Franklin Strategic Series
Statement of Investments, November 30, 2019 (unaudited)
Franklin Templeton SMACS: Series CH
Principal Amount | Value | |||
Municipal Bonds 105.3% | ||||
California 105.3% | ||||
California Community Housing Agency Workforce Housing Revenue, Annadel Apartments, Series A, 5.00%, 4/01/49 | $200,000 | $222,348 | ||
California PFA Educational Facilities Revenue, Trinity Classical Academy Project, Series A, 5.00%, 7/01/44 | 200,000 | 211,212 | ||
California State Municipal Finance Authority Senior Living Revenue, MT San Antonio Gardens Project, Refunding, 5.00%, 11/15/49 | 130,000 | 151,624 | ||
California Statewide CDA College Housing Revenue, NCCD-Hooper Street LLC-California College of the Arts Project, 5.25%, 7/01/52 | 200,000 | 229,672 | ||
California Statewide CDA Revenue, | ||||
Loma Linda University Medical Center, Series A, 5.50%, 12/01/58 | 250,000 | 292,687 | ||
a Statewide Community Infrastructure Program, Series C, 5.00%, 9/02/49 | 125,000 | 142,850 | ||
California Statewide CDA Special Tax Revenue, CFD No. 2016-02, Delta Coves, 5.00%, 9/01/39 | 100,000 | 111,328 | ||
Dublin CFD No. 2015-1 Special Tax, Improvement Area No. 2, Dublin Crossing, 5.00%, 9/01/49 | 135,000 | 155,855 | ||
Folsom Ranch Financing Authority Special Tax Revenue, | ||||
CFD No. 19, Mangini Ranch, 5.00%, 9/01/47 | 135,000 | 156,870 | ||
CFD No. 19, Mangini Ranch, 5.00%, 9/01/49 | 135,000 | 157,014 | ||
Foothill/Eastern Transportation Corridor Agency Toll Road Revenue, Subseries B-2, Refunding, Series B, 3.50%, 1/15/53 | 190,000 | 198,356 | ||
Menifee USD Special Tax, CFD No. 2018-2, Improvement Area No.4, 5.00%, 9/01/49 | 125,000 | 145,574 | ||
a | Rancho Cordova CFD No. 2018-1 Special Tax, Grantline 208, 5.00%, 9/01/49 | 125,000 | 142,469 | |
Roseville Special Tax, | ||||
Villages at Sierra Vista CFD No. 1, Public Facilities, 5.00%, 9/01/49 | 135,000 | 156,126 | ||
Westpark-Federico Community Facilities District No.1, 5.00%, 9/01/49 | 125,000 | 140,838 | ||
Tobacco Securitization Authority Southern California Tobacco Settlement Asset -Backed Revenue, San Diego County Tobacco Asset Securitization Corp., Class 2, Refunding, Series B-1, 5.00%, 6/01/48 | 125,000 | 143,770 | ||
Tracy CFD No. 2016-1 Special Tax, | ||||
Improvement Area No. 1, Tracy Hills, 5.00%, 9/01/48 | 135,000 | 154,822 | ||
Improvement Area No. 1, Tracy Hills, 5.00%, 9/01/49 | 135,000 | 154,697 | ||
Upland CFD No. 2015-1 Special Tax, Sycamore Hills, Series A, 4.00%, 9/01/49 | 185,000 | 199,226 | ||
Total Municipal Bonds (Cost $3,203,952) 105.3% | 3,267,338 | |||
Other Assets, less Liabilities (5.3)% | (164,183) | |||
Net Assets 100.0% | $3,103,155 |
See Abbreviations on page 12.
aSecurity purchased on a when-issued basis. |
Quarterly Statement of Investments | See Notes to Statements of Investments. | 1
Franklin Strategic Series
Statement of Investments, November 30, 2019 (unaudited)
Franklin Templeton SMACS: Series E
Country | Shares | Value | |||
Common Stocks 72.8% | |||||
Communication Services 6.8% | |||||
a | Alphabet Inc., A | United States | 70 | $91,286 | |
AT&T Inc. | United States | 4,700 | 175,686 | ||
Comcast Corp., A | United States | 300 | 13,245 | ||
280,217 | |||||
Consumer Discretionary 7.6% | |||||
The Home Depot Inc. | United States | 700 | 154,357 | ||
Target Corp. | United States | 1,300 | 162,513 | ||
316,870 | |||||
Consumer Staples 2.6% | |||||
PepsiCo Inc. | United States | 800 | 108,664 | ||
Energy 15.0% | |||||
Chevron Corp. | United States | 1,200 | 140,556 | ||
Occidental Petroleum Corp. | United States | 2,000 | 77,140 | ||
Royal Dutch Shell PLC, A, ADR | United Kingdom | 2,200 | 126,478 | ||
Schlumberger Ltd. | United States | 3,500 | 126,700 | ||
The Williams Cos. Inc. | United States | 6,600 | 149,952 | ||
620,826 | |||||
Financials 2.1% | |||||
Wells Fargo & Co. | United States | 1,600 | 87,136 | ||
Health Care 8.4% | |||||
Bristol-Myers Squibb Co. | United States | 1,675 | 95,374 | ||
CVS Health Corp. | United States | 1,865 | 140,379 | ||
Merck & Co. Inc. | United States | 1,300 | 113,334 | ||
349,087 | |||||
Industrials 9.1% | |||||
3M Co. | United States | 850 | 144,304 | ||
The Boeing Co. | United States | 226 | 82,757 | ||
General Dynamics Corp. | United States | 600 | 109,044 | ||
United Technologies Corp. | United States | 285 | 42,277 | ||
378,382 | |||||
Information Technology 8.7% | |||||
Analog Devices Inc. | United States | 150 | 16,943 | ||
Cisco Systems Inc. | United States | 2,000 | 90,620 | ||
International Business Machines Corp. | United States | 810 | 108,904 | ||
Texas Instruments Inc. | United States | 1,200 | 144,252 | ||
360,719 | |||||
Materials 2.4% | |||||
Rio Tinto PLC, ADR | Australia | 1,800 | 98,208 | ||
Real Estate 1.7% | |||||
Host Hotels & Resorts Inc. | United States | 4,140 | 72,409 |
Quarterly Statement of Investments | See Notes to Statements of Investments. | 2
Franklin Strategic Series
Statement of Investments (unaudited)
Franklin Templeton SMACS: Series E (continued)
Country | Shares | Value | |||
Common Stocks (continued) | |||||
Utilities 8.4% | |||||
Dominion Energy Inc. | United States | 1,400 | $116,354 | ||
Duke Energy Corp. | United States | 1,200 | 105,804 | ||
The Southern Co. | United States | 2,000 | 123,980 | ||
346,138 | |||||
Total Common Stocks (Cost $2,794,451) | 3,018,656 | ||||
Equity-Linked Securities 13.4% | |||||
Consumer Discretionary 7.2% | |||||
b | Citigroup Global Markets Holdings Inc. into Amazon.com Inc., 8.00%, 144A | United States | 30 | 54,217 | |
b | JPMorgan Chase Bank National Assn. into Target Corp., 9.00%, 144A | United States | 1,300 | 152,691 | |
b | Wells Fargo Bank National Assn. into General Motors Co., 8.50%, 144A | United States | 2,500 | 91,803 | |
298,711 | |||||
Health Care 2.3% | |||||
b | UBS AG London into CVS Health Corp., 8.50%, 144A | United States | 1,400 | 94,020 | |
Information Technology 3.9% | |||||
b | Royal Bank of Canada into Intel Corp., 8.00%, 144A | United States | 3,100 | 162,552 | |
Total Equity-Linked Securities (Cost $525,056) | 555,283 | ||||
Convertible Preferred Stocks (Cost $100,000) 2.8% | |||||
Information Technology 2.8% | |||||
Broadcom Inc., 8.00%, cvt. pfd., A | United States | 100 | 115,700 | ||
Preferred Stocks (Cost $137,118) 3.4% | |||||
Financials 3.4% | |||||
Citigroup Inc., 6.875%, pfd., K | United States | 5,000 | 140,650 | ||
Units | |||||
Index-Linked Notes (Cost $39,189) 1.0% | |||||
Financials 1.0% | |||||
c | Credit Suisse AG, senior note, 6.309%, 2/08/21 | United States | 13 | 39,565 | |
Total Investments before Short Term Investments (Cost $3,595,814) | 3,869,854 | ||||
Shares | |||||
Short Term Investments (Cost $301,177) 7.2% | |||||
Money Market Funds 7.2% | |||||
d,e | Institutional Fiduciary Trust Money Market Portfolio, 1.35% | United States | 301,177 | 301,177 | |
Total Investments (Cost $3,896,991) 100.6% | 4,171,031 | ||||
Other Assets, less Liabilities (0.6)% | (26,880) | ||||
Net Assets 100.0% | $4,144,151 |
| 3
Franklin Strategic Series
Statement of Investments (unaudited)
Statement of Investments (unaudited)
Franklin Templeton SMACS: Series E (continued)
See Abbreviations on page 12.
aNon-income producing. |
bSecurity was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration only to qualified institutional buyers or in a public offering registered under the Securities Act of 1933.At November 30, 2019, the aggregate value of these securities was $555,283, representing 13.4% of net assets. |
cSecurity pays variable interest based on the distributions of the strategy index and proceeds earned from related equity derivatives. The coupon rate shown represents the combined rate at period end. Cash payment at maturity or upon early redemption is based on the performance of the strategy index. |
dSee Note 5 regarding investments in affiliated management investment companies. |
eThe rate shown is the annualized seven-day effective yield at period end. |
| 4
Franklin Strategic Series
Statement of Investments, November 30, 2019 (unaudited)
Franklin Templeton SMACS: Series H
Shares | Value | |||
Management Investment Companies (Cost $1,017,100) 33.7% | ||||
Financials 33.7% | ||||
a | Franklin Liberty Intermediate Municipal Opportunities ETF | 40,000 | $1,014,800 | |
Principal Amount | ||||
Municipal Bonds 61.5% | ||||
California 4.8% | ||||
Tobacco Securitization Authority Southern California Tobacco Settlement Asset -Backed Revenue, San Diego County Tobacco Asset Securitization Corp., Class 2, Refunding, Series B-1, 5.00%, 6/01/48 | $125,000 | 143,770 | ||
Colorado 19.4% | ||||
Colorado State Health Facilities Authority Revenue, Christian Living Communities, Refunding and Improvement, 4.00%, 1/01/38 | 100,000 | 106,178 | ||
Denver Health and Hospital Authority Healthcare Revenue, Refunding, Series A, 4.00%, 12/01/37 | 100,000 | 111,102 | ||
Hunters Overlook Metropolitan District No. 5 GO, In the Town of Severance, Weld County, Limited Tax, Series A, 5.00%, 12/01/39 | 150,000 | 161,094 | ||
Village at Dry Creek Metropolitan District No. 2 GO, In the City of Thorton, Adams County, Limited Tax, Special, 4.375%, 12/01/44 | 200,000 | 205,614 | ||
583,988 | ||||
District of Columbia 5.4% | ||||
District of Columbia Revenue, District of Columbia International School Issue, 5.00%, 7/01/54 | 140,000 | 164,235 | ||
Indiana 3.9% | ||||
Indiana State Finance Authority Educational Facilities Revenue, Marian University Project, Series A, 5.00%, 9/15/39 | 100,000 | 118,417 | ||
Louisiana 12.5% | ||||
Calcasieu Parish Memorial Hospital Service District Hospital Revenue, Lake Charles Memorial Hospital Project, Refunding, 5.00%, 12/01/39 | 200,000 | 235,238 | ||
Louisiana Local Government Environmental Facilities and CDA Revenue, St. Martin Parish Gomesa Project, 4.40%, 11/01/44 | 135,000 | 141,591 | ||
376,829 | ||||
Maryland 3.3% | ||||
Baltimore Special Obligation Revenue, Mayor and City Council of Baltimore, Harbor Point Project, Senior, Refunding, Series A, 3.50%, 6/01/39 | 100,000 | 100,806 | ||
Texas 4.0% | ||||
New Hope Cultural Education Facilities Finance Corp. Education Revenue, Cityscape Schools Inc., Series A, 5.00%, 8/15/39 | 110,000 | 122,066 | ||
Washington 3.6% | ||||
Washington State Housing Finance Commission Revenue, Nonprofit Housing, Transforming Age Projects, Refunding, Series A, 5.00%, 1/01/49 | 100,000 | 109,142 | ||
Wisconsin 4.6% | ||||
PFAR, Retirement Facilities, Friends Homes, Refunding, 5.00%, 9/01/49 | 125,000 | 137,384 | ||
Total Municipal Bonds (Cost $1,837,366) | 1,856,637 | |||
Total Investments before Short Term Investments (Cost $2,854,466) | 2,871,437 |
Quarterly Statement of Investments | See Notes to Statements of Investments. | 5
Franklin Strategic Series
Statement of Investments (unaudited)
Statement of Investments (unaudited)
Franklin Templeton SMACS: Series H (continued)
Principal Amount | Value | |||
Short Term Investments (Cost $100,000) 3.3% | ||||
Municipal Bonds 3.3% | ||||
Florida 3.3% | ||||
b | Martin County PCR, Florida Power and Light Co. Project, Refunding, Daily VRDN and Put, 1.23%, 7/15/22 | $100,000 | $100,000 | |
Total Investments (Cost $2,954,466) 98.5% | 2,971,437 | |||
Other Assets, less Liabilities 1.5% | 46,286 | |||
Net Assets 100.0% | $3,017,723 |
See Abbreviations on page 12.
aSee Note 5 regarding investments in affiliated management investment companies. |
bVariable rate demand notes (VRDNs) are obligations which contain a floating or variable interest rate adjustment formula and an unconditional right of demand to receive payment of the principal balance plus accrued interest at specified dates. Unless otherwise noted, the coupon rate is determined based on factors including supply and demand, underlying credit, tax treatment, and current short term rates. The coupon rate shown represents the rate at period end. |
| 6
Franklin Strategic Series
Statement of Investments, November 30, 2019 (unaudited)
Franklin Templeton SMACS: Series I
Principal Amount | Value | |||
Corporate Bonds 98.3% | ||||
Communication Services 16.0% | ||||
AMC Entertainment Holdings Inc., senior sub. bond, 5.75%, 6/15/25 | $110,000 | $102,435 | ||
a | CCO Holdings LLC/CCO Holdings Capital Corp., senior bond, 144A, 5.00%, 2/01/28 | 50,000 | 52,751 | |
DISH DBS Corp., senior bond, 5.875%, 7/15/22 | 110,000 | 115,224 | ||
Netflix Inc., senior bond, 4.875%, 4/15/28 | 75,000 | 77,011 | ||
Sprint Communications Inc., senior note, 6.00%, 11/15/22 | 120,000 | 126,600 | ||
a | Univision Communications Inc., senior secured note, first lien, 144A, 5.125%, 2/15/25 | 110,000 | 106,288 | |
580,309 | ||||
Consumer Discretionary 14.3% | ||||
a | 24 Hour Holdings III LLC, senior note, 144A, 8.00%, 6/01/22 | 150,000 | 73,125 | |
Ford Motor Co., senior note, 4.346%, 12/08/26 | 110,000 | 111,077 | ||
a | Golden Nugget Inc., senior note, 144A, 6.75%, 10/15/24 | 55,000 | 56,924 | |
a | Hanesbrands Inc., senior bond, 144A, 4.875%, 5/15/26 | 75,000 | 79,958 | |
a | Shea Homes LP/Shea Homes Funding Corp., senior bond, 144A, 6.125%, 4/01/25 | 110,000 | 114,171 | |
a | Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp., senior bond, 144A, 5.50%, 3/01/25 | 75,000 | 80,156 | |
515,411 | ||||
Consumer Staples 3.3% | ||||
a | Post Holdings Inc., senior bond, 144A, 5.625%, 1/15/28 | 110,000 | 117,680 | |
Energy 10.6% | ||||
Calumet Specialty Products Partners LP/Calumet Finance Corp., | ||||
senior note, 7.75%, 4/15/23 | 110,000 | 106,150 | ||
a senior note, 144A, 11.00%, 4/15/25 | 50,000 | 50,438 | ||
Chesapeake Energy Corp., senior note, 7.50%, 10/01/26 | 350,000 | 174,247 | ||
Matador Resources Co., senior note, 5.875%, 9/15/26 | 55,000 | 53,970 | ||
384,805 | ||||
Financials 6.6% | ||||
b | Citigroup Inc., junior sub. bond, O, 5.875% to 3/27/20, FRN thereafter, Perpetual | 180,000 | 181,132 | |
Navient Corp., senior note, 5.50%, 1/25/23 | 55,000 | 58,231 | ||
239,363 | ||||
Health Care 36.4% | ||||
a | Bausch Health Cos. Inc., senior bond, 144A, 6.125%, 4/15/25 | 180,000 | 187,644 | |
CHS/Community Health Systems Inc., | ||||
a senior note, 144A, 8.00%, 12/15/27 | 174,000 | 170,955 | ||
a senior note, 144A, 6.875%, 4/01/28 | 425,000 | 214,625 | ||
a senior secured note, 144A, 8.00%, 3/15/26 | 150,000 | 150,094 | ||
DaVita Inc., senior bond, 5.00%, 5/01/25 | 55,000 | 56,880 | ||
Mylan Inc., senior bond, 4.55%, 4/15/28 | 110,000 | 117,971 | ||
a | Par Pharmaceutical Inc., senior secured note, 144A, 7.50%, 4/01/27 | 110,000 | 104,228 | |
Tenet Healthcare Corp., senior note, 7.00%, 8/01/25 | 300,000 | 315,502 | ||
1,317,899 | ||||
Industrials 2.2% | ||||
United Rentals North America Inc., senior bond, 4.875%, 1/15/28 | 75,000 | 78,443 |
Quarterly Statement of Investments |�� See Notes to Statements of Investments. | 7
Franklin Strategic Series
Statement of Investments (unaudited)
Statement of Investments (unaudited)
Franklin Templeton SMACS: Series I (continued)
Principal Amount | Value | |||
Corporate Bonds (continued) | ||||
Information Technology 1.5% | ||||
a | CommScope Technologies LLC, senior bond, 144A, 6.00%, 6/15/25 | $55,000 | $53,488 | |
Materials 4.3% | ||||
Freeport-McMoRan Inc., senior bond, 3.875%, 3/15/23 | 50,000 | 51,062 | ||
a | Mauser Packaging Solutions Holding Co., senior note, 144A, 7.25%, 4/15/25 | 110,000 | 104,499 | |
155,561 | ||||
Real Estate 1.6% | ||||
a | Iron Mountain Inc., senior note, 144A, 4.875%, 9/15/27 | 55,000 | 56,640 | |
Utilities 1.5% | ||||
Calpine Corp., senior note, 5.50%, 2/01/24 | 55,000 | 56,103 | ||
Total Corporate Bonds (Cost $3,711,862) | 3,555,702 | |||
Shares | ||||
Short Term Investments (Cost $35,346) 1.0% | ||||
Money Market Funds 1.0% | ||||
c,d | Institutional Fiduciary Trust Money Market Portfolio, 1.35% | 35,346 | 35,346 | |
Total Investments (Cost $3,747,208) 99.3% | 3,591,048 | |||
Other Assets, less Liabilities 0.7% | 24,136 | |||
Net Assets 100.0% | $3,615,184 |
See Abbreviations on page 12.
aSecurity 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.At November 30, 2019, the aggregate value of these securities was $1,773,664, representing 49.1% of net assets. |
bPerpetual security with no stated maturity date. |
cSee Note 5 regarding investments in affiliated management investment companies. |
dThe rate shown is the annualized seven-day effective yield at period end. |
| 8
Franklin Strategic Series
Notes to Statements of Investments (unaudited)
1. ORGANIZATION
Franklin Strategic Series (Trust) is registered under the Investment Company Act of 1940 (1940 Act) as an open-end management investment company, consisting of twelve 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).
2. FINANCIAL INSTRUMENT VALUATION
The Funds’ investments in financial instruments are carried at fair value daily. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The Funds calculate the net asset value (NAV) per share each business day as of 4 p.m. Eastern time or the regularly scheduled close of the New York Stock Exchange (NYSE), whichever is earlier. Under compliance policies and procedures approved by the Trust’s Board of Trustees (the Board), the Funds’ administrator has responsibility for oversight of valuation, including leading the cross-functional Valuation Committee (VC). The Funds may utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
Equity securities, 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. Foreign equity securities are valued as of the close of trading on the foreign stock exchange on which the security is primarily traded or as of 4 p.m. Eastern time. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at 4 p.m. Eastern time on the day that the value of the security is determined. Over-the-counter (OTC) securities are valued within the range of the most recent quoted bid and ask prices. Securities that trade in multiple markets or on multiple exchanges are valued according to the broadest and most representative market. Certain equity securities are valued based upon fundamental characteristics or relationships to similar securities.
Debt securities generally trade in the OTC market rather than on a securities exchange. The Funds’ pricing services use multiple valuation techniques to determine fair value. In instances where sufficient market activity exists, the pricing services may utilize a market-based approach through which quotes from market makers are used to determine fair value. In instances where sufficient market activity may not exist or is limited, the pricing services also utilize proprietary valuation models which may consider market characteristics such as benchmark yield curves, credit spreads, estimated default rates, anticipated market interest rate volatility, coupon rates, anticipated timing of principal repayments, underlying collateral, and other unique security features in order to estimate the relevant cash flows, which are then discounted to calculate the fair value.
Investments in open-end mutual funds are valued at the closing NAV.
The Funds have procedures to determine the fair value of financial instruments for which market prices are not reliable or readily available. Under these procedures, the Funds primarily employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values, and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.
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
| 9
Franklin Strategic Series
Notes to Statements of Investments (unaudited)
Notes to Statements of Investments (unaudited)
2. FINANCIAL INSTRUMENT VALUATION (continued)
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.
3. DERIVATIVE FINANCIAL INSTRUMENTS
Certain or all Funds 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.
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.
Certain or all Funds purchased or wrote exchange traded option contracts primarily to manage and/or gain exposure to equity price risk. An option is a contract entitling the holder to purchase or sell a specific amount of shares or units of an asset or notional amount of a swap (swaption), at a specified price. When an option is purchased or written, an amount equal to the premium paid or received is recorded as an asset or liability, respectively. Upon exercise of an option, the acquisition cost or sales proceeds of the underlying investment is adjusted by any premium received or paid. Upon expiration of an option, any premium received or paid is recorded as a realized gain or loss. Upon closing an option other than through expiration or exercise, the difference between the premium received or paid and the cost to close the position is recorded as a realized gain or loss. The Fund did not hold any option contracts at period end.
The following Funds have invested in derivatives during the period.
Franklin Templeton SMACS: Series E - Options
4. CONCENTRATION OF RISK
Franklin Templeton SMACS: Series CH invests a large percentage of its total assets in obligations of issuers within California. Such concentration may subject the Fund to risks associated with industrial or regional matters, and economic, political or legal developments occurring within California. In addition, investments in these securities are sensitive to interest rate changes and credit risk of the issuer and may subject the Funds to increased market volatility. The market for these investments may be limited, which may make them difficult to buy or sell.
| 10
Franklin Strategic Series
Notes to Statements of Investments (unaudited)
5. 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. During the period ended November 30, 2019, investments in affiliated management investment companies were as follows:
Value at Beginning of Period | Purchases | Sales | Realized Gain (Loss) | Net Change in Unrealized Appreciation (Depreciation) | Value at End of Period | Number of Shares Held at End of Period | Dividend Income | |
Franklin Templeton SMACS: Series E | ||||||||
Non-Controlled Affiliates | ||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.35% | $324,104 | $662,409 | $(685,336) | $ — | $ — | $301,177 | 301,177 | $1,603 |
Franklin Templeton SMACS: Series H | ||||||||
Non-Controlled Affiliates | ||||||||
Franklin Liberty Intermediate Municipal Opportunities ETF | $1,033,400 | $ — | $ — | $ — | $(18,600) | $1,014,800 | 40,000 | $5,541 |
Franklin Templeton SMACS: Series I | ||||||||
Non-Controlled Affiliates | ||||||||
Institutional Fiduciary Trust Money Market Portfolio, 1.35% | $281,746 | $210,314 | $(456,714) | $ — | $ — | $35,346 | 35,346 | $931 |
6. FAIR VALUE MEASUREMENTS
The Funds follow a fair value hierarchy that distinguishes between market data obtained from independent sources (observable inputs) and the Funds’ own market assumptions (unobservable inputs). These inputs are used in determining the value of the Funds’ financial instruments and are summarized in the following fair value hierarchy:
• | Level 1 – quoted prices in active markets for identical financial instruments |
• | Level 2 – other significant observable inputs (including quoted prices for similar financial instruments, interest rates, prepayment speed, credit risk, etc.) |
• | Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of financial instruments) |
The input levels are not necessarily an indication of the risk or liquidity associated with financial instruments at that level.
A summary of inputs used as of November 30, 2019, in valuing the Funds’ assets carried at fair value, is as follows:
Level 1 | Level 2 | Level 3 | Total | |
Franklin Templeton SMACS: Series CH | ||||
Assets: | ||||
Investments in Securities:a | ||||
Municipal Bonds | $— | $3,267,338 | $— | $3,267,338 |
Total Investments in Securities | $ — | $3,267,338 | $ — | $3,267,338 |
| 11
Franklin Strategic Series
Notes to Statements of Investments (unaudited)
Notes to Statements of Investments (unaudited)
6. FAIR VALUE MEASUREMENTS (continued)
Level 1 | Level 2 | Level 3 | Total | |
Franklin Templeton SMACS: Series E | ||||
Assets: | ||||
Investments in Securities:a | ||||
Equity Investmentsb | $3,275,006 | $— | $— | $3,275,006 |
Equity-Linked Securities | — | 555,283 | — | 555,283 |
Index-Linked Notes | — | 39,565 | — | 39,565 |
Short Term Investments | 301,177 | — | — | 301,177 |
Total Investments in Securities | $3,576,183 | $594,848 | $ — | $4,171,031 |
Franklin Templeton SMACS: Series H | ||||
Assets: | ||||
Investments in Securities:a | ||||
Management Investment Companies | $1,014,800 | $— | $— | $1,014,800 |
Municipal Bonds | — | 1,856,637 | — | 1,856,637 |
Short Term Investments | — | 100,000 | — | 100,000 |
Total Investments in Securities | $1,014,800 | $1,956,637 | $ — | $2,971,437 |
Franklin Templeton SMACS: Series I | ||||
Assets: | ||||
Investments in Securities:a | ||||
Corporate Bonds | $— | $3,555,702 | $— | $3,555,702 |
Short Term Investments | 35,346 | — | — | 35,346 |
Total Investments in Securities | $35,346 | $3,555,702 | $ — | $3,591,048 |
aFor detailed categories, see the accompanying Statement of Investments. |
bIncludes common, preferred and convertible preferred stocks. |
7. SUBSEQUENT EVENTS
The Funds have evaluated subsequent events through the issuance of the Statements of Investments and determined that no events have occurred that require disclosure.
Abbreviations
Selected Portfolio | |
ADR | American Depository Receipt |
CDA | Community Development Authority/Agency |
CFD | Community Facilities District |
ETF | Exchange-Traded Fund |
FRN | Floating Rate Note |
GO | General Obligation |
PCR | Pollution Control Revenue |
PFA | Public Financing Authority |
PFAR | Public Financing Authority Revenue |
For additional information on the Funds’ significant accounting policies, please refer to the Funds’ most recent semiannual or annual shareholder report.
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