Stryker Corp., senior note, 2.00%, 3/08/19		United States		50,000			50,191
Tenet Healthcare Corp., senior note, 5.50%, 3/01/19		United States		150,000			152,250
^bUniversal Health Services Inc., first lien, 144A, 3.75%, 8/01/19		United States		50,000			50,938

							253,379



franklintempleton.com	Annual Report	17

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*			Value

Corporate Bonds (continued)
Household & Personal Products 0.5%
Avon Products Inc., senior note, 6.50%, 3/01/19		United States		50,000		$	52,284

Insurance 1.6%
^bJackson National Life Global Funding,
secured note, 144A, 2.25%, 4/29/21		United States		50,000			49,524
secured note, 144A, 2.10%, 10/25/21		United States		25,000			24,527
^bPrincipal Life Global Funding II, senior secured note, 144A, 2.625%, 11/19/20		United States		100,000			101,107

							175,158

Materials 1.4%
EI du Pont de Nemours & Co., senior note, 2.20%, 5/01/20		United States		50,000			50,099
Reynolds Group Holdings Inc., senior bond, 8.125%, 6/15/17		United States		100,000			101,000

							151,099

Media 0.9%
Viacom Inc., senior bond, 3.125%, 6/15/22		United States		100,000			100,064

Pharmaceuticals, Biotechnology & Life Sciences 0.9%
Baxalta Inc., senior note, 3.60%, 6/23/22		United States		100,000			103,007

Technology Hardware & Equipment 2.3%
Cisco Systems Inc., senior note, 2.20%, 9/20/23		United States		100,000			97,969
^bDiamond 1 Finance Corp./Diamond 2 Finance Corp., senior secured note, first lien, 144A, 3.48%, 6/01/19		United States		50,000			51,170
^bSanmina Corp., senior note, first lien, 144A, 4.375%, 6/01/19		United States		100,000			102,750

							251,889

Telecommunication Services 0.9%
AT&T Inc., senior note, 3.95%, 1/15/25		United States		100,000			101,426

Transportation 1.4%
FedEx Corp., senior bond, 3.20%, 2/01/25		United States		50,000			50,539
XPO CNW Inc., senior bond, 7.25%, 1/15/18		United States		100,000			103,500

							154,039

Utilities 0.9%
Dominion Resources Inc., senior bond, 3.90%, 10/01/25		United States		50,000			51,567
The Southern Co., senior bond, 3.25%, 7/01/26		United States		50,000			48,760

							100,327

Total Corporate Bonds (Cost $4,160,327)							4,221,935

Foreign Government and Agency Securities 3.1%
^bThe Export-Import Bank of China, senior note, 144A, 2.50%, 7/31/19		China		200,000			202,250
Government of Indonesia, senior bond, FR70, 8.375%, 3/15/24		Indonesia		263,000,000	IDR		21,214
^aUnited Kingdom Treasury Bond, Reg S, 2.00%, 9/07/25		United Kingdom		85,000	GBP		119,974

Total Foreign Government and Agency Securities (Cost $345,844)							343,438

U.S. Government and Agency Securities (Cost $571,472) 5.3%
^d U.S. Treasury Note, Index Linked, 0.125%, 1/15/23		United States		583,560			585,076



18	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)


	Country		Principal Amount*		Value

Asset-Backed Securities and Commercial Mortgage-Backed Securities 33.0%
Banks 0.6%
^cCitigroup Commercial Mortgage Trust, 2007-C6, AM, FRN, 5.701%, 12/10/49		United States		20,000	$	20,263
^cImpac Secured Assets CMN Owner Trust, 2004-4, M1, FRN, 1.756%, 2/25/35		United States		50,000		49,300

						69,563

Diversified Financials 28.4%
^cAmerican Express Credit Account Secured Note Trust, 2012-4, B, FRN, 1.544%, 5/15/20		United States		100,000		100,141
Banc of America Commercial Mortgage Trust, 2015-UBS7, A4, 3.705%, 9/15/48		United States		100,000		105,065
^b,cBlueMountain CLO Ltd., 2013-3A, A, 144A, FRN, 2.439%, 10/29/25		United States		6,437		6,440
^cCapital One Multi-Asset Execution Trust, 2004-B3, B3, FRN, 1.724%, 1/18/22		United States		150,000		150,755
^b,cCarlyle Global Market Strategies CLO Ltd., 2014-3A, A1AR, 144A, FRN, 2.32%, 7/27/26		Cayman Islands		150,000		150,225
^b,cCent CLO, 2013-17A, A1, 144A, FRN, 2.339%, 1/30/25		United States		40,000		40,079
^cCOBALT CMBS Commercial Mortgage Trust, 2007-C2, AMFX, FRN, 5.526%, 4/15/47		United States		2,551		2,571
^b,cColony American Homes, 2015-1A, A, 144A, FRN, 2.194%, 7/17/32		United States		108,457		108,780
^c,eCOMM Mortgage Trust, 2014-UBS4, XA, IO, FRN, 1.398%, 8/10/47		United States		340,047		20,371
^cConseco Finance Securitizations Corp., 2002-2, M1, FRN, 7.424%, 3/01/33		United States		86,691		96,009
^bCore Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34		United States		30,000		30,834
^b,cDryden 31 Senior Loan Fund, 2014-31A, AR, 144A, FRN, 2.238%, 4/18/26		Cayman Islands		150,000		149,820
^b,cDryden 34 Senior Loan Fund, 14-34A, AR, 144A, FRN, 2.318%, 10/15/26		Cayman Islands		90,000		90,032
^b,cEaton Vance CDO Ltd., 2014-1A, AR, 144A, FRN, 2.358%, 7/15/26		United States		24,000		24,011
^b,cEleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.555%, 9/10/35		United States		100,000		104,107
^cFHLMC Structured Agency Credit Risk Debt Notes,
2015-DNA1, M2, FRN, 2.841%, 10/25/27		United States		250,000		256,069
2016-DNA1, M1, FRN, 2.441%, 7/25/28		United States		128,871		129,439
2016-HQA3, M1, FRN, 1.791%, 3/25/29		United States		239,316		240,299
^cFNMA Connecticut Avenue Securities,
2013-C01, M1, FRN, 2.991%, 10/25/23		United States		42,298		42,801
2014-C02, 2M1, FRN, 1.941%, 5/25/24		United States		21,485		21,531
2014-C02, 2M2, FRN, 3.591%, 5/25/24		United States		40,000		41,615
2014-C03, 1M2, FRN, 3.991%, 7/25/24		United States		50,000		52,637
2014-C04, 1M1, FRN, 5.891%, 11/25/24		United States		60,000		68,499
2014-C04, 2M2, FRN, 5.991%, 11/25/24		United States		46,304		52,000
2015-C01, 1M2, FRN, 5.291%, 2/25/25		United States		44,540		48,666
2015-C01, 2M2, FRN, 5.541%, 2/25/25		United States		62,401		67,755
2015-C02, 1M2, FRN, 4.991%, 5/25/25		United States		9,216		9,998
2015-C02, 2M2, FRN, 4.991%, 5/25/25		United States		22,478		24,125
2015-C03, 1M2, FRN, 5.991%, 7/25/25		United States		49,730		55,219
2015-C03, 2M2, FRN, 5.991%, 7/25/25		United States		50,000		55,718
2017-C01, 1B1, FRN, 6.741%, 7/25/29		United States		33,000		35,283
^b,cGalaxy XV CLO Ltd., 2013-15A, A, 144A, FRN, 2.408%, 4/15/25		United States		99,000		99,195
^b,cInvitation Homes Trust,
2015-SFR1, A, 144A, FRN, 2.444%, 3/17/32		United States		95,754		96,026
2015-SFR2, A, 144A, FRN, 2.344%, 6/17/32		United States		97,732		98,047



franklintempleton.com	Annual Report	19

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)
^cIXIS Real Estate Capital Trust, 2005-HE4, A3, FRN, 1.671%, 2/25/36		United States		124	$	124
^c,eJPMDB Commercial Mortgage Securities Trust, 2017-C5, XA, IO, FRN, 1.184%, 3/15/50		United States		199,927		15,097
^b,cMadison Park Funding XVIII Ltd., 2015-18A, C, 144A, FRN, 4.156%, 10/21/26		United States		100,000		100,967
^b,cOctagon Investment Partners XXIII Ltd.,
2015-1A, A1, 144A, FRN, 2.578%, 7/15/27		United States		18,490		18,545
2015-1A, A2, 144A, FRN, 2.578%, 7/15/27		United States		17,554		17,607
^b,cPPM Grayhawk CLO Ltd., 07-1A, B, 144A, FRN, 1.858%, 4/18/21		United States		43,216		43,248
^b,cResource Capital Corp. Ltd., 2015-CRE4, A, 144A, FRN, 2.394%, 8/15/32		United States		40,697		40,758
^cThornburg Mortgage Securities Trust, 2005-1, A3, FRN, 3.073%, 4/25/45		United States		36,813		36,838
^b,cTowd Point Mortgage Trust,
2016-3, A1, 144A, FRN, 2.25%, 4/25/56		United States		80,574		80,247
2016-5, A1, 144A, FRN, 2.50%, 10/25/56		United States		93,428		93,408

						3,121,001

Real Estate 4.0%
^bBAMLL Commercial Mortgage Securities Trust, 2012-PARK, A, 144A, 2.959%, 12/10/30		United States		100,000		101,872
^bColony MFM Trust, 2014-1, A, 144A, 2.543%, 4/20/50		United States		73,720		73,440
^b,cSWAY Residential Trust, 2014-1, A, 144A, FRN, 2.294%, 1/17/32		United States		68,728		69,096
^b,cTricon American Homes Trust,
2015-SFR1, A, 144A, FRN, 2.244%, 5/17/32		United States		91,661		91,894
2015-SFR1, C, 144A, FRN, 2.894%, 5/17/32		United States		100,000		99,852

						436,154

Total Asset-Backed Securities and Commercial Mortgage- Backed Securities (Cost $3,588,053)						3,626,718


Municipal Bonds 5.4%
California Statewide CDA, PCR, Southern California Edison Co., Mandatory Put 12/01/23, Refunding, Series D, 2.625%, 11/01/33		United States		5,000		5,136
Cincinnati GO, Various Purpose, Improvement and Refunding, Series A, 5.00%, 12/01/25		United States		100,000		120,453
Citizens Property Insurance Corp. Revenue, Coastal Account, senior secured, Series A1, 5.00%, 6/01/22		United States		125,000		143,568
Clark County School District GO, Refunding, Series D, 5.00%, 6/15/23		United States		25,000		29,471
Colorado State Board of Governors University Enterprise System Revenue, Green Bonds, Series E-2, 5.00%, 3/01/25		United States		100,000		120,110
Denver City and County Airport System Revenue, Refunding, Series A, 5.00%, 11/15/25		United States		5,000		6,049
Minnesota State GO, Refunding, Series D, 5.00%, 8/01/25		United States		5,000		6,139
New York State Dormitory Authority State Personal Income Tax Revenue, General Purpose, Refunding, Series A, 5.00%, 2/15/25		United States		15,000		17,893
Providence St. Joseph Health Obligated Group, 2.746%, 10/01/26		United States		15,000		14,371
Teays Valley Local School District GO, Pickaway Fairfield and Franklin Counties, Refunding, 4.00%, 12/01/26		United States		100,000		110,707
Texas State GO, Transportation Commission-Highway Improvement, Series A, 5.00%, 4/01/21		United States		5,000		5,701
University of Texas Revenue, Series J, 5.00%, 8/15/25		United States		15,000		18,342

Total Municipal Bonds (Cost $580,745)						597,940



20	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

Exchange

Number of
Contracts

Value

Options Purchased 0.1%

Calls - Exchange-Traded

Options on Interest Rate Futures 0.0%^†

Euro-Bund, May Strike Price 161 EUR, Expires 5/26/17

EUX

1,514

Counterparty

Notional
Amount*

Calls - Over-the-Counter

Currency Options 0.0%^†

USD/JPY, June Strike Price 113 JPY, Expires 6/26/17

BOFA

27,000

207

Puts - Over-the-Counter

Credit Default Swaptions 0.1%

Buy protection on CDX.NA.HY.28, Premium Rate 5.00%, Strike Price $104, Expires
9/20/17

CITI

300,000

3,393

Buy protection on CDX.NA.IG.28, Premium Rate 1.00%, Strike Price $80, Expires
9/20/17

JPHQ

400,000

908

4,301

Interest Rate Swaptions 0.0%^†

Receive float 3 month USD LIBOR, pay fixed 2.26%, Expires 7/21/17

HSBK

400,000

823

Receive float 3 month USD LIBOR, pay fixed 2.30%, Expires 5/08/17

CITI

300,000

Receive float 3 month USD LIBOR, pay fixed 2.45%, Expires 5/02/17

JPHQ

300,000

Receive float 3 month USD LIBOR, pay fixed 2.51%, Expires 7/21/17

HSBK

200,000

1,086

Receive float 3 month USD LIBOR, pay fixed 2.65%, Expires 5/08/17

CITI

200,000

1,915

Total Options Purchased (Cost $17,721)

7,937

Total Investments before Short Term Investments (Cost $9,459,377)

9,575,453

Country

Shares

Short Term Investments (Cost $1,305,181) 11.9%

Money Market Funds 11.9%

^f,gInstitutional Fiduciary Trust Money Market Portfolio, 0.37%

United States

1,305,181

Total Investments (Cost $10,764,558) 99.0%

10,880,634

Options Written 0.0%

—

Other Assets, less Liabilities 1.0%

109,535

Net Assets 100.0%

10,990,169

Counterparty

Notional
Amount*

^hOptions Written (Premiums received $957) 0.0%

Puts - Over-the-Counter

Interest Rate Swaptions 0.0%

Receive float 3 month USD LIBOR, pay fixed 2.45%, Expires 5/02/17

JPHQ

300,000

—



franklintempleton.com	Annual Report	21

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

^†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, 2017, the aggregate value of these securities was $230,796, representing 2.1% of net assets.

^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, 2017, the aggregate value of these securities was $2,809,657, representing 25.6% of net assets.

^cThe coupon rate shown represents the rate at period end.

^dPrincipal amount of security is adjusted for inflation. See Note 1(f).

^eInvestment in an interest-only security entities holders to receive only the interest payments on the underlying mortgages. The principal amount shown is the notional amount of the underlying mortgages. The rate represents the coupon rate.

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

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

^hSee Note 1(c) regarding written options.



22	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

At April 30, 2017, the Fund had the following futures contracts outstanding. See Note 1(c).

Futures Contracts


Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation

Interest Rate Contracts
Australian 10 Yr. Bond		Long		1	$	97,127		6/15/17		$2,857		$ —
Canadian 10 Yr. Bond		Long		1		102,250		6/21/17		2,291		—
Long Gilt		Long		1		166,148		6/28/17		2,848		—
U.S. Treasury 2 Yr. Note		Short		11		2,382,703		6/30/17		—		(715	)
U.S. Treasury 5 Yr. Note		Short		17		2,012,906		6/30/17		—		(5,622	)
U.S. Treasury 10 Yr. Note		Short		8		1,005,750		6/21/17		—		(5,646	)
U.S. Treasury 10 Yr. Ultra		Short		1		135,453		6/21/17		—		(1,190	)
U.S. Treasury 30 Yr. Bond		Short		1		152,969		6/21/17		—		(1,104	)

Total Futures Contracts										$7,996		$(14,277	)

Net unrealized appreciation (depreciation)												$ (6,281	)

At April 30, 2017, 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
British Pound		UBSW		Sell		12,000	$	14,749		5/05/17	$	—	$	(798	)
Swedish Krona		UBSW		Buy		200,000		22,316		5/05/17		272		—
Norwegian Krone		JPHQ		Buy		185,000		21,423		5/11/17		133		—
Swedish Krona		JPHQ		Sell		195,000		21,553		5/11/17		—		(477	)
British Pound		UBSW		Sell		13,000		16,242		5/16/17		—		(606	)
Australian Dollar		UBSW		Buy		53,000		39,868		6/13/17		—		(218	)
Australian Dollar		UBSW		Sell		206,000		155,147		6/13/17		1,034		—
British Pound		UBSW		Sell		109,000		136,786		6/22/17		—		(4,632	)
Indian Rupee		RBS		Buy		3,400,000		49,722		7/05/17		2,776		—
South African Rand		RBS		Buy		220,000		16,956		7/05/17		—		(690	)
South African Rand		RBS		Sell		220,000		15,983		7/05/17		—		(283	)
Canadian Dollar		RBS		Sell		91,000		68,472		7/10/17		1,725		—
Euro		UBSW		Buy		39,000		41,705		7/10/17		939		—
Euro		UBSW		Sell		129,000		138,640		7/10/17		—		(2,415	)
Chilean Peso		UBSW		Sell		13,000,000		19,713		7/14/17		288		—
Singapore Dollar		RBS		Sell		77,000		54,206		7/14/17		—		(953	)
Mexican Peso		RBS		Buy		1,930,000		92,967		7/17/17		8,183		—
Mexican Peso		RBS		Sell		700,000		35,907		7/17/17		—		(780	)
Japanese Yen		UBSW		Sell		2,365,074		21,486		7/19/17		189		—
South Korean Won		RBS		Sell		85,000,000		74,405		8/03/17		—		(412	)
Japanese Yen		JPHQ		Buy		35,719,260		324,259		12/17/18		6,864		—
Japanese Yen		JPHQ		Sell		35,719,260		324,187		12/17/18		—		(6,936	)
British Pound		JPHQ		Sell		86,300		115,081		8/15/19		235		—

Total Forward Exchange Contracts											$	22,638	$	(19,200	)

Net unrealized appreciation (depreciation)											$	3,438

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.



franklintempleton.com	Annual Report	23

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Flexible Alpha Bond Fund (continued)

At April 30, 2017, the Fund had the following credit default swap contracts outstanding. See Note 1(c).

Credit Default Swap Contracts


Description	Periodic Payment Rate			Counter- party/ Exchange		Notional Amount^a		Expiration Date		Unamortized Upfront Payments (Receipts)			Unrealized Appreciation		Unrealized Depreciation			Value			Rating^b


Centrally Cleared Swap Contracts
Contracts to Buy Protection
Single Name
Olin Corp.		1.00	%		ICE		$10,000		12/20/21		$ 535			$ —		$ (301	)		$ 234


Contracts to Sell Protection^c
Single Name
Freeport-McMoRan Inc.		1.00	%		ICE		15,000		12/20/21		(889	)		—		(313	)		(1,202	)		BB-

Total Centrally Cleared Swap Contracts											$ (354	)		$ —		$ (614	)		$ (968	)


OTC Swap Contracts
Contracts to Buy Protection
Single Name
The AES Corp.		5.00	%		JPHQ		$30,000		6/20/21		$ (2,763	)		$ —		$ (1,378	)		$ (4,141	)
The AES Corp.		5.00	%		JPHQ		35,000		6/20/22		(4,857	)		—		(143	)		(5,000	)
Avon Products Inc.		5.00	%		JPHQ		50,000		3/20/19		(3,361	)		—		(376	)		(3,737	)
Best Buy Co. Inc.		5.00	%		CITI		10,000		6/20/22		(1,617	)		—		(167	)		(1,784	)
CalAtlantic Group Inc.		5.00	%		BZWS		250,000		6/20/18		(11,388	)		—		(3,749	)		(15,137	)
KB Home		5.00	%		JPHQ		100,000		3/20/20		(10,284	)		—		(1,481	)		(11,765	)
Olin Corp.		1.00	%		GSCO		25,000		6/20/21		1,668			—		(1,514	)		154
Pactiv LLC		5.00	%		CITI		100,000		6/20/17		(258	)		—		(973	)		(1,231	)
PHH Corp.		5.00	%		BZWS		200,000		9/20/19		(2,144	)		—		(14,946	)		(17,090	)
Sanmina Corp.		5.00	%		BZWS		100,000		6/20/19		(9,206	)		—		(1,333	)		(10,539	)
Springleaf Finance Corp.		5.00	%		GSCO		100,000		6/20/20		(3,791	)		—		(2,881	)		(6,672	)
Staples Inc.		1.00	%		CITI		10,000		6/20/22		615			—		(86	)		529
Tenet Healthcare Corp.		5.00	%		BZWS		100,000		3/20/19		(4,271	)		—		(601	)		(4,872	)
Tenet Healthcare Corp.		5.00	%		GSCO		50,000		3/20/19		(2,089	)		—		(347	)		(2,436	)
Universal Health Services Inc.		5.00	%		BZWS		50,000		9/20/19		(4,962	)		—		(827	)		(5,789	)
XPO CNW Inc.		5.00	%		JPHQ		100,000		3/20/18		(2,144	)		—		(2,167	)		(4,311	)

Contracts to Sell Protection^c
Single Name
American Tower Corp.		1.00	%		GSCO		100,000		3/20/21		(1,456	)		86		—			(1,370	)		BBB-
Calpine Corp.		5.00	%		JPHQ		30,000		6/20/21		1,460			1,708		—			3,168			B
Calpine Corp.		5.00	%		JPHQ		35,000		6/20/22		2,606			146		—			2,752			B
Enterprise Products Operating LLC		1.00	%		GSCO		50,000		3/20/23		(740	)		469		—			(271	)		BBB+
Government of Mexico		1.00	%		JPHQ		10,000		9/20/20		(142	)		250		—			108			BBB+
Simon Property Group LP		1.00	%		CITI		20,000		6/20/22		67			13		—			80			A
Sprint Communications Inc.		5.00	%		JPHQ		12,000		9/20/20		-			1,269		—			1,269			B

Traded Index
^dCitibank Bespoke 58 IG/42 HY Equity Tranche 0-3% Index		0.00	%		CITI		10,000		6/20/19		(2,532	)		523		—			(2,009	)		Non-
																						Investment
																						Grade



24	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	Counter- party/ Exchange	Notional Amount^a	Expiration Date	Unamortized Upfront Payments (Receipts)			Unrealized Appreciation		Unrealized Depreciation		Value			Rating^b

OTC Swap Contracts (continued)
Contracts to Sell Protection^c(continued)
Traded Index (continued)
^dCitibank Bespoke Dec-18 Hong Kong Tranche Index	1.00%	CITI	$ 30,000	12/20/18	$	(1,054	)	$	629	$	—	$	(425	)		Non-

																Investment
																Grade
Total OTC Swap Contracts					$	(62,643	)	$	5,093	$	(32,969)	$	(90,519	)

Total Credit Default Swap Contracts					$	(62,997	)	$	5,093	$	(33,583)	$	(91,487	)

Net unrealized appreciation (depreciation)										$	(28,490)

^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.

^cThe Fund enters contracts to sell protection to create a long credit position. Performance triggers include default, bankruptcy or restructuring for single name swaps, and failure to pay or bankruptcy of the underlying securities for traded index swaps.

^dRepresents a custom index comprised of a basket of underlying issuers.

At April 30, 2017, the Fund had the following total return swap contracts outstanding. See Note 1(c).

Total Return Swap Contracts

Notional

Expiration

Unrealized

Underlying Instruments

Financing Rate

Counterparty

Value

Date

Appreciation

Depreciation

OTC Swap Contracts

Long

Receive Markit iBoxx USD Liquid Leveraged Loan Index

Pay 3-Month BBA USD
LIBOR

GSCO

$160,000

9/20/17

$ —

$(1,123

)

At April 30, 2017, the Fund had the following cross-currency swap contracts outstanding. See Note 1(c).

Cross Currency Swap Contracts

Counter-

Notional

Expiration

Unrealized

Description

party

Amount

Date

Appreciation

Depreciation

OTC Swap Contracts

Receive Floating Quarterly 3-month USD BBA LIBOR +1.53%

CITI

106,500

USD

3/03/22

$ —

$(1,498

)

Pay Fixed Annual 1.00%

100,000

EUR

See Notes 6 and 8 regarding investment transactions and other derivative information, respectively.

See Abbreviations on page 44.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	25

FRANKLIN STRATEGIC SERIES

Financial Statements

Statement of Assets and Liabilities

April 30, 2017

Franklin Flexible Alpha Bond Fund


Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	9,459,377
Cost - Non-controlled affiliates (Note 3f)		1,305,181

Total cost of investments	$	10,764,558

Value - Unaffiliated issuers	$	9,575,453
Value - Non-controlled affiliates (Note 3f)		1,305,181

Total value of investments		10,880,634
Cash		21
Foreign currency, at value (cost $531)		532
Receivables:
Investment securities sold		243,809
Capital shares sold		5,000
Interest		59,129
Affiliates		212,117
Due from brokers		56,366
Variation margin		2,455
OTC swap contracts (upfront payments $7,033)		6,416
Unrealized appreciation on OTC forward exchange contracts		22,638
Unrealized appreciation on OTC swap contracts		5,093

Total assets		11,494,210

Liabilities:
Payables:
Investment securities purchased		295,131
Capital shares redeemed		136
Distribution fees		490
Transfer agent fees		30
Professional fees		62,039
Distributions to shareholders		7,984
OTC swap contracts (upfront receipts $103,985)		69,059
Options written, at value (premiums received $957)		—
Unrealized depreciation on OTC forward exchange contracts		19,200
Unrealized depreciation on OTC swap contracts		35,590
Accrued expenses and other liabilities		14,382

Total liabilities		504,041

Net assets, at value	$	10,990,169

Net assets consist of:
Paid-in capital	$	11,090,099
Distributions in excess of net investment income		(33,482	)
Net unrealized appreciation (depreciation)		77,613
Accumulated net realized gain (loss)		(144,061	)

Net assets, at value	$	10,990,169



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

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

April 30, 2017

Franklin Flexible Alpha Bond Fund


Class A:
Net assets, at value			$10,442,840

Shares outstanding			1,058,939

Net asset value per share^a			$9.86

Maximum offering price per share (net asset value per share ÷ 95.75%)			$10.30

Class C:
Net assets, at value			$ 245,207

Shares outstanding			25,011

Net asset value and maximum offering price per share^a			$9.80

Class R:
Net assets, at value			$ 60,116

Shares outstanding			6,100

Net asset value and maximum offering price per share			$9.86

Class R6:
Net assets, at value			$ 9,856

Shares outstanding			1,000

Net asset value and maximum offering price per share			$9.86

Advisor Class:
Net assets, at value			$ 232,150

Shares outstanding			23,558

Net asset value and maximum offering price per share			$9.85

^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, 2017

Franklin Flexible Alpha Bond Fund


Investment income:
Dividends:
Unaffiliated issuers	$	7,044
Non-controlled affiliates (Note 3f)		778
Interest		265,440

Total investment income		273,262

Expenses:
Management fees (Note 3a)		60,038
Distribution fees: (Note 3c)
Class C		1,436
Class R		37
Transfer agent fees: (Note 3e)
Class A		1,782
Class C		37
Class R		5
Class R6		201
Advisor Class		52
Custodian fees (Note 4)		789
Reports to shareholders		14,364
Registration and filing fees		70,687
Professional fees		75,530
Amortization of offering costs (Note 1g)		57,329
Pricing fees		43,956
Other		20,772

Total expenses		347,015
Expense reductions (Note 4)		(32	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(272,355	)

Net expenses		74,628

Net investment income		198,634

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		10,134
Written options		17,433
Foreign currency transactions		(16,328	)
Futures contracts		(22,375	)
Swap contracts		4,357

Net realized gain (loss)		(6,779	)

Net change in unrealized appreciation (depreciation) on:
Investments		(8,443	)
Translation of other assets and liabilities denominated in foreign currencies		38,733
Written options		(4,539	)
Futures contracts		12,608
Swap contracts		(12,554	)

Net change in unrealized appreciation (depreciation)		25,805

Net realized and unrealized gain (loss)		19,026

Net increase (decrease) in net assets resulting from operations	$	217,660



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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Flexible Alpha Bond Fund


	Year Ended April 30,
	2017			2016^a
Increase (decrease) in net assets:
Operations:
Net investment income	$	198,634		$	104,677
Net realized gain (loss)		(6,779	)		(178,148	)
Net change in unrealized appreciation (depreciation)		25,805			51,808

Net increase (decrease) in net assets resulting from operations		217,660			(21,663	)

Distributions to shareholders from:
Net investment income:
Class A		(228,517	)		(98,481	)
Class C		(3,853	)		(1,140	)
Class R		(1,041	)		(85	)
Class R6		(220	)		(105	)
Advisor Class		(6,710	)		(1,870	)

Total distributions to shareholders		(240,341	)		(101,681	)

Capital share transactions: (Note 2)
Class A		263,641			10,322,042
Class C		42,152			204,600
Class R		50,835			10,000
Class R6		—			10,000
Advisor Class		(111,111	)		344,035

Total capital share transactions		245,517			10,890,677

Net increase (decrease) in net assets		222,836			10,767,333
Net assets:
Beginning of year		10,767,333			—

End of year	$	10,990,169		$	10,767,333

Undistributed net investment income included in net assets:
End of year	$	—		$	17,623

Distributions in excess of net investment income included in net assets:
End of year	$	(33,482	)	$	—

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \|	Annual Report	29

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 nine 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 financial statements of the remaining funds in the Trust are presented separately. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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

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.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond 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. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 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

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



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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)

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 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



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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 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.

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. Certain option contracts are marked-to-market daily and the daily change in fair value is accounted for as variation margin payable or receivable in the Statement of Assets and Liabilities. 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 Notes 6 and 8 regarding investment transactions and other derivative information, respectively.

d. 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	33

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. 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.

e. 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, 2017, 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 each tax jurisdiction’s statute of limitation.

f. 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. Distributions to shareholders are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.

Net investment income, not including 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.

g. Offering Costs

Offering costs are amortized on a straight line basis over twelve months.

h. Accounting Estimates



34	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

i. Guarantees and Indemnifications

that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. Shares of Beneficial Interest

At April 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Year Ended April 30,
	2017						2016^a
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold		33,507		$	331,682			1,055,699		$	10,552,738
Shares issued in reinvestment of distributions		1,227			12,100			319			3,152
Shares redeemed		(8,135	)		(80,141	)		(23,678	)		(233,848	)
Net increase (decrease)		26,599		$	263,641			1,032,340		$	10,322,042
Class C Shares:
Shares sold		20,061		$	197,723			44,749		$	442,689
Shares issued in reinvestment of distributions		393			3,853			108			1,064
Shares redeemed		(16,105	)		(159,424	)		(24,195	)		(239,153	)
Net increase (decrease)		4,349		$	42,152			20,662		$	204,600
Class R Shares:
Shares sold		5,015		$	50,000			1,000		$	10,000
Shares issued in reinvestment of distributions		85			835			—			—
Net increase (decrease)		5,100		$	50,835			1,000		$	10,000
Class R6 Shares:
Shares sold		—		$	—			1,000		$	10,000
Net increase (decrease)		—		$	—			1,000		$	10,000
Advisor Class Shares:
Shares sold		4,318		$	42,500			45,294		$	447,368
Shares issued in reinvestment of distributions		662			6,531			177			1,748
Shares redeemed		(16,269	)		(160,142	)		(10,624	)		(105,081	)
Net increase (decrease)		(11,289	)	$	(111,111	)		34,847		$	344,035

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.



franklintempleton.com	Annual Report	35

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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

For the year ended April 30, 2017, the effective investment management fee rate was 0.550% of the Fund’s average daily net assets.

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.

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	%



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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	$	139
CDSC retained	$	155

e. Transfer Agent Fees

For the year ended April 30, 2017, the Fund paid transfer agent fees of $2,077, of which $1,459 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 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, 2017, 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		Investment Income		Realized Gain (Loss)		% of Affiliated Fund Shares Outstanding Held at End of Year
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%		2,033,538		3,825,783		(4,554,140	)		1,305,181	$	1,305,181		$778		$–		0.0	%^a

^aRounds to less than 0.1%.

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 the 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 do not exceed 0.85% and Class R6 does not exceed 0.71% 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, 2017. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

h. Other Affiliated Transactions

At April 30, 2017, Franklin Resources, Inc. owned 89.5% of the Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.



franklintempleton.com	Annual Report	37

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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, 2017, the custodian fees were reduced as noted in the the Statement of Operations.

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any.

At April 30, 2017, the capital loss carryforwards were as follows:


Capital loss carryforwards:
Short term	$	124,272
Long term		31,677

Total capital loss carryforwards	$	155,949

During the year ended April 30, 2017, the Fund utilized $20,029 of capital loss carryforwards.

The tax character of distributions paid during the years ended April 30, 2017 and 2016, was as follows:

2017

2016

Distributions paid from ordinary income

240,341

101,681

At April 30, 2017, the cost of investments, net unrealized appreciation (depreciation) and undistributed ordinary income for income tax purposes were as follows:


Cost of investments	$	10,797,787

Unrealized appreciation	$	148,068
Unrealized depreciation		(65,221	)

Net unrealized appreciation (depreciation)	$	82,847

Distributable earnings - undistributed ordinary income	$	4,212

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of foreign currency transactions, bond discounts and premiums and financial futures transactions.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2017, aggregated $10,030,852 and $8,520,014, respectively.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

Transactions in options written during the year ended April 30, 2017, were as follows:


	Options
	Notional Amount			Premiums
Options outstanding at April 30, 2016	$	1,470,000		$	9,744
Options written		3,450,000			13,161
Options expired		(2,720,000	)		(11,352	)
Options exercised		—			—
Options closed		(1,900,000	)		(10,596	)
Options outstanding at April 30, 2017	$	300,000		$	957

See Notes 1(c) and 8 regarding derivative financial instruments and other derivative information, respectively.

7. Credit Risk

At April 30, 2017, the Fund had 17.7% of its portfolio invested in high yield 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.

8. Other Derivative Information

At April 30, 2017, the Fund’s investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts

Not Accounted for as

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

3,429

Variation margin

7,996

Variation margin

14,277

Unrealized depreciation on OTC swap contracts

2,621

Foreign exchange contracts

Investments in securities, at value

207

Unrealized appreciation on OTC

22,638

Unrealized depreciation on OTC

19,200

forward exchange contracts

Credit contracts

Investments in securities, at value

4,301

Variation margin

614

OTC swap contracts (premium paid)

6,416

OTC swap contracts (premium received)

69,059

Unrealized appreciation on OTC swap contracts

5,093

Unrealized depreciation on OTC swap contracts

32,969

Totals

50,080

138,740

^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.



franklintempleton.com	Annual Report	39

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

8. Other Derivative Information (continued)

For the year ended April 30, 2017, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:


Derivative Contracts Not Accounted for as Hedging Instruments	Statement of Operations Locations	Net Realized Gain (Loss) for the Year			Statement of Operations Locations	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		$ 21,316	^a	Investments		$(10,765	)^a
	Written options		1,211		Written options		257
	Futures contracts		(22,375	)	Futures contracts		12,608
	Swap contracts		30,692		Swap contracts		4,544
Foreign exchange contracts	Investments		(6,375	)^a	Investments		5,057	^a
	Written options		2,609		Written options		(2,560	)
	Foreign currency transactions		(15,333	)^b	Translation of other assets and liabilities denominated in foreign currencies		39,335	^b
Credit contracts	Investments		(38,707	)^a	Investments		3,424	^a
	Written options		13,613		Written options		(2,236	)
	Swap contracts		(26,335	)	Swap contracts		(17,098	)
Totals			$(39,684	)			$ 32,566

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statements of Operations.

^bForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies in the Statement of Operations.

For the year ended April 30, 2017, the average month end fair value of derivatives represented 1.0% of average month end net assets. The average month end number of open derivatives contracts for the year was 81.

At April 30, 2017, the Fund’s OTC derivative assets and liabilities are as follows:


	Gross and Net Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities
	Assets^a		Liabilities^a
Derivatives
Forward exchange contracts		$22,638		$ 19,200
Options purchased		6,423		—
Swap contracts		11,509		104,649
Total		$40,570		$123,849

^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.



40	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

At April 30, 2017, 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
			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		Cash Collateral Received		Net Amount (Not less than zero)
Counterparty
BOFA		$ 207		$ —			$ —		$ —		$ 207
CITI		5,242		(5,242	)		—		—		—
GSCO		2,223		(2,223	)		—		—		—
HSBK		1,909		—			—		—		1,909
JPHQ		15,583		(15,583	)		—		—		—
RBS		12,684		(3,118	)		—		—		9,566
UBSW		2,722		(2,722	)		—		—		—
Total		$40,570		$(28,888	)		$ —		$ —		$11,682

At April 30, 2017, 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
			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
BZWS		$ 53,427		$ —			$ —		$ —		$53,427
CITI		8,185		(5,242	)		—		—		2,943
GSCO		13,941		(2,223	)		—		—		11,718
JPHQ		36,509		(15,583	)		—		—		20,926
RBS		3,118		(3,118	)		—		—		—
UBSW		8,669		(2,722	)		—		—		5,947
Total		$123,849		$(28,888	)		$ —		$ —		$94,961

See Notes 1(c) and 6 regarding derivative financial instruments and investment transactions, respectively.

See Abbreviations on page 44.

9. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 9, 2018. 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.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

9. Credit Facility (continued)

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, 2017, 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.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

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

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



42	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

A summary of inputs used as of April 30, 2017, 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:
Management Investment Companies	$	192,409	$	—		$	—	$	192,409
Corporate Bonds		—		4,221,935			—		4,221,935
Foreign Government and Agency Securities		—		343,438			—		343,438
U.S. Government and Agency Securities		—		585,076			—		585,076
Asset-Backed Securities and Commercial
Mortgage-Backed Securities		—		3,626,718			—		3,626,718
Municipal Bonds		—		597,940			—		597,940
Options Purchased		1,514		6,423			—		7,937
Short Term Investments		1,305,181		—			—		1,305,181
Total Investments in Securities	$	1,499,104	$	9,381,530		$	—	$	10,880,634

Other Financial Instruments:
Futures Contracts	$	7,996	$	—		$	—	$	7,996
Forward Exchange Contracts		—		22,638			—		22,638
Swap Contracts		—		5,093			—		5,093
Total Other Financial Instruments	$	7,996	$	27,731		$	—	$	35,727

Liabilities:
Other Financial Instruments:
Options Written	$	—	$	—	^a	$	—	$	—
Futures Contracts		14,277		—			—		14,277
Forward Exchange Contracts		—		19,200			—		19,200
Swap Contracts		—		36,204			—		36,204
Total Other Financial Instruments	$	14,277	$	55,404		$	—	$	69,681

^aIncludes securities determined to have no value at April 30, 2017.

11. New Accounting Pronouncements

In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

12. Investment Company Reporting Modernization



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Flexible Alpha Bond Fund (continued)

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.

Abbreviations


Counterparty/Exchange		Currency		Selected Portfolio
BOFA	Bank of America, N.A.	EUR	Euro	BBA	British Bankers Association
BZWS	Barclays Bank PLC	GBP	British Pound	CDA	Community Development Authority/Agency
CITI	Citigroup, Inc.	IDR	Indonesian Rupiah	CDO	Collateralized Debt Obligation
EUX	Eurex	JPY	Japanese Yen	CLO	Collateralized Loan Obligation
GSCO	Goldman Sachs Group, Inc.	USD	United States Dollar	ETF	Exchange Traded Fund
HSBK	HSBC Bank PLC			FHLMC	Federal Home Loan Mortgage Corp
ICE	Intercontinental Exchange			FNMA	Federal National Mortgage Association
JPHQ	JP Morgan Chase & Co.			FRN	Floating Rate Note
RBS	Royal Bank of Scotland PLC			GO	General Obligation
UBSW	UBS AG			IO	Interest Only
				LIBOR	London InterBank Offered Rate
				MFM	Multi-Family Mortgage
				PCR	Pollution Control Revenue
				SFR	Single Family Revenue


Index Abbreviations
CDX.NA.HY.Series number		CDX North America High Yield Index
CDX.NA.IG.Series number		CDX North America Investment Grade Index



44	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 the Franklin Flexible Alpha Bond Fund:

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Flexible Alpha Bond Fund (the “Fund”) as of April 30, 2017, the results of its operations, the changes in its net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities as of April 30, 2017 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

June 20, 2017



franklintempleton.com	Annual Report	45

Tax Information (unaudited)

Under Section 871(k)(1)(C) of the Internal Revenue Code (Code), the Fund hereby reports the maximum amount allowable but no less than $191,386 as interest related dividends for purposes of the tax imposed under Section 871(a)(1)(A) of the Code for the fiscal year ended April 30, 2017.



46	Annual Report	franklintempleton.com

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 Investments 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)	Trustee	Since 1991	142	Bar-S Foods (meat packing company)
One Franklin Parkway				(1981-2010).
San Mateo, CA 94403-1906

Principal Occupation During at Least the Past 5 Years:
Director of various companies; and formerly, Director, RBC Holdings, Inc. (bank holding company) (until 2002); and President, Chief Executive
Officer and Chairman of the Board, General Host Corporation (nursery and craft centers) (until 1998).

Mary C. Choksi (1950) 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 H.J. Heinz Company (processed foods and allied products) (1998-2006)

Principal Occupation During at Least the Past 5 Years:
Senior Advisor, Strategic Investment Group (investment management group) (2015-present); director of various companies; and formerly, 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	Trustee	Since 1998	142	Hess Corporation (exploration and refining 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	142	Boeing Capital Corporation (aircraft financing) (2006-2013).

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



franklintempleton.com	Annual Report	47

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	142	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; 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).

John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 2006 and Lead Independent Trustee since 2008	116	None

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

Interested Board Members and Officers


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	158	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 44 of the investment companies in Franklin Templeton Investments; 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	142	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.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.

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 Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.



48	Annual Report	franklintempleton.com

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
Laura F. Fergerson (1962) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments.

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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

Steven J. Gray (1955) 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, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments.

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

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

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 45 of the investment companies in Franklin Templeton Investments.

Christopher J. Molumphy (1962) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2000	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 some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.



franklintempleton.com	Annual Report	49

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
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 Investments; 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 45 of the investment companies in Franklin Templeton Investments.

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 Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2006	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

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 and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.

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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

Note 3: Effective November 1, 2016, Frank Olson ceased to be a trustee of the trust.



50	Annual Report	franklintempleton.com

Interested Board Members and Officers (continued)



franklintempleton.com	Annual Report	51

FRANKLIN STRATEGIC SERIES

FRANKLIN FLEXIBLE ALPHA BOND FUND

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 18, 2017 (Meeting), the Board of Trustees (Board) of Franklin Strategic Series, 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 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.

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 U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board noted management’s continual 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, derivatives and liquidity risk management.

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 Franklin Templeton Investments (FTI) organization.

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



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FRANKLIN FLEXIBLE ALPHA BOND FUND

SHAREHOLDER INFORMATION

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 alternative credit focus funds underlying variable insurance products (VIPs). The Fund commenced operations on August 3, 2015, and thus has been in operation for less than two years. The Board noted that the Fund’s annualized income return and annualized total return for the one-year period were below the medians of its Performance Universe. The Board concluded that the Fund’s performance was acceptable given its short period of operation. In doing so, the Board noted that the Fund’s Performance Universe represents diverse risk profiles.

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 that at its February meeting each year, it receives an annual report 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 ratio and median Management Rate, respectively, of other mutual funds deemed comparable to and with a similar expense structure as the Fund selected by Broadridge (Expense Group). Broadridge fee and expense data is based upon information taken from the 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 10 other alternative credit focus funds underlying VIPs. 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 fair and 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 provided by each Manager that addresses the overall profitability of FTI’s U.S. 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, 2016, 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, the Fund’s independent registered public accounting firm has been engaged by each Manager to periodically review the reasonableness of 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 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



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FRANKLIN STRATEGIC SERIES

FRANKLIN FLEXIBLE ALPHA BOND FUND

SHAREHOLDER INFORMATION

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, quality and extent 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 a 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 on Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission’s website at sec.gov. The filed form may also be viewed and copied at the Commission’s Public Reference Room in Washington, DC. Information regarding the operations of the Public Reference Room may be obtained by calling (800) SEC-0330.

Householding of Reports and Prospectuses

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



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		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.


© 2017 Franklin Templeton Investments. All rights reserved.		953 A 06/17

LOGO

Franklin Templeton Investments

Gain From Our Perspective^®

Dear Shareholder:

During the 12 months ended April 30, 2017, mostly upbeat economic data, improved U.S. corporate earnings and supportive monetary policies were positives for the securities markets. After maintaining its target interest rate in the 0.25%–0.50% range for nearly a year, the U.S. Federal Reserve (Fed) increased its target range for the federal funds rate twice, in December 2016 and March 2017, to 0.75%–1.00%, noting improved employment and higher inflation. The 10-year U.S. Treasury yield began the period at 1.83% and ended the period at 2.29%. In this environment, U.S. stocks, as measured by the Standard & Poor’s 500^® Index, generated a +17.92% total return for the 12-month period. Investment-grade bonds, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, posted a +0.83% total return.¹

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 B. Jamieson

President and Chief Executive Officer – Investment

Management

Franklin Strategic Series

1. Source: Morningstar.

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


		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			38

Notes to Consolidated Financial Statements			42

Report of Independent Registered Public Accounting Firm			59

Board Members and Officers			60

Shareholder Information			65

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



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Annual Report

Franklin Strategic Income Fund

We are pleased to bring you Franklin Strategic Income Fund’s annual report for the fiscal year ended April 30, 2017.

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 and floating rate income securities, including bonds, corporate loans (and loan participations), mortgage-backed securities and other asset-backed securities and convertible securities.

Performance Overview

The Fund’s Class A shares delivered a +7.50% 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, generated a +0.83% 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, produced a +6.42% total return.² You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

Economic and Market Overview

The U.S. economy expanded during the 12 months under review. The economy strengthened in 2016’s third quarter, but moderated in the next two quarters, largely due to declines in private inventory investment and government spending. The manufacturing sector generally expanded and the services sector also continued to grow. The unemployment rate decreased from 5.0% in April 2016 to 4.4% at period-end.³ Monthly retail sales were volatile, but grew during most of the period. Annual inflation, as measured by the Consumer Price Index, increased from 1.1% to 2.2% during the period.

After maintaining its target interest rate in 0.25%–0.50% range for nearly a year, the U.S. Federal Reserve (Fed), at its December meeting, increased its target range for the federal funds rate to 0.50%–0.75%, as policymakers noted improvement in U.S. labor market and inflation. The Fed kept its interest rate unchanged at its February meeting, but incoming economic data, along with statements by Fed officials in late February and early March, heightened many investors’ expectations for a March interest-rate hike. The Fed, at its March meeting, made the widely anticipated increase in its federal funds target rate to 0.75%–1.00%.

The 10-year Treasury yield, which moves inversely to its price, shifted throughout the period. Treasury yields declined earlier in the period due to negative interest rates in Japan and Europe, central banks’ purchases of government bonds and the U.K.’s historic referendum to leave the European Union in June 2016 (also known as “the Brexit”). Geopolitical tensions in the Middle East and the Korean peninsula pulled the yield further down. However, the yield rose in October due to positive economic data and signals from the Fed about the possibility of an increase in interest rates in the near term. The yield further increased in November and December, amid a bond market sell-off, based on investor expectations that possible expansionary fiscal policies under new U.S. President Donald

1. Source: Morningstar.

2. Source: Lipper, a Thomson Reuters Company. For the 12-month period ended April 30, 2017, this category consisted of 325 funds. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. Fund performance relative to the average may have differed if these or other factors had been considered. The indexes are unmanaged and include reinvestment of any income or distributions. 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.

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

Portfolio Composition*

Based on Total Net Assets


	4/30/17			4/30/16
High Yield Corporate Bonds		28.8%			28.6%
Investment-Grade Corporate Bonds		17.0%			10.3%
Floating-Rate Loans		16.6%			19.6%
Mortgage-Backed Securities		12.8%			8.5%
International Government & Agency Bonds		8.5%			14.5%
U.S. Treasury Securities		6.5%			4.2%
Collateral Loan Obiligations		4.1%			1.5%
Other		2.5%			1.4%
Asset-Backed Securities		2.3%			0.1%
Municipal Bonds		2.1%			1.1%
Commercial Mortgage-Backed Securities		2.0%			4.0%
Equities		0.0%	^**		0.2%
Short-Term Investments & Other Net Assets		-3.2%			6.0%

*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 compostion may not macth the SOI.

**Rounds to less than 0.1% of total net assets.

Trump could lead to a stronger economy and higher inflation. Overall, the U.S. Treasury yield rose from 1.83% at the beginning of the period to 2.29% at period-end.

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?

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.

Manager’s Discussion

For global fixed income markets, the first half of the 12 months under review were generally characterized by low levels of

What are swap agreements?

What is a futures contract?

What is an option?

volatility and an increase in risk appetite amid low and negative global interest rates. Interest rates fluctuated with rates moving marginally higher on the short end of the U.S. Treasury yield curve and rising on the longer end. Starting in the second half of the period, rising global bond yields accelerated over the rest of 2016, mainly due to Donald Trump’s U.S. presidential victory and speculation about the likelihood of new spending and tax cuts in 2017 to stimulate the U.S. economy. Investors reassessed their outlook on global inflation and interest rates, and upbeat U.S. economic data persuaded the Fed to raise rates twice during the remainder of the period. U.S. Treasury yields stayed relatively stable during the first four months of 2017, although they increased ahead of the Fed’s March rate hike. However, yields fell again after subsequent dovish statements from the Fed and the retraction of President Trump’s health care reform legislation. Outside the U.S., many major economies reduced or kept their interest rates untouched during the period.



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FRANKLIN STRATEGIC INCOME FUND

What is duration?

What is the yield curve?

In this environment, many global fixed income sectors outpaced U.S. Treasuries on a duration-matched basis. Corporate credit, particularly high yield bonds, were among the strongest performers, as were hard- and local-currency emerging market debt securities.

Distributions*

5/1/16–4/30/17


	Distributions per Share (cents)^**
Month	Class A		Class C		Class R		Class R6		Advisor Class
May		2.45		2.13		2.25		2.77		2.65
June		2.55		2.24		2.36		2.86		2.74
July		2.26		1.95		2.06		2.59		2.46
August		1.28		0.96		1.09		1.60		1.48
September		1.12		0.80		0.92		1.44		1.32
October		0.91		0.61		0.72		1.22		1.10
November		0.91		0.59		0.71		1.24		1.12
December		1.27		0.95		1.08		1.58		1.47
January		1.10		0.78		0.91		1.42		1.30
February		1.15		0.83		0.95		1.47		1.36
March		1.15		0.82		0.95		1.47		1.35
April		1.15		0.82		0.95		1.47		1.35
Total		17.30		13.48		14.95		21.13		19.70

*The distribution amount is the sum of all distributions to shareholders for the period shown and includes only net investment income. All Fund distributions will vary depending upon current market conditions and past distributions are not indicative of future trends.

**Distributions were reduced duirng the period to meet federal income tax and excise tax requirements as a result of the impact of net foreign currency losses.

During the period, the Fund’s overweighted exposure to corporate credit provided a significant boost to performance, with senior secured floating rate loans being the primary contributor. Additionally, our positions in foreign currencies also added to results. Non-U.S. duration exposure and

non-agency residential mortgage-backed securities (RMBS) also benefited returns. In contrast, our exposure to emerging market sovereign debt and non-U.S. dollar-denominated debt hurt performance. The Fund’s more defensive duration positioning on the U.S. yield curve also detracted.

Corporate credit fundamentals remained generally supportive and technical conditions continued to be strong as the low interest-rate backdrop provided strong demand for corporate credit. We remained allocated across spread sectors, both corporate and securitized. Over the period, we increased our exposure to high yield and investment-grade corporate credit, treasury inflation protected securities (TIPS) and fixed-rate agency mortgage-backed securities (MBS).

We pared our allocation to emerging market debt securities and commercial MBS debt. We continued to find what we considered opportunities in global bond markets outside the U.S, and maintained exposure to international bonds and currencies.

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


		Christopher J. Molumphy, CFA

		Roger A. Bayston, CFA

		Patricia O’Connor, CFA

		Portfolio Management Team

CFA^® is a trademark owned by CFA Institute.



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FRANKLIN STRATEGIC INCOME FUND



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FRANKLIN STRATEGIC INCOME FUND

Performance Summary as of April 30, 2017

Performance as of 4/30/17¹


Share Class	Cumulative Total Return²	Average Annual Total Return³

A
1-Year	+7.50%	+2.97%
5-Year	+18.46%	+2.54%
10-Year	+62.92%	+4.54%

Advisor
1-Year	+7.76%	+7.76%
5-Year	+19.93%	+3.70%
10-Year	+67.13%	+5.27%


	Distribution		30-Day Standardized Yield⁵
Share Class	Rate⁴		(with waiver)		(without waiver)
A		1.88%		3.70%		3.65%
Advisor		2.23%		4.11%		4.06%

See page 9 for Performance Summary footnotes.



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FRANKLIN STRATEGIC INCOME 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.

Class A (5/1/07–4/30/17)

LOGO

Advisor Class (5/1/07–4/30/17)

LOGO

See page 9 for Performance Summary footnotes.



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FRANKLIN STRATEGIC INCOME FUND

PERFORMANCE SUMMARY

Distributions (5/1/16–4/30/17)


Share Class	Net Investment Income
A		$0.1730
C		$0.1348
R		$0.1495
R6		$0.2113
Advisor		$0.1970

Total Annual Operating Expenses⁸


Share Class	With Waiver		Without Waiver
A		0.88%		0.92%
Advisor		0.63%		0.67%

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. 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.

4. 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 4/30/17.

6. 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.

7. 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 Incomes 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 4/30/17, there were 325 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.

8. 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 STRATEGIC INCOME 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 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$1,026.80	$4.12	$1,020.73	$4.11	0.82%
C	$1,000	$1,024.70	$6.12	$1,018.74	$6.06	1.22%
R	$1,000	$1,025.60	$5.37	$1,019.49	$5.36	1.07%
R6	$1,000	$1,028.80	$2.16	$1,022.66	$2.16	0.43%
Advisor	$1,000	$1,028.00	$2.87	$1,021.97	$2.86	0.57%

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



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FRANKLIN STRATEGIC SERIES

Consolidated Financial Highlights

Franklin Strategic Income Fund


	Year Ended April 30,
	2017			2016			2015			2014			2013
Class A

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$9.32			$10.04			$10.57			$10.86			$10.48

Income from investment operations^a:

Net investment income^b		0.39			0.42			0.42			0.44			0.45

Net realized and unrealized gains (losses)		0.30			(0.74	)		(0.30	)		(0.18	)		0.54

Total from investment operations		0.69			(0.32	)		0.12			0.26			0.99

Less distributions from:

Net investment income and net foreign currency gains		(0.17	)		(0.40	)		(0.55	)		(0.45	)		(0.57	)

Net realized gains		—			—			(0.10	)		(0.10	)		(0.04	)

Total distributions		(0.17	)		(0.40	)		(0.65	)		(0.55	)		(0.61	)

Net asset value, end of year		$9.84			$9.32			$10.04			$10.57			$10.86

Total return^c		7.50%			(3.14	)%		1.16%			2.52%			9.70%

Ratios to average net assets

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

Expenses net of waiver and payments by affiliates^d		0.82%			0.84%			0.85%			0.86%	^e		0.87%

Net investment income		4.08%			4.44%			4.03%			4.16%			4.21%

Supplemental data

Net assets, end of year (000’s)		$3,833,786			$4,500,752			$5,242,844			$5,182,490			$4,966,834

Portfolio turnover rate		140.83%			88.04%			72.51%			54.11%			47.27%

Portfolio turnover rate excluding mortgage dollar rolls^f		87.33%			48.33%			49.36%			54.11%			44.33%

^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.

^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%.

^fSee Note 1(h) 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,
	2017			2016			2015			2014			2013
Class C

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$9.31			$10.04			$10.57			$10.85			$10.48

Income from investment operations^a:

Net investment income^b		0.35			0.38			0.38			0.40			0.41

Net realized and unrealized gains (losses)		0.31			(0.75	)		(0.30	)		(0.17	)		0.53

Total from investment operations		0.66			(0.37	)		0.08			0.23			0.94

Less distributions from:

Net investment income and net foreign currency gains		(0.13	)		(0.36	)		(0.51	)		(0.41	)		(0.53	)

Net realized gains		—			—			(0.10	)		(0.10	)		(0.04	)

Total distributions		(0.13	)		(0.36	)		(0.61	)		(0.51	)		(0.57	)

Net asset value, end of year		$9.84			$9.31			$10.04			$10.57			$10.85

Total return^c		7.19%			(3.64	)%		0.76%			2.20%			9.17%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.28%			1.28%			1.26%			1.26%			1.27%

Expenses net of waiver and payments by affiliates^d		1.22%			1.24%			1.25%			1.26%	^e		1.27%

Net investment income		3.68%			4.04%			3.63%			3.76%			3.81%

Supplemental data

Net assets, end of year (000’s)		$1,385,981			$1,645,852			$2,070,739			$2,109,049			$2,108,962

Portfolio turnover rate		140.83%			88.04%			72.51%			54.11%			47.27%

Portfolio turnover rate excluding mortgage dollar rolls^f		87.33%			48.33%			49.36%			54.11%			44.33%

^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%.

^fSee Note 1(h) 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,
	2017			2016			2015			2014			2013
Class R

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$9.28			$10.01			$10.54			$10.82			$10.45

Income from investment operations^a:

Net investment income^b		0.37			0.39			0.39			0.41			0.42

Net realized and unrealized gains (losses)		0.31			(0.74	)		(0.29	)		(0.17	)		0.53

Total from investment operations		0.68			(0.35	)		0.10			0.24			0.95

Less distributions from:

Net investment income and net foreign currency gains		(0.15	)		(0.38	)		(0.53	)		(0.42	)		(0.54	)

Net realized gains		—			—			(0.10	)		(0.10	)		(0.04	)

Total distributions		(0.15	)		(0.38	)		(0.63	)		(0.52	)		(0.58	)

Net asset value, end of year		$9.81			$9.28			$10.01			$10.54			$10.82

Total return		7.38%			(3.50	)%		0.91%			2.36%			9.36%

Ratios to average net assets

Expenses before waiver and payments by affiliates		1.13%			1.13%			1.11%			1.11%			1.12%

Expenses net of waiver and payments by affiliates^c		1.07%			1.09%			1.10%			1.11%	^d		1.12%

Net investment income		3.83%			4.19%			3.78%			3.91%			3.96%

Supplemental data

Net assets, end of year (000’s)		$146,552			$181,671			$223,758			$227,359			$260,647

Portfolio turnover rate		140.83%			88.04%			72.51%			54.11%			47.27%

Portfolio turnover rate excluding mortgage dollar rolls^e		87.33%			48.33%			49.36%			54.11%			44.33%

^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%.

^eSee Note 1(h) 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,
	2017			2016			2015			2014^a
Class R6

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$9.33			$10.05			$10.58			$10.87

Income from investment operations^b:

Net investment income^c		0.43			0.46			0.46			0.49

Net realized and unrealized gains (losses)		0.31			(0.74	)		(0.30	)		(0.19	)

Total from investment operations		0.74			(0.28	)		0.16			0.30

Less distributions from:

Net investment income and net foreign currency gains		(0.21	)		(0.44	)		(0.59	)		(0.49	)

Net realized gains		—			—			(0.10	)		(0.10	)

Total distributions		(0.21	)		(0.44	)		(0.69	)		(0.59	)

Net asset value, end of year		$9.86			$9.33			$10.05			$10.58

Total return		8.03%			(2.76	)%		1.54%			2.90%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.48%			0.49%			0.48%			0.48%

Expenses net of waiver and payments by affiliates^d		0.42%			0.45%			0.47%			0.48%	^e

Net investment income		4.48%			4.83%			4.41%			4.54%

Supplemental data

Net assets, end of year (000’s)		$369,106			$286,503			$253,929			$247,007

Portfolio turnover rate		140.83%			88.04%			72.51%			54.11%

Portfolio turnover rate excluding mortgage dollar rolls^f		87.33%			48.33%			49.36%			54.11%

^aFor the year May 1, 2013 (effective date) to April 30, 2014.

^bThe amount shown for a share outstanding throughout the period may not correlate with the 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.

^cBased on average daily shares outstanding.

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

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

^fSee Note 1(h) regarding mortgage dollar rolls.



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,
	2017			2016			2015			2014			2013
Advisor Class

Per share operating performance

(for a share outstanding throughout the year)

Net asset value, beginning of year		$9.33			$10.05			$10.58			$10.86			$10.49

Income from investment operations^a:

Net investment income^b		0.42			0.44			0.44			0.47			0.48

Net realized and unrealized gains (losses)		0.30			(0.74	)		(0.29	)		(0.17	)		0.53

Total from investment operations		0.72			(0.30	)		0.15			0.30			1.01

Less distributions from:

Net investment income and net foreign currency gains		(0.20	)		(0.42	)		(0.58	)		(0.48	)		(0.60	)

Net realized gains		—			—			(0.10	)		(0.10	)		(0.04	)

Total distributions		(0.20	)		(0.42	)		(0.68	)		(0.58	)		(0.64	)

Net asset value, end of year		$9.85			$9.33			$10.05			$10.58			$10.86

Total return		7.76%			(2.89	)%		1.41%			2.87%			9.87%

Ratios to average net assets

Expenses before waiver and payments by affiliates		0.63%			0.63%			0.61%			0.61%			0.62%

Expenses net of waiver and payments by affiliates^c		0.57%			0.59%			0.60%			0.61%	^d		0.62%

Net investment income		4.33%			4.69%			4.28%			4.41%			4.46%

Supplemental data

Net assets, end of year (000’s)		$1,070,103			$904,899			$1,130,796			$1,010,755			$956,001

Portfolio turnover rate		140.83%			88.04%			72.51%			54.11%			47.27%

Portfolio turnover rate excluding mortgage dollar rolls^e		87.33%			48.33%			49.36%			54.11%			44.33%

^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%.

^eSee Note 1(h) 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, 2017

Franklin Strategic Income Fund


	Country		Shares/ Warrants		Value

Common Stocks and Other Equity Interests 1.2%
Consumer Services 0.4%
^a,b,cTurtle Bay Resort		United States		5,579,939	$	25,946,719

Energy 0.7%
^aChaparral Energy Inc., A		United States		448,417		11,210,425
^a,dChaparral Energy Inc., A, 144A		United States		3,418		86,719
^aChaparral Energy Inc., B		United States		94,305		2,357,625
^a,eCHC Group LLC		Cayman Islands		168,355		2,020,260
^aEnergy XXI Gulf Coast Inc.		United States		244,178		6,714,895
^aEnergy XXI Gulf Coast Inc., wts., 12/30/21		United States		47,227		247,942
^a,dHalcon Resources Corp.		United States		955,276		6,141,864
^aHalcon Resources Corp., wts., 9/09/20		United States		75,770		79,558
^aLinn Energy Inc.		United States		239,823		6,722,239
^aMidstates Petroleum Co. Inc.		United States		6,826		126,690
^a,fMidstates Petroleum Co. Inc., wts., 4/21/20		United States		48,362		4,072
^aPenn Virginia Corp.		United States		187,985		7,442,307
^aW&T Offshore Inc.		United States		936,100		1,909,644

						45,064,240

Materials 0.0%^†
^aVerso Corp., A		United States		38,905		236,153
^aVerso Corp., wts., 7/25/23		United States		4,095		614
^a,dWarrior Met Coal Inc.		United States		211,824		3,638,294

						3,875,061

Retailing 0.0%^†
^a,d Holdco 2, A		South Africa		125,940,079		94,224
^a,dHoldco 2, B		South Africa		12,532,822		9,377

						103,601

Transportation 0.0%^†
^a,f CEVA Holdings LLC		United States		1,570		313,994

Utilities 0.1%
Vistra Energy Corp.		United States		513,779		7,680,996

Total Common Stocks and Other Equity Interests (Cost $179,918,243)						82,984,611


Management Investment Companies 7.2%
Diversified Financials 7.2%
^gFranklin Lower Tier Floating Rate Fund		United States		25,361,119		267,559,803
^gFranklin Middle Tier Floating Rate Fund		United States		21,833,687		219,646,896

Total Management Investment Companies (Cost $470,958,729)						487,206,699

Convertible Preferred Stocks 0.0%^†
Transportation 0.0%^†
^a,fCEVA Holdings LLC, cvt. pfd., A-1		United States		62		20,150
^a,fCEVA Holdings LLC, cvt. pfd., A-2		United States		3,399		764,676

Total Convertible Preferred Stocks (Cost $5,149,789)						784,826



16	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value

Convertible Bonds (Cost $16,016,242) 0.2%
Energy 0.2%
CHC Group LLC/CHC Finance Ltd., cvt., zero cpn., 10/01/20		Cayman Islands		8,657,428		$	15,972,955

Corporate Bonds 46.2%
Automobiles & Components 1.2%
Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		35,000,000			36,132,950
Ford Motor Credit Co. LLC, senior note, 3.096%, 5/04/23		United States		20,400,000			20,103,404
The Goodyear Tire & Rubber Co., senior bond, 5.00%, 5/31/26		United States		19,400,000			19,957,750
senior note, 5.125%, 11/15/23		United States		5,400,000			5,694,192

							81,888,296

Banks 4.3%
Bank of America Corp., senior note, 6.40%, 8/28/17		United States		10,000,000			10,159,350
senior note, 7.75%, 4/30/18		United States		3,700,000	GBP		5,123,779
senior note, 5.65%, 5/01/18		United States		5,000,000			5,189,765
senior note, 3.50%, 4/19/26		United States		46,000,000			45,986,568
CIT Group Inc., senior note, 5.375%, 5/15/20		United States		6,900,000			7,443,375
senior note, 5.00%, 8/15/22		United States		18,000,000			19,409,400
Citigroup Inc., senior note, 3.875%, 10/25/23		United States		20,000,000			20,917,140
senior note, 3.30%, 4/27/25		United States		2,500,000			2,488,420
senior note, 3.40%, 5/01/26		United States		23,300,000			23,033,984
sub. bond, 5.50%, 9/13/25		United States		10,000,000			11,064,890
sub. note, 4.05%, 7/30/22		United States		5,000,000			5,242,230
JPMorgan Chase & Co., ^hjunior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual		United States		10,000,000			10,650,000
^hjunior sub. bond, X, 6.10% to 10/01/24, FRN thereafter, Perpetual .		United States		5,000,000			5,368,750
senior bond, 3.30%, 4/01/26		United States		10,000,000			9,892,550
senior bond, 3.20%, 6/15/26		United States		7,000,000			6,870,164
senior note, 4.25%, 10/15/20		United States		10,000,000			10,648,370
senior note, 3.25%, 9/23/22		United States		5,000,000			5,127,450
sub. note, 3.375%, 5/01/23		United States		10,000,000			10,081,650
sub. note, 3.875%, 9/10/24		United States		10,000,000			10,258,690
Royal Bank of Scotland Group PLC, sub. note, 5.125%, 5/28/24		United Kingdom		2,600,000			2,674,217
Wells Fargo & Co., ^hjunior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual		United States		21,000,000			22,286,250
senior note, 2.60%, 7/22/20		United States		10,000,000			10,129,200
senior note, 3.00%, 4/22/26		United States		36,000,000			34,864,020

							294,910,212

Capital Goods 1.3%
Aircastle Ltd., senior note, 4.125%, 5/01/24		United States		25,500,000			25,997,250
ⁱCortes NP Acquisition Corp., senior note, 144A, 9.25%, 10/15/24		United States		16,900,000			18,230,875
Navistar International Corp., senior bond, 8.25%, 11/01/21		United States		11,400,000			11,599,500
ⁱTerex Corp., senior note, 144A, 5.625%, 2/01/25		United States		4,600,000			4,709,250
TransDigm Inc., senior sub. bond, 6.50%, 7/15/24		United States		4,000,000			4,120,000
senior sub. bond, 6.50%, 5/15/25		United States		2,500,000			2,562,500
senior sub. bond, 6.375%, 6/15/26		United States		15,000,000			15,150,000
senior sub. note, 6.00%, 7/15/22		United States		4,000,000			4,130,000

							86,499,375



franklintempleton.com	Annual Report	17

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value

Corporate Bonds (continued)
Commercial & Professional Services 0.3%
United Rentals North America Inc., senior bond, 5.875%, 9/15/26		United States		20,500,000		$	21,704,375

Consumer Durables & Apparel 1.0%
ⁱHanesbrands Inc., senior bond, 144A, 4.875%, 5/15/26		United States		25,100,000			25,100,000
KB Home, senior bond, 7.50%, 9/15/22		United States		5,000,000			5,678,125
senior note, 7.00%, 12/15/21		United States		10,000,000			11,137,500
PulteGroup Inc., senior bond, 5.00%, 1/15/27		United States		24,600,000			24,999,750

							66,915,375

Consumer Services 2.1%
ⁱ1011778 BC ULC/New Red Finance Inc., secured note, second lien, 144A, 6.00%, 4/01/22		Canada		20,000,000			20,900,000
GLP Capital LP/GLP Financing II Inc., senior note, 5.375%, 4/15/26		United States		6,100,000			6,450,750
ⁱInternational Game Technology PLC, senior secured bond, 144A, 6.50%, 2/15/25		United States		13,200,000			14,503,500
senior secured note, 144A, 6.25%, 2/15/22		United States		20,500,000			22,419,415
ⁱKFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC, senior note, 144A, 5.00%, 6/01/24		United States		8,900,000			9,211,500
senior note, 144A, 5.25%, 6/01/26		United States		9,100,000			9,350,250
Marriott International Inc., senior bond, 3.75%, 10/01/25		United States		30,000,000			30,548,070
ⁱWynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		13,700,000			14,282,250
ⁱWynn Macau Ltd., senior note, 144A, 5.25%, 10/15/21		Macau		12,700,000			13,081,000

							140,746,735

Diversified Financials 2.8%
Capital One Financial Corp., senior note, 3.20%, 2/05/25		United States		20,000,000			19,436,240
^i,j,kEagle Holdings Co. II LLC, senior note, 144A, PIK, 7.625%, 5/15/22		United States		3,300,000			3,300,000
The Goldman Sachs Group Inc., senior note, 3.50%, 1/23/25		United States		33,800,000			34,004,051
senior note, 3.75%, 2/25/26		United States		15,000,000			15,266,745
ⁱLincoln Finance Ltd., senior secured note, 144A, 6.875%, 4/15/21		Netherlands		8,400,000	EUR		9,856,189
Morgan Stanley, senior note, 3.875%, 1/27/26		United States		43,100,000			44,144,184
sub. bond, 3.95%, 4/23/27		United States		10,000,000			10,062,330
Navient Corp., senior note, 5.875%, 3/25/21		United States		5,000,000			5,200,000
senior note, 6.625%, 7/26/21		United States		8,000,000			8,490,000
senior note, 6.125%, 3/25/24		United States		10,000,000			9,950,000
ⁱPark Aerospace Holdings Ltd., senior note, 144A, 5.25%, 8/15/22		Ireland		7,200,000			7,605,000
senior note, 144A, 5.50%, 2/15/24		Ireland		12,400,000			13,131,600
ⁱTransurban Finance Co. Pty. Ltd., 144A, 3.375%, 3/22/27		Australia		11,400,000			11,104,540

							191,550,879

Energy 3.9%
^c,lBreitBurn Energy Partners LP/BreitBurn Finance Corp., senior bond, 7.875%, 4/15/22		United States		12,500,000			6,156,250
ⁱCalifornia Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22		United States		7,852,000			6,075,485
ⁱCalumet Specialty Products Partners LP/Calumet Finance Corp., senior note, 144A, 11.50%, 1/15/21		United States		8,900,000			10,368,500



18	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

Corporate Bonds (continued)
Energy (continued)
ⁱCheniere Corpus Christi Holdings LLC, senior secured note, 144A, 7.00%, 6/30/24		United States		8,800,000	$	9,876,944
senior secured note, first lien, 144A, 5.875%, 3/31/25		United States		8,200,000		8,763,750
CONSOL Energy Inc., senior note, 5.875%, 4/15/22		United States		20,000,000		19,600,000
Energy Transfer Equity LP, senior note, first lien, 7.50%, 10/15/20		United States		11,000,000		12,450,625
Energy Transfer Partners LP, senior note, 5.20%, 2/01/22		United States		10,000,000		10,836,810
^i,jEnQuest PLC, 144A, PIK, 8.00%, 10/15/23		United Kingdom		12,000,395		9,628,841
^i,mGaz Capital SA, (OJSC Gazprom), loan participation, senior note, 144A, 3.85%, 2/06/20		Russia		20,000,000		20,366,000
Kinder Morgan Inc., senior bond, 4.30%, 6/01/25		United States		17,000,000		17,736,729
senior note, 7.00%, 6/15/17		United States		3,500,000		3,521,483
senior note, 6.50%, 9/15/20		United States		9,000,000		10,074,060
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21		United States		20,000,000		20,600,000
Regency Energy Partners LP/Regency Energy Finance Corp., senior bond, 5.50%, 4/15/23		United States		5,000,000		5,230,450
senior note, 5.875%, 3/01/22		United States		1,300,000		1,433,207
senior note, 5.00%, 10/01/22		United States		10,000,000		10,676,470
Sabine Pass Liquefaction LLC, first lien, 5.625%, 2/01/21		United States		20,000,000		21,767,820
first lien, 5.625%, 4/15/23		United States		6,200,000		6,845,947
senior secured note, first lien, 5.625%, 3/01/25		United States		5,000,000		5,474,455
Sanchez Energy Corp., senior note, 6.125%, 1/15/23		United States		6,000,000		5,549,940
^i,jW&T Offshore Inc., second lien, 144A, PIK, 10.75%, 5/15/20		United States		5,050,512		4,286,325
senior secured note, third lien, 144A, PIK, 10.00%, 6/15/21		United States		4,519,777		3,486,996
Weatherford International Ltd., senior note, 7.75%, 6/15/21		United States		9,000,000		9,630,000
senior note, 8.25%, 6/15/23		United States		10,500,000		11,405,625
ⁱWoodside Finance Ltd., senior note, 144A, 3.70%, 9/15/26		Australia		12,500,000		12,348,875

						264,191,587

Food & Staples Retailing 0.7%
Kroger Co., senior bond, 2.65%, 10/15/26		United States		15,300,000		14,266,975
Walgreens Boots Alliance Inc., senior note, 3.80%, 11/18/24		United States		30,000,000		30,871,950

						45,138,925

Food, Beverage & Tobacco 1.9%
Anheuser-Busch InBev Finance Inc., senior note, 3.30%, 2/01/23		Belgium		15,700,000		16,119,221
ⁱImperial Brands Finance PLC, senior note, 144A, 3.50%, 2/11/23		United Kingdom		20,400,000		20,783,214
ⁱJBS USA LLC/Finance Inc., senior bond, 144A, 5.875%, 7/15/24		United States		6,800,000		7,123,000
senior note, 144A, 8.25%, 2/01/20		United States		11,000,000		11,324,500
senior note, 144A, 5.75%, 6/15/25		United States		5,000,000		5,187,500
Kraft Heinz Foods Co., senior bond, 3.00%, 6/01/26		United States		25,400,000		24,188,014
ⁱLamb Weston Holdings Inc., senior note, 144A, 4.625%, 11/01/24		United States		6,500,000		6,727,500
senior note, 144A, 4.875%, 11/01/26		United States		16,500,000		17,056,875



franklintempleton.com	Annual Report	19

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

Corporate Bonds (continued)
Food, Beverage & Tobacco (continued)
ⁱPost Holdings Inc., senior note, 144A, 6.00%, 12/15/22		United States		10,000,000	$	10,712,500
senior note, 144A, 7.75%, 3/15/24		United States		9,000,000		10,046,250

						129,268,574

Health Care Equipment & Services 1.6%
Centene Corp., senior note, 4.75%, 5/15/22		United States		12,000,000		12,510,000
CHS/Community Health Systems Inc., senior note, 7.125%, 7/15/20		United States		2,000,000		1,802,500
senior note, 6.875%, 2/01/22		United States		8,300,000		6,899,375
senior secured note, first lien, 6.25%, 3/31/23		United States		3,900,000		3,982,875
DaVita Inc., senior bond, 5.125%, 7/15/24		United States		10,000,000		10,300,050
senior bond, 5.00%, 5/01/25		United States		9,300,000		9,393,000
HCA Inc., senior bond, 5.875%, 5/01/23		United States		15,000,000		16,360,500
senior bond, 5.875%, 2/15/26		United States		3,000,000		3,195,000
senior secured bond, first lien, 5.875%, 3/15/22		United States		5,000,000		5,556,250
senior secured bond, first lien, 5.25%, 4/15/25		United States		10,000,000		10,771,900
ⁱMPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24		United States		11,100,000		11,960,250
Stryker Corp., senior bond, 3.50%, 3/15/26		United States		4,800,000		4,897,656
Tenet Healthcare Corp., senior note, 5.50%, 3/01/19		United States		7,000,000		7,105,000
senior note, 8.125%, 4/01/22		United States		5,000,000		5,100,000
senior note, 6.75%, 6/15/23		United States		2,700,000		2,585,250

						112,419,606

Household & Personal Products 0.3%
The Procter & Gamble Co., senior note, 2.45%, 11/03/26		United States		19,000,000		18,425,725

Insurance 1.1%
MetLife Inc., senior note, 3.60%, 4/10/24		United States		24,200,000		25,245,053
senior note, 3.00%, 3/01/25		United States		2,400,000		2,391,542
ⁱNippon Life Insurance Co., sub. bond, 144A, 5.10% to 10/16/24, FRN thereafter, 10/16/44		Japan		35,000,000		37,228,625
Prudential Financial Inc., 3.50%, 5/15/24		United States		9,900,000		10,299,069

						75,164,289

Materials 5.4%
ArcelorMittal, senior note, 6.25%, 3/01/21		France		17,600,000		19,252,640
senior note, 6.125%, 6/01/25		France		2,700,000		3,040,875
^i,jARD Finance SA, senior secured note, 144A, PIK, 7.125%, 9/15/23		Luxembourg		1,300,000		1,355,250
ⁱArdagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., senior note, 144A, 6.00%, 6/30/21		Luxembourg		5,100,000		5,291,250
senior note, 144A, 6.00%, 2/15/25		Luxembourg		11,500,000		11,701,250
ⁱBarminco Finance Pty. Ltd., senior note, 144A, 9.00%, 6/01/18		Australia		15,000,000		16,143,750
ⁱBWAY Holding Co., senior note, 144A, 7.25%, 4/15/25		United States		21,200,000		21,226,500
ⁱCemex Finance LLC, senior secured note, first lien, 144A, 6.00%, 4/01/24		Mexico		5,800,000		6,157,599
ⁱCemex SAB de CV, first lien, 144A, 5.70%, 1/11/25		Mexico		15,000,000		15,782,475
senior secured bond, first lien, 144A, 6.125%, 5/05/25		Mexico		4,000,000		4,297,180



20	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value

Corporate Bonds (continued)
Materials (continued)
ⁱCeramtec Group GmbH, senior note, 144A, 8.25%, 8/15/21		Germany		11,900,000	EUR	$	13,780,939
The Chemours Co., senior note, 6.625%, 5/15/23		United States		21,000,000			22,575,000
ⁱFirst Quantum Minerals Ltd., senior note, 144A, 7.00%, 2/15/21		Canada		10,000,000			10,400,000
senior note, 144A, 7.25%, 4/01/23		Canada		5,300,000			5,409,313
Freeport-McMoRan Inc., senior note, 4.55%, 11/14/24		United States		26,000,000			24,557,000
ⁱGlencore Finance Canada Ltd., senior bond, 144A, 4.95%, 11/15/21		Switzerland		13,300,000			14,306,065
ⁱGlencore Funding LLC, senior note, 144A, 4.125%, 5/30/23		Switzerland		5,000,000			5,143,925
senior note, 144A, 4.625%, 4/29/24		Switzerland		2,500,000			2,622,218
ⁱINVISTA Finance LLC, senior secured note, 144A, 4.25%, 10/15/19		United States		30,000,000			30,975,000
LYB International Finance BV, senior note, 4.00%, 7/15/23		United States		20,400,000			21,443,154
ⁱNovelis Corp., senior bond, 144A, 5.875%, 9/30/26		United States		15,400,000			15,862,000
ⁱOwens-Brockway Glass Container Inc., senior note, 144A, 5.00%, 1/15/22		United States		7,800,000			8,131,500
senior note, 144A, 5.875%, 8/15/23		United States		12,500,000			13,398,437
Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA, first lien, 5.75%, 10/15/20		United States		6,600,000			6,806,250
ⁱfirst lien, 144A, 5.125%, 7/15/23		United States		5,900,000			6,158,125
ⁱsenior note, 144A, 7.00%, 7/15/24		United States		5,600,000			6,037,500
^i,nsenior secured note, first lien, 144A, FRN, 4.658%, 7/15/21		United States		6,500,000			6,662,500
ⁱSealed Air Corp., senior bond, 144A, 5.125%, 12/01/24		United States		11,300,000			11,893,250
senior bond, 144A, 5.50%, 9/15/25		United States		2,600,000			2,788,500
senior note, 144A, 4.875%, 12/01/22		United States		11,300,000			11,822,625
Steel Dynamics Inc., senior bond, 5.50%, 10/01/24		United States		9,700,000			10,269,875
senior note, 5.125%, 10/01/21		United States		9,200,000			9,545,000

							364,836,945

Media 5.2%
21st Century Fox America Inc., senior note, 3.00%, 9/15/22		United States		6,100,000			6,188,249
ⁱAltice U.S. Finance I Corp., senior secured bond, 144A, 5.50%, 5/15/26		United States		22,000,000			22,797,500
AMC Networks Inc., senior note, 5.00%, 4/01/24		United States		18,000,000			18,281,700
CCO Holdings LLC/CCO Holdings Capital Corp., senior bond, 5.25%, 9/30/22		United States		15,000,000			15,600,000
ⁱsenior bond, 144A, 5.375%, 5/01/25		United States		13,000,000			13,585,000
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			5,206,250
senior sub. note, 7.625%, 3/15/20		United States		900,000			897,750
senior sub. note, 7.625%, 3/15/20		United States		6,400,000			6,496,000
CSC Holdings LLC, senior note, 6.75%, 11/15/21		United States		22,000,000			24,255,000
DISH DBS Corp., senior bond, 5.00%, 3/15/23		United States		10,000,000			10,050,000
senior note, 6.75%, 6/01/21		United States		4,000,000			4,360,000
senior note, 5.875%, 7/15/22		United States		3,000,000			3,185,370
senior note, 5.875%, 11/15/24		United States		5,000,000			5,262,500



franklintempleton.com	Annual Report	21

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value

Corporate Bonds (continued)
Media (continued)
iHeartCommunications Inc., senior secured bond, first lien, 9.00%, 3/01/21		United States		13,000,000		$	9,928,750
senior secured note, first lien, 9.00%, 9/15/22		United States		8,100,000			6,145,875
ⁱNexstar Broadcasting Inc., senior note, 144A, 5.625%, 8/01/24		United States		21,300,000			21,885,750
ⁱSirius XM Radio Inc., senior bond, 144A, 6.00%, 7/15/24		United States		14,600,000			15,658,500
senior bond, 144A, 5.375%, 4/15/25		United States		10,000,000			10,287,500
Tegna Inc., senior bond, 6.375%, 10/15/23		United States		12,000,000			12,795,000
ⁱsenior bond, 144A, 5.50%, 9/15/24		United States		2,800,000			2,884,000
senior note, 5.125%, 7/15/20		United States		9,800,000			10,130,750
Time Warner Cable LLC, senior note, 4.00%, 9/01/21		United States		15,600,000			16,305,963
Time Warner Inc., senior bond, 2.95%, 7/15/26		United States		25,400,000			23,877,143
ⁱUnitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, senior secured bond, first lien, 144A, 5.75%, 1/15/23		Germany		2,997,000	EUR		3,463,040
senior secured note, first lien, 144A, 5.625%, 4/15/23		Germany		1,520,000	EUR		1,764,874
ⁱUnitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25		Germany		18,000,000			19,215,000
ⁱUnivision Communications Inc., senior secured note, first lien, 144A, 5.125%, 2/15/25		United States		25,000,000			25,000,000
ⁱVirgin Media Finance PLC, senior bond, 144A, 6.375%, 10/15/24		United Kingdom		9,600,000	GBP		13,401,630
ⁱVirgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25		United Kingdom		14,000,000			14,472,500
ⁱZiggo Secured Finance BV, senior secured bond, 144A, 4.25%, 1/15/27		Netherlands		8,600,000	EUR		9,910,246

							356,366,840

Pharmaceuticals, Biotechnology & Life Sciences 1.7%
Actavis Funding SCS, senior bond, 3.80%, 3/15/25		United States		25,000,000			25,485,300
Baxalta Inc., senior note, 4.00%, 6/23/25		United States		25,000,000			25,756,425
Biogen Inc., senior note, 3.625%, 9/15/22		United States		14,900,000			15,542,399
ⁱEndo Dac/Endo Finance LLC/Endo Finco Inc., senior bond, 144A, 6.00%, 2/01/25		United States		11,900,000			10,109,050
senior note, 144A, 6.00%, 7/15/23		United States		5,000,000			4,406,250
ⁱJaguar Holding Co. II/Pharmaceutical Product Development LLC, senior note, 144A, 6.375%, 8/01/23		United States		12,900,000			13,480,500
ⁱValeant Pharmaceuticals International, senior note, 144A, 6.375%, 10/15/20		United States		9,000,000			7,773,750
ⁱValeant Pharmaceuticals International Inc., senior bond, 144A, 6.125%, 4/15/25		United States		3,100,000			2,300,200
senior note, 144A, 5.50%, 3/01/23		United States		8,000,000			5,940,000
senior note, 144A, 7.00%, 3/15/24		United States		2,100,000			2,147,250

							112,941,124

Real Estate 0.9%
American Tower Corp., senior bond, 3.375%, 10/15/26		United States		28,900,000			28,203,568
Equinix Inc., senior bond, 5.375%, 4/01/23		United States		25,000,000			26,156,250
MPT Operating Partnership LP/MPT Finance Corp., senior bond, 5.25%, 8/01/26		United States		4,200,000			4,326,000

							58,685,818



22	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

Corporate Bonds (continued)
Retailing 0.8%
Home Depot Inc., senior note, 2.125%, 9/15/26		United States		15,000,000	$	14,095,260
^i,jK2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22		South Africa		9,289,110		882,465
^i,jK2016740260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22		South Africa		1,341,707		1,818,013
Netflix Inc., senior bond, 5.875%, 2/15/25		United States		10,000,000		10,875,000
ⁱsenior bond, 144A, 4.375%, 11/15/26		United States		11,800,000		11,652,500
ⁱPetSmart Inc., senior note, 144A, 7.125%, 3/15/23		United States		20,000,000		18,300,000

						57,623,238

Semiconductors & Semiconductor Equipment 0.2%
Qorvo Inc., senior bond, 7.00%, 12/01/25		United States		4,300,000		4,794,500
senior note, 6.75%, 12/01/23		United States		10,000,000		10,887,500

						15,682,000

Software & Services 1.3%
ⁱBMC Software Finance Inc., senior note, 144A, 8.125%, 7/15/21		United States		22,000,000		22,481,360
ⁱFirst Data Corp., second lien, 144A, 5.75%, 1/15/24		United States		22,400,000		23,324,000
senior note, 144A, 7.00%, 12/01/23		United States		7,500,000		8,060,250
Fiserv Inc., senior bond, 3.85%, 6/01/25		United States		8,400,000		8,718,385
Infor (U.S.) Inc., senior note, 6.50%, 5/15/22		United States		20,000,000		20,900,000
ⁱSymantec Corp., senior note, 144A, 5.00%, 4/15/25		United States		5,500,000		5,699,375

						89,183,370

Technology Hardware & Equipment 0.9%
ⁱCommScope Technologies LLC, senior bond, 144A, 6.00%, 6/15/25		United States		16,600,000		17,782,750
ⁱDiamond 1 Finance Corp./Diamond 2 Finance Corp., senior note, 144A, 5.875%, 6/15/21		United States		2,500,000		2,656,250
senior note, 144A, 7.125%, 6/15/24		United States		12,600,000		13,933,975
Western Digital Corp., senior note, 10.50%, 4/01/24		United States		25,700,000		30,390,250

						64,763,225

Telecommunication Services 3.6%
AT&T Inc., senior bond, 3.40%, 5/15/25		United States		20,000,000		19,509,800
CenturyLink Inc., senior bond, 6.75%, 12/01/23		United States		5,000,000		5,375,000
senior bond, 5.625%, 4/01/25		United States		10,000,000		9,800,000
senior note, 5.80%, 3/15/22.		United States		2,000,000		2,100,000
ⁱDigicel Group Ltd., senior note, 144A, 8.25%, 9/30/20		Bermuda		10,000,000		9,203,150
senior note, 144A, 7.125%, 4/01/22		Bermuda		3,000,000		2,520,270
ⁱDigicel Ltd., senior note, 144A, 6.00%, 4/15/21		Bermuda		10,000,000		9,545,450
ⁱHughes Satellite Systems Corp., senior bond, 144A, 6.625%, 8/01/26		United States		17,200,000		17,716,000
Intelsat Jackson Holdings SA, senior note, 7.25%, 10/15/20		Luxembourg		15,000,000		14,118,000
senior note, 7.50%, 4/01/21		Luxembourg		5,000,000		4,600,000



franklintempleton.com	Annual Report	23

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*			Value

Corporate Bonds (continued)
Telecommunication Services (continued)
ⁱMillicom International Cellular SA, senior note, 144A, 6.625%, 10/15/21		Luxembourg		21,800,000		$	22,853,812
Sprint Communications Inc., senior note, 6.00%, 11/15/22		United States		10,000,000			10,443,750
ⁱsenior note, 144A, 9.00%, 11/15/18		United States		2,200,000			2,411,750
ⁱsenior note, 144A, 7.00%, 3/01/20		United States		5,000,000			5,475,000
ⁱSprint Spectrum Co. LLC/Sprint Spectrum Co. II LLC, 144A, 3.36%, 3/20/23		United States		15,800,000			15,945,519
T-Mobile USA Inc., senior bond, 6.50%, 1/15/24		United States		5,000,000			5,425,000
senior bond, 6.375%, 3/01/25		United States		14,700,000			16,101,204
senior note, 6.125%, 1/15/22		United States		2,000,000			2,117,500
senior note, 6.00%, 4/15/24		United States		4,200,000			4,561,200
senior note, 5.125%, 4/15/25		United States		6,000,000			6,337,500
Verizon Communications Inc., senior note, 5.15%, 9/15/23		United States		22,000,000			24,333,474
ⁱWind Acquisition Finance SA, senior secured note, 144A, 4.00%, 7/15/20		Italy		14,400,000	EUR		15,937,131
senior secured note, 144A, 7.00%, 4/23/21		Italy		17,300,000	EUR		19,616,684

							246,047,194

Transportation 0.8%
FedEx Corp., senior bond, 3.25%, 4/01/26.		United States		25,400,000			25,494,336
ⁱFlorida East Coast Holdings Corp., secured note, first lien, 144A, 6.75%, 5/01/19		United States		7,600,000			7,831,800
senior note, 144A, 9.75%, 5/01/20		United States		4,000,000			4,280,000
United Airlines Pass Through Trust, second lien, 2016-1, A, 3.45%, 1/07/30		United States		13,800,000			13,886,250

							51,492,386

Utilities 2.9%
Calpine Corp., senior bond, 5.75%, 1/15/25		United States		9,000,000			8,685,000
senior note, 5.375%, 1/15/23		United States		10,000,000			9,900,000
ⁱsenior secured bond, first lien, 144A, 5.875%, 1/15/24		United States		2,000,000			2,110,000
Dominion Resources Inc., senior bond, 2.85%, 8/15/26		United States		11,400,000			10,812,022
ⁱDynegy Inc., senior note, 144A, 8.00%, 1/15/25		United States		28,300,000			26,248,250
^h,iEDF SA, junior sub. bond, 144A, 5.625% to 1/22/24, FRN thereafter, Perpetual		France		5,000,000			4,992,700
sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual		France		25,000,000			25,019,500
Exelon Corp., senior bond, 3.95%, 6/15/25		United States		18,500,000			19,245,236
ⁱInterGen NV, secured bond, 144A, 7.00%, 6/30/23		Netherlands		25,000,000			23,375,000
Sempra Energy, senior bond, 3.55%, 6/15/24		United States		8,800,000			9,018,583
senior note, 3.75%, 11/15/25		United States		12,300,000			12,644,904
The Southern Co., senior bond, 3.25%, 7/01/26		United States		32,300,000			31,499,025
ⁱTalen Energy Supply LLC, senior note, 144A, 9.50%, 7/15/22		United States		13,400,000			12,562,500

							196,112,720

Total Corporate Bonds (Cost $3,118,313,689)							3,142,558,813



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

^n,o Senior Floating Rate Interests 9.5%
Automobiles & Components 0.4%
The Goodyear Tire & Rubber Co., Second Lien Term Loan, 2.99%, 4/30/19		United States		1,665,012	$	1,685,131
TI Group Automotive Systems LLC, Initial US Term Loan, 3.743%, 6/30/22		United States		23,846,549		24,025,397


						25,710,528

Capital Goods 0.2%
^pAllison Transmission Inc., Term Loans, 2.99%, 9/23/22		United States		8,700,050		8,797,326
Doncasters U.S. Finance LLC, Second Lien Term Loan, 9.50%, 10/09/20		United States		736,591		713,879
Harsco Corp., Initial Term Loan, 6.00%, 11/02/23		United States		2,313,871		2,364,487
Leidos (Abacus Innovations Corp.), B Term Loan, 3.25%, 8/16/23		United States		1,595,978		1,613,932


						13,489,624

Commercial & Professional Services 0.1%
KAR Auction Services Inc., Tranche B-3 Term Loans, 4.50%, 3/09/23		United States		9,418,827		9,537,975
Ventia Pty. Ltd., Term B Loans (USD), 4.662%, 5/21/22		Australia		837,670		846,047


						10,384,022

Consumer Services 0.9%
Aristocrat Technologies Inc., Tranche B-2 Loans, 3.406%, 10/20/21		United States		1,676,538		1,692,916
Avis Budget Car Rental LLC, Tranche B Term Loan, 3.15%, 3/15/22		United States		3,801,458		3,811,437
^pCaesars Entertainment Operating Co. LLC., Term B Loans, 5.75%, 8/31/24		United States		1,496,438		1,488,332
^pEldorado Resorts Inc., Initial Term Loan, 5.25%, 4/17/24		United States		5,317,262		5,323,909
Fitness International LLC, Term A Loan, 4.243%, 4/01/20		United States		31,843,975		31,843,974
^pGreektown Holdings LLC, Initial Term Loan, 6.00%, 4/25/24		United States		3,040,885		3,047,855
Prime Security Services Borrower LLC, 2016-2 Refinancing Term B-1 Loan, 4.25%, 5/02/22		United States		6,570,938		6,645,446
^c,jTurtle Bay Holdings LLC, Term Loan B, PIK, 3.75%, 6/30/17		United States		4,653,944		4,589,952


						58,443,821

Diversified Financials 0.1%
First Eagle Investment Management LLC, Initial Term Loans, 4.656%, 12/01/22		United States		5,255,414		5,283,336
Russell Investments US Institutional Holdco Inc., Initial Term Loan, 6.75%, 6/01/23		United States		3,578,420		3,614,204


						8,897,540

Energy 1.7%
Bowie Resource Holdings LLC, ^pFirst Lien Initial Term Loan, 6.75%, 8/14/20		United States		27,584,963		26,849,355
Second Lien Initial Term Loan, 11.75%, 2/16/21		United States		16,060,827		14,824,144
^pFieldwood Energy LLC, Loans, 3.875%, 10/01/18		United States		47,867,295		46,850,115
International Seaways Inc., Initial Term Loan, 5.79%, 8/05/19		United States		17,322,009		17,307,579
McDermott Finance LLC, Term Loan, 8.397%, 4/16/19		United States		1,520,032		1,543,783
OSG Bulk Ships Inc., Initial Term Loan, 5.29%, 8/05/19		United States		9,459,728		9,325,712
^pUTEX Industries Inc., First Lien Initial Term Loan, 5.00%, 5/21/21		United States		2,279,105		2,111,734


						118,812,422

Food & Staples Retailing 0.1%
^pAramark Corp., U.S. Term A Loan, 4.75%, 3/28/22		United States		6,284,308		6,305,914



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

^n,o Senior Floating Rate Interests (continued)
Food, Beverage & Tobacco 0.1%
JBS USA LUX SA, New Initial Term Loans, 3.483%, 10/30/22		Brazil		1,980,891	$	1,990,487
Pinnacle Foods Finance LLC, Initial Term Loans, 2.983%, 2/03/24		United States		1,758,624		1,771,681


						3,762,168

Health Care Equipment & Services 0.1%
Carestream Health Inc., Term Loan, 5.147%, 6/07/19		United States		4,741,176		4,713,028

Household & Personal Products 0.0%^†
Spectrum Brands Inc., Term Loans, 2.852% - 3.486%, 6/23/22		United States		359,358		362,727

Materials 0.8%
Chemours Co., Tranche B-1 US Term Loans, 3.49%, 5/12/22		United States		28,914,054		29,108,327
Cyanco Intermediate Corp., Initial Term Loan, 5.50%, 5/01/20		United States		7,750,335		7,793,931
^pFMG America Finance Inc. (Fortescue Metals Group), Loans, 3.75%, 6/30/19		Australia		8,997,073		9,063,454
Huntsman International LLC, 2015 Extended Term B Dollar Loan, 3.993%, 4/19/19		United States		1,192,471		1,198,930
OCI Beaumont LLC, Term B-3 Loan, 8.025%, 8/20/19		United States		8,784,994		9,059,525


						56,224,167

Media 0.5%
Altice US Finance I Corp., March 2017 Refinancing TL Commitments, 3.241%, 7/28/25		United States		1,986,110		1,986,606
AMC Entertainment Holdings Inc.,
2016 Incremental Term Commitments, 3.742%, 12/15/23		United States		771,290		777,750
Initial Term Loans, 3.744%, 12/15/22		United States		1,203,538		1,212,063
Charter Communications Operating LLC (CCO Safari), Term Loan A-1, 2.75%, 5/18/21		United States		9,576,000		9,579,419
CSC Holdings LLC, March 2017 Incremental Term Loans, 3.244%, 7/17/25		United States		12,958,602		12,967,711
Lions Gate Entertainment Corp., Term A Loan, 3.482%, 12/08/21		United States		5,314,041		5,343,933
Live Nation Entertainment Inc., Term B-2 Loans, 3.50%, 10/31/23		United States		769,357		775,483
UPC Financing Partnership, Facility AP, 3.744%, 4/15/25		United States		3,052,838		3,067,720


						35,710,685

Pharmaceuticals, Biotechnology & Life Sciences 1.0%
^pEndo Luxembourg Finance Co. I S.A.R.L and Endo LLC, Initial Term Loans, 7.25%, 4/27/24		United States		20,011,200		20,139,391
Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 3.195%, 1/31/25		United States		26,150,888		26,265,351
RPI Finance Trust, Term A-2 Term Loan, 3.397%, 10/14/20		United States		6,528,435		6,540,676
Valeant Pharmaceuticals International Inc., Series F Tranche B Term Loan, 5.74%, 4/01/22		United States		13,500,484		13,586,266


						66,531,684

Retailing 0.9%
Ascena Retail Group Inc., Tranche B Term Loan, 5.50%, 8/21/22		United States		35,667,667		32,323,823
Dollar Tree Inc., Term A-1 Loans, 2.75%, 7/06/20		United States		5,965,587		5,948,734
^pPetSmart Inc., Tranche B-2 Loans, 4.02%, 3/11/22		United States		21,848,935		20,169,298


						58,441,855



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

^n,o Senior Floating Rate Interests (continued)
Semiconductors & Semiconductor Equipment 0.4%
MACOM Technology Solutions Holdings Inc., Initial Term Loans, 3.989%, 5/07/21		United States		7,200,956	$	7,308,970
MKS Instruments Inc., Tranche B-2 Term Loans, 3.743%, 5/01/23		United States		4,492,375		4,545,722
ON Semiconductor Corp., 2017 Replacement Term Loans, 3.243%, 3/31/23		United States		18,172,822		18,299,378


						30,154,070

Software & Services 0.7%
Global Payments Inc., Delayed Draw Term Loan (A-2), 3.196%, 10/31/21		United States		11,053,194		11,073,919
MoneyGram International Inc., Term Loan, 4.397%, 3/27/20		United States		34,128,636		34,206,859
Rackspace Hosting Inc., 2016 Refinancing Term B Loan, 4.535%, 11/03/23		United States		3,856,451		3,888,186


						49,168,964

Technology Hardware & Equipment 0.4%
Ciena Corp., Refinancing Term Loan, 3.493%, 1/28/22		United States		1,858,782		1,873,885
Dell International LLC, Term A-3 Loan, 3.00%, 12/31/18		United States		9,738,459		9,763,818
Western Digital Corp., US Term B-2 Loan, 3.743%, 4/29/23		United States		9,835,105		9,926,079
Zebra Technologies Corp., Second Amendment Refinancing Term Loan, 3.60%, 10/27/21		United States		3,036,717		3,069,942


						24,633,724

Telecommunication Services 0.1%
Consolidated Communications Inc., Initial Term Loan, 4.00%, 10/05/23		United States		2,396,019		2,416,385
Global Tel*Link Corp., Term Loan, 5.00%, 5/23/20		United States		2,834,035		2,834,035


						5,250,420

Transportation 0.5%
Air Canada, Term Loan, 3.90%, 10/06/23		Canada		550,559		554,918
^pThe Hertz Corp., Tranche B-1 Term Loan, 3.743%, 6/30/23		United States		18,323,122		18,367,501
Navios Maritime Midstream Partners LP and Navios Maritime Midstream Partners Finance (US) Inc., Term Loan, 5.66%, 6/18/20		Marshall Islands		13,297,885		13,297,885
United Air Lines Inc., Class B Term Loans, 3.422%, 4/01/24		United States		3,173,715		3,187,105
XPO Logistics Inc., Loans, 3.405%, 11/01/21		United States		940,478		945,533


						36,352,942

Utilities 0.5%
Calpine Construction Finance Co. LP, Term B-1 Loan, 3.24%, 5/03/20 .		United States		13,234,307		13,283,935
EFS Cogen Holdings I LLC (Linden), Term B Advance, 4.65%, 6/28/23.		United States		1,700,074		1,714,949
Lightstone Holdco LLC,
Initial Term B Loan, 5.539%, 1/30/24		United States		8,936,884		8,999,121
Initial Term C Loan, 5.50%, 1/30/24		United States		551,340		555,180
NRG Energy Inc., Term Loans, 3.243%, 6/30/23		United States		8,565,275		8,612,564


						33,165,749

Total Senior Floating Rate Interests (Cost $644,595,049)						646,516,054



franklintempleton.com	Annual Report	27

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*				Value

Foreign Government and Agency Securities 8.6%
Government of the Philippines, senior note, 3-21, 2.875%, 5/22/17		Philippines		900,000,000		PHP	$	17,944,889
Government of Hungary, 5.375%, 2/21/23		Hungary		16,250,000				18,042,781
Government of Indonesia,
FR28, 10.00%, 7/15/17		Indonesia		10,200,000,000		IDR		773,057
FR34, 12.80%, 6/15/21		Indonesia		169,210,000,000		IDR		15,475,084
FR36, 11.50%, 9/15/19		Indonesia		35,400,000,000		IDR		2,941,368
senior bond, FR39, 11.75%, 8/15/23		Indonesia		29,150,000,000		IDR		2,711,830
senior bond, FR44, 10.00%, 9/15/24		Indonesia		8,340,000,000		IDR		728,366
senior bond, FR56, 8.375%, 9/15/26		Indonesia		750,000,000,000		IDR		61,304,325
senior bond, FR70, 8.375%, 3/15/24		Indonesia		140,000,000,000		IDR		11,292,694
Government of Malaysia, senior bond, 4.24%, 2/07/18		Malaysia		66,300,000		MYR		15,398,522
senior note, 3.58%, 9/28/18		Malaysia		39,800,000		MYR		9,211,853
Government of Mexico,
7.75%, 12/14/17		Mexico		4,000,000	^q	MXN		21,393,281
M, 4.75%, 6/14/18		Mexico		10,000,000	^q	MXN		51,974,240
senior note, 8.50%, 12/13/18		Mexico		11,540,000	^q	MXN		62,890,131
senior note, M, 5.00%, 6/15/17		Mexico		9,500,000	^q	MXN		50,392,511
ⁱGovernment of Serbia, senior note, 144A, 4.875%, 2/25/20		Serbia		29,400,000				30,693,747
senior note, 144A, 7.25%, 9/28/21		Serbia		15,000,000				17,296,425
ⁱGovernment of Ukraine,
144A, 7.75%, 9/01/22		Ukraine		2,200,000				2,172,500
144A, 7.75%, 9/01/23		Ukraine		4,355,000				4,232,625
144A, 7.75%, 9/01/24		Ukraine		4,355,000				4,169,499
144A, 7.75%, 9/01/25		Ukraine		4,355,000				4,145,285
144A, 7.75%, 9/01/26		Ukraine		4,355,000				4,112,862
144A, 7.75%, 9/01/27		Ukraine		4,354,000				4,101,033
^a,r144A, VRI, GDP Linked Security, 5/31/40		Ukraine		20,490,000				7,256,738
Korea Monetary Stabilization Bond, senior note, 1.56%, 10/02/17		South Korea		33,000,000,000		KRW		29,039,654
Nota Do Tesouro Nacional,
10.00%, 1/01/21		Brazil		80,000	^s	BRL		25,273,633
10.00%, 1/01/23		Brazil		123,902	^s	BRL		38,872,091
^tIndex Linked, 6.00%, 8/15/18		Brazil		34,550	^s	BRL		32,951,910
^tIndex Linked, 6.00%, 5/15/23		Brazil		33,800	^s	BRL		32,897,331
senior note, 10.00%, 1/01/19		Brazil		25,000	^s	BRL		7,957,895

Total Foreign Government and Agency Securities (Cost $612,171,899)								587,648,160

U.S. Government and Agency Securities 6.4%
U.S. Treasury Bond,
4.50%, 5/15/17		United States		8,000,000				8,011,776
7.125%, 2/15/23		United States		3,000,000				3,852,831
6.25%, 8/15/23		United States		4,000,000				5,008,124
6.875%, 8/15/25		United States		1,000,000				1,358,027
6.50%, 11/15/26		United States		34,000,000				46,364,848
5.25%, 2/15/29		United States		1,750,000				2,266,010
3.00%, 11/15/45		United States		50,000,000				50,371,100
^uIndex Linked, 0.625%, 1/15/24		United States		52,143,606				53,617,288
^uIndex Linked, 2.375%, 1/15/25		United States		32,951,384				38,150,717



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

U.S. Government and Agency Securities (continued)
U.S. Treasury Note,
4.75%, 8/15/17		United States		7,000,000	$	7,077,791
3.875%, 5/15/18		United States		22,000,000		22,612,304
3.75%, 11/15/18		United States		39,000,000		40,496,781
2.75%, 2/15/24		United States		33,000,000		34,407,648
2.375%, 8/15/24		United States		5,000,000		5,083,495
^uIndex Linked, 2.125%, 1/15/19		United States		9,076,026		9,485,328
^uIndex Linked, 0.625%, 7/15/21		United States		10,807,233		11,207,436
^uIndex Linked, 0.125%, 7/15/24		United States		92,878,024		92,480,785

Total U.S. Government and Agency Securities (Cost $429,760,602)						431,852,289

Asset-Backed Securities and Commercial Mortgage- Backed Securities 11.7%
Banks 1.5%
Banc of America Commercial Mortgage Trust, 2006-4, AJ, 5.695%, 7/10/46		United States		5,883,862		5,873,082
ⁿBear Stearns ARM Trust, 2004-4, A6, FRN, 3.195%, 6/25/34		United States		12,024,538		12,167,967
Bear Stearns Commercial Mortgage Securities Trust, 2006-PW13, AJ, 5.611%, 9/11/41		United States		1,186,514		1,185,792
ⁿCitibank Credit Card Issuance Trust,
2013-A2, A2, FRN, 1.268%, 5/26/20		United States		7,230,000		7,245,802
2013-A4, A4, FRN, 1.408%, 7/24/20		United States		7,666,000		7,696,224
Citigroup Commercial Mortgage Trust,
2006-C5, AJ, 5.482%, 10/15/49		United States		12,245,532		11,613,271
ⁿ2007-C6, AM, FRN, 5.701%, 12/10/49		United States		14,650,000		14,842,772
ⁿCommercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.759%, 7/10/38		United States		12,633,000		10,711,794
CSAIL Commercial Mortgage Trust, 2015-C1, A4, 3.505%, 4/15/50		United States		10,050,000		10,389,220
ⁿCWABS Asset-Backed Certificates Trust, 2005-11, AF4, FRN, 4.685%, 3/25/34		United States		2,800,000		2,822,922
ⁿMerrill Lynch Mortgage Investors Trust, 2005-A6, 2A3, FRN, 1.371%, 8/25/35		United States		2,692,413		2,609,517
ⁿMorgan Stanley Capital I Trust,
2007-IQ16, AM, FRN, 6.11%, 12/12/49		United States		3,102,000		3,149,786
2007-IQ16, AMA, FRN, 6.106%, 12/12/49		United States		12,415,000		12,642,638


						102,950,787

Diversified Financials 10.2%
^i,nAres Enhanced Loan Investment Strategy IR Ltd.,
2013-IRAR, A2A, 144A, FRN, 3.053%, 7/23/25		Cayman Islands		8,410,000		8,434,770
2013-IRAR, BR, 144A, FRN, 4.053%, 7/23/25		United States		9,000,000		9,064,530
^i,nAtrium VIII,
8A, BR, 144A, FRN, 3.053%, 10/23/24		Cayman Islands		4,520,000		4,558,420
8A, CR, 144A, FRN, 3.653%, 10/23/24		Cayman Islands		6,080,000		6,110,096
^i,nAtrium X, 10A, C, 144A, FRN, 3.758%, 7/16/25		United States		13,950,000		14,025,609
^i,nAtrium XI, 11A, CR, 144A, FRN, 3.303%, 10/23/25		Cayman Islands		15,440,000		15,439,846
Banc of America Commercial Mortgage Trust,
2015-UBS7, A3, 3.441%, 9/15/48		United States		10,920,000		11,286,529
2015-UBS7, A4, 3.705%, 9/15/48		United States		12,450,000		13,080,558



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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)
ⁿBank of America Credit Card Trust, 2005-A1, A, FRN, 1.324%, 6/15/20		United States		9,175,000	$	9,193,389
^i,nBCAP LLC Trust, 2009-RR1, 2A2, 144A, FRN, 3.098%, 5/26/35		United States		9,473,234		8,960,267
ⁱBlueMountain CLO Ltd., ⁿ2012-2A, BR, 144A, FRN, 2.952%, 11/20/28		Cayman Islands		6,710,000		6,744,556
2012-2A, CR, 144A, 3.652%, 11/20/28		Cayman Islands		2,730,000		2,746,435
^i,nBurnham Park CLO Ltd.,
2016-1A, A, 144A, FRN, 2.586%, 10/20/29		Cayman Islands		4,590,000		4,591,331
2016-1A, B, 144A, FRN, 2.956%, 10/20/29		Cayman Islands		6,000,000		5,981,640
2016-1A, C, 144A, FRN, 3.556%, 10/20/29		Cayman Islands		6,000,000		6,007,260
ⁿCapital One Multi-Asset Execution Trust,
2014-A3, A3, FRN, 1.374%, 1/18/22		United States		4,265,000		4,286,331
2016-A1, A1, FRN, 1.444%, 2/15/22		United States		32,250,000		32,465,133
2016-A2, A2, FRN, 1.624%, 2/15/24		United States		44,033,000		44,607,133
^i,nCarlyle Global Market Strategies CLO Ltd.,
2012-4A, BR, 144A, FRN, 3.056%, 1/20/29		United States		6,540,000		6,576,362
2012-4A, C1R, 144A, FRN, 3.756%, 1/20/29		United States		6,330,000		6,359,055
^i,nCatamaran CLO Ltd.,
2013-1A, C, 144A, FRN, 3.77%, 1/27/25		United States		11,250,000		11,250,900
2014-2A, BR, 144A, FRN, 4.108%, 10/18/26		Cayman Islands		11,770,000		11,798,954
^i,nCent CDO Ltd., 2007-15A, A2B, 144A, FRN, 1.46%, 3/11/21		United States		3,881,000		3,758,011
^i,nCent CLO 20 Ltd., 13-20A, AR, 144A, FRN, 2.256%, 1/25/26		Cayman Islands		2,000,000		2,000,000
^i,nCent CLO LP,
2013-17A, B, 144A, FRN, 4.039%, 1/30/25		United States		7,450,980		7,468,564
2014-22A, A2AR, 144A, FRN, 2.984%, 11/07/26		Cayman Islands		5,224,000		5,248,553
2014-22A, BR, 144A, FRN, 3.984%, 11/07/26		United States		4,416,410		4,417,072
ⁿChase Issuance Trust,
2012-A10, A10, FRN, 1.254%, 12/16/19		United States		5,205,000		5,211,139
2013-A6, A6, FRN, 1.414%, 7/15/20		United States		12,040,000		12,086,453
^i,nCole Park CLO Ltd., 15-1A, B, 144A, FRN, 3.406%, 10/20/28		Cayman Islands		3,530,000		3,557,287
ⁱCore Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34		United States		15,065,000		15,483,599
^i,nCumberland Park CLO Ltd.,
2015-2A, B, 144A, FRN, 3.256%, 7/20/26		United States		12,270,000		12,319,693
2015-2A, C, 144A, FRN, 4.006%, 7/20/26		United States		1,850,000		1,854,181
ⁿDiscover Card Execution Note Trust, 2016-A2, A2, FRN, 1.534%, 9/15/21		United States		32,250,000		32,497,570
^i,nDryden 33 Senior Loan Fund,
2014-33A, BR, 144A, FRN, 3.008%, 10/15/28		Cayman Islands		7,030,000		7,038,506
2014-33A, CR, 144A, FRN, 3.658%, 10/15/28		United States		3,530,000		3,556,440
^i,nDryden 34 Senior Loan Fund, 14-34A, AR, 144A, FRN, 2.318%, 10/15/26		Cayman Islands		2,000,000		2,000,720
^i,nDryden XXV Senior Loan Fund, 2012-25A, CR, 144A, FRN, 3.658%, 1/15/25		Cayman Islands		4,949,000		4,973,696
^i,nEaton Vance CDO Ltd., 2014-1A, AR, 144A, FRN, 2.358%, 7/15/26		United States		17,022,000		17,029,830
^i,nEleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.555%, 9/10/35		United States		14,920,000		15,532,738
ⁿFHLMC Structured Agency Credit Risk Debt Notes,
2014-DN1, M2, FRN, 3.191%, 2/25/24		United States		13,000,000		13,375,981
2014-DN4, M3, FRN, 5.541%, 10/25/24		United States		8,100,000		8,936,202
2014-HQ2, M2, FRN, 3.191%, 9/25/24		United States		14,600,000		15,064,738
2015-HQ1, M2, FRN, 3.191%, 3/25/25		United States		6,214,224		6,300,610



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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)
ⁿFHLMC Structured Agency Credit Risk Debt Notes, (continued)
2015-HQ1, M3, FRN, 4.791%, 3/25/25		United States		3,880,000	$	4,213,315
^i,nFlagship CLO VIII Ltd., 2014-8A, AR, 144A, FRN, 2.408%, 1/16/26		Cayman Islands		6,880,000		6,890,526
ⁿFNMA Connecticut Avenue Securities,
2014-C03, 1M2, FRN, 3.991%, 7/25/24		United States		7,360,000		7,748,230
2015-C01, 1M2, FRN, 5.291%, 2/25/25		United States		9,941,260		10,862,191
2015-C01, 2M2, FRN, 5.541%, 2/25/25		United States		21,232,958		23,054,711
2015-C02, 1M2, FRN, 4.991%, 5/25/25		United States		12,036,663		13,057,131
2015-C02, 2M2, FRN, 4.991%, 5/25/25		United States		14,588,558		15,657,433
2015-C03, 2M2, FRN, 5.991%, 7/25/25		United States		20,410,000		22,744,190
2017-C01, 1M2, FRN, 4.541%, 7/25/29		United States		20,720,000		21,496,086
^i,nGalaxy CLO Ltd.,
2014-17A, AR, 144A, FRN, 2.558%, 7/15/26		Cayman Islands		9,540,000		9,570,719
2014-17A, BR, 144A, FRN, 2.958%, 7/15/26		Cayman Islands		6,190,000		6,206,837
2014-17A, C1R, 144A, FRN, 3.558%, 7/15/26		Cayman Islands		3,070,000		3,055,295
ⁱG-Force LLC, 2005-RRA, C, 144A, 5.20%, 8/22/36		United States		11,144,000		10,939,952
ⁿImpac Secured Assets Trust, 2007-2, FRN, 1.241%, 4/25/37		United States		2,382,638		2,341,692
^i,nInvitation Homes Trust, 2015-SFR1, A, 144A, FRN, 2.444%, 3/17/32		United States		8,905,114		8,930,454
JP Morgan Chase Commercial Mortgage Securities Trust, 2006-CB17, AM, 5.464%, 12/12/43		United States		1,031,299		1,031,082
^i,nLCM XVI LP, 16A, B, 144A, FRN, 3.158%, 7/15/26		Cayman Islands		7,650,000		7,657,038
^i,nLCM XVII LP,
2017A, BR, 144A, FRN, 3.008%, 10/15/26		United States		4,590,000		4,608,727
2017A, CR, 144A, FRN, 3.658%, 10/15/26		United States		4,240,000		4,249,625
ⁿMortgageIT Trust,
2004-1, A2, FRN, 1.891%, 11/25/34		United States		3,259,879		3,114,812
2005-5, A1, FRN, 1.251%, 12/25/35		United States		2,757,937		2,573,763
^i,nOctagon Investment Partners XVII Ltd., 2013-1A, B1, 144A, FRN, 2.856%, 10/25/25		Cayman Islands		5,660,000		5,674,490
^i,k,nOctagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 0.00%, 8/12/26		Cayman Islands		6,800,000		6,800,000
^i,nOctagon Investment Partners XXIII Ltd., 2015-1A, B, 144A, FRN, 3.158%, 7/15/27		Cayman Islands		4,590,000		4,594,406
ⁿOpteum Mortgage Acceptance Corp. Trust, 2005-4, 1APT, FRN, 1.301%, 11/25/35		United States		4,642,314		4,454,191
ⁿStructured Asset Mortgage Investments Trust, 2003-AR2, A1, FRN, 1.734%, 12/19/33		United States		4,473,529		4,312,190
ⁿStructured Asset Securities Corp., 2005-2XS, 2A2, FRN, 2.483%, 2/25/35		United States		3,302,231		3,170,778
ⁿThornburg Mortgage Securities Trust,
2005-1, A3, FRN, 3.073%, 4/25/45		United States		4,617,329		4,620,372
2005-2, A1, FRN, 2.769%, 7/25/45		United States		2,642,263		2,564,484
^i,nVoya CLO Ltd.,
2013-1A, B, 144A, FRN, 4.058%, 4/15/24		United States		2,740,000		2,745,617
2013-2A, B, 144A, FRN, 3.836%, 4/25/25		United States		10,770,000		10,814,157
2015-2A, B, 144A, FRN, 3.133%, 7/23/27		United States		9,290,000		9,306,443
Wells Fargo Mortgage Backed Securities Trust, ⁿ2004-W, A9, FRN, 3.004%, 11/25/34		United States		1,969,948		1,998,017
2007-3, 3A1, 5.50%, 4/25/22		United States		443,048		453,449



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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)
^i,nWestchester CLO Ltd., 2007-1A, A1A, 144A, FRN, 1.259%, 8/01/22		United States		662,707	$	662,521


						695,455,611

Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $794,137,574)						798,406,398

Mortgage-Backed Securities 9.5%
ⁿ Federal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%^†
FHLMC, 2.957%, 1/01/33		United States		53,850		55,717

Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 4.2%
FHLMC Gold 15 Year, 4.50%, 10/01/18 - 9/01/19		United States		191,313		196,882
FHLMC Gold 15 Year, 5.00%, 12/01/17 - 7/01/22		United States		312,206		324,658
FHLMC Gold 15 Year, 5.50%, 7/01/17 - 2/01/19		United States		7,763		7,842
^vFHLMC Gold 30 Year, 3.00%, 5/01/47		United States		77,000,000		76,905,253
FHLMC Gold 30 Year, 3.50%, 8/01/46		United States		36,371,916		37,443,974
^vFHLMC Gold 30 Year, 3.50%, 5/01/47		United States		52,000,000		53,472,875
FHLMC Gold 30 Year, 4.00%, 3/01/47		United States		110,201,087		116,153,811
FHLMC Gold 30 Year, 4.50%, 10/01/40		United States		209,237		225,966
FHLMC Gold 30 Year, 5.00%, 5/01/27 - 2/01/38		United States		1,750,331		1,920,380
FHLMC Gold 30 Year, 5.50%, 6/01/33 - 6/01/36		United States		1,204,184		1,355,374
FHLMC Gold 30 Year, 6.00%, 6/01/33 - 6/01/37		United States		352,592		399,979
FHLMC Gold 30 Year, 6.50%, 10/01/21 - 6/01/36		United States		232,001		259,669
FHLMC Gold 30 Year, 7.00%, 9/01/21 - 8/01/32		United States		35,049		37,021
FHLMC Gold 30 Year, 7.50%, 1/01/26 - 1/01/31		United States		7,662		8,804
FHLMC Gold 30 Year, 8.00%, 11/01/25 - 1/01/26		United States		219		226
FHLMC Gold 30 Year, 9.00%, 12/01/24		United States		117		131


						288,712,845

ⁿ Federal National Mortgage Association (FNMA) Adjustable Rate 0.0%^†
FNMA, 2.784% - 2.955%, 4/01/20 - 12/01/34		United States		204,539		215,133

Federal National Mortgage Association (FNMA) Fixed Rate 3.5%
FNMA 15 Year, 2.50%, 7/01/27		United States		414,776		421,292
FNMA 15 Year, 4.50%, 3/01/20		United States		45,167		46,367
FNMA 15 Year, 5.00%, 1/01/18 - 6/01/18		United States		29,972		30,784
FNMA 15 Year, 5.50%, 5/01/17 - 4/01/22		United States		90,494		94,026
^vFNMA 30 Year, 3.00%, 5/01/47		United States		90,000,000		89,922,657
FNMA 30 Year, 3.50%, 7/01/46		United States		53,158,591		54,729,155
^vFNMA 30 Year, 3.50%, 5/01/47		United States		53,000,000		54,503,044
^vFNMA 30 Year, 4.00%, 5/01/47		United States		25,000,000		26,332,030
FNMA 30 Year, 4.50%, 3/01/28 - 2/01/41		United States		673,398		727,694
FNMA 30 Year, 5.00%, 9/01/23 - 10/01/35		United States		1,928,361		2,116,049
FNMA 30 Year, 5.50%, 9/01/33 - 12/01/35		United States		1,670,354		1,875,874
FNMA 30 Year, 6.00%, 6/01/34 - 5/01/38		United States		3,306,960		3,759,406
FNMA 30 Year, 6.50%, 3/01/28 - 10/01/37		United States		496,015		559,409
FNMA 30 Year, 7.50%, 10/01/29.		United States		7,810		9,284
FNMA 30 Year, 8.00%, 1/01/25 - 5/01/26		United States		3,997		4,668
FNMA 30 Year, 8.50%, 7/01/25		United States		483		497


						235,132,236



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Principal Amount*		Value

Mortgage-Backed Securities (continued)
Government National Mortgage Association (GNMA) Fixed Rate 1.8%
GNMA I SF 30 Year, 5.00%, 6/15/34 - 7/15/34		United States		204,596	$	227,255
GNMA I SF 30 Year, 5.50%, 2/15/33 - 6/15/36		United States		585,247		660,027
GNMA I SF 30 Year, 6.00%, 8/15/36		United States		45,142		51,293
GNMA I SF 30 Year, 6.50%, 12/15/28 - 3/15/32		United States		46,326		51,956
GNMA I SF 30 Year, 7.00%, 11/15/27 - 5/15/28		United States		21,397		23,186
GNMA I SF 30 Year, 7.50%, 9/15/23 - 5/15/27		United States		2,267		2,482
GNMA I SF 30 Year, 8.00%, 2/15/25 - 9/15/27		United States		4,461		4,926
GNMA I SF 30 Year, 8.50%, 8/15/24		United States		73		81
GNMA I SF 30 Year, 9.00%, 1/15/25		United States		275		276
GNMA I SF 30 Year, 9.50%, 6/15/25		United States		492		494
^vGNMA II SF 30 Year, 3.00%, 5/01/47		United States		57,000,000		57,772,619
GNMA II SF 30 Year, 3.50%, 2/20/47		United States		37,371,948		38,892,515
^vGNMA II SF 30 Year, 3.50%, 5/01/47		United States		20,000,000		20,780,468
GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33		United States		300,682		336,031
GNMA II SF 30 Year, 5.50%, 6/20/34		United States		151,227		169,555
GNMA II SF 30 Year, 6.00%, 11/20/34		United States		139,494		161,505
GNMA II SF 30 Year, 6.50%, 7/20/28 - 12/20/31		United States		74,875		86,530
GNMA II SF 30 Year, 7.50%, 4/20/32		United States		18,647		20,998


						119,242,197

Total Mortgage-Backed Securities (Cost $642,740,647)						643,358,128

Municipal Bonds 2.1%
California State GO, Refunding, 5.00%, 9/01/29		United States		17,200,000		20,520,460
California Statewide CDA, PCR, Southern California Edison Co., Mandatory Put 12/01/23, Refunding, Series D, 2.625%, 11/01/33		United States		4,000,000		4,108,480
Clark County School District GO, Refunding, Series D, 5.00%, 6/15/23		United States		15,300,000		18,036,099
Denver City and County Airport System Revenue, Refunding, Series A, 5.00%, 11/15/25		United States		2,145,000		2,595,085
Illinois State GO, Build America Bonds, 7.35%, 7/01/35		United States		8,000,000		8,383,360
Minnesota State GO, Refunding, Series D, 5.00%, 8/01/25		United States		8,550,000		10,497,690
New Jersey EDA Revenue, School Facilities Construction, Refunding, Series NN, 5.00%, 3/01/30		United States		5,200,000		5,283,668
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		3,895,115
New York State Dormitory Authority State Personal Income Tax Revenue, General Purpose, Refunding, Series A, 5.00%, 2/15/25		United States		9,410,000		11,225,001
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		14,970,564
Puerto Rico Electric Power Authority Power Revenue,
Series A, 6.75%, 7/01/36		United States		30,900,000		22,016,250
Series XX, 5.25%, 7/01/40		United States		15,000,000		10,612,500
University of Texas Revenue, Series J, 5.00%, 8/15/25		United States		9,800,000		11,983,440


Total Municipal Bonds (Cost $145,920,959)						144,127,712



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)


	Country		Shares		Value

Escrows and Litigation Trusts 0.0%^†
^a,fMidstates Petroleum Co. Inc./Midstates Petroleum Co. LLC, Escrow Account		United States		15,000,000	$	—
^a,fNewPage Corp., Litigation Trust		United States		14,000,000		—
^aPenn Virginia Corp., Escrow Account		United States		15,000,000		375,000
^a,fVistra Energy Corp., Escrow Account		United States		30,000,000		348,000
^aVistra Energy Corp., Escrow Account, TRA		United States		513,780		706,447

Total Escrows and Litigation Trusts (Cost $2,921,896)						1,429,447

Total Investments before Short Term Investments (Cost $7,062,605,318)						6,982,846,092


			Principal Amount*
Short Term Investments 3.1%
U.S. Government and Agency Securities (Cost $3,880,937) 0.1%
^w,xU.S. Treasury Bill, 8/17/17		United States		3,890,000		3,880,765

Total Investments before Money Market Funds (Cost $7,066,486,255)						6,986,726,857


			Shares
Money Market Funds (Cost $204,828,690) 3.0%
^g,yInstitutional Fiduciary Trust Money Market Portfolio, 0.37%		United States		204,828,690		204,828,690

Total Investments (Cost $7,271,314,945) 105.7%						7,191,555,547
Other Assets, less Liabilities (5.7)%						(386,028,590	)

Net Assets 100.0%					$	6,805,526,957



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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.

^bThe security is owned by FT Holdings Corporation II, a wholly-owned subsidiary of the Fund. See Note 1(g).

^cAt April 30, 2017, pursuant to the Fund’s policies and the requirements of applicable securities law, the Fund is restricted from trading these securities at year end.

^dSee Note 8 regarding restricted securities.

^eSee Note 11 regarding holdings of 5% voting securities.

^fSecurity has been deemed illiquid because it may not be able to be sold within seven days. At April 30, 2017, the aggregate value of these securities was $1,450,892, representing less than 0.1% of net assets.

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

^hPerpetual security with no stated maturity date.

ⁱSecurity 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, 2017, the aggregate value of these securities was $1,657,978,886, representing 24.4% of net assets.

^jIncome may be received in additional securities and/or cash.

^kSecurity purchased on a when-issued basis. See Note 1(c).

^lSee Note 7 regarding defaulted securities.

^mSee Note 1(f) regarding loan participation notes.

ⁿThe coupon rate shown represents the rate at period end.

^oSee Note 1(i) regarding senior floating rate interests.

^pA portion or all of the security purchased on a delayed delivery basis. See Note 1(c).

^qPrincipal amount is stated in 100 Mexican Peso Units.

^rThe principal represents the notional amount. See Note 1(d) regarding value recovery instruments.

^sPrincipal amount is stated in 1,000 Brazilian Real Units.

^tRedemption price at maturity is adjusted for inflation. See Note 1(k).

^uPrincipal amount of security is adjusted for inflation. See Note 1(k).

^vSecurity purchased on a to-be-announced (TBA) basis. See Note 1(c).

^wThe security was issued on a discount basis with no stated coupon rate.

^xA portion or all of the security has been segregated as collateral for open future contracts. At April 30, 2017, the value of this security and/or cash pledged amounted to $3,559,168, representing less than 0.1% of net assets.

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



franklintempleton.com	Annual Report	35

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

At April 30, 2017, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts


Description	Type		Number of Contracts		Notional Value		Expiration Date		Unrealized Appreciation		Unrealized Depreciation

Interest Rate Contracts
Euro-Bund		Long		145	$	25,552,910		6/08/17	$	73,929		$ —
Long Gilt		Long		496		82,409,476		6/28/17		1,412,685		—
U.S. Treasury 10 Yr. Ultra		Long		361		48,898,578		6/21/17		836,676		—
U.S. Treasury 30 Yr. Bond		Long		214		32,735,312		6/21/17		686,575		—

Total Futures Contracts									$	3,009,865		$ —

Net unrealized appreciation (depreciation)									$	3,009,865

At April 30, 2017, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts


Currency	Counterparty^a		Type		Quantity		Contract Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation

OTC Forward Exchange Contracts
British Pound		DBAB		Sell		28,000,000		35,019,600			5/18/17	$	—	$	(1,270,355	)
Canadian Dollar		JPHQ		Sell		50,000,000		38,018,188			5/18/17		1,375,087		—
Philippine Peso		JPHQ		Buy		41,860,000		835,529			5/18/17		—		(2,834	)
South Korean Won		JPHQ		Buy		23,000,000,000		20,089,968			5/18/17		135,443		—
South Korean Won		JPHQ		Sell		57,100,000,000		49,054,140			5/18/17		—		(1,157,641	)
Australian Dollar		JPHQ		Buy		9,000,000		6,712,110			8/17/17		14,583		—
Australian Dollar		JPHQ		Sell		72,000,000		55,176,120			8/17/17		1,362,577		—
British Pound		JPHQ		Sell		6,500,000		8,163,513			8/17/17		—		(283,792	)
Euro		JPHQ		Buy		9,500,000		10,398,225			8/17/17		10,927		—
Euro		JPHQ		Sell		144,500,000		155,612,772			8/17/17		—		(2,715,902	)
Japanese Yen		JPHQ		Buy		1,100,000,000		9,914,644			8/17/17		4,716		—
Japanese Yen		JPHQ		Sell		5,500,000,000		48,920,633			8/17/17		—		(676,168	)
Indian Rupee		JPHQ		Buy		2,329,000,000		34,038,759			8/18/17		1,733,063		—
Indonesian Rupiah		JPHQ		Buy		146,000,000,000		10,715,596			8/18/17		100,331		—
Indonesian Rupiah		JPHQ		Sell		146,000,000,000		10,842,926			8/18/17		26,999		—
Australian Dollar		DBAB		Sell		72,000,000		54,093,096			10/23/17		325,370		—
Australian Dollar		JPHQ		Sell		21,200,000		15,917,808			10/23/17		86,200		—
Euro		DBAB		Sell		99,200,000		107,708,384			10/23/17		—		(1,390,630	)
Euro		JPHQ		Sell		14,400,000		15,650,640			10/23/17		—		(186,314	)
Indian Rupee		DBAB		Buy		2,886,000,000		43,718,132			10/23/17		239,958		—
Japanese Yen		DBAB		Sell		15,400,000,000		142,017,946			10/23/17		2,676,859		—
British Pound		JPHQ		Sell		13,300,000		152,711,044	SEK		10/26/17		93,333		—
British Pound		JPHQ		Sell		8,300,000		10,951,850			8/15/18		37,094		—

Total Forward Exchange Contracts												$	8,222,540	$	(7,683,636	)

Net unrealized appreciation (depreciation)												$	538,904

*In U.S. dollars unless otherwise indicated.

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.



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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS

Franklin Strategic Income Fund (continued)

At April 30, 2017, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts


Description	Periodic Payment Rate	Counter- party/ Exchange	Notional Amount^a	Expiration Date	Unamortized Upfront Payments (Receipts)			Unrealized Appreciation		Unrealized Depreciation			Value			Rating^b

Centrally Cleared Swap Contracts
Contracts to Buy Protection
Traded Index
CDX.NA.HY.28	5.00%	ICE	$89,000,000	6/20/22	$	(6,401,498	)	$	—	$	(956,924	)	$	(7,358,422	)

OTC Swap Contracts
Contracts to Sell Protection^c
Traded Index
Citibank Bespoke 58 IG/42 HY Equity Tranche 0-3% Index	0.00%	CITI	5,440,000	6/20/19		(1,377,111	)		284,325		—			(1,092,786	)		Non-
																	Investment
																	Grade
MCDX.NA.28	1.00%	CITI	61,430,000	6/20/22		969,147			274,422		—			1,243,569			Investment

																	Grade
Total OTC Swap Contracts					$	(407,964	)	$	558,747	$	—		$	150,783

Total Credit Default Swap Contracts					$	(6,809,462	)	$	558,747	$	(956,924	)	$	(7,207,639	)

Net unrealized appreciation (depreciation)										$	(398,177	)

^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 internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cThe Fund enters contracts to sell protection to create a long credit position. Performance triggers include failure to pay or bankruptcy of the underlying securities for traded index swaps.

See Note 10 regarding other derivative information.

See Abbreviations on page 58.



franklintempleton.com	The accompanying notes are an integral part of these consolidated financial statements. \| Annual Report	37

FRANKLIN STRATEGIC SERIES

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

April 30, 2017

Franklin Strategic Income Fund


Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	6,593,086,378
Cost - Controlled affiliates (Note 3f)		470,958,729
Cost - Non-controlled affiliates (Note 3f and 11)		207,269,838

Total cost of investments	$	7,271,314,945

Value - Unaffiliated issuers	$	6,497,499,898
Value - Controlled affiliates (Note 3f)		487,206,699
Value - Non-controlled affiliates (Note 3f and 11)		206,848,950

Total value of investments		7,191,555,547
Cash.		2,069,833
Restricted Cash (Note 1e)		1,525,000
Foreign currency, at value (cost $796,418)		796,226
Receivables:
Investment securities sold		13,646,630
Capital shares sold		5,596,411
Dividends and interest		61,351,447
Due from brokers		6,452,327
OTC swap contracts (upfront payments $981,538)		969,147
Unrealized appreciation on OTC forward exchange contracts		8,222,540
Unrealized appreciation on OTC swap contracts		558,747
Unrealized appreciation on unfunded loan commitments (Note 9)		44,003
Other assets		10,741

Total assets		7,292,798,599

Liabilities:
Payables:
Investment securities purchased		452,285,205
Capital shares redeemed		15,876,598
Management fees		2,281,628
Distribution fees		1,574,659
Transfer agent fees		1,515,821
Distributions to shareholders		527,147
Variation margin		79,729
OTC swap contracts (upfront receipts $1,468,800)		1,377,111
Due to brokers		3,048,000
Unrealized depreciation on OTC forward exchange contracts		7,683,636
Deferred tax.		446,453
Accrued expenses and other liabilities.		575,655

Total liabilities		487,271,642

Net assets, at value	$	6,805,526,957

Net assets consist of:
Paid-in capital	$	7,267,763,805
Distributions in excess of net investment income		(118,770,181	)
Net unrealized appreciation (depreciation)		(76,980,576	)
Accumulated net realized gain (loss)		(266,486,091	)

Net assets, at value	$	6,805,526,957



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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)


Class A:
Net assets, at value			$3,833,785,559

Shares outstanding			389,521,240

Net asset value per share^a			$9.84

Maximum offering price per share (net asset value per share ÷ 95.75%)			$10.28

Class C:
Net assets, at value			$1,385,980,715

Shares outstanding			140,839,928

Net asset value and maximum offering price per share^a			$9.84

Class R:
Net assets, at value			$ 146,551,739

Shares outstanding			14,944,509

Net asset value and maximum offering price per share			$9.81

Class R6:
Net assets, at value			$ 369,106,386

Shares outstanding			37,446,072

Net asset value and maximum offering price per share			$9.86

Advisor Class:
Net assets, at value			$1,070,102,558

Shares outstanding			108,612,471

Net asset value and maximum offering price per share			$9.85

^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 consolidated financial statements. \|	Annual Report	39

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the year ended April 30, 2017

Franklin Strategic Income Fund


Investment income:
Dividends:
Unaffiliated issuers	$	2,919,890
Controlled affiliates (Note 3f)		53,275,635
Non-controlled affiliates (Note 3f and 11)		109,263
Interest		301,604,468

Total investment income		357,909,256

Expenses:
Management fees (Note 3a)		33,148,598
Distribution fees: (Note 3c)
Class A		10,499,147
Class C		9,863,918
Class R		827,064
Transfer agent fees: (Note 3e)
Class A		6,198,875
Class C		2,253,518
Class R		244,382
Class R6		2,912
Advisor Class		1,429,001
Custodian fees (Note 4)		334,165
Reports to shareholders		739,192
Registration and filing fees.		209,221
Professional fees		284,150
Trustees’ fees and expenses		74,422
Other		533,567

Total expenses		66,642,132
Expense reductions (Note 4)		(55,060	)
Expenses waived/paid by affiliates (Note 3f)		(4,731,183	)

Net expenses		61,855,889

Net investment income		296,053,367

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(166,259,743	)
Controlled affiliates (Note 3f)		4,959,209
Foreign currency transactions.		(7,542,859	)
Futures contracts		(7,478,050	)
Swap contracts		(2,275,156	)

Net realized gain (loss)		(178,596,599	)

Net change in unrealized appreciation (depreciation) on:
Investments		363,035,034
Translation of other assets and liabilities denominated in foreign currencies		46,165,474
Futures contracts		3,009,865
Swap contracts		(743,033	)
Change in deferred taxes on unrealized appreciation		123,654

Net change in unrealized appreciation (depreciation)		411,590,994

Net realized and unrealized gain (loss)		232,994,395

Net increase (decrease) in net assets resulting from operations	$	529,047,762



40	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,
	2017			2016
Increase (decrease) in net assets:
Operations:
Net investment income		$ 296,053,367			$ 355,162,709
Net realized gain (loss)		(178,596,599	)		(321,053,396	)
Net change in unrealized appreciation (depreciation)		411,590,994			(343,721,849	)

Net increase (decrease) in net assets resulting from operations		529,047,762			(309,612,536	)

Distributions to shareholders from:
Net investment income:
Class A		(76,684,998	)		(203,235,139	)
Class C		(21,849,570	)		(69,997,315	)
Class R		(2,644,424	)		(8,052,939	)
Class R6		(9,361,333	)		(12,383,078	)
Advisor Class		(19,738,810	)		(45,388,450	)

Total distributions to shareholders		(130,279,135	)		(339,056,921	)

Capital share transactions: (Note 2)
Class A		(898,775,869	)		(361,847,394	)
Class C		(344,124,057	)		(276,223,074	)
Class R		(44,210,930	)		(25,817,388	)
Class R6		61,813,436			52,377,445
Advisor Class		112,378,776			(142,209,084	)

Total capital share transactions		(1,112,918,644	)		(753,719,495	)

Net increase (decrease) in net assets		(714,150,017	)		(1,402,388,952	)
Net assets:
Beginning of year		7,519,676,974			8,922,065,926

End of year		$6,805,526,957			$ 7,519,676,974


Distributions in excess of net investment income included in net assets:
End of year		$ (118,770,181	)		$ (145,570,016	)



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

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 nine separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Strategic Income Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

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.

Certain derivative financial instruments are centrally cleared or traded 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.



42	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and OTC markets may be completed before 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.

b. Foreign Currency Translation

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

c. Securities Purchased on a When-Issued, Delayed Delivery and TBA Basis

The Fund purchases securities on a when-issued or 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.



franklintempleton.com	Annual Report	43

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

1. Organization and Significant Accounting Policies (continued)

d. 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 Consolidated Statement of Assets and Liabilities. Realized gain and loss and unrealized appreciation and depreciation on these contracts for the period are included in the Consolidated 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 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.

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 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 credit default swap contracts primarily to manage exposure to credit risk. A credit default swap is an agreement between the Fund and a counterparty whereby the buyer of the contract receives credit protection and the seller of the contract guarantees the credit worthiness of a referenced debt obligation. These agreements may be privately negotiated in the over-the-counter market (OTC credit default swaps) or may be executed in a multilateral trade facility platform, such as a registered exchange (centrally cleared credit default swaps). The underlying referenced debt obligation may be a single issuer of corporate or sovereign debt, a credit index, 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



44	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

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 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 OTC option contracts primarily to manage and/or gain exposure to 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.

The Fund invests in value recovery instruments (VRI) primarily to gain exposure to growth risk. 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 10 regarding other derivative information.

e. Restricted Cash

At April 30, 2017, 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 Consolidated Statement of Assets and Liabilities.

f. Loan Participation Notes

The Fund invests in loan participation notes (Participations). Participations are loans originally issued to a borrower by one or more financial institutions (the Lender) and subsequently sold to other investors, such as the Fund. Participations typically result in the Fund having a contractual relationship only with the Lender and not with the borrower. The Fund has the right to receive from the Lender any payments of principal, interest and fees which the Lender received from the borrower. The Fund generally has no rights to either enforce compliance by the borrower with the terms of the loan agreement or to any collateral relating to the original loan. As a result, the Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. The Participations may also involve interest rate risk and liquidity risk, including the potential default or insolvency of the borrower and/or the Lender.

g. FT Holdings Corporation II (FT Subsidiary)

The Fund invests in certain financial instruments through its investment in 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, 2017, FT subsidiary’s investment, Turtle Bay Resort, as well as any other



franklintempleton.com	Annual Report	45

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

1. Organization and Significant Accounting Policies (continued)

g. FT Holdings Corporation II (FT Subsidiary) (continued)

assets and liabilities of FT subsidiary are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities. The financial statements have been consolidated and include the accounts of the Fund and FT subsidiary. All intercompany transactions and balances have been eliminated. At April 30, 2017, the net assets of FT subsidiary were $26,516,818, representing less than 1% of the Fund’s consolidated net assets. The Fund’s investments in FT subsidiary is limited to 25% of consolidated assets.

h. Mortgage Dollar Rolls

i. Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are generally the prime rate offered by a designated U.S. bank or the London InterBank Offered Rate (LIBOR). Senior secured corporate loans often require prepayment of principal from excess cash flows or at the discretion of the borrower. As a result, actual maturity may be substantially less than the stated maturity. Senior secured corporate loans in which the Fund invests are generally readily marketable, but may be subject to certain restrictions on resale.

j. Income and Deferred Taxes

k. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an adjustment to interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date 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 and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or



46	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

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.

l. Accounting Estimates

m. Guarantees and Indemnifications

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

2. Shares of Beneficial Interest

At April 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Year Ended April 30,
	2017						2016
	Shares			Amount			Shares			Amount
Class A Shares:
Shares sold		52,682,489		$	505,267,299			86,621,299		$	820,474,987
Shares issued in reinvestment of distributions		7,476,400			71,451,152			19,950,107			187,902,460
Shares redeemed		(153,723,653	)		(1,475,494,320	)		(145,536,164	)		(1,370,224,841	)
Net increase (decrease)		(93,564,764	)	$	(898,775,869	)		(38,964,758	)	$	(361,847,394	)
Class C Shares:
Shares sold		12,084,940		$	115,680,760			23,699,305		$	225,556,988
Shares issued in reinvestment of distributions		2,077,286			19,824,729			6,662,132			62,783,652
Shares redeemed		(50,018,546	)		(479,629,546	)		(59,915,146	)		(564,563,714	)
Net increase (decrease)		(35,856,320	)	$	(344,124,057	)		(29,553,709	)	$	(276,223,074	)
Class R Shares:
Shares sold		3,506,082		$	33,582,209			3,750,305		$	35,486,868
Shares issued in reinvestment of distributions		270,945			2,577,967			836,414			7,856,192
Shares redeemed		(8,402,262	)		(80,371,106	)		(7,375,237	)		(69,160,448	)
Net increase (decrease)		(4,625,235	)	$	(44,210,930	)		(2,788,518	)	$	(25,817,388	)



franklintempleton.com	Annual Report	47

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

2. Shares of Beneficial Interest (continued)


	Year Ended April 30,
	2017						2016
	Shares			Amount			Shares			Amount
Class R6 Shares:
Shares sold		29,445,785		$	281,752,337			7,061,535		$	67,749,297
Shares issued in reinvestment of distributions		939,596			9,020,539			1,263,743			11,900,261
Shares redeemed		(23,650,469	)		(228,959,440	)		(2,868,916	)		(27,272,113	)
Net increase (decrease)		6,734,912		$	61,813,436			5,456,362		$	52,377,445
Advisor Class Shares:
Shares sold		56,693,852		$	545,767,778			29,938,042		$	283,540,799
Shares issued in reinvestment of distributions		1,934,521			18,551,538			4,428,844			41,793,674
Shares redeemed		(47,049,436	)		(451,940,540	)		(49,826,590	)		(467,543,557	)
Net increase (decrease)		11,578,937		$	112,378,776			(15,459,704	)	$	(142,209,084	)

3. Transactions with Affiliates


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

a. Management Fees

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, 2017, the effective investment management fee rate was 0.453% of the Fund’s average daily net assets.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

b. Administrative Fees

c. Distribution Fees

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	$	903,032
CDSC retained	$	102,352

e. Transfer Agent Fees

For the year ended April 30, 2017, the Fund paid transfer agent fees of $10,128,688, of which $4,398,034 was retained by Investor Services.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income 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 Consolidated Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. Prior to May 1, 2013, the waiver was accounted for as a reduction to management fees. During the year ended April 30, 2017, 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		Investment Income		Realized Gain (Loss)			% of Affiliated Fund Shares Outstanding Held at End of Year
Controlled Affiliates
Franklin Lower Tier Floating Rate Fund	38,346,600	—	(12,985,481)	25,361,119	$	267,559,803	$	35,276,773	$	5,141,681			82.8	%
Franklin Middle Tier Floating Rate Fund	29,441,483	—	(7,607,796)	21,833,687		219,646,896		17,998,862		(182,472	)		77.3	%
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 0.37%	910,963,589	1,701,085,992	(2,407,220,891)	204,828,690	$	204,828,690	$	109,263	$	—			1.1	%
Total					$	692,035,389	$	53,384,898	$	4,959,209

g. Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.01% until August 31, 2017. There were no Class R6 transfer agent fees waived during the year ended April 30, 2017.

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, 2017, the purchase and sale transactions aggregated $0 and $8,183,250, respectively.

4. Expense Offset Arrangement



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

5. Income Taxes

For tax purposes, capital losses may be carried over to offset future capital gains, if any. At April 30, 2017, the capital loss carryforwards were as follows:


Capital loss carryforwards:
Short Term	$	17,059,753
Long Term		246,333,535

Total capital loss carryforwards	$	263,393,288

For tax purposes, the Fund may elect to defer any portion of a late-year ordinary loss to the first day of the following fiscal year. At April 30, 2017, the Fund deferred late-year ordinary losses of $84,249,471.

The tax character of distributions paid during the years ended April 30, 2017 and 2016, was as follows:

2017

2016

Distributions paid from ordinary income

130,279,135

339,056,921

At April 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments.	$	7,300,580,680


Unrealized appreciation	$	188,697,390
Unrealized depreciation		(297,722,523)

Net unrealized appreciation (depreciation)	$	(109,025,133)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of defaulted securities, foreign currency transactions, bond discounts and premiums and inflation related adjustments on foreign securities.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2017, aggregated $10,157,062,872 and $10,323,330,874, respectively.

7. Credit Risk and Defaulted Securities

At April 30, 2017, the Fund had 49.8% of its portfolio invested in high yield, senior secured floating rate notes, 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 a defaulted security and/or other securities for which the income has been deemed uncollectible. At April 30, 2017, the value of this security was $6,156,250, representing 0.1% 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 security has been identified in the accompanying Consolidated Statement of Investments.



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

8. Restricted Securities

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

At April 30, 2017, investments in restricted securities, excluding certain securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:


Shares	Issuer	Acquisition Date		Cost		Value

3,418	^a Chaparral Energy Inc., A, 144A		3/21/17	$	86,048	$	86,719
955,276	^b Halcon Resources Corp.		10/23/12 - 11/24/15		24,687,967		6,141,864
125,940,079	Holdco 2, A		2/08/13 - 2/01/17		977,122		94,224
12,532,822	Holdco 2, B		2/01/17		9,305		9,377
211,824	Warrior Met Coal Inc.		5/28/14 - 11/13/14		29,562,025		3,638,294
	Total Restricted Securities (Value is 0.1% of Net Assets)			$	55,322,467	$	9,970,478

^aThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $13,568,050 as of April 30, 2017.

^bThe Fund also invests in unrestricted securities or other investments in the issuer, valued at $79,558 as of April 30, 2017.

9. Unfunded Loan Commitments

The Fund enters into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrowers’ discretion. Unfunded loan commitments and funded portions of credit agreements are marked to market daily and any unrealized appreciation or depreciation is included in the Consolidated Statement of Assets and Liabilities and the Consolidated Statement of Operations. Funded portions of credit agreements are presented in the Consolidated Statement of Investments.

At April 30, 2017, unfunded commitments were as follows:


Borrower	Unfunded Commitment
Global Tel*Link Corp, Revolving Commitment		$1,478,221

10. Other Derivative Information

At April 30, 2017, the Fund’s 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

3,009,865

Variation margin

—

Foreign exchange contracts

Unrealized appreciation on OTC forward exchange contracts

8,222,540

Unrealized depreciation on OTC forward exchange contracts

7,683,636

Credit contracts

Variation margin

—

Variation margin

956,924

OTC swap contracts (upfront payments)

969,147

OTC swap contracts (upfront receipts)

1,377,111



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

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

Unrealized appreciation on OTC swap contracts

558,747

Unrealized depreciation on OTC swap contracts

—

Value recovery instruments

Investments in securities, at value

7,256,738

Investments in securities, at value

—

Totals

20,017,037

10,017,671

^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.

For the year ended April 30, 2017, the effect of derivative contracts in the Fund’s Consolidated Statement of Operations was as follows:

Derivative Contracts

Not Accounted for as

Hedging Instruments

Consolidated Statement of

Operations Locations

Net Realized
Gain (Loss) for
the Year

Consolidated Statement of
Operations Locations

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

(7,478,050)

Futures contracts

3,009,865

Swap contracts

1,302,484

Swap contracts

—

Foreign exchange contracts

Investments

(221,720)

Investments

—

Foreign currency transactions

(5,138,233)

Translation of other assets and

46,907,815

liabilities denominated in

foreign currencies

Credit contracts

Investments

(478,800)

Investments

—

Swap contracts

(3,577,640)

Swap contracts

(743,033)

Value recovery instruments

Investments

—

Investments

822,878

Totals

(15,591,959

49,997,525

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations.

At April 30, 2017, the Fund’s OTC derivative assets and liabilities are as follows:


	Gross and Net Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities
	Assets^a		Liabilities^a
Derivatives
Forward exchange contracts		$8,222,540		$7,683,636
Swap contracts		1,527,894		1,377,111
Total		$9,750,434		$9,060,747

^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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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

10. Other Derivative Information (continued)

At April 30, 2017, 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		Cash Collateral Received^b			Net Amount (Not less than zero)
Counterparty
CITI		$1,527,894		$(1,377,111	)		$ —		$ —			$150,783
DBAB		3,242,187		(2,660,985	)		—		(581,202	)		—
JPHQ		4,980,353		(4,980,353	)		—		—			—
Total		$9,750,434		$(9,018,449	)		$ —		$(581,202	)		$150,783

At April 30, 2017, 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
CITI		$1,377,111		$(1,377,111	)		$ —		$ —		$ —
DBAB		2,660,985		(2,660,985	)		—		—		—
JPHQ		5,022,651		(4,980,353	)		—		—		42,298
Total		$9,060,747		$(9,018,449	)		$ —		$ —		$ 42,298

^bIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit the collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

For the year ended April 30, 2017, the average month end fair value of derivatives represented 0.8% of average month end net assets. The average month end number of open derivative contracts for the period was 57.

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page 58.

11. Holdings of 5% Voting Securities of Portfolio Companies



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

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

Investment
Income

Realized Gain

(Loss)

Non-Controlled Affiliates

CHC Group LLC (Value is 0.0%^aof Net Assets)

—

168,355

—

168,355

$2,020,260

$—

^aRounds to less than 0.1% of net assets.

^bGross addition was the result of a corporate action.

12. 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, 2017, the Fund did not use the Global Credit Facility.

13. Fair Value Measurements

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

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

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



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

13. Fair Value Measurements (continued)

A summary of inputs used as of April 30, 2017, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2			Level 3			Total
Assets:
Investments in Securities:
Equity Investments:^a
Consumer Services	$	—	$	—		$	25,946,719		$	25,946,719
Energy.		23,243,275		15,588,310			6,232,655			45,064,240
Materials		236,767		—			3,638,294			3,875,061
Retailing		—		—			103,601			103,601
Transportation		—		1,098,820			—			1,098,820
All Other Equity Investments^b		494,887,695		—			—			494,887,695
Convertible Bonds		—		15,972,955			—			15,972,955
Corporate Bonds		—		3,142,558,813			—			3,142,558,813
Senior Floating Rate Interests		—		646,516,054	^c		—			646,516,054
Foreign Government and Agency Securities		—		587,648,160			—			587,648,160
U.S. Government and Agency Securities		—		431,852,289			—			431,852,289
Asset-Backed Securities and Commercial
Mortgage-Backed Securities		—		798,406,398			—			798,406,398
Mortgage-Backed Securities		—		643,358,128			—			643,358,128
Municipal Bonds		—		144,127,712			—			144,127,712
Escrows and Litigation Trusts		—		1,081,447			348,000	^c		1,429,447
Short Term Investments		208,709,455		—			—			208,709,455
Total Investments in Securities	$	727,077,192	$	6,428,209,086		$	36,269,269		$	7,191,555,547
Other Financial Instruments:
Futures Contracts	$	3,009,865	$	—		$	—		$	3,009,865
Forward Exchange Contracts		—		8,222,540			—			8,222,540
Swap Contracts.		—		558,747			—			558,747
Unfunded Loan Commitments		—		44,003			—			44,003
Total Other Financial Instruments	$	3,009,865	$	8,825,290		$	—		$	11,835,155

Liabilities:
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	7,683,636		$	—		$	7,683,636
Swap Contracts.		—		956,924			—			956,924
Total Other Financial Instruments	$	—	$	8,640,560		$	—		$	8,640,560

^aIncludes common and convertible preferred stocks and management investment companies as well as other equity investments.

^bFor detailed categories, see the accompanying Consolidated Statement of Investments.

^cIncludes securities determined to have no value at April 30, 2017.

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

14. New Accounting Pronouncements



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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

15. Investment Company Reporting Modernization

16. 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.



franklintempleton.com	Annual Report	57

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Franklin Strategic Income Fund (continued)

Abbreviations


Counterparty/Exchange		Currency		Selected Portfolio
CITI	Citigroup, Inc.	BRL	Brazilian Real	ARM	Adjustable Rate Mortgage
DBAB	Deutsche Bank AG	EUR	Euro	CDA	Community Development Authority/Agency
ICE	Intercontinental Exchange	GBP	British Pound	CDO	Collateralized Debt Obligation
JPHQ	JP Morgan Chase & Co.	IDR	Indonesian Rupiah	CLO	Collateralized Loan Obligation
		KRW	South Korean Won	EDA	Economic Development Authority
		MXN	Mexican Peso	FRN	Floating Rate Note
		MYR	Malaysian Ringgit	GDP	Gross Domestic Product
		PHP	Philippine Peso	GO	General Obligation
		SEK	Swedish Krona	HDC	Housing Development Corp.
		USD	United States Dollar	PCR	Pollution Control Revenue
				PIK	Payment-In-Kind
				SF	Single Family
				TRA	Tax Receivable Agreement Right
				VRI	Value Recovery Instruments


Index
CDX.NA.HY.28		CDX North America High Yield Index
MCDX.NA.28		MCDX North America Index



58	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 the Franklin Strategic Income Fund:

In our opinion, the accompanying consolidated statement of assets and liabilities, including the consolidated statement of investments, and the related consolidated statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Strategic Income Fund (the “Fund”) as of April 30, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the consolidated financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These consolidated financial statements and consolidated financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of April 30, 2017 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP

San Francisco, California

June 20, 2017



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FRANKLIN STRATEGIC SERIES

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	142	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).

Mary C. Choksi (1950)	Trustee	Since 2014	136	Avis Budget Group Inc. (car rental)
One Franklin Parkway San Mateo, CA 94403-1906				(2007-present), Omnicom Group Inc. (advertising and marketing communications services) (2011-present) and H.J. Heinz Company (processed foods and allied products) (1998-2006)

Principal Occupation During at Least the Past 5 Years:
Senior Advisor, Strategic Investment Group (investment management group) (2015-present); director of various companies; and formerly, 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)	Trustee	Since 1998	142	Hess Corporation (exploration and
One Franklin Parkway San Mateo, CA 94403-1906				refining 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)	Trustee	Since 2009	142	Boeing Capital Corporation (aircraft
One Franklin Parkway San Mateo, CA 94403-1906				financing) (2006-2013).

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



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Independent Board Members (continued)


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	142	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; 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).

John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 2006 and Lead Independent Trustee since 2008	116	None

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

Interested Board Members and Officers


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	158	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 44 of the investment companies in Franklin Templeton Investments; 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	142	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.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.

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 Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.



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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

Laura F. Fergerson (1962) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments.

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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

Steven J. Gray (1955) 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, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments.

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

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

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 45 of the investment companies in Franklin Templeton Investments.

Christopher J. Molumphy (1962) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2000	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 some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.



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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

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 Investments; 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 45 of the investment companies in Franklin Templeton Investments.

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 Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).

Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2006	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.

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 and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.

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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

Note 3: Effective November 1, 2016, Frank Olson ceased to be a trustee of the trust.



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Interested Board Members and Officers (continued)



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FRANKLIN STRATEGIC INCOME FUND

Shareholder Information

Board Approval of Investment Management Agreements

FRANKLIN STRATEGIC SERIES

Franklin Strategic Income Fund

(Fund)

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 existing management fees 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 U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board noted management’s continual 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, derivatives and liquidity risk management.

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 investments relating to the services provided to the Fund by the Franklin Templeton Investments (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 Fund and its shareholders.

Fund Performance

The Board reviewed and considered the performance results of the Fund over various time periods ended January 31, 2017. 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



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FRANKLIN STRATEGIC SERIES

FRANKLIN STRATEGIC INCOME FUND

SHAREHOLDER INFORMATION

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 multi-sector income funds. The Board noted that the Fund’s annualized income return for the one-year period was below the median of its Performance Universe, but for the three-, 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 for the one- and 10-year periods was above the median of its Performance Universe, but for the three- and five-year periods was below the median of its Performance Universe. Given the Fund’s income-oriented investment objective, the Board concluded that the Fund’s performance was acceptable. In doing so, the Board noted the Fund’s positive longer term relative performance.

Comparative Fees and Expenses

used by Broadridge to select the mutual funds included in an Expense Group.

The Expense Group for the Fund included the Fund and seven 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 fair and 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 U.S. 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, 2016, 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, the Fund’s independent registered public accounting firm has been engaged by the Manager to periodically review the reasonableness of 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 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.



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SHAREHOLDER INFORMATION

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, quality and extent 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 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 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.



© 2017 Franklin Templeton Investments. All rights reserved.						194 A 06/17

LOGO

Franklin Templeton Investments

Gain From Our Perspective^®

Dear Shareholder:

During the 12 months ended April 30, 2017, the global economy expanded amid a stronger recovery in some developed markets and encouraging economic data in certain emerging markets. Improving growth expectations led to higher interest rates. In this environment, global government bonds, as measured by the Citigroup World Government Bond Index, recorded modest losses.

Franklin Global Government 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.

As previously communicated, on February 28, 2017, the Board of Trustees of Franklin Strategic Series, on behalf of Franklin

Global Government Bond Fund, approved a proposal to terminate and liquidate the Fund. The liquidation is anticipated to occur on or about June 16, 2017, but may be delayed if unforeseen circumstances arise.

Thank you for your trust and participation in Franklin Global Government Bond Fund. It has been our privilege to serve you.

Sincerely,

LOGO

Edward B. Jamieson

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 Global Government Bond Fund			3

Performance Summary			7

Your Fund’s Expenses			10

Financial Highlights and Statement of Investments			11

Financial Statements			18

Notes to Financial Statements			22

Report of Independent Registered Public Accounting Firm			33

Board Members and Officers			34

Shareholder Information			39

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 Global Government Bond Fund

This annual report for Franklin Global Government Bond Fund covers the fiscal year ended April 30, 2017. As previously communicated, on February 28, 2017, the Board of Trustees of Franklin Strategic Series, on behalf of Franklin Global Government Bond Fund, approved a proposal to terminate and liquidate the Fund. The liquidation is anticipated to occur on or about June 16, 2017, but may be delayed if unforeseen circumstances arise. Effective April 12, 2017, the Fund closed to all new investors.

Your Fund’s Goal and Main Investments

The Fund seeks total return, consisting of interest income and capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in “government bonds” of issuers located around the world. Government bonds include floating, variable and fixed-rate debt securities of any maturity, such as bonds, notes, bills and debentures, issued or guaranteed by governments, government agencies or instrumentalities, including government-sponsored entities, supra-national entities and public-private partnerships.

Portfolio Composition*

Based on Total Net Assets as of 4/30/17

LOGO

*Figures represent the net Fund exposure and include certain derivatives held in the portfolio (or their underlying reference assets) or unsettled trades and may not total 100% or may be negative due to rounding, use of any derivatives or other factors.

Performance Overview

For the 12 months under review, the Fund’s Class A shares had a -3.55% cumulative total return. In comparison, global government bonds, as measured by the Fund’s benchmark, the

Citigroup World Government Bond Index (WGBI), had a -3.61% cumulative total return for the same period.¹ You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

Geographic Composition*

Based on Total Net Assets as of 4/30/17

LOGO

Economic and Market Overview

During the 12 months under review, global government bond performance weakened significantly, as measured by the Citigroup WGBI, with most of the losses sustained in late 2016. At the beginning of the period, data suggested the U.S. economy was picking up, and the U.S. Federal Reserve (Fed) signaled the strong possibility of an increase in interest rates.

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 16.



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FRANKLIN GLOBAL GOVERNMENT BOND FUND

However, a far weaker-than-expected monthly U.S. payroll report quashed such speculation, and was swiftly followed by the unexpected outcome of a referendum in the U.K., in which voters opted to leave the European Union (also known as “Brexit”). In the aftermath of this result, demand for perceived safe-haven assets surged globally, driving the yields of many sovereign bonds down to historic lows. Over the following months, confidence among investors gradually returned, as it became apparent that the global economic and financial impact of the U.K. decision was more limited than originally feared, and therefore yields subsequently retraced much of their downward move.

Distributions*

5/1/16–4/30/17**


	Distributions per Share (cents)
Month		Class A	Class C	Class R	Class R6	Advisor Class
May		1.56	1.08	1.22	1.70	1.62
June		0.24	—	—	0.30	0.28
July		0.26	0.01	0.14	0.57	0.55
August		0.26	—	—	0.33	0.31
September		0.26	—	—	0.33	0.32
October		0.09	—	—	0.34	0.32
November		0.19	—	—	0.48	0.42
December		0.21	0.06	0.13	0.49	0.47
Total		3.07	1.15	1.49	4.54	4.29

**No distributions for the months of January through April 2017.

This rise in global bond yields picked up speed over the rest of 2016, mainly due to Donald Trump’s victory in November’s U.S. presidential election, which caused investors to reassess their outlook on global inflation and interest rates. Indications about the incoming administration’s policies suggested a likely fiscal stimulus through infrastructure spending, as well as tax cuts to stimulate U.S. economic growth. Many market participants speculated that such developments would also require the Fed to review its previously dovish stance. With risk appetites surging in the aftermath of the election result, a steady flow of upbeat data from the U.S. economy persuaded the Fed to raise U.S. interest rates at its last meeting of 2016.

Nevertheless, the U.S. Treasury market predominantly remained confined to a tight trading range during the first four months of 2017. Benchmark yields did rise to their highest level of the year ahead of a widely anticipated decision to raise U.S. interest rates in March, but sentiment swiftly reversed after the Fed’s accompanying statement turned out to be more

dovish than expected. Treasury yields fell further following the retraction of President Trump’s health care reform legislation, which raised concerns that planned tax reforms might face similar problems.

Political uncertainty in Europe remained high for much of the review period, and the European Central Bank announced an extension of its monetary easing program at the end of 2016, pledging to maintain its bond purchases until at least the end of 2017. However, the outcome of the first round of the French presidential elections in April 2017, which allayed fears about a potential surge of support for populism among French voters and pointed to a likely eventual victory for the centrist candidate Emmanuel Macron, improved sentiment among investors, pushing up eurozone bond yields toward the end of the period.

Investment Strategy

We invest selectively in bonds around the world based upon our assessment of changing market, political and economic conditions. While seeking opportunities, we consider various factors including interest rates, currency exchange rates and credit risks. We use top-down macroeconomic research, bottom-up sector-specific research and quantitative analysis to identify and to seek to exploit market inefficiencies while employing a disciplined risk management process. We may use various currency-related derivative instruments, including currency forward and currency futures contracts, as well as various interest rate/bond-related derivative instruments, including interest rate/bond futures contracts and swap agreements.

What is a currency forward contract?

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

What is a futures contract?

Manager’s Discussion

During the 12 months ended April 30 2017, the Fund performed slightly better than its benchmark, the Citigroup WGBI. The Fund’s currency allocation was the most significant contributor to relative performance, although this



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What are swap agreements?

was partially offset by the negative impact of duration and yield-curve positioning.

What is duration?

What is the yield curve?

The Fund’s currency positioning contributed to relative returns, mainly due to an overweighted allocation to a stronger U.S. dollar, which received a boost from speculation about potentially tighter U.S. monetary policy in the wake of Donald Trump’s victory in the U.S. presidential elections.

The Fund’s positions denominated in currencies other than the U.S. dollar, euro, Japanese yen and the British pound also enhanced relative results, helped by holdings in local-currency Polish bonds. The Fund’s exposure to emerging-market bonds further added to relative performance.

In contrast, the Fund’s duration and yield-curve positioning held back relative performance, hurt by underweighted duration positioning in Japanese and U.S. government bonds.

The Fund’s security selection among government bonds also weighed slightly on relative returns.

CFA^® is a trademark owned by CFA Institute.

Currency Composition*

4/30/17


	% of Total Net Assets
North America		54.8	%
U.S. Dollar		51.5	%
Canadian Dollar		3.3	%
Europe		30.8	%
Euro		18.7	%
British Pound Sterling		5.8	%
Polish Zloty		3.6	%
Swedish Krona		2.7	%
Asia		9.3	%
Japanese Yen		6.9	%
Malaysian Ringitt		2.4	%
Latin America & Caribbean		5.2	%
Mexican Peso		5.2	%
Australia & New Zealand		-0.1	%
Australian Dollar		-0.1	%

Thank you for your participation in Franklin Global Government Bond Fund. It has been a pleasure serving your investment needs.


		John W. Beck

		David Zahn, CFA

		Portfolio Management Team



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Performance Summary as of April 30, 2017

Performance as of 4/30/17¹


Share Class	Cumulative Total Return²	Average Annual Total Return³

A
1-Year	-3.55%	-7.69%
3-Year	-4.58%	-2.95%
Since Inception (9/6/13)	+0.96%	-0.92%

Advisor
1-Year	-3.31%	-3.31%
3-Year	-4.30%	-1.46%
Since Inception (9/6/13)	+1.67%	+0.45%


	Distribution	30-Day Standardized Yield⁵
Share Class	Rate⁴	(with waiver)	(without waiver)
A	0.26%	1.09%	-0.35%
Advisor	0.61%	1.28%	-0.22%

See page 9 for Performance Summary footnotes.



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FRANKLIN GLOBAL GOVERNMENT BOND FUND

PERFORMANCE SUMMARY

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

Class A (9/6/13–4/30/17)

LOGO

Advisor Class (9/6/13–4/30/17)

LOGO

See page 9 for Performance Summary footnotes.



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FRANKLIN GLOBAL GOVERNMENT BOND FUND

PERFORMANCE SUMMARY

Distributions (5/1/16–4/30/17)


Share Class	Net Investment Income
A	$	0.0307
C	$	0.0115
R	$	0.0149
R6	$	0.0454
Advisor	$	0.0429

Total Annual Operating Expenses⁷


Share Class	With Waiver		Without Waiver
A		0.86%		2.17%
Advisor		0.61%		1.92%

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. Special risks are associated with investing in foreign securities, including risks associated with political and economic developments, trading practices, availability of information, limited markets and currency exchange rate fluctuations and policies. Sovereign debt securities are subject to various risks in addition to those relating to debt securities and foreign securities generally, including, but not limited to, the risk that a governmental entity may be unwilling or unable to pay interest and repay principal on its sovereign debt. Investments in emerging market countries are subject to all of the risks of foreign investing generally and have additional heightened risks due to a lack of established legal, political, business and social frameworks to support securities markets. Changes in interest rates will affect the value of the Fund’s portfolio and its share price and yield. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio that may result in significant volatility and cause the Fund to participate in losses (as well as gains) in an amount that exceeds the Fund’s initial investment. The Fund 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. Distribution rate is based on an annualization of the respective class’s December dividend and the maximum offering price (NAV for Advisor Class) per share on 12/31/16.

6. Source: Morningstar. The Citigroup WGBI is a market capitalization-weighted index consisting of investment-grade world government bond markets.

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

See page 9 for Performance Summary footnotes.



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FRANKLIN GLOBAL GOVERNMENT 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 (actual return after expenses)		Hypothetical (5% annual return before expenses)
Share Class	Beginning Account Value 11/1/16	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Ending Account Value 4/30/17	Expenses Paid During Period 11/1/16–4/30/17^1,2	Net Annualized Expense Ratio²
A	$1,000	$979.20	$3.78	$1,020.98	$3.86	0.77%
C	$1,000	$976.70	$6.13	$1,018.60	$6.26	1.25%
R	$1,000	$981.10	$2.75	$1,022.02	$2.81	0.56%
R6	$1,000	$980.90	$2.65	$1,022.12	$2.71	0.54%
Advisor	$1,000	$980.80	$2.95	$1,021.82	$3.01	0.60%

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



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FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Global Government Bond Fund


	Year Ended April 30,
	2017			2016			2015			2014^a

Class A

Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$ 9.59			$ 9.81			$10.45			$10.00

Income from investment operations^b:
Net investment income^c		0.12			0.12			0.17			0.11
Net realized and unrealized gains (losses)		(0.46	)		(0.17	)		(0.24	)		0.47

Total from investment operations		(0.34	)		(0.05	)		(0.07	)		0.58

Less distributions from:
Net investment income and net foreign currency gains		(0.03	)		(0.17	)		(0.40	)		(0.13	)
Net realized gains		—			—			(0.17	)		—
Total distributions		(0.03	)		(0.17	)		(0.57	)		(0.13	)

Net asset value, end of year		$ 9.22			$ 9.59			$ 9.81			$10.45

Total return^d		(3.55)%			(0.44)%			(0.64)%			5.81%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		2.11%			1.98%			2.37%			3.22%
Expenses net of waiver and payments by affiliates		0.77%			0.67%			0.64%			0.57%
Net investment income		1.29%			1.23%			1.63%			1.62%

Supplemental data
Net assets, end of year (000’s)		$ 10,905			$13,356			$11,487			$11,232
Portfolio turnover rate		40.33%			37.97%			60.28%			13.24%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.

^cBased on average daily shares outstanding.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	11

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Global Government Bond Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014^a
Class C

Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$ 9.57			$ 9.79			$10.44			$10.00

Income from investment operations^b:
Net investment income^c		0.08			0.06			0.10			0.08
Net realized and unrealized gains (losses)		(0.46	)		(0.16	)		(0.24	)		0.46

Total from investment operations		(0.38	)		(0.10	)		(0.14	)		0.54

Less distributions from:
Net investment income and net foreign currency gains		(0.01	)		(0.12	)		(0.34	)		(0.10	)
Net realized gains		—			—			(0.17	)		—
Total distributions		(0.01	)		(0.12	)		(0.51	)		(0.10	)

Net asset value, end of year		$ 9.18			$ 9.57			$ 9.79			$10.44

Total return^d		(3.96)%			(1.03)%			(1.34)%			5.46%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		2.59%			2.56%			2.95%			3.81%
Expenses net of waiver and payments by affiliates		1.25%			1.25%			1.22%			1.16%
Net investment income		0.81%			0.65%			1.05%			1.03%

Supplemental data
Net assets, end of year (000’s)		$275			$509			$292			$156
Portfolio turnover rate		40.33%			37.97%			60.28%			13.24%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.

^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.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Global Government Bond Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014^a
Class R

Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$ 9.58			$ 9.80			$10.44			$10.00

Income from investment operations^b:
Net investment income^c		0.15			0.08			0.12			0.08
Net realized and unrealized gains (losses)		(0.47	)		(0.16	)		(0.23	)		0.47

Total from investment operations		(0.32	)		(0.08	)		(0.11	)		0.55

Less distributions from:
Net investment income and net foreign currency gains		(0.01	)		(0.14	)		(0.36	)		(0.11	)
Net realized gains		—			—			(0.17	)		—

Total distributions		(0.01	)		(0.14	)		(0.53	)		(0.11	)

Net asset value, end of year		$ 9.25			$ 9.58			$ 9.80			$10.44

Total return^d		(3.19)%			(0.90)%			(1.07)%			5.52%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		1.94%			2.39%			2.82%			3.66%
Expenses net of waiver and payments by affiliates		0.60%			1.08%			1.09%			1.01%
Net investment income		1.46%			0.82%			1.18%			1.18%

Supplemental data
Net assets, end of year (000’s)		$9			$10			$10			$10
Portfolio turnover rate		40.33%			37.97%			60.28%			13.24%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.

^cBased on average daily shares outstanding.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	13

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Global Government Bond Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014^a

Class R6

Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$ 9.59			$ 9.81			$10.45			$10.00
Income from investment operations^b:
Net investment income^c		0.14			0.13			0.18			0.11

Net realized and unrealized gains (losses)		(0.45	)		(0.17	)		(0.24	)		0.48

Total from investment operations		(0.31	)		(0.04	)		(0.06	)		0.59
Less distributions from:
Net investment income and net foreign currency gains		(0.05	)		(0.18	)		(0.41	)		(0.14	)
Net realized gains		—			—			(0.17	)		—

Total distributions		(0.05	)		(0.18	)		(0.58	)		(0.14	)

Net asset value, end of year		$ 9.23			$ 9.59			$ 9.81			$10.45

Total return^d		(3.29)%			(0.38)%			(0.62)%			5.91%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		2.60%			2.82%			3.04%			3.78%
Expenses net of waiver and payments by affiliates		0.52%			0.59%			0.57%			0.51%
Net investment income		1.54%			1.31%			1.70%			1.68%

Supplemental data
Net assets, end of year (000’s)		$9			$10			$10			$10
Portfolio turnover rate		40.33%			37.97%			60.28%			13.24%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.

^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.



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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Global Government Bond Fund (continued)


	Year Ended April 30,
	2017			2016			2015			2014^a

Advisor Class

Per share operating performance
(for a share outstanding throughout the year)
Net asset value, beginning of year		$ 9.61			$ 9.83			$10.49			$10.00

Income from investment operations^b:
Net investment income^c		0.14			0.12			0.17			0.10
Net realized and unrealized gains (losses)		(0.46	)		(0.16	)		(0.24	)		0.52

Total from investment operations		(0.32	)		(0.04	)		(0.07	)		0.62

Less distributions from:
Net investment income and net foreign currency gains		(0.04	)		(0.18	)		(0.42	)		(0.13	)
Net realized gains		—			—			(0.17	)		—

Total distributions		(0.04	)		(0.18	)		(0.59	)		(0.13	)

Net asset value, end of year		$ 9.25			$ 9.61			$ 9.83			$10.49

Total return^d		(3.31)%			(0.38)%			(0.65)%			6.24%

Ratios to average net assets^e
Expenses before waiver and payments by affiliates		1.94%			1.91%			2.30%			3.16%
Expenses net of waiver and payments by affiliates		0.60%			0.60%			0.57%			0.51%
Net investment income		1.46%			1.30%			1.70%			1.68%

Supplemental data
Net assets, end of year (000’s)		$275			$10			$10			$10
Portfolio turnover rate		40.33%			37.97%			60.28%			13.24%

^aFor the period September 6, 2013 (commencement of operations) to April 30, 2014.

^cBased on average daily shares outstanding.

^dTotal return is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	15

FRANKLIN STRATEGIC SERIES

Statement of Investments, April 30, 2017

Franklin Global Government Bond Fund

Country

Principal
Amount*

Value

Foreign Government and Agency Securities 69.5%

Government of Canada, 2.75%, 6/01/22

Canada

450,000

CAD

357,531

Government of Chile, 3.875%, 8/05/20

Chile

100,000

105,745

^aGovernment of Finland, senior bond, Reg S, 2.00%, 4/15/24

Finland

350,000

EUR

431,590

^aGovernment of France, Reg S, 1.00%, 5/25/19

France

160,000

EUR

179,898

^aGovernment of Indonesia, Reg S, 4.875%, 5/05/21

Indonesia

200,000

214,979

^aGovernment of Lithuania, senior note, Reg S, 6.625%, 2/01/22

Lithuania

200,000

235,455

Government of Malaysia,

senior bond, 4.24%, 2/07/18

Malaysia

650,000

MYR

150,966

senior note, 3.654%, 10/31/19

Malaysia

550,000

MYR

127,771

Government of Mexico,

7.75%, 12/14/17

Mexico

30,000

MXN

160,450

8.00%, 12/07/23

Mexico

30,000

MXN

166,934

Government of Peru, senior bond, 6.55%, 3/14/37

Peru

200,000

263,561

Government of Poland,

3.25%, 7/25/19

Poland

1,400,000

PLN

369,971

4.00%, 10/25/23

Poland

1,150,000

PLN

313,044

2.50%, 7/25/26

Poland

2,000,000

PLN

482,897

^aGovernment of Spain,

senior bond, Reg S, 4.40%, 10/31/23

Spain

180,000

EUR

240,084

senior bond, Reg S, 2.15%, 10/31/25

Spain

350,000

EUR

403,751

senior bond, Reg S, 5.15%, 10/31/28

Spain

200,000

EUR

292,766

Italy Treasury Bond,

^aReg S, 3.50%, 3/01/30

Italy

700,000

EUR

843,988

senior bond, 4.25%, 9/01/19

Italy

160,000

EUR

190,653

senior bond, 5.50%, 9/01/22

Italy

450,000

EUR

600,984

senior bond, 1.25%, 12/01/26

Italy

375,000

EUR

378,263

^aQueensland Treasury Corp.,

senior bond, Reg S, 5.75%, 7/22/24

Australia

600,000

AUD

537,530

senior note, Reg S, 6.00%, 7/21/22

Australia

300,000

AUD

263,964

^aUnited Kingdom Treasury Bond, Reg S, 4.25%, 6/07/32

United Kingdom

230,000

GBP

410,008

^aUnited Kingdom Treasury Note, Reg S, 1.25%, 7/22/18

United Kingdom

190,000

GBP

249,747

Total Foreign Government and Agency Securities

(Cost $8,476,810)

7,972,530

U.S. Government and Agency Securities 22.6%

U.S. Treasury Bond,

4.375%, 11/15/39

United States

140,000

176,036

2.50%, 2/15/45

United States

140,000

127,575

^cIndex Linked, 3.375%, 4/15/32

United States

164,672

232,901

U.S. Treasury Note,

1.875%, 8/31/17

United States

700,000

702,211

1.25%, 11/15/18

United States

300,000

300,146

2.625%, 11/15/20

United States

850,000

880,182

^cIndex Linked, 1.25%, 7/15/20

United States

167,534

176,647

Total U.S. Government and Agency Securities

(Cost $2,562,306)

2,595,698

Total Investments before Short Term Investments

(Cost $11,039,116)

10,568,228



16	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS

Franklin Global Government Bond Fund (continued)

Country

Shares

Value

Short Term Investments (Cost $610,946) 5.3%

Money Market Funds 5.3%

^d,eInstitutional Fiduciary Trust Money Market Portfolio, 0.37%

United States

610,946

$ 610,946

Total Investments (Cost $11,650,062) 97.4%

11,179,174

Other Assets, less Liabilities 2.6%

293,529

Net Assets 100.0%

$11,472,703

^*The principal amount is stated in U.S. dollars unless otherwise indicated.

^bPrincipal amount is stated in 100 Mexican Peso Units.

^cPrincipal amount of security is adjusted for inflation. See Note 1(e).

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

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

At April 30, 2017, 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
Australian Dollar		BZWS		Sell		1,100,000		827,813			6/13/17		$ 4,879		$ —
Euro		CITI		Sell		1,010,000		1,070,721			6/13/17		—		(32,117	)
Japanese Yen		CITI		Buy		88,000,000		770,897			6/13/17		20,272		—
Malaysian Ringgit		BZWS		Sell		900,000		200,245			6/13/17		—		(7,253	)
Mexican Peso		RBCCM		Buy		5,000,000		251,442			6/13/17		12,021		—
Polish Zloty		BZWS		Sell		2,900,000		709,376			6/13/17		—		(37,821	)
Singapore Dollar		CITI		Buy		350,000		251,374			6/13/17		—		(730	)
Singapore Dollar		CITI		Sell		350,000		246,967			6/13/17		—		(3,677	)
Swedish Krona		BZWS		Buy		2,750,000		288,793	EUR		6/13/17		—		(4,097	)


Total Forward Exchange Contracts													$ 37,172		$ (85,695	)


Net unrealized appreciation (depreciation)															$ (48,523	)

*In U.S. dollars unless otherwise indicated.

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

See Abbreviations on page 32.



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \| Annual Report	17

FRANKLIN STRATEGIC SERIES

Financial Statements

Statement of Assets and Liabilities

April 30, 2017

Franklin Global Government Bond Fund


Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	11,039,116
Cost - Non-controlled affiliates (Note 3f)		610,946

Total cost of investments	$	11,650,062

Value - Unaffiliated issuers	$	10,568,228
Value - Non-controlled affiliates (Note 3f)		610,946

Total value of investments		11,179,174
Cash		7,832
Foreign currency, at value (cost $239,111)		239,375
Receivables:
Capital shares sold		13
Interest		115,207
Affiliates		89,736
Unrealized appreciation on OTC forward exchange contracts		37,172
Other assets.		10

Total assets		11,668,519
Liabilities:
Payables:
Capital shares redeemed		56,079
Distribution fees		826
Transfer agent fees		1,305
Professional fees.		44,548
Unrealized depreciation on OTC forward exchange contracts		85,695
Accrued expenses and other liabilities		7,363

Total liabilities		195,816

Net assets, at value.	$	11,472,703
Net assets consist of:
Paid-in capital.	$	12,531,688
Distributions in excess of net investment income.		(356,302	)
Net unrealized appreciation (depreciation)		(517,375	)
Accumulated net realized gain (loss)		(185,308	)

Net assets, at value.	$	11,472,703



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

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Assets and Liabilities (continued)

April 30, 2017

Franklin Global Government Bond Fund


Class A:
Net assets, at value	$	10,904,500

Shares outstanding		1,182,448

Net asset value per share^a	$	9.22

Maximum offering price per share (net asset value per share ÷ 95.75%)	$	9.63

Class C:
Net assets, at value	$	274,954

Shares outstanding		29,954

Net asset value and maximum offering price per share^a		$9.18

Class R:
Net assets, at value	$	9,251

Shares outstanding		1,000

Net asset value and maximum offering price per share		$9.25

Class R6:
Net assets, at value	$	9,228

Shares outstanding		1,000

Net asset value and maximum offering price per share		$9.23

Advisor Class:
Net assets, at value	$	274,770

Shares outstanding		29,697

Net asset value and maximum offering price per share		$9.25

^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	19

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Operations

for the year ended April 30, 2017

Franklin Global Government Bond Fund


Investment income:
Dividends from non-controlled affliates (Note 3f)	$	687
Interest		268,693

Total investment income		269,380

Expenses:
Management fees (Note 3a)		85,036
Distribution fees: (Note 3c)
Class A		20,985
Class C		2,504
Transfer agent fees: (Note 3e)
Class A		11,385
Class C		354
Class R		9
Class R6		70
Advisor Class		233
Custodian fees (Note 4)		2,066
Reports to shareholders		13,986
Registration and filing fees		72,361
Professional fees		57,686
Other		10,195

Total expenses		276,870
Expenses waived/paid by affiliates (Note 3g)		(174,772	)

Net expenses		102,098

Net investment income		167,282

Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments		(247,864	)
Foreign currency transactions		(124,193	)

Net realized gain (loss)		(372,057	)

Net change in unrealized appreciation (depreciation) on:
Investments		(427,236	)
Translation of other assets and liabilities denominated in foreign currencies		122,621

Net change in unrealized appreciation (depreciation)		(304,615	)

Net realized and unrealized gain (loss)		(676,672	)

Net increase (decrease) in net assets resulting from operations	$	(509,390	)



20	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 Global Government Bond Fund


	Year Ended April 30,
	2017			2016
Increase (decrease) in net assets:
Operations:
Net investment income	$	167,282		$	146,029
Net realized gain (loss)		(372,057	)		(259,529)
Net change in unrealized appreciation (depreciation)		(304,615	)		94,403
Net increase (decrease) in net assets resulting from operations		(509,390	)		(19,097)
Distributions to shareholders from:
Net investment income:
Class A		(42,454	)		(207,807)
Class C		(599	)		(4,106)
Class R		(15	)		(139)
Class R6		(45	)		(179)
Advisor Class		(566	)		(196)
Total distributions to shareholders		(43,679	)		(212,427)
Capital share transactions: (Note 2)
Class A		(1,928,442	)		2,094,584
Class C		(217,799	)		222,515
Advisor Class		278,096			25
Total capital share transactions		(1,868,145	)		2,317,124
Net increase (decrease) in net assets		(2,421,214	)		2,085,600
Net assets:
Beginning of year.		13,893,917			11,808,317
End of year	$	11,472,703		$	13,893,917
Distributions in excess of net investment income included in net assets:
End of year	$	(356,302	)	$	(193,628)



franklintempleton.com	The accompanying notes are an integral part of these financial statements. \|	Annual Report	21

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements

Franklin Global Government Bond Fund

1. Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of nine separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Global Government Bond Fund (Fund) is included in this report. The financial statements of the remaining funds in the Trust are presented separately. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees primarily due to differing arrangements for distribution and transfer agent fees.

The Fund was closed to new investors with limited exceptions effective at the close of market April 12, 2017.

The following summarizes the Fund’s significant accounting policies.

a. Financial Instrument Valuation

Debt securities generally trade in the over-the-counter (OTC) market rather than on a securities exchange. The Fund’s pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through

which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value. Securities denominated in a foreign currency are converted into their U.S. dollar equivalent at the foreign exchange rate in effect at 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 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 VC convenes on a regular basis to review such financial instruments and considers a number of factors, including significant unobservable valuation inputs, when arriving at fair value. The VC primarily employs a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The VC employs various methods for calibrating these valuation approaches including a regular review of key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.



22	Annual Report	franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

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.

b. Foreign Currency Translation

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

rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Board.

c. Derivative Financial Instruments

Derivative counterparty credit risk is managed through a formal evaluation of the creditworthiness of all potential counter-parties. 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



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

1. Organization and Significant Accounting

Policies (continued)

c. Derivative Financial Instruments (continued)

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 terms are contract specific for OTC derivatives. For OTC derivatives traded under an ISDA master agreement, posting of collateral is required by either the Fund or the applicable counterparty if the total net exposure of all OTC derivatives with the applicable counterparty exceeds the minimum transfer amount, which typically ranges from $100,000 to $250,000, and can vary depending on the counterparty and the type of the agreement. Generally, collateral is determined at the close of Fund business each day and any additional collateral required due to changes in derivative values may be delivered by the Fund or the counterparty the next business day, or within a few business days. Collateral pledged and/or received by the Fund, if any, is held in segregated accounts with the Fund’s custodian/counterparty broker and can be in the form of cash and/or securities. Unrestricted cash may be invested according to the Fund’s investment objectives. 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.

See Note 8 regarding other derivative information.

d. Income and Deferred Taxes

e. Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Distributions to shareholders are recorded on the ex-dividend date and are determined according to income tax regulations (tax basis). Distributable earnings determined on a tax basis may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

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 Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

2. Shares of Beneficial Interest

At April 30, 2017, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:


	Year Ended April 30,
	2017^a						2016^a
	Shares			Amount			Shares			Amount

Class A Shares:
Shares sold		402,621		$	3,810,870			332,524		$	3,141,724
Shares issued in reinvestment of distributions		1,486			14,111			3,698			35,024
Shares redeemed		(614,975	)		(5,753,423	)		(114,211	)		(1,082,164	)

Net increase (decrease)		(210,868	)	$	(1,928,442	)		222,011		$	2,094,584

Class C Shares:
Shares sold		22,275		$	208,140			44,024		$	416,435
Shares issued in reinvestment of distributions		63			599			421			3,989
Shares redeemed		(45,551	)		(426,538	)		(21,056	)		(197,909	)
Net increase (decrease)		(23,213	)	$	(217,799	)		23,389		$	222,515



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

2. Shares of Beneficial Interest (continued)


	Year Ended April 30,
				2017^a						2016^a
	Shares			Amount			Shares			Amount

Advisor Class Shares:
Shares sold		68,523		$	649,193			1,207		$	11,435
Shares issued in reinvestment of distributions		57			523			—			—
Shares redeemed		(39,883	)		(371,620	)		(1,207	)		(11,410	)

Net increase (decrease)		28,697		$	278,096			—		$	25

^aDuring the year Class R and Class R6 did not report any share transactions.

3. Transactions with Affiliates

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


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

a. Management Fees

The Fund pays an investment management fee to FTIML based on the average daily net assets of the Fund as follows:


Annualized Fee Rate		Net Assets
0.650%		Up to and including $1 billion
0.600%		Over $1 billion, up to and including $5 billion
0.550%		Over $5 billion, up to and including $10 billion
0.545%		Over $10 billion, up to and including $15 billion
0.540%		Over $15 billion, up to and including $20 billion
0.535%		In excess of $20 billion

For the year ended April 30, 2017, the effective investment management fee rate was 0.650% of the Fund’s average daily net assets.

b. Administrative Fees

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

c. Distribution Fees



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

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 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.

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	$	2,886
CDSC retained	$	33

e. Transfer Agent Fees

For the year ended April 30, 2017, the Fund paid transfer agent fees of $12,051, of which $7,884 was retained by Investor Services.

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)

% of
Affiliated
Fund Shares
Outstanding
Held at End
of Year

Non-Controlled Affiliates

Institutional Fiduciary Trust Money Market

Portfolio, 0.37%

2,527,951

5,891,610

(7,808,615

)

610,946

$610,946

$687

$–

–

%^a

^aRounds to less than 0.1%.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

3. Transactions with Affiliates (continued)

g. Waiver and Expense Reimbursements

FTIML and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses) for Class A, Class C, Class R and Advisor Class of the Fund do not exceed 0.60%, and Class R6 does not exceed 0.59% 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, 2017. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

h. Other Affiliated Transactions

At April 30, 2017, Franklin Advisers, Inc. an affiliate of FTIML, owned 64.16% of the Fund’s outstanding shares. Investment activities of this shareholder could have a material impact on the Fund.

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, 2017, the capital loss carryforwards were as follows:


Capital loss carryforwards not subject to expiration:
Short term	$	142,081
Long term		43,227
Total capital loss carryforwards	$	185,308

The tax character of distributions paid during the years ended April 30, 2017 and 2016, was as follows:


	2017		2016
Distributions paid from ordinary income	$	43,679	$	212,427

At April 30, 2017, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:


Cost of investments	$	11,835,244
Unrealized appreciation	$	186,036
Unrealized depreciation		(842,106	)
Net unrealized appreciation (depreciation)	$	(656,070	)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of bond discounts and premiums, foreign currency transactions, and tax straddles.



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NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the year ended April 30, 2017, aggregated $4,962,997 and $4,694,682, respectively.

7. Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

8. Other Derivative Information

At April 30, 2017, the Fund’s investments in derivative contracts are reflected in the Statement of Assets and Liabilities as follows:

Asset Derivatives

Liability Derivatives

Derivative Contracts

Not Accounted for as

Hedging Instruments

Statement of

Assets and Liabilities

Location

Fair Value

Statement of

Assets and Liabilities

Location

Fair Value

Foreign exchange contracts

Unrealized appreciation on OTC

forward exchange contracts

$37,172

Unrealized depreciation on OTC

forward exchange contracts

$85,695

For the year ended April 30, 2017, the effect of derivative contracts in the Fund’s Statement of Operations was as follows:

Derivative Contracts

Not Accounted for as

Hedging Instruments

Statement of

Operations Locations

Net Realized

Gain (Loss) for

the Year

Statement of

Operations Locations

Net Change in

Unrealized

Appreciation
(Depreciation)

for the Year

Net realized gain (loss) from:

Net change in unrealized appreciation (depreciation) on:

Foreign exchange contracts

Foreign currency transactions

(89,016

)^a

Translation of other assets and liabilities denominated in foreign currencies

122,440

^aForward exchange contracts are included in net realized gain (loss) from foreign currency transactions and net change in unrealized appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies in the Statement of Operations.

At April 30, 2017, the Fund’s 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		$37,172		$85,695

^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.



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

8. Other Derivative Information (continued)

At April 30, 2017, the Fund’s OTC derivative assets which may be offset against the Fund’s OTC derivative liabilities and collateral received from the counterparty, is as follows:


			Amounts Not Offset in the
			Statement of Assets and Liabilities
	Gross Amounts of Assets Presented in the Statement of Assets and Liabilities		Financial Instruments Available for Offset			Financial Instruments Collateral Received		Cash Collateral Received		Net Amount (Not less than zero)
Counterparty
BZWS		$4,879		$(4,879	)		$ —		$ —		$ —
CITI		20,272		(20,272	)		—		—		—
RBCCM		12,021		—			—		—		12,021
Total		$37,172		$(25,151	)		$ —		$ —		$12,021

At April 30, 2017, the Fund’s OTC derivative liabilities which may be offset against the Fund’s OTC derivative assets and collateral pledged to the counterparty, is as follows:


			Amounts Not Offset in the
			Statement of Assets and Liabilities
	Gross 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
BZWS		$49,171		$(4,879	)		$ —		$ —		$44,292
CITI		36,524		(20,272	)		—		—		16,252
RBCCM		—		—			—		—		—
Total		$85,695		$(25,151	)		$ —		$ —		$60,544

For the year ended April 30, 2017, the average month end fair value of derivatives represented 0.7% of average month end net assets. The average month end number of open derivatives contracts for the year was 8.

See Note 1(c) regarding derivative financial instruments.

See Abbreviations on page 32.

9. Credit Facility



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NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

10. Fair Value Measurements

•

Level 1 – quoted prices in active markets for identical financial instruments

•

Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

•

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

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

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

A summary of inputs used as of April 30, 2017, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:


	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:
Foreign Government and Agency Securities	$	—	$	7,972,530	$	—	$	7,972,530
U.S. Government and Agency Securities		—		2,595,698		—		2,595,698
Short Term Investments		610,946		—		—		610,946
Total Investments in Securities	$	610,946	$	10,568,228	$	—	$	11,179,174

Other Financial Instruments:
Forward Exchange Contracts	$	—	$	37,172	$	—	$	37,172

Liabilities:
Other Financial Instruments:
Forward Exchange Contracts	$	—	$	85,695	$	—	$	85,695

11. New Accounting Pronouncements



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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS

Franklin Global Government Bond Fund (continued)

12. Investment Company Reporting Modernization

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, except for the following:

On February 28, 2017, the Board approved a proposal to liquidate the Fund. The Fund liquidated on June 16, 2017.

Abbreviations


Counterparty		Currency
BZWS	Barclays Bank PLC	AUD	Australian Dollar
CITI	Citigroup, Inc.	CAD	Canadian Dollar
RBCCM	Royal Bank of Canada	EUR	Euro
		GBP	British Pound
		MXN	Mexican Peso
		MYR	Malaysian Ringgit
		PLN	Polish Zloty



32	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 the Franklin Global Government Bond Fund:

In our opinion, the accompanying statement of assets and liabilities, including the statement of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of the Franklin Global Government Bond Fund (the “Fund”) as of April 30, 2017, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as “financial statements”) are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities as of April 30, 2017 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.

As discussed in Note 13, the Investment Manager liquidated the Fund. Our opinion is not modified with respect to this matter.

PricewaterhouseCoopers LLP

San Francisco, California

June 20, 2017



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FRANKLIN STRATEGIC SERIES

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	142	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).


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 H.J. Heinz Company (processed foods and allied products) (1998-2006)

Principal Occupation During at Least the Past 5 Years:
Senior Advisor, Strategic Investment Group (investment management group) (2015-present); director of various companies; and formerly, 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	Trustee	Since 1998	142	Hess Corporation (exploration and refining 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	142	Boeing Capital Corporation (aircraft financing) (2006-2013).

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



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Independent Board Members (continued)


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	142	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; 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).


John B. Wilson (1959) One Franklin Parkway San Mateo, CA 94403-1906	Lead Independent Trustee	Trustee since 2006 and Lead Independent Trustee since 2008	116	None

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

Interested Board Members and Officers
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	158	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 44 of the investment companies in Franklin Templeton Investments; 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	142	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.; Senior Vice President, Franklin Advisory Services, LLC; and officer and/or director or trustee, as the case may be, of some of the other subsidiaries of Franklin Resources, Inc. and of 42 of the investment companies in Franklin Templeton Investments.


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 Investments; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.



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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


Laura F. Fergerson (1962) One Franklin Parkway San Mateo, CA 94403-1906	Chief Executive Officer – Finance and Administration	Since 2009	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Vice President, Franklin Templeton Services, LLC; Vice President, Franklin Advisers, Inc. and Franklin Templeton Institutional, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.


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, Franklin Templeton Investments; and officer of 27 of the investment companies in Franklin Templeton Investments.


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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.


Steven J. Gray (1955) 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, Franklin Templeton Investments; Vice President, Franklin Templeton Distributors, Inc.; and officer of 45 of the investment companies in Franklin Templeton Investments.


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

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


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 45 of the investment companies in Franklin Templeton Investments.


Christopher J. Molumphy (1962) One Franklin Parkway San Mateo, CA 94403-1906	Vice President	Since 2000	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 some of the other subsidiaries of Franklin Resources, Inc. and of 22 of the investment companies in Franklin Templeton Investments.



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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


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 Investments; 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 45 of the investment companies in Franklin Templeton Investments.


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 Investments; Vice President, Franklin Templeton Companies, LLC; officer of 45 of the investment companies in Franklin Templeton Investments; and formerly, Senior Associate General Counsel, Franklin Templeton Investments (2007-2013); and Secretary and Vice President, Templeton Group of Funds (2004-2013).


Karen L. Skidmore (1952) One Franklin Parkway San Mateo, CA 94403-1906	Vice President and Secretary	Since 2006	Not Applicable	Not Applicable

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.


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, Franklin Templeton Investments; and officer of 45 of the investment companies in Franklin Templeton Investments.


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 and Executive Vice President, Franklin Resources, Inc.; and officer of some of the other subsidiaries of Franklin Resources, Inc. and of 45 of the investment companies in Franklin Templeton Investments.


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

Principal Occupation During at Least the Past 5 Years:
Senior Associate General Counsel, Franklin Templeton Investments; Assistant Secretary, Franklin Resources, Inc.; Vice President and Secretary, Templeton Investment Counsel, LLC; and officer of 45 of the investment companies in Franklin Templeton Investments.

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

Note 2: Officer information is current as of the date of this report. It is possible that after this date, information about officers may change.

Note 3: Effective November 1, 2016, Frank Olson ceased to be a trustee of the trust.



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FRANKLIN STRATEGIC SERIES

Interested Board Members and Officers (continued)



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FRANKLIN GLOBAL GOVERNMENT BOND FUN

Shareholder Information

Board Approval of Investment Management Agreements

FRANKLIN STRATEGIC SERIES

Franklin Global Government Bond Fund

(Fund)

At an in-person meeting held on April 18, 2017 (Meeting), the Board of Trustees (Board) of Franklin Strategic Series, 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 Templeton Investment Management Limited (Manager) and the Fund (Management Agreement) for the shorter of an additional one-year period or the date on which the Fund is liquidated. The Independent Trustees received advice from and met separately with Independent Trustee counsel in considering whether to approve the continuation of the Management Agreement. The Board noted that effective at the close of market on April 12, 2017, the Fund was closed to new investors and that effective on or about June 9, 2017 the Fund will close to all investors. The Board further noted that the Fund is expected to be liquidated on or about June 16, 2017 (Liquidation).

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 U.S. funds and other accounts, including management’s explanation of differences among accounts where relevant. The Board noted management’s continual 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, derivatives and liquidity risk management.

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 investments relating to the services provided to the Fund by the Franklin Templeton Investments (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 Fund and its shareholders.

Fund Performance

The Board reviewed and considered the performance results of



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FRANKLIN STRATEGIC SERIES

FRANKLIN GLOBAL GOVERNMENT BOND FUND

SHAREHOLDER INFORMATION

the Fund over various time periods ended January 31, 2017. 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 global income funds. The Fund has been in operation for less than five years. The Board noted that the Fund’s annualized total return for the one- and three-year periods was below the median and in the fifth quintile of its Performance Universe. The Board concluded that the Fund’s performance was unacceptable and noted that it had approved the Liquidation, especially in light of the Fund’s nominal assets of approximately $12 million as of the end of 2016.

Comparative Fees and Expenses

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 six other global income funds. The Board noted that the Management Rate for the Fund was above the median of its Expense Group, but its actual total expense ratio was below the median and in the first quintile of its Expense Group. The Board concluded that the Management Rate charged to the Fund is fair and reasonable. In doing so, the Board noted that the Fund’s actual total expense ratio reflected a fee waiver from management and that the Board had approved the Liquidation.

Profitability

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.



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FRANKLIN GLOBAL GOVERNMENT BOND FUND

SHAREHOLDER INFORMATION

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, quality and extent 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 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 concluded that the Fund is not expected to experience economies of scale prior to Liquidation.

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 the shorter of an additional one-year period or the date on which the Fund is liquidated.

Proxy Voting Policies and Procedures

Exchange Commission’s website at sec.gov and reflect the most recent 12-month period ended June 30.

Quarterly Statement of Investments

Householding of Reports and Prospectuses



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		Annual Report and Shareholder Letter
		Franklin Global Government Bond Fund
		Investment Manager
		Franklin Templeton Investment Management Limited
		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.


© 2017 Franklin Templeton Investments. All rights reserved.		058 A 06/17

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.

(c)

N/A

(d)

N/A

(f) Pursuant to Item 12(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.

Item 3. Audit Committee Financial Expert.

(a) (1) The Registrant has an audit committee financial expert serving on its audit committee.

(2) The audit committee financial expert is John B. Wilson and he is “independent” as defined under the relevant Securities and Exchange Commission Rules and Releases.

Item 4. Principal Accountant Fees and Services.

(a) Audit Fees

The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $436,510 for the fiscal year ended April 30, 2017 and $469,079 for the fiscal year ended April 30, 2016.

(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.

There were no 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.

(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, 2017 and $6,913 for the fiscal year ended April 30, 2016. 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 other than services reported in paragraphs (a)-(c) of Item 4 were $258,717 for the fiscal year ended April 30, 2017 and $676,383 for the fiscal year ended April 30, 2016. The services for which these fees were paid included preparation and review of materials provided to the fund Board in connection with the investment management contract renewal process and derivatives assessment, and the review of system processes related to fixed income securities. Other services include compliance examination for Investment Advisor Act rule 204-2 and 206-4(2).

(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 $258,717 for the fiscal year ended April 30, 2017 and $683,296 for the fiscal year ended April 30, 2016.

(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

Item 5. Audit Committee of Listed Registrants. N/A

Item 6. Schedule of Investments. N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934 and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.

(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal controls or in other factors that could materially affect the internal controls over financial reporting subsequent to the date of their evaluation in connection with the preparation of this Shareholder Report on Form N-CSR.

Item 12. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of 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, 2017

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, 2017

By		/S/ GASTON GARDEY
		Gaston Gardey
		Chief Financial Officer and
		Chief Accounting Officer

Date		June 26, 2017