UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM N-CSRS

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: 10/31/18

Item 1. Reports to Stockholders.

Semiannual Report and Shareholder Letter   October 31, 2018

Franklin Growth Opportunities Fund

Franklin Select U.S. Equity Fund

Formerly, Franklin Focused Core Equity Fund

Franklin Small Cap Growth Fund

Franklin Small-Mid Cap Growth Fund

Sign up for electronic delivery at franklintempleton.com/edelivery

Franklin Templeton Investments

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

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

Dear Shareholder:

The six months ended October 31, 2018, benefited from mostly upbeat economic data as the U.S. job market continued to improve and the unemployment rate declined. During the second and third quarters, U.S. corporate profits rose, supported by healthy economic growth and tax cuts.

In September 2018, the Standard & Poor’s 500^® Index (S&P 500^®) reached an all-time high, but experienced heightened volatility near period-end due to investor concerns about U.S. Federal Reserve interest-rate policies, higher U.S. Treasury yields, trade tensions, a potentially slower economy and some weaker-than-expected fourth-quarter 2018 revenue guidance. Within this environment, U.S. stocks, as measured by the S&P 500, generated a modest positive total return for the six-month period.

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

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

In addition, Franklin Strategic Series’ semiannual 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,

Edward B. Jamieson

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

This letter reflects our analysis and opinions as of October 31, 2018, 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.

Not FDIC Insured |  May Lose Value  |  No Bank Guarantee

franklintempleton.com Not part of the semiannual report         1

Contents

Semiannual Report

Economic and Market Overview	3
Franklin Growth Opportunities Fund	4
Franklin Select U.S. Equity Fund	10
Franklin Small Cap Growth Fund	16
Franklin Small-Mid Cap Growth Fund	22
Financial Highlights and Statements of Investments	28
Financial Statements	61
Notes to Financial Statements	67
Shareholder Information	84

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

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Semiannual Report

Economic and Market Overview

The U.S. economy grew during the six months under review. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The manufacturing and services sectors expanded during the period. The unemployment rate declined from 3.9% in April 2018, as reported at the beginning of the six-month period, to a nearly 49-year low of 3.7% at period-end.¹ Annual inflation, as measured by the Consumer Price Index, was 2.5% in April 2018, as reported at the beginning of the period, and while it varied during the six months under review, it ended the period at 2.5%.¹

The U.S. Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% at its June 2018 meeting and continued to reduce its balance sheet as part of its ongoing plan to normalize monetary policy. In his congressional testimony in July 2018 and at the Fed symposium in August, Fed Chair Jerome Powell reiterated the Fed’s intention to gradually raise interest rates. At its September 2018 meeting, the Fed raised its target range for the federal funds rate 0.25% to 2.00%–2.25%, as widely expected. Furthermore, the Fed raised its forecast for U.S. economic growth in 2018 and 2019 and projected one more rate increase in 2018. Minutes from the Fed’s September meeting (released in October) indicated that a few officials expected monetary policy to become modestly restrictive of economic growth, while some officials seemed to favor increasing the federal funds rate temporarily above what they consider to be its longer-term level to reduce the risk of overshooting the Fed’s inflation objective. In contrast, some officials indicated they would not favor a restrictive policy unless they see clear signs of an overheating economy and rising inflation.

U.S. equity markets rose overall during the period, benefiting from mostly upbeat economic data and better U.S. corporate earnings. However, markets were pressured at certain times during the period by fears of tighter regulation of information technology and technology-related companies, as well as concerns that strong economic growth and rising inflation would lead the Fed to increase its target rate faster than expected. Other factors that curbed investor sentiment were tensions between the U.S. and North Korea earlier in the

period, political uncertainties in the U.S., the Trump administration’s protectionist policies, and the potential impact of escalating U.S.-China trade tensions on global growth and corporate earnings. Partially offsetting these concerns were an overall easing of tensions in the Korean peninsula in the latter part of the period, intermittent U.S.-China trade negotiations, an agreement between the U.S. and the European Union to try to reduce trade barriers, and a trade deal between the U.S., Mexico and Canada. After reaching a new all-time high in September 2018, the broad U.S. stock market, as measured by the Standard & Poor’s 500 Index (S&P 500), experienced heightened volatility in October amid investor concerns about the Fed’s interest-rate path, rising U.S. Treasury yields, trade, a potentially moderating economy and several big companies’ weaker-than-expected fourth-quarter 2018 revenue guidance. In this environment, the S&P 500 generated a +3.40% total return for the six-month period.²

The foregoing information reflects our analysis and opinions as of October 31, 2018. 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: U.S. Bureau of Labor Statistics.

2. Source: Morningstar.

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

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Franklin Growth Opportunities Fund

This semiannual report for Franklin Growth Opportunities Fund covers the period ended October 31, 2018.	Portfolio Composition
	Based on Total Net Assets as of 10/31/18

Your Fund’s Goal and Main Investments

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

Performance Overview

The Fund’s Class A shares delivered a +0.96% cumulative total return for the six months under review. In comparison, the Fund’s narrow benchmark, the Russell 3000^® Growth Index, which measures performance of Russell 3000^® Index companies with relatively higher price-to-book ratios and higher forecasted growth values, generated a +4.29% 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 +3.40% total return.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 7.

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

Investment Strategy

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

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 six months under review, several sectors represented in the Fund’s portfolio posted positive returns and contributed to absolute performance. Relative to the Russell 3000^® Growth Index, key contributors to the Fund’s performance included stock selection and an underweighting in materials. Within the sector, our position in Ingevity, a

1. Source: Morningstar.

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

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

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 33.

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FRANKLIN GROWTH OPPORTUNITIES FUND

manufacturer of specialty chemicals and carbon materials, benefited relative results.

Other key individual contributors to relative performance included our investments in payment solutions provider Mastercard, biopharmaceutical firm AbbVie,² programmable devices company Xilinx and frozen potato products manufacturer Lamb Weston Holdings. Mastercard continues to perform very well, exceeding expectations and announcing several growth initiatives and partnerships. The company has shown an ability to both invest for the long term while delivering solid quarter-to-quarter execution, which we believe is supported by a strong organic growth profile, specifically in Europe and total cross-border flows. Our underweighted position in Abbvie, which declined during the period due to investor concerns about rebates and biosimilar adoptions, contributed to relative results. Xilinx benefited from the adoption of complex programmable logic devices into additional end markets and its introduction of new products. In addition to delivering solid results for the September 2018 quarter, the company also provided strong forward guidance.

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

Within consumer discretionary, casino resorts operator Wynn Resorts’ shares fell amid slowing VIP trends in Macau, concerns about new competition and trade war risks, and a weak third-quarter convention calendar in Las Vegas with relatively weak leisure visitation.²

In the financials sector, our positions in financial and banking holding company SVB Financial Group and financial services firm Charles Schwab hindered relative returns.

In consumer staples, Constellation Brands, which produces, markets and distributes beverage alcohol products, detracted from relative results.

Other key individual detractors included our positions in medical devices company Nevro and defense and security solutions manufacturer Raytheon. Nevro’s shares declined due to weaker-than-expected earnings reports and a reduction in 2018 sales guidance. Although Nevro’s market growth and share capture assumptions have been lowered, we believe

Top 10 Holdings

10/31/18

Company Sector/Industry	% of Total Net Assets
Amazon.com Inc. Consumer Discretionary		7.4%
Apple Inc. Information Technology		6.0%
Mastercard Inc. Information Technology		5.0%
Microsoft Corp. Information Technology		4.7%
Alphabet Inc. Communication Services		4.0%
Visa Inc. Information Technology		4.0%
UnitedHealth Group Inc. Health Care		2.7%
SBA Communications Corp. Real Estate		2.3%
ServiceNow Inc. Information Technology		2.2%
Adobe Inc. Information Technology		2.0%

Nevro’s growth profile is still attractive, with new applications and product enhancements driving its strong growth going forward. Raytheon’s shares declined along with many defense stocks, despite the company’s better-than-expected earnings reports and a relatively solid 2019 guidance.

2. Not held at period-end.

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

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FRANKLIN GROWTH OPPORTUNITIES FUND

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

	Grant Bowers Lead Portfolio Manager
	Sara Araghi, CFA
	Portfolio Management Team

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

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FRANKLIN GROWTH OPPORTUNITIES FUND

Performance Summary as of October 31, 2018

The performance table does 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 10/31/18¹

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

Share Class	Cumulative Total Return2	Average Annual Total Return3
A4
6-Month	+0.96%	-4.60%
1-Year	+8.89%	+2.90%
5-Year	+63.11%	+9.04%
10-Year	+271.21%	+13.37%
Advisor
6-Month	+1.09%	+1.09%
1-Year	+9.16%	+9.16%
5-Year	+65.35%	+10.58%
10-Year	+281.74%	+14.33%

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

See page 8 for Performance Summary footnotes.

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FRANKLIN GROWTH OPPORTUNITIES FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

Share Class
A	0.99%
Advisor	0.74%

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

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

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

5. 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.

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FRANKLIN GROWTH OPPORTUNITIES FUND

Your Fund’s Expenses

As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated.

Actual Fund Expenses

The table below provides information about actual account values and actual expenses in the columns under the heading “Actual.” In these columns the Fund’s actual return, which includes the effect of Fund expenses, is used to calculate the “Ending Account Value” for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 ÷ $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings “Actual” and “Expenses Paid During Period” (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $64.50.

Hypothetical Example for Comparison with Other Funds

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

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

		Actual		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
Share Class	Beginning Account Value 5/1/18	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Net Annualized Expense Ratio2
A	$1,000	$1,009.60	$4.76	$1,020.47	$4.79	0.94%
C	$1,000	$1,005.80	$8.54	$1,016.69	$8.59	1.69%
R	$1,000	$1,008.40	$6.02	$1,019.21	$6.06	1.19%
R6	$1,000	$1,011.50	$2.94	$1,022.28	$2.96	0.58%
Advisor	$1,000	$1,010.90	$3.50	$1,021.73	$3.52	0.69%

1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above—in the far right column—multiplied by the simple average account value over the period indicated, and then multiplied by 184/365 to reflect the one-half year period.

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

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Franklin Select U.S. Equity Fund

Formerly, Franklin Focused Core Equity Fund

This semiannual report for Franklin Select U.S. Equity Fund covers the period ended October 31, 2018. As previously communicated, effective June 1, 2018, the Fund changed its investment strategy, but its goal remained the same.

Your Fund’s Goal and Main Investments

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

Performance Overview

The Fund’s Class A shares delivered a +0.06% cumulative total return for the six months under review. In comparison, the S&P 500, which tracks the broad U.S. stock market, generated a +3.40% total return.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 13.

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

Portfolio Composition

Based on Total Net Assets as of 10/31/18

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

Manager’s Discussion

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

Within the IT sector, our investments in software and electronics equipment company Apple, software and services

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 41.

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FRANKLIN SELECT U.S. EQUITY FUND

firm Microsoft and payment technology company Mastercard benefited absolute performance. Apple reported solid results for its fiscal second and third quarters (ended March and June, respectively), supported by strong growth in services and higher average selling price for iPhones, and issued strong guidance for its fiscal fourth quarter (ended September). Near period-end, the company revealed its latest lineup of products, which included new Apple Watch and iPhone models. Microsoft reported robust quarterly results during the period, supported by solid demand for its suite of office and cloud-based products and services. The company is a beneficiary of strong sales execution, a positive enterprise IT spending environment, its status as a critical partner to IT departments in this time of digital transformation, and a large installed base that it is successfully moving to higher-value cloud and Service-as-a-Software (SaaS) deployments. In the consumer market, the company continued to deliver new value into the declining personal computer market, while generating growth in gaming.

In health care, life sciences tools and services company Illumina and health care provider UnitedHealth Group contributed to absolute results. Illumina benefited from strong second- and third-quarter earnings, with revenue and a raise in guidance coming in above expectations. Results were helped by high customer utilization rates of the company’s genome sequencing system NovaSeq.

In the materials sector, Ecolab, which provides products and services in the field of water, hygiene and energy, aided absolute results.

Other key individual contributors to absolute performance included frozen potato products manufacturer Lamb Weston Holdings.

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

Within financials, our positions in asset manager BlackRock and financial services firm Charles Schwab hurt absolute results. Although BlackRock reported better-than-expected earnings for the second and third quarters of 2018, its shares declined due to investor concerns about slower investment inflows. Charles Schwab reported second-quarter 2018 earnings that were slightly better than market expectations and third-quarter earnings that were in line with expectations. However, its shares declined due to investor concerns about pricing pressures coming from new no-fee products introduced by competitors.

Top 10 Holdings

10/31/18

Company Sector/Industry	% of Total Net Assets
Amazon.com Inc. Consumer Discretionary		4.3%
Microsoft Corp. Information Technology		3.5%
Alphabet Inc. Communication Services		3.2%
Mastercard Inc. Information Technology		2.8%
Analog Devices Inc. Information Technology		2.7%
UnitedHealth Group Inc. Health Care		2.7%
The Charles Schwab Corp. Financials		2.6%
NextEra Energy Inc. Utilities		2.4%
Apple Inc. Information Technology		2.4%
Fortive Corp. Industrials		2.3%

In consumer discretionary, Alibaba Group Holding, China’s largest e-commerce company, hindered absolute results.

In the industrials sector, defense and security solutions manufacturer Raytheon and nuclear components and products company BWX Technologies hurt performance.

Other key individual detractors included semiconductor equipment company Applied Materials. Its shares fell after the company reported mixed results for fiscal third-quarter 2018 (ended July), with earnings exceeding market expectations and revenue missing expectations. Furthermore, the company provided a weaker-than-expected guidance for its fiscal fourth quarter, due in part to weakness at a foundry customer that reduced capital expenditures resulting from weaker cryptocurrency (a digital or virtual currency that uses cryptography for security) demand.

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FRANKLIN SELECT U.S. EQUITY FUND

Thank you for your continued participation in Franklin Select U.S. Equity Fund.

	Serena Perin Vinton, CFA Lead Portfolio Manager

	Chris Anderson
	Portfolio Management Team

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, 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 SELECT U.S. EQUITY FUND

Performance Summary as of October 31, 2018

The performance table does 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 10/31/18¹

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

Share Class	Cumulative Total Return2		Average Annual Total Return3
A4
6-Month		+0.06%		-5.44%
1-Year		+4.61%		-1.15%
5-Year		+43.92%		+6.34%
10-Year		+226.50%		+11.93%
Advisor
6-Month		+0.18%		+0.18%
1-Year		+4.86%		+4.86%
5-Year		+45.74%		+7.82%
10-Year		+234.98%		+12.85%

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

See page 14 for Performance Summary footnotes.

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FRANKLIN SELECT U.S. EQUITY FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

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

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

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

1.The Fund has an expense reduction contractually guaranteed through 8/31/19. Fund investment results reflect the expense reduction; without this reduction, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

5. 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.

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FRANKLIN SELECT U.S. 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		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
			Expenses		Expenses	Net
	Beginning	Ending	Paid During	Ending	Paid During	Annualized
Share	Account	Account	Period	Account	Period	Expense
Class	Value 5/1/18	Value 10/31/18	5/1/18–10/31/181,2	Value 10/31/18	5/1/18–10/31/181,2	Ratio2
A	$1,000	$1,000.60	$6.20	$1,019.00	$  6.26	1.23%
C	$1,000	$   996.80	$9.97	$1,015.22	$10.06	1.98%
R	$1,000	$   999.40	$7.66	$1,017.54	$  7.73	1.52%
R6	$1,000	$1,002.40	$4.29	$1,020.92	$  4.33	0.85%
Advisor	$1,000	$1,001.80	$4.94	$1,020.27	$  4.99	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 184/365 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 Semiannual Report       15

Franklin Small Cap Growth Fund

This semiannual report for Franklin Small Cap Growth Fund covers the period ended October 31, 2018. At the market close on February 12, 2015, the Fund closed to new investors with limited exceptions. Existing shareholders may add to their accounts. Effective April 28, 2017, the Fund opened Class R6 shares to new investors who are eligible to purchase Class R6 shares. Effective January 17, 2019, all share classes of the Fund will be re-opened to new investors.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth by investing, under normal market conditions, at least 80% of its net assets in 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 +3.09% cumulative total return for the six months under review. In comparison, the Russell 2000^® Growth Index, which measures performance of small-cap companies with relatively higher price-to-book ratios and higher forecasted growth values, had a -1.26% total return.² The Standard & Poor’s 500 Index (S&P 500), which tracks the broad U.S. stock market, produced a +3.40% total return.² You can find the Fund’s long-term performance data in the Performance Summary beginning on page 19.

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. We define quality

Portfolio Composition

Based on Total Net Assets as of 10/31/18

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

Manager’s Discussion

During the six months under review, key contributors to the Fund’s performance relative to the Russell 2000^® Growth

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 48.

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FRANKLIN SMALL CAP GROWTH FUND

Index included stock selection and an overweighting in the information technology (IT) sector and stock selection in the consumer discretionary and industrials sectors.

Within IT, our positions in cloud communications company Twilio and system-level semiconductor solutions developer Integrated Device Technology (not held at period-end) aided relative results. Twilio reported stronger-than-expected earnings and revenue for the first and second quarters of 2018 and raised its full-year 2018 guidance, aided by a larger customer base, higher average revenue per customer and its core voice and messaging solutions. During the period, the company introduced a new contact center solution, Twilio Flex, and announced its plan to acquire a leading business-to-consumer email messaging company.

In consumer discretionary, Duluth Holdings, which sells men’s and women’s casual wear, work wear and accessories through its own channels, contributed to relative results.

In the industrials sector, notable contributors included Spirit Airlines,³ an ultra low-cost, low-fare airline, and Mercury Systems, a provider of secure sensor and safety critical mission processing subsystems. Spirit Airlines delivered better-than-expected second- and third-quarter earnings, supported by solid growth in ticket and non-ticket revenues, fares and capacity. The airline also benefited from service improvements and cost reductions, as well as a new pilot deal that gave the airline more flexibility, leading to more completed flights.

Other notable contributors included medical device manufacturer DexCom³ and cancer diagnostics and pharmaceutical services company NeoGenomics. DexCom reported better-than-expected sales for the first and second quarters of 2018, driven by strong international sales growth, and company management raised its 2018 sales guidance. Furthermore, management indicated that the early adoption of the recently launched G6 continuous glucose monitoring (CGM) system represented a broadening of its user base into individuals who had been waiting for a CGM system that did not require finger stick calibration measurements.

In contrast, key detractors from the Fund’s relative performance included stock selection and an overweighting in the financials sector and stock selection and underweightings in the communication services and consumer staples sectors.

Top 10 Holdings

10/31/18

Company Sector/Industry	% of Total Net Assets
2U Inc. Information Technology		2.1%
Mercury Systems Inc. Industrials		1.8%
Spirit Airlines Inc. Industrials		1.7%
Grand Canyon Education Inc. Consumer Discretionary		1.4%
Cubic Corp. Industrials		1.4%
Integer Holdings Corp. Health Care		1.4%
Univar Inc. Industrials		1.4%
US Ecology Inc. Industrials		1.3%
Kennametal Inc. Industrials		1.3%
Twilio Inc. Information Technology		1.3%

Within the financials sector, our position in Western Alliance Bancorp, which provides banking products and services for businesses, hampered relative results. Other key detractors included motion pictures technology company IMAX in the communication services sector and baked sweet goods company Hostess Brands in the consumer staples sector.

Other notable individual detractors from the Fund’s relative performance included medical devices company Nevro, roofing materials distributor Beacon Roofing Supply and education technology company 2U. Nevro’s shares declined due to weaker-than-expected earnings reports and a reduction in 2018 sales guidance. Although Nevro’s market growth and share capture assumptions have been lowered, we believe Nevro’s growth profile is still attractive, with new applications and product enhancements driving its strong growth going forward. Beacon Roofing Supply’s share price weakened due to investor concerns about several issues, including rising mortgage rates, an unfavorable price/cost dynamic for roofing shingles and slowing growth in upcoming quarters due to increased storm-related activity last year. 2U’s shares reached an all-time high in mid-May after the company reported better-than-expected first-quarter 2018 results and raised its revenue

3. Not part of the index.

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

franklintempleton.com Semiannual Report       17

FRANKLIN SMALL CAP GROWTH FUND

guidance for full-year 2018. However, its shares were pressured by an analyst report that raised investor concerns about the company’s competition. Nonetheless, the company reported strong second-quarter results and again raised its full-year 2018 guidance.

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, 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 SMALL CAP GROWTH FUND

Performance Summary as of October 31, 2018

The performance table does 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 10/31/18¹

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

Share Class	Cumulative   Total Return2	Average Annual   Total Return3
A4
6-Month	+3.09%	-2.59%
1-Year	+13.71%	+7.44%
5-Year	+50.13%	+7.24%
10-Year	+328.88%	+15.02%
Advisor
6-Month	+3.21%	+3.21%
1-Year	+14.00%	+14.00%
5-Year	+52.12%	+8.75%
10-Year	+341.21%	+16.00%

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

See page 20 for Performance Summary footnotes.

  franklintempleton.com   Semiannual Report         19

FRANKLIN SMALL CAP GROWTH FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

Share Class	With Waiver		Without Waiver
A		1.09%		1.10%
Advisor		0.84%		0.85%

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

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

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

5. 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.

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FRANKLIN SMALL CAP GROWTH 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 5/1/18	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Net Annualized Expense Ratio2
A	$1,000	$1,030.90	$5.37	$1,019.91	$5.35	1.05%
C	$1,000	$1,026.80	$9.20	$1,016.13	$9.15	1.80%
R	$1,000	$1,029.60	$6.65	$1,018.65	$6.61	1.30%
R6	$1,000	$1,033.00	$3.23	$1,022.03	$3.21	0.63%
Advisor	$1,000	$1,032.10	$4.10	$1,021.17	$4.08	0.80%

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 184/365 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 Semiannual Report       21

Franklin Small-Mid Cap Growth Fund

This semiannual report for Franklin Small-Mid Cap Growth Fund covers the period ended October 31, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks long-term capital growth by investing, under normal market conditions, at least 80% of its net assets in 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 +0.19% cumulative total return for the six months under review. In comparison, the Russell Midcap^® Growth Index, which measures performance of companies in the Russell Midcap^® Index with relatively higher price-to-book ratios and higher forecasted growth values, generated a +0.94% 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 +3.40% total return.² You can find the Fund’s long-term performance data in the Performance Summary beginning on page 25.

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 10/31/18

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 six months under review, most sectors represented in the Fund’s portfolio posted positive returns and contributed to absolute performance. Relative to the Russell Midcap^® Growth Index, key contributors to the Fund’s performance included stock selection and an underweighting in the materials

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, 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 57.

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FRANKLIN SMALL-MID CAP GROWTH FUND

sector and stock selection in the financials and consumer discretionary sectors.

In materials, our investment in Ingevity, a manufacturer of specialty chemicals and carbon materials, benefited relative results.³ In financials, MarketAxess Holdings, an electronic trading platform operator, aided relative returns.

In the consumer discretionary sector, notable contributors included apparel and home product retailer Burlington Stores, education services provider Grand Canyon Education and fantasy sports company DraftKings³. Burlington Stores reported better-than-expected earnings for the first and second quarters of 2018 and raised its earnings guidance for full-year 2018. The company continued to show improved productivity, merchandise margin expansion and store growth opportunities.

Other key individual contributors included system-level semiconductor solutions developer Integrated Device Technology⁴ and medical device manufacturer DexCom. Integrated Device Technology reported better-than-expected second-quarter 2018 earnings results and raised its full-year 2018 guidance. Further boosting its shares was an agreement to be acquired by Japanese semiconductor company Renesas Electronics (not a Fund holding). DexCom reported better-than-expected sales for the first and second quarters of 2018, driven by strong international sales growth, and company management raised its 2018 sales guidance. Furthermore, management indicated that the early adoption of the recently launched G6 continuous glucose monitoring (CGM) system represented a broadening of its user base into individuals who had been waiting for a CGM system that did not require finger stick calibration measurements.

In contrast, key detractors from the Fund’s relative performance included stock selection in the information technology (IT), energy and real estate sectors.

Within IT, notable detractors included education technology company 2U, software solutions firm Red Hat⁴ and semiconductor products manufacturer Microchip Technology. 2U’s shares reached an all-time high in mid-May after the company reported better-than-expected first-quarter 2018 results and raised its revenue guidance for full-year 2018. However, its shares were pressured by an analyst report that raised investor concerns about the company’s competition. Nonetheless, the company reported strong second-quarter

Top 10 Holdings

10/31/18

Company Sector/Industry	% of Total Net Assets
Roper Technologies Inc. Industrials	2.7%
Edwards Lifesciences Corp. Health Care	2.1%
ServiceNow Inc. Information Technology	2.1%
GoDaddy Inc. Information Technology	1.9%
SBA Communications Corp. Real Estate	1.8%
Ross Stores Inc. Consumer Discretionary	1.7%
Verisk Analytics Inc. Industrials	1.7%
Workday Inc. Information Technology	1.7%
2U Inc. Information Technology	1.6%
Worldpay Inc. Information Technology	1.5%

results and again raised its full-year 2018 guidance. Red Hat reported slightly better-than-expected revenue and earnings for its fiscal first quarter (ended May) and reduced its revenue outlook for fiscal-year 2019 (ending in February), citing unfavorable currency exchange rates. Furthermore, the company reported slightly weaker-than-expected revenue for its fiscal second quarter (ended August), due to various reasons, including unfavorable currency exchange rates and increased competition in its middleware business.

In the energy sector, our position in oil and natural gas company Concho Resources hurt relative results.

Other key individual detractors from relative performance included holdings in medical devices company Nevro and homebuilder NVR. Nevro’s shares declined due to weaker-than-expected earnings reports and a reduction in 2018 sales guidance.

3. Not part of the index.

4. Not held at period-end.

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

franklintempleton.com   Semiannual Report       23

FRANKLIN SMALL-MID CAP GROWTH FUND

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

	Edward B. Jamieson Lead Portfolio Manager
	John P. Scandalios Michael P. McCarthy, CFA James Cross, CFA Portfolio Management Team

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, 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.

24       Semiannual Report franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH FUND

Performance Summary as of October 31, 2018

The performance table does 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 10/31/18¹

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

Share Class	Cumulative   Total Return2	Average Annual   Total Return3
A4
6-Month	+0.19%	-5.32%
1-Year	+4.66%	-1.10%
5-Year	+45.45%	+6.57%
10-Year	+236.44%	+12.26%
Advisor
6-Month	+0.33%	+0.33%
1-Year	+4.94%	+4.94%
5-Year	+47.30%	+8.05%
10-Year	+245.20%	+13.19%

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

See page 26 for Performance Summary footnotes.

franklintempleton.com   Semiannual Report       25

FRANKLIN SMALL-MID CAP GROWTH FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

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

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

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

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

5. 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.

26       Semiannual Report franklintempleton.com

FRANKLIN SMALL-MID CAP GROWTH 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 5/1/18	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Net Annualized Expense Ratio2
A	$1,000	$1,001.90	$4.34	$1,020.87	$4.38	0.86%
C	$1,000	$ 998.10	$8.11	$1,017.09	$8.19	1.61%
R	$1,000	$1,000.60	$5.55	$1,019.66	$5.60	1.10%
R6	$1,000	$1,003.80	$2.42	$1,022.79	$2.45	0.48%
Advisor	$1,000	$1,003.30	$3.08	$1,022.13	$3.11	0.61%

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 184/365 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   Semiannual Report       27

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Growth Opportunities Fund

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016		2015			2014
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$38.58			$34.81			$30.40			$33.13		$28.48			$24.29
Income from investment operationsa:
Net investment income (loss)b		(0.07)			(0.10)			(0.09)			(0.19)		(0.19)			(0.19)
Net realized and unrealized gains (losses)		0.44			7.03			5.14			(1.88)		5.50			5.11
Total from investment operations		0.37			6.93			5.05			(2.07)		5.31			4.92
Less distributions from net realized gains		—			(3.16)			(0.64)			(0.66)		(0.66)			(0.73)
Net asset value, end of period		$38.95			$38.58			$34.81			$30.40		$33.13			$28.48
Total returnc		0.96%			20.43%			16.88%			(6.36)%		18.87%			20.26%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.94%			1.02%			1.05%			1.11%		1.18%			1.17%
Expenses net of waiver and payments by affiliates		0.94%	e,f		0.99%	e		0.97%	e		1.10%		1.18%	f		1.17%	e,f
Net investment income (loss)		(0.32)%			(0.27)%			(0.30)%			(0.58)%		(0.59)%			(0.70)%
Supplemental data
Net assets, end of period (000’s)		$2,548,290			$2,428,175			$2,272,831			$548,871		$457,619			$349,343
Portfolio turnover rate		16.02%			22.68%			47.75%			25.56%		40.64%			36.64%

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

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Growth Opportunities Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$32.67			$30.12			$26.59			$29.27			$25.41			$21.89
Income from investment operationsa:
Net investment income (loss)b		(0.19	)		(0.33	)		(0.29	)		(0.37	)		(0.36	)		(0.35	)
Net realized and unrealized gains (losses)		0.38			6.04			4.46			(1.65	)		4.88			4.60
Total from investment operations		0.19			5.71			4.17			(2.02	)		4.52			4.25
Less distributions from net realized gains		—			(3.16	)		(0.64	)		(0.66	)		(0.66	)		(0.73	)
Net asset value, end of period		$32.86			$32.67			$30.12			$26.59			$29.27			$25.41
Total returnc		0.58%			19.53%			15.98%			(7.03)%			18.04%			19.42%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.69%			1.77%			1.80%			1.85%			1.88%			1.87%
Expenses net of waiver and payments by affiliates		1.69%	e,f		1.74%	e		1.72%	e		1.84%			1.88%	f		1.87%	e,f
Net investment income (loss)		(1.07)%			(1.02)%			(1.05)%			(1.32)%			(1.29)%			(1.40)%
Supplemental data
Net assets, end of period (000’s)		$238,946			$400,295			$390,123			$137,882			$110,513			$85,883
Portfolio turnover rate		16.02%			22.68%			47.75%			25.56%			40.64%			36.64%

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

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

^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.  |  Semiannual Report       29

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Growth Opportunities Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$36.93			$33.52			$29.37			$32.10			$27.67			$23.67
Income from investment operationsa:
Net investment income (loss)b		(0.11	)		(0.18	)		(0.17	)		(0.26	)		(0.24	)		(0.24	)
Net realized and unrealized gains (losses)		0.42			6.75			4.96			(1.81	)		5.33			4.97
Total from investment operations		0.31			6.57			4.79			(2.07	)		5.09			4.73
Less distributions from net realized gains		—			(3.16	)		(0.64	)		(0.66	)		(0.66	)		(0.73	)
Net asset value, end of period		$37.24			$36.93			$33.52			$29.37			$32.10			$27.67
Total returnc		0.84%			20.14%			16.62%			(6.60)%			18.63%			19.99%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.19%			1.27%			1.30%			1.35%			1.38%			1.37%
Expenses net of waiver and payments by affiliates		1.19%	e,f		1.24%	e		1.22%	e		1.34%			1.38%	f		1.37%	e,f
Net investment income (loss)		(0.57)%			(0.52)%			(0.55)%			(0.82)%			(0.79)%			(0.90)%
Supplemental data
Net assets, end of period (000’s)		$34,978			$36,582			$50,429			$39,786			$48,266			$42,953
Portfolio turnover rate		16.02%			22.68%			47.75%			25.56%			40.64%			36.64%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

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

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Growth Opportunities Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)		Year Ended April 30,
			2018			2017			2016			2015			2014a
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$41.78		$37.30			$32.39			$35.09			$29.98			$24.99
Income from investment operationsb:
Net investment income (loss)c		0.01		0.07			0.05			(0.05	)		(0.03	)		(0.07	)
Net realized and unrealized gains (losses)		0.47		7.57			5.50			(1.99	)		5.80			5.79
Total from investment operations		0.48		7.64			5.55			(2.04	)		5.77			5.72
Less distributions from net realized gains		—		(3.16	)		(0.64	)		(0.66	)		(0.66	)		(0.73	)
Net asset value, end of period		$42.26		$41.78			$37.30			$32.39			$35.09			$29.98
Total returnd		1.15%		20.98%			17.42%			(5.94)%			19.47%			22.90%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.59%		0.58%			0.59%			0.67%			0.68%			0.71%
Expenses net of waiver and payments by affiliates		0.58%f		0.55%f			0.51%f			0.66%			0.68%	g		0.71%	f,g
Net investment income (loss)		0.04%		0.17%			0.16%			(0.14)%			(0.09)%			(0.24)%
Supplemental data
Net assets, end of period (000’s)		$372,619		$369,688			$291,825			$235,620			$246,911			$180,843
Portfolio turnover rate		16.02%		22.68%			47.75%			25.56%			40.64%			36.64%

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

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

^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.  |  Semiannual Report       31

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Growth Opportunities Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$41.34			$37.02			$32.20			$34.96			$29.93			$25.43
Income from investment operationsa:
Net investment income (loss)b		(0.01	)		(0.01	)		(0.02	)		(0.11	)		(0.10	)		(0.13	)
Net realized and unrealized gains (losses)		0.46			7.49			5.48			(1.99	)		5.79			5.36
Total from investment operations		0.45			7.48			5.46			(2.10	)		5.69			5.23
Less distributions from net realized gains		—			(3.16	)		(0.64	)		(0.66	)		(0.66	)		(0.73	)
Net asset value, end of period		$41.79			$41.34			$37.02			$32.20			$34.96			$29.93
Total returnc		1.09%			20.71%			17.21%			(6.11)%			19.23%			20.58%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.69%			0.77%			0.80%			0.85%			0.88%			0.87%
Expenses net of waiver and payments by affiliates		0.69%	e,f		0.74%	e		0.72%	e		0.84%			0.88%	f		0.87%	e,f
Net investment income (loss)		(0.07)%			(0.02)%			(0.05)%			(0.32)%			(0.29)%			(0.40)%
Supplemental data
Net assets, end of period (000’s)		$573,809			$583,509			$537,193			$256,377			$269,887			$224,469
Portfolio turnover rate		16.02%			22.68%			47.75%			25.56%			40.64%			36.64%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

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

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

FRANKLIN STRATEGIC SERIES

Statement of Investments, October 31, 2018 (unaudited)

Franklin Growth Opportunities Fund

	Country		Shares		Value
Common Stocks 97.1%
Communication Services 8.7%
a Alphabet Inc., C		United States		141,218	$	152,059,306
a Electronic Arts Inc.		United States		273,347		24,869,110
a Facebook Inc., A		United States		445,940		67,689,233
a Liberty Broadband Corp., C		United States		398,771		33,070,079
a Netflix Inc.		United States		94,664		28,567,702
The Walt Disney Co.		United States		206,647		23,729,276
						329,984,706
Consumer Discretionary 9.3%
a Alibaba Group Holding Ltd., ADR		China		112,248		15,970,645
a Amazon.com Inc.		United States		175,410		280,306,934
Aptiv PLC		United States		310,457		23,843,097
a Booking Holdings Inc.		United States		16,258		30,476,922
						350,597,598
Consumer Staples 3.9%
Constellation Brands Inc., A		United States		243,478		48,508,122
Lamb Weston Holdings Inc.		United States		585,690		45,777,530
a Monster Beverage Corp.		United States		704,493		37,232,455
a Nomad Foods Ltd.		United Kingdom		848,960		16,215,136
						147,733,243
Energy 1.0%
Diamondback Energy Inc.		United States		328,246		36,881,721
Financials 6.7%
a Athene Holding Ltd., A		United States		344,551		15,752,872
The Charles Schwab Corp.		United States		1,199,717		55,474,914
Intercontinental Exchange Inc.		United States		526,269		40,543,764
MarketAxess Holdings Inc.		United States		115,487		24,214,159
MSCI Inc.		United States		261,375		39,305,572
S&P Global Inc.		United States		206,927		37,726,931
a SVB Financial Group		United States		161,783		38,379,781
						251,397,993
Health Care 14.2%
a ABIOMED Inc.		United States		125,198		42,717,558
a Celgene Corp.		United States		241,835		17,315,386
a Centene Corp.		United States		273,841		35,686,959
a Edwards Lifesciences Corp.		United States		327,286		48,307,413
a Elanco Animal Health Inc.		United States		303,435		9,248,699
a,b Guardant Health Inc.		United States		65,800		2,202,984
a Heron Therapeutics Inc.		United States		1,043,980		28,980,885
a IDEXX Laboratories Inc.		United States		43,192		9,161,887
a Illumina Inc.		United States		107,267		33,376,127
a Intuitive Surgical Inc.		United States		73,172		38,135,783
Medtronic PLC		United States		295,141		26,509,565
a Nevro Corp.		United States		486,365		23,715,157
a PTC Therapeutics Inc.		United States		600,031		23,113,194
a Sage Therapeutics Inc.		United States		198,926		25,597,798
UnitedHealth Group Inc.		United States		397,500		103,886,625
a Veeva Systems Inc.		United States		216,347		19,763,298
West Pharmaceutical Services Inc.		United States		447,854		47,436,696
						535,156,014

franklintempleton.com   Semiannual Report       33

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Growth Opportunities Fund (continued)

	Country		Shares		Value
Common Stocks (continued)
Industrials 10.9%
Allegiant Travel Co.		United States		45,773	$	5,224,530
The Boeing Co.		United States		118,585		42,081,073
a CoStar Group Inc.		United States		188,656		68,184,052
Honeywell International Inc.		United States		230,925		33,442,559
a IHS Markit Ltd.		United States		687,516		36,115,215
Raytheon Co.		United States		386,564		67,664,163
a Resideo Technologies Inc.		United States		38,487		810,151
Rockwell Automation Inc.		United States		167,009		27,511,393
Roper Technologies Inc.		United States		134,892		38,160,947
Stanley Black & Decker Inc.		United States		178,377		20,784,488
a Univar Inc.		United States		744,134		18,320,579
a Verisk Analytics Inc.		United States		439,698		52,693,408
						410,992,558
Information Technology 37.9%
a 2U Inc.		United States		626,932		39,440,292
a Adobe Inc.		United States		303,216		74,518,364
a Adyen NV		Netherlands		7,000		4,526,396
Amphenol Corp., A		United States		104,868		9,385,686
Analog Devices Inc.		United States		302,239		25,300,427
Apple Inc.		United States		1,027,152		224,802,487
a Autodesk Inc.		United States		277,091		35,814,012
a Elastic NV		United States		47,200		3,209,600
a Fiserv Inc.		United States		383,466		30,408,854
a Guidewire Software Inc.		United States		99,276		8,832,586
a InterXion Holding NV		Netherlands		648,898		38,200,625
a,c,d LegalZoom.com Inc.		United States		418,321		17,536,016
Mastercard Inc., A		United States		946,211		187,037,528
Microsoft Corp.		United States		1,654,321		176,698,026
Monolithic Power Systems		United States		297,294		35,116,367
NVIDIA Corp.		United States		248,919		52,479,593
a PayPal Holdings Inc.		United States		369,633		31,119,402
a Pluralsight Inc., A		United States		84,500		1,893,645
a PTC Inc.		United States		152,616		12,577,085
a Salesforce.com Inc.		United States		421,929		57,905,536
a ServiceNow Inc.		United States		466,159		84,393,425
a StoneCo. Ltd.		Brazil		71,500		2,051,335
a Twilio Inc., A		United States		281,430		21,169,165
a Tyler Technologies Inc.		United States		174,879		37,014,889
Visa Inc., A		United States		1,086,520		149,776,782
Xilinx Inc.		United States		409,838		34,987,870
a Zendesk Inc.		United States		587,963		32,320,326
						1,428,516,319
Materials 0.9%
a Axalta Coating Systems Ltd.		United States		402,526		9,934,342
a Ingevity Corp.		United States		254,671		23,195,434
						33,129,776

34     Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Growth Opportunities Fund (continued)

	Country		Shares		Value
Common Stocks(continued)
Real Estate 3.6%
American Tower Corp.		United States		182,028	$	28,361,783
Equinix Inc.		United States		56,910		21,554,093
a SBA Communications Corp., A		United States		529,884		85,931,288
						135,847,164
Total Common Stocks (Cost $2,002,858,612)						3,660,237,092
Preferred Stocks 1.4%
Communication Services 0.2%
a,c,d Tanium Inc., pfd., G		United States		805,800		6,373,855
Consumer Discretionary 0.9%
a,c,d ClearMotion Inc., pfd., C		United States		2,610,594		6,150,418
a,c,d Proterra Inc., pfd., 5, 144A		United States		2,362,202		18,559,431
a,c,d Proterra Inc., pfd., 6, 144A		United States		596,775		4,688,763
a,c,d Proterra Inc., pfd., 7		United States		780,667		6,133,572
						35,532,184
Industrials 0.3%
a,c,d,e Optoro Inc., pfd., E		United States		509,182		10,020,702
Total Preferred Stocks (Cost $39,818,563)						51,926,741
Total Investments before Short Term Investments (Cost $2,042,677,175)						3,712,163,833
Short Term Investments 2.1%
Money Market Funds (Cost $77,027,803) 2.0%
f,g Institutional Fiduciary Trust Money Market Portfolio, 1.83%		United States		77,027,803		77,027,803
h Investments from Cash Collateral Received for Loaned Securities (Cost $2,175,000) 0.1%
Money Market Funds 0.1%
f,g Institutional Fiduciary Trust Money Market Portfolio, 1.83%		United States		2,175,000		2,175,000
Total Investments (Cost $2,121,879,978) 100.6%						3,791,366,636
Other Assets, less Liabilities (0.6)%						(22,725,205	)
Net Assets 100.0%					$	3,768,641,431

See Abbreviations on page 83.

^aNon-income producing.

^bA portion or all of the security is on loan at October 31, 2018. See Note 1(c).

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

^dSee Note 7 regarding restricted securities.

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

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

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

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

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

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Select U.S. Equity Fund

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period	$	16.32		$	15.20		$	13.12		$	15.29		$	13.38		$	10.63
Income from investment operationsa:
Net investment income (loss)b		(0.03	)		(0.04	)		(0.01	)		0.07	c		(0.01	)		0.03
Net realized and unrealized gains (losses)		0.04			1.16			2.09			(1.83	)		2.23			2.92
Total from investment operations		0.01			1.12			2.08			(1.76	)		2.22			2.95
Less distributions from:
Net investment income		—			—			—			(0.06	)		—			(0.07	)
Net realized gains		—			—			—			(0.35	)		(0.31	)		(0.13	)
Total distributions		—			—			—			(0.41	)		(0.31	)		(0.20	)
Net asset value, end of period		$16.33			$16.32			$15.20			$13.12			$15.29			$13.38
Total returnd		0.06%			7.37%			15.85%			(11.70)%			16.84%			28.00%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.48%			1.54%			1.47%			1.46%			1.54%			1.73%
Expenses net of waiver and payments by affiliates		1.23%f			1.25%f			1.24%f			1.25%			1.28%			1.22%
Net investment income (loss)		(0.33)%			(0.25)%			(0.04)%			0.48%c			(0.07)%			0.23%
Supplemental data
Net assets, end of period (000’s)		$68,151			$65,565			$77,733			$100,483			$92,612			$40,372
Portfolio turnover rate		0.17%			93.43%			17.45%			35.56%			25.55%			43.30%

^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, 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%.

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$15.42			$14.46			$12.58			$14.73			$12.98			$10.36
Income from investment operationsa:
Net investment income (loss)b		(0.09	)		(0.15	)		(0.10	)		(0.04	)c		(0.11	)		(0.06	)
Net realized and unrealized gains (losses)		0.04			1.11			1.98			(1.76	)		2.17			2.84
Total from investment operations		(0.05	)		0.96			1.88			(1.80	)		2.06			2.78
Less distributions from:
Net investment income.		—			—			—			—			—			(0.03	)
Net realized gains		—			—			—			(0.35	)		(0.31	)		(0.13	)
Total distributions		—			—			—			(0.35	)		(0.31	)		(0.16	)
Net asset value, end of period		$15.37			$15.42			$14.46			$12.58			$14.73			$12.98
Total returnd		(0.32)%			6.64%			14.94%			(12.31)%			16.12%			26.99%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		2.23%			2.29%			2.21%			2.20%			2.24%			2.43%
Expenses net of waiver and payments by affiliates		1.98%	f		2.00%	f		1.98%	f		1.99%			1.98%			1.92%
Net investment income (loss)		(1.08)%			(1.00)%			(0.78)%			(0.26)%	c		(0.77)%			(0.47)%
Supplemental data
Net assets, end of period (000’s)		$14,806			$18,103			$20,341			$25,119			$18,758			$6,666
Portfolio turnover rate		0.17%			93.43%			17.45%			35.56%			25.55%			43.30%

^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 (0.72)%.

^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%.

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Semiannual Report       37

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)

	Six Months Ended October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.08			$15.01			$12.98			$15.15			$13.28			$10.56
Income from investment operationsa:
Net investment income (loss)b		(0.05	)		(0.06	)		(0.03	)		0.03	c		(0.04	)		0.01
Net realized and unrealized gains (losses)		0.04			1.13			2.06			(1.81	)		2.22			2.90
Total from investment operations		(0.01	)		1.07			2.03			(1.78	)		2.18			2.91
Less distributions from:
Net investment income		—			—			—			(0.04	)		—			(0.06	)
Net realized gains		—			—			—			(0.35	)		(0.31	)		(0.13	)
Total distributions		—			—			—			(0.39	)		(0.31	)		(0.19	)
Net asset value, end of period		$16.07			$16.08			$15.01			$12.98			$15.15			$13.28
Total returnd		(0.06)%			7.13%			15.64%			(11.91)%			16.66%			27.70%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.77%			1.70%			1.64%			1.69%			1.74%			1.93%
Expenses net of waiver and payments by affiliates		1.52%	f		1.41%	f		1.41%	f		1.48%			1.48%			1.42%
Net investment income (loss)		(0.62)%			(0.41)%			(0.21)%			0.25%	c		(0.27)%			0.03%
Supplemental data
Net assets, end of period (000’s)		$135			$137			$166			$273			$169			$124
Portfolio turnover rate		0.17%			93.43%			17.45%			35.56%			25.55%			43.30%

^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 (0.21)%.

^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%.

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014a
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.64			$15.44			$13.27			$15.46			$13.49			$10.54
Income from investment operationsb:
Net investment incomec		—	d		0.11			0.05			0.12	e		0.05			0.07
Net realized and unrealized gains (losses)		0.04			1.09			2.12			(1.85	)		2.27			3.11
Total from investment operations		0.04			1.20			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 period		$16.68			$16.64			$15.44			$13.27			$15.46			$13.49
Total returnf		0.24%			7.77%			16.35%			(11.32)%			17.45%			30.43%
Ratios to average net assetsg
Expenses before waiver and payments by affiliates		1.17%			1.12%			1.06%			1.04%			1.09%			2.28%
Expenses net of waiver and payments by affiliates		0.85%	h		0.84%	h		0.84%	h		0.85%			0.83%			0.77%
Net investment income		0.05%			0.16%			0.36%			0.88%	e		0.38%			0.68%
Supplemental data
Net assets, end of period (000’s)		$892			$939			$20,401			$33,640			$25,739			$14
Portfolio turnover rate		0.17%			93.43%			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.

^dAmount rounds to less than $0.01 per share.

^eNet 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%.

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

^gRatios are annualized for periods less than one year.

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

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Select U.S. Equity Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$16.57			$15.39			$13.25			$15.44			$13.48			$10.70
Income from investment operationsa:
Net investment income (loss)b		(0.01	)		—	c		0.03			0.10	d		0.04			0.07
Net realized and unrealized gains (losses)		0.04			1.18			2.11			(1.85	)		2.25			2.93
Total from investment operations		0.03			1.18			2.14			(1.75	)		2.29			3.00
Less distributions from:
Net investment income		—			—			—			(0.09	)		(0.02	)		(0.09	)
Net realized gains		—			—			—			(0.35	)		(0.31	)		(0.13	)
Total distributions		—			—			—			(0.44	)		(0.33	)		(0.22	)
Net asset value, end of period		$16.60			$16.57			$15.39			$13.25			$15.44			$13.48
Total returne		0.18%			7.67%			16.15%			(11.45)%			17.25%			28.27%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		1.23%			1.29%			1.22%			1.20%			1.24%			1.43%
Expenses net of waiver and payments by affiliates		0.98%	g		1.00%	g		0.99%	g		0.99%			0.98%			0.92%
Net investment income (loss)		(0.08)%			—%	h		0.21%			0.74%	d		0.23%			0.53%
Supplemental data
Net assets, end of period (000’s)		$11,694			$10,450			$13,077			$10,736			$9,914			$6,990
Portfolio turnover rate		0.17%			93.43%			17.45%			35.56%			25.55%			43.30%

^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.

^cAmount rounds to less than $0.01 per share.

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

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

^fRatios are annualized for periods less than one year.

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

^hRounds to less than 0.01%.

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

FRANKLIN STRATEGIC SERIES

Statement of Investments, October 31, 2018 (unaudited)

Franklin Select U.S. Equity Fund

	Country		Shares		Value
Common Stocks 95.2%
Communication Services 6.9%
a Alphabet Inc., A		United States		2,800	$	3,053,624
a Electronic Arts Inc.		United States		15,000		1,364,700
The Walt Disney Co.		United States		18,900		2,170,287
						6,588,611
Consumer Discretionary 9.7%
a Alibaba Group Holding Ltd., ADR		China		13,500		1,920,780
a Amazon.com Inc.		United States		2,600		4,154,826
Aptiv PLC		United States		15,500		1,190,400
NIKE Inc., B		United States		27,000		2,026,080
						9,292,086
Consumer Staples 6.3%
Constellation Brands Inc., A		United States		8,000		1,593,840
Estee Lauder Cos. Inc., A		United States		9,400		1,291,936
Lamb Weston Holdings Inc.		United States		23,000		1,797,680
a Monster Beverage Corp.		United States		25,320		1,338,162
						6,021,618
Energy 3.0%
Cabot Oil & Gas Corp., A		United States		61,140		1,481,422
a Concho Resources Inc.		United States		9,700		1,349,173
						2,830,595
Financials 8.9%
BlackRock Inc.		United States		5,200		2,139,384
The Charles Schwab Corp.		United States		53,500		2,473,840
Intercontinental Exchange Inc.		United States		26,800		2,064,672
S&P Global Inc.		United States		9,900		1,804,968
						8,482,864
Health Care 15.1%
a ABIOMED Inc.		United States		4,500		1,535,400
AstraZeneca PLC, ADR		United Kingdom		53,400		2,070,852
a Illumina Inc.		United States		5,700		1,773,555
a Mettler-Toledo International Inc.		United States		3,100		1,695,142
Stryker Corp.		United States		11,200		1,816,864
Teleflex Inc.		United States		6,950		1,673,143
UnitedHealth Group Inc.		United States		9,700		2,535,095
a Waters Corp.		United States		7,300		1,384,737
						14,484,788
Industrials 13.4%
3M Co.		United States		10,000		1,902,600
BWX Technologies Inc.		United States		22,000		1,286,120
FedEx Corp.		United States		7,400		1,630,516
Fortive Corp.		United States		29,600		2,197,800
Raytheon Co.		United States		12,000		2,100,480
Republic Services Inc.		United States		21,200		1,540,816
a Verisk Analytics Inc.		United States		18,140		2,173,898
						12,832,230
Information Technology 24.6%
a Adyen NV		Netherlands		400		258,651
Amphenol Corp., A		United States		16,700		1,494,650
Analog Devices Inc.		United States		31,150		2,607,566

franklintempleton.com Semiannual Report       41

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Select U.S. Equity Fund (continued)

	Country		Shares		Value
Common Stocks (continued)
Information Technology (continued)
Apple Inc.		United States		10,500	$	2,298,030
Applied Materials Inc.		United States		34,020		1,118,578
Cognex Corp.		United States		28,800		1,233,792
a InterXion Holding NV		Netherlands		30,900		1,819,083
Mastercard Inc., A		United States		13,500		2,668,545
Microsoft Corp.		United States		31,400		3,353,834
NVIDIA Corp.		United States		6,000		1,264,980
a Salesforce.com Inc.		United States		15,000		2,058,600
a ServiceNow Inc.		United States		11,300		2,045,752
a Tyler Technologies Inc.		United States		6,200		1,312,292
						23,534,353
Materials 3.1%
Albemarle Corp.		United States		10,300		1,021,966
Ecolab Inc.		United States		13,000		1,990,950
						3,012,916
Real Estate 1.8%
a SBA Communications Corp., A		United States		10,600		1,719,002
Utilities 2.4%
NextEra Energy Inc.		United States		13,500		2,328,750
Total Common Stocks (Cost $83,979,935)						91,127,813
Short Term Investments (Cost $4,662,257) 4.9%
Money Market Funds 4.9%
b,c Institutional Fiduciary Trust Money Market Portfolio, 1.83%		United States		4,662,257		4,662,257
Total Investments (Cost $88,642,192) 100.1%						95,790,070
Other Assets, less Liabilities (0.1)%						(112,281	)
Net Assets 100.0%					$	95,677,789

^aNon-income producing.

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

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

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

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Small Cap Growth Fund

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class A
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$23.01			$19.60			$16.37			$18.83			$18.20			$14.26
Income from investment operationsa:
Net investment income (loss)b		(0.09	)		(0.13	)		(0.11	)		(0.08	)		(0.12	)		(0.15	)
Net realized and unrealized gains (losses)		0.80			3.96			3.34			(2.03	)		1.57			4.75
Total from investment operations		0.71			3.83			3.23			(2.11	)		1.45			4.60
Less distributions from net realized gains		—			(0.42	)		—			(0.35	)		(0.82	)		(0.66	)
Net asset value, end of period		$23.72			$23.01			$19.60			$16.37			$18.83			$18.20
Total returnc		3.09%			19.71%			19.73%			(11.28)%			8.34%			32.40%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.07%			1.11%			1.10%			1.13%			1.16%			1.20%
Expenses net of waiver and payments by affiliates		1.05%	e		1.10%	e		1.08%	e		1.11%	e		1.16%	f		1.20%	f
Net investment income (loss)		(0.73)%			(0.61)%			(0.61)%			(0.44)%			(0.66)%			(0.85)%
Supplemental data
Net assets, end of period (000’s)		$677,410			$665,251			$719,752			$792,072			$1,164,218			$851,317
Portfolio turnover rate		24.92%			29.82%			29.93%			43.99%			30.15%			40.35%

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

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

^fBenefit 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.  |  Semiannual Report       43

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small Cap Growth Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class C
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$19.41			$16.71			$14.07			$16.36			$16.03			$12.70
Income from investment operationsa:
Net investment income (loss)b		(0.16	)		(0.25	)		(0.21	)		(0.18	)		(0.22	)		(0.24	)
Net realized and unrealized gains (losses)		0.68			3.37			2.85			(1.76	)		1.37			4.23
Total from investment operations		0.52			3.12			2.64			(1.94	)		1.15			3.99
Less distributions from net realized gains		—			(0.42	)		—			(0.35	)		(0.82	)		(0.66	)
Net asset value, end of period		$19.93			$19.41			$16.71			$14.07			$16.36			$16.03
Total returnc		2.68%			18.79%			18.76%			(11.95	)%		7.58%			31.57%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.82%			1.86%			1.85%			1.88%			1.87%			1.90%
Expenses net of waiver and payments by affiliates		1.80%	e		1.85%	e		1.83%	e		1.86%	e		1.87%	f		1.90%	f
Net investment income (loss)		(1.48)%			(1.36)%			(1.36)%			(1.19)%			(1.37)%			(1.55)%
Supplemental data
Net assets, end of period (000’s)		$92,179			$132,116			$142,539			$157,175			$225,105			$187,271
Portfolio turnover rate		24.92%			29.82%			29.93%			43.99%			30.15%			40.35%

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

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

44       Semiannual 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)

	Six Months Ended October 31, 2018 (unaudited)
				Year Ended April 30,
				2018			2017			2016			2015			2014
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$21.93			$18.74			$15.70			$18.11			$17.57			$13.81
Income from investment operationsa:
Net investment income (loss)b		(0.12	)		(0.17	)		(0.15	)		(0.12	)		(0.16	)		(0.18	)
Net realized and unrealized gains (losses)		0.77			3.78			3.19			(1.94	)		1.52			4.60
Total from investment operations		0.65			3.61			3.04			(2.06	)		1.36			4.42
Less distributions from net realized gains		—			(0.42	)		—			(0.35	)		(0.82	)		(0.66	)
Net asset value, end of period		$22.58			$21.93			$18.74			$15.70			$18.11			$17.57
Total returnc		2.96%			19.37%			19.36%			(11.46)%			8.12%			32.15%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.32%			1.36%			1.35%			1.38%			1.37%			1.40%
Expenses net of waiver and payments by affiliates		1.30%	e		1.35%	e		1.33%	e		1.36%	e		1.37%	f		1.40%	f
Net investment income (loss)		(0.98)%			(0.86)%			(0.86)%			(0.69)%			(0.87)%			(1.05)%
Supplemental data
Net assets, end of period (000’s)		$71,956			$71,398			$79,995			$79,929			$92,455			$51,190
Portfolio turnover rate		24.92%			29.82%			29.93%			43.99%			30.15%			40.35%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

^fBenefit 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.  |  Semiannual Report       45

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small Cap Growth Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)
				Year Ended April 30,
				2018			2017			2016			2015			2014a
Class R6
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$24.88			$21.06			$17.52			$20.02			$19.21			$14.64
Income from investment operationsb:
Net investment income (loss)c		(0.04	)		(0.03	)		(0.03	)		0.01			(0.03	)		(0.06	)
Net realized and unrealized gains (losses)		0.86			4.27			3.57			(2.16	)		1.66			5.29
Total from investment operations		0.82			4.24			3.54			(2.15	)		1.63			5.23
Less distributions from net realized gains		—			(0.42	)		—			(0.35	)		(0.82	)		(0.66	)
Net asset value, end of period		$25.70			$24.88			$21.06			$17.52			$20.02			$19.21
Total returnd		3.30%			20.23%			20.21%			(10.81)%			8.91%			35.80%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.67%			0.65%			0.63%			0.63%			0.66%			0.72%
Expenses net of waiver and payments by affiliates		0.63%	f		0.63%	f		0.61%	f		0.61%	f		0.66%	g		0.72%	g
Net investment income (loss)		(0.31)%			(0.14)%			(0.14)%			0.06%			(0.16)%			(0.37)%
Supplemental data
Net assets, end of period (000’s)		$949,815			$935,509			$858,972			$846,724			$844,293			$87,777
Portfolio turnover rate		24.92%			29.82%			29.93%			43.99%			30.15%			40.35%

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

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year.

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

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

46       Semiannual 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)

	Six Months Ended October 31, 2018 (unaudited)
				Year Ended April 30,
				2018			2017			2016			2015			2014
Advisor Class
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$24.61			$20.88			$17.41			$19.94			$19.17			$14.94
Income from investment operationsa:
Net investment income (loss)b		(0.07	)		(0.08	)		(0.07	)		(0.04	)		(0.07	)		(0.11	)
Net realized and unrealized gains (losses)		0.86			4.23			3.54			(2.14	)		1.66			5.00
Total from investment operations		0.79			4.15			3.47			(2.18	)		1.59			4.89
Less distributions from net realized gains.		—			(0.42	)		—			(0.35	)		(0.82	)		(0.66	)
Net asset value, end of period		$25.40			$24.61			$20.88			$17.41			$19.94			$19.17
Total returnc		3.21%			19.97%			19.93%			(11.06)%			8.65%			32.87%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.82%			0.86%			0.85%			0.88%			0.87%			0.90%
Expenses net of waiver and payments by affiliates		0.80%	e		0.85%	e		0.83%	e		0.86%	e		0.87%	f		0.90%	f
Net investment income (loss)		(0.48)%			(0.36)%			(0.36)%			(0.19)%			(0.37)%			(0.55)%
Supplemental data
Net assets, end of period (000’s)		$716,229			$713,135			$805,661			$850,975			$1,077,822			$427,406
Portfolio turnover rate		24.92%			29.82%			29.93%			43.99%			30.15%			40.35%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

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

^fBenefit 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.  |  Semiannual Report       47

FRANKLIN STRATEGIC SERIES

Statement of Investments, October 31, 2018 (unaudited)

Franklin Small Cap Growth Fund

	Shares		Value
Common Stocks 96.1%
Communication Services 2.0%
a Eventbrite Inc., A		229,200	$	6,486,360
a IMAX Corp.		964,800		18,678,528
a Yelp Inc.		611,400		26,180,148
				51,345,036
Consumer Discretionary 13.4%
a At Home Group Inc.		794,200		21,713,428
a Boot Barn Holdings Inc.		1,060,435		26,171,536
Dave & Buster’s Entertainment Inc.		391,500		23,313,824
a,b,c DraftKings Inc.		9,905,685		22,601,167
a,d Duluth Holdings Inc.		1,052,942		32,356,908
a Five Below Inc.		188,300		21,432,306
a Grand Canyon Education Inc.		283,300		35,327,510
a Laureate Education Inc., A		69,355		1,032,696
Lithia Motors Inc.		271,100		24,149,588
a M/I Homes Inc.		1,160,776		28,055,956
a,d RH		221,000		25,571,910
a,e Sportsman’s Warehouse Holdings Inc.		3,588,200		18,048,646
Steven Madden Ltd.		661,150		20,674,160
Tenneco Inc., A		359,000		12,360,370
Wingstop Inc.		383,329		24,004,062
				336,814,067
Consumer Staples 1.7%
a Hostess Brands Inc., A		1,485,500		15,449,200
a The Simply Good Foods Co.		754,600		14,307,216
a Smart & Final Stores Inc.		2,454,324		12,394,336
				42,150,752
Energy 2.7%
a Callon Petroleum Co.		2,567,400		25,596,978
d Liberty Oilfield Services Inc., A		1,376,500		26,125,970
a Ring Energy Inc.		2,435,600		17,365,828
				69,088,776
Financials 8.3%
Chemical Financial Corp.		542,923		25,441,372
Evercore Inc.		207,200		16,926,168
a FGL Holdings., A		1,464,200		11,567,180
a Focus Financial Partners Inc.		75,700		2,891,740
Houlihan Lokey Inc.		475,200		19,568,736
LegacyTexas Financial Group Inc.		633,100		24,393,343
MB Financial Inc.		548,300		24,339,037
a Metropolitan Bank Holding Corp.		318,661		11,745,845
Pinnacle Financial Partners Inc.		534,404		27,949,329
a PRA Group Inc.		506,500		15,620,460
a Western Alliance Bancorp		570,300		27,511,272
				207,954,482
Health Care 22.3%
a Aclaris Therapeutics Inc.		1,259,049		14,970,093
a Allogene Therapeutics Inc.		360,700		8,660,407
a American Renal Associates Holdings Inc.		1,087,100		20,970,159
a Amicus Therapeutics Inc.		1,198,900		13,403,702

48       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small Cap Growth Fund (continued)

	Shares		Value
Common Stocks (continued)
Health Care (continued)
a,e Aratana Therapeutics Inc.		2,466,919	$	14,653,499
a Argenx SE, ADR (Netherlands)		125,200		10,017,252
a Array BioPharma Inc.		1,507,500		24,421,500
a Ascendis Pharma AS, ADR (Denmark)		138,900		8,929,881
a Collegium Pharmaceutical Inc.		698,800		11,215,740
a DexCom Inc.		122,400		16,251,048
a Dynavax Technologies Corp.		1,116,300		11,040,207
a,d Foamix Pharmaceuticals Ltd. (Israel)		586,080		2,549,448
a G1 Therapeutics Inc.		148,800		5,953,488
a Global Blood Therapeutics Inc.		283,800		9,958,542
a HealthEquity Inc.		159,716		14,661,929
a Heron Therapeutics Inc.		944,388		26,216,211
a Inspire Medical Systems Inc.		218,304		8,749,624
a Integer Holdings Corp.		466,900		34,770,043
a Iovance Biotherapeutics Inc.		1,909,200		17,335,536
a iRhythm Technologies Inc.		391,097		30,216,154
a Karyopharm Therapeutics Inc.		547,757		5,773,359
a Loxo Oncology Inc.		69,658		10,633,990
a Neogen Corp.		285,666		17,345,639
a NeoGenomics Inc.		1,323,000		24,396,120
a Neos Therapeutics Inc.		646,938		2,024,916
a Neuronetics Inc.		292,300		7,447,804
a Nevro Corp.		628,600		30,650,536
a Odonate Therapeutics Inc.		383,200		5,556,400
a Penumbra Inc.		160,700		21,855,200
a,e Pfenex Inc.		1,787,331		7,095,704
a PTC Therapeutics Inc.		559,400		21,548,088
a,d RA Medical Systems Inc.		219,200		2,345,440
a Reata Pharmaceuticals Inc.		295,374		17,406,390
a Revance Therapeutics Inc.		871,492		18,972,381
a Sage Therapeutics Inc.		135,700		17,461,876
a TG Therapeutics Inc.		247,875		1,127,831
a,d TherapeuticsMD Inc.		2,797,900		13,681,731
a Tivity Health Inc.		818,378		28,160,387
				558,428,255
Industrials 17.8%
Allegiant Travel Co.		275,348		31,428,221
Altra Industrial Motion Corp.		677,600		21,866,152
a Astronics Corp.		467,019		13,618,274
a Astronics Corp., B		70,052		2,038,513
a Beacon Roofing Supply Inc.		830,000		23,165,300
Cubic Corp.		536,300		35,186,643
Granite Construction Inc.		657,243		30,049,150
Healthcare Services Group Inc.		712,500		28,920,375
Kennametal Inc.		924,700		32,780,615
a,e The KeyW Holding Corp.		3,430,282		26,859,108
Lindsay Corp.		64,721		6,188,622
a Mercury Systems Inc.		950,916		44,559,924
Mobile Mini Inc.		432,400		17,780,288
a SAIA Inc.		343,824		21,612,777
a Spirit Airlines Inc.		825,700		42,853,830
a Univar Inc.		1,397,732		34,412,162

franklintempleton.com Semiannual Report       49

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small Cap Growth Fund (continued)

	Shares		Value
Common Stocks (continued)
Industrials (continued)
US Ecology Inc.		490,765	$	34,319,196
				447,639,150
Information Technology 25.5%
a 2U Inc.		839,472		52,811,184
a Alarm.com Holdings Inc.		407,824		18,140,012
a Alteryx Inc.		438,000		23,209,620
a Anaplan Inc.		25,200		579,600
a Elastic NV		127,534		8,672,312
a Envestnet Inc.		457,822		23,815,900
a GreenSky Inc., A		1,644,000		21,667,920
a Guidewire Software Inc.		204,900		18,229,953
a Hubspot Inc.		143,829		19,510,404
a Inphi Corp.		575,900		18,428,800
a InterXion Holding NV (Netherlands)		512,795		30,188,242
a Lattice Semiconductor Corp.		2,544,700		15,293,647
a,b,c LegalZoom.com Inc.		357,820		14,999,814
ManTech International Corp., A		515,000		29,499,200
Monolithic Power Systems		216,700		25,596,604
a Nanometrics Inc.		510,500		16,366,630
a Paylocity Holding Corp.		342,932		22,561,496
a Pluralsight Inc., A		1,127,000		25,256,070
a Pure Storage Inc., A		813,900		16,424,502
a Q2 Holdings Inc.		442,600		23,559,598
a RealPage Inc.		335,700		17,792,100
a Twilio Inc., A		434,302		32,668,196
a USA Technologies Inc.		646,500		3,749,700
Versum Materials Inc.		796,500		25,137,540
a ViaSat Inc.		492,183		31,381,588
a Viavi Solutions Inc.		1,470,000		16,949,100
a WEX Inc.		76,300		13,425,748
a Wix.com Ltd. (Israel)		263,500		25,651,725
a Zendesk Inc.		477,314		26,237,951
a Zscaler Inc.		582,000		21,120,780
				638,925,936
Materials 1.2%
a Ingevity Corp.		320,600		29,200,248
Real Estate 1.2%
Coresite Realty Corp.		315,700		29,631,602
Total Common Stocks (Cost $1,920,120,281)				2,411,178,304
Preferred Stocks 3.1%
Consumer Discretionary 1.4%
a,b,c Proterra Inc., pfd., 5, 144A		1,787,047		14,040,534
a,b,c Proterra Inc., pfd., 6, 144A		1,310,834		10,299,006
a,b,c Proterra Inc., pfd., 7		536,367		4,214,147
a,b,c Tula Technology Inc., E		3,611,111		6,662,886
				35,216,573
Financials 0.6%
a,b,c Peloton Interactive Inc., pfd., F		1,038,769		15,000,011

50       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small Cap Growth Fund (continued)

	Shares		Value
Preferred Stocks (continued)
Industrials 0.4%
a,b,c,e Optoro Inc., pfd., E		508,130	$	9,999,999
Information Technology 0.7%
a,b,c Smule Inc., pfd., G, 144A		1,542,673		13,412,075
a,b,c Smule Inc., pfd., H, 144A		352,675		3,245,645
				16,657,720
Total Preferred Stocks (Cost $65,362,396)				76,874,303
Total Investments before Short Term Investments (Cost $1,985,482,677)				2,488,052,607
Short Term Investments 3.2%
Money Market Funds (Cost $11,371,636) 0.5%
f,g Institutional Fiduciary Trust Money Market Portfolio, 1.83%		11,371,636		11,371,636
h Investments from Cash Collateral Received for Loaned Securities (Cost $67,585,075) 2.7%
Money Market Funds 2.7%
f,g Institutional Fiduciary Trust Money Market Portfolio, 1.83%		67,585,075		67,585,075
Total Investments (Cost $2,064,439,388) 102.4%				2,567,009,318
Other Assets, less Liabilities (2.4)%				(59,421,137	)
Net Assets 100.0%			$	2,507,588,181

^aNon-income producing.

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

^cSee Note 7 regarding restricted securities.

^dA portion or all of the security is on loan at October 31, 2018. See Note 1(c).

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

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

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

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

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Semiannual Report       51

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Small-Mid Cap Growth Fund

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$36.07			$34.35			$31.84			$38.38			$40.42			$38.01
Income from investment operationsa:
Net investment income (loss)b		(0.05	)		(0.15	)		(0.11	)		(0.03	)c		(0.14	)		(0.20	)
Net realized and unrealized gains (losses)		0.12			4.97			4.73			(3.37	)		5.71			8.39
Total from investment operations		0.07			4.82			4.62			(3.40	)		5.57			8.19
Less distributions from net realized gains		—			(3.10	)		(2.11	)		(3.14	)		(7.61	)		(5.78	)
Net asset value, end of period		$36.14			$36.07			$34.35			$31.84			$38.38			$40.42
Total returnd		0.19%			14.28%			15.01%			(9.02)%			15.78%			21.99%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.87%			1.02%			0.95%			0.96%			0.94%			0.96%
Expenses net of waiver and payments by affiliates		0.86%f			1.00%f			0.94%	f		0.95%	f		0.94%	g		0.96%	f,g
Net investment income (loss)		(0.26)%			(0.41)%			(0.34)%			(0.08)%	c		(0.35)%			(0.48)%
Supplemental data
Net assets, end of period (000’s)		$2,403,214			$2,262,471			$2,303,113			$2,231,822			$2,535,853			$2,371,448
Portfolio turnover rate		28.30%			38.35%			35.46%			38.72%			47.98%			40.82%

^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, 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%.

52       Semiannual 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)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$25.84			$25.59			$24.40			$30.43			$33.78			$32.80
Income from investment operationsa:
Net investment income (loss)b		(0.14	)		(0.31	)		(0.27	)		(0.23	)c		(0.36	)		(0.43	)
Net realized and unrealized gains (losses)		0.09			3.66			3.57			(2.66	)		4.62			7.19
Total from investment operations		(0.05	)		3.35			3.30			(2.89	)		4.26			6.76
Less distributions from net realized gains		—			(3.10	)		(2.11	)		(3.14	)		(7.61	)		(5.78	)
Net asset value, end of period		$25.79			$25.84			$25.59			$24.40			$30.43			$33.78
Total returnd		(0.19)%			13.39%			14.15%			(9.72)%			14.96%			21.04%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.62%			1.77%			1.70%			1.71%			1.69%			1.71%
Expenses net of waiver and payments by affiliates		1.61%	f		1.75%	f		1.69%	f		1.70%	f		1.69%	g		1.71%	f,g
Net investment income (loss)		(1.01)%			(1.16)%			(1.09)%			(0.83)%	c		(1.10)%			(1.23)%
Supplemental data
Net assets, end of period (000’s)		$165,090			$334,769			$371,262			$377,024			$448,722			$404,923
Portfolio turnover rate		28.30%			38.35%			35.46%			38.72%			47.98%			40.82%

^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 (1.13)%.

^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.  |  Semiannual Report       53

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small-Mid Cap Growth Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class R
Per share operating performance (for a share outstanding throughout the period)
Net asset value, beginning of period		$33.15			$31.87			$29.75			$36.18			$38.61			$36.61
Income from investment operationsa:
Net investment income (loss)b		(0.09	)		(0.22	)		(0.18	)		(0.11	)c		(0.23	)		(0.29	)
Net realized and unrealized gains (losses)		0.11			4.60			4.41			(3.18	)		5.41			8.07
Total from investment operations		0.02			4.38			4.23			(3.29	)		5.18			7.78
Less distributions from net realized gains		—			(3.10	)		(2.11	)		(3.14	)		(7.61	)		(5.78	)
Net asset value, end of period		$33.17			$33.15			$31.87			$29.75			$36.18			$38.61
Total returnd		0.06%			14.00%			14.70%			(9.24	)%		15.52%			21.66%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.11%			1.26%			1.19%			1.21%			1.19%			1.21%
Expenses net of waiver and payments by affiliates		1.10%	f		1.24%	f		1.18%	f		1.20%	f		1.19%	g		1.21%	f,g
Net investment income (loss)		(0.50)%			(0.65)%			(0.58)%			(0.33)%	c		(0.60)%			(0.73)%
Supplemental data
Net assets, end of period (000’s)		$69,131			$70,692			$81,864			$86,989			$96,593			$85,921
Portfolio turnover rate		28.30%			38.35%			35.46%			38.72%			47.98%			40.82%

^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 (0.63)%.

^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%.

54       Semiannual 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)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$39.91			$37.51			$34.43			$41.04			$42.53			$38.96
Income from investment operationsb:
Net investment incomec		0.03			0.05			0.05			0.15d			0.05			0.01
Net realized and unrealized gains (losses)		0.12			5.45			5.14			(3.62	)		6.07			9.34
Total from investment operations		0.15			5.50			5.19			(3.47	)		6.12			9.35
Less distributions from net realized gains		—			(3.10	)		(2.11	)		(3.14	)		(7.61	)		(5.78	)
Net asset value, end of period		$40.06			$39.91			$37.51			$34.43			$41.04			$42.53
Total returne		0.38%			14.90%			15.51%			(8.54)%			16.32%			24.43%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		0.51%			0.50%			0.48%			0.48%			0.48%			0.47%
Expenses net of waiver and payments by affiliates		0.48%	g		0.47%	g		0.47%	g		0.47%	g		0.48%	h		0.47%	g,h
Net investment income		0.12%			0.12%			0.13%			0.40%	d		0.11%			0.01%
Supplemental data
Net assets, end of period (000’s)		$263,604			$275,835			$222,577			$242,237			$206,548			$157,153
Portfolio turnover rate		28.30%			38.35%			35.46%			38.72%			47.98%			40.82%

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

^bThe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund’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 $0.11 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%.

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

^fRatios are annualized for periods less than one year.

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

^hBenefit 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.  |  Semiannual Report       55

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Small-Mid Cap Growth Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$39.33			$37.11			$34.15			$40.83			$42.44			$39.56
Income from investment operationsa:
Net investment income (loss)b		(—	)c		(0.06	)		(0.03	)		0.06d			(0.04	)		(0.10	)
Net realized and unrealized gains (losses)		0.13			5.38			5.10			(3.60	)		6.04			8.76
Total from investment operations		0.13			5.32			5.07			(3.54	)		6.00			8.66
Less distributions from net realized gains		—			(3.10	)		(2.11	)		(3.14	)		(7.61	)		(5.78	)
Net asset value, end of period		$39.46			$39.33			$37.11			$34.15			$40.83			$42.44
Total returne		0.33%			14.57%			15.28%			(8.79)%			16.09%			22.30%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		0.62%			0.77%			0.70%			0.71%			0.69%			0.71%
Expenses net of waiver and payments by affiliates		0.61%	g		0.75%	g		0.69%	g		0.70%	g		0.69%	h		0.71%	g,h
Net investment income (loss)		(0.01)%			(0.16)%			(0.09)%			0.17%	d		(0.10)%			(0.23)%
Supplemental data
Net assets, end of period (000’s)		$524,983			$520,842			$584,840			$551,176			$708,617			$650,426
Portfolio turnover rate		28.30%			38.35%			35.46%			38.72%			47.98%			40.82%

^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.

^cAmount rounds to less than $0.01 per share.

^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 (0.13)%.

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

^fRatios are annualized for periods less than one year.

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

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

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

FRANKLIN STRATEGIC SERIES

Statement of Investments, October 31, 2018 (unaudited)

Franklin Small-Mid Cap Growth Fund

	Shares		Value
Common Stocks 96.5%
Consumer Discretionary 15.4%
Aptiv PLC		463,000	$	35,558,400
a Burlington Stores Inc.		263,000		45,101,870
a Dollar Tree Inc.		385,000		32,455,500
Domino’s Pizza Inc.		151,000		40,587,291
a,b,c DraftKings Inc.		7,974,537		18,194,991
Expedia Group Inc.		258,500		32,423,655
a Grand Canyon Education Inc.		359,000		44,767,300
a GrubHub Inc.		117,000		10,850,580
MGM Resorts International		668,000		17,822,240
a Norwegian Cruise Line Holdings Ltd.		335,800		14,798,706
a NVR Inc.		12,500		27,987,875
a O’Reilly Automotive Inc.		141,000		45,225,750
Ross Stores Inc.		602,000		59,598,000
Tapestry Inc.		375,000		15,866,250
Tractor Supply Co.		261,900		24,065,991
a Ulta Beauty Inc.		78,000		21,412,560
a,d Under Armour Inc., A		387,000		8,556,570
Vail Resorts Inc.		80,000		20,105,600
VF Corp.		160,000		13,260,800
				528,639,929
Consumer Staples 1.2%
Brown-Forman Corp., B		398,000		18,443,320
Lamb Weston Holdings Inc.		290,000		22,666,400
				41,109,720
Energy 1.6%
Cabot Oil & Gas Corp., A		806,010		19,529,622
a Concho Resources Inc.		177,700		24,716,293
Diamondback Energy Inc.		100,000		11,236,000
				55,481,915
Financials 7.9%
Arthur J. Gallagher & Co.		510,000		37,745,100
CBOE Global Markets Inc.		330,000		37,240,500
First Republic Bank.		215,000		19,562,850
a Focus Financial Partners Inc.		148,000		5,653,600
MarketAxess Holdings Inc.		195,000		40,885,650
Moody’s Corp.		263,000		38,261,240
MSCI Inc.		206,500		31,053,470
SEI Investments Co.		323,000		17,264,350
a SVB Financial Group		103,500		24,553,305
a Western Alliance Bancorp		335,000		16,160,400
				268,380,465
Health Care 14.4%
a ABIOMED Inc.		94,000		32,072,800
a Agios Pharmaceuticals Inc.		50,000		3,153,000
a Array BioPharma Inc.		130,000		2,106,000
a BioMarin Pharmaceutical Inc.		222,666		20,523,125
a Centene Corp.		296,000		38,574,720
a Cerner Corp.		328,502		18,816,595
a DexCom Inc.		170,414		22,625,867
a Edwards Lifesciences Corp.		490,000		72,324,000

franklintempleton.com Semiannual Report       57

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth Fund (continued)

	Shares		Value
Common Stocks (continued)
Health Care (continued)
a Elanco Animal Health Inc.		174,400	$	5,315,712
a,d Guardant Health Inc.		72,300		2,420,604
a Heron Therapeutics Inc.		60,000		1,665,600
a IDEXX Laboratories Inc.		102,500		21,742,300
a Incyte Corp.		207,614		13,457,539
a Insulet Corp.		249,217		21,983,432
a iRhythm Technologies Inc.		181,450		14,018,827
a Jazz Pharmaceuticals PLC		133,000		21,123,060
a Mettler-Toledo International Inc.		74,500		40,738,090
a Neurocrine Biosciences Inc.		155,042		16,612,750
a Nevro Corp.		248,000		12,092,480
a Penumbra Inc.		161,647		21,983,992
a Revance Therapeutics Inc.		356,000		7,750,120
a Sage Therapeutics Inc.		42,000		5,404,560
a Sarepta Therapeutics Inc.		76,000		10,165,760
a Seattle Genetics Inc.		144,500		8,110,785
a Veeva Systems Inc.		119,500		10,916,325
a Waters Corp.		160,000		30,350,400
West Pharmaceutical Services Inc.		145,000		15,358,400
				491,406,843
Industrials 18.6%
BWX Technologies Inc.		421,000		24,611,660
a CoStar Group Inc.		134,000		48,430,280
Fortive Corp.		612,500		45,478,125
Harris Corp.		245,500		36,508,305
IDEX Corp.		263,500		33,417,070
a IHS Markit Ltd.		636,915		33,457,145
J.B. Hunt Transport Services Inc.		281,000		31,081,410
a Mercury Systems Inc.		409,000		19,165,740
Old Dominion Freight Line Inc.		198,000		25,823,160
Republic Services Inc.		476,000		34,595,680
Rockwell Automation Inc.		263,000		43,323,990
Roper Technologies Inc.		327,530		92,658,237
Stanley Black & Decker Inc.		247,000		28,780,440
Textron Inc.		329,800		17,687,174
TransUnion		225,000		14,793,750
a Univar Inc.		942,000		23,192,040
a Verisk Analytics Inc.		488,000		58,481,920
a WABCO Holdings Inc.		226,000		24,283,700
				635,769,826
Information Technology 32.4%
a 2U Inc.		853,000		53,662,230
a Advanced Micro Devices Inc.		750,000		13,657,500
a Adyen NV (Netherlands)		47,500		30,714,828
a Alarm.com Holdings Inc.		369,000		16,413,120
Amphenol Corp., A		540,000		48,330,000
a ANSYS Inc.		108,000		16,151,400
a Arista Networks Inc.		83,000		19,119,050
a Autodesk Inc.		377,000		48,727,250
a Black Knight Inc.		358,000		17,459,660
a,d Ceridian HCM Holding Inc.		251,000		9,530,470

58       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth Fund (continued)

	Shares		Value
Common Stocks (continued)
Information Technology (continued)
Cognex Corp.		661,000	$	28,317,240
a Elastic NV		149,400		10,159,200
a EPAM Systems Inc.		142,000		16,964,740
a FleetCor Technologies Inc.		172,000		34,405,160
a GoDaddy Inc., A		887,800		64,960,326
a GreenSky Inc., A		437,100		5,760,978
a Guidewire Software Inc.		321,000		28,559,370
a Inphi Corp.		105,000		3,360,000
a InterXion Holding NV (Netherlands)		426,000		25,078,620
KLA-Tencor Corp.		364,000		33,320,560
Lam Research Corp.		223,000		31,605,790
Maxim Integrated Products Inc.		170,000		8,503,400
Microchip Technology Inc.		762,000		50,124,360
Monolithic Power Systems		225,000		26,577,000
a Pluralsight Inc., A		430,000		9,636,300
a PTC Inc.		233,000		19,201,530
a Q2 Holdings Inc.		231,000		12,296,130
a ServiceNow Inc.		391,000		70,786,640
a Shopify Inc., A (Canada)		70,000		9,670,500
a Silicon Laboratories Inc.		155,000		12,637,150
Skyworks Solutions Inc.		183,000		15,877,080
a Square Inc., A		652,000		47,889,400
a StoneCo. Ltd. (Brazil)		64,100		1,839,029
a Synopsys Inc.		268,000		23,994,040
Total System Services Inc.		227,500		20,736,625
a Trimble Inc.		463,000		17,306,940
a Twilio Inc., A		124,000		9,327,280
a ViaSat Inc.		449,050		28,631,428
a Wix.com Ltd. (Israel)		257,000		25,018,950
a Workday Inc., A		433,000		57,597,660
a Worldpay Inc., A		574,200		52,734,528
Xilinx Inc.		287,000		24,501,190
a Zscaler Inc.		268,000		9,725,720
				1,110,870,372
Materials 2.8%
Avery Dennison Corp.		252,000		22,861,440
Celanese Corp.		226,000		21,908,440
a Ingevity Corp.		276,780		25,209,122
Packaging Corp. of America		290,000		26,624,900
				96,603,902
Real Estate 2.2%
Coresite Realty Corp.		147,000		13,797,420
a SBA Communications Corp., A		383,000		62,111,110
				75,908,530
Total Common Stocks (Cost $2,438,031,570)				3,304,171,502

franklintempleton.com Semiannual Report       59

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Small-Mid Cap Growth Fund (continued)

	Shares		Value
Preferred Stocks (Cost $7,135,914) 0.3%
Consumer Discretionary 0.3%
a,b,c Proterra Inc., pfd., 5, 144A		1,416,913	$	11,132,452
Total Investments before Short Term Investments (Cost $2,445,167,484)				3,315,303,954
Short Term Investments 4.0%
Money Market Funds (Cost $128,140,053) 3.7%
e,f Institutional Fiduciary Trust Money Market Portfolio, 1.83%		128,140,053		128,140,053
g Investments from Cash Collateral Received for Loaned Securities (Cost $9,970,826) 0.3%
Money Market Funds 0.3%
e,f Institutional Fiduciary Trust Money Market Portfolio, 1.83%		9,970,826		9,970,826
Total Investments (Cost $2,583,278,363) 100.8%.				3,453,414,833
Other Assets, less Liabilities (0.8)%				(27,392,854	)
Net Assets 100.0%			$	3,426,021,979

^aNon-income producing.

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

^cSee Note 7 regarding restricted securities.

^dA portion or all of the security is on loan at October 31, 2018. See Note 1(c).

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

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

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

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

FRANKLIN STRATEGIC SERIES

Financial Statements

Statements of Assets and Liabilities

October 31, 2018 (unaudited)

	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Assets:
+Investments in securities:
Cost - Unaffiliated issuers		$2,032,656,473		$83,979,935		$1,865,952,438		$2,445,167,484
Cost - Non-controlled affiliates (Note 3f and 8)		89,223,505		4,662,257		198,486,950		138,110,879
Value - Unaffiliated issuers		$3,702,143,131		$91,127,813		$2,411,395,651		$3,315,303,954
Value - Non-controlled affiliates (Note 3f and 8)		89,223,505		4,662,257		155,613,667		138,110,879
Receivables:
Investment securities sold		—		—		12,211,825		1,524,289
Capital shares sold		2,633,000		77,962		2,009,006		1,926,406
Dividends		639,793		13,785		230,046		201,916
Due from custodian		—		—		31,900		—
Other assets		1,139		—		763		1,061
Total assets		3,794,640,568		95,881,817		2,581,492,858		3,457,068,505
Liabilities:
Payables:
Investment securities purchased		16,993,027		—		603,924		6,534,770
Capital shares redeemed		2,943,134		76,469		3,271,028		10,332,020
Management fees		1,804,472		58,344		1,348,313		1,319,956
Distribution fees		850,957		28,613		275,264		761,129
Transfer agent fees		1,061,889		33,520		659,083		1,914,933
Funds advanced by custodian		820		—		—		—
Payable upon return of securities loaned		2,175,000		—		67,616,975		9,970,826
Accrued expenses and other liabilities		169,838		7,082		130,090		212,892
Total liabilities		25,999,137		204,028		73,904,677		31,046,526
Net assets, at value		$3,768,641,431		$95,677,789		$2,507,588,181		$3,426,021,979
Net assets consist of:
Paid-in capital		$1,711,781,419		$75,714,315		$1,556,926,509		$2,174,550,155
Total distributable earnings (loss)		2,056,860,012		19,963,474		950,661,672		1,251,471,824
Net assets, at value		$3,768,641,431		$95,677,789		$2,507,588,181		$3,426,021,979

⁺Includes securities loaned $     2,092,500 $                 — $     65,197,887 $     10,012,326

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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Assets and Liabilities (continued)

October 31, 2018 (unaudited)

	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Class A:
Net assets, at value		$2,548,289,779		$68,150,589		$677,409,512		$2,403,213,831
Shares outstanding		65,420,487		4,174,106		28,559,757		66,499,476
Net asset value per sharea		$38.95		$16.33		$23.72		$36.14
Maximum offering price per share (net asset value per share ÷ 94.50%)		$41.22		$17.28		$25.10		$38.24
Class C:
Net assets, at value		$   238,946,253		$14,806,033		$  92,178,958		$   165,089,542
Shares outstanding		7,271,838		963,552		4,624,392		6,401,898
Net asset value and maximum offering price per sharea		$32.86		$15.37		$19.93		$25.79
Class R:
Net assets, at value		$     34,977,730		$     134,689		$  71,955,592		$     69,131,244
Shares outstanding		939,144		8,382		3,187,335		2,084,205
Net asset value and maximum offering price per share		$37.24		$16.07		$22.58		$33.17
Class R6:
Net assets, at value		$   372,618,874		$     892,328		$949,815,102		$   263,604,490
Shares outstanding		8,818,087		53,505		36,953,748		6,580,074
Net asset value and maximum offering price per share		$42.26		$16.68		$25.70		$40.06
Advisor Class:
Net assets, at value		$   573,808,795		$11,694,150		$716,229,017		$   524,982,872
Shares outstanding		13,729,254		704,518		28,194,281		13,305,545
Net asset value and maximum offering price per share		$41.79		$16.60		$25.40		$39.46

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

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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Operations

for the six months ended October 31, 2018 (unaudited)

	Franklin Growth     Opportunities Fund			Franklin Select U.S. Equity Fund			Franklin Small Cap Growth Fund			Franklin Small-Mid Cap Growth Fund
Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers		$ 12,469,473			$    431,222			$     3,264,899			$     9,860,492
Non-controlled affiliates (Note 3f and 8)		152,301			24,572			419,396			989,632
Income from securities loaned (net of fees and rebates)		9,947			—			783,968			141,759
Total investment income		12,631,721			455,794			4,468,263			10,991,883
Expenses:
Management fees (Note 3a)		11,098,845			478,268			8,570,555			8,406,017
Distribution fees: (Note 3c)
Class A		3,271,412			87,304			897,315			3,030,253
Class C		2,069,113			90,832			692,916			1,692,413
Class R		95,505			383			196,813			184,331
Transfer agent fees: (Note 3e)
Class A		1,653,049			49,075			668,026			1,859,647
Class C		262,563			12,809			128,804			261,109
Class R		24,213			100			72,980			57,352
Class R6		49,622			368			190,444			54,326
Advisor Class		395,584			8,132			728,081			433,248
Custodian fees (Note 4)		21,579			771			11,150			14,806
Reports to shareholders		169,107			7,768			81,592			156,788
Registration and filing fees		66,776			40,147			52,547			81,567
Professional fees		37,866			19,867			30,748			34,685
Trustees’ fees and expenses		22,755			627			15,624			21,620
Other		33,925			4,614			24,798			32,981
Total expenses		19,271,914			801,065			12,362,393			16,321,143
Expense reductions (Note 4)		(1,678	)		(94	)		(679	)		(58	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(47,225	)		(127,672	)		(318,475	)		(277,667	)
Net expenses		19,223,011			673,299			12,043,239			16,043,418
Net investment income (loss)		(6,591,290	)		(217,505	)		(7,574,976	)		(5,051,535	)
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		230,685,717			373,981			255,554,082			211,205,029
Non-controlled affiliates (Note 3f and 8)		—			—			(6,561,761	)		—
Foreign currency transactions		6,322			(489	)		—			(45,437	)
Net realized gain (loss)		230,692,039			373,492			248,992,321			211,159,592
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(180,829,105	)		(218,889	)		(166,619,498	)		(196,828,976	)
Non-controlled affiliates (Note 3f and 8)		—			—			6,657,883			—
Translation of other assets and liabilities denominated in foreign currencies		—			—			—			1,845
Net change in unrealized appreciation (depreciation)		(180,829,105	)		(218,889	)		(159,961,615	)		(196,827,131	)
Net realized and unrealized gain (loss)		49,862,934			154,603			89,030,706			14,332,461

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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Operations (continued)

for the six months ended October 31, 2018 (unaudited)

	Franklin Growth     Opportunities Fund		Franklin Select U.S. Equity Fund			Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Net increase (decrease) in net assets resulting from operations		$43,271,644		$(62,902	)		$81,455,730		$9,280,926

*Foreign taxes withheld on dividends $                 123 $                 534         $             — $             236

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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Growth Opportunities Fund						Franklin Select U.S. Equity Fund
	Six Months Ended  October 31, 2018  (unaudited)			Year Ended April 30, 2018			Six Months Ended  October 31, 2018  (unaudited)			Year Ended April 30, 2018
Increase (decrease) in net assets:
Operations:
Net investment income (loss)		$     (6,591,290	)		$    (10,261,563	)		$    (217,505	)		$      (359,541	)
Net realized gain (loss)		230,692,039			289,840,333			373,492			23,070,802
Net change in unrealized appreciation (depreciation)		(180,829,105	)		405,837,652			(218,889	)		(15,755,359	)
Net increase (decrease) in net assets resulting from operations		43,271,644			685,416,422			(62,902	)		6,955,902
Distributions to shareholders: (Note 1e)
Class A		—			(189,384,206	)		—			—
Class C		—			(36,890,234	)		—			—
Class R		—			(3,861,226	)		—			—
Class R6		—			(26,495,718	)		—			—
Advisor Class		—			(42,059,463	)		—			—
Total distributions to shareholders		—			(298,690,847	)		—			—
Capital share transactions: (Note 2)
Class A		97,540,283			(91,864,958	)		2,681,699			(17,113,814	)
Class C		(168,908,248	)		(23,626,956	)		(3,365,792	)		(3,442,504	)
Class R		(1,959,419	)		(18,366,509	)		(1,885	)		(43,959	)
Class R6		(1,623,067	)		41,353,334			(52,856	)		(19,406,366	)
Advisor Class		(17,928,425	)		(18,372,365	)		1,286,131			(3,475,298	)
Total capital share transactions		(92,878,876	)		(110,877,454	)		547,297			(43,481,941	)
Net increase (decrease) in net assets		(49,607,232	)		275,848,121			484,395			(36,526,039	)
Net assets:
Beginning of period		3,818,248,663			3,542,400,542			95,193,394			131,719,433
End of period (Note 1e)		$3,768,641,431			$3,818,248,663			$95,677,789			$95,193,394

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FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Changes in Net Assets (continued)

	Franklin Small Cap Growth Fund						Franklin Small-Mid Cap Growth Fund
	Six Months Ended  October 31, 2018  (unaudited)			Year Ended April 30, 2018			Six Months Ended  October 31, 2018  (unaudited)			Year Ended April 30, 2018
Increase (decrease) in net assets:
Operations:
Net investment income (loss)		$    (7,574,976	)		$    (10,835,341	)		$    (5,051,535	)		$    (14,570,284	)
Net realized gain (loss)		248,992,321			347,278,699			211,159,592			393,654,195
Net change in unrealized appreciation
(depreciation)		(159,961,615	)		131,654,453			(196,827,131	)		100,694,860
Net increase (decrease) in net assets resulting from operations		81,455,730			468,097,811			9,280,926			479,778,771
Distributions to shareholders: (Note 1e)
Class A		—			(13,026,727	)		—			(188,183,859	)
Class C		—			(2,968,851	)		—			(37,764,936	)
Class R		—			(1,455,647	)		—			(6,640,970	)
Class R6		—			(16,214,723	)		—			(21,566,773	)
Advisor Class		—			(13,459,989	)		—			(39,628,357	)
Total distributions to shareholders		—			(47,125,937	)		—			(293,784,895	)
Capital share transactions: (Note 2)
Class A		(10,009,516	)		(165,302,683	)		137,763,407			(165,123,618	)
Class C		(44,776,944	)		(30,398,855	)		(171,944,683	)		(43,224,469	)
Class R		(1,610,909	)		(20,277,000	)		(1,674,574	)		(14,958,409	)
Class R6		(14,421,598	)		(75,776,145	)		(15,129,222	)		39,199,957
Advisor Class		(20,457,752	)		(218,726,187	)		3,116,911			(100,935,015	)
Total capital share transactions		(91,276,719	)		(510,480,870	)		(47,868,161	)		(285,041,554	)
Net increase (decrease) in net assets		(9,820,989	)		(89,508,996	)		(38,587,235	)		(99,047,678	)
Net assets:
Beginning of period		2,517,409,170			2,606,918,166			3,464,609,214			3,563,656,892
End of period (Note 1e)		$2,507,588,181			$2,517,409,170			$3,426,021,979			$3,464,609,214

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FRANKLIN STRATEGIC SERIES

Notes to Financial Statements (unaudited)

1. Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eight separate funds, four of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Funds offer five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

Franklin Small Cap Growth Fund was closed to new investors with limited exceptions effective at the close of market February 12, 2015. Effective April 28, 2017, the Fund opened Class R6 shares to new investors who are eligible to purchase Class R6 shares. Effective January 17, 2019, all share classes of the Fund will be re-opened to new investors.

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

The following summarizes the Funds’ significant accounting policies.

a.   Financial Instrument Valuation

The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The 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.

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 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.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.   Organization and Significant Accounting Policies (continued)

a.  Financial Instrument Valuation (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 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 Lending

Certain or all Funds participate in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Funds. The Fund may receive income from the investment of cash collateral, in addition to lending fees and rebates paid by the borrower. Income from securities loaned, net of fees paid to the securities lending agent and/or third-party vendor, is reported separately in the Statements of Operations. The Fund bears the market risk with respect to the collateral investment, securities loaned, and the risk that the agent may default on its obligations to the Fund. If the borrower defaults on its obligation to return the securities loaned, the Fund has the right to repurchase the securities in the

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

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

d.  Income and Deferred Taxes

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

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 October 31, 2018, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

e.  Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Funds. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These

differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

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

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

f.  Accounting Estimates

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

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1.  Organization and Significant Accounting Policies (continued)

g.  Guarantees and Indemnifications

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

behalf of the Funds, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

*Effective during the current reporting period, it is no longer required to present certain line items on the Statements of Changes in Net Assets. Such disclosure changes are included in the Statements of Changes in Net Assets, therefore prior period amounts are presented below.

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

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

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

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

2.  Shares of Beneficial Interest

At October 31, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Funds’ shares were as follows:

	Franklin Growth						Franklin Select U.S.
	Opportunities Fund						Equity Fund
	Shares			Amount			Shares			Amount
Class A Shares:
Six Months ended October 31, 2018
Shares solda		7,257,876		$	295,658,732			569,190		$	9,777,381
Shares redeemed		(4,777,086	)		(198,118,449	)		(412,715	)		(7,095,682	)
Net increase (decrease)		2,480,790		$	97,540,283			156,475		$	2,681,699
Year ended April 30, 2018
Shares sold		7,166,896		$	269,822,921			503,310		$	8,051,742
Shares issued in reinvestment of distributions		4,805,055			175,240,189			—			—
Shares redeemed		(14,319,505	)		(536,928,068	)		(1,600,612	)		(25,165,556	)
Net increase (decrease)		(2,347,554	)	$	(91,864,958	)		(1,097,302	)	$	(17,113,814	)

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	Franklin Growth Opportunities Fund						Franklin Select U.S. Equity Fund
	Shares			Amount			Shares			Amount
Class C Shares:
Six Months ended October 31, 2018
Shares sold		872,537		$	30,597,963			112,140		$	1,819,445
Shares redeemeda		(5,854,284	)		(199,506,211	)		(322,807	)		(5,185,237)
Net increase (decrease)		(4,981,747	)	$	(168,908,248	)		(210,667	)	$	(3,365,792)
Year ended April 30, 2018
Shares sold		1,416,968		$	45,670,045			169,798		$	2,570,525
Shares issued in reinvestment of distributions		1,171,816			36,291,145			—			—
Shares redeemed		(3,285,529	)		(105,588,146	)		(401,846	)		(6,013,029)
Net increase (decrease)		(696,745	)	$	(23,626,956	)		(232,048	)	$	(3,442,504)
Class R Shares:
Six Months ended October 31, 2018
Shares sold		92,540		$	3,675,571			184		$	3,097
Shares redeemed		(143,874	)		(5,634,990	)		(292	)		(4,982)
Net increase (decrease)		(51,334	)	$		(1,959,419)		(108	)	$	(1,885)
Year ended April 30, 2018
Shares sold		184,889		$	6,657,157			5,129		$	77,884
Shares issued in reinvestment of distributions		109,382			3,821,807			—			—
Shares redeemed		(808,089	)		(28,845,473	)		(7,727	)		(121,843)
Net increase (decrease)		(513,818	)	$	(18,366,509	)		(2,598	)	$	(43,959)
Class R6 Shares:
Six Months ended October 31, 2018
Shares sold		758,900		$	33,814,413			5,151		$	89,694
Shares redeemed		(790,073	)		(35,437,480	)		(8,100	)		(142,550)
Net increase (decrease)		(31,173	)	$		(1,623,067)		(2,949	)	$	(52,856)
Year ended April 30, 2018
Shares sold		1,719,083		$	70,340,588			85,528		$	1,360,151
Shares issued in reinvestment of distributions		516,029			20,352,194			—			—
Shares redeemed		(1,209,156	)		(49,339,448	)		(1,350,483	)		(20,766,517)
Net increase (decrease)		1,025,956		$	41,353,334			(1,264,955	)	$	(19,406,366)
Advisor Class Shares:
Six Months ended October 31, 2018
Shares sold		1,370,255		$	60,775,277			122,595		$	2,145,129
Shares redeemed		(1,755,221	)		(78,703,702	)		(48,777	)		(858,998)
Net increase (decrease)		(384,966	)	$	(17,928,425	)		73,818		$	1,286,131
Year ended April 30, 2018
Shares sold		2,255,020		$	89,869,837			224,083		$	3,543,200
Shares issued in reinvestment of distributions		1,049,408			40,968,889			—			—
Shares redeemed		(3,702,910	)		(149,211,091	)		(442,950	)		(7,018,498)
Net increase (decrease)		(398,482	)	$	(18,372,365	)		(218,867	)	$	(3,475,298)

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2.   Shares of Beneficial Interest (continued)

	Franklin Small Cap Growth Fund				Franklin Small-Mid Cap Growth Fund
	Shares		Amount		Shares		Amount
Class A Shares:
Six Months ended October 31, 2018
Shares solda		3,635,208	$	90,395,669		9,410,625	$	352,963,377
Shares redeemed		(3,987,623)		(100,405,185)		(5,634,609)		(215,199,970)
Net increase (decrease)		(352,415)	$	(10,009,516)		3,776,016	$	137,763,407
Year ended April 30, 2018
Shares sold		3,189,012	$	67,849,901		10,215,023	$	369,305,768
Shares issued in reinvestment of distributions		547,334		11,920,682		5,062,829		177,806,171
Shares redeemed		(11,554,343)		(245,073,266)		(19,601,669)		(712,235,557)
Net increase (decrease)		(7,817,997)	$	(165,302,683)		(4,323,817)	$	(165,123,618)
Class C Shares:
Six Months ended October 31, 2018
Shares sold		209,869	$	4,446,956		947,242	$	25,733,614
Shares redeemeda		(2,392,405)		(49,223,900)		(7,502,265)		(197,678,297)
Net increase (decrease)		(2,182,536)	$	(44,776,944)		(6,555,023)	$	(171,944,683)
Year ended April 30, 2018
Shares sold		279,449	$	5,088,767		1,315,525	$	34,824,098
Shares issued in reinvestment of distributions		156,063		2,874,674		1,482,639		37,392,153
Shares redeemed		(2,157,881)		(38,362,296)		(4,350,045)		(115,440,720)
Net increase (decrease)		(1,722,369)	$	(30,398,855)		(1,551,881)	$	(43,224,469)
Class R Shares:
Six Months ended October 31, 2018
Shares sold		565,479	$	13,715,673		220,252	$	7,739,994
Shares redeemed		(634,175)		(15,326,582)		(268,734)		(9,414,568)
Net increase (decrease)		(68,696)	$	(1,610,909)		(48,482)	$	(1,674,574)
Year ended April 30, 2018
Shares sold		642,577	$	13,280,250		564,940	$	18,785,330
Shares issued in reinvestment of distributions		69,237		1,438,739		197,203		6,369,651
Shares redeemed		(1,724,856)		(34,995,989)		(1,198,049)		(40,113,390)
Net increase (decrease)		(1,013,042)	$	(20,277,000)		(435,906)	$	(14,958,409)
Class R6 Shares:
Six Months ended October 31, 2018
Shares sold		6,161,099	$	169,587,523		985,570	$	41,007,203
Shares redeemed		(6,805,084)		(184,009,121)		(1,317,360)		(56,136,425)
Net increase (decrease)		(643,985)	$	(14,421,598)		(331,790)	$	(15,129,222)
Year ended April 30, 2018
Shares sold		9,126,555	$	210,441,655		2,883,707	$	115,938,495
Shares issued in reinvestment of distributions		599,648		14,103,732		509,486		19,762,976
Shares redeemed		(12,909,982)		(300,321,532)		(2,414,377)		(96,501,514)
Net increase (decrease)		(3,183,779)	$	(75,776,145)		978,816	$	39,199,957

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	Franklin Small Cap Growth Fund						Franklin Small-Mid Cap Growth Fund
	Shares			Amount			Shares			Amount
Advisor Class Shares:
Six Months ended October 31, 2018
Shares sold		2,886,532		$	78,570,799			1,789,434		$	74,788,763
Shares redeemed		(3,666,667	)		(99,028,551	)		(1,726,099	)		(71,671,852)
Net increase (decrease)		(780,135	)	$	(20,457,752	)		63,335		$	3,116,911
Year ended April 30, 2018
Shares sold		5,063,743		$	115,186,325			2,962,038		$	115,876,935
Shares issued in reinvestment of distributions		516,706			12,028,914			979,925			37,482,152
Shares redeemed		(15,186,221	)		(345,941,426	)		(6,459,038	)		(254,294,102)
Net increase (decrease)		(9,605,772	)	$	(218,726,187	)		(2,517,075	)	$	(100,935,015)

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

3.  Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton 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 Growth Opportunities Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:

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

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3.  Transactions with Affiliates (continued)

a.  Management Fees (continued)

Franklin Select U.S. Equity Fund pays an investment management fee to Advisers based on the average daily net assets of the Fund as follows:

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

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

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

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

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For the period ended October 31, 2018, each Fund’s annualized gross effective investment management fee rate based on average daily net assets was as follows:

Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
	0.543%		0.950%		0.613%		0.457%

b.   Administrative Fees

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

c.   Distribution Fees

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

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

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

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

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 period:

	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Sales charges retained net of commissions paid to unaffiliated brokers/dealers		$231,172		$10,930		$13,076		$306,789
CDSC retained		$    4,589		$     403		$     709		$    9,242

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3.   Transactions with Affiliates (continued)

d.   Sales Charges/Underwriting Agreements (continued)

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

e.   Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the period ended October 31, 2018, the Funds paid transfer agent fees as noted in the Statements of Operations of which the following amounts were retained by Investor Services:

	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Transfer agent fees		$1,081,682		$34,713		$721,767		$1,190,418

f.   Investments in Affiliated Management Investment Companies

Certain or all Funds invest in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the period ended October 31, 2018, investments in affiliated management investment companies were as follows:

	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions			Number of Shares Held at End of Period		Value at End of Period		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Franklin Growth Opportunities Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		18,556,305		444,177,013		(383,530,515	)		79,202,803		$ 79,202,803		$152,301		$   —		$   —
Franklin Select U.S. Equity Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		761,261		11,287,866		(7,386,870	)		4,662,257		$  4,662,257		$ 24,572		$   —		$   —
Franklin Small Cap Growth Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		91,669,644		630,309,093		(643,022,026	)		78,956,711		$ 78,956,711		$419,396		$   —		$   —
Franklin Small-Mid Cap Growth Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		143,228,358		471,081,540		(476,199,019	)		138,110,879		$138,110,879		$989,632		$   —		$   —

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g.   Waiver and Expense Reimbursements

Advisers and Investor Services have contractually agreed in advance to waive or limit their respective fees and to assume as their own expense certain expenses otherwise payable by Franklin Select U.S. Equity Fund so that the expenses (excluding distribution fees and acquired fund fees and expenses) for Class A, Class C, Class R and Advisor Class of the Fund does not exceed 1.00%, and Class R6 does not exceed 0.88% based on the average net assets of each class (other than certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) until August 31, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

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

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

h.   Other Affiliated Transactions

At October 31, 2018, one or more of the funds in Franklin Fund Allocator Series owned 5.5% of the Franklin Growth Opportunities Fund outstanding shares.

4.   Expense Offset Arrangement

The Funds have entered into an arrangement with their custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Funds’ custodian expenses. During the period ended October 31, 2018, the custodian fees were reduced as noted in the Statements of Operations.

5.   Income Taxes

For tax purposes, the Funds may elect to defer any portion of late-year ordinary to the first day of the following fiscal year. At April 30, 2018, the deferred were as follows:

	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund
Late-year ordinary losses		$4,273,095		$243,544		$2,644,651

At October 31, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

	Franklin Growth Opportunities Fund			Franklin Select U.S. Equity Fund			Franklin Small Cap Growth Fund			Franklin Small-Mid Cap Growth Fund
Cost of investments		$2,125,578,971		$	88,642,192		$	2,069,861,309		$	2,584,951,950
Unrealized appreciation		$1,738,537,434		$	11,929,729		$	677,751,268		$	943,208,033
Unrealized depreciation		(72,749,769	)		(4,781,851	)		(180,603,259	)		(74,745,150)
Net unrealized appreciation (depreciation)		$1,665,787,665		$	7,147,878		$	497,148,009		$	868,462,883

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

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6.   Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended October 31, 2018, were as follows:

	Franklin Growth Opportunities Fund		Franklin Select U.S. Equity Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Purchases		$638,306,087		$   162,763		$667,250,726		$   988,094,105
Sales		$769,255,422		$3,756,136		$771,148,434		$1,052,870,261

At October 31, 2018, in connection with securities lending transactions, certain or all Funds loaned investments and received cash collateral as follows:

	Franklin Growth Opportunities Fund		Franklin Small Cap Growth Fund		Franklin Small-Mid Cap Growth Fund
Securities lending transactionsa:
Equity investmentsb		$2,175,000		$67,585,075		$9,970,826

^aThe agreements can be terminated at any time.

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

7.   Restricted Securities

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

At October 31, 2018, investments in restricted securities, excluding securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:

Shares		Issuer	Acquisition Date		Cost		Value
	Franklin Growth Opportunities Fund
	2,610,594	ClearMotion Inc., pfd., C		11/06/17	$	5,500,000	$	6,150,418
	418,321	LegalZoom.com Inc.		7/20/18		17,536,016		17,536,016
	509,182	Optoro Inc., pfd., E		7/24/18		10,020,702		10,020,702
	2,362,202	Proterra Inc., pfd., 5, 144A		9/21/16 - 1/13/17		11,896,616		18,559,431
	596,775	Proterra Inc., pfd., 6, 144A		6/07/17		3,306,052		4,688,763
	780,667	Proterra Inc., pfd., 7		5/21/18 - 9/18/18		5,094,960		6,133,572
	805,800	Tanium Inc., pfd., G		9/14/15		4,000,233		6,373,855
		Total Restricted Securities (Value is 1.8% of Net Assets)			$	57,354,579	$	69,462,757
	Franklin Small Cap Growth Fund
	9,905,685	DraftKings Inc.		8/07/15 - 3/02/17	$	26,627,302	$	22,601,167
	357,820	LegalZoom.com Inc.		7/20/18		14,999,814		14,999,814
	508,130	Optoro Inc., pfd., E		7/24/18		9,999,999		9,999,999
	1,038,769	Peloton Interactive Inc., pfd., F		8/08/18		15,000,011		15,000,011
	1,787,047	Proterra Inc., pfd., 5, 144A		9/21/16 - 1/13/17		8,999,998		14,040,534
	1,310,834	Proterra Inc., pfd., 6, 144A		6/07/17 - 1/02/18		7,261,842		10,299,006
	536,367	Proterra Inc., pfd., 7		5/21/18		3,500,556		4,214,147
	1,542,673	Smule Inc., pfd., G, 144A		5/31/16		11,099,995		13,412,075
	352,675	Smule Inc., pfd., H, 144A		4/27/17		2,999,995		3,245,645
	3,611,111	Tula Technology Inc., E		9/08/17		6,500,000		6,662,886
		Total Restricted Securities (Value is 4.6% of Net Assets)			$	106,989,512	$	114,475,284

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Shares	Issuer	Acquisition Date		Cost		Value
Franklin Small-Mid Cap Growth Fund
7,974,537	DraftKings Inc.		8/07/15 - 3/02/17		$21,380,303		$18,194,991
1,416,913	Proterra Inc., pfd., 5, 144A		9/21/16		7,135,914		11,132,452
	Total Restricted Securities (Value is 0.9% of Net Assets)				$28,516,217		$29,327,443

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 period ended October 31, 2018, investments in “affiliated companies” were as follows:

Name of Issuer	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions			Number of Shares Held at End of Period		Value at End of Period		Dividend Income		Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)
Franklin Growth Opportunities Fund
Non-Controlled Affiliates
Optoro Inc., pfd., E (Value is 0.3% of Net Assets)		—		509,182		—			509,182	$	10,020,702		$  —	$	—			$             —
Franklin Small Cap Growth Fund
Non-Controlled Affiliates
Aratana Therapeutics Inc.		2,697,019		—		(230,100	)		2,466,919	$	14,653,499		$  —	$	(3,550,800	)		$ 5,556,274
The KeyW Holding Corp.		3,430,282		—		—			3,430,282		26,859,108		—		—			308,725
Optoro Inc., pfd., E		—		508,130		—			508,130		9,999,999		—		—			—
Pfenex Inc.		1,175,631		611,700		—			1,787,331		7,095,704		—		—			(2,763,804	)
Sportsman’s Warehouse Holdings Inc.		4,162,000		—		(573,800	)		3,588,200		18,048,646		—		(3,010,961	)		3,556,688
Total Affiliated Securities (Value is 3.1% of Net Assets)										$	76,656,956		$  —	$	(6,561,761	)		$  6,657,883

9. Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. 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 October 31, 2018, the Funds did not use the Global Credit Facility.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

10. Fair Value Measurements

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

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)

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

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 October 31, 2018 , in valuing the Funds’ assets carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Franklin Growth Opportunities Fund
Assets:
Investments in Securities:a
Equity Investments:b
Communication Services	$	329,984,706	$	—	$	6,373,855	$	336,358,561
Consumer Discretionary		350,597,598		—		35,532,184		386,129,782
Industrials		410,992,558		—		10,020,702		421,013,260
Information Technology		1,410,980,303		—		17,536,016		1,428,516,319
All Other Equity Investments		1,140,145,911		—		—		1,140,145,911
Short Term Investments		79,202,803		—		—		79,202,803
Total Investments in Securities	$	3,721,903,879	$	—	$	69,462,757	$	3,791,366,636
Franklin Select U.S. Equity Fund
Assets:
Investments in Securities:a
Equity Investments	$	91,127,813	$	—	$	—	$	91,127,813
Short Term Investments		4,662,257		—		—		4,662,257
Total Investments in Securities	$	95,790,070	$	—	$	—	$	95,790,070
Franklin Small Cap Growth Fund
Assets:
Investments in Securities:a
Equity Investments:b
Consumer Discretionary	$	314,212,900	$	—	$	57,817,740	$	372,030,640
Financials		207,954,482		—		15,000,011		222,954,493
Industrials		447,639,150		—		9,999,999		457,639,149
Information Technology		623,926,122		—		31,657,534		655,583,656
All Other Equity Investments		779,844,669		—		—		779,844,669
Short Term Investments		78,956,711		—		—		78,956,711
Total Investments in Securities	$	2,452,534,034	$	—	$	114,475,284	$	2,567,009,318

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

	Level  1		Level 2		Level  3		Total
Franklin Small-Mid Cap Growth Fund
Assets:
Investments in Securities:a
Equity Investments:b
Consumer Discretionary		$      510,444,938	$	—		$     29,327,443		$      539,772,381
All Other Equity Investments.		2,775,531,573		—		—		2,775,531,573
Short Term Investments		138,110,879		—		—		138,110,879
Total Investments in Securities		$  3,424,087,390	$	—		$     29,327,443		$   3,453,414,833

^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 beginning and/or end of the period. At October 31, 2018, the reconciliation of assets are as follows:

	Balance at Beginning of Period		Purchases		Sales		Transfer Into (Out of) Level 3		Cost Basis Adjustments		Net Realized Gain (Loss)		Net Unrealized Appreciation (Depreciation)			Balance at End of Period		Net Change in Unrealized Appreciation (Depreciation) on Assets Held at Period End
Franklin Growth Opportunities Fund
Assets:
Investments in Securities:
Equity Investmentsa:
Communication Services	$	5,074,222	$	—	$	—		$  —		$  —		$  —		$  1,299,633		$	6,373,855		$  1,299,633
Consumer Discretionary		23,116,412		5,094,960		—		—		—		—		7,320,812			35,532,184		7,320,812
Industrials		—		10,020,702		—		—		—		—		—			10,020,702		—
Information Technology		—		17,536,016		—		—		—		—		—			17,536,016		—
Total Investments in Securities	$	28,190,634	$	32,651,678	$	—		$  —		$  —		$  —		$  8,620,445		$	69,462,757		$  8,620,445
Franklin Small Cap Growth Fund
Assets:
Investments in Securities:
Equity Investmentsa:
Consumer Discretionary	$	40,098,007	$	3,500,556	$	—		$  —		$  —		$  —		$14,219,177		$	57,817,740		$14,219,177
Financials		—		15,000,011		—		—		—		—		—			15,000,011		—
Industrials		—		9,999,999		—		—		—		—		—			9,999,999		—
Information Technology		16,778,723		14,999,814		—		—		—		—		(121,003	)		31,657,534		(121,003	)
Total Investments in Securities	$	56,876,730	$	43,500,380	$	—		$  —		$  —		$  —		$14,098,174		$	114,475,284		$14,098,174

^aIncludes common and preferred stocks.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

10. Fair Value Measurements (continued)

Significant unobservable valuation inputs for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of October 31, 2018, are as follows:

Description	Fair Value at End of Period		Valuation Technique		Unobservable Inputs	Amount/ Range			Impact to Fair Value if Input Increasesa
Franklin Growth Opportunities Fund
Assets:
Investments in Securities:
Equity Investments:b
Consumer Discretionary	$	35,532,184		Discounted cash flow	Forward EBITDA growth rate		4.0	%		Increase	c
					Free cash flow growth rate		2.0	%		Increase
					Discount rate		10.3	% - 12.9%		Decrease	d
					Discount for lack of marketability		5.6% - 25.0	%		Decrease	c
Communication Services		6,373,855		Discounted cash flow	NOPAT multiple		30.6	x		Increase	c
					Discount rate		10.4	%		Decrease	c
					Discount for lack of marketability		18.7	%		Decrease	c
All Other Investmentse		27,556,718
Total	$	69,462,757

Franklin Small Cap Growth Fund
Assets:
Investments in Securities:
Equity Investments:b
Consumer Discretionary	$57,817,740	Discounted cash flow	Forward EBITDA growth rate	4.0	%	Increase	c
			Free cash flow	$2.8	(bil)	Increase	d
			Discount rate	10.3	% - 17.9%	Decrease	d
			Discount for lack of marketability	5.6	% - 11.6%	Decrease	c
		Market Comparables	EV / EBITDA multiple	22.2x - 24.2	x	Increase	c
			EV / revenue multiple	12.3	x	Increase	c
			Volatility	45.8	%	Increase
			Discount for lack of	23.7	%	Decrease	c
			marketability
Information Technology	16,657,720	Market Comparables	EV / revenue multiple	4.8	x	Increase	c
			Discount for lack of marketability	13.9	%	Decrease	c
			Volatility	49.9	%	Increase
All Other Investmentse	39,999,824
Total	$114,475,284

^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 but not net assets.

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

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

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

11. New Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in the ASU modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

12. Subsequent Events

The Funds have evaluated subsequent events through the issuance of the financial statements and determined that no events have occurred that require disclosure, other than those already disclosed in the financial statements.

Abbreviations

Selected Portfolio

ADR     American Depositary Receipt

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Shareholder Information

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.

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    Semiannual Report and Shareholder Letter Franklin Strategic Series   Investment Manager Franklin Advisers, Inc.   Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN^® / 342-5236 franklintempleton.com   Shareholder Services (800) 632-2301

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

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

© 2018 Franklin Templeton Investments. All rights reserved. FSS1 S 12/18

Semiannual Report and Shareholder Letter           October 31, 2018

Franklin Biotechnology Discovery Fund

Franklin Natural Resources Fund

Sign up for electronic delivery at franklintempleton.com/edelivery

Franklin Templeton Investments

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

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

Dear Shareholder:

The six months ended October 31, 2018, benefited from mostly upbeat economic data as the U.S. job market continued to improve and the unemployment rate declined. During the second and third quarters, U.S. corporate profits rose, supported by healthy economic growth and tax cuts.

In September 2018, the Standard & Poor’s 500^® Index (S&P 500^®) reached an all-time high, but experienced heightened volatility near period-end due to investor concerns about U.S. Federal Reserve interest-rate policies, higher U.S. Treasury yields, trade tensions, a potentially slower economy and some weaker-than-expected fourth-quarter 2018 revenue guidance. Within this environment, U.S. stocks, as measured by the S&P 500, generated a modest positive total return for the six-month period.

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

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

In addition, Franklin Strategic Series’ semiannual 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,

Edward B. Jamieson

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

This letter reflects our analysis and opinions as of October 31, 2018, 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.

Not FDIC Insured |  May Lose Value |   No Bank Guarantee

franklintempleton.com Not part of the semiannual report             1

Contents

Economic and Market Overview	3
Franklin Biotechnology Discovery Fund	4
Franklin Natural Resources Fund	9
Financial Highlights and Statements of Investments	16
Financial Statements	30
Notes to Financial Statements	34
Shareholder Information	46

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

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Semiannual Report

Economic and Market Overview

The U.S. economy grew during the six months under review. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The manufacturing and services sectors expanded during the period. The unemployment rate declined from 3.9% in April 2018, as reported at the beginning of the six-month period, to a nearly 49-year low of 3.7% at period-end.¹ Annual inflation, as measured by the Consumer Price Index, was 2.5% in April 2018, as reported at the beginning of the period, and while it varied during the six months under review, it ended the period at 2.5%.¹

The U.S. Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% at its June 2018 meeting and continued to reduce its balance sheet as part of its ongoing plan to normalize monetary policy. In his congressional testimony in July 2018 and at the Fed symposium in August, Fed Chair Jerome Powell reiterated the Fed’s intention to gradually raise interest rates. At its September 2018 meeting, the Fed raised its target range for the federal funds rate 0.25% to 2.00%–2.25%, as widely expected. Furthermore, the Fed raised its forecast for U.S. economic growth in 2018 and 2019 and projected one more rate increase in 2018. Minutes from the Fed’s September meeting (released in October) indicated that a few officials expected monetary policy to become modestly restrictive of economic growth, while some officials seemed to favor increasing the federal funds rate temporarily above what they consider to be its longer-term level to reduce the risk of overshooting the Fed’s inflation objective. In contrast, some officials indicated they would not favor a restrictive policy unless they see clear signs of an overheating economy and rising inflation.

U.S. equity markets rose overall during the period, benefiting from mostly upbeat economic data and better U.S. corporate earnings. However, markets were pressured at certain times during the period by fears of tighter regulation of information technology and technology-related companies, as well as concerns that strong economic growth and rising inflation would lead the Fed to increase its target rate faster than expected. Other factors that curbed investor sentiment were tensions between the U.S. and North Korea earlier in the

period, political uncertainties in the U.S., the Trump administration’s protectionist policies, and the potential impact of escalating U.S.-China trade tensions on global growth and corporate earnings. Partially offsetting these concerns were an overall easing of tensions in the Korean peninsula in the latter part of the period, intermittent U.S.-China trade negotiations, an agreement between the U.S. and the European Union to try to reduce trade barriers, and a trade deal between the U.S., Mexico and Canada. After reaching a new all-time high in September 2018, the broad U.S. stock market, as measured by the Standard & Poor’s 500 Index (S&P 500), experienced heightened volatility in October amid investor concerns about the Fed’s interest-rate path, rising U.S. Treasury yields, trade, a potentially moderating economy and several big companies’ weaker-than-expected fourth-quarter 2018 revenue guidance. In this environment, the S&P 500 generated a +3.40% total return for the six-month period.²

The foregoing information reflects our analysis and opinions as of October 31, 2018. 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: U.S. 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 semiannual report for Franklin Biotechnology Discovery Fund covers the period ended October 31, 2018.

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 had a -4.86% cumulative total return for the six months under review. In comparison, the NASDAQ Biotechnology Index^®, which tracks U.S. and international-based biotechnology stocks, posted a +0.88% total return.¹ Also in comparison, the Standard & Poor’s 500 Index, which is a broad measure of the U.S. stock market, posted a +3.40% total return.¹ You can find the Fund’s long-term performance data in the Performance Summary beginning on page 6.

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

Investment Strategy

We are research-driven, fundamental investors, pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between earnings growth, business and financial risk, and valuation. We rely on a team of analysts to help provide in-depth industry expertise and use both qualitative and quantitative analysis to evaluate companies for distinct and sustainable competitive advantages likely to lead to growth in earnings and/or share price. Competitive advantages, such as a particular product niche, proven technology, sound financial position and strong management, are all factors we believe may contribute to strong growth potential.

Portfolio Composition

Based on Total Net Assets as of 10/31/18

*Includes escrows and litigation trusts securities.

Manager’s Discussion

During the six months under review, the biotech industry experienced significant volatility, particularly during the last month of the period. Please keep in mind that volatility is not uncommon in the biotechnology industry, and we seek to take advantage of short-term volatility by initiating positions or adding to existing holdings in companies we believe are undervalued.

Key detractors from the Fund’s absolute performance during the period included Celgene, Clovis Oncology (not held at period-end) and Nektar Therapeutics. Biopharmaceutical company Celgene detracted from results despite positive earnings reports for the second and third quarters of 2018. The pending loss of patent protection for Revlimid, the company’s most profitable drug, continued to weigh on investor sentiment, as did drug trial and approval setbacks that occurred prior to the period. Shares of pharmaceutical company Clovis Oncology declined despite a study suggesting Rubraca, currently used for treating ovarian cancer, may also be effective for treating prostate cancer. Investor sentiment was hampered by concerns the study could end up benefiting competitor AstraZenceca (not a Fund holding), as doctors may choose that company’s drug Lynparza, which is in the same class as Rubraca, to treat prostate cancer. Pharmaceutical company Nektar Therapeutics also detracted from results. The company was hurt by the release of positive drug study data from competitor Roche as

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.

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 20.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

well as investor skepticism about a Nektar drug currently in the development stage.

In contrast, key contributors to the Fund’s absolute performance included Illumina, Array BioPharma and Neurocrine Biosciences. Illumina develops, manufactures and markets integrated systems for the analysis of genetic variation and function. The company benefited from strong second- and third-quarter earnings, with revenue and a raise in guidance coming in above expectations. Results were helped by high customer utilization rates of the company’s genome sequencing system NovaSeq. Array BioPharma is focused on the development and sale of cancer-treatment drugs. Third-quarter earnings greatly benefited from the U.S. debut of Braftovi-Mektovi, a two-drug treatment for skin cancer, which saw sales well above market expectations. The company also has a colon cancer drug in the trial phase that could prove to be profitable. Biopharmaceutical company Neurocrine Biosciences contributed to results due to second-quarter revenues beating investor expectations. Strong earnings were driven by increased sales of Ingrezza, a drug used to treat a neurological disorder.

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   Wendy Lam, Ph.D.   Steven Kornfeld, CFA   Portfolio Management Team

Top 10 Holdings

10/31/18

Company Sector/Industry	% of Total Net Assets
Alexion Pharmaceuticals Inc. Biotechnology		7.4%
Celgene Corp. Biotechnology		6.5%
Biogen Inc. Biotechnology		6.2%
Vertex Pharmaceuticals Inc. Biotechnology		5.6%
Illumina Inc. Life Sciences Tools & Services		5.2%
Regeneron Pharmaceuticals Inc. Biotechnology		4.1%
Array BioPharma Inc. Biotechnology		3.7%
Amgen Inc. Biotechnology		3.7%
Gilead Sciences Inc. Biotechnology		3.6%
Heron Therapeutics Inc. Biotechnology		3.1%

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

Performance Summary as of October 31, 2018

The performance table does 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 10/31/18¹

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

Share Class	Cumulative   Total Return2	Average Annual   Total Return3
A4
6-Month	-4.86%	-10.10%
1-Year	-5.30%	-10.51%
5-Year	+41.84%	+6.03%
10-Year	+293.41%	+14.03%
Advisor5
6-Month	-4.73%	-4.73%
1-Year	-5.07%	-5.07%
5-Year	+43.65%	+7.51%
10-Year	+303.27%	+14.96%

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

See page 7 for Performance Summary footnotes.

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FRANKLIN BIOTECHNOLOGY DISCOVERY FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁶

Share Class	With Waiver			Without Waiver
A		1.02	%		1.04%
Advisor		0.77	%		0.79%

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

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

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

2.  Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

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

5. 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 +274.83% and +15.51%.

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.

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FRANKLIN BIOTECHNOLOGY DISCOVERY 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 5/1/18	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Net Annualized Expense Ratio2
A	$1,000	$951.40	$4.92	$1,020.16	$5.09	1.00%
C	$1,000	$947.80	$8.59	$1,016.38	$8.89	1.75%
R6	$1,000	$953.20	$3.10	$1,022.03	$3.21	0.63%
Advisor	$1,000	$952.70	$3.69	$1,021.42	$3.82	0.75%

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 184/365 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 Natural Resources Fund

This semiannual report for Franklin Natural Resources Fund covers the period ended October 31, 2018.

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 had a -13.30% cumulative total return for the six 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, had a -10.41% total return.¹ Also in comparison, the Standard & Poor’s 500 Index, which is a broad measure of the U.S. stock market, posted a +3.40% total return.¹ Please note index performance information is provided for reference and we do not attempt to track any index but rather undertake investments on the basis of fundamental research. The Fund’s strategy, which focuses on companies with higher long-term growth potential, differs from the natural resources index’s large weighting in income-oriented companies that we believe typically provide more limited opportunities for growth. This difference may occasionally lead to wide performance discrepancies, especially in periods when investors focus on short-term safety and yield or, conversely, when investors focus more heavily on companies with stronger growth prospects and greater commodity price leverage. You can find the Fund’s long-term performance data in the Performance Summary beginning on page 13.

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

Geographic Composition

Based on Total Net Assets as of 10/31/18

Investment Strategy

We are research-driven, fundamental investors, pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between potential earnings growth, business and financial risk, and valuation. We rely on a team of analysts to help provide in-depth industry expertise and use both qualitative and quantitative analysis to evaluate companies for distinct and sustainable competitive advantages likely to lead to growth in earnings and/or share price. Competitive advantages, such as a particular product niche, proven technology, sound financial position and strong management, are all factors we believe may contribute to strong growth potential.

Sector Overview

Global commodity prices experienced heightened volatility during the six-month period driven, by multiple crosscurrents that also impacted commodity-linked equity values. Although natural gas and certain metals rose, several commodities, such as oil and silver, declined. Commodities were up early in the period until late May, when investors became concerned about the potential for a U.S. trade war with China and other trading partners. In June, lukewarm economic data from Asia, Latin America and Europe also pressured commodity prices. At the same time, a stronger U.S. dollar made commodities more

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 27.

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FRANKLIN NATURAL RESOURCES FUND

expensive for buyers using other currencies. Through the summer months, despite the agreement by the U.S., Mexico and Canada on the new North American Free Trade Agreement, continued trade conflicts, particularly between the U.S. and China, contributed to investor fears about potentially slower global economic growth that could hinder commodity demand and affect consumer and business sentiment.

Crude oil prices declined for the period amid mixed global supply and demand trends. After increasing to a multi-year high early in the period due to concerns about vulnerable global supply, crude oil prices declined in mid-July due to concerns that tense trade negotiations between the U.S. and China may hurt economic growth and dampen global energy demand. Oil prices recovered from late August through early October amid renewed U.S. sanctions against Iran, plummeting oil output from Venezuela, political turmoil in Libya, declines in U.S. oil stockpiles and healthy global demand growth, especially in emerging markets. After reaching a new multi-year high in early October, oil prices swiftly declined in response to rising U.S. oil supplies, fears of slowing global demand growth and potential increases in output by Russia and Saudi Arabia, resulting in an overall decline in oil prices for the period.

Strong demand for U.S. natural gas led to higher prices despite record production. An extended winter season increased natural gas demand through the beginning of the period, setting the stage for decreased inventories. Overseas demand for liquefied natural gas increased exports, also helping to absorb supply. Gas prices decreased in July along with most commodities due to trade concerns, but prices rebounded after ongoing summer heat waves increased demand. The increased summer demand resulted in lower-than-expected inventories ahead of the high-demand heating season that starts in November. These factors led to price increases for the remainder of the period, including a large increase in October and for the period overall.

Gold prices declined for the period amid U.S. dollar strength and rising U.S. interest rates that drove many investors toward income-producing asset classes. Silver and platinum prices decreased for similar reasons, while palladium prices rose amid tight global supplies and stronger demand for the metal due to its emissions-control use in gasoline vehicles. Among industrial metals, iron ore prices increased, while prices of copper and other metals declined in response to expectations about trade tensions and the weakening outlook for China, the world’s largest consumer of base metals, as its factory activity slowed.

Manager’s Discussion

The reporting period followed relatively strong performance from late 2017, which we believe made the Fund’s holdings

Portfolio Composition

Based on Total Net Assets as of 10/31/18

*Includes convertible preferred stock.

more susceptible to the downdraft that followed. Since the late spring of 2018, investors became increasingly concerned with trade and tariff implementation and the potential for slowing economic growth. In particular, these concerns negatively impacted the mining industry (where the index has almost no exposure) and cyclical sectors, such as chemicals (again, little to no index exposure), while sectors viewed as more stable with heavier weights in the index, such as oil and gas storage and transportation and metal and glass containers, outperformed. Although the entire period was fairly volatile, October was particularly weak as oil prices plummeted. This period also spanned the third-quarter earnings season, which was particularly volatile, mostly to the downside.

Oil and gas exploration and production was the biggest detractor from the Fund’s performance relative to the S&P North American Natural Resources Sector Index due to a decline in oil prices that impacted the industry in early October. Top detractors included an underweighting in diversified producer ConocoPhillips, which appreciated in a down market as investors flocked to large producers perceived as having

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FRANKLIN NATURAL RESOURCES FUND

Top 10 Holdings

10/31/18

Company Sector/Industry	% of Total Net Assets
Schlumberger Ltd. Oil & Gas Equipment & Services	3.9%
Cabot Oil & Gas Corp. Oil & Gas Exploration & Production	3.7%
Exxon Mobil Corp. Integrated Oil & Gas	3.6%
Chevron Corp. Integrated Oil & Gas	3.3%
Royal Dutch Shell PLC Integrated Oil & Gas	2.8%
Diamondback Energy Inc. Oil & Gas Exploration & Production	2.8%
BHP Billiton PLC Diversified Metals & Mining	2.7%
Concho Resources Inc. Oil & Gas Exploration & Production	2.7%
TechnipFMC PLC Oil & Gas Equipment & Services	2.6%
Occidental Petroleum Corp. Integrated Oil & Gas	2.5%

lower risk, and an overweighting in natural gas producer EQT, which suffered from missed production targets and lowered guidance. However, the industry held one of the biggest single contributors in natural gas producer Cabot Oil & Gas.

Oil and gas equipment and services hurt relative results due to the Fund’s overweighting in the sector. OFS (oilfield services) is one of the most leveraged industries to oil prices since activity is tied to producer spending, which is tied to producer cash flow, and therefore commodity prices. The industry had been struggling for most of the period due to sector overcapacity and limited signs of spending increases outside the U.S., but fell further in October because of lower oil prices. Weakness was broad-based with no particular themes, though onshore OFS stocks were weak as a result of slowing activity in the Permian Basin of Texas due to pipeline constraints and weak local oil prices. Top detractors included Oil States, Superior Energy Services and Halliburton.

Most metals prices declined before mining equities as the commodities responded to potential economic slowing, particularly in China. As indicators increasingly pointed to slowing growth, the equities followed with significant declines for small-mid capitalization miners while large, diversified

companies held up much better. For example, copper producers Antofagasta and First Quantum Minerals declined and hurt the Fund’s relative performance.² Although select off-benchmark holdings in diversified metals and mining producers detracted from absolute returns, their more modest declines compared with the benchmark contributed to relative returns.

During this tough period, Fund gains were as much from a lack of exposure as from investments. The Fund also benefited from its cash holdings.

Stock selection in oil and gas drilling, particularly in Pioneer Energy Services,² was the biggest contributor to the Fund’s relative performance. Underweightings in paper and packaging and aluminum, both of which investors perceived as being tied to the economy, also contributed to relative performance. Off-benchmark allocations in specialty chemicals (particularly in Albemarle) and fertilizers and agricultural chemicals benefited relative results as investors believed these industries were less sensitive to economic trends and tariffs.

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

2. Not part of the index.

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

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FRANKLIN NATURAL RESOURCES FUND

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, 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 NATURAL RESOURCES FUND

Performance Summary as of October 31, 2018

The performance table does 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 10/31/18¹

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

Share Class	Cumulative   Total Return2	Average Annual   Total Return3
A4
6-Month	-13.30%	-18.08%
1-Year	-1.87%	-7.28%
5-Year	-31.16%	-8.24%
10-Year	+21.38%	+1.38%
Advisor
6-Month	-13.19%	-13.19%
1-Year	-1.58%	-1.58%
5-Year	-30.21%	-6.94%
10-Year	+24.85%	+2.24%

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

See page 14 for Performance Summary footnotes.

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FRANKLIN NATURAL RESOURCES FUND

PERFORMANCE SUMMARY

Total Annual Operating Expenses⁵

Share Class	With Waiver	Without Waiver
A	1.06%	1.06%
Advisor	0.81%	0.81%

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

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

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized

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

5. 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.

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FRANKLIN NATURAL RESOURCES 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		Hypothetical
		(actual return after expenses)		(5% annual return before expenses)
Share Class	Beginning Account Value 5/1/18	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Net Annualized Expense Ratio2
A	$1,000	$867.00	$4.75	$1,020.11	$5.14	1.01%
C	$1,000	$863.50	$8.27	$1,016.33	$8.94	1.76%
R6	$1,000	$868.70	$2.68	$1,022.33	$2.91	0.57%
Advisor	$1,000	$868.10	$3.58	$1,021.37	$3.87	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 184/365 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 STRATEGIC SERIES

Financial Highlights

Franklin Biotechnology Discovery Fund

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$146.14			$147.22			$128.19			$182.30			$129.27			$105.95
Income from investment operationsa:
Net investment income (loss)b		(0.53	)		(0.80	)		(0.79	)		(0.94	)		(1.09	)		(1.07	)
Net realized and unrealized gains (losses)		(6.57	)		3.32			25.75			(39.39	)		60.79			33.18
Total from investment operations		(7.10	)		2.52			24.96			(40.33	)		59.70			32.11
Less distributions from:
Net investment income		—			—			(1.73	)		—			—			—
Net realized gains		—			(3.60	)		(4.20	)		(13.78	)		(6.67	)		(8.79	)
Total distributions		—			(3.60	)		(5.93	)		(13.78	)		(6.67	)		(8.79	)
Net asset value, end of period		$139.04			$146.14			$147.22			$128.19			$182.30			$129.27
Total returnc		(4.86)%			1.69%			20.02%			(23.55)%			46.81%			30.60%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.02%			1.05%			1.04%			0.99%			1.00%			1.10%
Expenses net of waiver and payments by affiliatese		1.00%			1.03%			1.02%			0.98%			1.00%	f		1.10%	f
Net investment income (loss)		(0.67)%			(0.53)%			(0.58)%			(0.56)%			(0.67)%			(0.82)%
Supplemental data
Net assets, end of period (000’s)		$969,243			$1,081,883			$1,176,687			$1,074,903			$1,601,906			$1,141,890
Portfolio turnover rate		13.48%			26.95%			34.12%			22.13%			41.43%			48.70%

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

^bBased on average daily shares outstanding.

^cTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Biotechnology Discovery Fund (continued)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014a
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$141.75			$143.98			$125.99			$180.67			$129.11			$159.15
Income from investment operationsb:
Net investment income (loss)c		(1.08	)		(1.90	)		(1.81	)		(2.11	)		(2.38	)		(0.34	)
Net realized and unrealized gains (losses)		(6.32	)		3.27			25.29			(38.79	)		60.61			(29.70	)
Total from investment operations		(7.40)			1.37			23.48			(40.90	)		58.23			(30.04	)
Less distributions from:
Net investment income		—			—			(1.29	)		—			—			—
Net realized gains		—			(3.60	)		(4.20	)		(13.78	)		(6.67	)		—
Total distributions		—			(3.60	)		(5.49	)		(13.78	)		(6.67	)		—
Net asset value, end of period		$134.35			$141.75			$143.98			$125.99			$180.67			$129.11
Total returnd		(5.22)%			0.93%			19.14%			(24.09)%			45.76%			(18.88)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.77%			1.80%			1.79%			1.71%			1.75%			1.82%
Expenses net of waiver and payments by affiliatesf		1.75%			1.78%			1.77%			1.70%			1.75%	g		1.82%	g
Net investment income (loss)		(1.42)%			(1.28)%			(1.33)%			(1.28)%			(1.42)%			(1.52)%
Supplemental data
Net assets, end of period (000’s)		$49,921			$58,433			$53,935			$17,562			$23,051			$5,486
Portfolio turnover rate		13.48%			26.95%			34.12%			22.13%			41.43%			48.70%

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

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

^cBased on average daily shares outstanding.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, 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.  |  Semiannual Report       17

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Biotechnology Discovery Fund (continued)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$150.65			$151.03			$131.37			$185.75			$131.09			$104.56
Income from investment operationsb:
Net investment income (loss)c		(0.24	)		(0.17	)		(0.25	)		(0.32	)		(0.45	)		(0.49	)
Net realized and unrealized gains (losses)		(6.81	)		3.39			26.41			(40.28	)		61.78			35.81
Total from investment operations		(7.05	)		3.22			26.16			(40.60	)		61.33			35.32
Less distributions from:
Net investment income		—			—			(2.30	)		—			—			—
Net realized gains		—			(3.60	)		(4.20	)		(13.78	)		(6.67	)		(8.79	)
Total distributions		—			(3.60	)		(6.50	)		(13.78	)		(6.67	)		(8.79	)
Net asset value, end of period		$143.60			$150.65			$151.03			$131.37			$185.75			$131.09
Total returnd		(4.68)%			2.11%			20.50%			(23.24)%			47.40%			34.10%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.69%			0.65%			0.63%			0.60%			0.60%			0.63%
Expenses net of waiver and payments by affiliatesf		0.63%			0.61%			0.61%			0.59%			0.60%	g		0.63%	g
Net investment income (loss)		(0.30)%			(0.11)%			(0.17)%			(0.17)%			(0.27)%			(0.35)%
Supplemental data
Net assets, end of period (000’s)		$6,824			$8,307			$8,891			$5,568			$76,436			$50,846
Portfolio turnover rate		13.48%			26.95%			34.12%			22.13%			41.43%			48.70%

^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.

^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%.

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Biotechnology Discovery Fund (continued)

	Six Months Ended
	October 31, 2018						Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$149.54			$150.20			$130.67			$185.12			$130.86			$106.86
Income from investment operationsa:
Net investment income (loss)b		(0.34	)		(0.45	)		(0.46	)		(0.55	)		(0.70	)		(0.69	)
Net realized and unrealized gains (losses)		(6.74	)		3.39			26.27			(40.12	)		61.63			33.48
Total from investment operations		(7.08	)		2.94			25.81			(40.67	)		60.93			32.79
Less distributions from:
Net investment income		—			—			(2.08	)		—			—			—
Net realized gains		—			(3.60	)		(4.20	)		(13.78	)		(6.67	)		(8.79	)
Total distributions		—			(3.60	)		(6.28	)		(13.78	)		(6.67	)		(8.79	)
Net asset value, end of period		$142.46			$149.54			$150.20			$130.67			$185.12			$130.86
Total returnc		(4.73)%			1.94%			20.32%			(23.36)%			47.17%			31.02%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.77%			0.80%			0.79%			0.75%			0.75%			0.80%
Expenses net of waiver and payments by affiliatese		0.75%			0.78%			0.77%			0.74%			0.75%	f		0.80%f
Net investment income (loss)		(0.42)%			(0.28)%			(0.33)%			(0.32)%			(0.42)%			(0.52)%
Supplemental data
Net assets, end of period (000’s)		$172,130			$180,219			$159,894			$93,263			$167,035			$91,012
Portfolio turnover rate		13.48%			26.95%			34.12%			22.13%			41.43%			48.70%

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

^bBased on average daily shares outstanding.

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

^dRatios are annualized for periods less than one year.

^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.  |  Semiannual Report       19

FRANKLIN STRATEGIC SERIES

Statement of Investments, October 31, 2018 (unaudited)

Franklin Biotechnology Discovery Fund

	Country		Shares/ Warrants		Value
Common Stocks and Other Equity Interests 96.6%
Biotechnology 77.7%
aAcceleron Pharma Inc.		United States		166,700	$	8,463,359
aAimmune Therapeutics Inc.		United States		119,100		3,165,678
aAlexion Pharmaceuticals Inc.		United States		793,800		88,961,166
a,b,cAllogene Therapeutics Inc., 144A		United States		326,797		6,863,893
Amgen Inc.		United States		232,300		44,785,117
aAmicus Therapeutics Inc.		United States		890,000		9,950,200
aAnaptysBio Inc.		United States		111,900		8,361,168
a,bARCA biopharma Inc., wts., 6/16/22		United States		1,338,619		49,090
aArgenx SE, ADR		Netherlands		191,903		15,354,159
aArray BioPharma Inc.		United States		2,769,500		44,865,900
aAscendis Pharma AS, ADR		Denmark		180,300		11,591,487
aAudentes Therapeutics Inc.		United States		146,600		4,134,120
a,dAurinia Pharmaceuticals Inc.		Canada		749,600		4,077,824
aAvrobio Inc.		United States		33,900		1,019,034
aBiogen Inc.		United States		245,061		74,564,710
aBioMarin Pharmaceutical Inc.		United States		341,156		31,444,349
aBluebird Bio Inc.		United States		79,300		9,095,710
a,dCara Therapeutics Inc.		United States		159,600		2,990,904
aCelgene Corp.		United States		1,087,900		77,893,640
aChemoCentryx Inc.		United States		563,208		6,093,911
aConcert Pharmaceuticals Inc.		United States		207,400		3,094,408
aCRISPR Therapeutics AG		Switzerland		195,814		6,416,825
aCytomX Therapeutics Inc.		United States		125,100		1,783,926
a,bDelMar Pharmaceuticals Inc., wts., 4/12/22		Canada		291,578		3,500
aDynavax Technologies Corp.		United States		771,870		7,633,794
aExelixis Inc.		United States		656,600		9,107,042
aFate Therapeutics Inc.		United States		1,994,946		24,857,027
aG1 Therapeutics Inc.		United States		412,426		16,501,164
Gilead Sciences Inc.		United States		624,500		42,578,410
aGlobal Blood Therapeutics Inc.		United States		197,500		6,930,275
aGlycoMimetics Inc.		United States		776,900		9,773,402
aHeron Therapeutics Inc.		United States		1,328,677		36,884,074
aHomology Medicines Inc.		United States		138,400		2,604,688
aImmunomedics Inc.		United States		266,300		5,999,739
a,b,cIntarcia Therapeutics Inc., DD		United States		80,195		1,672,893
aIntercept Pharmaceuticals Inc.		United States		47,700		4,579,677
aIovance Biotherapeutics Inc.		United States		2,187,900		19,866,132
aKaryopharm Therapeutics Inc.		United States		463,154		4,881,643
a,dKezar Life Sciences Inc.		United States		131,900		3,261,887
aLoxo Oncology Inc.		United States		76,500		11,678,490
aMacroGenics Inc.		United States		180,200		2,966,092
aMinerva Neurosciences Inc.		United States		492,400		5,401,628
aMolecular Templates Inc., wts., 2/12/20		United States		439,500		—
aNeurocrine Biosciences Inc.		United States		338,200		36,238,130
a,bNorthwest Biotherapeutics Inc., wts., 2/20/19		United States		223,880		—
aNovavax Inc.		United States		2,282,500		4,017,200
aPfenex Inc.		United States		870,884		3,457,409
aPortola Pharmaceuticals Inc.		United States		286,500		5,641,185
aPrincipia Biopharma Inc.		United States		92,600		2,129,800
aPTC Therapeutics Inc.		United States		365,600		14,082,912
aRegeneron Pharmaceuticals Inc.		United States		143,809		48,785,765
aREGENXBIO Inc.		United States		243,276		16,219,211

20       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Biotechnology Discovery Fund (continued)

	Country		Shares/ Warrants		Value
Common Stocks and Other Equity Interests (continued)
Biotechnology (continued)
aReplimune Group Inc.		United States		29,515	$	380,153
a,dRocket Pharmaceuticals Inc.		United States		88,300		1,398,672
aRubius Therapeutics Inc.		United States		174,200		2,862,106
aSage Therapeutics Inc.		United States		132,570		17,059,108
aSarepta Therapeutics Inc.		United States		120,300		16,091,328
aTG Therapeutics Inc.		United States		339,700		1,545,635
auniQure NV		Netherlands		84,700		2,179,331
aVertex Pharmaceuticals Inc.		United States		395,400		67,004,484
aXencor Inc.		United States		196,232		6,420,711
a,dZymeworks Inc.		Canada		267,520		3,416,230
						931,131,505
Health Care Providers & Services 0.1%
a,dGuardant Health Inc.		United States		22,000		736,560
Life Sciences Tools & Services 5.7%
aIllumina Inc.		United States		200,300		62,323,345
aMorphoSys AG, ADR		Germany		275,700		6,346,614
						68,669,959
Pharmaceuticals 13.1%
aAclaris Therapeutics Inc.		United States		995,662		11,838,421
aAratana Therapeutics Inc.		United States		1,158,300		6,880,302
aAssembly Biosciences Inc.		United States		78,600		1,798,368
aBioPharmX Corp.		United States		1,991,575		336,178
a,eBioPharmX Corp., 144A		United States		1,945,737		328,440
a,bBioPharmX Corp., wts., 3/29/21		United States		108,000		53
a,bBioPharmX Corp., wts., 11/22/23		United States		1,679,900		45,186
aCollegium Pharmaceutical Inc.		United States		403,450		6,475,373
aCymabay Therapeutics Inc.		United States		678,300		7,156,065
aDermira Inc.		United States		825,300		10,357,515
aFoamix Pharmaceuticals Ltd.		Israel		750,900		3,266,415
aIntra-Cellular Therapies Inc.		United States		216,100		3,669,378
aIterum Therapeutics PLC		United States		144,737		882,172
aJazz Pharmaceuticals PLC		United States		172,700		27,428,214
aLogicBio Therapeutics Inc.		United States		280,700		3,000,683
aMarinus Pharmaceuticals Inc.		United States		734,420		3,437,086
aNektar Therapeutics		United States		260,800		10,087,744
aNeos Therapeutics Inc.		United States		489,765		1,532,964
a,dNovan Inc.		United States		120,969		300,003
a,dOdonate Therapeutics Inc.		United States		404,482		5,864,989
a,dOptinose Inc.		United States		230,300		2,436,574
aReata Pharmaceuticals Inc.		United States		232,200		13,683,546
aRevance Therapeutics Inc.		United States		463,800		10,096,926
a,dTherapeuticsMD Inc.		United States		2,847,040		13,922,026
aZogenix Inc.		United States		275,215		11,492,978
						156,317,599
Total Common Stocks and Other Equity Interests   (Cost $718,716,761)						1,156,855,623

franklintempleton.com Semiannual Report       21

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Biotechnology Discovery Fund (continued)

	Country		Shares		Value
Preferred Stocks 0.5%
Biotechnology 0.5%
a,b,cMetacrine Inc.		United States		1,330,687	$	2,821,056
a,b,cPrecision BioSciences Inc., Series B		United States		750,193		3,758,467
						6,579,523
Escrows and Litigation Trusts (Cost $2,486,601) 0.1%
a,bTrue North Therapeutics Inc., Escrow Account		United States		759,880		1,212,087
Total Investments before Short Term Investments (Cost $727,782,885)						1,164,647,233
Short Term Investments 5.7%
Money Market Funds (Cost $41,249,953) 3.5%
f,gInstitutional Fiduciary Trust Money Market Portfolio, 1.83%		United States		41,249,953		41,249,953
hInvestments from Cash Collateral Received for Loaned Securities (Cost $26,778,635) 2.2%
Money Market Funds 2.2%
f,gInstitutional Fiduciary Trust Money Market Portfolio, 1.83%		United States		26,778,635		26,778,635
Total Investments (Cost $795,811,473) 102.9%						1,232,675,821
Other Assets, less Liabilities (2.9)%						(34,558,017	)
Net Assets 100.0%					$	1,198,117,804

See Abbreviations on page 45.

^aNon-income producing.

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

^cSee Note 8 regarding restricted securities.

^dA portion or all of the security is on loan at October 31, 2018. See Note 1(c).

^eSecurity 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 October 31, 2018, the aggregate value of these securities was $328,440, representing less than 0.1% of net assets.

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

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

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

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

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Natural Resources Fund

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$27.96			$25.11			$25.02			$31.46			$39.79			$33.03
Income from investment operationsa:
Net investment incomeb		0.13			0.39	c		0.20			0.29			0.23			0.19
Net realized and unrealized gains (losses)		(3.85	)		2.77			0.17			(6.55	)		(8.27	)		6.65
Total from investment operations		(3.72	)		3.16			0.37			(6.26	)		(8.04	)		6.84
Less distributions from net investment income		—			(0.31	)		(0.28	)		(0.18	)		(0.29	)		(0.08	)
Net asset value, end of period		$24.24			$27.96			$25.11			$25.02			$31.46			$39.79
Total returnd		(13.30)%			12.74%			1.37%			(19.80)%			(20.07)%			20.74%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.02%			1.13%			1.06%			1.14%			1.08%			1.07%
Expenses net of waiver and payments by affiliates		1.01%	f		1.13%	f,g		1.05%	f		1.13%			1.08%	f,g		1.07%	f,g
Net investment income		0.95%			1.56%	c		0.79%			1.22%			0.67%			0.53%
Supplemental data
Net assets, end of period (000’s)		$277,018			$344,695			$398,703			$461,596			$572,518			$624,250
Portfolio turnover rate		18.47%			29.98%			29.74%			35.77%			30.05%			21.03%

^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 $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.91%.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, 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.  |  Semiannual Report       23

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Natural Resources Fund (continued)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$27.17			$24.28			$24.25			$30.46			$38.39			$32.02
Income from investment operationsa:
Net investment income (loss)b		0.03			0.20	c		0.01			0.11			(0.01	)		(0.06	)
Net realized and unrealized gains (losses)		(3.74	)		2.69			0.15			(6.31	)		(7.91	)		6.43
Total from investment operations		(3.71	)		2.89			0.16			(6.20	)		(7.92	)		6.37
Less distributions from net investment income		—			—			(0.13	)		(0.01	)		(0.01	)		—
Net asset value, end of period		$23.46			$27.17			$24.28			$24.25			$30.46			$38.39
Total returnd		(13.65)%			11.90%			0.63%			(20.37)%			(20.63)%			19.89%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.77%			1.88%			1.81%			1.87%			1.78%			1.76%
Expenses net of waiver and payments by affiliates		1.76%	f		1.88%	f,g		1.80%	f		1.86%			1.78%	f,g		1.76%	f,g
Net investment income (loss)		0.20%			0.81%	c		0.04%			0.49%			(0.03)%			(0.16)%
Supplemental data
Net assets, end of period (000’s)		$56,462			$83,814			$96,835			$107,724			$123,735			$126,651
Portfolio turnover rate		18.47%			29.98%			29.74%			35.77%			30.05%			21.03%

^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 $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 0.16%.

^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%.

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

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Natural Resources Fund (continued)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$29.79			$26.87			$26.73			$33.62			$42.58			$38.28
Income from investment operationsb:
Net investment incomec		0.20			0.57	d		0.47			0.51			0.46			0.19
Net realized and unrealized gains (losses)		(4.11	)		2.95			0.04			(7.06	)		(8.92	)		4.31
Total from investment operations		(3.91	)		3.52			0.51			(6.55	)		(8.46	)		4.50
Less distributions from net investment income		—			(0.60	)		(0.37	)		(0.34	)		(0.50	)		(0.20	)
Net asset value, end of period		$25.88			$29.79			$26.87			$26.73			$33.62			$42.58
Total returne		(13.13)%			13.37%			1.89%			(19.31)%			(19.61)%			11.83%
Ratios to average net assetsf
Expenses before waiver and payments by affiliates		0.60%			0.64%			0.83%			0.60%			0.55%			0.55%
Expenses net of waiver and payments by affiliates		0.57%	g		0.57%	g		0.54%	g		0.55%			0.54%	g		0.53%	g
Net investment income		1.39%			2.12%	d		1.30%			1.80%			1.21%			1.07%
Supplemental data
Net assets, end of period (000’s)		$15,688			$15,866			$218			$15			$439			$939
Portfolio turnover rate		18.47%			29.98%			29.74%			35.77%			30.05%			21.03%

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

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

^cBased on average daily shares outstanding.

^dNet investment income per share includes approximately $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.47%.

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

^fRatios are annualized for periods less than one year.

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

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Semiannual Report       25

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Natural Resources Fund (continued)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016			2015			2014
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$29.80			$26.81			$26.71			$33.63			$42.52			$35.31
Income from investment operationsa:
Net investment incomeb		0.18			0.49	c		0.29			0.36			0.35			0.31
Net realized and unrealized gains (losses)		(4.11	)		2.95			0.17			(7.00	)		(8.85	)		7.10
Total from investment operations		(3.93	)		3.44			0.46			(6.64	)		(8.50	)		7.41
Less distributions from net investment income		—			(0.45	)		(0.36	)		(0.28	)		(0.39	)		(0.20	)
Net asset value, end of period		$25.87			$29.80			$26.81			$26.71			$33.63			$42.52
Total returnd		(13.19)%			13.04%			1.64%			(19.60)%			(19.81)%			21.07%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.77%			0.88%			0.81%			0.87%			0.78%			0.77%
Expenses net of waiver and payments by affiliates		0.76%	f		0.88%	f,g		0.80%	f		0.86%			0.78%	f,g		0.77%	f,g
Net investment income		1.20%			1.81%	c		1.04%			1.49%			0.97%			0.83%
Supplemental data
Net assets, end of period (000’s)		$66,563			$78,443			$94,070			$90,185			$79,307			$94,651
Portfolio turnover rate		18.47%			29.98%			29.74%			35.77%			30.05%			21.03%

^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 $0.16 per share related to income received in the form of special dividends in connection with certain Fund holdings. Excluding this amount, the ratio of net investment income to average net assets would have been 1.16%.

^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%.

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

FRANKLIN STRATEGIC SERIES

Statement of Investments, October 31, 2018 (unaudited)

Franklin Natural Resources Fund

	Country		Shares		Value
Common Stocks 98.4%
Aluminum 0.4%
aAlcoa Corp.		United States		42,500		$    1,487,075
Construction Materials 0.4%
aCemex SAB de CV, CPO, ADR		Mexico		367,000		1,849,680
Copper 4.9%
Antofagasta PLC		United Kingdom		614,300		6,157,656
First Quantum Minerals Ltd.		Zambia		321,900		3,213,742
Freeport-McMoRan Inc.		United States		416,400		4,851,060
aImperial Metals Corp.		Canada		364,500		365,566
Lundin Mining Corp.		Chile		665,200		2,734,287
Sandfire Resources NL		Australia		622,467		2,930,078
						20,252,389
Diversified Chemicals 1.2%
BASF SE		Germany		34,200		2,634,322
DowDuPont Inc.		United States		44,400		2,394,048
						5,028,370
Diversified Metals & Mining 9.3%
Anglo American PLC		United Kingdom		129,000		2,760,147
BHP Billiton PLC, ADR		United Kingdom		283,400		11,406,850
Glencore PLC		Switzerland		2,002,800		8,156,426
Hudbay Minerals Inc.		Canada		236,500		929,001
aNautilus Minerals Inc.		Canada		3,895,831		251,602
Nexa Resources SA		Peru		202,200		2,254,530
Rio Tinto PLC, ADR		Australia		99,000		4,879,710
South32 Ltd.		Australia		1,050,000		2,690,538
Teck Resources Ltd., B		Canada		252,400		5,217,108
						38,545,912
Fertilizers & Agricultural Chemicals 0.7%
Nutrien Ltd.		Canada		57,700		3,054,061
Gold 5.3%
Agnico Eagle Mines Ltd.		Canada		99,200		3,504,768
Alamos Gold Inc., A		Canada		741,400		2,963,009
aB2Gold Corp.		Canada		1,778,900		4,392,679
Barrick Gold Corp.		Canada		255,400		3,205,270
Goldcorp Inc.		Canada		240,000		2,164,800
aGuyana Goldfields Inc.		Canada		1,303,900		1,753,526
Newcrest Mining Ltd.		Australia		142,400		2,077,443
OceanaGold Corp.		Australia		402,310		1,158,496
Randgold Resources Ltd., ADR		United Kingdom		5,400		424,116
aTahoe Resources Inc.		Canada		229,382		542,019
						22,186,126
Integrated Oil & Gas 15.3%
Chevron Corp.		United States		124,000		13,844,600
Exxon Mobil Corp.		United States		189,900		15,131,232
Occidental Petroleum Corp.		United States		154,700		10,375,729
Petroleo Brasileiro SA, ADR		Brazil		63,900		1,038,375
Royal Dutch Shell PLC, A, ADR		United Kingdom		184,821		11,678,839
Suncor Energy Inc.		Canada		218,200		7,321,135
Total SA, B, ADR		France		75,510		4,424,886
						63,814,796

franklintempleton.com Semiannual Report       27

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Natural Resources Fund (continued)

	Country		Shares		Value
Common Stocks (continued)
Oil & Gas Drilling 2.6%
Patterson-UTI Energy Inc.		United States		384,000	$	6,389,760
aPioneer Energy Services Corp.		United States		806,746		2,396,036
aRowan Cos. PLC		United States		119,100		1,894,881
						10,680,677
Oil & Gas Equipment & Services 16.9%
Baker Hughes a GE Co., A		United States		226,600		6,047,954
aC&J Energy Services Inc.		United States		116,700		2,191,626
aDril-Quip Inc.		United States		44,300		1,885,408
Halliburton Co.		United States		295,435		10,245,686
Hunting PLC		United Kingdom		87,100		750,927
Liberty Oilfield Services Inc., A		United States		71,800		1,362,764
Mammoth Energy Services Inc.		United States		116,808		2,915,528
aNine Energy Service Inc.		United States		76,800		2,843,904
aOceaneering International Inc.		United States		127,400		2,412,956
aOil States International Inc.		United States		158,366		3,526,811
aRanger Energy Services Inc.		United States		170,831		1,110,401
RPC Inc.		United States		76,400		1,136,832
Schlumberger Ltd.		United States		315,347		16,180,455
aSelect Energy Services Inc.		United States		127,100		1,215,076
aSuperior Energy Services Inc.		United States		675,900		5,292,297
TechnipFMC PLC		United Kingdom		402,800		10,593,640
aWeatherford International PLC		United States		511,300		690,255
						70,402,520
Oil & Gas Exploration & Production 27.5%
Anadarko Petroleum Corp.		United States		102,600		5,458,320
Cabot Oil & Gas Corp., A		United States		627,800		15,211,594
aCairn Energy PLC		United Kingdom		1,490,200		3,759,132
aCallon Petroleum Co.		United States		752,800		7,505,416
Canadian Natural Resources Ltd.		Canada		210,800		5,785,128
aConcho Resources Inc.		United States		79,100		11,002,019
ConocoPhillips		United States		90,300		6,311,970
Diamondback Energy Inc.		United States		103,300		11,606,788
EOG Resources Inc.		United States		69,700		7,342,198
EQT Corp.		United States		221,300		7,517,561
Hess Corp.		United States		116,500		6,687,100
a,bJagged Peak Energy Inc.		United States		511,316		6,299,413
Noble Energy Inc.		United States		367,300		9,127,405
Pioneer Natural Resources Co.		United States		49,500		7,289,865
aRing Energy Inc.		United States		483,500		3,447,355
						114,351,264
Oil & Gas Refining & Marketing 3.3%
HollyFrontier Corp.		United States		31,500		2,124,360
Marathon Petroleum Corp.		United States		63,500		4,473,575
Phillips 66		United States		39,700		4,081,954
Valero Energy Corp.		United States		31,200		2,842,008
						13,521,897
Oil & Gas Storage & Transportation 8.1%
Enbridge Inc.		Canada		136,647		4,251,088
Kinder Morgan Inc.		United States		533,200		9,075,064
ONEOK Inc.		United States		70,400		4,618,240

28       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Natural Resources Fund (continued)

	Country	Shares		Value
Common Stocks (continued)
Oil & Gas Storage & Transportation (continued)
Targa Resources Corp.	United States		167,100		$    8,634,057
TransCanada Corp.	Canada		67,800		2,557,416
The Williams Cos. Inc.	United States		181,800		4,423,194
					33,559,059
Paper Packaging 0.5%
Packaging Corp. of America	United States		24,100		2,212,621
Pharmaceuticals 0.1%
aElanco Animal Health Inc.	United States		17,600		536,448
Specialty Chemicals 1.4%
Albemarle Corp.	United States		41,800		4,147,396
Umicore SA	Belgium		32,200		1,516,306
					5,663,702
Trading Companies & Distributors 0.5%
aUnivar Inc.	United States		82,900		2,040,998
Total Common Stocks (Cost $362,775,516)					409,187,595
Convertible Preferred Stocks 0.2%
Oil & Gas Exploration & Production 0.2%
Sanchez Energy Corp., 4.875%, cvt. pfd., A	United States		62,700		367,554
Sanchez Energy Corp., 6.50%, cvt. pfd., B	United States		39,800		261,120
Total Convertible Preferred Stocks (Cost $4,441,628)					628,674
Total Investments before Short Term Investments (Cost $367,217,144)					409,816,269
Short Term Investments 2.5%
Money Market Funds (Cost $6,802,640) 1.6%
c,dInstitutional Fiduciary Trust Money Market Portfolio, 1.83%	United States		6,802,640		6,802,640
eInvestments from Cash Collateral Received for Loaned Securities (Cost $3,692,500) 0.9%
Money Market Funds 0.9%
c,dInstitutional Fiduciary Trust Money Market Portfolio, 1.83%	United States		3,692,500		3,692,500
Total Investments (Cost $377,712,284) 101.1%					420,311,409
Other Assets, less Liabilities (1.1)%					(4,580,179	)
Net Assets 100.0%					$415,731,230

See Abbreviations on page 45.

^aNon-income producing.

^bA portion or all of the security is on loan at October 31, 2018. See Note 1(c).

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

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

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

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Semiannual Report       29

FRANKLIN STRATEGIC SERIES

Financial Statements

Statements of Assets and Liabilities

October 31, 2018 (unaudited)

	Franklin Biotechnology     Discovery Fund	Franklin Natural Resources Fund
Assets:
+Investments in securities:
Cost - Unaffiliated issuers	$   727,782,885	$ 367,217,144
Cost - Non-controlled affiliates (Note 3f)	68,028,588	10,495,140
Value - Unaffiliated issuers	$1,164,647,233	$ 409,816,269
Value - Non-controlled affiliates (Note 3f)	68,028,588	10,495,140
Cash	—	30,227
Receivables:
Investment securities sold **	2,189,562	1,598,298
Capital shares sold	631,137	116,386
Dividends and interest	63,042	396,960
Due from custodian	612,075	—
Other assets	426	159
Total assets	1,236,172,063	422,453,439
Liabilities:
Payables:
Investment securities purchased	7,617,115	1,821,717
Capital shares redeemed	1,604,088	611,751
Management fees	626,621	191,639
Distribution fees	268,468	120,441
Transfer agent fees	442,477	224,891
Payable upon return of securities loaned	27,390,710	3,692,500
Accrued expenses and other liabilities.	104,780	59,270
Total liabilities	38,054,259	6,722,209
Net assets, at value	$1,198,117,804	$ 415,731,230
Net assets consist of:
Paid-in capital	$   737,556,314	$ 518,859,148
Total distributable earnings (loss)	460,561,490	(103,127,918)
Net assets, at value	$1,198,117,804	$ 415,731,230

+Includes securities loaned	$    26,011,284	$     3,639,328
**Includes securities loaned	$           53,884	$                 —

30       Semiannual 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)

October 31, 2018 (unaudited)

	Franklin Biotechnology Discovery Fund		Franklin Natural     Resources Fund
Class A:
Net assets, at value		$969,243,020	$277,018,370
Shares outstanding		6,971,195	11,427,293
Net asset value per sharea		$139.04	$24.24
Maximum offering price per share (net asset value per share ÷ 94.50%)		$147.13	$25.65
Class C:
Net assets, at value		$  49,921,444	$  56,462,043
Shares outstanding		371,582	2,406,292
Net asset value and maximum offering price per sharea		$134.35	$23.46
Class R6:
Net assets, at value		$    6,823,691	$  15,687,583
Shares outstanding		47,519	606,090
Net asset value and maximum offering price per share		$143.60	$25.88
Advisor Class:
Net assets, at value		$172,129,649	$  66,563,234
Shares outstanding		1,208,299	2,573,431
Net asset value and maximum offering price per share		$142.46	$25.87

^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.  |  Semiannual Report       31

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Operations

for the six months ended October 31, 2018 (unaudited)

	Franklin Biotechnology Discovery Fund			Franklin Natural       Resources Fund
Investment income:
Dividends: (net of foreign taxes)*
Unaffiliated issuers		$  1,459,622			$  4,732,691
Non-controlled affiliates (Note 3f)		264,302			74,548
Income from securities loaned (net of fees and rebates)		554,107			86,807
Total investment income		2,278,031			4,894,046
Expenses:
Management fees (Note 3a)		4,084,690			1,250,737
Distribution fees: (Note 3c)
Class A		1,413,200			408,883
Class C		311,074			390,500
Transfer agent fees: (Note 3e)
Class A		852,149			351,373
Class C		46,921			84,295
Class R6		2,849			3,951
Advisor Class		148,034			83,291
Custodian fees (Note 4)		7,858			6,295
Reports to shareholders		76,843			54,661
Registration and filing fees		58,401			42,428
Professional fees		28,338			20,856
Trustees’ fees and expenses		8,512			3,159
Other		16,277			9,279
Total expenses		7,055,146			2,709,708
Expense reductions (Note 4)		(658	)		(85	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(121,550	)		(29,528	)
Net expenses		6,932,938			2,680,095
Net investment income (loss)		(4,654,907	)		2,213,951
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(6,082,635	)		7,482,975
Foreign currency transactions		—			(4,164	)
Net realized gain (loss)		(6,082,635	)		7,478,811
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(46,169,170	)		(74,531,985	)
Translation of other assets and liabilities denominated in foreign currencies		—			6,607
Net change in unrealized appreciation (depreciation)		(46,169,170	)		(74,525,378	)
Net realized and unrealized gain (loss)		(52,251,805	)		(67,046,567	)
Net increase (decrease) in net assets resulting from operations		$(56,906,712	)		$(64,832,616	)
*Foreign taxes withheld on dividends		$                —			$      202,419

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

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

	Franklin Biotechnology						Franklin Natural
	Discovery Fund						Resources Fund
	Six Months Ended						Six Months Ended
	October 31, 2018			Year Ended			October 31, 2018			Year Ended
	(unaudited)			April 30, 2018			(unaudited)			April 30, 2018
Increase (decrease) in net assets:
Operations:
Net investment income (loss)	$	(4,654,907	)	$	(7,400,442	)	$	2,213,951		$	7,807,287
Net realized gain (loss)		(6,082,635	)		54,362,893			7,478,811			(12,640,009	)
Net change in unrealized appreciation (depreciation)		(46,169,170	)		(22,596,221	)		(74,525,378	)		63,514,023
Net increase (decrease) in net assets resulting from operations		(56,906,712	)		24,366,230			(64,832,616	)		58,681,301
Distributions to shareholders: (Note 1e)
Class A		—			(27,114,653	)		—			(4,171,579	)
Class C		—			(1,417,301	)		—			—
Class R6		—			(199,407	)		—			(26,407	)
Advisor Class		—			(4,208,617	)		—			(1,426,444	)
Total distributions to shareholders		—			(32,939,978	)		—			(5,624,430	)
Capital share transactions: (Note 2)
Class A		(67,717,611	)		(88,622,240	)		(25,108,427	)		(89,055,299	)
Class C		(5,870,067	)		5,540,101			(17,655,311	)		(22,010,700	)
Class R6		(1,172,032	)		(555,474	)		2,194,141			14,973,208
Advisor Class		942,002			21,646,333			(1,684,169	)		(23,972,393	)
Total capital share transactions		(73,817,708	)		(61,991,280	)		(42,253,766	)		(120,065,184	)
Net increase (decrease) in net assets		(130,724,420	)		(70,565,028	)		(107,086,382	)		(67,008,313	)
Net assets:
Beginning of period		1,328,842,224			1,399,407,252			522,817,612			589,825,925
End of period (Note 1e)	$	1,198,117,804		$	1,328,842,224		$	415,731,230		$	522,817,612

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

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements (unaudited)

1.   Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eight separate funds, two of which are included in this report (Funds) and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). The Funds offer four classes of shares: Class A, Class C, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Funds’ significant accounting policies.

a.   Financial Instrument Valuation

The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The 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.

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 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

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

When the last day of the reporting period is a non-business day, certain foreign markets may be open on those days that the Funds’ NAV is not calculated, which could result in differences between the value of the Funds’ portfolio securities on the last business day and the last calendar day of the reporting period. Any significant security valuation changes due to an open foreign market are adjusted and reflected by the Funds for financial reporting purposes.

b.   Foreign Currency Translation

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

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

Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign

exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period.

c.   Securities Lending

Certain or all Funds participate in an agency based securities lending program to earn additional income. The Fund receives cash collateral against the loaned securities in an amount equal to at least 102% of the fair value of the loaned securities. Collateral is maintained over the life of the loan in an amount not less than 100% of the fair value of loaned securities, as determined at the close of Fund business each day; any additional collateral required due to changes in security values is delivered to the Fund on the next business day. The collateral is deposited into a joint cash account with other funds and is used to invest in a money market fund managed by Franklin Advisers, Inc., an affiliate of the Funds. 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.

d.   Income and Deferred Taxes

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

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

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1.   Organization and Significant Accounting Policies (continued)

d.     Income and Deferred Taxes (continued)

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 October 31, 2018, each Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

e.   Security Transactions, Investment Income, Expenses and Distributions

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

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

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

f.   Accounting Estimates

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

g.   Guarantees and Indemnifications

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

*Effective during the current reporting period, it is no longer required to present certain line items on the Statements of Changes in Net Assets. Such disclosure changes are included in the Statements of Changes in Net Assets, therefore prior period amounts are presented below.

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

	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Distributions from net investment income:
Class A		$             —		$(4,171,579)
Class R6		—		(26,407)
Advisor Class		—		(1,426,444)
Distributions from net realized gains:
Class A		(27,114,653)		—
Class C		(1,417,301)		—
Class R6		(199,407)		—
Advisor Class		(4,208,617)		—

For the year ended April 30, 2018, undistributed net investment income(loss) included in net assets were as follows:

Fund	Undistributed net investment income (loss)
Franklin Biotechnology Discovery Fund		$(8,318,907)
Franklin Natural Resources Fund		$ 4,345,619

2.   Shares of Beneficial Interest

At October 31, 2018, 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:
Six Months ended October 31, 2018
Shares solda		398,985		$	62,153,412			798,608		$	21,736,904
Shares redeemed		(831,000	)		(129,871,023	)		(1,697,702	)		(46,845,331	)
Net increase (decrease)		(432,015	)	$	(67,717,611	)		(899,094	)	$	(25,108,427	)
Year ended April 30, 2018
Shares sold		1,057,237		$	160,996,348			1,583,808		$	40,230,459
Shares issued in reinvestment of distributions		175,206			25,819,984			164,031			4,090,940
Shares redeemed		(1,821,677	)		(275,438,572	)		(5,298,641	)		(133,376,698	)
Net increase (decrease)		(589,234	)	$	(88,622,240	)		(3,550,802	)	$	(89,055,299	)
Class C Shares:
Six Months ended October 31, 2018
Shares sold		40,777		$	6,186,511			170,166		$	4,591,281
Shares redeemeda		(81,428	)		(12,056,578	)		(848,550	)		(22,246,592	)
Net increase (decrease)		(40,651	)	$	(5,870,067	)		(678,384	)	$	(17,655,311	)
Year ended April 30, 2018
Shares sold		142,042		$	21,098,664			388,443		$	9,522,328
Shares issued in reinvestment of distributions		9,827			1,408,701			—			—
Shares redeemed		(114,253	)		(16,967,264	)		(1,292,254	)		(31,533,028	)
Net increase (decrease)		37,616		$	5,540,101			(903,811	)	$	(22,010,700	)

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2.   Shares of Beneficial Interest (continued)

	Franklin Biotechnology Discovery Fund						Franklin Natural Resources Fund
	Shares			Amount			Shares			Amount
Class R6 Shares:
Six Months ended October 31, 2018
Shares sold		9,097		$	1,504,671			157,637		$	4,641,559
Shares redeemed		(16,721	)		(2,676,703	)		(84,112	)		(2,447,418	)
Net increase (decrease)		(7,624	)	$	(1,172,032	)		73,525		$	2,194,141
Year ended April 30, 2018
Shares sold		18,257		$	2,841,320			544,711		$	15,552,699
Shares issued in reinvestment of distributions		1,314			199,406			995			26,408
Shares redeemed		(23,294	)		(3,596,200	)		(21,257	)		(605,899	)
Net increase (decrease)		(3,723	)	$	(555,474	)		524,449		$	14,973,208
Advisor Class Shares:
Six Months ended October 31, 2018
Shares sold		205,886		$	33,371,953			307,606		$	9,097,717
Shares redeemed		(202,712	)		(32,429,951	)		(366,527	)		(10,781,886	)
Net increase (decrease)		3,174		$	942,002			(58,921	)	$	(1,684,169	)
Year ended April 30, 2018
Shares sold		444,625		$	68,532,853			1,055,556		$	28,419,344
Shares issued in reinvestment of distributions		24,690			3,720,072			52,254			1,387,336
Shares redeemed		(328,722	)		(50,606,592	)		(1,984,254	)		(53,779,073	)
Net increase (decrease)		140,593		$	21,646,333			(876,444	)	$	(23,972,393	)

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

3.   Transactions with Affiliates

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

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

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a.   Management Fees

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

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

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

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

For the period ended October 31, 2018, each Fund’s annualized gross effective investment management fee rate based on average daily net assets was as follows:

Franklin Biotechnology     Discovery Fund	Franklin Natural             Resources Fund
0.585%	0.501%

b.   Administrative Fees

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

c.   Distribution Fees

The Board has adopted distribution plans for each share class, with the exception of Class R6 and Advisor Class shares, pursuant to Rule 12b-1 under the 1940 Act. Under the Funds’ Class A reimbursement distribution plans, the Funds reimburse Distributors for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. Under the Class A reimbursement distribution plans, costs exceeding the maximum for the current plan year cannot be reimbursed in subsequent periods. In addition, under the Funds’ Class C compensation distribution plans, the Funds pay Distributors

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3.   Transactions with Affiliates (continued)

c.     Distribution Fees (continued)

for costs incurred in connection with the servicing, sale and distribution of each Fund’s shares up to the maximum annual plan rate for each class. The plan year, for purposes of monitoring compliance with the maximum annual plan rates, is February 1 through January 31 for each Fund.

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

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.

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 period:

	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Sales charges retained net of commissions paid to unaffiliated brokers/dealers		$ 117,719		$ 22,338
CDSC retained		$   17,544		$   1,522

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

e.   Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the period ended October 31, 2018, 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		$337,151		$182,584

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f.   Investments in Affiliated Management Investment Companies

Certain or all Funds invest in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Funds are waived on assets invested in the affiliated management investment companies, as noted in the Statements of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the period ended October 31, 2018, investments in affiliated management investment companies were as follows:

	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions			Number of Shares Held at End of Period		Value at End of Period		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Franklin Biotechnology Discovery Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		80,026,544		265,085,948		(277,083,904	)		68,028,588		$68,028,588		$264,302		$    —		$    —
Franklin Natural Resources Fund
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		17,288,464		109,715,983		(116,509,307	)		10,495,140		$10,495,140		$ 74,548		$    —		$    —

g.   Waiver and Expense Reimbursements

Investor Services has contractually agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.03% until August 31, 2019.

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 period ended October 31, 2018, 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. Capital loss carryforwards with no expiration, if any, must be fully utilized before those losses with expiration dates.

At April 30, 2018, the capital loss carryforwards were as follows:

	Franklin Natural Resources Fund
Capital loss carryforwards not subject to expiration:
Short Term	$	11,809,756
Long Term		133,011,661
Total capital loss carryforwards	$	144,821,417

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5.   Income Taxes (continued)

At October 31, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

	Franklin Biotechnology Discovery Fund			Franklin Natural Resources Fund
Cost of investments		$809,568,613			$396,289,499
Unrealized appreciation		$514,477,293			$  85,031,081
Unrealized depreciation		(91,370,085	)		(61,009,171	)
Net unrealized appreciation (depreciation)		$423,107,208			$  24,021,910

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

6.   Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended October 31, 2018, were as follows:

	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Purchases		$180,304,513		$  89,166,663
Sales		$244,844,972		$123,609,194

At October 31, 2018, in connection with securities lending transactions, certain or all Funds loaned investments and received cash collateral as follows:

	Franklin Biotechnology Discovery Fund		Franklin Natural Resources Fund
Securities lending transactionsa:
Equity Investmentsb		$27,390,710		$3,692,500

^aThe agreements can be terminated at any time.

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

7.   Concentration of Risk

Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities.

8.   Restricted Securities

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

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At October 31, 2018, investments in restricted securities, excluding securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:

Shares		Issuer	Acquisition Date		Cost		Value
	Franklin Biotechnology Discovery Fund
	326,797	Allogene Therapeutics Inc., 144A		9/05/18	$	5,000,000	$	6,863,893
	80,195	Intarcia Therapeutics Inc., DD		3/26/14		2,597,516		1,672,893
	1,330,687	Metacrine Inc.		6/04/18		2,821,056		2,821,056
	750,193	Precision BioSciences Inc., Series B		5/25/18		3,758,467		3,758,467
		Total Restricted Securities (Value is 1.3% of Net Assets)			$	14,177,039	$	15,116,309

9.   Credit Facility

The Funds, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. 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 October 31, 2018, the Funds did not use the Global Credit Facility.

10.   Fair Value Measurements

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

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

• Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments)

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

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.

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

10.   Fair Value Measurements (continued)

A summary of inputs used as of October 31, 2018, in valuing the Funds’ assets carried at fair value, is as follows:

	Level 1		Level 2			Level 3			Total
Franklin Biotechnology Discovery Fund
Assets:
Investments in Securities:a
Equity Investments:b
Biotechnology	$	922,542,129	$	—	c	$	15,168,899	c	$	937,711,028
Pharmaceuticals		156,272,360		—			45,239			156,317,599
All Other Equity Investments		69,406,519		—			—			69,406,519
Escrows and Litigation Trusts		—		—			1,212,087			1,212,087
Short Term Investments		68,028,588		—			—			68,028,588
Total Investments in Securities	$	1,216,249,596	$	—		$	16,426,225		$	1,232,675,821
Franklin Natural Resources Fund
Assets:
Investments in Securities:a
Equity Investments:b
Oil & Gas Exploration & Production	$	114,351,264	$	628,674		$	—		$	114,979,938
All Other Equity Investments		294,836,331		—			—			294,836,331
Short Term Investments		10,495,140		—			—			10,495,140
Total Investments in Securities	$	419,682,735	$	628,674		$	—		$	420,311,409

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

^bIncludes common and convertible preferred stocks as well as other equity investments.

^cIncludes securities determined to have no value at October 31, 2018.

A reconciliation of assets in which Level 3 inputs are used in determining fair value is presented when there are significant Level 3 financial instruments at the beginning and/or end of the period. At October 31, 2018, the reconciliation of assets is as follows:

																				Net Change in
																				Unrealized
																				Appreciation
							Transfer					Net		Net						(Depreciation)
	Balance at						Into					Realized		Unrealized			Balance			on Assets
	Beginning of						(Out of)			Cost Basis		Gain		Appreciation			at End			Held at
	Period		Purchases		Sales		Level 3a			Adjustments		(Loss)		(Depreciation)			of Period			Period End
Franklin Biotechnology Discovery Fund
Assets:
Investments in Securities:
Equity Investments:b
Biotechnology		$1,877,026		$14,107,232		$—	$	—			$—		$—	$	(815,359	)		$15,168,899	c	$	(815,359	)
Pharmaceuticals		3,976,061		—		—		(2,799,991	)		—		—		(1,130,831	)		45,239			(98,854	)
Escrows and Litigation Trusts		1,411,906		—		—		—			—		—		(199,819	)		1,212,087			(199,819	)
Total Investments in Securities		$7,264,993		$14,107,232		$—	$	(2,799,991	)		$—		$—	$	(2,146,009	)		$16,426,225		$	(1,114,032	)

^aThe investments were transferred out of Level 3 as a result of the availability of other significant observable valuation inputs.

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

^cIncludes securities determined to have no value.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Significant unobservable valuation inputs for material Level 3 financial instruments and impact to fair value as a result of changes in unobservable valuation inputs as of October 31, 2018, are as follows:

Description	Fair Value at End of Period		Valuation Technique		Unobservable Inputs	Amount / Range		Impact to Fair Value if Input Increasesa
Franklin Biotechnology Discovery Fund
Assets:
Investments in Securities:
Equity Investments:
Biotechnology	$	8,536,786		Discounted Cash Flow	Free Cash flow		$  70.7 / share	Increaseb
					Discount for lack of marketability		12.5% - 35.0%	Decreaseb
					Weighted average cost of capital		9.7%	Decreaseb
					Probability rate		50.0%	Increaseb
Escrows and Litigation Trusts		1,212,087		Discounted Cash Flow	Probability rate		0.0% - 75.0%c	Increaseb
					Weighted average cost of capital		10.0%	Decrease
All Other Investmentsd		6,677,352
Total	$	16,426,225

^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.

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

^cIncludes probability assumptions for various outcomes of milestone payments for clinical trials and regulatory approvals.

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

11.   New Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in the ASU modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

12.   Subsequent Events

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

Abbreviations

Selected Portfolio
ADR	American Depositary Receipt
CPO	Certificate of Ordinary Participation (usually Mexico)

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FRANKLIN STRATEGIC SERIES

Shareholder Information

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.

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	Semiannual Report and Shareholder Letter Franklin Strategic Series Investment Manager Franklin Advisers, Inc. Distributor Franklin Templeton Distributors, Inc. (800) DIAL BEN® / 342-5236 franklintempleton.com Shareholder Services (800) 632-2301
Authorized for distribution only when accompanied or preceded by a summary prospectus and/or prospectus. Investors should carefully consider a fund’s investment goals, risks, charges and expenses before investing. A prospectus contains this and other information; please read it carefully before investing. To help ensure we provide you with quality service, all calls to and from our service areas are monitored and/or recorded.
© 2018 Franklin Templeton Investments. All rights reserved.		FSS2 S 12/18

Semiannual Report and Shareholder Letter   October 31, 2018

Sign up for electronic delivery at franklintempleton.com/edelivery

Franklin Templeton Investments

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

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

Dear Shareholder:

During the six months ended October 31, 2018, the U.S. economy grew, while annual inflation began and ended the period at the same level. With these factors in mind, the U.S. Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% at its June and September 2018 meetings. Overall, the 10-year Treasury yield, which moves inversely to price, increased during the period. The yield rose to multi-year highs in May and October 2018 amid investor concerns about inflation and Fed actions, but declined at certain points during the period due to uncertainty surrounding political tensions and economic turmoil in the U.S. and other countries. The U.S. dollar also rose against its major trading partners during the period. In this environment, global government bonds, as measured by the FTSE World Government Bond Index, had modest losses in U.S. dollar terms.

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

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 Flexible Alpha Bond Fund’s semiannual 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,

Edward B. Jamieson

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

This letter reflects our analysis and opinions as of October 31, 2018, 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.

Not FDIC Insured | May Lose Value | No Bank Guarantee  

franklintempleton.com Not part of the semiannual report                     1

Contents
Semiannual Report
Franklin Flexible Alpha Bond Fund	3
Performance Summary	7
Your Fund’s Expenses	9
Financial Highlights and Statement of Investments	10
Financial Statements	34
Notes to Financial Statements	39
Shareholder Information	54

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

2       Semiannual Report franklintempleton.com

Semiannual Report

Franklin Flexible Alpha Bond Fund

This semiannual report for Franklin Flexible Alpha Bond Fund covers the period ended October 31, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks to provide total return through a combination of current income and capital appreciation by investing at least 80% of its net assets in bonds and investments that provide exposure to bonds, including debt obligations of any credit quality, maturity or duration, all varieties of fixed income, variable rate and floating-rate debt securities and investments, money market instruments and derivatives. The Fund aims to provide attractive risk-adjusted total returns over a full market cycle. A full market cycle is a period of time that spans a full business and economic cycle, which may include periods of rising and declining interest rates.

What is duration?

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

Performance Overview

For the six months under review, the Fund’s Class A shares delivered a +1.00% cumulative total return. In comparison, the LIBOR USD 3-Month Rate Index posted a +2.16% total return.¹ The index tracks the interest rate at which banks offer to lend to one another in the wholesale money markets in London and is used to set the cost of various variable-rate loans. You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

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

Sector Exposure*

10/31/18

	% of Total Net Assets
Collateralized Loan Obligations		22.2%
Residential Mortgage-Backed Securities		21.9%
Floating-Rate Loans		17.0%
Investment-Grade Corporate Securities		12.4%
International Bonds		8.6%
Commercial Mortgage-Backed Securities		6.1%
Covered Bonds		4.8%
High-Yield Corporate Securities		3.7%
Treasury Inflation-Protected Securities		2.9%
Municipal Bonds		2.4%
Asset-Backed Securities		0.0%	**
Other		0.0%	**
Agency Mortgage-Backed Securities		0.0%	**
Interest-Rate Derivatives		-34.7%
Cash & Cash Equivalents		19.1%

*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.

**Rounds to less than 0.1%.

Economic and Market Overview

The U.S. economy grew during the six months under review. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The manufacturing and services sectors expanded during the period. The unemployment rate declined from 3.9% in April 2018, as reported at the beginning of the six-month period, to a nearly 49-year low of 3.7% at period-end.² Annual inflation, as measured by the Consumer Price Index, was 2.5% in April

1. Source: Bloomberg LP.

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.

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 15.

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FRANKLIN FLEXIBLE ALPHA BOND FUND

2018, as reported at the beginning of the period, and while it varied during the six months under review, it ended the period at 2.5%.²

Dividend Distributions*

5/1/18–10/31/18

			Dividend per Share (cents)
Month	Class A		Class C		Class R		Class R6		Advisor Class
May		1.2601		1.1178		1.4491		1.8198	1.9819
June		1.3402		1.2697		1.1372		1.4877	1.3418
July		1.5761		1.4688		1.5959		2.2257	1.9702
August		1.7712		1.4283		1.5541		2.1787	1.9776
September		1.3435		1.0819		1.1739		1.6741	1.5259
October		2.4119		2.3123		2.3735		2.1809	2.8921
Total		9.7030		8.6788		9.2837		11.5669	11.6895

*The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. Assumes shares were purchased and held for the entire accrual period. Since dividends accrue daily, your actual distributions will vary depending on the date you purchased your shares and any account activity. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

The U.S. Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% at its June 2018 meeting and continued to reduce its balance sheet as part of its ongoing plan to normalize monetary policy. In his congressional testimony in July 2018 and at the Fed symposium in August, Fed Chair Jerome Powell reiterated the Fed’s intention to gradually raise interest rates. At its September 2018 meeting, the Fed raised its target range for the federal funds rate 0.25% to 2.00%–2.25%, as widely expected. Furthermore, the Fed raised its forecast for U.S. economic growth in 2018 and 2019 and projected one more rate increase in 2018. Minutes from the Fed’s September meeting (released in October) indicated that a few officials expected monetary policy to become modestly restrictive of economic growth, while some officials seemed to favor increasing the federal funds rate temporarily above what they consider to be its longer-term level to reduce the risk of overshooting the Fed’s inflation objective. In contrast, some officials indicated they would not favor a restrictive policy unless they see clear signs of an overheating economy and rising inflation.

The 10-year Treasury yield, which moves inversely to its price, increased during the period. The yield rose to multi-year highs in May and October 2018 amid investor concerns about higher inflation and the Fed’s interest-rate path. Expectations that other central banks might scale back monetary stimulus and better-than-expected U.S. economic reports also pushed the yield higher. However, some factors weighed on the Treasury

yield at certain points during the period, including concerns about political turmoil in Italy, political uncertainties in the U.S., tensions between the U.S. and North Korea, the Trump administration’s protectionist trade policies, U.S. trade disputes with its allies and China, and economic turmoil in Turkey and Argentina. Overall, the 10-year Treasury yield rose from 2.95% at the beginning of the period to 3.15% at period-end.

Currency Composition*

10/31/18

	% of Total Net Assets
North America		99.8%
U.S. Dollar		99.8%
Mexican Peso		0.5%
Canadian Dollar		-0.5%
Europe		0.4%
Swedish Krona		0.3%
Polish Zloty		0.1%
Norwegian Krone		0.0%	**
British Pound		0.0%	**
Euro		0.0%	**
Asia		0.1%
India Rupee		0.3%
Indonesia Rupiah		0.3%
Chinese Renminbi		-0.2%
Philipine Peso		-0.3%
Australia & New Zealand		-0.3%
Australian Dollar		-0.3%

*Currency Composition is intended to estimate the portfolio’s exposure to various currencies, including any hedged or increased exposure through certain derivatives held in the portfolio (or their underlying reference assets) and may not total 100% or may be negative due to rounding, use of any derivatives, unsettled trades or other factors.

**Rounds to less than 0.1%.

Investment Strategy

The Fund seeks to generate returns from various sources, other than solely from interest income, by allocating its portfolio across various risks (such as credit, currency and duration risks). In employing this strategy, the Fund has the flexibility to invest across all debt asset classes without regard to country, sector, quality, maturity or duration and without reference to a benchmark index.

The Fund may engage in active and frequent trading as part of its investment strategies and, at any given time, may have a

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FRANKLIN FLEXIBLE ALPHA BOND FUND

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 (including covered bonds); municipal securities; and derivatives and other instruments with similar economic characteristics, or that provide exposure, to such debt securities.

Manager’s Discussion

Over the six-month period, the Fund delivered a positive total return and outperformed its benchmark on a gross basis. The Fund’s yield curve and duration positioning was the primary source of positive alpha, driven primarily by duration exposure in the U.S. The Fund’s spread-sector exposure also enhanced results, driven primarily by the Fund’s exposure to floating-rate bank loans (including collateralized loan obligations), residential mortgage-backed securities (RMBS), as well as investment-grade and high-yield corporate securities. The Fund’s sovereign emerging markets debt exposure and basis-trade positions (taking opposing long and short positions in two securities to profit from the convergence of their values) also contributed to returns. In contrast, the Fund’s exposure to covered bonds, Treasury Inflation-Protected Securities (TIPS), and foreign currency exposure were the primary detractors from returns over the period.

What is the yield curve?

A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.

At period-end, we continued to invest in a broad set of global fixed income sectors, with a goal of achieving more consistent positive alpha with a risk-diversified portfolio. Additionally, we maintained the Fund’s risk profile at a conservative level. We remained overweighted in the investment-grade corporate bond sector as well as securitized sectors including RMBS and commercial mortgage-backed securities. We also continued to find what we considered value in credit-hedged corporate positions. We sought to hedge all of the high-yield corporate beta (or risk) in the Fund, although we retained exposure to select corporate loans and collateralized loan obligations. We also retained positions in TIPS as well as covered bonds. Overall, portfolio duration remained relatively neutral toward U.S. interest-rate and non-U.S. duration positions.

The Fund maintained an overweighting to the U.S. dollar versus a basket of developed market and commodity-related currencies for most of the period. Overall currency allocation did not represent a significant portion of the Fund’s risk allocation.

The Fund utilized derivatives, including credit default and currency swaps, currency forwards, futures, interest-rate swaps, total return swaps and inflation index swaps, principally as a tool for efficient portfolio management and to manage overall portfolio risk. These derivative transactions may provide the same, or similar, net long or short exposure to select currencies, interest rates, countries, duration or credit risks in a less expensive way than by directly purchasing securities. In those markets where portfolio securities are readily available, the cost difference in normal market conditions may be small. Overall, the portfolio continued to meet its risk-adjusted return target and remained in the lower end of our targeted risk range. Much of the Fund’s derivatives positioning was to hedge various risks in the portfolio and achieve the goal of a stable return profile.

What are swap agreements?

Swap agreements, such as interest-rate, currency and credit default swaps, are contracts between the Fund and another party (the swap counterparty). In a basic swap transaction, the Fund agrees with the swap counterparty to exchange the returns (or differentials in rates of return) earned or realized on a particular “notional amount” of underlying instruments. The notional amount is the set amount selected by the parties as the basis on which to calculate the obligations that they have agreed to exchange. The parties typically do not actually exchange the notional amount. Instead, they agree to exchange the returns that would be earned or realized if the notional amount were invested in given instruments or at given interest rates.

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.

What is a futures contract?

A futures contract is an agreement between the Fund and a counterparty made through a U.S. or foreign futures exchange to buy or sell an underlying instrument or asset at a specific price on a future date.

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FRANKLIN FLEXIBLE ALPHA BOND FUND

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

6       Semiannual Report franklintempleton.com

FRANKLIN FLEXIBLE ALPHA BOND FUND

Performance Summary as of October 31, 2018

The performance tables 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 10/31/18¹

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 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
6-Month		+1.00%4		-3.26%
1-Year		+1.23%		-3.10%
3-Year		+3.92%		-0.16%
Since Inception (8/3/15)		+3.61%		-0.23%
Advisor
6-Month		+0.89%		+0.89%
1-Year		+1.54%		+1.54%
3-Year		+4.09%		+1.35%
Since Inception (8/3/15)		+3.89%		+1.18%

	Distribution Rate5		30-Day Standardized Yield6
Share Class			(with waiver)		(without waiver)
A		2.78%		2.31%		2.20%
Advisor		3.38%		2.69%		2.56%

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

See page 8 for Performance Summary footnotes.

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FRANKLIN FLEXIBLE ALPHA BOND FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–10/31/18)

Share Class	Net Investment Income
A	$0.097030
C	$0.086788
R	$0.092837
R6	$0.115669
Advisor	$0.116895

Total Annual Operating Expenses⁷

Share Class	With Waiver		Without Waiver
A		1.19%		1.24%
Advisor		0.94%		0.99%

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

All investments involve risks, including possible loss of principal. Changes in the financial strength of a bond issuer or in a bond’s credit rating may affect its value. Interest rate movements and mortgage prepayments will affect the Fund’s share price and yield. During periods of declining interest rates, principal prepayments tend to increase as borrowers refinance their mortgages at lower rates; therefore the Fund may be forced to reinvest returned principal at lower interest rates, reducing income. Bond prices generally move in the opposite direction of interest rates. Thus, as the prices of bonds in the Fund adjust to a rise in interest rates, the Fund’s share price may decline. The Fund may be affected by issuers that fail to make interest payments and repay principal when due. The risks associated with higher-yielding, lower-rated securities (commonly called junk bonds) include higher risk of default and loss of principal. Derivatives, including currency management strategies, involve costs and can create economic leverage in the portfolio, which may result in significant volatility and cause the Fund to participate in losses (as well as enable gains) in an amount that exceeds the Fund’s initial investment. The Fund may not achieve the anticipated benefits, and may realize losses when a counterparty fails to perform as intended. The Fund is actively managed but there is no guarantee that the manager’s investment decisions will produce the desired results. The Fund’s prospectus also includes a description of the main investment risks.

1. The Fund has an expense reduction and a fee waiver associated with any investments it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the expense reduction and fee waiver; without these reductions, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

4. Total return information is based on net asset values calculated for shareholder transactions. Certain adjustments were made to the net assets of the Fund at 4/30/18 for financial reporting purposes, and as a result, the total returns based on those net asset values differ from the adjusted total returns reported in the Financial Highlights.

5. 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 10/31/18.

6. The Fund’s 30-day standardized yield is calculated over a trailing 30-day period using the yield to maturity on bonds and/or the dividends accrued on stocks. It may not equal the Fund’s actual income distribution rate, which reflects the Fund’s past dividends paid to shareholders.

7. 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.

8       Semiannual Report franklintempleton.com

FRANKLIN FLEXIBLE ALPHA BOND 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 5/1/18	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Net Annualized Expense Ratio2
A	$1,000	$1,007.90	$4.56	$1,020.67	$4.58	0.90%
C	$1,000	$1,005.90	$6.37	$1,018.85	$6.41	1.26%
R	$1,000	$1,006.40	$5.71	$1,019.51	$5.75	1.13%
R6	$1,000	$1,008.80	$2.99	$1,022.23	$3.01	0.59%
Advisor	$1,000	$1,008.90	$3.09	$1,022.13	$3.11	0.61%

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 184/365 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 Semiannual Report       9

FRANKLIN STRATEGIC SERIES

Financial Highlights

Franklin Flexible Alpha Bond Fund

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016a
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$    9.79			$    9.86			$    9.88		$  10.00
Income from investment operationsb:
Net investment income		0.118	c		0.166	c		0.180		0.099
Net realized and unrealized gains (losses)		(0.051	)		(0.066	)		0.017		(0.123)
Total from investment operations		0.067			0.100			0.197		(0.024)
Less distributions from:
Net investment income		(0.097	)		(0.160	)		(0.217	)	(0.096)
Net realized gains		—			(0.010	)		—		—
Total distributions		(0.097	)		(0.170	)		(0.217	)	(0.096)
Net asset value, end of period		$    9.76			$    9.79			$    9.86		$    9.88
Total returnd		0.79%			1.02%			2.22%		(0.34)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.19%			0.97%			3.17%		3.47%
Expenses net of waiver and payments by affiliatesf		0.90%			0.79%			0.67%		0.84%
Net investment income		2.42%			1.80%			1.83%		1.37%
Supplemental data
Net assets, end of period (000’s)		$2,142			$1,132			$10,443		$10,200
Portfolio turnover rate		7.34%			48.04%			90.37%		40.12%
Portfolio turnover rate excluding mortgage dollar rollsg		6.58%			19.40%			57.79%		30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

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

^cBased on average daily shares outstanding.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^gSee Note 1(f) regarding mortgage dollar rolls.

10       Semiannual 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)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016a
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$    9.73			$    9.80			$    9.86		$  10.00
Income from investment operationsb:
Net investment income		0.100	c		0.120			0.130		0.072
Net realized and unrealized gains (losses)		(0.043	)		(0.062	)		(0.006	)	(0.131)
Total from investment operations		0.057			0.058			0.124		(0.059)
Less distributions from:
Net investment income		(0.087	)		(0.118	)		(0.184	)	(0.081)
Net realized gains		—			(0.010	)		—		—
Total distributions		(0.087	)		(0.128	)		(0.184	)	(0.081)
Net asset value, end of period		$    9.70			$    9.73			$    9.80		$    9.86
Total returnd		0.59%			0.49%			1.47%		(0.69)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.55%			1.58%			3.88%		3.98%
Expenses net of waiver and payments by affiliatesf		1.26%			1.40%			1.38%		1.34%
Net investment income		2.06%			1.19%			1.12%		0.87%
Supplemental data
Net assets, end of period (000’s)		$303			$279			$245		$204
Portfolio turnover rate		7.34%			48.04%			90.37%		40.12%
Portfolio turnover rate excluding mortgage dollar rollsg		6.58%			19.40%			57.79%		30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

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

^cBased on average daily shares outstanding.

^dTotal return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year.

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^gSee Note 1(f) regarding mortgage dollar rolls.

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Semiannual Report       11

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Flexible Alpha Bond Fund (continued)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016a
Class R
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$    9.78			$    9.86			$    9.86		$  10.00
Income from investment operationsb:
Net investment income		0.107	c		0.112			0.112		0.072
Net realized and unrealized gains (losses)		(0.044	)		(0.058	)		0.095		(0.127)
Total from investment operations		0.063			0.054			0.207		(0.055)
Less distributions from:
Net investment income		(0.093	)		(0.124	)		(0.207	)	(0.085)
Net realized gains		—			(0.010	)		—		—
Total distributions		(0.093	)		(0.134	)		(0.207	)	(0.085)
Net asset value, end of period		$    9.75			$    9.78			$    9.86		$    9.86
Total returnd		0.64%			0.54%			2.21%		(0.65)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		1.42%			1.47%			3.36%		3.84%
Expenses net of waiver and payments by affiliatesf		1.13%			1.29%			0.86%		1.22%
Net investment income		2.19%			1.30%			1.64%		0.99%
Supplemental data
Net assets, end of period (000’s)		$52			$51			$60		$10
Portfolio turnover rate		7.34%			48.04%			90.37%		40.12%
Portfolio turnover rate excluding mortgage dollar rollsg		6.58%			19.40%			57.79%		30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^gSee Note 1(f) regarding mortgage dollar rolls.

12       Semiannual 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)

	Six Months Ended October 31, 2018 (unaudited)
				Year Ended April 30,
				2018			2017			2016a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$    9.79			$    9.86			$    9.88		$  10.00
Income from investment operationsb:
Net investment income		0.135	c		0.204			0.177		0.108
Net realized and unrealized gains (losses)		(0.049	)		(0.088	)		0.022		(0.124)
Total from investment operations		0.086			0.116			0.199		(0.016)
Less distributions from:
Net investment income		(0.116	)		(0.176	)		(0.219	)	(0.104)
Net realized gains		—			(0.010	)		—		—
Total distributions		(0.116	)		(0.186	)		(0.219	)	(0.104)
Net asset value, end of period		$    9.76			$    9.79			$    9.86		$    9.88
Total returnd		0.88%			1.18%			2.03%		(0.15)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.66%			0.86%			5.23%		3.72%
Expenses net of waiver and payments by affiliatesf		0.59%			0.71%			0.71%		0.71%
Net investment income		2.73%			1.88%			1.79%		1.50%
Supplemental data
Net assets, end of period (000’s)		$411,574			$210,808			$10		$10
Portfolio turnover rate		7.34%			48.04%			90.37%		40.12%
Portfolio turnover rate excluding mortgage dollar rollsg		6.58%			19.40%			57.79%		30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^gSee Note 1(f) regarding mortgage dollar rolls.

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Semiannual Report       13

FRANKLIN STRATEGIC SERIES

FINANCIAL HIGHLIGHTS

Franklin Flexible Alpha Bond Fund (continued)

	Six Months Ended
	October 31, 2018			Year Ended April 30,
	(unaudited)			2018			2017			2016a
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$    9.79			$    9.85			$    9.88		$  10.00
Income from investment operationsb:
Net investment income		0.133	c		0.194			0.166		0.107
Net realized and unrealized gains (losses)		(0.046	)		(0.072	)		0.023		(0.129)
Total from investment operations		0.087			0.122			0.189		(0.022)
Less distributions from:
Net investment income		(0.117	)		(0.172	)		(0.219	)	(0.098)
Net realized gains		—			(0.010	)		—		—
Total distributions		(0.117	)		(0.182	)		(0.219	)	(0.098)
Net asset value, end of period		$    9.76			$    9.79			$    9.85		$    9.88
Total returnd		0.89%			1.14%			2.13%		(0.31)%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.90%			0.93%			3.22%		3.34%
Expenses net of waiver and payments by affiliatesf		0.61%			0.75%			0.72%		0.71%
Net investment income		2.71%			1.84%			1.78%		1.50%
Supplemental data
Net assets, end of period (000’s)		$389			$425			$232		$344
Portfolio turnover rate		7.34%			48.04%			90.37%		40.12%
Portfolio turnover rate excluding mortgage dollar rollsg		6.58%			19.40%			57.79%		30.05%

^aFor the period August 3, 2015 (commencement of operations) to April 30, 2016.

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

^cBased on average daily shares outstanding.

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

^eRatios are annualized for periods less than one year, except for non-recurring expenses, if any.

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

^gSee Note 1(f) regarding mortgage dollar rolls.

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

FRANKLIN STRATEGIC SERIES

Statement of Investments, October 31, 2018 (unaudited)

Franklin Flexible Alpha Bond Fund

	Country		Shares			Value
Management Investment Companies (Cost $4,549,803) 1.1%
Diversified Financials 1.1%
Invesco Senior Loan ETF		United States		196,765		$	4,527,563
			Principal Amount*
Corporate Bonds 26.0%
Automobiles & Components 0.2%
Aptiv Corp., senior bond, 4.15%, 3/15/24		United States		900,000			896,604
Banks 8.7%
aBanca Monte dei Paschi di Siena SpA,
secured note, Reg S, 2.875%, 7/16/62		Italy		1,500,000	EUR		1,816,115
secured note, Reg S, 2.125%, 11/26/63		Italy		2,000,000	EUR		2,314,398
aBanca Popolare di Milano Scarl,
secured note, Reg S, 0.875%, 9/14/23		Italy		900,000	EUR		1,016,900
secured note, Reg S, 0.625%, 6/08/24		Italy		2,800,000	EUR		3,087,682
aBanco BPM SpA, secured note, Reg S, 0.75%, 3/31/23		Italy		1,700,000	EUR		1,918,117
aBanco Comercial Portugues SA, secured note, Reg S, 0.75%, 5/31/23		Portugal		900,000	EUR		1,031,707
Bank of America Corp.,
senior bond, 5.50%, 12/04/19		United States		75,000	GBP		100,005
senior note, 3.50%, 4/19/26		United States		2,300,000			2,190,254
senior note, 3.55% to 3/05/23, FRN thereafter, 3/05/24		United States		1,400,000			1,374,786
Bank of Nova Scotia, secured note, 1.875%, 4/26/22		Canada		100,000			96,661
Caixa Geral de Depositos SA,
secured note, 3.00%, 1/15/20		Portugal		2,000,000	EUR		2,278,879
asecured note, Reg S, 1.00%, 1/27/23		Portugal		100,000	EUR		115,712
Citigroup Inc.,
senior note, 2.65%, 10/26/20		United States		1,050,000			1,034,458
senior note, 3.40%, 5/01/26		United States		2,300,000			2,162,527
HSBC Holdings PLC,
senior note, 4.30%, 3/08/26		United Kingdom		1,400,000			1,380,722
senior note, 3.262% to 3/13/22, FRN thereafter, 3/13/23		United Kingdom		1,400,000			1,369,270
bICICI Bank Ltd./Dubai, senior note, 144A, 3.80%, 12/14/27		India		500,000			449,127
Industrial & Commercial Bank of China Ltd., senior note, 2.452%, 10/20/21		China		1,900,000			1,823,468
JPMorgan Chase & Co.,
senior bond, 3.30%, 4/01/26		United States		2,300,000			2,174,460
senior note, 2.40%, 6/07/21		United States		400,000			389,851
bKookmin Bank, secured note, 144A, 2.25%, 2/03/22		South Korea		1,800,000			1,739,860
PHH Corp., senior note, 7.375%, 9/01/19		United States		200,000			205,750
Royal Bank of Canada, secured note, 2.10%, 10/14/21		Canada		100,000			97,861
bStandard Chartered PLC, senior note, 144A, 3.885% to 3/15/23, FRN thereafter, 3/15/24		United Kingdom		1,200,000			1,167,450
bThe Toronto-Dominion Bank, secured note, 144A, 2.25%, 3/15/22		Canada		200,000			195,333
aTurkiye Vakiflar Bankasi TAO, secured note, Reg S, 2.375%, 11/04/22		Turkey		3,800,000	EUR		4,142,387
Wells Fargo & Co., senior note, 3.00%, 4/22/26		United States		600,000			553,567
							36,227,307
Consumer Durables & Apparel 0.0%†
KB Home, senior note, 8.00%, 3/15/20		United States		100,000			104,875
Consumer Services 0.1%
bWynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25		United States		525,000			500,719

franklintempleton.com Semiannual Report       15

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country		Principal Amount*		Value
Corporate Bonds (continued)
Diversified Financials 2.2%
Capital One Financial Corp.,
senior note, 3.05%, 3/09/22		United States		1,200,000	$	1,171,653
senior note, 3.20%, 2/05/25		United States		3,100,000		2,900,692
cDeutsche Bank AG, senior note, FRN, 3.632%, (3-month USD LIBOR + 1.31%), 8/20/20		Germany		100,000		99,888
bDexia Credit Local SA, senior note, 144A, 2.375%, 9/20/22		France		250,000		241,159
The Goldman Sachs Group Inc.,
senior note, 3.75%, 5/22/25		United States		2,000,000		1,939,387
csenior note, FRN, 3.534%, (3-month USD LIBOR + 1.20%), 9/15/20		United States		500,000		507,086
bICBCIL Finance Co. Ltd., senior note, 144A, 2.50%, 9/29/21		China		500,000		476,120
Morgan Stanley, senior note, 3.70%, 10/23/24		United States		1,400,000		1,367,872
Navient Corp., senior bond, 8.00%, 3/25/20		United States		400,000		418,500
Springleaf Finance Corp., senior note, 6.00%, 6/01/20		United States		60,000		61,500
						9,183,857
Energy 2.5%
Anadarko Petroleum Corp., senior bond, 3.45%, 7/15/24		United States		1,350,000		1,284,220
CNOOC Finance 2015 USA LLC, senior note, 3.50%, 5/05/25		China		1,700,000		1,618,391
bCNPC General Capital Ltd., senior note, 144A, 3.40%, 4/16/23		China		2,100,000		2,046,891
Energy Transfer LP, senior bond, first lien, 7.50%, 10/15/20		United States		750,000		795,939
Enterprise Products Operating LLC, senior note, 3.35%, 3/15/23		United States		1,450,000		1,421,325
Exxon Mobil Corp., senior note, 2.222%, 3/01/21		United States		100,000		97,738
Oceaneering International Inc., senior note, 4.65%, 11/15/24		United States		50,000		46,489
Sabine Pass Liquefaction LLC, senior secured note, first lien, 5.625%, 4/15/23		United States		1,250,000		1,317,267
bSinopec Group Overseas Development 2015 Ltd., senior note, 144A, 2.50%, 4/28/20		China		1,800,000		1,773,873
bWoodside Finance Ltd., senior note, 144A, 3.65%, 3/05/25		Australia		100,000		95,952
						10,498,085
Food & Staples Retailing 0.3%
Safeway Inc., senior bond, 5.00%, 8/15/19		United States		1,000,000		1,010,000
Food, Beverage & Tobacco 1.0%
Anheuser-Busch Inbev Finance Inc., senior bond, 3.65%, 2/01/26		Belgium		1,400,000		1,329,961
Bunge Ltd. Finance Corp., senior note, 3.25%, 8/15/26		United States		50,000		44,886
bImperial Brands Finance PLC, senior note, 144A, 4.25%, 7/21/25		United Kingdom		1,695,000		1,667,093
Kraft Heinz Foods Co.,
senior bond, 3.00%, 6/01/26		United States		600,000		536,456
senior note, 3.50%, 7/15/22		United States		350,000		346,008
Reynolds American Inc., senior note, 4.45%, 6/12/25		United Kingdom		100,000		99,634
						4,024,038
Health Care Equipment & Services 1.1%
Anthem Inc., senior note, 2.95%, 12/01/22		United States		600,000		580,323
bCentene Corp., senior note, 144A, 5.375%, 6/01/26		United States		1,000,000		1,017,500
CVS Health Corp., senior note, 3.70%, 3/09/23		United States		1,700,000		1,681,289
Edwards Lifesciences Corp., senior note, 4.30%, 6/15/28		United States		300,000		298,451
HCA Inc., senior secured bond, first lien, 5.875%, 3/15/22		United States		950,000		996,312
Tenet Healthcare Corp., senior note, 5.50%, 3/01/19		United States		90,000		90,563
bUniversal Health Services Inc., senior secured note, first lien, 144A, 3.75%, 8/01/19		United States		50,000		50,031
						4,714,469

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STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country		Principal Amount*		Value
Corporate Bonds (continued)
Insurance 0.5%
bAthene Global Funding, secured note, 144A, 3.00%, 7/01/22		United States		1,850,000	$	1,791,245
bJackson National Life Global Funding,
secured note, 144A, 2.25%, 4/29/21		United States		50,000		48,606
secured note, 144A, 2.10%, 10/25/21		United States		25,000		23,970
						1,863,821
Materials 1.1%
Freeport-McMoRan Inc., senior note, 4.00%, 11/14/21		United States		915,000		894,412
bGlencore Funding LLC, senior note, 144A, 3.00%, 10/27/22		Switzerland		1,300,000		1,245,192
LYB International Finance BV, senior note, 4.00%, 7/15/23		United States		1,500,000		1,496,475
bSealed Air Corp., senior bond, 144A, 5.25%, 4/01/23		United States		950,000		945,250
						4,581,329
Media & Entertainment 0.3%
bTencent Holdings Ltd., senior note, 144A, 2.985%, 1/19/23		China		1,200,000		1,157,172
Pharmaceuticals, Biotechnology & Life Sciences 1.1%
Allergan Funding SCS, senior bond, 3.80%, 3/15/25		United States		900,000		868,486
Amgen Inc.,
senior note, 2.60%, 8/19/26		United States		1,100,000		986,137
senior note, 3.20%, 11/02/27		United States		550,000		506,846
bBayer U.S. Finance II LLC, senior note, 144A, 3.875%, 12/15/23		Germany		400,000		394,391
Celgene Corp.,
senior bond, 3.875%, 8/15/25		United States		200,000		193,254
senior bond, 3.45%, 11/15/27		United States		1,100,000		1,004,449
bSABIC Capital II BV, senior note, 144A, 4.50%, 10/10/28		Saudi Arabia		400,000		392,628
						4,346,191
Real Estate 0.6%
American Homes 4 Rent LP, senior bond, 4.25%, 2/15/28		United States		400,000		379,897
American Tower Corp.,
senior bond, 3.50%, 1/31/23		United States		500,000		490,083
senior bond, 3.375%, 10/15/26		United States		700,000		644,207
Crown Castle International Corp., senior note, 3.15%, 7/15/23		United States		600,000		576,532
Prologis LP, senior note, 4.25%, 8/15/23		United States		200,000		205,754
						2,296,473
Retailing 0.4%
Alibaba Group Holding Ltd., senior note, 2.80%, 6/06/23		China		1,100,000		1,053,926
Amazon.com Inc., senior note, 2.40%, 2/22/23		United States		300,000		286,891
bPetSmart Inc., senior note, 144A, 7.125%, 3/15/23		United States		550,000		387,750
						1,728,567
Semiconductors & Semiconductor Equipment 0.3%
Maxim Integrated Products Inc., senior note, 3.45%, 6/15/27		United States		1,300,000		1,211,616
Software & Services 0.3%
Fiserv Inc., senior bond, 3.85%, 6/01/25		United States		1,400,000		1,382,721
Technology Hardware & Equipment 0.0%†
bSanmina Corp., senior note, first lien, 144A, 4.375%, 6/01/19		United States		100,000		100,125
Tech Data Corp., senior bond, 4.95%, 2/15/27		United States		50,000		48,341
						148,466

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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country		Principal Amount*			Value
Corporate Bonds (continued)
Telecommunication Services 0.8%
Telefonica Emisiones S.A.U., senior note, 4.103%, 3/08/27		Spain		1,800,000		$	1,713,492
Verizon Communications Inc., senior note, 2.45%, 11/01/22		United States		1,650,000			1,578,517
							3,292,009
Transportation 0.6%
bAir Canada 2017-1AA PTT, secured bond, 144A, 3.30%, 7/15/31		Canada		100,000			93,956
bAmerican Airlines Group Inc., senior note, 144A, 5.50%, 10/01/19		United States		530,000			537,287
American Airlines Pass Through Trust, first lien, 2016-2, AA, 3.20%, 12/15/29		United States		46,100			43,576
FedEx Corp., senior bond, 3.20%, 2/01/25		United States		1,450,000			1,387,456
bTransurban Finance Co. Pty. Ltd., senior secured bond, 144A, 3.375%, 3/22/27		Australia		500,000			460,578
							2,522,853
Utilities 3.9%
Calpine Corp., senior note, 5.375%, 1/15/23		United States		35,000			33,294
aCGNPC International Ltd., senior note, Reg S, 3.75%, 12/11/27		China		2,100,000			1,965,222
bColbun SA, senior note, 144A, 3.95%, 10/11/27		Chile		200,000			184,393
Dominion Energy Inc.,
senior bond, 3.90%, 10/01/25		United States		50,000			48,855
senior bond, 2.85%, 8/15/26		United States		2,500,000			2,267,526
Duke Energy Indiana Inc., senior secured bond, 3.75%, 7/15/20		United States		100,000			100,952
b,dEDF SA, junior sub. bond, 144A, 5.625% to 1/22/24, FRN thereafter, Perpetual		France		2,200,000			2,136,695
bIsrael Electric Corp. Ltd., secured bond, 144A, 4.25%, 8/14/28		Israel		1,400,000			1,328,082
bKorea East-West Power Co. Ltd., senior note, 144A, 3.875%, 7/19/23		South Korea		500,000			499,083
The Southern Co., senior bond, 3.25%, 7/01/26		United States		2,350,000			2,182,907
bState Grid Overseas Investment 2016 Ltd., senior note, 144A, 3.50%, 5/04/27		China		3,500,000			3,289,020
bThree Gorges Finance I Cayman Islands Ltd., senior note, 144A, 3.70%, 6/10/25		China		2,100,000			2,029,997
							16,066,026
Total Corporate Bonds (Cost $111,317,668)							107,757,198
Foreign Government and Agency Securities 1.9%
bThe Export-Import Bank of China,
senior note, 144A, 2.50%, 7/31/19		China		200,000			198,871
senior note, 144A, 3.625%, 7/31/24		China		2,100,000			2,059,974
bThe Export-Import Bank of India, senior note, 144A, 3.875%, 2/01/28		India		3,400,000			3,125,035
The Export-Import Bank of Korea, senior note, 2.875%, 1/21/25		South Korea		1,100,000			1,029,028
Government of Indonesia, senior bond, FR70, 8.375%, 3/15/24		Indonesia		263,000,000	IDR		17,226
bHarvest Operations Corp., senior note, 144A, 4.20%, 6/01/23		South Korea		1,000,000			1,011,285
The Korea Development Bank, senior note, 3.375%, 3/12/23		South Korea		600,000			590,907
Total Foreign Government and Agency Securities (Cost $8,220,570)							8,032,326
U.S. Government and Agency Securities 1.0%
eU.S. Treasury Note,
Index Linked, 0.25%, 1/15/25		United States		1,426,489			1,355,864
Index Linked, 0.125%, 7/15/26		United States		2,945,316			2,742,653
Total U.S. Government and Agency Securities (Cost $4,252,958)							4,098,517

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STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country		Principal     Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities 50.2%
Banks 0.4%
b,fDBCG Mortgage Trust, 2017-BBG, A, 144A, FRN, 2.98%, (1-month USD LIBOR + 0.70%), 6/15/34		United States		1,500,000	$	1,500,754
fImpac Secured Assets Corp., 2004-4, M1, FRN, 3.046%, (1-month USD LIBOR + 0.765%), 2/25/35		United States		21,522		21,587
						1,522,341
Diversified Financials 49.6%
b,fAlinea CLO Ltd., 2018-1A, B, 144A, FRN, 3.957%, (3-month USD LIBOR + 1.65%), 7/20/31		United States		2,300,000		2,298,873
b,fAMMC CLO 21 Ltd., 2017-21A, C, 144A, FRN, 4.449%, (3-month USD LIBOR + 2.10%), 11/02/30		United States		400,000		395,408
b,fAntares CLO Ltd., 2018-1A, B, 144A, FRN, 4.119%, (3-month USD LIBOR + 1.65%), 4/20/31		United States		600,000		600,330
b,fAtrium XIII,
2013A, B, 144A, FRN, 3.977%, (3-month USD LIBOR + 1.50%), 11/21/30		United States		2,000,000		1,996,600
2013A, C, 144A, FRN, 4.277%, (3-month USD LIBOR + 1.80%), 11/21/30		United States		600,000		595,452
bBAMLL Commercial Mortgage Securities Trust,
2012-PARK, A, 144A, 2.959%, 12/10/30		United States		100,000		98,586
2015-200P, A, 144A, 3.218%, 4/14/33		United States		600,000		579,876
Banc of America Commercial Mortgage Trust, 2015-UBS7, A4, 3.705%, 9/15/48		United States		100,000		99,301
b,fBellemeade Re Ltd., 2018-1A, M1B, 144A, FRN, 3.881%, (1-month USD LIBOR + 1.60%), 4/25/28		Bermuda		1,320,000		1,327,581
gBENCHMARK Mortgage Trust, 2018-B1, A5, FRN, 3.666%, 1/15/51		United States		1,542,000		1,509,330
b,fBetony CLO 2 Ltd., 2018-1A, C, 144A, FRN, 5.42%, (3-month USD LIBOR + 2.90%), 4/30/31		United States		500,000		499,500
b,gBlueMountain CLO Ltd.,
2018-3A, B, 144A, FRN, 4.206%, 10/25/30		United States		3,000,000		2,999,460
2018-3A, C, 144A, FRN, 4.636%, 10/25/30		United States		1,428,570		1,428,313
b,h,iBlueMountain CLO XXIII Ltd.,
2018-23A, B, 144A, FRN, 10/20/31		United States		1,000,000		1,000,000
2018-23A, C, 144A, FRN, 10/20/31		United States		694,444		694,444
b,fBlueMountain Fuji U.S. CLO I Ltd., 2017-1A, C, 144A, FRN, 4.819%, (3-month USD LIBOR + 2.35%), 7/20/29		United States		60,000		60,350
b,fBlueMountain Fuji U.S. CLO II Ltd., 2017-2A, A1A, 144A, FRN, 3.548%, (3-month USD LIBOR + 1.20%), 10/20/30		United States		250,000		251,245
b,fBlueMountain Fuji U.S. CLO III Ltd., 2017-3A, C, 144A, FRN, 4.039%, (3-month USD LIBOR + 1.70%), 1/15/30		United States		1,900,000		1,878,245
b,gBX Commercial Mortgage Trust, 2018-IND, A, 144A, FRN, 3.03%, 11/15/35		United States		1,020,000		1,029,807
bBXP Trust, 2017-GM, A, 144A, 3.379%, 6/13/39		United States		2,000,000		1,916,055
fCapital One Multi-Asset Execution Trust, 2004-B3, B3, FRN, 3.01%, (1-month USD LIBOR + 0.73%), 1/18/22		United States		150,000		150,302
b,fCarlyle Global Market Strategies CLO Ltd.,
2014-4RA, A1B, 144A, FRN, 3.786%, (3-month USD LIBOR + 1.35%), 7/15/30		United States		2,750,000		2,749,697
2014-4RA, C, 144A, FRN, 5.336%, (3-month USD LIBOR + 2.90%), 7/15/30		United States		750,000		744,465

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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
b,gCarlyle GMS Finance MM CLO LLC, 2015-1A, A2R, 144A, FRN, 4.636%, 10/15/31		United States		800,000	$	801,400
b,fCarlyle U.S. CLO Ltd.,
2017-2A, B, 144A, FRN, 4.869%, (3-month USD LIBOR + 2.40%), 7/20/31		United States		60,000		60,188
2017-4A, B, 144A, FRN, 4.286%, (3-month USD LIBOR + 1.85%), 1/15/30		United States		1,107,000		1,103,125
2017-4A, C, 144A, FRN, 5.236%, (3-month USD LIBOR + 2.80%), 1/15/30		United States		400,000		394,088
gCD Mortgage Trust, 2016-CD2, A4, FRN, 3.526%, 11/10/49		United States		1,500,000		1,459,247
b,gCGRBS Commercial Mortgage Trust, 2013-VN05, C, 144A, FRN, 3.584%, 3/13/35		United States		450,000		441,086
b,gCIM Trust, 2018-INV1, A4, 144A, FRN, 4.00%, 8/25/48		United States		1,324,289		1,316,427
b,gColombia Cent CLO 27 Ltd., 2018-27A, A2A, 144A, FRN, 4.899%, 10/25/28		United States		769,231		769,616
bCOMM Mortgage Trust,
g2014-277P, A, 144A, FRN, 3.611%, 8/10/49		United States		900,000		897,607
2015-3BP, A, 144A, 3.178%, 2/10/35		United States		600,000		579,054
gConseco Finance Securitizations Corp., 2002-2, M1, FRN, 7.424%, 3/01/33		United States		66,097		72,303
bCore Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34		United States		28,460		28,166
b,fDorchester Park CLO Ltd., 2015-1A, CR, 144A, FRN, 4.219%, (3-month USD LIBOR + 1.75%), 4/20/28		United States		1,350,000		1,346,760
b,gDryden 38 Senior Loan Fund, 2015-38A, CR, 144A, FRN, 4.436%, 7/15/30		United States		2,500,000		2,486,675
b,gDryden 45 Senior Loan Fund,
2016-45A, A2R, 144A, FRN, 3.836%, 10/15/30		United States		1,000,000		1,000,040
2016-45A, BR, 144A, FRN, 4.136%, 10/15/30		United States		1,000,000		1,000,050
2016-45A, CR, 144A, FRN, 4.636%, 10/15/30		United States		1,250,000		1,250,050
b,fDryden 49 Senior Loan Fund, 2017-49A, C, 144A, FRN, 4.799%, (3-month USD LIBOR + 2.35%), 7/18/30		United States		60,000		60,127
b,fDryden 53 CLO Ltd.,
2017-53A, B, 144A, FRN, 3.836%, (3-month USD LIBOR + 1.40%), 1/15/31		United States		1,000,000		989,900
2017-53A, C, 144A, FRN, 4.136%, (3-month USD LIBOR + 1.70%), 1/15/31		United States		1,000,000		987,100
b,h,iDryden 61 CLO Ltd., 61A, A2, FRN, 1/17/32		United States		2,000,000		2,000,000
b,fDryden 64 CLO Ltd.,
2018-64A, A, 144A, FRN, 3.415%, (3-month USD LIBOR + 0.97%), 4/18/31		United States		3,000,000		2,985,270
2018-64A, C, 144A, FRN, 4.195%, (3-month USD LIBOR + 1.75%), 4/18/31		United States		750,000		743,842
b,gEleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.555%, 9/10/35		United States		2,005,000		1,980,105
b,fEllington CLO III Ltd., 2018-3A, A1, 144A, FRN, 4.119%, (3-month USD LIBOR + 1.65%), 7/20/30		United States		500,000		499,715
fFHLMC Structured Agency Credit Risk Debt Notes,
2014-DN1, M2, FRN, 4.481%, (1-month USD LIBOR + 2.20%), 2/25/24		United States		430,828		442,130
2014-DN2, M3, FRN, 5.881%, (1-month USD LIBOR + 3.60%), 4/25/24		United States		2,000,000		2,206,550
2014-DN3, M3, FRN, 6.281%, (1-month USD LIBOR + 4.00%), 8/25/24		United States		203,490		221,225
2014-DN4, M3, FRN, 6.831%, (1-month USD LIBOR + 4.55%), 10/25/24		United States		1,703,728		1,884,060
2014-HQ2, M2, FRN, 4.481%, (1-month USD LIBOR + 2.20%), 9/25/24		United States		430,224		442,267
2014-HQ2, M3, FRN, 6.031%, (1-month USD LIBOR + 3.75%), 9/25/24		United States		2,500,000		2,865,922
2014-HQ3, M3, FRN, 7.031%, (1-month USD LIBOR + 4.75%), 10/25/24		United States		270,871		299,151
2015-DN1, M3, FRN, 6.431%, (1-month USD LIBOR + 4.15%), 1/25/25		United States		681,604		730,312
2015-DNA1, M2, FRN, 4.131%, (1-month USD LIBOR + 1.85%), 10/25/27		United States		213,380		216,811
2015-DNA1, M3, FRN, 5.581%, (1-month USD LIBOR + 3.30%), 10/25/27		United States		2,000,000		2,239,388
2015-DNA2, M2, FRN, 4.881%, (1-month USD LIBOR + 2.60%), 12/25/27		United States		126,898		129,365
2015-DNA2, M3, FRN, 6.181%, (1-month USD LIBOR + 3.90%), 12/25/27		United States		2,850,000		3,144,406
2015-DNA3, M2, FRN, 5.131%, (1-month USD LIBOR + 2.85%), 4/25/28		United States		433,386		447,388
2015-DNA3, M3, FRN, 6.981%, (1-month USD LIBOR + 4.70%), 4/25/28		United States		2,500,000		2,958,575

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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country		Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
fFHLMC Structured Agency Credit Risk Debt Notes, (continued)
2015-HQ1, M2, FRN, 4.487%, (1-month USD LIBOR + 2.20%), 3/25/25		United States		84,178	$	84,403
2015-HQ1, M3, FRN, 6.087%, (1-month USD LIBOR + 3.80%), 3/25/25		United States		550,000		583,058
2015-HQ2, M3, FRN, 5.537%, (1-month USD LIBOR + 3.25%), 5/25/25		United States		1,500,000		1,669,014
2015-HQA1, M3, FRN, 6.981%, (1-month USD LIBOR + 4.70%), 3/25/28		United States		2,000,000		2,277,563
2015-HQA2, M2, FRN, 5.081%, (1-month USD LIBOR + 2.80%), 5/25/28		United States		272,839		280,170
2015-HQA2, M3, FRN, 7.081%, (1-month USD LIBOR + 4.80%), 5/25/28		United States		2,000,000		2,312,272
2016-DNA1, M3, FRN, 7.837%, (1-month USD LIBOR + 5.55%), 7/25/28		United States		1,550,000		1,865,316
2016-DNA2, M2, FRN, 4.481%, (1-month USD LIBOR + 2.20%), 10/25/28		United States		300,946		303,842
2016-DNA2, M3, FRN, 6.931%, (1-month USD LIBOR + 4.65%), 10/25/28		United States		1,800,000		2,066,134
2016-DNA3, M2, FRN, 4.281%, (1-month USD LIBOR + 2.00%), 12/25/28		United States		311,101		314,624
2016-HQA2, M2, FRN, 4.531%, (1-month USD LIBOR + 2.25%), 11/25/28		United States		455,537		464,825
2016-HQA2, M3, FRN, 7.431%, (1-month USD LIBOR + 5.15%), 11/25/28		United States		2,000,000		2,349,024
2016-HQA3, M1, FRN, 3.081%, (1-month USD LIBOR + 0.80%), 3/25/29		United States		110,793		110,870
2016-HQA3, M2, FRN, 3.631%, (1-month USD LIBOR + 1.35%), 3/25/29		United States		2,350,000		2,384,981
2016-HQA4, M2, FRN, 3.581%, (1-month USD LIBOR + 1.30%), 4/25/29		United States		700,000		708,386
2013-DN2, M2, FRN, 6.531%, (1-month USD LIBOR + 4.25%), 11/25/23		United States		1,835,477		2,030,484
b,fFlagship CLO VIII Ltd., 2014-8A, CRR, 144A, FRN, 4.236%, (3-month USD LIBOR + 1.80%), 1/16/26		United States		1,400,000		1,394,568
b,gFlagstar Mortgage Trust, 2018-6RR, 1A3, 144A, FRN, 4.00%, 10/25/48		United States		1,450,000		1,452,890
fFNMA Connecticut Avenue Securities,
2013-C01, M1, FRN, 4.281%, (1-month USD LIBOR + 2.00%), 10/25/23		United States		1,572		1,574
2013-C01, M2, FRN, 7.531%, (1-month USD LIBOR + 5.25%), 10/25/23		United States		2,000,000		2,291,768
2014-C01, M2, FRN, 6.681%, (1-month USD LIBOR + 4.40%), 1/25/24		United States		3,300,000		3,736,180
2014-C02, 1M2, FRN, 4.881%, (1-month USD LIBOR + 2.60%), 5/25/24		United States		1,820,000		1,935,890
2014-C02, 2M2, FRN, 4.881%, (1-month USD LIBOR + 2.60%), 5/25/24		United States		2,819,215		2,984,871
2014-C03, 1M2, FRN, 5.281%, (1-month USD LIBOR + 3.00%), 7/25/24		United States		1,313,579		1,400,270
2014-C03, 2M2, FRN, 5.181%, (1-month USD LIBOR + 2.90%), 7/25/24		United States		2,665,343		2,850,286
2014-C04, 1M1, FRN, 7.181%, (1-month USD LIBOR + 4.90%), 11/25/24		United States		714,333		816,783
2014-C04, 2M2, FRN, 7.281%, (1-month USD LIBOR + 5.00%), 11/25/24		United States		498,779		562,583
2015-C01, 1M2, FRN, 6.581%, (1-month USD LIBOR + 4.30%), 2/25/25		United States		32,410		35,588
2015-C01, 2M2, FRN, 6.831%, (1-month USD LIBOR + 4.55%), 2/25/25		United States		129,896		140,160
2015-C02, 1M2, FRN, 6.281%, (1-month USD LIBOR + 4.00%), 5/25/25		United States		468,090		513,465
2015-C02, 2M2, FRN, 6.281%, (1-month USD LIBOR + 4.00%), 5/25/25		United States		147,746		159,401
2015-C03, 1M2, FRN, 7.281%, (1-month USD LIBOR + 5.00%), 7/25/25		United States		2,786,680		3,137,063
2015-C03, 2M2, FRN, 7.281%, (1-month USD LIBOR + 5.00%), 7/25/25		United States		731,959		813,727
2016-C01, 1M2, FRN, 9.031%, (1-month USD LIBOR + 6.75%), 8/25/28		United States		2,666,493		3,200,770
2017-C01, 1B1, FRN, 8.031%, (1-month USD LIBOR + 5.75%), 7/25/29		United States		33,000		39,898
2018-C04, 2M1, FRN, 3.031%, (1-month USD LIBOR + 0.75%), 12/25/30		United States		757,865		758,182
b,gFREMF Mortgage Trust, 2018-K72, B, 144A, FRN, 3.992%, 12/25/50		United States		450,000		432,511
b,h,iGalaxy XXVI CLO Ltd.,
2018-26A, A, 144A, FRN, 11/22/31		United States		685,921		685,921
2018-26A, B, 144A, FRN, 11/22/31		United States		600,000		600,000
b,fGalaxy XXVII CLO Ltd.,
2018-27A, A, 144A, FRN, 3.335%, (3-month USD LIBOR + 1.02%), 5/16/31		United States		2,500,000		2,488,800
2018-27A, C, 144A, FRN, 4.115%, (3-month USD LIBOR + 1.80%), 5/16/31		United States		1,450,000		1,448,608
2018-27A, C, 144A, FRN, 5.065%, (3-month USD LIBOR + 2.75%), 5/16/31		United States		300,000		298,965
b,fGilbert Park CLO Ltd.,
2017-1A, B, 144A, FRN, 4.036%, (3-month USD LIBOR + 1.60%), 10/15/30		United States		3,000,000		3,001,650
2017-1A, D, 144A, FRN, 5.386%, (3-month USD LIBOR + 2.95%), 10/15/30		United States		400,000		400,500

franklintempleton.com Semiannual Report       21

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country	Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
GS Mortgage Securities Trust,
2016-GS3, A4, 2.85%, 10/10/49	United States		600,000	$	558,455
2017-GS5, A4, 3.674%, 3/10/50	United States		2,600,000		2,552,273
2017-GS6, A3, 3.433%, 5/10/50	United States		2,000,000		1,923,658
b,fHalcyon Loan Advisors Funding Ltd., 2018-1A, A2, 144A, FRN, 4.183%, (3-month USD LIBOR + 1.80%), 7/21/31	United States		400,000		398,752
bInvitation Homes Trust,
f 2017-SFR2, A, 144A, FRN, 3.14%, (1-month USD LIBOR + 0.85%), 12/17/36	United States		3,345,149		3,353,808
f 2018-SFR1, A, 144A, FRN, 2.99%, (1-month USD LIBOR + 0.70%), 3/17/37	United States		1,588,306		1,588,326
f 2018-SFR3, A, 144A, FRN, 3.29%, (1-month USD LIBOR + 1.00%), 7/17/37	United States		1,129,791		1,130,530
g,h 2018-SFR4, A, 144A, FRN, 3.35%, 1/17/38	United States		1,370,000		1,370,000
b,gJ.P. Morgan Chase Commercial Mortgage Securities Trust, 2016-NINE, A, 144A, FRN, 2.854%, 10/06/38	United States		600,000		556,104
JPMBB Commercial Mortgage Securities Trust,
2015-C30, A5, 3.822%, 7/15/48	United States		1,500,000		1,496,731
g 2015-C30, AS, FRN, 4.226%, 7/15/48	United States		450,000		452,855
2016-C1, A5, 3.576%, 3/15/49	United States		1,500,000		1,468,565
JPMCC Commercial Mortgage Securities Trust, 2017-JP6, A5, 3.49%, 7/15/50	United States		2,100,000		2,024,547
g,jJPMDB Commercial Mortgage Securities Trust, 2017-C5, XA, IO, FRN, 1.018%, 3/15/50	United States		196,407		12,034
b,fLCM 26 Ltd., 26A, C, 144A, FRN, 4.269%, (3-month USD LIBOR + 1.80%), 1/20/31	United States		400,000		395,596
b,h,iLCM 28 Ltd.,
28A, B, 144A, FRN, 10/20/30	United States		1,000,000		1,000,000
28A, C, 144A, FRN, 10/20/30	United States		500,000		500,000
b,fLong Point Park CLO Ltd.,
2017-1A, A2, 144A, FRN, 3.824%, (3-month USD LIBOR + 1.375%), 1/17/30	United States		1,000,000		991,220
2017-1A, B, 144A, FRN, 4.149%, (3-month USD LIBOR + 1.70%), 1/17/30	United States		1,000,000		982,140
b,h,iMadison Park Funding XXIX Ltd.,
2018-29A, A2, 144A, FRN, 10/18/30	United States		1,468,182		1,468,182
2018-29A, B, 144A, FRN, 10/18/30	United States		3,000,000		3,000,000
2018-29A, C, 144A, FRN, 10/18/30	United States		766,129		766,129
2018-29A, D, 144A, FRN, 10/18/30	United States		600,000		600,000
b,gMadison Park Funding XIV Ltd.,
2014-14A, A2RR, 144A, FRN, 3.869%, 10/22/30	United States		1,000,000		999,940
2014-14A, BRR, 144A, FRN, 4.169%, 10/22/30	United States		1,500,000		1,499,580
2014-14A, CRR, 144A, FRN, 4.669%, 10/22/30	United States		562,500		562,331
b,fMagnetite XVIII Ltd., 2016-18A, C, 144A, FRN, 4.664%, (3-month USD LIBOR + 2.35%), 11/15/28	United States		1,867,000		1,868,662
b,gMill City Mortgage Loan Trust, 2018-1, A1, 144A, FRN, 3.25%, 5/25/62	United States		2,358,529		2,337,534
bMorgan Stanley Capital I Trust, 2014-150E, A, 144A, 3.912%, 9/09/32	United States		450,000		449,835
b,fNeuberger Berman Loan Advisers CLO Ltd., 2017-26A, B, 144A, FRN, 3.945%, (3-month USD LIBOR + 1.50%), 10/18/30	United States		539,475		536,540
b,fOctagon Investment Partners 18-R Ltd., 2018-18A, C, 144A, FRN, 5.136%, (3-month USD LIBOR + 2.70%), 4/16/31	United States		350,000		347,039
b,gOctagon Investment Partners 27 Ltd., 2016-1A, CR, 144A, FRN, 4.536%, 7/15/30	United States		1,565,000		1,562,715

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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country	Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
b,fOctagon Investment Partners 33 Ltd.,
2017-1A, A2, 144A, FRN, 3.969%, (3-month USD LIBOR + 1.50%), 1/20/31	United States		2,000,000	$	1,992,740
2017-1A, B, 144A, FRN, 4.319%, (3-month USD LIBOR + 1.85%), 1/20/31	United States		500,000		495,710
2017-1A, C, 144A, FRN, 5.219%, (3-month USD LIBOR + 2.75%), 1/20/31	United States		250,000		248,297
b,fOctagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 3.468%, (3-month USD LIBOR + 1.13%), 8/12/26	United States		500,000		500,660
b,fOctagon Investment Partners XXIII Ltd.,
2015-1A, BR, 144A, FRN, 3.636%, (3-month USD LIBOR + 1.20%), 7/15/27	United States		1,200,000		1,198,836
2015-1A, CR, 144A, FRN, 4.286%, (3-month USD LIBOR + 1.85%), 7/15/27	United States		2,000,000		2,002,640
2015-1A, DR, 144A, FRN, 4.986%, (3-month USD LIBOR + 2.55%), 7/15/27	United States		300,000		298,491
bProgress Residential Trust, 2018-SFR2, A, 144A, 3.712%, 8/17/35	United States		290,000		287,100
b,gRace Point X CLO Ltd., 2016-10A, C1R, 144A, FRN, 4.49%, 7/25/31	United States		1,700,000		1,694,645
b,fRadnor RE Ltd., 2018-1, M1, 144A, FRN, 3.681%, (1-month USD LIBOR + 1.40%), 3/25/28	United States		630,000		631,269
b,fTCI-Cent CLO Income Note Issuer Ltd., 2017-1A, B, 144A, FRN, 4.84%, (3-month USD LIBOR + 2.35%), 7/25/30	United States		2,000,000		2,007,460
bTCI-Flatiron CLO Ltd.,
g2017-1A, A, 144A, FRN, 3.512%, 11/17/30	United States		2,000,000		2,001,520
f2017-1A, B, 144A, FRN, 3.872%, (3-month USD LIBOR + 1.56%), 11/17/30	United States		2,000,000		1,994,060
f2017-1A, C, 144A, FRN, 4.162%, (3-month USD LIBOR + 1.85%), 11/17/30	United States		1,200,000		1,190,196
f2017-1A, D, 144A, FRN, 5.062%, (3-month USD LIBOR + 2.75%), 11/17/30	United States		250,000		246,660
gThornburg Mortgage Securities Trust, 2005-1, A3, FRN, 3.518%, 4/25/45	United States		26,673		26,989
bTowd Point Mortgage Trust,
g2015-2, 2A1, 144A, FRN, 3.75%, 11/25/57	United States		385,264		385,782
g2016-3, A1, 144A, FRN, 2.25%, 4/25/56	United States		1,919,268		1,877,366
g2016-4, A1, 144A, FRN, 2.25%, 7/25/56	United States		1,215,792		1,183,846
g 2016-5, A1, 144A, FRN, 2.50%, 10/25/56	United States		468,775		457,463
g2017-1, A1, 144A, FRN, 2.75%, 10/25/56	United States		1,421,414		1,392,526
g2017-2, A1, 144A, FRN, 2.75%, 4/25/57	United States		1,390,986		1,362,446
g2017-4, A1, 144A, FRN, 2.75%, 6/25/57	United States		272,917		265,728
f2017-5, A1, 144A, FRN, 2.887%, (1-month USD LIBOR + 0.60%), 2/25/57	United States		159,816		160,038
g2018-1, A1, 144A, FRN, 3.00%, 1/25/58	United States		620,657		608,420
g2018-2, A1, 144A, FRN, 3.25%, 3/25/58	United States		302,008		298,063
g2018-4, A1, 144A, FRN, 3.00%, 6/25/58	United States		1,959,199		1,903,975
g2018-5, A1A, 144A, FRN, 3.25%, 7/25/58	United States		652,576		645,038
bVoya CLO Ltd.,
f2013-2A, A1R, 144A, FRN, 3.46%, (3-month USD LIBOR + 0.97%), 4/25/31	United States		2,000,000		1,990,000
f2013-2A, BR, 144A, FRN, 4.34%, (3-month USD LIBOR + 1.85%), 4/25/31	United States		2,000,000		1,990,600
f2014-1A, BR2, 144A, FRN, 4.345%, (3-month USD LIBOR + 1.90%), 4/18/31	United States		2,750,000		2,746,700
g2016-3A, A2R, 144A, FRN, 3.871%, 10/18/31	United States		1,636,364		1,636,364
f2017-2A, B, 144A, FRN, 4.786%, (3-month USD LIBOR + 2.35%), 6/07/30	United States		1,000,000		1,002,770

franklintempleton.com Semiannual Report       23

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Country	Principal Amount*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
b,fWebster Park CLO Ltd., 2015-1A, BR, 144A, FRN, 4.269%, (3-month USD LIBOR + 1.80%), 7/20/30	United States		2,000,000	$	1,993,660
Wells Fargo Commercial Mortgage Trust, 2016-NXS6, A4, 2.918%, 11/15/49	United States		1,500,000		1,400,227
b,gWells Fargo Mortgage Backed Securities, 2018-1, A3, 144A, FRN, 3.50%, 7/25/47	United States		910,000		895,985
b,fWest CLO Ltd., 2014-1A, A2R, 144A, FRN, 3.795%, (3-month USD LIBOR + 1.35%), 7/18/26	United States		170,000		170,000
					205,708,900
Real Estate 0.2%
b American Homes 4 Rent, 2014-SFR3, A, 144A, 3.678%, 12/17/36	United States		754,475		746,086
b,f Colony American Homes, 2015-1A, A, 144A, FRN, 3.487%, (1-month USD LIBOR + 1.20%), 7/17/32	United States		100,589		100,678
					846,764
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $209,277,277)					208,078,005
Mortgage-Backed Securities (Cost $258,612) 0.1%
Federal National Mortgage Association (FNMA) Fixed Rate 0.1%
FNMA, 3.50%, 7/01/56	United States		251,403		244,228
Municipal Bonds 0.2%
Cincinnati GO, Various Purpose, Improvement and Refunding, Series A, 5.00%, 12/01/25	United States		100,000		113,844
Citizens Property Insurance Corp. Revenue, Coastal Account, senior secured, Series A-1, 5.00%, 6/01/22	United States		125,000		134,748
Colorado State Board of Governors University Enterprise System Revenue, Green Bonds, Series E-2, 5.00%, 3/01/25	United States		100,000		114,173
Orlando Health Obligated Group, 3.777%, 10/01/28	United States		105,000		102,049
Providence St. Joseph Health Obligated Group, 2.746%, 10/01/26	United States		15,000		13,751
San Jose RDA Successor Agency Tax Allocation, Senior, Refunding, Series A-T, 3.226%, 8/01/27	United States		190,000		182,119
Teays Valley Local School District GO, Pickaway Fairfield and Franklin Counties, Refunding, 4.00%, 12/01/26	United States		100,000		105,256
Texas State GO, Transportation Commission Highway Improvement, Series A, 5.00%, 4/01/21	United States		5,000		5,332
Total Municipal Bonds (Cost $782,888)					771,272
	Number of Contracts	Notional Amount*
Options Purchased 0.1%
Puts - Over-the-Counter
Credit Default Swaptions 0.1%
Buy protection on CDX.NA.HY.31, Premium Rate 5.00%, Strike Price $106.50, Counterparty SMB, Expires 2/20/19	1		7,000,000		202,811
Buy Protection on CDX.NA.IG.30, Premium Rate 1.00%, Strike Price $60, Counterparty JPHQ, Expires 12/19/18	1		13,000,000		37,076
Buy protection on CDX.NA.IG.30, Premium Rate 1.00%, Strike Price $62.50, Counterparty SMB, Expires 11/21/18	1		8,750,000		13,825
					253,712

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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Number of Contracts		Notional  Amount*		Value
Options Purchased (continued)
Puts - Over-the-Counter (continued)
Interest Rate Swaptions 0.0%†
Receive float 1 year USD LIBOR, Pay fixed 3.60%, Counterparty SMB, Expires 1/22/19		1		13,500,000	$	124,119
Receive float 3 month USD LIBOR, Pay fixed 3.42%, Counterparty SMB, Expires 2/05/19		1		8,000,000		40,904
						165,023
Total Options Purchased (Cost $319,777)						418,735
Total Investments before Short Term Investments (Cost $338,979,553)						333,927,844
	Country		Principal  Amount*
Short Term Investments 24.2%
Corporate Bonds (Cost $300,851) 0.0%†
Diversified Financials 0.0%†
Navient Corp., senior note, 5.50%, 1/15/19		United States		300,000		301,500
Total Investments before Money Market Funds (Cost $339,280,404)						334,229,344
			Shares
Money Market Funds (Cost $100,219,262) 24.2%
k,lInstitutional Fiduciary Trust Money Market Portfolio, 1.83%		United States		100,219,262		100,219,262
Total Investments (Cost $439,499,666) 104.8%						434,448,606
Options Written (0.0)%†						(123,469	)
TBA Sale Commitments (0.1)%						(292,066	)
Other Assets, less Liabilities (4.7)%						(19,573,538	)
Net Assets 100.0%					$	414,459,533
			Principal  Amount*
TBA Sale Commitments (Proceeds $293,344) (0.1)%
Federal National Mortgage Association (FNMA) Fixed Rate (0.1)%
mFNMA 30 Year, 3.50%, 10/01/48		United States		300,000	$	(292,066	)

franklintempleton.com Semiannual Report       25

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Number of Contracts		Notional  Amount*		Value
nOptions Written (0.0)%†
Puts - Over-the-Counter
Credit Default Swaptions (0.0)%†
Buy protection on CDX.NA.HY.31, Premium Rate 5.00%, Strike Price $104.50, Counterparty SMB, Expires 2/20/19		1		7,000,000	$	(111,594	)
Buy Protection on CDX.NA.IG.30, Premium Rate 1.00%, Strike Price $75, Counterparty JPHQ, Expires 12/19/18		1		13,000,000		(10,361	)
Buy protection on CDX.NA.IG.30, Premium Rate 1.00%, Strike Price $80, Counterparty SMB, Expires 11/21/18		1		8,750,000		(1,514	)
Total Options Written (Premiums received $62,463)					$	(123,469	)

^†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 October 31, 2018, the aggregate value of these securities was $17,408,240, representing 4.2% 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 October 31, 2018, the aggregate value of these securities was $164,300,319, representing 39.6% of net assets.

^cThe coupon rate shown represents the rate at period end.

^dPerpetual security with no stated maturity date.

^ePrincipal amount of security is adjusted for inflation. See Note 1(h).

^fThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.

^gAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.

^hSecurity purchased on a when-issued basis. See Note 1(c).

ⁱThe coupon rate will be determined at time of issue.

^jInvestment in an interest-only security entitles holders to receive only the interest payment on the underlying instruments. The principal amount shown is the notional amount of the underlying instruments.

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

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

^mSecurity sold on a to-be-announced (TBA) basis resulting in a short position. As such, the Fund is not subject to fees and expenses associated with short sale transactions.

ⁿSee Note 1(d) regarding written options.

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FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

At October 31, 2018, the Fund had the following futures contracts outstanding. See Note 1(d).

Futures Contracts

Description	Type		Number of Contracts		Notional  Amount*		Expiration Date		Value/ Unrealized Appreciation (Depreciation)
Interest Rate Contracts
Australian 10 Yr. Bond		Long		63	$	5,771,100		12/17/18		$  10,572
Canadian 10 Yr. Bond		Long		55		5,522,357		12/18/18		(53,369	)
Euro-Bund		Short		69		12,520,352		12/06/18		(67,518	)
U.S. Treasury 2 Yr. Note		Short		308		64,882,125		12/31/18		125,886
U.S. Treasury 5 Yr. Note		Short		308		34,613,906		12/31/18		177,023
U.S. Treasury 10 Yr. Note		Short		187		22,147,813		12/19/18		171,974
Ultra 10 Yr. U.S. Treasury Note		Long		11		1,376,203		12/19/18		(32,685	)
Total Futures Contracts										$331,883

*As of period end.

At October 31, 2018, the Fund had the following forward exchange contracts outstanding. See Note 1(d).

Forward Exchange Contracts

Currency	Counterpartya		Type		Quantity		Contract  Amount*			Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Canadian Dollar		UBSW		Buy		26,000		27,915	AUD		11/02/18	$	—	$	(5	)
Canadian Dollar		UBSW		Sell		26,000		26,805	AUD		11/02/18		—		(781	)
Indonesian Rupiah		JPHQ		Buy		16,736,500,000		1,124,182			11/27/18		—		(28,758	)
Mexican Peso		RBS		Buy		23,658,000		1,232,197			11/28/18		—		(73,047	)
Philippine Peso		JPHQ		Sell		67,100,000		1,233,972			11/29/18		—		(21,871	)
Japanese Yen		JPHQ		Buy		188,300,000		1,681,527			11/30/18		—		(9,810	)
Japanese Yen		JPHQ		Sell		188,300,000		1,684,860			11/30/18		13,144		—
Polish Zloty		RBS		Buy		1,550,000		425,252			12/03/18		—		(21,068	)
Swedish Krona		UBSW		Buy		19,735,000		2,203,179			12/05/18		—		(40,922	)
Swedish Krona		UBSW		Sell		7,000,000		799,360			12/05/18		32,409		—
Canadian Dollar		UBSW		Sell		2,557,000		1,968,634			12/06/18		24,471		—
Japanese Yen		JPHQ		Buy		35,719,260		324,259			12/17/18		—		(6,514	)
Japanese Yen		JPHQ		Sell		35,719,260		324,187			12/17/18		6,442		—
Australian Dollar		UBSW		Sell		1,820,000		1,310,768			12/27/18		21,651		—
Euro		UBSW		Sell		2,177,000		2,574,607			12/27/18		96,199		—
Norwegian Krone		UBSW		Buy		1,690,000		206,669			1/15/19		—		(5,527	)
British Pound		UBSW		Sell		82,000		108,839			1/18/19		3,646		—
Indian Rupee		RBS		Buy		87,750,000		1,183,181			1/29/19		—		(13,025	)
Canadian Dollar		RBS		Sell		91,000		69,705			1/30/19		434		—
Mexican Peso		JPHQ		Buy		16,500,000		811,768			2/05/19		—		(12,682	)
Canadian Dollar		UBSW		Sell		26,000		27,934	AUD		2/11/19		7		—
Euro		JPHQ		Buy		1,200,000		1,383,657			3/14/19		—		(7,939	)
Euro		JPHQ		Sell		1,200,000		1,403,160			3/14/19		27,443		—
Euro		JPHQ		Buy		1,500,000		1,729,746			3/15/19		—		(9,950	)
Chinese Yuan Renminbi		JPHQ		Sell		5,800,000		827,862			4/26/19		2,661		—

franklintempleton.com Semiannual Report       27

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

Forward Exchange Contracts (continued)

Currency	Counterpartya		Type		Quantity		Contract  Amount*		Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
British Pound		JPHQ		Sell		86,300		115,081		8/15/19	$	3,184	$	—
Total Forward Exchange Contracts											$	231,691	$	(251,899	)
Net unrealized appreciation (depreciation)													$	(20,208	)

*In U.S. dollars unless otherwise indicated.

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

At October 31, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(d).

Credit Default Swap Contracts

Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional  Amounta		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
Centrally Cleared Swap Contracts
Contracts to Buy Protectionc
Single Name
Navient Corp.		(5.00)%		Quarterly				3/20/19	$	300,000	$	(7,129	)	$	(4,746	)	$	(2,383	)
Contracts to Sell Protectionc,d
Traded Index
CDX.EM.30		1.00%		Quarterly				12/20/23		400,000		(18,566	)		(17,477	)		(1,089	)		Investment
																					Grade
Total Centrally Cleared Swap Contracts.											$	(25,695	)	$	(22,223	)	$	(3,472	)
OTC Swap Contracts
Contracts to Buy Protectionc
Single Name
The AES Corp.		(5.00)%		Quarterly		JPHQ		6/20/22	$	35,000	$	(5,250	)	$	(3,435	)	$	(1,815	)
Ally Financial Inc.		(5.00)%		Quarterly		CITI		12/20/22		150,000		(22,859	)		(22,652	)		(207	)
Ally Financial Inc.		(5.00)%		Quarterly		JPHQ		12/20/22		100,000		(15,240	)		(15,272	)		32
Ally Financial Inc.		(5.00)%		Quarterly		JPHQ		12/20/22		150,000		(22,859	)		(22,770	)		(89	)
American Airlines Group Inc.		(5.00)%		Quarterly		BZWS		12/20/19		400,000		(22,826	)		(18,955	)		(3,871	)
American Airlines Group Inc.		(5.00)%		Quarterly		CITI		12/20/19		130,000		(7,418	)		(6,082	)		(1,336	)
Boyd Gaming Corp.		(5.00)%		Quarterly		BZWS		6/20/22		525,000		(74,497	)		(72,027	)		(2,470	)
Dish DBS Corp.		(5.00)%		Quarterly		BZWS		12/20/20		175,000		(12,946	)		(10,873	)		(2,073	)
Dish DBS Corp.		(5.00)%		Quarterly		JPHQ		6/20/21		470,000		(31,403	)		(18,153	)		(13,250	)
Energy Transfer LP		(5.00)%		Quarterly		MSCO		12/20/20		750,000		(77,204	)		(67,501	)		(9,703	)
Government of Italy		(1.00)%		Quarterly		BZWS		6/20/23		700,000		15,528			7,070			8,458
Government of Turkey		(1.00)%		Quarterly		BZWS		12/20/19		166,667		3,944			8,850			(4,906	)
KB Home		(5.00)%		Quarterly		JPHQ		3/20/20		100,000		(6,662	)		(4,933	)		(1,729	)
Nabors Industries Inc.		(1.00)%		Quarterly		JPHQ		6/20/20		5,000		(10	)		74			(84	)
Navient Corp.		(5.00)%		Quarterly		JPHQ		3/20/20		400,000		(26,247	)		(20,145	)		(6,102	)
PHH Corp.		(5.00)%		Quarterly		BZWS		9/20/19		200,000		(9,552	)		(796	)		(8,756	)
Safeway Inc.		(5.00)%		Quarterly		BZWS		6/20/19		1,000,000		(34,272	)		(22,457	)		(11,815	)
Sanmina Corp.		(5.00)%		Quarterly		BZWS		6/20/19		100,000		(3,628	)		(2,735	)		(893	)

28       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

Credit Default Swap Contracts (continued)

Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional  Amounta		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
OTC Swap Contracts (continued)
Contracts to Buy Protectionc (continued)
Single Name (continued)
Springleaf Finance Corp.		(5.00)%		Quarterly		GSCO		6/20/20		60,000		(4,378	)		(1,186	)		(3,192	)
Tenet Healthcare Corp.		(5.00)%		Quarterly		BZWS		3/20/19		90,000		(2,135	)		(782	)		(1,353	)
Universal Health Services Inc.		(5.00)%		Quarterly		BZWS		9/20/19		50,000		(2,449	)		(1,841	)		(608	)
Contracts to Sell Protectionc,d
Single Name
American Tower Corp.		1.00%		Quarterly		GSCO		3/20/21	$	100,000	$	(59	)	$	(894	)	$	835			BBB-
Capital One Financial Corp.		1.00%		Quarterly		JPHQ		12/20/22		150,000		2,509			2,153			356			BBB
Dish DBS Corp.		5.00%		Quarterly		BZWS		12/20/22		175,000		3,840			7,473			(3,633	)		B
Dish DBS Corp.		5.00%		Quarterly		JPHQ		6/20/23		470,000		(2,271	)		(5,767	)		3,496			B
General Electric Co.		1.00%		Quarterly		BZWS		12/20/23		400,000		(8,226	)		(1,649	)		(6,577	)		BBB+
General Electric Co.		1.00%		Quarterly		CITI		12/20/23		840,000		(17,275	)		4,080			(21,355	)		BBB+
General Electric Co.		1.00%		Quarterly		CITI		12/20/23		440,000		(9,049	)		(2,120	)		(6,929	)		BBB+
General Electric Co.		1.00%		Quarterly		JPHQ		12/20/23		200,000		(3,838	)		(4,071	)		233			BBB+
Goldman Sachs Group Inc.		1.00%		Quarterly		BZWS		12/20/22		250,000		4,063			3,904			159			BBB+
Goldman Sachs Group Inc.		1.00%		Quarterly		JPHQ		12/20/22		150,000		2,438			2,318			120			BBB+
Government of Argentina		5.00%		Quarterly		CITI		12/20/23		630,000		(24,024	)		(36,656	)		12,632			B+
Government of China		1.00%		Quarterly		CITI		12/20/23		4,150,000		59,579			74,343			(14,764	)		A+
Government of Indonesia		1.00%		Quarterly		CITI		12/20/23		2,925,000		(72,600	)		(65,012	)		(7,588	)		BBB-
Government of Italy		1.00%		Quarterly		BZWS		6/20/23		700,000		(44,217	)		(31,002	)		(13,215	)		NR
Morgan Stanley		1.00%		Quarterly		BZWS		12/20/22		250,000		4,752			4,377			375			BBB+
Nabors Industries Inc.		1.00%		Quarterly		JPHQ		6/20/22		5,000		(304	)		(475	)		171			BB
Sprint Communications Inc.		5.00%		Quarterly		JPHQ		9/20/20		12,000		999			—			999			B
Traded Index
eBNP Paribas Bespoke Bordeaux Index, Mezzanine Tranche 5-7%		2.00%		Quarterly		BNDP		12/20/20		500,000		(5,005	)		—			(5,005	)		Non-
																					Investment Grade
eBNP Paribas Bespoke Bordeaux Index, Mezzanine Tranche 7-10%		2.10%		Quarterly		BNDP		6/20/20		300,000		243			—			243			Non-
																					Investment Grade
eCitibank Bespoke Bogota Index, Mezzanine Tranche 7-10%		1.35%		Quarterly		CITI		6/20/20		1,650,000		4,919			—			4,919			Non-
																					Investment Grade
eCitibank Bespoke Boulder Index, Mezzanine Tranche 5-10%		1.18%		Quarterly		CITI		12/20/19		3,000,000		12,582			—			12,582			Non-
																					Investment Grade

franklintempleton.com Semiannual Report       29

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

Credit Default Swap Contracts (continued)

Description	Periodic Payment Rate Received (Paid)	Payment Frequency		Counter- party		Maturity Date		Notional  Amounta		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
OTC Swap Contracts (continued)
Contracts to Sell Protectionc,d (continued)
Traded Index (continued)
eCitibank Bespoke Boulder Index, Mezzanine Tranche 5-15%	1.24%		Quarterly		CITI		12/20/19	$	1,600,000	$	11,914		$	—			$  11,914			Non-
																				Investment Grade
eCitibank Bespoke Broker Index, Mezzanine Tranche 3-7%	1.30%		Quarterly		CITI		6/20/19		1,900,000		4,049			—			4,049			Non-
																				Investment Grade
eCitibank Bespoke Broker Index, Mezzanine Tranche 3-7%	1.40%		Quarterly		CITI		6/20/19		1,500,000		4,316			—			4,316			Non-
																				Investment Grade
eCitibank Bespoke Cambridge Index, Equity Tranche 0-3%	0.00%		Quarterly		CITI		12/20/19		500,000		(87,430	)		(46,534	)		(40,896	)		Non-
																				Investment Grade
eCitibank Bespoke Hong Kong Index, Mezzanine Tranche 3-5%	1.00%		Quarterly		CITI		12/20/18		30,000		39			(88	)		127			Non-
																				Investment Grade
eCitibank Bespoke Index, Mezzanine Tranche 6-10%	0.63%		Quarterly		CITI		12/20/18		1,000,000		599			—			599			Non-
																				Investment Grade
eCitibank Bespoke Lima Index, Mezzanine Tranche 5-7%	2.13%		Quarterly		CITI		12/20/19		650,000		3,815			—			3,815			Non-
																				Investment Grade
eCitibank Bespoke Lisbon Index, Equity Tranche 0-3%	0.00%		Quarterly		CITI		6/20/19		10,000		(638	)		(752	)		114			Non-
																				Investment Grade
eCitibank Bespoke Lisbon Index, Mezzanine Tranche 3-7%	0.79%		Quarterly		CITI		6/20/19		1,100,000		(1,957	)		—			(1,957	)		Non-
																				Investment Grade
eCitibank Bespoke Verona Index, Equity Tranche 0-3%	0.00%		Quarterly		CITI		12/20/19		15,000		(2,199	)		(1,713	)		(486	)		Non-
																				Investment Grade

30       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

Credit Default Swap Contracts(continued)

Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amounta		Value		Unamortized Upfront Payments (Receipts)		Unrealized Appreciation (Depreciation)		Ratingb
OTC Swap Contracts (continued)
Contracts to Sell Protectionc,d (continued)
Traded Index (continued)
eCitibank Bespoke Verona Index, Mezzanine Tranche 7-15%		0.40%		Quarterly		CITI		12/20/19	$	280,000	$	825	$	—	$	825		Non-
																		Investment Grade
MCDX.NA.30		1.00%		Quarterly		CITI		6/20/23		7,100,000		177,856		154,075		23,781		Investment
																		Grade
MCDX.NA.30		1.00%		Quarterly		CITI		6/20/28		2,000,000		50,100		19,444		30,656		Investment
																		Grade
Total OTC Swap Contracts											$	(292,018)	$	(221,167)	$	(70,851)
Total Credit Default Swap Contracts											$	(317,713)	$	(243,390)	$	(74,323)

^aIn U.S. dollars unless otherwise indicated. For contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.

^bBased on Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps, and failure to pay or bankruptcy of the underlying securities for traded index swaps.

^dThe Fund enters contracts to sell protection to create a long credit position.

^eRepresents a custom index comprised of a basket of underlying instruments.

At October 31, 2018, the Fund had the following cross-currency swap contracts outstanding. See Note 1(d).

Cross-Currency Swap Contracts

Description

Payment Frequency

Counter- party

Maturity Date

Notional Amount

Value/ Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Receive Floating 3-month USD LIBOR + 0.728%

Quarterly

1,185,000

USD

Pay Fixed 0.10%

Annual

HSBK

1/15/19

1,000,000

EUR

$

52,943

Receive Floating 3-month USD LIBOR + 1.894%

Quarterly

2,460,000

USD

Pay Fixed 1.50%

Annual

CITI

5/04/21

2,000,000

EUR

229,459

Receive Floating 3-month USD LIBOR + 1.850%

Quarterly

617,500

USD

Pay Fixed 1.50%

Annual

CITI

5/04/21

500,000

EUR

59,603

Receive Floating 3-month USD LIBOR + 2.870%

Quarterly

232,400

USD

Pay Fixed 2.50%

Annual

CITI

5/04/21

200,000

EUR

6,980

Receive Floating 3-month USD LIBOR + 1.303%

Quarterly

496,000

USD

Pay Fixed 1.00%

Annual

JPHQ

5/04/21

400,000

EUR

49,684

Receive Floating 3-month USD LIBOR + 1.123%

Quarterly

111,500

USD

Pay Fixed 0.75%

Annual

HSBK

4/01/22

100,000

EUR

(1,077

)

franklintempleton.com Semiannual Report       31

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

Cross-Currency Swap Contracts (continued)

Description	Payment Frequency		Counter- party		Maturity Date		Notional Amount			Value/ Unrealized Appreciation (Depreciation)
OTC Swap Contracts (continued)
Receive Floating 3-month USD LIBOR + 1.045%		Quarterly						1,552,200	USD
Pay Fixed 0.75%		Annual		HSBK		5/31/22		1,300,000	EUR		$    93,566
Receive Floating 3-month USD LIBOR + 0.849%		Quarterly						3,472,000	USD
Pay Fixed 0.75%		Annual		DBAB		9/14/22		2,800,000	EUR		350,096
Receive Floating 3-month USD LIBOR + 0.821%		Quarterly						466,000	USD
Pay Fixed 0.625%		Annual		BNDP		6/08/23		400,000	EUR		18,132
Receive Floating 3-month USD LIBOR + 0.783%		Quarterly						957,600	USD
Pay Fixed 0.625%		Annual		HSBK		6/08/23		800,000	EUR		61,836
Receive Floating 3-month USD LIBOR + 0.825%		Quarterly						4,616,000	USD
Pay Fixed 1.00%		Annual		CITI		7/16/24		4,000,000	EUR		64,775
Receive Floating 3-month USD LIBOR + 0.730%		Quarterly						466,000	USD
Pay Fixed 1.00%		Annual		CITI		11/26/25		400,000	EUR		15,305
Receive Floating 3-month USD LIBOR + 1.395%		Quarterly						358,500	USD
Pay Fixed 1.50%		Annual		HSBK		11/26/25		300,000	EUR		21,291
Receive Floating 3-month USD LIBOR + 1.415%		Quarterly						598,500	USD
Pay Fixed 1.50%		Annual		HSBK		11/26/25		500,000	EUR		36,596
Total Cross Currency Swap Contracts											$1,059,189

At October 31, 2018, the Fund had the following interest rate swap contracts outstanding. See Note 1(d).

Interest Rate Swap Contracts

Description	Payment Frequency		Maturity Date		Notional Amount		Value		Unamortized Upfront Payments (Receipts)		Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.788%		Semi-Annual		3/26/23	$	7,900,000		$ 105,085		$        —		$105,085
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.790%		Semi-Annual		3/28/23		7,900,000		104,682		—		104,682
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.713%		Semi-Annual		3/29/23		4,700,000		77,786		—		77,786
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.806%		Semi-Annual		4/17/23		5,800,000		75,836		—		75,836
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 2.00%		Semi-Annual		6/20/25		11,100,000		716,619		597,834		118,785
Receive Floating 3-month USD LIBOR		Quarterly
Pay Fixed 3.082%		Semi-Annual		9/28/25		8,000,000		31,251		—		31,251
Total Interest Rate Swap Contracts								$1,111,259		$597,834		$513,425

32       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

At October 31, 2018, the Fund had the following inflation index swap contracts outstanding. See Note 1(d).

Inflation Index Swap Contracts

Description	Payment Frequency		Maturity Date		Notional Amount		Value/ Unrealized Appreciation (Depreciation)
Centrally Cleared Swap Contracts
Receive variable change in USA-CPI-U		At maturity
Pay Fixed 2.079%		At maturity		9/18/24	$	1,770,000		$  24,763
Receive variable change in USA-CPI-U		At maturity
Pay Fixed 2.35%		At maturity		9/20/26		5,200,000		(50,794	)
Receive variable change in USA-CPI-U		At maturity
Pay Fixed 2.313%		At maturity		6/01/28		1,400,000		(6,455	)
Total Inflation Index Swap Contracts								$(32,486	)

At October 31, 2018, the Fund had the following total return swap contracts outstanding. See Note 1(d).

Total Return Swap Contracts

Underlying Instruments

Financing Rate

Payment Frequency

Counterparty

Maturity Date

Notional Value

Value/ Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Longa

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

FBCO

12/20/18

$  4,500,000

$  71,787

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

GSCO

12/20/18

5,160,000

98,099

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

FBCO

3/20/19

5,300,000

82,025

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

GSCO

3/20/19

4,000,000

60,272

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

JPHQ

3/20/19

1,050,000

16,775

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

JPHQ

6/20/19

22,800,000

6,178

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

MSCO

6/20/19

900,000

1,020

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

CITI

9/20/19

4,200,000

(33,482

)

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

GSCO

9/20/19

14,000,000

(122,567

)

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

JPHQ

9/20/19

4,200,000

(26,289

)

Total Total Return Swap Contracts

$ 153,818

^a The Fund receives the total return on the underlying instrument and pays a variable financing rate.

See Note 8 regarding other derivative information.

See Abbreviations on page 53.

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

FRANKLIN STRATEGIC SERIES

Financial Statements

Statement of Assets and Liabilities

October 31, 2018 (unaudited)

Franklin Flexible Alpha Bond Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$339,280,404
Cost - Non-controlled affiliates (Note 3f)	100,219,262
Value - Unaffiliated issuers	$334,229,344
Value - Non-controlled affiliates (Note 3f)	100,219,262
Cash	316,796
Restricted cash for OTC derivative contracts (Note 1e)	1,090,000
Foreign currency, at value (cost $219,345)	219,470
Receivables:
Investment securities sold	293,693
Capital shares sold	95
Interest	1,259,050
Deposits with brokers for:
Futures contracts	908,252
Centrally cleared swap contracts	1,216,075
Variation margin on futures contracts	132,164
Variation margin on centrally cleared swap contracts	101,707
OTC swap contracts (upfront payments $317,135)	288,161
Unrealized appreciation on OTC forward exchange contracts	231,691
Unrealized appreciation on OTC swap contracts	1,522,228
Other assets	69,365
Total assets	442,097,353
Liabilities:
Payables:
Investment securities purchased	23,658,111
Capital shares redeemed	557
Management fees	159,435
Distribution fees	822
Transfer agent fees	5,955
Distributions to shareholders	898,417
Deposits from brokers for:
OTC derivative contracts	1,310,000
OTC swap contracts (upfront receipts $719,624)	509,328
Options written, at value (premiums received $62,463)	123,469
TBA sale commitments, at value (proceeds $293,344)	292,066
Unrealized depreciation on OTC forward exchange contracts	251,899
Unrealized depreciation on OTC swap contracts	380,072
Accrued expenses and other liabilities	47,689
Total liabilities	27,637,820
Net assets, at value	$414,459,533
Net assets consist of:
Paid-in capital	$416,804,664
Total distributable earnings (loss)	(2,345,131	)
Net assets, at value	$414,459,533

34       Semiannual 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)

October 31, 2018 (unaudited)

Franklin Flexible Alpha Bond Fund

Class A:
Net assets, at value	$	2,141,549
Shares outstanding		219,412
Net asset value per sharea		$9.76
Maximum offering price per share (net asset value per share ÷ 95.75%)		$10.19
Class C:
Net assets, at value	$	303,467
Shares outstanding		31,292
Net asset value and maximum offering price per sharea		$9.70
Class R:
Net assets, at value	$	52,092
Shares outstanding		5,344
Net asset value and maximum offering price per share		$9.75
Class R6:
Net assets, at value	$	411,573,641
Shares outstanding		42,177,376
Net asset value and maximum offering price per share		$9.76
Advisor Class:
Net assets, at value	$	388,784
Shares outstanding		39,848
Net asset value and maximum offering price per share		$9.76

^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.  |  Semiannual Report       35

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Operations

for the six months ended October 31, 2018 (unaudited)

Franklin Flexible Alpha Bond Fund

Investment income:
Dividends:
Unaffiliated issuers	$	93,022
Non-controlled affiliates (Note 3f)		466,014
Interest: (net of foreign taxes)~
Unaffiliated issuers		4,278,602
Total investment income		4,837,638
Expenses:
Management fees (Note 3a)		799,250
Distribution fees: (Note 3c)
Class A		2,150
Class C		891
Class R		139
Transfer agent fees: (Note 3e)
Class A		1,691
Class C		360
Class R		68
Class R6		28,985
Advisor Class		515
Custodian fees (Note 4)		8,702
Reports to shareholders		3,242
Registration and filing fees		41,296
Professional fees		45,608
Trustees’ fees and expenses		576
Other		29,333
Total expenses		962,806
Expense reductions (Note 4)		(305	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(102,250	)
Net expenses		860,251
Net investment income		3,977,387
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:
Unaffiliated issuers		(184,671	)
Written options		45,318
Foreign currency transactions		(97,218	)
Forward exchange contracts		45,641
Futures contracts		(102,835	)
TBA sale commitments		4,758
Swap contracts		21,468
Net realized gain (loss)		(267,539	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(3,170,472	)
Translation of other assets and liabilities denominated in foreign currencies		1,750
Forward exchange contracts		3,379
Written options		(65,786	)
Futures contracts		208,995

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

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statement of Operations (continued)

for the six months ended October 31, 2018 (unaudited)

Franklin Flexible Alpha Bond Fund

TBA sale commitments		1,277
Swap contracts		1,336,585
Net change in unrealized appreciation (depreciation)		(1,684,272	)
Net realized and unrealized gain (loss)		(1,951,811	)
Net increase (decrease) in net assets resulting from operations	$	2,025,576

^~Foreign taxes withheld on interest   $          1,435

franklintempleton.com The accompanying notes are an integral part of these financial statements.  |  Semiannual Report       37

FRANKLIN STRATEGIC SERIES

FINANCIAL STATEMENTS

Statements of Changes in Net Assets

Franklin Flexible Alpha Bond Fund

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30, 2018
Increase (decrease) in net assets:
Operations:
Net investment income		$  3,977,387			$  1,642,692
Net realized gain (loss)		(267,539	)		1,033,175
Net change in unrealized appreciation (depreciation)		(1,684,272	)		(1,558,393	)
Net increase (decrease) in net assets resulting from operations		2,025,576			1,117,474
Distributions to shareholders: (Note 1h)
Class A		(13,076	)		(103,600	)
Class C		(2,400	)		(3,159	)
Class R		(489	)		(745	)
Class R6		(3,448,779	)		(1,711,598	)
Advisor Class		(4,658	)		(6,239	)
Total distributions to shareholders		(3,469,402	)		(1,825,341	)
Capital share transactions: (Note 2)
Class A		1,016,665			(9,288,308	)
Class C		25,280			35,861
Class R		1,704			(9,156	)
Class R6		202,199,383			211,478,984
Advisor Class		(35,105	)		195,749
Total capital share transactions		203,207,927			202,413,130
Net increase (decrease) in net assets		201,764,101			201,705,263
Net assets:
Beginning of period		212,695,432			10,990,169
End of period (Note 1h)		$414,459,533			$212,695,432

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

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements (unaudited)

Franklin Flexible Alpha Bond Fund

1.   Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eight separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Flexible Alpha Bond Fund (Fund) is included in this report. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a.   Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The 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.

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

franklintempleton.com Semiannual Report       39

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

1.   Organization and Significant Accounting Policies (continued)

a.   Financial Instrument Valuation (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.

b.   Foreign Currency Translation

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

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

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 When-Issued Basis

The Fund purchases securities on a when-issued 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.

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 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 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 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

40       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

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 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

franklintempleton.com Semiannual Report       41

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

1.   Organization and Significant Accounting Policies (continued)

d.   Derivative Financial Instruments (continued)

spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Statement of Operations.

The Fund entered into inflation index swap contracts primarily to manage and/or gain exposure to inflation risk. An inflation index swap is an agreement between the Fund and a counterparty to exchange cash flows whereby one party makes payments based on the percentage change in an index that serves as a measure of inflation and the other party makes a regular payment based on a compounded fixed rate, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC inflation index swap) or may be executed on a registered exchange (centrally cleared inflation index swap). For centrally cleared inflation index swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Typically, an inflation index swap has payment obligations netted and exchanged upon maturity.

The Fund entered into interest rate swap contracts primarily to manage interest rate risk. An interest rate swap is an agreement between the Fund and a counterparty to exchange cash flows based on the difference between two interest rates, applied to a notional amount. These agreements may be privately negotiated in the over-the-counter market (OTC interest rate swaps) or may be executed on a registered exchange (centrally cleared interest rate swaps). For centrally cleared interest rate swaps, required initial margins are pledged by the Fund, and the daily change in fair value is accounted for as a variation margin payable or receivable in the Statement of Assets and Liabilities. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized.

The Fund entered into OTC total return swap contracts primarily to manage and/or gain exposure to interest rate risk of an underlying instrument such as a stock, bond, index or basket of securities or indices. A total return swap is an agreement

between the Fund and a counterparty to exchange a return linked to an underlying instrument for a floating or fixed rate payment, both based upon a notional amount. Over the term of the contract, contractually required payments to be paid or received are accrued daily and recorded as unrealized appreciation or depreciation until the payments are made, at which time they are recognized as realized gain or loss.

The Fund purchased or wrote exchange traded and/or OTC option contracts primarily to manage and/or gain exposure to interest rate, foreign exchange rate and credit risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. 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 Note 8 regarding other derivative information.

e.   Restricted Cash

At October 31, 2018, the Fund held restricted cash in connection with investments in certain derivative securities. Restricted cash is held in a segregated account with the Fund’s custodian and is reflected in the Statement of Assets and Liabilities.

f.   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

42       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

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 and may result in an increase to the Fund’s portfolio turnover rate. The risks of mortgage dollar roll transactions include the potential inability of the counterparty to fulfill its obligations.

g.   Income and Deferred Taxes

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

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

The Fund may recognize an income tax liability related to its uncertain tax positions under U.S. GAAP when the uncertain tax position has a less than 50% probability that it will be sustained upon examination by the tax authorities based on its technical merits. As of October 31, 2018, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

h.   Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest

income. Paydown gains and losses are recorded as an adjustment to interest income. Dividend income is recorded on the ex-dividend date. Dividends from net investment income are normally declared daily; these dividends may be reinvested or paid monthly to shareholders. Distributions from realized capital gains and other distributions, if any, are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

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

Net investment income, excluding class specific expenses, is allocated daily to each class of shares based upon the relative value of the settled shares of each class. Realized and unrealized gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

Inflation-indexed bonds are adjusted for inflation through periodic increases or decreases in the security’s interest accruals, face amount, or principal redemption value, by amounts corresponding to the rate of inflation as measured by an index. Any increase or decrease in the face amount or principal redemption value will be included as interest income in the Statement of Operations.

i.   Accounting Estimates

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.

franklintempleton.com Semiannual Report       43

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

1.   Organization and Significant Accounting Policies (continued)

j.   Guarantees and Indemnifications

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

*Effective during the current reporting period, it is no longer required to present certain line items on the Statements of Changes in Net Assets. Such disclosure changes are included in the Statements of Changes in Net Assets, therefore prior period amounts are presented below.

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

Distributions from net investment income:
Class A	$	(102,670	)
Class C		(2,927	)
Class R		(695	)
Class R6		(1,603,614	)
Advisor Class		(5,822	)
Distributions from net realized gains:
Class A		(930	)
Class C		(232	)
Class R		(50	)
Class R6		(107,984	)
Advisor Class		(417	)

For the year ended April 30, 2018, undistributed net investment income included in net assets was $58,013.

2.   Shares of Beneficial Interest

At October 31, 2018, there were an unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended						Year Ended
	October 31, 2018						April 30, 2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		112,051		$	1,097,858			71,706		$	705,410
Shares issued in reinvestment of distributions		1,320			12,915			2,584			25,433
Shares redeemed		(9,609	)		(94,108	)		(1,017,579	)		(10,019,151	)
Net increase (decrease)		103,762		$	1,016,665			(943,289	)	$	(9,288,308	)
Class C Shares:
Shares sold		13,163		$	127,939			28,772		$	281,596
Shares issued in reinvestment of distributions		247			2,400			318			3,106
Shares redeemeda		(10,801	)		(105,059	)		(25,418	)		(248,841	)
Net increase (decrease)		2,609		$	25,280			3,672		$	35,861

44       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	Six Months Ended						Year Ended
	October 31, 2018						April 30, 2018
	Shares			Amount			Shares			Amount
Class R Shares:
Shares sold		124		$	1,216			—		$	—
Shares issued in reinvestment of distributions		50			488			71			695
Shares redeemed		—			—			(1,001	)		(9,851	)
Net increase (decrease)		174		$	1,704			(930	)	$	(9,156	)
Class R6 Shares:
Shares sold		20,683,370		$	202,592,000			21,649,534		$	212,625,650
Shares issued in reinvestment of distributions		11,779			115,199			9,792			96,166
Shares redeemed		(51,867	)		(507,816	)		(126,232	)		(1,242,832	)
Net increase (decrease)		20,643,282		$	202,199,383			21,533,094		$	211,478,984
Advisor Class Shares:
Shares sold		—		$	—			19,425		$	191,301
Shares issued in reinvestment of distributions		477			4,658			635			6,240
Shares redeemed		(4,066	)		(39,763	)		(181	)		(1,792	)
Net increase (decrease)		(3,589	)	$	(35,105	)		19,879		$	195,749

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

3.   Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton 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 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 period ended October 31, 2018, the annualized gross effective investment management fee rate was 0.550% of the Fund’s average daily net assets.

franklintempleton.com Semiannual Report       45

FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

3.   Transactions with Affiliates (continued)

a.   Management Fees (continued)

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	%

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 period:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	179
CDSC retained	$	2

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

e.   Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the period ended October 31, 2018, the Fund paid transfer agent fees of $31,619, of which $29,470 was retained by Investor Services.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

f.   Investments in Affiliated Management Investment Companies

The Fund invests in one or more affiliated management investment companies for purposes other than exercising a controlling influence over the management or policies. Management fees paid by the Fund are waived on assets invested in the affiliated management investment companies, as noted in the Statement of Operations, in an amount not to exceed the management and administrative fees paid directly or indirectly by each affiliate. During the period ended October 31, 2018, the Fund held investments in affiliated management investment companies as follows:

	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions			Number of Shares Held at End of Period		Value at End of Period		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		44,846,991		211,312,068		(155,939,797	)		100,219,262		$100,219,262		$466,014		$  —		$  —

g.   Waiver and Expense Reimbursements

Advisers has contractually agreed in advance to waive or limit its fees and to assume as its own expense certain expenses otherwise payable by the Fund so that the expenses (excluding distribution fees, and acquired fund fees and expenses, and certain non-routine expenses or costs, including those relating to litigation, indemnification, reorganizations, and liquidations) for Class A, Class C, Class R, and Advisor Class of the Fund do not exceed 0.85%, and for Class R6 do not exceed 0.81%, based on the average net assets of each class until August 31, 2019. Total expenses waived or paid are not subject to recapture subsequent to the Fund’s fiscal year end.

Prior to September 1, 2018, expenses (excluding certain fees and expenses as previously disclosed) for Class R6 were limited to 0.85% based on the average net assets of the class.

Investor Services has voluntarily agreed in advance to waive or limit its fees so that the new transfer agent fee arrangement effective November 1, 2017 will not increase the fees retained by more than 0.02% based on the average net assets of the class. Investor Services may discontinue this waiver in the future.

h.   Other Affiliated Transactions

At October 31, 2018, the shares of the Fund were owned by the following entities/investment companies:

	Shares		Percentage of Outstanding Sharesa
Franklin Resources, Inc.		31,020,441		73.0%
Franklin Total Return Fund		10,172,940		24.0%
		41,193,381		97.0%

^aInvestment activities of significant shareholders could have a material impact on the Fund.

4.   Expense Offset Arrangement

The Fund has entered into an arrangement with its custodian whereby credits realized as a result of uninvested cash balances are used to reduce a portion of the Fund’s custodian expenses. During the period ended October 31, 2018, the custodian fees were reduced as noted in the Statement of Operations.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

5.   Income Taxes

At October 31, 2018, the cost of investments, net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	439,832,402
Unrealized appreciation	$	3,079,507
Unrealized depreciation		(6,580,418	)
Net unrealized appreciation (depreciation)	$	(3,500,911	)

Differences between income and/or capital gains as determined on a book basis and a tax basis are primarily due to differing treatments of paydown losses, bond discounts and premiums, swaps and financial futures transactions.

6.   Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended October 31, 2018, aggregated $184,634,594 and $17,163,249, respectively.

7.   Credit Risk

At October 31, 2018, the Fund had 8.4% of its portfolio invested in high yield securities or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

8.   Other Derivative Information

At October 31, 2018, 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		$  165,023	a	Options written, at value	$        —
	Variation margin on futures contracts		485,455	b	Variation margin on futures contracts	153,572b
	Variation margin on centrally cleared swap contracts		513,425	b	Variation margin on centrally cleared swap contracts	—
	Unrealized appreciation on OTC swap contracts		1,396,422		Unrealized depreciation on OTC swap contracts	183,415
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		231,691		Unrealized depreciation on OTC forward exchange contracts	251,899
Credit contracts	Investments in securities, at value		253,712	a	Options written, at value	123,469
	Variation margin on centrally cleared swap contracts		—		Variation margin on centrally cleared swap contracts	3,472b
	OTC swap contracts (upfront payments)		288,161		OTC swap contracts (upfront receipts)	509,328
	Unrealized appreciation on OTC swap contracts		125,806		Unrealized depreciation on OTC swap contracts	196,657

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

	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
Inflation contracts	Variation margin on centrally cleared swap contracts		$ 24,763	b	Variation margin on centrally cleared swap contracts	$ 57,249b
Totals			$3,484,458			$1,479,061

^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 period end is separately reported within the Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

For the period ended October 31, 2018, 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 Location	Net Realized Gain (Loss) for the Period			Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Interest rate contracts	Investments	$	44,224	a	Investments	$ (56,773)a
	Written options		15,180		Written options	(1,380)
	Futures contracts		(102,836)		Futures contracts	208,995
	Swap contracts		(216,624)		Swap contracts	1,406,524
Foreign exchange contracts	Forward exchange contracts		45,641		Forward exchange contracts	3,379
Credit contracts	Investments		(57,719)	a	Investments	123,675a
	Written options		30,138		Written options	(64,406)
	Swap contracts		238,108		Swap contracts	1,955
Inflation contracts	Swap contracts		(16)		Swap contracts	(71,894)
Totals		$	(3,904)			$1,550,075

^aPurchased option contracts are included in net realized gain (loss) from investments and net change in unrealized appreciation (depreciation) on investments in the Statement of Operations.

For the period ended October 31, 2018, the average month end notional amount of futures contracts, options and swap contracts, and the average month end contract value for forward exchange contracts, were as follows:

Futures contracts	$	99,762,506
Options		57,876,857
Swap contracts		135,185,178
Forward exchange contracts		18,005,341

At October 31, 2018, 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
	Assetsa		Liabilitiesa
Derivatives
Forward exchange contracts		$231,691		$ 251,899
Options purchased		418,735		—
Options written		—		123,469
Swap contracts		1,810,389		889,400
Total		$2,460,815		$1,264,768

^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 (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

8.   Other Derivative Information (continued)

At October 31, 2018, 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 Receiveda			Net Amount (Not less than zero)
Counterparty
BNDP		$    18,375		$    (5,005	)		$    —		$            —			$    13,370
BZWS		40,666		(40,666	)		—		—			—
CITI		1,120,053		(423,716	)		—		(696,337	)		—
DBAB		350,096		—			—		(290,000	)		60,096
FBCO		153,812		—			—		(153,812	)		—
GSCO		159,206		(127,839	)		—		(31,367	)		—
HSBK		266,232		(1,077	)		—		—			265,155
JPHQ		172,538		(172,538	)		—		—			—
MSCO		1,020		(1,020	)		—		—			—
RBS		434		(434	)		—		—			—
UBSW		178,383		(47,235	)		—		—			131,148
Total		$2,460,815		$(819,530	)		$    —		$(1,171,516	)		$469,769

^aIn some instances, the collateral amount disclosed in the table above was adjusted due to the requirement to limit collateral amount to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amount disclosed herein.

At October 31, 2018, 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
BNDP		$        5,005		$    (5,005	)		$    —		$    —		$          —
BZWS		223,288		(40,666	)		—		—		182,622
CITI		423,716		(423,716	)		—		—		—
DBAB		—		—			—		—		—
FBCO		—		—			—		—		—
GSCO		127,839		(127,839	)		—		—		—
HSBK		1,077		(1,077	)		—		—		—
JPHQ		252,264		(172,538	)		—		—		79,726
MSCO		77,204		(1,020	)		—		—		76,184
RBS		107,140		(434	)		—		—		106,706
UBSW		47,235		(47,235	)		—		—		—
Total		$1,264,768		$(819,530	)		$    —		$    —		$445,238

See Note 1(d) regarding derivative financial instruments.

See Abbreviations on page 53.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

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 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Statement of Operations. During the period ended October 31, 2018, 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.

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FRANKLIN STRATEGIC SERIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

10.   Fair Value Measurements (continued)

A summary of inputs used as of October 31, 2018, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3		Total
Assets:
Investments in Securities:a
Management Investment Companies	$	4,527,563	$	—	$	—	$	4,527,563
Corporate Bonds		—		107,757,198		—		107,757,198
Foreign Government and Agency Securities		—		8,032,326		—		8,032,326
U.S. Government and Agency Securities		—		4,098,517		—		4,098,517
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		208,078,005		—		208,078,005
Mortgage-Backed Securities		—		244,228		—		244,228
Municipal Bonds		—		771,272		—		771,272
Options Purchased		—		418,735		—		418,735
Short Term Investments		100,219,262		301,500		—		100,520,762
Total Investments in Securities	$	104,746,825	$	329,701,781	$	—	$	434,448,606
Other Financial Instruments:
Futures Contracts	$	485,455	$	—	$	—	$	485,455
Forward Exchange Contracts		—		231,691		—		231,691
Swap Contracts.		—		2,060,416		—		2,060,416
Total Other Financial Instruments	$	485,455	$	2,292,107	$	—	$	2,777,562
Liabilities:
Other Financial Instruments:
Options Written	$	—	$	123,469	$	—	$	123,469
TBA Sales Commitments		—		292,066		—		292,066
Futures Contracts		153,572		—		—		153,572
Forward Exchange Contracts		—		251,899		—		251,899
Swap Contracts		—		440,793		—		440,793
Total Other Financial Instruments	$	153,572	$	1,108,227	$	—	$	1,261,799

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

11.   New Accounting Pronouncements

In August 2018, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in the ASU modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

12.   Subsequent Events

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

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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Franklin Flexible Alpha Bond Fund (continued)

Abbreviations

Counterparty/Exchange		Currency		Selected Portfolio
BNDP	BNP Paribas	AUD	Australian Dollar	CLO	Collateralized Loan Obligation
BZWS	Barclays Bank PLC	EUR	Euro	CPI	Consumer Price Index
CITI	Citigroup, Inc.	GBP	British Pound	ETF	Exchange Traded Fund
DBAB	Deutsche Bank AG	IDR	Indonesian Rupiah	FHLMC	Federal Home Loan Mortgage Corp.
FBCO	Credit Suisse International	USD	United States Dollar	FRN	Floating Rate Note
GSCO	Goldman Sachs Group, Inc.			GO	General Obligation
HSBK	HSBC Bank PLC			IO	Interest Only
JPHQ	JP Morgan Chase & Co.			LIBOR	London InterBank Offered Rate
MSCO	Morgan Stanley			RDA	Redevelopment Agency/Authority
RBS	Royal Bank of Scotland PLC			SFR	Single Family Revenue
SMB	Citigroup Global Markets
UBSW	UBS AG

Index
CDX.EM.30	CDX Emerging Markets Index
CDX.NA.HY.Series number	CDX North America High Yield Index
CDX.NA.IG.Series number	CDX North America Investment Grade Index
MCDX.NA.Series number	MCDX North America Index

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FRANKLIN FLEXIBLE ALPHA BOND FUND

Shareholder Information

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.

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Semiannual 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

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

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

© 2018 Franklin Templeton Investments. All rights reserved. 953 S 12/18

Semiannual Report
and Shareholder Letter   October 31, 2018

Franklin Strategic Income Fund

A SERIES OF FRANKLIN STRATEGIC SERIES

Sign up for electronic delivery at franklintempleton.com/edelivery

Franklin Templeton Investments

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

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

Dear Shareholder:

The six months ended October 31, 2018, benefited from mostly upbeat economic data as the U.S. job market continued to improve and the unemployment rate declined. During the second and third quarters, U.S. corporate profits rose, supported by healthy economic growth and tax cuts.

In September 2018, the Standard & Poor’s 500^® Index (S&P 500^®) reached an all-time high, but experienced heightened volatility near period-end due to investor concerns about U.S. Federal Reserve interest-rate policies, higher U.S. Treasury yields, trade tensions, a potentially slower economy and some weaker-than-expected fourth-quarter 2018 revenue guidance. Within this environment, U.S. stocks, as measured by the S&P 500, generated a modest positive total return for the six-month period. Investment-grade bonds, as measured by the Bloomberg Barclays U.S. Aggregate Bond Index, had a slightly negative total return for the same period.

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

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

In addition, Franklin Strategic 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,

Edward B. Jamieson

President and Chief Executive Officer –

Investment Management

Franklin Strategic Series

This letter reflects our analysis and opinions as of October 31, 2018, 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.

Not FDIC Insured | May Lose Value | No Bank Guarantee

franklintempleton.com Not part of the semiannual report         1

Contents

Semiannual Report

Franklin Strategic Income Fund	3
Performance Summary	7
Your Fund’s Expenses	9
Consolidated Financial Highlights and Consolidated Statement of Investments	10
Consolidated Financial Statements	43
Notes to Consolidated Financial Statements	48
Shareholder Information	64

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

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Semiannual Report

Franklin Strategic Income Fund

We are pleased to bring you Franklin Strategic Income Fund’s semiannual report for the period ended October 31, 2018.

Your Fund’s Goal and Main Investments

The Fund seeks a high level of current income, with capital appreciation over the long term as a secondary objective. The Fund uses an active asset allocation process and under normal market conditions invests at least 65% of its assets in U.S. and foreign debt securities, including those in emerging markets.

The Fund may invest in all varieties of fixed, variable and floating rate income securities, including bonds, U.S. and foreign government and agency securities, corporate loans (and loan participations), mortgage-backed securities and other asset-backed securities and convertible securities.

Performance Overview

The Fund’s Class A shares delivered a +0.41%% cumulative total return for the six 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, had a -0.19% 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 -0.34% total return.² You can find more of the Fund’s performance data in the Performance Summary beginning on page 7.

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

Economic and Market Overview

The U.S. economy grew during the six months under review. The economy grew faster in 2018’s second quarter, driven by consumer spending, business investment, exports and government spending, but moderated in the third quarter due to declines in exports and housing investment. The manufacturing and services sectors expanded during the period. The unemployment rate declined from 3.9% in April 2018, as reported at the beginning of the six-month period, to a nearly 49-year low of 3.7% at period-end.³ Annual inflation, as measured by the Consumer Price Index, was 2.5% in April 2018, as reported at the beginning of the period, and while it varied during the six months under review, it ended the period at 2.5%.³

The U.S. Federal Reserve (Fed) raised its target range for the federal funds rate 0.25% at its June 2018 meeting and continued to reduce its balance sheet as part of its ongoing plan to normalize monetary policy. In his congressional testimony in July 2018 and at the Fed symposium in August, Fed Chair Jerome Powell reiterated the Fed’s intention to gradually raise interest rates. At its September 2018 meeting, the Fed raised its target range for the federal funds rate 0.25% to 2.00%–2.25%, as widely expected. Furthermore, the Fed raised its forecast for U.S. economic growth in 2018 and 2019 and projected one more rate increase in 2018. Minutes from the Fed’s September meeting (released in October) indicated that a few officials expected monetary policy to become modestly restrictive of economic growth, while some officials seemed to favor increasing the federal funds rate temporarily above what they consider to be its longer-term level to reduce the risk of overshooting the Fed’s inflation objective. In contrast, some officials indicated they would not favor a restrictive policy unless they see clear signs of an overheating economy and rising inflation.

1. Source: Morningstar.

2. Source: Lipper, a Thomson Reuters Company. For the six-month period ended 10/31/18, this category consisted of 328 funds. Lipper calculations do not include sales charges or expense subsidization by a fund’s manager. Fund performance relative to the average may have differed if these or other factors had been considered.

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 15.

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FRANKLIN STRATEGIC INCOME FUND

The 10-year Treasury yield, which moves inversely to its price, increased during the period. The yield rose to multi-year highs in May and October 2018 amid investor concerns about higher inflation and the Fed’s interest-rate path. Expectations that other central banks might scale back monetary stimulus and better-than-expected U.S. economic reports also pushed the yield higher. However, some factors weighed on the Treasury yield at certain points during the period, including concerns about political turmoil in Italy, political uncertainties in the U.S., tensions between the U.S. and North Korea, the Trump administration’s protectionist trade policies, U.S. trade disputes with its allies and China, and economic turmoil in Turkey and Argentina. Overall, the 10-year Treasury yield rose from 2.95% at the beginning of the period to 3.15% at period-end.

Portfolio Composition*

Based on Consolidated Net Assets

	10/31/18	4/30/18
High-Yield Corporate Bonds	25.7%	32.0%
Mortgage-Backed Securities	17.9%	14.7%
Investment Grade Corporate Bonds	17.2%	16.2%
Floating-Rate Loans	16.2%	15.6%
International Government & Agency Bonds	7.9%	8.8%
Collateral Loan Obligations	7.6%	5.5%
Commercial Mortgage-Backed Securities	2.5%	2.4%
Treasury Inflation-Protected Securities	2.2%	2.0%
Asset-Backed Securities	2.1%	2.4%
U.S. Treasury Securities	2.1%	2.0%
Municipal Bonds	1.5%	1.2%
Other	1.2%	0.7%
Marketplace Loans	0.2%	0.0%
Covered Bonds	0.1%	0.0%
Short-Term Investments & Other Net Assets	-4.4%	-3.5%

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

Investment Strategy

We use an active asset allocation strategy to try to achieve the Fund’s investment goals. We employ a top-down analysis of macroeconomic trends combined with a bottom-up fundamental analysis of market sectors, industries and issuers to try to take advantage of varying sector reactions to economic events. We regularly enter into various currency-related transactions involving derivative instruments, including currency and cross currency forwards, currency swaps, currency and currency index futures contracts and currency options. We may also enter into interest-rate and credit-related transactions involving derivative instruments, including

interest-rate, fixed income total return and credit default swaps and interest rate and/or bond futures contracts.

What is a currency forward contract?

A currency forward contract is an agreement between the Fund and a counterparty to buy or sell a foreign currency in exchange for another currency at a specific exchange rate on a future date. Currency forward contracts are privately traded in the interbank market, not on a centralized exchange.

What 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.

Manager’s Discussion

For global fixed income markets, the six months under review began with low levels of volatility, strong risk appetite and relatively low interest rates. The Fed raised its rates in June and September 2018 and projected one more increase in 2018 citing a continued strengthening of the economy and strong labor market conditions. Divergences in monetary policy stances as well as long-term yields contributed to U.S. dollar appreciation, which resulted in marginally tighter, localized pressures due to currency depreciation in emerging market countries such as

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FRANKLIN STRATEGIC INCOME FUND

Argentina and Turkey during the period. However, investors were encouraged by an overall easing of tensions in the Korean Peninsula, a U.S.-EU agreement to try to reduce trade barriers and a trade deal between the U.S., Mexico and Canada. By period-end, the market experienced heightened volatility amid investor concerns with increased interest rates, the Trump administrations protectionist policies and the potential impact of the U.S.-China trade tensions.

In this environment, senior secured floating rate loans, high-yield corporate credit, commercial mortgage-backed securities (CMBS) and U.S. agency bonds outpaced U.S. Treasuries on a duration-matched basis. Senior secured floating rate loans and high yield bonds were the strongest performers, as were CMBS.

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.

Dividend Distributions*

5/1/18–10/31/18

	Dividend per Share (cents)
Month	Class A		Class C		Class R		Class R6		Advisor Class
May		3.11		2.79		2.92		3.39		3.31
June		3.46		3.12		3.25		3.79		3.67
July		3.61		3.29		3.41		3.92		3.81
August		3.61		3.27		3.40		3.94		3.82
September		3.61		3.31		3.43		3.90		3.79
October		3.62		3.14		3.38		3.97		3.84
Total		21.02		18.92		19.79		22.91		22.24

* The distribution amount is the sum of all estimated tax-basis net investment income distributions for the period shown. A portion or all of the distribution may be reclassified as return of capital or short-term or long-term capital gains once final tax designations are known. All Fund distributions will vary depending upon current market conditions, and past distributions are not indicative of future trends.

During the period, the Fund’s U.S. duration exposure was a significant boost to performance. Additionally, our exposure to non-dollar developed securities also added to results. Senior secured floating rate loans, sovereign emerging markets securities and tax-exempt municipal bonds also benefited returns. Our exposure to foreign currencies, fixed-rate agency mortgage-backed securities (MBS) and sovereign developed securities hurt performance.

During the period, the Fund’s corporate credit exposure (inclusive of high-yield and investment-grade corporate credit, senior secured floating-rate bank loans and collateralized loan

What is the yield curve?

A yield curve is a line that plots the yield to maturity of bonds having equal credit quality against their maturity dates.

obligations), benefited from strong performance across corporate sectors. U.S. duration exposure was a significant boost to performance. Additionally, our exposure to non-dollar developed and sovereign emerging markets securities also added to results. Foreign currency exposure was largely negative for overall for returns with positive returns from our Australian dollar and Canadian dollar shorts being offset by negative performance of our short euro and Brazilian real positions.

The Fund remained allocated across spread sectors, both corporate and securitized. Over the period, we reduced high-yield corporate credit due to strong sector performance and increased our exposure to senior secured floating-rate loans, collateralized loan obligations and investment-grade corporate bonds. In our analysis, opportunities remained in the non-agency residential MBS asset class. During the period, the portfolio added exposure to the sector where we preferred to remain allocated to the seasoned credit risk transfer, where, in our opinion, fundamental and technical forces remained positive. We maintained our CMBS exposure at the top of the capital structure as commercial real estate prices have surpassed pre-financial crisis levels, rent growth slowed and capitalization rates trended higher.

We continued to reduce our foreign-currency risk. Our foreign currency exposure was held through a basket of developed-market shorts with major positions in the Australian dollar, euro and Canadian dollar versus a basket of emerging market long positions with major positions in the Mexican peso, Indonesian rupiah and Indian rupee.

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FRANKLIN STRATEGIC INCOME FUND

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

The foregoing information reflects our analysis, opinions and portfolio holdings as of October 31, 2018, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.

CFA^® is a trademark owned by CFA Institute.

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FRANKLIN STRATEGIC INCOME FUND

Performance Summary as of October 31, 2018

The performance tables 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 10/31/18¹

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 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
6-Month		+0.41	%		-3.89	%
1-Year		-0.82	%		-5.04	%
5-Year		+9.40	%		+0.93	%
10-Year		+86.29	%		+5.96	%
Advisor
6-Month		+0.65	%		+0.65	%
1-Year		-0.57	%		-0.57	%
5-Year		+10.77	%		+2.07	%
10-Year		+90.91	%		+6.68	%

Share Class	Distribution Rate4			30-Day Standardized  Yield5
				(with waiver)			(without waiver)
A		3.85	%		4.34	%		4.28	%
Advisor		4.28	%		4.79	%		4.73	%

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

See page 8 for Performance Summary footnotes.

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FRANKLIN STRATEGIC INCOME FUND

PERFORMANCE SUMMARY

Distributions (5/1/18–10/31/18)

Share Class	Net Investment Income
A		$0.2102
C		$0.1892
R		$0.1979
R6		$0.2291
Advisor		$0.2224

Total Annual Operating Expenses⁶

Share Class	With Waiver		Without Waiver
A		0.88%		0.93%
Advisor		0.63%		0.68%

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

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

1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/19. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower.

2. Cumulative total return represents the change in value of an investment over the periods indicated.

3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year, if any, has not been annualized.

4. 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 10/31/18.

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

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FRANKLIN STRATEGIC INCOME 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 5/1/18	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Ending Account Value 10/31/18	Expenses Paid During Period 5/1/18–10/31/181,2	Net Annualized Expense Ratio2
A	$1,000	$1,004.10	$4.19	$1,021.02	$4.23	0.83%
C	$1,000	$1,003.00	$6.21	$1,019.00	$6.26	1.23%
R	$1,000	$1,002.90	$5.45	$1,019.76	$5.50	1.08%
R6	$1,000	$1,006.10	$2.22	$1,022.99	$2.24	0.44%
Advisor	$1,000	$1,006.50	$2.93	$1,022.28	$2.96	0.58%

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 184/365 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 STRATEGIC SERIES

Consolidated Financial Highlights

Franklin Strategic Income Fund

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class A
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$ 9.61			$ 9.84			$ 9.32			$10.04			$10.57			$10.86
Income from investment operationsa:
Net investment incomeb		0.21			0.39			0.39			0.42			0.42			0.44
Net realized and unrealized gains (losses)		(0.17	)		(0.32	)		0.30			(0.74	)		(0.30	)		(0.18	)
Total from investment operations		0.04			0.07			0.69			(0.32	)		0.12			0.26
Less distributions from:
Net investment income and net foreign currency gains		(0.21	)		(0.30	)		(0.17	)		(0.40	)		(0.55	)		(0.45	)
Net realized gains		—			—			—			—			(0.10	)		(0.10	)
Total distributions		(0.21	)		(0.30	)		(0.17	)		(0.40	)		(0.65	)		(0.55	)
Net asset value, end of period		$ 9.44			$ 9.61			$ 9.84			$ 9.32			$10.04			$10.57
Total returnc		0.41%			0.64%			7.50%			(3.14)%			1.16%			2.52%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.89%			0.90%			0.88%			0.88%			0.86%			0.86%
Expenses net of waiver and payments by affiliatese		0.83%			0.85%			0.82%			0.84%			0.85%			0.86%	f
Net investment income		4.30%			3.93%			4.08%			4.44%			4.03%			4.16%
Supplemental data
Net assets, end of period (000’s)		$3,182,735			$3,291,002			$3,833,786			$4,500,752			$5,242,844			$5,182,490
Portfolio turnover rate		51.80%			115.94%			140.83%			88.04%			72.51%			54.11%
Portfolio turnover rate excluding mortgage dollar rollsg		15.14%			47.40%			87.33%			48.33%			49.36%			54.11%

^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, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

^gSee Note 1(i) regarding mortgage dollar rolls.

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class C
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$ 9.60			$ 9.84			$ 9.31			$10.04			$10.57			$10.85
Income from investment operationsa:
Net investment incomeb		0.19			0.35			0.35			0.38			0.38			0.40
Net realized and unrealized gains (losses)		(0.16	)		(0.33	)		0.31			(0.75	)		(0.30	)		(0.17	)
Total from investment operations		0.03			0.02			0.66			(0.37	)		0.08			0.23
Less distributions from:
Net investment income and net foreign currency gains		(0.19	)		(0.26	)		(0.13	)		(0.36	)		(0.51	)		(0.41	)
Net realized gains		—			—			—			—			(0.10	)		(0.10	)
Total distributions		(0.19	)		(0.26	)		(0.13	)		(0.36	)		(0.61	)		(0.51	)
Net asset value, end of period		$ 9.44			$ 9.60			$ 9.84			$ 9.31			$10.04			$10.57
Total returnc		0.30%			0.14%			7.19%			(3.64)%			0.76%			2.20%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.29%			1.30%			1.28%			1.28%			1.26%			1.26%
Expenses net of waiver and payments by affiliatese		1.23%			1.25%			1.22%			1.24%			1.25%			1.26%	f
Net investment income		3.90%			3.53%			3.68%			4.04%			3.63%			3.76%
Supplemental data
Net assets, end of period (000’s)		$788,868			$1,078,890			$1,385,981			$1,645,852			$2,070,739			$2,109,049
Portfolio turnover rate		51.80%			115.94%			140.83%			88.04%			72.51%			54.11%
Portfolio turnover rate excluding mortgage dollar rollsg		15.14%			47.40%			87.33%			48.33%			49.36%			54.11%

^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, and is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

^gSee Note 1(i) regarding mortgage dollar rolls.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.  |  Semiannual Report       11

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Class R
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$  9.57			$  9.81			$  9.28			$10.01			$10.54			$10.82
Income from investment operationsa:
Net investment incomeb		0.19			0.36			0.37			0.39			0.39			0.41
Net realized and unrealized gains (losses)		(0.16	)		(0.33	)		0.31			(0.74	)		(0.29	)		(0.17	)
Total from investment operations		0.03			0.03			0.68			(0.35	)		0.10			0.24
Less distributions from:
Net investment income and net foreign currency gains		(0.20	)		(0.27	)		(0.15	)		(0.38	)		(0.53	)		(0.42	)
Net realized gains		—			—			—			—			(0.10	)		(0.10	)
Total distributions		(0.20	)		(0.27	)		(0.15	)		(0.38	)		(0.63	)		(0.52	)
Net asset value, end of period		$  9.40			$  9.57			$  9.81			$   9.28			$10.01			$10.54
Total returnc		0.29%			0.29%			7.38%			(3.50)%			0.91%			2.36%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		1.14%			1.15%			1.13%			1.13%			1.11%			1.11%
Expenses net of waiver and payments by affiliatese		1.08%			1.10%			1.07%			1.09%			1.10%			1.11%	f
Net investment income		4.05%			3.68%			3.83%			4.19%			3.78%			3.91%
Supplemental data
Net assets, end of period (000’s)		$95,193			$105,692			$146,552			$181,671			$223,758			$227,359
Portfolio turnover rate		51.80%			115.94%			140.83%			88.04%			72.51%			54.11%
Portfolio turnover rate excluding mortgage dollar rollsg		15.14%			47.40%			87.33%			48.33%			49.36%			54.11%

^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 is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

^gSee Note 1(i) regarding mortgage dollar rolls.

12       Semiannual 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)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014a
Class R6
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$ 9.62			$ 9.86			$ 9.33			$10.05			$10.58			$10.87
Income from investment operationsb:
Net investment incomec		0.23			0.43			0.43			0.46			0.46			0.49
Net realized and unrealized gains (losses)		(0.17	)		(0.34	)		0.31			(0.74	)		(0.30	)		(0.19	)
Total from investment operations		0.06			0.09			0.74			(0.28	)		0.16			0.30
Less distributions from:
Net investment income and net foreign currency gains		(0.23	)		(0.33	)		(0.21	)		(0.44	)		(0.59	)		(0.49	)
Net realized gains		—			—			—			—			(0.10	)		(0.10	)
Total distributions		(0.23	)		(0.33	)		(0.21	)		(0.44	)		(0.69	)		(0.59	)
Net asset value, end of period		$ 9.45			$ 9.62			$ 9.86			$ 9.33			$10.05			$10.58
Total returnd		0.61%			0.95%			8.03%			(2.76)%			1.54%			2.90%
Ratios to average net assetse
Expenses before waiver and payments by affiliates		0.51%			0.50%			0.48%			0.49%			0.48%			0.48%
Expenses net of waiver and payments by affiliatesf		0.44%			0.45%			0.42%			0.45%			0.47%			0.48%	g
Net investment income		4.69%			4.33%			4.48%			4.83%			4.41%			4.54%
Supplemental data
Net assets, end of period (000’s)		$430,953			$433,068			$369,106			$286,503			$253,929			$247,007
Portfolio turnover rate		51.80%			115.94%			140.83%			88.04%			72.51%			54.11%
Portfolio turnover rate excluding mortgage dollar rollsh		15.14%			47.40%			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.

^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%.

^hSee Note 1(i) regarding mortgage dollar rolls.

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.  |  Semiannual Report       13

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL HIGHLIGHTS

Franklin Strategic Income Fund (continued)

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30,
				2018			2017			2016			2015			2014
Advisor Class
Per share operating performance
(for a share outstanding throughout the period)
Net asset value, beginning of period		$ 9.62			$ 9.85			$ 9.33			$10.05			$10.58			$10.86
Income from investment operationsa:
Net investment incomeb		0.22			0.41			0.42			0.44			0.44			0.47
Net realized and unrealized gains (losses)		(0.17	)		(0.32	)		0.30			(0.74	)		(0.29	)		(0.17	)
Total from investment operations		0.05			0.09			0.72			(0.30	)		0.15			0.30
Less distributions from:
Net investment income and net foreign currency gains		(0.22	)		(0.32	)		(0.20	)		(0.42	)		(0.58	)		(0.48	)
Net realized gains		—			—			—			—			(0.10	)		(0.10	)
Total distributions		(0.22	)		(0.32	)		(0.20	)		(0.42	)		(0.68	)		(0.58	)
Net asset value, end of period		$ 9.45			$ 9.62			$ 9.85			$ 9.33			$10.05			$10.58
Total returnc		0.65%			0.79%			7.76%			(2.89)%			1.41%			2.87%
Ratios to average net assetsd
Expenses before waiver and payments by affiliates		0.64%			0.65%			0.63%			0.63%			0.61%			0.61%
Expenses net of waiver and payments by affiliatese		0.58%			0.60%			0.57%			0.59%			0.60%			0.61%	f
Net investment income		4.55%			4.18%			4.33%			4.69%			4.28%			4.41%
Supplemental data
Net assets, end of period (000’s)		$880,470			$933,747			$1,070,103			$904,899			$1,130,796			$1,010,755
Portfolio turnover rate		51.80%			115.94%			140.83%			88.04%			72.51%			54.11%
Portfolio turnover rate excluding mortgage dollar rollsg		15.14%			47.40%			87.33%			48.33%			49.36%			54.11%

^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 is not annualized for periods less than one year.

^dRatios are annualized for periods less than one year.

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

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

^gSee Note 1(i) regarding mortgage dollar rolls.

14       Semiannual Report  |  The accompanying notes are an integral part of these consolidated financial statements. franklintempleton.com

FRANKLIN STRATEGIC SERIES

Consolidated Statement of Investments, October 31, 2018 (unaudited)

Franklin Strategic Income Fund

	Country		Shares/ Warrants			Value
Common Stocks and Other Equity Interests 0.4%
Consumer Services 0.0%†
a,aa,bTurtle Bay Resort		United States		5,579,939		$	122,759
Energy 0.4%
aBirch Permian Holdings Inc.		United States		94,570			1,205,768
aBirch Permian Holdings Inc.		United States		737,192			9,214,900
aChaparral Energy Inc.		United States		94,305			1,461,727
a,cChaparral Energy Inc., A, 144A		United States		3,418			51,817
a,bEnergy XXI Gulf Coast Inc., wts., 12/30/21		United States		47,227			—
aHalcon Resources Corp.		United States		955,276			3,171,516
aHalcon Resources Corp., wts., 9/09/20		United States		75,770			3,349
aMidstates Petroleum Co. Inc.		United States		6,993			50,420
a,bMidstates Petroleum Co. Inc., wts., 4/21/20		United States		49,552			85
aRiviera Resources Inc.		United States		88,309			1,882,748
aRoan Resources Inc.		United States		88,309			1,436,787
							18,479,117
Materials 0.0%†
aVerso Corp., A		United States		38,905			1,093,620
aVerso Corp., wts., 7/25/23		United States		4,095			26,617
							1,120,237
Retailing 0.0%†
a,b,dK2016470219 South Africa Ltd., A		South Africa		125,940,079			85,367
a,b,dK2016470219 South Africa Ltd., B		South Africa		12,532,821			8,495
							93,862
Transportation 0.0%†
a,bCEVA Logistics AG		Switzerland		50,632			1,462,003
Total Common Stocks and Other Equity Interests (Cost $69,675,318)							21,277,978
Management Investment Companies 8.3%
Diversified Financials 8.3%
eFranklin Lower Tier Floating Rate Fund		United States		25,361,119			242,705,906
eFranklin Middle Tier Floating Rate Fund		United States		21,833,687			205,236,662
Total Management Investment Companies (Cost $470,958,729)							447,942,568
				Principal Amount	*
Corporate Bonds 44.8%
Automobiles & Components 0.2%
Fiat Chrysler Automobiles NV, senior note, 5.25%, 4/15/23		United Kingdom		10,000,000			9,970,650
Banks 3.7%
Bank of America Corp.,
senior bond, 3.248%, 10/21/27		United States		5,000,000			4,599,186
senior note, 3.50%, 4/19/26		United States		46,000,000			43,805,078
Citigroup Inc.,
senior note, 3.30%, 4/27/25		United States		2,500,000			2,385,905
senior note, 3.40%, 5/01/26		United States		23,300,000			21,907,341
senior note, 3.20%, 10/21/26		United States		20,000,000			18,346,776
sub. bond, 5.50%, 9/13/25		United States		10,000,000			10,503,853

franklintempleton.com Semiannual Report       15

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*			Value
Corporate Bonds (continued)
Banks (continued)
Citigroup Inc., (continued)
sub. note, 4.05%, 7/30/22	United States	5,000,000			$	5,026,152
cICICI Bank Ltd./Dubai, senior note, 144A, 3.80%, 12/14/27	India	15,800,000				14,192,405
cIntesa Sanpaolo SpA, senior note, 144A, 6.50%, 2/24/21	Italy	1,400,000				1,432,298
JPMorgan Chase & Co.,
fjunior sub. bond, R, 6.00% to 8/01/23, FRN thereafter, Perpetual	United States	10,000,000				10,075,000
fjunior sub. bond, X, 6.10% to 10/01/24, FRN thereafter, Perpetual	United States	5,000,000				5,089,000
senior bond, 3.30%, 4/01/26	United States	10,000,000				9,454,172
sub. note, 3.375%, 5/01/23	United States	10,000,000				9,757,367
sub. note, 3.875%, 9/10/24	United States	10,000,000				9,833,753
Royal Bank of Scotland Group PLC, sub. note, 5.125%, 5/28/24	United Kingdom	7,600,000				7,512,866
gTurkiye Vakiflar Bankasi TAO, secured note, Reg S, 2.375%, 11/04/22	Turkey	3,900,000		EUR		4,251,398
fWells Fargo & Co., junior sub. bond, S, 5.90% to 6/15/24, FRN thereafter, Perpetual	United States	21,000,000				21,078,120
						199,250,670
Capital Goods 1.4%
Aircastle Ltd., senior note, 4.125%, 5/01/24	United States	23,000,000				22,369,296
cBeacon Roofing Supply Inc., senior note, 144A, 4.875%, 11/01/25	United States	15,000,000				13,537,500
CNH Industrial NV, senior bond, 3.85%, 11/15/27	United Kingdom	6,600,000				6,149,385
Legrand France SA, senior bond, 8.50%, 2/15/25	France	200,000				242,706
cTerex Corp., senior note, 144A, 5.625%, 2/01/25	United States	14,600,000				13,906,500
cVertiv Group Corp., senior note, 144A, 9.25%, 10/15/24	United States	16,900,000				16,900,000
						73,105,387
Commercial & Professional Services 0.9%
cIHS Markit Ltd., senior note, 144A, 4.00%, 3/01/26	United States	11,700,000				11,027,250
United Rentals North America Inc., senior bond, 5.875%, 9/15/26	United States	20,500,000				20,166,875
cWest Corp., senior note, 144A, 8.50%, 10/15/25	United States	20,300,000				18,422,250
						49,616,375
Consumer Durables & Apparel 0.9%
cHanesbrands Inc., senior bond, 144A, 4.875%, 5/15/26	United States	25,100,000				23,907,750
KB Home,
senior bond, 7.50%, 9/15/22	United States	5,000,000				5,300,000
senior note, 7.00%, 12/15/21.	United States	10,000,000				10,437,500
PulteGroup Inc., senior bond, 5.00%, 1/15/27	United States	12,000,000				11,145,000
						50,790,250
Consumer Services 1.6%
c1011778 BC ULC/New Red Finance Inc.,
secured note, second lien, 144A, 5.00%, 10/15/25	Canada	11,500,000				10,810,000
senior secured note, first lien, 144A, 4.25%, 5/15/24	Canada	4,000,000				3,760,000
cGolden Nugget Inc., senior note, 144A, 6.75%, 10/15/24	United States	13,200,000				13,200,000
cInternational Game Technology PLC,
senior secured bond, 144A, 6.50%, 2/15/25	United States	13,200,000				13,431,000
senior secured note, 144A, 6.25%, 2/15/22	United States	5,000,000				5,162,500
cKFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of
America LLC,
senior note, 144A, 5.00%, 6/01/24	United States	8,900,000				8,799,875
senior note, 144A, 5.25%, 6/01/26	United States	9,100,000				8,963,500

16       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*			Value
Corporate Bonds (continued)
Consumer Services (continued)
cStars Group Holdings BV/Stars Group U.S. Co-Borrower LLC, senior note, 144A, 7.00%, 7/15/26	Canada	6,600,000			$	6,715,500
cWynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25	United States	13,700,000				13,066,375
						83,908,750
Diversified Financials 2.8%
Capital One Financial Corp., senior note, 3.20%, 2/05/25	United States	20,000,000				18,714,146
The Goldman Sachs Group Inc.,
senior note, 3.50%, 1/23/25	United States	33,800,000				32,384,739
senior note, 3.75%, 2/25/26	United States	15,000,000				14,414,979
cLincoln Finance Ltd., senior secured note, 144A, 6.875%, 4/15/21	Netherlands	8,400,000		EUR		9,846,635
Morgan Stanley,
senior bond, 3.591% to 7/22/27, FRN thereafter, 7/22/28	United States	10,000,000				9,377,430
senior note, 3.875%, 1/27/26	United States	43,100,000				41,797,500
Navient Corp.,
senior note, 5.875%, 3/25/21	United States	5,000,000				5,068,750
senior note, 6.625%, 7/26/21	United States	8,000,000				8,250,000
senior note, 6.125%, 3/25/24	United States	10,000,000				9,787,500
						149,641,679
Energy 5.0%
Anadarko Petroleum Corp., senior bond, 3.45%, 7/15/24	United States	6,000,000				5,707,644
cCalifornia Resources Corp., secured note, second lien, 144A, 8.00%, 12/15/22	United States	7,852,000				7,007,910
Cheniere Corpus Christi Holdings LLC,
senior secured note, first lien, 7.00%, 6/30/24	United States	8,800,000				9,537,000
senior secured note, first lien, 5.875%, 3/31/25	United States	8,200,000				8,446,000
Cheniere Energy Partners LP, senior secured note, first lien, 5.25%, 10/01/25	United States	11,900,000				11,706,625
CNOOC Finance 2015 USA LLC, senior note, 3.50%, 5/05/25	China	12,800,000				12,185,536
CONSOL Energy Inc., senior note, 5.875%, 4/15/22	United States	20,000,000				19,687,600
Energy Transfer LP, senior bond, first lien, 7.50%, 10/15/20	United States	11,000,000				11,673,750
Energy Transfer Operating LP,
senior bond, 4.05%, 3/15/25	United States	1,300,000				1,247,678
senior note, 5.20%, 2/01/22	United States	10,000,000				10,345,202
Energy Transfer Partners LP/Regency Energy Finance Corp., senior note, 5.00%, 10/01/22	United States	10,000,000				10,312,385
c,hEnQuest PLC, senior note, 144A, PIK, 7.00%, 4/15/22	United Kingdom	12,855,122				11,698,161
Exxon Mobil Corp., senior note, 2.222%, 3/01/21	United States	3,000,000				2,932,133
c,iGaz Capital SA, (OJSC Gazprom), loan participation, senior note, 144A, 3.85%, 2/06/20	Russia	20,000,000				19,915,300
Kinder Morgan Inc.,
senior bond, 4.30%, 6/01/25	United States	17,000,000				16,933,954
senior note, 3.15%, 1/15/23	United States	9,000,000				8,686,675
Martin Midstream Partners LP/Martin Midstream Finance Corp., senior note, 7.25%, 2/15/21	United States	20,000,000				19,950,000
Oceaneering International Inc., senior note, 4.65%, 11/15/24	United States	2,100,000				1,952,546
Sabine Pass Liquefaction LLC,
senior secured note, first lien, 5.625%, 2/01/21	United States	20,000,000				20,703,767
senior secured note, first lien, 5.625%, 4/15/23	United States	6,200,000				6,533,643
senior secured note, first lien, 5.625%, 3/01/25	United States	5,000,000				5,227,029
Sanchez Energy Corp., senior note, 6.125%, 1/15/23	United States	6,000,000				2,265,000

franklintempleton.com Semiannual Report       17

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Corporate Bonds (continued)
Energy (continued)
cSinopec Group Overseas Development 2016 Ltd., senior note, 144A, 2.75%, 9/29/26	China	12,800,000		$	11,355,904
cSunoco LP/Sunoco Finance Corp., senior note, 144A, 4.875%, 1/15/23	United States	5,900,000			5,700,875
Weatherford International Ltd.,
senior note, 7.75%, 6/15/21	United States	9,000,000			7,481,250
senior note, 8.25%, 6/15/23	United States	10,500,000			8,085,000
cWoodside Finance Ltd.,
senior bond, 144A, 3.70%, 3/15/28	Australia	7,100,000			6,598,385
senior note, 144A, 3.70%, 9/15/26	Australia	5,400,000			5,087,671
					268,964,623
Food & Staples Retailing 0.9%
cAramark Services Inc., senior bond, 144A, 5.00%, 2/01/28	United States	7,600,000			7,229,500
Kroger Co., senior bond, 2.65%, 10/15/26	United States	15,300,000			13,415,261
Walgreens Boots Alliance Inc., senior note, 3.80%, 11/18/24	United States	30,000,000			29,307,019
					49,951,780
Food, Beverage & Tobacco 1.5%
Bunge Ltd. Finance Corp., senior note, 3.25%, 8/15/26	United States	2,000,000			1,795,442
cImperial Brands Finance PLC, senior note, 144A, 3.50%, 2/11/23	United Kingdom	20,400,000			19,854,443
Kraft Heinz Foods Co., senior bond, 3.00%, 6/01/26	United States	25,400,000			22,709,973
cLamb Weston Holdings Inc., senior note, 144A, 4.875%, 11/01/26	United States	16,500,000			15,984,375
cPost Holdings Inc.,
senior bond, 144A, 5.625%, 1/15/28	United States	10,000,000			9,428,000
senior note, 144A, 5.50%, 3/01/25	United States	8,000,000			7,765,000
Reynolds American Inc., senior note, 4.45%, 6/12/25	United Kingdom	1,900,000			1,893,042
					79,430,275
Health Care Equipment & Services 2.6%
cAvantor Inc., senior secured note, first lien, 144A, 6.00%, 10/01/24	United States	18,000,000			18,000,000
Centene Corp.,
senior note, 4.75%, 5/15/22	United States	12,000,000			12,075,000
csenior note, 144A, 5.375%, 6/01/26	United States	8,600,000			8,750,500
CHS/Community Health Systems Inc.,
senior note, 6.875%, 2/01/22	United States	7,223,000			3,638,586
csenior note, 144A, 8.125%, 6/30/24	United States	2,807,000			2,231,565
senior secured note, first lien, 6.25%, 3/31/23	United States	3,900,000			3,601,455
CVS Health Corp., senior bond, 4.30%, 3/25/28	United States	9,600,000			9,382,076
DaVita Inc.,
senior bond, 5.125%, 7/15/24	United States	10,000,000			9,575,000
senior bond, 5.00%, 5/01/25	United States	9,300,000			8,788,500
Edwards Lifesciences Corp., senior note, 4.30%, 6/15/28	United States	2,700,000			2,686,055
HCA Inc.,
senior bond, 5.875%, 2/15/26	United States	3,000,000			3,075,000
senior secured bond, first lien, 5.25%, 4/15/25	United States	10,000,000			10,237,500
senior secured bond, first lien, 5.50%, 6/15/47	United States	12,000,000			11,838,000

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Corporate Bonds (continued)
Health Care Equipment & Services (continued)
cMPH Acquisition Holdings LLC, senior note, 144A, 7.125%, 6/01/24	United States	11,100,000		$	11,303,352
c,hPolaris Intermediate Corp., senior note, 144A, PIK, 8.50%, 12/01/22	United States	2,900,000			2,983,375
Stryker Corp., senior bond, 3.50%, 3/15/26	United States	4,800,000			4,587,112
Tenet Healthcare Corp.,
senior note, 5.50%, 3/01/19	United States	7,000,000			7,043,750
senior note, 8.125%, 4/01/22	United States	5,000,000			5,225,000
senior note, 6.75%, 6/15/23	United States	2,700,000			2,702,565
					137,724,391
Insurance 0.6%
cNippon Life Insurance Co., sub. bond, 144A, 5.10% to 10/16/24, FRN thereafter, 10/16/44	Japan	35,000,000			35,156,800
Materials 6.0%
ArcelorMittal,
senior note, 5.50%, 3/01/21	France	17,600,000			18,210,808
senior note, 6.125%, 6/01/25	France	2,700,000			2,891,531
hARD Finance SA, secured note, PIK, 7.125%, 9/15/23	Luxembourg	1,300,000			1,270,750
cArdagh Packaging Finance PLC/Ardagh MP Holdings USA Inc., senior note, 144A, 6.00%, 2/15/25	Luxembourg	11,500,000			10,795,625
cBWAY Holding Co., senior note, 144A, 7.25%, 4/15/25	United States	21,200,000			20,140,000
cCemex SAB de CV,
senior secured bond, first lien, 144A, 5.70%, 1/11/25	Mexico	15,000,000			14,615,475
senior secured bond, first lien, 144A, 6.125%, 5/05/25	Mexico	4,000,000			3,986,260
The Chemours Co., senior note, 6.625%, 5/15/23	United States	10,860,000			11,131,500
cCrown Americas LLC/Crown Americas Capital Corp., senior note, 144A, 4.75%, 2/01/26	United States	7,100,000			6,718,375
cFirst Quantum Minerals Ltd.,
senior note, 144A, 7.00%, 2/15/21	Zambia	8,000,000			7,840,000
senior note, 144A, 7.25%, 4/01/23	Zambia	7,200,000			6,678,000
cFMG Resources (August 2006) Pty. Ltd.,
senior note, 144A, 5.125%, 3/15/23	Australia	3,600,000			3,483,000
senior note, 144A, 5.125%, 5/15/24	Australia	7,700,000			7,348,803
Freeport-McMoRan Inc., senior note, 4.55%, 11/14/24	United States	20,000,000			18,575,000
cGlencore Finance Canada Ltd., senior bond, 144A, 4.95%, 11/15/21	Switzerland	13,300,000			13,657,762
cGlencore Funding LLC,
senior note, 144A, 4.125%, 5/30/23	Switzerland	5,000,000			4,945,348
senior note, 144A, 4.625%, 4/29/24	Switzerland	2,500,000			2,504,255
cINVISTA Finance LLC, senior secured note, 144A, 4.25%, 10/15/19	United States	10,000,000			10,071,000
LYB International Finance BV, senior note, 4.00%, 7/15/23	United States	20,400,000			20,352,060
cNew Gold Inc., senior note, 144A, 6.375%, 5/15/25	Canada	6,900,000			5,563,125
cNorthwest Acquisitions ULC/Dominion Finco Inc., secured note, second lien, 144A, 7.125%, 11/01/22	Canada	3,800,000			3,835,530
cNovelis Corp., senior bond, 144A, 5.875%, 9/30/26	United States	19,400,000			18,333,000
cOwens-Brockway Glass Container Inc.,
senior note, 144A, 5.00%, 1/15/22	United States	7,800,000			7,731,750
senior note, 144A, 5.875%, 8/15/23	United States	12,500,000			12,500,000

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Corporate Bonds (continued)
Materials (continued)
Reynolds Group Issuer Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer Luxembourg SA,
csenior note, 144A, 7.00%, 7/15/24	United States	5,600,000		$	5,624,500
senior secured note, first lien, 5.75%, 10/15/20	United States	6,396,111			6,404,106
csenior secured note, first lien, 144A, 5.125%, 7/15/23	United States	5,900,000			5,782,000
c,jsenior secured note, first lien, 144A, FRN, 5.936%, (3-month USD LIBOR + 3.50%), 7/15/21	United States	6,500,000			6,581,250
cSealed Air Corp.,
senior bond, 144A, 5.125%, 12/01/24	United States	11,300,000			11,074,000
senior bond, 144A, 5.50%, 9/15/25	United States	2,600,000			2,561,000
senior note, 144A, 4.875%, 12/01/22	United States	9,000,000			8,943,750
cSociedad Quimica y Minera de Chile SA, senior note, 144A, 3.625%, 4/03/23	Chile	1,500,000			1,455,443
Steel Dynamics Inc.,
senior bond, 5.50%, 10/01/24	United States	9,700,000			9,784,875
senior note, 5.125%, 10/01/21	United States	9,200,000			9,280,500
cSunCoke Energy Partners LP/SunCoke Energy Partners Finance Corp., senior note, 144A, 7.50%, 6/15/25	United States	19,500,000			19,890,000
					320,560,381
Media & Entertainment 5.0%
cAltice Financing SA, secured bond, 144A, 7.50%, 5/15/26	Luxembourg	3,000,000			2,835,000
cAltice US Finance I Corp., senior secured note, first lien, 144A, 5.50%, 5/15/26	United States	22,000,000			21,484,320
CCO Holdings LLC/CCO Holdings Capital Corp.,
senior bond, 5.25%, 9/30/22	United States	8,500,000			8,558,437
csenior bond, 144A, 5.375%, 5/01/25	United States	13,000,000			12,756,250
Clear Channel Worldwide Holdings Inc.,
senior note, 6.50%, 11/15/22	United States	3,000,000			3,026,250
senior note, 6.50%, 11/15/22	United States	5,000,000			5,101,000
senior sub. note, 7.625%, 3/15/20	United States	900,000			901,125
senior sub. note, 7.625%, 3/15/20	United States	6,400,000			6,416,000
CSC Holdings LLC, senior note, 6.75%, 11/15/21	United States	17,000,000			17,844,050
DISH DBS Corp.,
senior bond, 5.875%, 7/15/22	United States	2,000,000			1,897,500
senior bond, 5.00%, 3/15/23	United States	10,000,000			8,787,500
senior note, 5.875%, 11/15/24	United States	8,000,000			6,830,000
kiHeartCommunications Inc.,
senior secured bond, first lien, 9.00%, 3/01/21	United States	8,000,000			5,820,000
senior secured note, first lien, 9.00%, 9/15/22	United States	3,100,000			2,247,500
Netflix Inc.,
senior bond, 5.875%, 2/15/25	United States	10,000,000			10,187,500
senior bond, 4.375%, 11/15/26	United States	11,800,000			10,863,375
cNexstar Broadcasting Inc., senior note, 144A, 5.625%, 8/01/24	United States	21,300,000			20,394,750
Tegna Inc.,
senior bond, 6.375%, 10/15/23	United States	12,000,000			12,315,000
csenior bond, 144A, 5.50%, 9/15/24	United States	2,800,000			2,807,000
senior note, 5.125%, 7/15/20	United States	7,800,000			7,809,750
Time Warner Inc., senior bond, 2.95%, 7/15/26	United States	25,400,000			22,516,806
cUnitymedia KabelBW GmbH, senior bond, 144A, 6.125%, 1/15/25	Germany	18,000,000			18,652,500
cUnivision Communications Inc., senior secured note, first lien, 144A, 5.125%, 2/15/25	United States	25,000,000			22,912,500

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*			Value
Corporate Bonds (continued)
Media & Entertainment (continued)
cVirgin Media Finance PLC, senior bond, 144A, 6.375%, 10/15/24	United Kingdom	9,600,000		GBP	$	12,687,936
cVirgin Media Secured Finance PLC, senior secured bond, first lien, 144A, 5.50%, 1/15/25	United Kingdom	14,000,000				13,685,000
cZiggo Secured Finance BV, senior secured bond, 144A, 4.25%, 1/15/27	Netherlands	8,600,000		EUR		9,675,469
						269,012,518
Pharmaceuticals, Biotechnology & Life Sciences 1.8%
Allergan Funding SCS, senior bond, 3.80%, 3/15/25	United States	25,000,000				24,124,618
Amgen Inc., senior bond, 4.95%, 10/01/41	United States	1,600,000				1,587,384
cBausch Health Cos. Inc.,
senior bond, 144A, 6.125%, 4/15/25	United States	3,100,000				2,858,820
senior note, 144A, 4.50%, 5/15/23	United States	8,000,000		EUR		8,806,595
senior note, 144A, 8.50%, 1/31/27	United States	5,000,000				5,100,000
senior note, first lien, 144A, 7.00%, 3/15/24	United States	2,100,000				2,204,349
cBayer US Finance II LLC, senior bond, 144A, 4.375%, 12/15/28	Germany	11,700,000				11,353,218
Celgene Corp., senior bond, 3.45%, 11/15/27	United States	7,900,000				7,213,773
c,hEagle Holdings Co. II LLC, senior note, 144A, PIK, 7.625%, 5/15/22	United States	3,300,000				3,324,750
cEndo DAC/Endo Finance LLC/Endo Finco Inc.,
senior bond, 144A, 6.00%, 2/01/25	United States	11,900,000				10,025,750
senior note, 144A, 6.00%, 7/15/23	United States	5,000,000				4,336,000
cJaguar Holding Co. II/Pharmaceutical Product Development LLC,
senior note, 144A, 6.375%, 8/01/23	United States	12,900,000				12,928,380
cSABIC Capital II BV, senior note, 144A, 4.50%, 10/10/28	Saudi Arabia	5,500,000				5,398,635
						99,262,272
Real Estate 1.3%
American Homes 4 Rent LP, senior bond, 4.25%, 2/15/28	United States	8,000,000				7,597,937
American Tower Corp., senior bond, 3.375%, 10/15/26	United States	28,900,000				26,596,577
Equinix Inc., senior bond, 5.375%, 4/01/23	United States	20,000,000				20,437,200
MPT Operating Partnership LP/MPT Finance Corp.,
senior bond, 5.25%, 8/01/26	United States	4,200,000				4,074,000
senior bond, 5.00%, 10/15/27	United States	10,700,000				10,081,540
						68,787,254
Retailing 0.8%
Amazon.com Inc., senior note, 2.80%, 8/22/24	United States	8,900,000				8,500,264
Home Depot Inc., senior note, 2.125%, 9/15/26	United States	15,000,000				13,366,542
JD.com Inc., senior note, 3.125%, 4/29/21	China	2,000,000				1,931,250
b,d,hK2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22	South Africa	9,688,700				11,991
d,hK2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22	South Africa	1,873,803				138,373
cParty City Holdings Inc., senior note, 144A, 6.625%, 8/01/26	United States	5,300,000				5,167,500
cPetSmart Inc., senior note, 144A, 7.125%, 3/15/23	United States	20,000,000				14,100,000
						43,215,920
Semiconductors & Semiconductor Equipment 0.1%
Maxim Integrated Products Inc., senior note, 3.375%, 3/15/23	United States	1,800,000				1,760,474
cQorvo Inc., senior note, 144A, 5.50%, 7/15/26	United States	5,600,000				5,628,000
						7,388,474

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Corporate Bonds (continued)
Software & Services 0.7%
Fiserv Inc., senior bond, 3.85%, 6/01/25	United States	8,400,000		$	8,296,326
Infor (U.S.) Inc., senior note, 6.50%, 5/15/22	United States	20,000,000			20,050,000
cSymantec Corp., senior note, 144A, 5.00%, 4/15/25	United States	9,500,000			8,961,225
					37,307,551
Technology Hardware & Equipment 0.6%
cCommScope Technologies LLC, senior bond, 144A, 6.00%, 6/15/25	United States	16,600,000			16,226,500
cDell International LLC/EMC Corp.,
senior note, 144A, 5.875%, 6/15/21	United States	2,500,000			2,540,733
senior note, 144A, 7.125%, 6/15/24	United States	12,600,000			13,345,375
Juniper Networks Inc., senior bond, 5.95%, 3/15/41	United States	1,200,000			1,171,968
Tech Data Corp., senior bond, 4.95%, 2/15/27	United States	1,900,000			1,836,966
					35,121,542
Telecommunication Services 2.1%
cDigicel Group Ltd.,
senior note, 144A, 8.25%, 9/30/20	Bermuda	5,000,000			3,600,000
senior note, 144A, 7.125%, 4/01/22	Bermuda	3,000,000			1,890,000
cDigicel Ltd., senior note, 144A, 6.00%, 4/15/21	Bermuda	10,000,000			9,148,150
Hughes Satellite Systems Corp., senior bond, 6.625%, 8/01/26	United States	17,200,000			16,426,000
Sprint Communications Inc.,
senior note, 6.00%, 11/15/22	United States	10,000,000			10,118,750
csenior note, 144A, 7.00%, 3/01/20	United States	5,000,000			5,193,750
cSprint Spectrum Co. LLC, senior secured bond, first lien, 144A, 5.152%, 9/20/29	United States	15,300,000			15,338,250
T-Mobile USA Inc.,
senior bond, 6.50%, 1/15/24	United States	5,000,000			5,187,500
senior bond, 6.375%, 3/01/25	United States	14,700,000			15,196,125
senior note, 5.125%, 4/15/25	United States	6,000,000			5,925,000
Verizon Communications Inc., senior note, 5.15%, 9/15/23	United States	22,000,000			23,372,081
					111,395,606
Transportation 0.8%
cDAE Funding LLC,
senior note, 144A, 4.50%, 8/01/22	United Arab Emirates	6,000,000			5,895,000
senior note, 144A, 5.00%, 8/01/24	United Arab Emirates	14,000,000			13,650,000
cTransurban Finance Co. Pty. Ltd., senior secured bond, 144A, 3.375%, 3/22/27	Australia	11,400,000			10,501,167
United Airlines Pass Through Trust, second lien, 2016-1, A, 3.45%, 1/07/30	United States	13,071,862			12,454,983
					42,501,150
Utilities 3.5%
Calpine Corp.,
senior bond, 5.75%, 1/15/25	United States	9,000,000			8,075,700
senior note, 5.375%, 1/15/23	United States	10,000,000			9,512,500
csenior secured bond, first lien, 144A, 5.875%, 1/15/24	United States	2,000,000			2,005,000

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Corporate Bonds (continued)
Utilities (continued)
cClearway Energy Operating LLC, senior note, 144A, 5.75%, 10/15/25	United States	12,800,000		$	12,640,000
cColbun SA, senior note, 144A, 3.95%, 10/11/27	Chile	6,200,000			5,716,183
Dominion Energy Inc., senior bond, 2.85%, 8/15/26	United States	11,400,000			10,339,919
c,fEDF SA,
junior sub. bond, 144A, 5.625% to 1/22/24, FRN thereafter, Perpetual	France	5,000,000			4,856,125
junior sub. note, 144A, 5.25% to 1/29/23, FRN thereafter, Perpetual	France	25,000,000			24,260,375
Exelon Corp., senior bond, 3.95%, 6/15/25	United States	18,500,000			18,236,256
cInterGen NV, secured bond, 144A, 7.00%, 6/30/23	Netherlands	4,800,000			4,716,000
cIsrael Electric Corp. Ltd., secured bond, 144A, 4.25%, 8/14/28	Israel	9,200,000			8,727,396
The Southern Co., senior bond, 3.25%, 7/01/26	United States	32,300,000			30,003,365
cState Grid Overseas Investment 2016 Ltd., senior note, 144A, 3.50%, 5/04/27	China	12,800,000			12,028,416
cTalen Energy Supply LLC,
senior note, 144A, 9.50%, 7/15/22	United States	15,900,000			16,218,000
senior note, 144A, 10.50%, 1/15/26	United States	8,100,000			7,148,250
cThree Gorges Finance I Cayman Islands Ltd., senior note, 144A, 3.15%, 6/02/26	China	12,800,000			11,815,296
Virginia Electric & Power Co., senior bond, 6.35%, 11/30/37	United States	820,000			994,645
					187,293,426
Total Corporate Bonds (Cost $2,525,329,686)					2,409,357,724
j,lSenior Floating Rate Interests 8.7%
Automobiles & Components 0.2%
Allison Transmission Inc., New Term Loans, 4.04%, (1-month USD LIBOR + 1.75%), 9/23/22	United States	2,269,668			2,283,853
TI Group Automotive Systems LLC, Initial US Term Loan, 4.802%, (1-month USD LIBOR + 2.50%), 6/30/22	United States	9,315,471			9,280,538
					11,564,391
Capital Goods 0.1%
Altra Industrial Motion Corp., Term Loan, 4.302%, (1-month USD LIBOR + 2.00%), 10/01/25	United States	757,197			756,251
Doncasters U.S. Finance LLC, Second Lien Term Loan, 10.636%, (3-month USD LIBOR + 8.25%), 10/09/20	United States	736,591			624,261
Harsco Corp., Term Loan B-2, 4.563%, (1-month USD LIBOR + 2.25%), 12/10/24	United States	4,280,788			4,302,192
					5,682,704
Commercial & Professional Services 0.2%
KAR Auction Services Inc., Tranche B-5 Term Loans, 4.938%, (3-month USD LIBOR + 2.50%), 3/09/23	United States	7,307,255			7,323,148
m,nUnited Rentals North America Inc., Initial Term Loans, TBD, 10/30/25	United States	3,784,673			3,805,962
Ventia Pty. Ltd., Term B Loans (USD), 5.886%, (3-month USD LIBOR + 3.50%), 5/21/22	Australia	833,442			839,693
					11,968,803

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
j,lSenior Floating Rate Interests (continued)
Consumer Services 0.3%
Aristocrat Technologies Inc., Term B-3 Loans, 4.219%, (3-month USD LIBOR + 1.75%), 10/19/24	United States	1,556,965		$	1,553,337
Avis Budget Car Rental LLC, Tranche B Term Loans, 4.31%, (1-month USD LIBOR + 2.00%), 2/13/25	United States	6,359,788			6,351,647
Eldorado Resorts Inc., Initial Term Loan, 4.563%, (1-month USD LIBOR + 2.25%), 4/17/24	United States	3,508,476			3,517,248
Greektown Holdings LLC, Initial Term Loan, 5.052%, (1-month USD LIBOR + 2.75%), 4/25/24	United States	3,002,874			3,001,622
					14,423,854
Diversified Financials 0.2%
m,nFirst Eagle Holdings Inc., Initial Term Loans, TBD, 12/01/24	United States	5,177,798			5,190,742
Trans Union LLC, 2017 Replacement Term A-2 Loans, 4.052%, (1-month USD LIBOR + 1.75%), 8/09/22	United States	3,452,284			3,458,758
					8,649,500
Energy 2.0%
Bowie Resource Holdings LLC,
First Lien Initial Term Loan, 8.052%, (1-month USD LIBOR + 5.75%), 8/14/20	United States	22,547,970			22,078,228
Second Lien Initial Term Loan, 13.052%, (1-month USD LIBOR + 10.75%), 2/16/21	United States	16,760,827			16,090,394
Fieldwood Energy LLC, Closing Date Loans, 7.552%, (1-month USD LIBOR + 5.25%), 4/11/22	United States	49,391,396			49,792,948
Foresight Energy LLC, Term Loans, 8.277%, (3-month USD LIBOR + 5.75%), 3/28/22	United States	10,218,614			10,259,059
OSG Bulk Ships Inc., Initial Term Loan, 6.77%, (6-month USD LIBOR + 4.25%), 8/05/19	United States	7,897,976			7,832,187
					106,052,816
Food & Staples Retailing 0.3%
Aramark Corp., U.S. Term B-3 Loan, 4.052%, (1-month USD LIBOR + 1.75%), 3/11/25	United States	3,656,382			3,663,238
Smart & Final Stores LLC, First Lien Term Loan, 5.802%, (1-month USD LIBOR + 3.50%), 11/15/22	United States	11,875,171			11,489,228
					15,152,466
Food, Beverage & Tobacco 0.7%
CSM Bakery Supplies LLC,
Second Lien Term Loan, 10.16%, (3-month USD LIBOR + 7.75%), 7/03/21	United States	8,170,000			7,598,100
Term Loans, 6.41%, (3-month USD LIBOR + 4.00%), 7/03/20	United States	1,830,000			1,765,950
JBS USA LUX SA, New Initial Term Loans, 4.837% - 4.886%, (3-month USD LIBOR + 2.50%), 10/30/22	United States	26,331,643			26,362,503
					35,726,553
Health Care Equipment & Services 0.0%†
IQVIA Inc., Term B-3 Dollar Loans, 4.136%, (3-month USD LIBOR + 1.75%), 6/11/25	United States	1,458,999			1,456,810
U.S. Renal Care Inc., Initial Term Loan, 6.636%, (3-month USD LIBOR + 4.25%), 12/31/22	United States	983,530			956,893
					2,413,703

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
j,lSenior Floating Rate Interests (continued)
Household & Personal Products 0.1%
Spectrum Brands, Inc.,
USD Term Loans, 4.31%, (1-month USD LIBOR + 2.00%), 6/23/22	United States	1,342,695		$	1,345,772
USD Term Loans, 4.33% - 4.40%, (2-month USD LIBOR + 2.00%), 6/23/22	United States	1,784,681			1,788,772
USD Term Loans, 4.35%, (3-month USD LIBOR + 2.00%), 6/23/22	United States	1,007,021			1,009,329
					4,143,873
Materials 0.8%
Ashland LLC, Term B Loan, 4.03% - 4.052%, (1-month USD LIBOR + 1.75%), 5/17/24	United States	4,092,812			4,107,730
Axalta Coating Systems U.S. Holdings Inc., Term B-3 Dollar Loan, 4.136%, (3-month USD LIBOR + 1.75%), 6/01/24	United States	4,824,915			4,819,560
Chemours Co., Tranche B-2 US$ Term Loan, 4.05%, (1-month USD LIBOR + 1.75%), 4/03/25	United States	11,501,349			11,451,031
Crown Americas LLC, Dollar Term B Loan, 4.283%, (1-month USD LIBOR + 2.00%), 4/03/25	United States	942,904			946,145
Oxbow Carbon LLC,
Second Lien Term Loan, 9.802%, (1-month USD LIBOR + 7.50%), 1/04/24	United States	2,161,171			2,209,797
Tranche A Term Loan, 4.552%, (1-month USD LIBOR + 2.25%), 1/04/22	United States	12,603,125			12,634,633
Tranche B Term Loan, 5.802%, (1-month USD LIBOR + 3.50%), 1/04/23	United States	7,536,375			7,564,636
					43,733,532
Media & Entertainment 0.7%
Altice U.S. Finance I Corp., March 2017 Refinancing Term Loan Commitments, 4.552%, (1-month USD LIBOR + 2.25%), 7/28/25	United States	1,961,283			1,959,649
AMC Entertainment Holdings Inc.,
2016 Incremental Term Loans, 4.53%, (1-month USD LIBOR + 2.25%), 12/15/23	United States	4,528,536			4,537,027
Initial Term Loans, 4.53%, (1-month USD LIBOR + 2.25%), 12/15/22	United States	5,926,610			5,937,722
Charter Communications Operating LLC, Term A-2 Loan, 3.81%, (1-month USD LIBOR + 1.50%), 3/31/23	United States	8,964,978			8,977,583
CSC Holdings LLC, March 2017 Incremental Term Loans, 4.53%, (1-month USD LIBOR + 2.25%), 7/17/25	United States	12,764,223			12,716,204
Lions Gate Capital Holdings LLC, Term A Loan, 4.052%, (1-month USD LIBOR + 1.75%), 3/22/23	Canada	2,541,660			2,544,837
					36,673,022
Pharmaceuticals, Biotechnology & Life Sciences 0.8%
Bausch Health Cos. Inc., Initial Term Loans, 5.274%, (1-month USD LIBOR + 3.00%), 6/02/25	United States	3,141,757			3,148,958
Endo Luxembourg Finance Co. I S.A.R.L. and Endo LLC, Initial Term Loans, 6.563%, (1-month USD LIBOR + 4.25%), 4/29/24	United States	19,761,060			19,851,466
Grifols Worldwide Operations USA Inc., Tranche B Term Loan, 4.467%, (1-week USD LIBOR + 2.25%), 1/31/25	United States	12,856,862			12,883,373
Syneos Health Inc., Initial Term B Loans, 4.302%, (1-month USD LIBOR + 2.00%), 8/01/24	United States	8,679,807			8,670,173
					44,553,970

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
j,lSenior Floating Rate Interests (continued)
Retailing 1.1%
Ascena Retail Group Inc., Tranche B Term Loan, 6.813%, (1-month USD LIBOR + 4.50%), 8/21/22	United States	30,640,905		$	29,805,941
General Nutrition Centers Inc.,
Tranche B-2 Term Loans, 11.56%, (1-month USD LIBOR + 9.25%), 3/04/21	United States	13,385,549			13,102,779
Tranche B-2 Term Loans, 13.50%, (Prime + 7.75%), 3/04/21	United States	2,339,167			2,289,752
Jo-Ann Stores Inc., Initial Loans, 7.477%, (3-month USD LIBOR + 5.00%), 10/23/23	United States	12,371,375			12,389,412
					57,587,884
Semiconductors & Semiconductor Equipment 0.3%
MKS Instruments Inc., Tranche B-4 Term Loan, 4.052%, (1-month USD LIBOR + 1.75%), 4/29/23	United States	2,722,325			2,731,689
ON Semiconductor Corp., 2018 New Replacement Term B-3 Loans, 4.052%, (1-month USD LIBOR + 1.75%), 3/31/23	United States	11,425,542			11,421,978
					14,153,667
Software & Services 0.1%
Rackspace Hosting Inc., Term B Loans, 5.348%, (3-month USD LIBOR + 3.00%), 11/03/23	United States	3,808,245			3,704,318
Wex Inc., Term B-2 Loan, 4.552%, (1-month USD LIBOR + 2.25%), 7/01/23	United States	1,862,877			1,868,365
					5,572,683
Technology Hardware & Equipment 0.0%†
CommScope Inc., Tranche 5 Term Loans, 4.302%, (1-month USD LIBOR + 2.00%), 12/29/22	United States	447,087			448,764
Telecommunication Services 0.0%†
Global Tel*Link Corp., Term Loan, 6.386%, (3-month USD LIBOR + 4.00%), 5/23/20	United States	2,749,354			2,761,382
Transportation 0.5%
Air Canada, Term Loan, 4.295%, (1-month USD LIBOR + 2.00%), 10/06/23	Canada	545,053			546,870
Hertz Corp., Tranche B-1 Term Loan, 5.06%, (1-month USD LIBOR + 2.75%), 6/30/23	United States	8,998,987			8,965,943
International Seaways Operating Corp., Initial Term Loans, 8.26%, (1-month USD LIBOR + 5.50%), 6/22/22	United States	6,709,072			6,751,003
Navios Maritime Midstream Partners LP, Initial Term Loan, 6.84%, (3-month USD LIBOR + 4.50%), 6/18/20	Marshall Islands	13,094,864			12,636,544
					28,900,360
Utilities 0.3%
EFS Cogen Holdings I LLC (Linden), Term B Advance, 5.64%, (3-month USD LIBOR + 3.25%), 6/28/23	United States	6,145,674			6,145,127
NRG Energy Inc., Term Loan B, 4.136%, (3-month USD LIBOR + 1.75%), 6/30/23	United States	8,435,825			8,411,572
					14,556,699
Total Senior Floating Rate Interests (Cost $463,230,300)					464,720,626

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CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*			Value
Foreign Government and Agency Securities 5.8%
cThe Export-Import Bank of India, senior note, 144A, 3.875%, 2/01/28	India	16,000,000			$	14,706,048
Government of Hungary, 5.375%, 2/21/23	Hungary	16,250,000				17,104,750
Government of Indonesia,
senior bond, FR34, 12.80%, 6/15/21	Indonesia	169,210,000,000		IDR		12,413,736
senior bond, FR36, 11.50%, 9/15/19	Indonesia	35,400,000,000		IDR		2,422,404
senior bond, FR39, 11.75%, 8/15/23	Indonesia	29,150,000,000		IDR		2,167,961
senior bond, FR44, 10.00%, 9/15/24	Indonesia	8,340,000,000		IDR		585,460
senior bond, FR56, 8.375%, 9/15/26	Indonesia	363,988,000,000		IDR		23,602,656
Government of Mexico,
senior bond, M, 6.50%, 6/10/21	Mexico	4,690,000	o	MXN		21,957,848
senior note, M 10, 8.50%, 12/13/18	Mexico	16,200,000	o	MXN		79,772,291
cGovernment of Serbia,
senior note, 144A, 4.875%, 2/25/20	Serbia	29,400,000				29,688,855
senior note, 144A, 7.25%, 9/28/21	Serbia	15,000,000				16,206,600
cGovernment of Ukraine,
144A, 7.75%, 9/01/22	Ukraine	2,200,000				2,137,850
144A, 7.75%, 9/01/23	Ukraine	4,355,000				4,156,303
144A, 7.75%, 9/01/24	Ukraine	4,355,000				4,098,839
144A, 7.75%, 9/01/25	Ukraine	4,355,000				4,020,188
144A, 7.75%, 9/01/26	Ukraine	4,355,000				3,947,916
a,p144A, VRI, GDP Linked Security, 5/31/40	Ukraine	20,490,000				10,567,923
Nota Do Tesouro Nacional,
10.00%, 1/01/21	Brazil	97,200	q	BRL		27,005,405
10.00%, 1/01/23	Brazil	34,402	q	BRL		9,469,621
rIndex Linked, 6.00%, 5/15/23	Brazil	19,500	q	BRL		17,457,271
senior note, 10.00%, 1/01/19	Brazil	25,000	q	BRL		6,744,604
Total Foreign Government and Agency Securities (Cost $347,723,653)						310,234,529
U.S. Government and Agency Securities 4.1%
U.S. Treasury Bond,
7.125%, 2/15/23	United States	3,000,000				3,500,508
6.25%, 8/15/23	United States	4,000,000				4,583,047
6.875%, 8/15/25	United States	1,000,000				1,232,793
6.50%, 11/15/26	United States	34,000,000				42,223,750
5.25%, 2/15/29	United States	1,750,000				2,068,999
3.00%, 11/15/45	United States	50,000,000				46,570,312
sIndex Linked, 0.625%, 1/15/24	United States	24,800,209				24,274,503
U.S. Treasury Note,
2.375%, 8/15/24	United States	5,000,000				4,826,758
sIndex Linked, 0.125%, 7/15/24	United States	96,143,526				91,634,208
Total U.S. Government and Agency Securities (Cost $231,304,738)						220,914,878

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities 20.1%
Banks 0.5%
Citigroup Commercial Mortgage Trust, 2006-C5, AJ, 5.482%, 10/15/49	United States	4,962,854		$	4,803,149
tCommercial Mortgage Trust, 2006-GG7, AJ, FRN, 5.667%, 7/10/38	United States	10,783,000			9,937,646
CSAIL Commercial Mortgage Trust, 2015-C1, A4, 3.505%, 4/15/50	United States	10,050,000			9,908,754
tCWABS Asset-Backed Certificates Trust, 2005-11, AF4, FRN, 4.436%, 3/25/34	United States	2,579,575			2,599,588
uMerrill Lynch Mortgage Investors Trust, 2005-A6, 2A3, FRN, 2.661%, (1-month USD LIBOR + 0.38%), 8/25/35	United States	1,431,189			1,437,509
					28,686,646
Diversified Financials 19.6%
c,uAMMC CLO XI Ltd.,
2012-11A, BR2, 144A, FRN, 4.12%, (3-month USD LIBOR + 1.60%), 4/30/31	United States	3,000,000			2,952,540
2012-11A, CR2, 144A, FRN, 4.42%, (3-month USD LIBOR + 1.90%), 4/30/31	United States	1,000,000			998,750
2012-11A, DR2, 144A, FRN, 5.37%, (3-month USD LIBOR + 2.85%), 4/30/31	United States	1,450,000			1,424,784
c,uAntares CLO Ltd., 2018-1A, B, 144A, FRN, 4.119%, (3-month USD LIBOR + 1.65%), 4/20/31	United States	17,500,000			17,509,625
c,uAres CLO Ltd., 2018-48A, D, 144A, FRN, 5.039%, (3-month USD LIBOR + 2.70%), 7/20/30	United States	3,550,000			3,510,950
c,uAres XLIII CLO Ltd., 2017-43A, A, 144A, FRN, 3.656%, (3-month USD LIBOR + 1.22%), 10/15/29	United States	3,870,000			3,873,986
c,uAtrium VIII,
8A, BR, 144A, FRN, 4.377%, (3-month USD LIBOR + 1.90%), 10/23/24	United States	4,520,000			4,527,006
8A, CR, 144A, FRN, 4.977%, (3-month USD LIBOR + 2.50%), 10/23/24	United States	6,080,000			6,101,949
c,uAtrium XI, 2011A, CR, 144A, FRN, 4.627%, (3-month USD LIBOR + 2.15%), 10/23/25	United States	15,440,000			15,479,218
c,tAtrium XIV LLC, 14A, D, 144A, FRN, 5.26%, 8/23/30	United States	3,750,000			3,734,400
Banc of America Commercial Mortgage Trust,
2015-UBS7, A3, 3.441%, 9/15/48	United States	10,920,000			10,692,425
2015-UBS7, A4, 3.705%, 9/15/48	United States	12,450,000			12,362,937
t2015-UBS7, B, FRN, 4.362%, 9/15/48	United States	6,740,000			6,797,353
c,tBBC Middle Market CLO LLC, 2018-1A, A2, 144A, FRN, 4.369%, 10/20/30	United States	6,300,000			6,298,362
c,tBCAP LLC Trust, 2009-RR1, 2A2, 144A, FRN, 4.286%, 5/26/35	United States	7,305,115			7,105,781
c,uBetony CLO 2 Ltd., 2018-1A, C, 144A, FRN, 5.42%, (3-month USD LIBOR + 2.90%), 4/30/31	United States	4,000,000			3,996,000
cBlueMountain CLO Ltd.,
u2012-2A, BR, 144A, FRN, 4.222%, (3-month USD LIBOR + 1.90%), 11/20/28	United States	6,710,000			6,722,212
u2012-2A, CR, 144A, FRN, 4.922%, (3-month USD LIBOR + 2.60%), 11/20/28	United States	2,730,000			2,727,952
t2014-2A, CR2, 144A, FRN, 4.669%, 10/20/30	United States	3,800,000			3,800,000
t2018-1A, D, 144A, FRN, 5.57%, 7/30/30	United States	5,000,000			5,000,500

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CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
c,uBlueMountain Fuji U.S. CLO II Ltd., 2017-2A, A1A, 144A, FRN, 3.548%, (3-month USD LIBOR + 1.20%), 10/20/30	United States	4,200,000		$	4,220,916
c,uBlueMountain Fuji U.S. CLO III Ltd., 2017-3A, A2, 144A, FRN, 3.489%, (3-month USD LIBOR + 1.15%), 1/15/30	United States	4,600,000			4,606,486
c,uBurnham Park CLO Ltd.,
2016-1A, A, 144A, FRN, 3.899%, (3-month USD LIBOR + 1.43%), 10/20/29	United States	4,590,000			4,617,861
2016-1A, B, 144A, FRN, 4.269%, (3-month USD LIBOR + 1.80%), 10/20/29	United States	6,000,000			6,006,660
2016-1A, C, 144A, FRN, 4.869%, (3-month USD LIBOR + 2.40%), 10/20/29	United States	6,000,000			6,012,120
c,tButtermilk Park CLO Ltd., 2018-1A, C, 144A, FRN, 4.438%, 10/15/31	United States	9,730,950			9,723,846
uCapital One Multi-Asset Execution Trust,
2014-A3, A3, FRN, 2.66%, (1-month USD LIBOR + 0.38%), 1/18/22	United States	4,265,000			4,269,105
2016-A1, A1, FRN, 2.73%, (1-month USD LIBOR + 0.45%), 2/15/22	United States	32,250,000			32,300,187
2016-A2, A2, FRN, 2.91%, (1-month USD LIBOR + 0.63%), 2/15/24	United States	44,033,000			44,472,925
c,uCarlyle Global Market Strategies CLO Ltd.,
2012-4A, BR, 144A, FRN, 4.369%, (3-month USD LIBOR + 1.90%), 1/20/29	United States	6,540,000			6,563,806
2012-4A, C1R, 144A, FRN, 5.069%, (3-month USD LIBOR + 2.60%), 1/20/29	United States	6,330,000			6,358,548
2014-4RA, C, 144A, FRN, 5.336%, (3-month USD LIBOR + 2.90%), 7/15/30	United States	3,000,000			2,977,860
c,tCarlyle GMS Finance MM CLO LLC, 2015-1A, A2R, 144A, FRN, 4.636%, 10/15/31	United States	12,000,000			12,021,000
c,uCarlyle U.S. CLO Ltd., 2017-2A, A1B, 144A, FRN, 3.689%, (3-month USD LIBOR + 1.22%), 7/20/31	United States	8,500,000			8,518,615
c,uCatamaran CLO Ltd., 2014-2A, BR, 144A, FRN, 5.395%, (3-month USD LIBOR + 2.95%), 10/18/26	United States	11,770,000			11,809,429
c,uCent CLO LP,
2014-22A, A2AR, 144A, FRN, 4.293%, (3-month USD LIBOR + 1.95%), 11/07/26	United States	5,224,000			5,230,426
2014-22A, BR, 144A, FRN, 5.293%, (3-month USD LIBOR + 2.95%), 11/07/26	United States	4,416,410			4,425,287
c,tCGRBS Commercial Mortgage Trust, 2013-VN05, C, 144A, FRN, 3.584%, 3/13/35	United States	7,700,000			7,547,466
c,uCole Park CLO Ltd., 2015-1A, B, 144A, FRN, 4.719%, (3-month USD LIBOR + 2.25%), 10/20/28	United States	3,530,000			3,541,014
tCOMM Mortgage Trust, 2014-CR19, B, FRN, 4.703%, 8/10/47	United States	7,700,000			7,797,173
c,tConsumer Loan Underlying Bond (CLUB) Certificate Issuer Trust I, 2018-14, PT, 144A, FRN, 9.57%, 9/16/41	United States	10,158,338			10,131,517
cCore Industrial Trust, 2015-CALW, A, 144A, 3.04%, 2/10/34	United States	14,291,734			14,143,951
uDiscover Card Execution Note Trust, 2016-A2, A2, FRN, 2.82%, (1-month USD LIBOR + 0.54%), 9/15/21	United States	32,250,000			32,301,797

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
c,uDryden 33 Senior Loan Fund,
2014-33A, BR, 144A, FRN, 4.286%, (3-month USD LIBOR + 1.85%), 10/15/28	United States	7,030,000		$	7,045,958
2014-33A, CR, 144A, FRN, 4.936%, (3-month USD LIBOR + 2.50%), 10/15/28	United States	3,530,000			3,539,990
c,tDryden 38 Senior Loan Fund,
2015-38A, CR, 144A, FRN, 4.436%, 7/15/30	United States	7,186,000			7,147,699
2015-38A, DR, 144A, FRN, 5.436%, 7/15/30	United States	4,556,000			4,568,575
c,uDryden 42 Senior Loan Fund, 2016-42A, DR, 144A, FRN, 5.366%, (3-month USD LIBOR + 2.93%), 7/15/30	United States	8,400,000			8,326,584
c,uDryden 55 CLO Ltd.,
2018-55A, A1, 144A, FRN, 3.456%, (3-month USD LIBOR + 1.02%), 4/15/31	United States	6,000,000			5,989,440
2018-55A, D, 144A, FRN, 5.286%, (3-month USD LIBOR + 2.85%), 4/15/31	United States	3,000,000			2,998,830
c,uDryden 64 CLO Ltd.,
2018-64A, A, 144A, FRN, 3.415%, (3-month USD LIBOR + 0.97%), 4/18/31	United States	5,070,000			5,045,106
2018-64A, D, 144A, FRN, 5.095%, (3-month USD LIBOR + 2.65%), 4/18/31	United States	2,200,000			2,158,662
c,tEaton Vance CLO Ltd.,
2014-1RA, C, 144A, FRN, 4.257%, 7/15/30	United States	1,972,575			1,964,073
2014-1RA, D, 144A, FRN, 5.207%, 7/15/30	United States	3,653,850			3,652,973
c,tEleven Madison Trust Mortgage Trust, 2015-11MD, A, 144A, FRN, 3.555%, 9/10/35	United States	14,920,000			14,734,746
FHLMC Structured Agency Credit Risk Debt Notes,
u2013-DN2, M2, FRN, 6.531%, (1-month USD LIBOR + 4.25%), 11/25/23	United States	2,253,049			2,492,420
u2014-DN1, M2, FRN, 4.481%, (1-month USD LIBOR + 2.20%), 2/25/24	United States	8,616,562			8,842,591
u2014-DN2, M3, FRN, 5.881%, (1-month USD LIBOR + 3.60%), 4/25/24	United States	13,890,000			15,324,490
u2014-DN3, M3, FRN, 6.281%, (1-month USD LIBOR + 4.00%), 8/25/24	United States	1,263,505			1,373,626
u2014-DN4, M3, FRN, 6.831%, (1-month USD LIBOR + 4.55%), 10/25/24	United States	13,709,333			15,160,401
u2014-HQ1, M3, FRN, 6.381%, (1-month USD LIBOR + 4.10%), 8/25/24	United States	3,660,000			3,992,617
u2014-HQ2, M2, FRN, 4.481%, (1-month USD LIBOR + 2.20%), 9/25/24	United States	10,468,786			10,761,831
u2014-HQ3, M3, FRN, 7.031%, (1-month USD LIBOR + 4.75%), 10/25/24	United States	7,669,031			8,469,708
u2015-DNA1, M3, FRN, 5.581%, (1-month USD LIBOR + 3.30%), 10/25/27	United States	2,830,000			3,168,735
u2015-DNA3, M3, FRN, 6.981%, (1-month USD LIBOR + 4.70%), 4/25/28	United States	18,411,581			21,788,819
u2015-HQ1, M2, FRN, 4.487%, (1-month USD LIBOR + 2.20%), 3/25/25	United States	648,066			649,794
u2015-HQ1, M3, FRN, 6.087%, (1-month USD LIBOR + 3.80%), 3/25/25	United States	9,580,000			10,155,805

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CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
FHLMC Structured Agency Credit Risk Debt Notes, (continued)
u2015-HQA1, M3, FRN, 6.981%, (1-month USD LIBOR + 4.70%), 3/25/28	United States	18,830,000		$	21,443,256
u2016-DNA2, M3, FRN, 6.931%, (1-month USD LIBOR + 4.65%), 10/25/28	United States	17,820,000			20,454,723
tHQA1, M2, FRN, 5.831%, 8/25/29	United States	19,800,000			21,627,207
c,uFlagship CLO VIII Ltd.,
2014-8A, ARR, 144A, FRN, 3.286%, (3-month USD LIBOR + 0.85%), 1/16/26	United States	6,880,000			6,870,918
2014-8A, DR, 144A, FRN, 5.486%, (3-month USD LIBOR + 3.05%), 1/16/26	United States	3,000,000			2,997,270
uFNMA Connecticut Avenue Securities,
2013-C01, M2, FRN, 7.531%, (1-month USD LIBOR + 5.25%), 10/25/23	United States	16,865,000			19,325,337
2014-C01, M2, FRN, 6.681%, (1-month USD LIBOR + 4.40%), 1/25/24	United States	17,420,000			19,722,504
2014-C02, 1M2, FRN, 4.881%, (1-month USD LIBOR + 2.60%), 5/25/24	United States	14,572,000			15,499,888
2014-C03, 1M2, FRN, 5.281%, (1-month USD LIBOR + 3.00%), 7/25/24	United States	30,730,588			32,758,690
2014-C03, 2M2, FRN, 5.181%, (1-month USD LIBOR + 2.90%), 7/25/24	United States	4,742,695			5,071,781
2015-C01, 1M2, FRN, 6.581%, (1-month USD LIBOR + 4.30%), 2/25/25	United States	7,233,972			7,943,348
2015-C01, 2M2, FRN, 6.831%, (1-month USD LIBOR + 4.55%), 2/25/25	United States	12,999,698			14,026,935
2015-C02, 1M2, FRN, 6.281%, (1-month USD LIBOR + 4.00%), 5/25/25	United States	26,916,321			29,525,455
2015-C02, 2M2, FRN, 6.281%, (1-month USD LIBOR + 4.00%), 5/25/25	United States	14,652,201			15,808,081
2015-C03, 1M2, FRN, 7.281%, (1-month USD LIBOR + 5.00%), 7/25/25	United States	27,278,041			30,707,840
2015-C03, 2M2, FRN, 7.281%, (1-month USD LIBOR + 5.00%), 7/25/25	United States	17,952,641			19,958,141
2017-C01, 1M2, FRN, 5.831%, (1-month USD LIBOR + 3.55%), 7/25/29	United States	20,720,000			22,463,236
c,uGalaxy XVIII CLO Ltd., 2018-28A, C, 144A, FRN, 4.289%, (3-month USD LIBOR + 1.95%), 7/15/31	United States	3,070,000			3,050,997
c,uGalaxy XXV CLO Ltd., 2018-25A, D, 144A, FRN, 5.875%, (3-month USD LIBOR + 3.10%), 10/25/31	United States	4,734,850			4,683,240
c,uGalaxy XXVII CLO Ltd., 2018-27A, C, 144A, FRN, 5.065%, (3-month USD LIBOR + 2.75%), 5/16/31	United States	5,750,000			5,730,162
GS Mortgage Securities Trust,
t2016-GS3, B, FRN, 3.395%, 10/10/49	United States	8,037,000			7,601,342
2017-GS6, B, 3.869%, 5/10/50	United States	7,700,000			7,460,452

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Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
c,tHPS Loan Management Ltd., 2013A-18, C, 144A, FRN, 4.586%, 10/15/30	United States	4,950,000		$	4,949,158
c,tJ.P. Morgan Chase Commercial Mortgage Securities Trust, 2016-NINE, B, 144A, FRN, 2.854%, 10/06/38	United States	9,600,000			8,722,791
JPMCC Commercial Mortgage Securities Trust, 2017-JP6, B, 3.946%, 7/15/50	United States	9,250,000			8,931,000
c,uLCM XVI LP, 2016A, BR, 144A, FRN, 3.936%, (3-month USD LIBOR + 1.50%), 7/15/26	United States	6,900,000			6,894,963
c,tLCM XVII LP,
2017A, BRR, 144A, FRN, 4.026%, 10/15/31	United States	4,590,000			4,591,423
2017A, CRR, 144A, FRN, 4.526%, 10/15/31	United States	4,240,000			4,239,915
c,uLCM XVIII LP, 2018A, DR, 144A, FRN, 5.269%, (3-month USD LIBOR + 2.80%), 4/20/31	United States	6,860,000			6,852,454
c,uLCM XXIV Ltd., 24A, A, 144A, FRN, 3.779%, (3-month USD LIBOR + 1.31%), 3/20/30	United States	4,300,000			4,320,382
c,uMadison Park Funding XXIII Ltd.,
2017-23A, B, 144A, FRN, 4.209%, (3-month USD LIBOR + 1.70%), 7/27/30	United States	2,400,000			2,399,472
2017-23A, C, 144A, FRN, 4.859%, (3-month USD LIBOR + 2.35%), 7/27/30	United States	5,000,000			5,018,750
c,tMagnetite Ltd., 2015-14RA, A1, 144A, FRN, 3.559%, 10/18/31	United States	2,000,000			1,999,940
c,uMagnetite XVIII Ltd., 2016-18A, B, 144A, FRN, 4.064%, (3-month USD LIBOR + 1.75%), 11/15/28	United States	2,090,000			2,092,592
uMortgageIT Trust,
2004-1, A2, FRN, 3.181%, (1-month USD LIBOR + 0.90%), 11/25/34	United States	2,237,500			2,206,429
2005-5, A1, FRN, 2.541%, (1-month USD LIBOR + 0.26%), 12/25/35	United States	1,923,251			1,910,000
c,tNeuberger Berman CLO Ltd., 2016-22A, CR, 144A, FRN, 4.649%, 10/17/30	United States	2,129,630			2,129,609
c,uNZCG Funding Ltd., 2015-1A, A2R, 144A, FRN, 3.861%, (3-month USD LIBOR + 1.55%), 2/26/31	United States	15,500,000			15,372,435
c,uOctagon Investment Partners 30 Ltd., 144A, FRN, 3.789%, (3-month USD LIBOR + 1.32%), 3/17/30	United States	4,300,000			4,315,953
c,uOctagon Investment Partners 37 Ltd., 2018-2A, C, 144A, FRN, 5.21%, (3-month USD LIBOR + 2.85%), 7/25/30	United States	4,000,000			3,981,120
c,tOctagon Investment Partners 38 Ltd., 2018-1A, C, 144A, FRN, 5.137%, 7/20/30	United States	5,000,000			4,995,650
c,uOctagon Investment Partners XVI Ltd., 2013-1A, DR, 144A, FRN, 5.336%, (3-month USD LIBOR + 3.00%), 7/17/30	United States	6,000,000			5,964,240
c,uOctagon Investment Partners XX Ltd., 2014-1A, AR, 144A, FRN, 3.468%, (3-month USD LIBOR + 1.13%), 8/12/26	United States	6,100,000			6,108,052
c,uOctagon Investment Partners XXIII Ltd.,
2015-1A, BR, 144A, FRN, 3.636%, (3-month USD LIBOR + 1.20%), 7/15/27	United States	4,590,000			4,585,548
2015-1A, DR, 144A, FRN, 4.986%, (3-month USD LIBOR + 2.55%), 7/15/27	United States	6,400,000			6,367,808

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CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Asset-Backed Securities and Commercial Mortgage-Backed Securities (continued)
Diversified Financials (continued)
uOpteum Mortgage Acceptance Corp. Trust, 2005-4, 1APT, FRN, 2.591%, (1-month USD LIBOR + 0.31%), 11/25/35	United States	2,583,468		$	2,572,286
uStructured Asset Securities Corp., 2005-2XS, 2A2, FRN, 3.756%, (1-month USD LIBOR + 1.50%), 2/25/35	United States	2,121,028			2,094,774
tThornburg Mortgage Securities Trust, 2005-1, A3, FRN, 3.518%, 4/25/45	United States	3,345,513			3,385,087
c,tVoya CLO 2015-2 Ltd., 2A, BR, 144A, FRN, 3.977%, 7/23/27	United States	9,290,000			9,295,853
c,uVoya CLO Ltd.,
2013-2A, BR, 144A, FRN, 4.34%, (3-month USD LIBOR + 1.85%), 4/25/31	United States	5,770,000			5,742,881
2014-1A, CR2, 144A, FRN, 5.245%, (3-month USD LIBOR + 2.80%), 4/18/31	United States	8,000,000			7,960,080
2017-2A, B, 144A, FRN, 4.786%, (3-month USD LIBOR + 2.35%), 6/07/30	United States	19,200,000			19,253,184
2018-2A, D, 144A, FRN, 5.124%, (3-month USD LIBOR + 2.75%), 7/15/31	United States	2,900,000			2,855,108
Wells Fargo Mortgage Backed Securities Trust,
t2004-W, A9, FRN, 4.69%, 11/25/34	United States	1,139,628			1,174,291
2007-3, 3A1, 5.50%, 4/25/22	United States	212,911			216,489
					1,052,798,718
Total Asset-Backed Securities and Commercial Mortgage-Backed Securities (Cost $1,086,390,981)					1,081,485,364
Mortgage-Backed Securities 9.7%
vFederal Home Loan Mortgage Corp. (FHLMC) Adjustable Rate 0.0%†
FHLMC, 3.679%, (US 1 Year CMT T-Note +/- MBS Margin), 1/01/33	United States	17,907			18,454
Federal Home Loan Mortgage Corp. (FHLMC) Fixed Rate 6.0%
FHLMC Gold 15 Year, 4.50%, 2/01/19 - 9/01/19	United States	29,198			29,664
FHLMC Gold 15 Year, 5.00%, 4/01/19 - 7/01/22	United States	94,389			96,549
FHLMC Gold 15 Year, 5.50%, 2/01/19	United States	71			71
FHLMC Gold 30 Year, 3.50%, 12/01/47	United States	14,415,593			14,049,802
wFHLMC Gold 30 Year, 3.50%, 10/01/48	United States	139,600,000			135,925,172
FHLMC Gold 30 Year, 4.00%, 5/01/48	United States	70,592,273			70,687,484
wFHLMC Gold 30 Year, 4.00%, 11/01/48	United States	98,700,000			98,741,920
FHLMC Gold 30 Year, 4.50%, 10/01/40	United States	155,377			161,073
FHLMC Gold 30 Year, 5.00%, 5/01/27 - 2/01/38	United States	1,217,567			1,281,963
FHLMC Gold 30 Year, 5.50%, 6/01/33 - 6/01/36	United States	881,374			943,813
FHLMC Gold 30 Year, 6.00%, 6/01/33 - 6/01/37	United States	275,158			299,453
FHLMC Gold 30 Year, 6.50%, 10/01/21 - 6/01/36	United States	143,703			158,369
FHLMC Gold 30 Year, 7.00%, 9/01/21 - 8/01/32	United States	25,772			26,631
FHLMC Gold 30 Year, 7.50%, 1/01/26 - 1/01/31	United States	6,042			6,849
FHLMC Gold 30 Year, 8.00%, 11/01/25 - 1/01/26	United States	77			77
FHLMC Gold 30 Year, 9.00%, 12/01/24	United States	77			83
					322,408,973

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Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Mortgage-Backed Securities (continued)
vFederal National Mortgage Association (FNMA) Adjustable Rate 0.0%†
FNMA, 3.824%, (US 1 Year CMT T-Note +/- MBS Margin), 12/01/34	United States	150,203		$	158,501
Federal National Mortgage Association (FNMA) Fixed Rate 2.7%
FNMA 15 Year, 2.50%, 7/01/27	United States	298,215			287,986
FNMA 15 Year, 4.50%, 3/01/20	United States	13,197			13,391
FNMA 15 Year, 5.50%, 3/01/21 - 4/01/22	United States	41,422			41,829
FNMA 30 Year, 3.50%, 11/01/47	United States	36,917,185			35,978,380
wFNMA 30 Year, 3.50%, 10/01/48	United States	107,000,000			104,170,355
FNMA 30 Year, 4.50%, 3/01/28 - 2/01/41	United States	499,745			517,222
FNMA 30 Year, 5.00%, 9/01/23 - 10/01/35	United States	1,329,950			1,400,644
FNMA 30 Year, 5.50%, 9/01/33 - 12/01/35	United States	1,190,523			1,275,555
FNMA 30 Year, 6.00%, 6/01/34 - 5/01/38	United States	2,467,445			2,679,398
FNMA 30 Year, 6.50%, 3/01/28 - 10/01/37	United States	352,989			391,079
FNMA 30 Year, 7.50%, 10/01/29	United States	5,796			6,604
FNMA 30 Year, 8.00%, 1/01/25 - 5/01/26	United States	3,157			3,463
					146,765,906
Government National Mortgage Association (GNMA) Fixed Rate 1.0%
GNMA I SF 30 Year, 4.50%, 9/20/48	United States	29,947,227			30,774,927
wGNMA I SF 30 Year, 4.50%, 11/01/48	United States	19,000,000			19,491,700
GNMA I SF 30 Year, 5.00%, 6/15/34 - 7/15/34	United States	158,879			168,343
GNMA I SF 30 Year, 5.50%, 2/15/33 - 6/15/36	United States	416,746			446,881
GNMA I SF 30 Year, 6.00%, 8/15/36	United States	23,344			25,376
GNMA I SF 30 Year, 6.50%, 2/15/29 - 3/15/32	United States	40,506			44,191
GNMA I SF 30 Year, 7.00%, 11/15/27 - 5/15/28	United States	10,948			11,150
GNMA I SF 30 Year, 7.50%, 9/15/23 - 5/15/27	United States	750			769
GNMA I SF 30 Year, 8.00%, 2/15/25 - 9/15/27	United States	3,860			4,105
GNMA I SF 30 Year, 8.50%, 8/15/24	United States	51			52
GNMA I SF 30 Year, 9.00%, 1/15/25	United States	222			223
GNMA I SF 30 Year, 9.50%, 6/15/25	United States	429			430
GNMA II SF 30 Year, 5.00%, 9/20/33 - 11/20/33	United States	221,217			236,226
GNMA II SF 30 Year, 5.50%, 6/20/34	United States	112,331			120,164
GNMA II SF 30 Year, 6.00%, 11/20/34	United States	107,733			116,710
GNMA II SF 30 Year, 6.50%, 7/20/28 - 12/20/31	United States	60,032			66,500
GNMA II SF 30 Year, 7.50%, 4/20/32	United States	16,979			18,500
					51,526,247
Total Mortgage-Backed Securities (Cost $526,961,676)					520,878,081
Municipal Bonds 1.5%
California State GO, Various Purpose, Refunding, 5.00%, 9/01/29	United States	17,200,000			19,804,424
New Jersey EDA Revenue, School Facilities Construction, Refunding, Series NN, 5.00%, 3/01/30	United States	5,200,000			5,446,740
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			3,731,700
Orlando Health Obligated Group, 3.777%, 10/01/28	United States	3,870,000			3,761,251
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			14,563,886

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CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Country		Principal Amount	*		Value
Municipal Bonds (continued)
kPuerto Rico Electric Power Authority Power Revenue,
Series A, 6.75%, 7/01/36	United States		30,900,000		$	20,007,750
Series XX, 5.25%, 7/01/40	United States		15,000,000			9,600,000
San Jose RDA Successor Agency Tax Allocation, Senior, Refunding, Series A-T, 3.25%, 8/01/29	United States		5,675,000			5,325,534
Total Municipal Bonds (Cost $89,767,691)						82,241,285
		Shares
Escrows and Litigation Trusts 0.0%†
a,bMidstates Petroleum Co. Inc./Midstates Petroleum Co. LLC, Escrow Account	United States		15,000,000			—
a,bNewPage Corp., Litigation Trust	United States		14,000,000			—
aPenn Virginia Corp., Escrow Account	United States		15,000,000			39,375
a,bT-Mobile USA Inc., Escrow Account	United States		29,900,000			—
aVistra Energy Corp., Escrow Account	United States		30,000,000			150,000
Total Escrows and Litigation Trusts (Cost $952,711)						189,375
Total Investments before Short Term Investments (Cost $5,812,295,483)						5,559,242,408
			Principal Amount	*
Short Term Investments 2.0%
U.S. Government and Agency Securities (Cost $4,999,723) 0.1%
xU.S. Treasury Bill, 11/01/18	United States		5,000,000			5,000,000
Total Investments before Money Market Funds and Repurchase Agreement (Cost $5,817,295,206)						5,564,242,408
		Shares
Money Market Funds (Cost $80,992,803) 1.5%
e,yInstitutional Fiduciary Trust Money Market Portfolio, 1.83%	United States		80,992,803			80,992,803

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Franklin Strategic Income Fund (continued)

	Country	Principal Amount	*		Value
Short Term Investments (continued)
Repurchase Agreements (Cost $20,825,536) 0.4%
zJoint Repurchase Agreement, 2.191%, 11/01/18 (Maturity Value $20,826,804)
BNP Paribas Securities Corp. (Maturity Value $9,623,650)
Deutsche Bank Securities Inc. (Maturity Value $2,782,669)
HSBC Securities (USA) Inc. (Maturity Value $8,420,485) Collateralized by U.S. Government Agency Securities, 3.00% - 4.50%, 6/15/39 - 6/20/48; U.S. Treasury Bond, 2.50%, 8/15/23; and U.S. Treasury Note, 1.00% - 3.50%, 11/15/19 - 7/31/23 (valued at $21,244,845)	United States	20,825,536		$	20,825,536
Total Investments (Cost $5,919,113,545) 105.4%					5,666,060,747
Other Assets, less Liabilities (5.4)%					(287,841,309	)
Net Assets 100.0%				$	5,378,219,438

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CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

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.

^aaThe security is owned by FT Holdings Corporation ll, a wholly-owned subsidiary of the Fund. See Note 1(h).

^bFair valued using significant unobservable inputs. See Note 11 regarding fair value measurements.

^cSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933. These securities have been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At October 31, 2018, the aggregate value of these securities was $1,636,653,364, representing 30.4% of net assets.

^dSee Note 8 regarding restricted securities.

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

^fPerpetual security with no stated maturity date.

^gSecurity was purchased pursuant to Regulation S under the Securities Act of 1933, which exempts from registration securities offered and sold outside of the United States. Such a security cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. This security has been deemed liquid under guidelines approved by the Trust’s Board of Trustees. At October 31, 2018, the value of this security was $4,251,398, representing 0.1% of net assets.

^hIncome may be received in additional securities and/or cash.

ⁱSee Note 1(g) regarding loan participation notes.

^jThe coupon rate shown represents the rate at period end.

^kSee Note 7 regarding defaulted securities.

^lSee Note 1(j) regarding senior floating rate interests.

^mSecurity purchased on a delayed delivery basis. See Note 1(d).

ⁿA portion or all of the security represents an unsettled loan commitment. The coupon rate is to-be determined (TBD) at the time of settlement and will be based upon a reference index/floor plus a spread.

^oPrincipal amount is stated in 100 Mexican Peso Units.

^pThe principal represents the notional amount. See Note 1(e) regarding value recovery instruments.

^qPrincipal amount is stated in 1,000 Brazilian Real Units.

^rRedemption price at maturity and coupon payment is adjusted for inflation. See Note 1(l).

^sPrincipal amount of security is adjusted for inflation. See Note 1(l).

^tAdjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions. The coupon rate shown represents the rate at period end.

^uThe coupon rate shown represents the rate inclusive of any caps or floors, if applicable, in effect at period end.

^vAdjustable Rate Mortgage-Backed Security (ARM); the rate shown is the effective rate at period end. ARM rates are not based on a published reference rate and spread, but instead pass-through weighted average interest income inclusive of any caps or floors, if applicable, from the underlying mortgage loans in which the majority of mortgages pay interest based on the index shown at their designated reset dates plus a spread, less the applicable servicing and guaranty fee (MBS margin).

^wSecurity purchased on a to-be-announced (TBA) basis. See Note 1(d).

^xThe security was issued on a discount basis with no stated coupon rate.

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

^zSee Note 1(c) regarding joint repurchase agreement.

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FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

At October 31, 2018, the Fund had the following futures contracts outstanding. See Note 1(e).

Futures Contracts

Description	Type	Number of Contracts		Notional Amount	*	Expiration Date	Value/ Unrealized Appreciation (Depreciation)
Interest Rate Contracts
Euro-Bund	Short	444	$	80,565,745		12/06/18	$   (207,144	)
Long Gilt	Long	496		77,548,691		12/27/18	265,310
U.S. Treasury 5 Yr. Note	Short	1,184		133,061,250		12/31/18	413,231
U.S. Treasury 30 Yr. Bond	Long	310		42,818,750		12/19/18	(407,712	)
Ultra 10 Yr. U.S. Treasury Note	Long	690		86,325,469		12/19/18	(2,050,266	)
Total Futures Contracts							$(1,986,581	)

*As of period end.

At October 31, 2018, the Fund had the following forward exchange contracts outstanding. See Note 1(e).

Forward Exchange Contracts

Currency	Counterparty	a	Type	Quantity		Contract Amount	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts
Australian Dollar	JPHQ		Buy	6,000,000	$	4,370,178	11/13/18	$	—	$	(122,465	)
Australian Dollar	JPHQ		Sell	41,450,000		30,648,462	11/13/18		1,303,841		—
Brazilian Real	JPHQ		Buy	10,000,000		2,651,676	11/13/18		29,143		—
Brazilian Real	JPHQ		Sell	97,000,000		25,189,963	11/13/18		—		(813,981	)
British Pound	JPHQ		Sell	4,600,000		5,940,417	11/13/18		61,701		—
Euro	JPHQ		Buy	3,900,000		4,597,183	11/13/18		—		(176,850	)
Euro	JPHQ		Sell	35,200,000		40,975,968	11/13/18		1,079,625		—
Indian Rupee	JPHQ		Buy	2,200,000,000		31,645,570	11/13/18		—		(1,964,106	)
Indian Rupee	JPHQ		Sell	1,970,000,000		27,730,466	11/13/18		1,152,064		—
Polish Zloty	JPHQ		Buy	60,000,000		16,235,304	11/13/18		—		(596,855	)
Polish Zloty	JPHQ		Sell	60,000,000		15,740,678	11/13/18		102,229		—
Swedish Krona	JPHQ		Buy	228,000,000		25,558,647	11/13/18		—		(628,777	)
Swedish Krona	JPHQ		Sell	135,000,000		15,158,163	11/13/18		397,055		—
Indonesian Rupiah	JPHQ		Sell	246,000,000,000		16,544,489	11/21/18		425,655		—
Australian Dollar	JPHQ		Sell	19,500,000		14,000,707	1/14/19		184,135		—
Brazilian Real	JPHQ		Sell	23,000,000		5,447,655	1/18/19		—		(685,427	)
Australian Dollar	DBAB		Sell	3,000,000		2,160,600	2/04/19		34,139		—
Brazilian Real	JPHQ		Sell	61,000,000		15,212,349	2/04/19		—		(1,030,408	)
Canadian Dollar	JPHQ		Sell	15,200,000		11,879,269	2/04/19		307,923		—
Indian Rupee	DBAB		Buy	1,326,000,000		17,931,034	2/04/19		—		(262,499	)
Indian Rupee	JPHQ		Buy	212,000,000		2,833,656	2/04/19		—		(8,823	)
Mexican Peso	JPHQ		Buy	150,000,000		7,379,711	2/05/19		—		(115,295	)
Mexican Peso	JPHQ		Sell	1,340,000,000		69,918,759	2/05/19		5,023,307		—
South Korean Won	JPHQ		Sell	18,600,000,000		16,340,156	2/07/19		—		(12,498	)
Norwegian Krone	JPHQ		Buy	137,300,000		16,903,652	2/19/19		—		(537,054	)
British Pound	JPHQ		Sell	4,800,000		6,343,584	3/14/19		169,274		—
Canadian Dollar	JPHQ		Sell	27,000,000		20,811,253	3/14/19		246,240		—
Euro	DBAB		Buy	800,000		952,960	3/14/19		—		(35,815	)

38       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

Forward Exchange Contracts (continued)

Currency	Counterparty	a	Type	Quantity		Contract Amount	Settlement Date		Unrealized Appreciation		Unrealized Depreciation
OTC Forward Exchange Contracts (continued)
Euro	DBAB		Sell	800,000	$	948,240	3/14/19	$	31,095	$	—
Euro	JPHQ		Sell	6,825,400		8,096,767	3/14/19		271,916		—
Swedish Krona	JPHQ		Buy	50,700,000		5,691,833	3/14/19		—		(83,441	)
Chinese Yuan Renminbi	JPHQ		Sell	110,000,000		15,704,190	4/11/19		46,540		—
Philippine Peso	JPHQ		Sell	600,000,000		10,902,153	4/11/19		—		(207,724	)
Total Forward Exchange Contracts								$	10,865,882	$	(7,282,018	)
Net unrealized appreciation (depreciation)								$	3,583,864

^aMay be comprised of multiple contracts with the same counterparty, currency and settlement date.

At October 31, 2018, the Fund had the following credit default swap contracts outstanding. See Note 1(e).

Credit Default Swap Contracts

Description	Periodic Payment Rate Received (Paid)	Payment Frequency	Counter- party	Maturity Date		Notional Amount	a		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)		Rating	b
Centrally Cleared Swap Contracts
Contracts to Sell Protectionc,d
Traded Index
CDX.EM.30	1.00%	Quarterly		12/20/23	$	83,150,000		$	(3,859,329)		$	(3,663,021	)	$	(196,308	)	Investment Grade
OTC Swap Contracts
Contracts to Buy Protectionc
Single Name
Ally Financial Inc.	(5.00)%	Quarterly	CITI	12/20/22	$	7,350,000		$	(1,120,113	)	$	(1,109,973	)	$	(10,140	)
Ally Financial Inc.	(5.00)%	Quarterly	JPHQ	12/20/22		3,700,000			(563,866	)		(565,031	)		1,165
Ally Financial Inc.	(5.00)%	Quarterly	JPHQ	12/20/22		8,750,000			(1,333,468	)		(1,328,280	)		(5,188	)
Government of Italy	(1.00)%	Quarterly	BZWS	6/20/23		14,200,000			315,002			143,418			171,584
Government of Turkey	(1.00)%	Quarterly	BZWS	12/20/19		9,100,000			215,326			483,205			(267,879	)
Government of Turkey	(1.00)%	Quarterly	BZWS	12/20/23		12,472,500			1,501,062			1,586,520			(85,458	)
Contracts to Sell Protectionc,d
Single Name
General Electric Co.	1.00%	Quarterly	JPHQ	12/20/23		5,325,000			(102,191	)		(108,404	)		6,213		BBB+
Government of Argentina	5.00%	Quarterly	MSCO	6/20/23		48,600,000			(1,591,803	)		4,500,166			(6,091,969	)	B+
Government of Brazil	1.00%	Quarterly	CITI	12/20/23		21,400,000			(978,740	)		(1,870,917	)		892,177		BB-
Government of Colombia	1.00%	Quarterly	JPHQ	12/20/23		19,400,000			(233,396	)		(136,822	)		(96,574	)	BBB-
Government of Indonesia	1.00%	Quarterly	BOFA	12/20/23		16,700,000			(414,500	)		(261,558	)		(152,942	)	BBB-
Government of Indonesia	1.00%	Quarterly	CITI	12/20/23		17,000,000			(421,946	)		(377,846	)		(44,100	)	BBB-
Government of Italy	1.00%	Quarterly	BZWS	6/20/23		14,200,000			(896,977	)		(628,909	)		(268,068	)	NR
Government of Mexico	1.00%	Quarterly	CITI	12/20/23		32,600,000			(628,104	)		(264,388	)		(363,716	)	BBB+

franklintempleton.com Semiannual Report       39

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

Credit Default Swap Contracts (continued)

Description	Periodic Payment Rate Received (Paid)	Payment Frequency	Counter- party	Maturity Date		Notional Amount	a		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)		Rating	b
OTC Swap Contracts (continued)
Contracts to Sell Protectionc,d (continued)
Traded Index
eBNP Paribas Bespoke Bordeaux Index, Mezzanine Tranche 7-10%	2.10%	Quarterly	BNDP	6/20/20	$	6,850,000		$	5,543		$	—		$	5,543		Non- Investment Grade
eCitibank Bespoke Bogota Index, Mezzanine Tranche 7-10%	1.35%	Quarterly	CITI	6/20/20		7,000,000			20,869			—			20,869		Non- Investment Grade
eCitibank Bespoke Broker Index, Mezzanine Tranche 3-7%	1.30%	Quarterly	CITI	6/20/19		16,200,000			34,527			—			34,527		Non- Investment Grade
eCitibank Bespoke Broker Index, Mezzanine Tranche 3-7%	1.40%	Quarterly	CITI	6/20/19		13,200,000			37,985			—			37,985		Non- Investment Grade
eCitibank Bespoke Cambridge Index, Equity Tranche 0-3%	0.00%	Quarterly	CITI	12/20/19		27,300,000			(4,773,657	)		(2,540,748	)		(2,232,909	)	Non- Investment Grade
eCitibank Bespoke Lisbon Index, Equity Tranche 0-3%	0.00%	Quarterly	CITI	6/20/19		5,440,000			(347,234	)		(409,077	)		61,843		Non- Investment Grade
eCitibank Bespoke Verona Index, Equity Tranche 0-3%	0.00%	Quarterly	CITI	12/20/19		10,900,000			(1,598,205	)		(1,245,234	)		(352,971	)	Non- Investment Grade
eCitibank Bespoke Verona Index, Mezzanine Tranche 7-15%	0.40%	Quarterly	CITI	12/20/19		31,000,000			91,297			—			91,297		Non- Investment Grade

40       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

Credit Default Swap Contracts (continued)

Description	Periodic Payment Rate Received (Paid)		Payment Frequency		Counter- party		Maturity Date		Notional Amounta		Value			Unamortized Upfront Payments (Receipts)			Unrealized Appreciation (Depreciation)			Ratingb
OTC Swap Contracts (continued)
Contracts to Sell Protectionc,d (continued)
Traded Index (continued)
MCDX.NA.30		1.00%		Quarterly		CITI		6/20/23	$	23,060,000	$	577,655		$	500,418		$	77,237			Investment Grade
Total OTC Swap Contracts.											$	(12,204,934	)	$	(3,633,460	)	$	(8,571,474	)
Total Credit Default Swap Contracts											$	(16,064,263	)	$	(7,296,481	)	$	(8,767,782	)

^aFor contracts to sell protection, the notional amount is equal to the maximum potential amount of the future payments and no recourse provisions have been entered into in association with the contracts.

^bBased on Standard and Poor’s (S&P) Rating for single name swaps and internal ratings for index swaps. Internal ratings based on mapping into equivalent ratings from external vendors.

^cPerformance triggers for settlement of contract include default, bankruptcy or restructuring for single name swaps and failure to pay or bankruptcy of the underlying securities for traded index swaps.

^dThe fund enters contracts to sell protection to create a long credit position.

^eRepresents a custom index comprised of a basket of underlying issuers.

At October 31, 2018, the Fund had the following cross-currency swap contracts outstanding. See Note 1(e).

Cross-Currency Swap Contracts

Description	Payment Frequency		Counter- party		Maturity Date		Notional Amount			Value/ Unrealized Appreciation (Depreciation)
OTC Swap Contracts
Receive Floating 3-month USD LIBOR + 2.87%		Quarterly						3,834,600	USD
Pay Fixed 2.50%.		Annual		CITI		5/04/21		3,300,000	EUR		$115,296

At October 31, 2018, the Fund had the following total return swap contracts outstanding. See Note 1(e).

Total Return Swap Contracts

Underlying Instruments

Financing Rate

Payment Frequency

Counterparty

Maturity Date

Notional Value

Value/ Unrealized Appreciation (Depreciation)

OTC Swap Contracts

Longa

iBoxx USD Liquid High Yield Index

3-month USD LIBOR

Quarterly

BNDP

3/20/19

$

23,000,000

$  (175,590

)

iBoxx USD Liquid High Yield Index

3-month USD LIBOR

Quarterly

FBCO

3/20/19

38,000,000

(305,441

)

iBoxx USD Liquid High Yield Index

3-month USD LIBOR

Quarterly

BOFA

6/20/19

14,000,000

(47,311

)

iBoxx USD Liquid High Yield Index

3-month USD LIBOR

Quarterly

CITI

6/20/19

38,000,000

(209,662

)

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

GSCO

6/20/19

170,000,000

1,872,851

franklintempleton.com Semiannual Report       41

FRANKLIN STRATEGIC SERIES

CONSOLIDATED STATEMENT OF INVESTMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

Total Return Swap Contracts (continued)

Underlying Instruments

Financing Rate

Payment Frequency

Counterparty

Maturity Date

Notional Value

Value/ Unrealized Appreciation (Depreciation)

OTC Swap Contracts (continued)

Longa (continued)

Markit iBoxx USD Liquid Leveraged Loan Index

3-month USD LIBOR

Quarterly

JPHQ

9/20/19

$

25,000,000

$  (156,482

)

Total Total Return Swap Contracts

$   978,365

^aThe Fund receives the total return on the underlying instrument and pays a variable financing rate.

See Note 9 regarding other derivative information.

See Abbreviations on page 63.

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

FRANKLIN STRATEGIC SERIES

Consolidated Financial Statements

Consolidated Statement of Assets and Liabilities

October 31, 2018 (unaudited)

Franklin Strategic Income Fund

Assets:
Investments in securities:
Cost - Unaffiliated issuers	$	5,346,336,477
Cost - Controlled affiliates (Note 3f)		470,958,729
Cost - Non-controlled affiliates (Note 3f)		80,992,803
Cost - Unaffiliated repurchase agreements		20,825,536
Value - Unaffiliated issuers	$	5,116,299,840
Value - Controlled affiliates (Note 3f)		447,942,568
Value - Non-controlled affiliates (Note 3f)		80,992,803
Value - Unaffiliated repurchase agreements		20,825,536
Cash		25,116,399
Restricted cash for OTC derivative contracts (Note 1f)		2,130,000
Receivables:
Investment securities sold		4,614
Capital shares sold		2,327,784
Dividends and interest		46,745,155
Deposits with brokers for:
OTC derivative contracts		17,970,532
TBA transactions		1,164,000
Centrally cleared swap contracts		13,078,343
OTC swap contracts (upfront payments $8,014,111)		7,213,727
Unrealized appreciation on OTC forward exchange contracts		10,865,882
Unrealized appreciation on OTC swap contracts		3,388,587
FT Subsidiary deferred tax benefit (Note 1h)		532,014
Other assets		4,890
Total assets		5,796,602,674
Liabilities:
Payables:
Investment securities purchased		369,563,785
Capital shares redeemed		10,855,759
Management fees		1,849,093
Distribution fees		1,199,532
Transfer agent fees		1,356,734
Distributions to shareholders		1,377,037
Variation margin on futures contracts.		472,821
Variation margin on centrally cleared swap contracts		41,622
Deposits from brokers for:
OTC derivative contracts		2,130,000
OTC swap contracts (upfront receipts $15,969,720)		10,847,187
Unrealized depreciation on OTC forward exchange contracts		7,282,018
Unrealized depreciation on OTC swap contracts		10,866,400
Deferred tax.		65,472
Accrued expenses and other liabilities.		475,776
Total liabilities		418,383,236
Net assets, at value	$	5,378,219,438
Net assets consist of:
Paid-in capital	$	6,080,343,839
Total distributable earnings (loss)		(702,124,401	)
Net assets, at value	$	5,378,219,438

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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Assets and Liabilities (continued)

October 31, 2018 (unaudited)

Franklin Strategic Income Fund

Class A:
Net assets, at value	$3,182,735,218
Shares outstanding	337,172,776
Net asset value per sharea	$9.44
Maximum offering price per share (net asset value per share ÷ 95.75%)	$9.86
Class C:
Net assets, at value	$   788,868,464
Shares outstanding	83,577,506
Net asset value and maximum offering price per sharea	$9.44
Class R:
Net assets, at value	$     95,193,181
Shares outstanding	10,123,912
Net asset value and maximum offering price per share	$9.40
Class R6:
Net assets, at value	$   430,952,846
Shares outstanding	45,589,285
Net asset value and maximum offering price per share	$9.45
Advisor Class:
Net assets, at value	$   880,469,729
Shares outstanding	93,181,573
Net asset value and maximum offering price per share	$9.45

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

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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations

for the six months ended October 31, 2018 (unaudited)

Franklin Strategic Income Fund

Investment income:
Dividends:
Unaffiliated issuers	$	890,189
Controlled affiliates (Note 3f)		18,199,994
Non-controlled affiliates (Note 3f)		1,022,234
Interest: (net of foreign taxes)~
Unaffiliated issuers		124,335,526
Other income (Note 1h)		1,064,430
Total investment income		145,512,373
Expenses:
Management fees (Note 3a)		12,899,957
Distribution fees: (Note 3c)
Class A		4,004,740
Class C		3,268,390
Class R		255,636
Transfer agent fees: (Note 3e)
Class A		2,512,769
Class C		792,640
Class R		80,235
Class R6		62,431
Advisor Class		720,810
Custodian fees (Note 4)		106,553
Reports to shareholders		283,311
Registration and filing fees		96,689
Professional fees		115,478
Trustees’ fees and expenses		38,632
Other		93,985
Total expenses		25,332,256
Expense reductions (Note 4)		(64,682	)
Expenses waived/paid by affiliates (Note 3f and 3g)		(1,584,189	)
Net expenses		23,683,385
Net investment income		121,828,988
Realized and unrealized gains (losses):
Net realized gain (loss) from:
Investments:#
Unaffiliated issuers		(10,436,685	)
Foreign currency transactions		(1,304,275	)
Forward exchange contracts		(298,087	)
Futures contracts		2,465,362
Swap contracts		2,274,122
Net realized gain (loss)		(7,299,563	)
Net change in unrealized appreciation (depreciation) on:
Investments:
Unaffiliated issuers		(72,019,987	)
Controlled affiliates (Note 3f)		(9,171,969	)
Translation of other assets and liabilities denominated in foreign currencies		(18,875	)
Forward exchange contracts		3,272,653
Futures contracts		(3,021,787	)
Swap contracts		(6,461,655	)

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

FRANKLIN STRATEGIC SERIES

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Operations (continued)

for the six months ended October 31, 2018 (unaudited)

Franklin Strategic Income Fund

Change in FT Subsidiary deferred tax benefit (Note 1h)		(858,525	)
Change in deferred taxes on unrealized appreciation		254,256
Net change in unrealized appreciation (depreciation)		(88,025,889	)
Net realized and unrealized gain (loss)		(95,325,452	)
Net increase (decrease) in net assets resulting from operations	$	26,503,536

~Foreign taxes withheld on interest	$     206,238
#Net of foreign taxes	$       21,122

46       Semiannual 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

	Six Months Ended October 31, 2018 (unaudited)			Year Ended April 30, 2018
Increase (decrease) in net assets:
Operations:
Net investment income.	$	121,828,988		$	249,545,798
Net realized gain (loss)		(7,299,563	)		(113,213,321	)
Net change in unrealized appreciation (depreciation)		(88,025,889	)		(92,950,330	)
Net increase (decrease) in net assets resulting from operations		26,503,536			43,382,147
Distributions to shareholders: (Note 1l)
Class A		(69,612,378	)		(106,537,907	)
Class C		(19,223,579	)		(31,329,580	)
Class R		(2,090,290	)		(3,355,206	)
Class R6		(10,431,726	)		(13,824,604	)
Advisor Class		(21,059,951	)		(32,910,570	)
Total distributions to shareholders.		(122,417,924	)		(187,957,867	)
Capital share transactions: (Note 2)
Class A		(53,138,892	)		(461,379,634	)
Class C		(274,344,996	)		(280,427,839	)
Class R		(8,780,398	)		(38,252,437	)
Class R6		5,595,857			75,196,883
Advisor Class		(37,596,034	)		(113,689,921	)
Total capital share transactions		(368,264,463	)		(818,552,948	)
Net increase (decrease) in net assets		(464,178,851	)		(963,128,668	)
Net assets:
Beginning of period		5,842,398,289			6,805,526,957
End of period (Note 1l)	$	5,378,219,438		$	5,842,398,289

franklintempleton.com The accompanying notes are an integral part of these consolidated financial statements.  |  Semiannual Report       47

FRANKLIN STRATEGIC SERIES

Notes to Consolidated Financial Statements (unaudited)

Franklin Strategic Income Fund

1.   Organization and Significant Accounting Policies

Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of eight separate funds and applies the specialized accounting and reporting guidance in U.S. Generally Accepted Accounting Principles (U.S. GAAP). Franklin Strategic Income Fund (Fund) is included in this report. The Fund offers five classes of shares: Class A, Class C, Class R, Class R6, and Advisor Class. Beginning on October 19, 2018, Class C shares automatically convert to Class A shares after they have been held for 10 years. Each class of shares may differ by its initial sales load, contingent deferred sales charges, voting rights on matters affecting a single class, its exchange privilege and fees due to differing arrangements for distribution and transfer agent fees.

The following summarizes the Fund’s significant accounting policies.

a.   Financial Instrument Valuation

The Fund’s investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Fund calculates the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Fund’s administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The 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 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.

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. Investments in repurchase agreements are valued at cost, which approximates fair value.

Certain derivative financial instruments are centrally cleared or trade in the OTC market. The Fund’s pricing services use various techniques including industry standard option pricing models and proprietary discounted cash flow models to determine the fair value of those instruments. The Fund’s net benefit or obligation under the derivative contract, as measured by the fair value of the contract, is included in net assets.

The Fund has procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the 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

48       Semiannual Report franklintempleton.com

FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

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.

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

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

The Fund does not separately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments in the Consolidated Statement 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.   Joint Repurchase Agreement

The Fund enters into a joint repurchase agreement whereby its uninvested cash balance is deposited into a joint cash account with other funds managed by the investment manager or an affiliate of the investment manager and is used to invest in one or more repurchase agreements. The value and face amount of the joint repurchase agreement are allocated to the funds based on their pro-rata interest. A repurchase agreement is accounted for as a loan by the Fund to the seller, collateralized by securities which are delivered to the Fund’s custodian. The fair value, including accrued interest, of the initial collateralization is required to be at least 102% of the dollar amount invested by the funds, with the value of the underlying securities marked to

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Franklin Strategic Income Fund (continued)

1.   Organization and Significant Accounting Policies (continued)

c.   Joint Repurchase Agreement (continued)

market daily to maintain coverage of at least 100%. Repurchase agreements are subject to the terms of Master Repurchase Agreements (MRAs) with approved counterparties (sellers). The MRAs contain various provisions, including but not limited to events of default and maintenance of collateral for repurchase agreements. In the event of default by either the seller or the Fund, certain MRAs may permit the non-defaulting party to net and close-out all transactions, if any, traded under such agreements. The Fund may sell securities it holds as collateral and apply the proceeds towards the repurchase price and any other amounts owed by the seller to the Fund in the event of default by the seller. This could involve costs or delays in addition to a loss on the securities if their value falls below the repurchase price owed by the seller. The joint repurchase agreement held by the Fund at period end, as indicated in the Consolidated Statement of Investments, had been entered into on October 31, 2018.

d.   Securities Purchased on a Delayed Delivery and TBA Basis

The Fund purchases securities on a delayed delivery and to-be-announced (TBA) basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that the value at delivery may be more or less than the trade date purchase price. Although the Fund will generally purchase these securities with the intention of holding the securities, it may sell the securities before the settlement date. Sufficient assets have been segregated for these securities and collateral has been pledged and/or received for open TBA trades.

e.   Derivative Financial Instruments

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.

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

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Franklin Strategic Income Fund (continued)

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 Consolidated 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 Consolidated Statement of Assets and Liabilities. Over the term of the contract, the buyer pays the seller a periodic stream of payments, provided that no event of default has occurred. Such periodic payments are accrued daily as an unrealized appreciation or depreciation until the payments are made, at

which time they are realized. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the credit default swap agreement and prevailing market conditions (credit spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

The Fund entered into OTC cross currency swap contracts primarily to manage and/or gain exposure to interest rate risk and certain foreign currencies. A cross currency swap is an agreement between the Fund and a counterparty to exchange cash flows (determined using either a fixed or floating rate) based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the opening of the contract. Cross currency swaps may require the exchange of notional amounts at the opening and/or closing of the contract. Over the term of the contract, contractually required payments to be paid and to be received are accrued daily and recorded as unrealized depreciation and appreciation until the payments are made, at which time they are realized. Upfront payments and receipts are reflected in the Consolidated Statement of Assets and Liabilities and represent compensating factors between stated terms of the cross currency swap contract and prevailing market conditions (interest rate spreads and other relevant factors). These upfront payments and receipts are amortized over the term of the contract as a realized gain or loss in the Consolidated Statement of Operations.

The Fund 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 invests in value recovery instruments (VRI) primarily to gain exposure to economic growth. Periodic payments from VRI are dependent on established benchmarks for underlying variables. VRI has a notional amount, which is used to calculate amounts of payments to holders. Payments are recorded upon

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Franklin Strategic Income Fund (continued)

1.   Organization and Significant Accounting Policies (continued)

e.   Derivative Financial Instruments (continued)

receipt as realized gains in the Consolidated Statement of Operations. The risks of investing in VRI include growth risk, liquidity, and the potential loss of investment.

See Note 9 regarding other derivative information.

f.   Restricted Cash

At October 31, 2018, 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.

g.   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.

h.   FT Holdings Corporation II (FT Subsidiary)

The Fund invests in certain financial instruments through its investment in FT Subsidiary. FT Subsidiary is a Delaware Corporation, is a wholly-owned subsidiary of the Fund, and is able to invest in certain financial instruments consistent with the investment objective of the Fund. At October 31, 2018, FT Subsidiary’s investment, Turtle Bay Resort, as well as any other assets and liabilities of FT Subsidiary are reflected in the Fund’s Consolidated Statement of Investments and Consolidated Statement of Assets and Liabilities.

During the period ended October 31, 2018, Turtle Bay Resort paid a distribution to FT Subsidiary. The distribution received is reflected as other income in FT Subsidiary in the Consolidated Statement of Operations. For U.S. income tax purposes, this distribution is estimated to result in a taxable loss to FT Subsidiary, and as such an estimated tax expense was not recorded in FT Subsidiary. A deferred tax benefit has been recorded on the unrealized depreciation of the security. When the Fund disposes of the security, the deferred asset is relieved and the Fund should incur a realized tax benefit. The estimated deferred tax benefit was calculated using a federal rate of 21% and a Hawaii state rate (net of federal tax benefit) of 3%. This is reflected as FT Subsidiary deferred tax benefit in the 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 October 31, 2018, the net assets of FT Subsidiary were $18,634,166, representing less than 1% of the Fund’s consolidated net assets. The Fund’s investment in FT Subsidiary is limited to 25% of consolidated assets.

i.   Mortgage Dollar Rolls

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 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.

j.   Senior Floating Rate Interests

The Fund invests in senior secured corporate loans that pay interest at rates which are periodically reset by reference to a base lending rate plus a spread. These base lending rates are

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Franklin Strategic Income Fund (continued)

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.

k.   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 October 31, 2018, the Fund has determined that no tax liability is required in its financial statements related to uncertain tax positions for any open tax years (or expected to be taken in future tax years). Open tax years are those that remain subject to examination and are based on the statute of limitations in each jurisdiction in which the Fund invests.

l.   Security Transactions, Investment Income, Expenses and Distributions

Security transactions are accounted for on trade date. Realized gains and losses on security transactions are determined on a specific identification basis. Interest income and estimated expenses are accrued daily. Amortization of premium and accretion of discount on debt securities are included in interest income. Paydown gains and losses are recorded as an

adjustment to interest income. Facility fees are recognized as income over the expected term of the loan. Dividend income is recorded on the ex-dividend date except for certain dividends from securities where the dividend rate is not available. In such cases, the dividend is recorded as soon as the information is received by the Fund. Distributions to shareholders are recorded on the ex-dividend date. Distributable earnings are determined according to income tax regulations (tax basis) and may differ from earnings recorded in accordance with U.S. GAAP. These differences may be permanent or temporary. Permanent differences are reclassified among capital accounts to reflect their tax character. These reclassifications have no impact on net assets or the results of operations. Temporary differences are not reclassified, as they may reverse in subsequent periods.*

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

Realized and unrealized gains and losses and net investment income, excluding class specific expenses, are allocated daily to each class of shares based upon the relative proportion of net assets of each class. Differences in per share distributions by class are generally due to differences in class specific expenses.

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 Consolidated Statement of Operations.

m.   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.

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Franklin Strategic Income Fund (continued)

1.  Organization and Significant Accounting Policies (continued)

n.   Guarantees and Indemnifications

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

behalf of the Fund, enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. Currently, the Trust expects the risk of loss to be remote.

*Effective during the current reporting period, it is no longer required to present certain line items on the Statements of Changes in Net Assets. Such disclosure changes are included in the Statements of Changes in Net Assets, therefore prior period amounts are presented below.

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

Distributions from net investment income:

Class A	$	(106,537,907	)
Class C		(31,329,580	)
Class R		(3,355,206	)
Class R6		(13,824,604	)
Advisor Class		(32,910,570	)

For the year ended April 30, 2018, distributions in excess of net investment income included in net assets was $39,100,421.

2. Shares of Beneficial Interest

At October 31, 2018, there were unlimited number of shares authorized (without par value). Transactions in the Fund’s shares were as follows:

	Six Months Ended October 31, 2018						Year Ended April 30, 2018
	Shares			Amount			Shares			Amount
Class A Shares:
Shares solda		29,822,642		$	284,451,463			43,921,154		$	432,817,045
Shares issued in reinvestment of distributions		6,722,150			64,175,598			10,060,731			98,645,567
Shares redeemed		(41,972,704	)		(401,765,953	)		(100,902,437	)		(992,842,246)
Net increase (decrease)		(5,427,912	)	$	(53,138,892	)		(46,920,552	)	$	(461,379,634)
Class C Shares:
Shares sold		2,191,325		$	20,963,000			8,181,686		$	80,552,705
Shares issued in reinvestment of distributions		1,876,875			17,928,117			2,971,594			29,122,692
Shares redeemeda		(32,829,383	)		(313,236,113	)		(39,654,519	)		(390,103,236)
Net increase (decrease)		(28,761,183	)	$	(274,344,996	)		(28,501,239	)	$	(280,427,839)
Class R Shares:
Shares sold		679,340		$	6,477,667			2,109,693		$	20,673,849
Shares issued in reinvestment of distributions		214,332			2,038,654			334,005			3,263,282
Shares redeemed		(1,814,779	)		(17,296,719	)		(6,343,188	)		(62,189,568)
Net increase (decrease)		(921,107	)	$	(8,780,398	)		(3,899,490	)	$	(38,252,437)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

	Six Months Ended October 31, 2018						Year Ended April 30, 2018
	Shares			Amount			Shares			Amount
Class R6 Shares:
Shares sold		5,462,880		$	52,394,485			16,787,902		$	165,966,032
Shares issued in reinvestment of distributions		1,053,167			10,069,008			1,355,636			13,298,999
Shares redeemed		(5,946,443	)		(56,867,636	)		(10,569,929	)		(104,068,148	)
Net increase (decrease)		569,604		$	5,595,857			7,573,609		$	75,196,883
Advisor Class Shares:
Shares sold		10,083,699		$	96,682,619			27,736,896		$	273,558,768
Shares issued in reinvestment of distributions		2,102,391			20,093,944			3,187,566			31,290,077
Shares redeemed		(16,113,126	)		(154,372,597	)		(42,428,324	)		(418,538,766	)
Net increase (decrease)		(3,927,036	)	$	(37,596,034	)		(11,503,862	)	$	(113,689,921	)

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

3. Transactions with Affiliates

Franklin Resources, Inc. is the holding company for various subsidiaries that together are referred to as Franklin Templeton 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

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 period ended October 31, 2018, the annualized gross effective investment management fee rate was 0.455% of the Fund’s average daily net assets.

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FRANKLIN STRATEGIC SERIES

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Franklin Strategic Income Fund (continued)

3. Transactions with Affiliates (continued)

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	%

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 period:

Sales charges retained net of commissions paid to unaffiliated brokers/dealers	$	164,908
CDSC retained	$	18,788

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

e. Transfer Agent Fees

Each class of shares pays transfer agent fees to Investor Services for its performance of shareholder servicing obligations. The fees are based on an annualized asset based fee of 0.02% plus a transaction based fee. In addition, each class reimburses Investor Services for out of pocket expenses incurred and, except for Class R6, reimburses shareholder servicing fees paid to third parties. These fees are allocated daily based upon their relative proportion of such classes’ aggregate net assets. Class R6 pays Investor Services transfer agent fees specific to that class.

For the period ended October 31, 2018, the Fund paid transfer agent fees of $4,168,885, of which $1,707,496 was retained by Investor Services.

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Franklin Strategic Income Fund (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. During the period ended October 31, 2018, the Fund held investments in affiliated management investment companies as follows:

	Number of Shares Held at Beginning of Period		Gross Additions		Gross Reductions			Number of Shares Held at End of Period		Value at End of Period		Dividend Income		Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)
Controlled Affiliates
Franklin Lower Tier Floating Rate Fund		25,361,119		—		—			25,361,119	$	242,705,906	$	10,723,594	$	—	$	(7,861,947	)
Franklin Middle Tier Floating Rate Fund		21,833,687		—		—			21,833,687		205,236,662		7,476,400		—		(1,310,022	)
Total Controlled Affiliates										$	447,942,568	$	18,199,994	$	—	$	(9,171,969	)
Non-Controlled Affiliates
Institutional Fiduciary Trust Money Market Portfolio, 1.83%		200,193,361		224,024,084		(343,224,642	)		80,992,803		80,992,803		1,022,234		—		—
Total Affiliated Securities										$	528,935,371	$	19,222,228	$	—	$	(9,171,969	)

g. Waiver and Expense Reimbursements

Investor Services has voluntarily agreed in advance to waive or limit its fees so that the Class R6 transfer agent fees do not exceed 0.02% based on the average net assets of the class. Investor Services may discontinue this waiver in the future.

h. Other Affiliated Transactions

At October 31, 2018, one or more of funds in Franklin Fund Allocator Series owned 5.5% of the Fund’s outstanding shares.

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 period ended October 31, 2018, the custodian fees were reduced as noted in the Consolidated 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, 2018, the capital loss carryforwards were as follows:

Capital loss carryforwards not subject to expiration:
Short Term	$	43,255,168
Long Term		367,922,122
Total capital loss carryforwards	$	411,177,290

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, 2018, the Fund deferred late-year ordinary losses of $8,967,409.

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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

5. Income Taxes (continued)

At October 31, 2018, the cost of investments and net unrealized appreciation (depreciation) for income tax purposes were as follows:

Cost of investments	$	5,938,919,528
Unrealized appreciation	$	49,832,152
Unrealized depreciation		(335,581,891	)
Net unrealized appreciation (depreciation)	$	(285,749,739	)

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 inflation related adjustments on foreign securities.

6. Investment Transactions

Purchases and sales of investments (excluding short term securities) for the period ended October 31, 2018, aggregated $2,996,577,281 and $3,310,012,700, respectively.

7. Credit Risk and Defaulted Securities

At October 31, 2018, the Fund had 39.8% of its portfolio invested in high yield, senior secured floating rate loans, or other securities rated below investment grade and unrated securities, if any. These securities may be more sensitive to economic conditions causing greater price volatility and are potentially subject to a greater risk of loss due to default than higher rated securities.

The Fund held defaulted securities and/or other securities for which the income has been deemed uncollectible. At October 31, 2018, the aggregate value of these securities was $37,675,250, representing 0.7% of the Fund’s net assets. The Fund discontinues accruing income on securities for which income has been deemed uncollectible and provides an estimate for losses on interest receivable. The securities have been identified in the accompanying Consolidated Statement of Investments.

8. Restricted Securities

The Fund invests in securities that are restricted under the Securities Act of 1933 (1933 Act). Restricted securities are often purchased in private placement transactions, and cannot be sold without prior registration unless the sale is pursuant to an exemption under the 1933 Act. Disposal of these securities may require greater effort and expense, and prompt sale at an acceptable price may be difficult. The Fund may have registration rights for restricted securities. The issuer generally incurs all registration costs.

At October 31, 2018, investments in restricted securities, excluding securities exempt from registration under the 1933 Act deemed to be liquid, were as follows:

Principal Amount/ Shares		Issuer	Acquisition Date		Cost		Value
	125,940,079	K2016470219 South Africa Ltd., A		2/08/13 - 2/01/17	$	977,122	$	85,367
	12,532,821	K2016470219 South Africa Ltd., B		2/01/17		9,305		8,495
	9,688,700	K2016470219 South Africa Ltd., senior secured note, 144A, PIK, 3.00%, 12/31/22		2/08/13 - 7/05/18		15,304,198		11,991
	1,873,803	K2016470260 South Africa Ltd., senior secured note, 144A, PIK, 25.00%, 12/31/22		2/01/17 - 7/05/18		1,648,480		138,373
		Total Restricted Securities (Value is 0.0%† of Net Assets)			$	17,939,105	$	244,226
	†Rounds to less than 0.1% of net assets.

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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

9. Other Derivative Information

At October 31, 2018, 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 on futures contracts		$    678,541	a	Variation margin on futures contracts		$  2,665,122	a
	Unrealized appreciation on OTC swap contracts		1,988,147		Unrealized depreciation on OTC swap contracts		894,486
Foreign exchange contracts	Unrealized appreciation on OTC forward exchange contracts		10,865,882		Unrealized depreciation on OTC forward exchange contracts		7,282,018
Credit contracts	Variation margin on centrally cleared swap contracts		—		Variation margin on centrally cleared swap contracts		196,308	a
	OTC swap contracts (upfront payments)		7,213,727		OTC swap contracts (upfront receipts)		10,847,187
	Unrealized appreciation on OTC swap contracts		1,400,440		Unrealized depreciation on OTC swap contracts		9,971,914
Value recovery instruments	Investments in securities, at value		10,567,923	b
Totals			$32,714,660				$31,857,035

^aThis amount reflects the cumulative appreciation (depreciation) of futures contracts and centrally cleared swap contracts as reported in the Consolidated Statement of Investments. Only the variation margin receivable/payable at period end is separately reported within the Consolidated Statement of Assets and Liabilities. Prior variation margin movements were recorded to cash upon receipt or payment.

^bVRI are included in investments in securities, at value in the Consolidated Statement of Assets and Liabilities.

For the period ended October 31, 2018, 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 Location	Net Realized Gain (Loss) for the Period			Consolidated Statement of Operations Location	Net Change in Unrealized Appreciation (Depreciation) for the Period
	Net realized gain (loss) from:				Net change in unrealized appreciation (depreciation) on:
Interest rate contracts	Futures contracts		$  2,465,362		Futures contracts		$(3,021,787	)
	Swap contracts		(1,941,241	)	Swap contracts		1,093,661
Foreign exchange contracts	Forward exchange contracts		(298,087	)	Forward exchange contracts		3,272,653
Credit contracts	Swap contracts		4,215,363		Swap contracts		(7,555,316	)
Value recovery instruments	Investments		—		Investments		(3,326,551	)a
Totals			$  4,441,397				$(9,537,340	)

^aVRI are included in net change in unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations.

For the period ended October 31, 2018, the average month end notional amount of futures contracts and swap contracts, the average month end contract value for forward exchange contracts and average month end fair value of VRI, were as follows:

Futures contracts	$	234,541,742
Swap contracts		572,096,286
Forward exchange contracts		631,528,296
VRI		12,398,104

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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

9. Other Derivative Information (continued)

At October 31, 2018, the Fund’s OTC derivative assets and liabilities are as follows:

	Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities
	Assetsa		Liabilitiesa
Derivatives
Forward exchange contracts		$10,865,882		$  7,282,018
Swap contracts		10,602,314		21,713,587
Total		$21,468,196		$28,995,605

^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.

At October 31, 2018, 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 Receiveda			Net Amount (Not less than zero)
Counterparty
BNDP		$          5,543	$	(5,543	)	$	—		$	—			$            —
BZWS		2,384,727		(1,250,314	)		(1,134,413	)		—			—
CITI		1,831,649		(1,831,649	)		—			—			—
DBAB		65,234		(65,234	)		—			—			—
GSCO		1,872,851		—			—			(1,872,851	)		—
JPHQ		10,808,026		(9,380,485	)		—			—			1,427,541
MSCO		4,500,166		(4,500,166	)		—			—			—
Total		$21,468,196	$	(17,033,391	)	$	(1,134,413	)	$	(1,872,851	)		$1,427,541

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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

At October 31, 2018, 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 Pledgeda			Net Amount (Not less than zero)
Counterparty
BNDP		$      175,590	$	(5,543	)		$  —	$	(170,047	)		$        —
BOFA		461,811		—			—		(461,811	)		—
BZWS		1,250,314		(1,250,314	)		—		—			—
CITI		11,031,681		(1,831,649	)		—		(9,200,032	)		—
DBAB		298,314		(65,234	)		—		(120,000	)		113,080
FBCO		305,441		—			—		(305,441	)		—
JPHQ		9,380,485		(9,380,485	)		—		—			—
MSCO		6,091,969		(4,500,166	)		—		(1,591,803	)		—
Total		$28,995,605	$	(17,033,391	)		$  —	$	(11,849,134	)		$113,080

^aIn some instances, the collateral amounts disclosed in the table above were adjusted due to the requirement to limit collateral amounts to avoid the effect of overcollateralization. Actual collateral received and/or pledged may be more than the amounts disclosed herein.

See Note 1(e) regarding derivative financial instruments.

See Abbreviations on page 63.

10. Credit Facility

The Fund, together with other U.S. registered and foreign investment funds (collectively, Borrowers), managed by Franklin Templeton Investments, are borrowers in a joint syndicated senior unsecured credit facility totaling $2 billion (Global Credit Facility) which matures on February 8, 2019. This Global Credit Facility provides a source of funds to the Borrowers for temporary and emergency purposes, including the ability to meet future unanticipated or unusually large redemption requests.

Under the terms of the Global Credit Facility, the Fund shall, in addition to interest charged on any borrowings made by the Fund and other costs incurred by the Fund, pay its share of fees and expenses incurred in connection with the implementation and maintenance of the Global Credit Facility, based upon its relative share of the aggregate net assets of all of the Borrowers, including an annual commitment fee of 0.15% based upon the unused portion of the Global Credit Facility. These fees are reflected in other expenses in the Consolidated Statement of Operations. During the period ended October 31, 2018, the Fund did not use the Global Credit Facility.

11. Fair Value Measurements

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

• Level 1 – quoted prices in active markets for identical financial instruments

• Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.)

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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

11. Fair Value Measurements (continued)

• Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of financial instruments)

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

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 October 31, 2018, in valuing the Fund’s assets and liabilities carried at fair value, is as follows:

	Level 1		Level 2		Level 3			Total
Assets:
Investments in Securities:a
Equity Investments:b
Consumer Services	$	—	$	—	$	122,759		$	122,759
Energy		6,596,637		11,882,395		85	c		18,479,117
Retailing		—		—		93,862			93,862
Transportation		—		—		1,462,003			1,462,003
All Other Equity Investments		449,062,805		—		—			449,062,805
Corporate Bonds:
Retailing		—		43,203,929		11,991			43,215,920
All Other Corporate Bonds		—		2,366,141,804		—			2,366,141,804
Senior Floating Rate Interests		—		464,720,626		—			464,720,626
Foreign Government and Agency Securities		—		310,234,529		—			310,234,529
U.S. Government and Agency Securities		—		220,914,878		—			220,914,878
Asset-Backed Securities and Commercial Mortgage-Backed Securities		—		1,081,485,364		—			1,081,485,364
Mortgage-Backed Securities		—		520,878,081		—			520,878,081
Municipal Bonds		—		82,241,285		—			82,241,285
Escrows and Litigation Trusts		—		189,375		—	c		189,375
Short Term Investments		85,992,803		20,825,536		—			106,818,339
Total Investments in Securities	$	541,652,245	$	5,122,717,802	$	1,690,700		$	5,666,060,747
Other Financial Instruments:
Futures Contracts	$	678,541	$	—	$	—		$	678,541
Forward Exchange Contracts		—		10,865,882		—			10,865,882
Swap Contracts		—		3,388,587		—			3,388,587
Total Other Financial Instruments	$	678,541	$	14,254,469	$	—		$	14,933,010
Liabilities:
Other Financial Instruments:
Futures Contracts	$	2,665,122	$	—	$	—		$	2,665,122
Forward Exchange Contracts		—		7,282,018		—			7,282,018
Swap Contracts		—		11,062,708		—			11,062,708
Total Other Financial Instruments	$	2,665,122	$	18,344,726	$	—		$	21,009,848

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

^bIncludes common and management investment companies as well as other equity interests.

^cIncludes securities determined to have no value at October 31, 2018.

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

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FRANKLIN STRATEGIC SERIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Franklin Strategic Income Fund (continued)

12. 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 acquired at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities acquired 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 has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

In August 2018, FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in the ASU modify the disclosure requirements on fair value measurements in Topic 820. The ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Management has reviewed the requirements and believes the adoption of this ASU will not have a material impact on the financial statements.

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		Currency		Selected Portfolio
BNDP	BNP Paribas	BRL	Brazilian Real	ARM	Adjustable Rate Mortgage
BOFA	Bank of America Corp.	EUR	Euro	CLO	Collateralized Loan Obligation
BZWS	Barclays Bank PLC	GBP	British Pound	CMT	Constant Maturity Treasury Index
CITI	Citigroup, Inc.	IDR	Indonesian Rupiah	EDA	Economic Development Authority
DBAB	Deutsche Bank AG	MXN	Mexican Peso	FRN	Floating Rate Note
FBCO	Credit Suisse International	USD	United States Dollar	GDP	Gross Domestic Product
GSCO	The Goldman Sachs Group, Inc.			GO	General Obligation
JPHQ	JP Morgan Chase & Co.			HDC	Housing Development Corp.
MSCO	Morgan Stanley			LIBOR	London InterBank Offered Rate
				MBS	Mortgage-Backed Security
				PIK	Payment-In-Kind
				RDA	Redevelopment Agency/Authority
				SF	Single Family
				TBD	To be determined
				T-Note	Treasury Note
				VRI	Value Recovery Instruments

Index
CDX.EM.30	CDX Emerging Markets Index
MCDX.NA.30	MCDX North America Index

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FRANKLIN STRATEGIC SERIES

FRANKLIN STRATEGIC INCOME FUND

Shareholder Information

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.

64       Semiannual Report franklintempleton.com

	Semiannual 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

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

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

© 2018 Franklin Templeton Investments. All rights reserved. 194 S 12/18

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. N/A

Item 5. Audit Committee of Listed Registrants. N/A

Item 6. Schedule of Investments. N/A

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A

Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. N/A

Item 10. Submission of Matters to a Vote of Security Holders.

There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees that would require disclosure herein.

Item 11. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Within 90 days prior to the filing date of this Shareholder Report on Form N-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 were not effective related to internal control over financial reporting specific to the monitoring of market events following the close of trading in foreign stock markets that assist in determining the reliability of the values of the foreign securities held by the Franklin Natural Resources Fund and which may require the use of fair valuation factors to account for changes in the values of those securities subsequent to the local close of the foreign market but prior to the net asset calculation of the Funds. As a result, a material weakness exists at period end for the Franklin Natural Resources Fund. There are no misstatements to current and previously issued financial statements. However, this material weakness could result in misstatements of security values and unrealized gains or losses and associated disclosures that would result in a material misstatement of the interim or annual consolidated financial statements that would not be prevented or detected.

After October 31, 2018 and prior to the issuance of the Registrant’s financial statements, the Registrant’s controls were enhanced through the implementation of a daily secondary review of market events following the close of trading on foreign stock markets to ensure the appropriate application of market level fair value.

(b) Changes in Internal Controls. There have been no changes in the Registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Company. N/A

Item 13. Exhibits.

(a) (1) Code of Ethics

(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer—Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer—Finance and Administration, and Gaston Gardey, Chief Financial Officer and Chief Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FRANKLIN STRATEGIC SERIES

By	/s/ MATTHEW T. HINKLE
	Matthew T. Hinkle
	Chief Executive Officer – Finance and Administration
	Date December 27, 2018

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 December 27, 2018

By	/s/ GASTON GARDEY
	Gaston Gardey
	Chief Financial Officer and Chief Accounting Officer
	Date December 27, 2018