Franklin Strategic Series N-CSR Certified annual shareholder report (management investment company)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-06243

Franklin Strategic Series

(Exact name of registrant as specified in charter)

One Franklin Parkway, San Mateo, CA 94403-1906

(Address of principal executive offices)(Zip code)

Alison Baur, 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: 8/31

Date of reporting period: 8/31/22

Item 1. Reports to Stockholders.

a.)

The following is a copy of the report transmitted to shareholders pursuant to Rule30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1.)

b.)

Include a copy of each notice transmitted to stockholders in reliance on Rule 30e-3 under the Act (17 CFR 270.30e-3) that contains disclosures specified by paragraph (c)(3) of that rule.

Not Applicable

.

Annual

Report

Franklin

Strategic

Series

August

31,

2022

Sign

up

for

electronic

delivery

at

franklintempleton.com/edelivery

Franklin

Templeton

SMACS:

Series

CH

Franklin

Templeton

SMACS:

Series

E

Franklin

Templeton

SMACS:

Series

H

Franklin

Templeton

SMACS:

Series

I

Not

FDIC

Insured

May

Lose

Value

No

Bank

Guarantee

franklintempleton.com

Annual

Report

1

Contents

Annual

Report

Franklin

Templeton

SMACS:

Series

CH

2

Franklin

Templeton

SMACS:

Series

E

8

Franklin

Templeton

SMACS:

Series

H

14

Franklin

Templeton

SMACS:

Series

I

20

Financial

Highlights

and

Schedules

of

Investments

27

Financial

Statements

44

Notes

to

Financial

Statements

48

Report

of

Independent

Registered

Public

Accounting

Firm

60

Tax

Information

61

Board

Members

and

Officers

62

Shareholder

Information

67

2

franklintempleton.com

Annual

Report

ANNUAL

REPORT

Franklin

Templeton

SMACS:

Series

CH

This

annual

report

for

Franklin

Templeton

SMACS:

Series

CH

(Fund)

covers

the

fiscal

year

ended

August

31,

2022

.

Your

Fund’s

Goal

and

Main

Investments

The

Fund

seeks

to

provide

investors

with

a

high

level

of

income

exempt

from

federal

and

California

personal

income

taxes,

with

capital

appreciation

as

a

secondary

goal.

1

Under

normal

market

conditions,

the

Fund

invests

substantially

all

of

its

net

assets

in

municipal

securities

whose

interest

is

free

from

regular

federal

income

taxes

and

from

California

personal

income

taxes.

1

The

Fund

may

invest

in

municipal

securities

rated

in

any

rating

category

(or

unrated

or

short-

term

rated

securities

of

comparable

credit

quality),

including

municipal

securities

rated

A

or

lower

by

one

or

more

U.S.

nationally

recognized

rating

services

(or

unrated

or

short-

term

rated

securities

of

comparable

credit

quality),

below

investment

grade

securities

(or

“junk

bonds”)

and

defaulted

securities.

Performance

Overview

The

Fund’s

share

price,

as

measured

by

net

asset

value

(NAV),

decreased

from

$10.51

on

August

31,

2021,

to

$8.85

on

August

31,

2022.

The

Fund

paid

dividends

totaling

35.6843

cents

per

share

for

the

reporting

period.

2

The

Performance

Summary

beginning

on

page

4

shows

that

at

the

end

of

this

reporting

period

the

Fund’s

distribution

rate

was

4.06%

based

on

an

annualization

of

August’s

2.9928

cents

per

share

dividend

and

the

NAV

of

$8.85

on

August

31,

2022.

An

investor

in

the

2022

maximum

combined

effective

federal

and

California

personal

income

tax

bracket

of

53.10%

(including

3.80%

Medicare

tax)

would

need

to

earn

a

distribution

rate

of

8.66%

from

a

taxable

investment

to

match

the

Fund’s

tax-free

distribution

rate.

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.

Municipal

Bond

Market

Overview

During

the

12

months

ending

August

31,

2022,

multi-decade

high

inflation

continued

throughout

much

of

the

period

as

a

strong

U.S.

job

market

and

ample

consumer

savings

pushed

demand

beyond

the

ability

of

businesses

to

increase

supply.

In

response,

the

U.S.

Federal

Reserve

(Fed)

began

increasing

short-term

interest

rates

at

a

pace

not

seen

since

the

1980s,

leading

U.S.

Treasury

(UST)

yields

to

move

much

higher

over

the

period.

Recessionary

concerns

began

to

emerge

as

the

market

debated

whether

the

Fed

could

engineer

a

soft

landing

that

would

bring

inflation

down

without

causing

a

severe

economic

contraction.

Despite

strong

returns

in

the

second

half

of

2021,

the

municipal

bond

(muni)

market

subsequently

saw

one

of

its

worst

starts

to

a

new

year

in

2022.

High

levels

of

fixed

income

market

volatility

and

poor

performance

caused

significant

year-to-date

outflows

from

muni

retail

vehicles,

leading

market

technical

conditions

to

worsen.

Higher

all-in

issuance

costs

reduced

net

muni

issuance,

which

has

been

limited

as

of

period-end.

Fundamentals

remained

strong,

however,

with

many

issuers

reporting

surpluses

for

2022

as

federal

government

transfers

bolstered

revenues.

For

the

12-month

period,

U.S.

fixed

income

sectors

saw

mixed

performance

relative

to

equities,

as

measured

by

the

Standard

&

Poor’s

®

500

Index,

which

posted

a

-11.23%

total

return

for

the

period.

3

Investment-grade

munis,

as

measured

by

the

Bloomberg

Municipal

Bond

Index,

posted

a

-8.63%

total

return,

and

USTs,

as

measured

by

the

Bloomberg

U.S.

Treasury

Index,

posted

a

-10.80%

total

return.

3

In

contrast,

investment-grade

corporate

bonds,

as

measured

by

the

Bloomberg

U.S.

Corporate

Bond

Index,

posted

a

-14.91%

total

return.

3

1.

For

investors

subject

to

alternative

minimum

tax,

a

small

portion

of

Fund

dividends

may

be

taxable.

Distributions

of

capital

gains

are

generally

taxable.

To

avoid

imposition

of

28%

backup

withholding

on

all

Fund

distributions

and

redemption

proceeds,

U.S.

investors

must

be

properly

certified

on

Form

W-9

and

non-U.S.

investors

on

Form

W-8BEN.

2.

The

distribution

amount

is

the

sum

of

all

net

investment

income

distributions

for

the

period

shown.

Assumes

shares

were

purchased

and

held

for

the

entire

accrual

period.

Since

dividends

accrue

daily,

your

actual

distributions

will

vary

depending

on

the

date

you

purchased

your

shares

and

any

account

activity.

All

Fund

distributions

will

vary

depending

upon

current

market

conditions,

and

past

distributions

are

not

indicative

of

future

trends.

3.

Source:

Morningstar.

Treasuries,

if

held

to

maturity,

offer

a

fixed

rate

of

return

and

a

fixed

principal

value;

their

interest

payments

and

principal

are

guaranteed.

The

dollar

value,

number

of

shares

or

principal

amount,

and

names

of

all

portfolio

holdings

are

listed

in

the

Fund’s

Schedule

of

Investments

(SOI).

The

SOI

begins

on

page

28

.

Franklin

Templeton

SMACS:

Series

CH

3

franklintempleton.com

Annual

Report

State

Update

During

the

12-month

period,

California’s

large

and

diverse

economy,

with

its

recent

trend

of

strong

revenue

performance

and

use

of

surplus

funds

to

build

reserves,

has

enabled

the

state

to

deal

with

economic

and

fiscal

challenges

due

to

COVID-19.

California’s

unemployment

rate

began

the

period

at

7.4%

and

ended

at

4.1%,

compared

with

the

3.7%

national

rate.

State

revenue

growth

has

been

strong

as

tax

collections

in

recent

years

have

exceeded

projections,

and

budgets

for

the

2022

and

2023

fiscal

years

featured

large

amounts

of

one-time

spending

while

maintaining

healthy

levels

of

reserves.

California’s

net

tax-

supported

debt

was

$2,458

per

capita

and

3.2%

of

personal

income,

compared

with

the

$1,179

and

2.1%

national

medians,

respectively.

4

Independent

credit

rating

agency

Moody’s

Investors

Service

assigned

California’s

general

obligations

bonds

an

Aa2

rating

with

a

stable

outlook.

5

The

rating

reflected

Moody’s

view

of

the

state’s

large

and

diverse

economy,

healthy

budget

reserves

and

strong

liquidity.

Moody’s

also

noted

challenges,

including

high

revenue

volatility

given

the

state’s

disproportionate

dependence

on

income

taxes,

constrained

flexibility

to

adjust

spending

and

raise

revenue,

and

above-average

debt

and

fixed

cost

burdens.

Investment

Strategy

We

select

securities

we

believe

will

provide

the

best

balance

between

risk

and

return

within

the

Fund’s

range

of

allowable

investments

and

typically

use

a

buy-and-hold

strategy.

This

means

we

generally

hold

securities

in

the

Fund’s

portfolio

for

income

purposes,

rather

than

trading

securities

for

capital

gains,

although

we

may

sell

a

security

at

any

time

if

we

believe

doing

so

could

help

the

Fund

meet

its

goal.

We

may

consider

existing

market

conditions,

the

availability

of

lower-rated

securities,

and

whether

the

difference

in

yields

between

higher-

and

lower-rated

securities

justifies

the

higher

risk

of

lower-rated

securities.

Thus,

there

may

be

times

when

the

Fund

has

a

majority

of

its

investments

in

securities

that

are

considered

investment

grade.

Manager’s

Discussion

Consistent

with

our

high-yield

investment

strategy,

we

sought

to

invest

in

bonds

that

have

an

average

weighted

maturity

of

15

to

30

years

with

good

call

features.

Based

on

the

combination

of

our

value-oriented

philosophy

of

investing

primarily

for

income

and

a

positively

sloping

municipal

yield

curve,

in

which

interest

rates

for

longer-term

bonds

are

higher

than

those

for

shorter-term

bonds,

we

favored

the

use

of

longer-term

bonds.

The

Fund

does

not

use

leverage

or

credit

derivatives

to

boost

short-term

returns.

We

believe

our

conservative,

buy-and-hold

investment

strategy

can

help

us

achieve

high,

current,

tax-free

income

for

shareholders.

Thank

you

for

your

participation

in

Franklin

Templeton

SMACS:

Series

CH.

We

look

forward

to

serving

your

future

investment

needs.

The

foregoing

information

reflects

our

analysis,

opinions

and

portfolio

holdings

as

of

August

31,

2022,

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,

state,

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.

Portfolio

Composition

8/31/22

%

of

Total

Investments*

Special

Tax

46.11%

Housing

22.92%

Health

Care

13.46%

Industrial

Dev.

Revenue

and

Pollution

Control

7.74%

Transportation

5.47%

Education

4.30%

*

Does

not

include

cash

and

cash

equivalents.

4.

Source:

Moody’s

Investors

Service,

States

–

US:

Debt,

pension

and

OPEB

liabilities

all

up

in

fiscal

2021,

9/7/22.

5.

This

does

not

indicate

Moody’s

rating

of

the

Fund.

See

www.franklintempletondatasources.com

for

additional

data

provider

information.

Performance

Summary

as

of

August

31,

2022

Franklin

Templeton

SMACS:

Series

CH

4

franklintempleton.com

Annual

Report

The

performance

tables

and

graph

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.

Capital

gain

distributions

are

net

profits

realized

from

the

sale

of

portfolio

securities.

Performance

as

of

8/31/22

1

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.

Cumulative

Total

Return

2

Average

Annual

Total

Return

3

–

1-Year

-12.61%

-12.61%

Since

Inception

(6/3/19)

-0.00%

-0.00%

30-Day

Standardized

Yield

6

Taxable

Equivalent

30-Day

Standardized

Yield

5

Distribution

Rate

4

Taxable

Equivalent

Distribution

Rate

5

(with

fee

waiver)

(without

fee

waiver)

(with

fee

waiver)

(without

fee

waiver)

4.06%

8.66%

4.81%

0.91%

10.26%

1.94%

See

page

6

for

Performance

Summary

footnotes.

Franklin

Templeton

SMACS:

Series

CH

Performance

Summary

5

franklintempleton.com

Annual

Report

See

page

6

for

Performance

Summary

footnotes

Total

Return

Index

Comparison

for

a

Hypothetical

$10,000

Investment

1

Total

return

represents

the

change

in

value

of

an

investment

over

the

periods

shown.

It

includes

any

applicable

maximum

sales

charge,

Fund

expenses,

account

fees

and

reinvested

distributions.

The

unmanaged

index

includes

reinvestment

of

any

income

or

distributions.

It

differs

from

the

Fund

in

composition

and

does

not

pay

management

fees

or

expenses.

One

cannot

invest

directly

in

an

index.

6/3/19-8/31/22

Franklin

Templeton

SMACS:

Series

CH

Performance

Summary

6

franklintempleton.com

Annual

Report

All

investments

involve

risks,

including

possible

loss

of

principal.

Because

municipal

bonds

are

sensitive

to

interest-rate

movements,

the

Fund’s

yield

and

share

price

will

fluctuate

with

market

conditions.

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.

Because

the

Fund

invests

principally

in

a

single

state,

it

is

subject

to

greater

risk

of

adverse

economic

and

regulatory

changes

in

that

state

than

a

geographically

diversified

fund.

Investments

in

lower-rated

bonds

include

higher

risk

of

default

and

loss

of

principal.

Changes

in

the

credit

rating

of

a

bond,

or

in

the

credit

rating

or

financial

strength

of

a

bond’s

issuer,

insurer

or

guarantor,

may

affect

the

bond’s

value.

The

Fund

may

invest

a

significant

part

of

its

assets

in

municipal

securities

that

finance

similar

types

of

projects,

such

as

utilities,

hospitals,

higher

education

and

trans-

portation.

A

change

that

affects

one

project

would

likely

affect

all

similar

projects,

thereby

increasing

market

risk.

Events

such

as

the

spread

of

deadly

diseases,

disasters,

and

financial,

political

or

social

disruptions,

may

heighten

risks

and

adversely

affect

performance.

The

Fund’s

prospectus

also

includes

a

description

of

the

main

investment

risks.

Russia’s

military

invasion

of

Ukraine

in

February

2022,

the

resulting

responses

by

the

United

States

and

other

countries,

and

the

potential

for

wider

conflict

could

increase

volatility

and

uncertainty

in

the

financial

markets

and

adversely

affect

regional

and

global

economies.

The

United

States

and

other

countries

have

im-

posed

broad-ranging

economic

sanctions

on

Russia

and

certain

Russian

individuals,

banking

entities

and

corporations

as

a

response

to

its

invasion

of

Ukraine.

The

United

States

and

other

countries

have

also

imposed

economic

sanctions

on

Belarus

and

may

impose

sanctions

on

other

countries

that

support

Russia’s

military

invasion.

These

sanctions,

as

well

as

any

other

economic

consequences

related

to

the

invasion,

such

as

additional

sanctions,

boycotts

or

changes

in

consumer

or

purchaser

preferences

or

cyberattacks

on

governments,

companies

or

individuals,

may

further

decrease

the

value

and

liquidity

of

certain

Russian

securities

and

securities

of

issuers

in

other

countries

that

are

subject

to

economic

sanctions

related

to

the

invasion.

1.

The

Fund

has

an

expense

reduction

(including

acquired

fund

fees

and

expenses)

contractually

guaranteed

through

12/31/22.

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.

Distribution

rate

is

based

on

an

annualization

of

the

Fund’s

August

dividend

and

the

NAV

per

share

on

8/31/22.

5.

Taxable

equivalent

distribution

rate

and

yield

assume

the

published

rates

as

of

6/20/22

for

the

maximum

combined

effective

federal

and

California

state

personal

income

tax

rate

of

53.10%,

based

on

the

federal

income

tax

rate

of

37.00%

plus

3.80%

Medicare

tax.

6.

The

Fund’s

30-day

standardized

yield

is

calculated

over

a

trailing

30-day

period

using

the

yield

to

maturity

on

bonds

and/or

the

dividends

accrued

on

stocks.

It

may

not

equal

the

Fund’s

actual

income

distribution

rate,

which

reflects

the

Fund’s

past

dividends

paid

to

shareholders.

7.

Source:

Morningstar.

The

Bloomberg

Municipal

Bond

California

Exempt

Index

is

the

California

component

of

the

Bloomberg

Municipal

Bond

Index,

a

market

value-weight-

ed

index

of

tax-exempt,

investment-grade

municipal

bonds

with

maturities

of

one

year

or

more.

8.

Figures

are

as

stated

in

the

Fund’s

current

prospectus,

including

the

effect

of

acquired

fund

fees

and

expenses,

and

may

differ

from

the

expense

ratios

disclosed

in

the

Your

Fund’s

Expenses

and

Financial

Highlights

sections

in

this

report.

In

periods

of

market

volatility,

assets

may

decline

significantly,

causing

total

annual

Fund

operating

expenses

to

become

higher

than

the

figures

shown.

See

www.franklintempletondatasources.com

for

additional

data

provider

information.

Distributions

(9/1/21–8/31/22)

Net

Investment

Income

$0.356843

Total

Annual

Operating

Expenses

8

With

Fee

Waiver

Without

Fee

Waiver

0.00%

3.11%

Your

Fund’s

Expenses

Franklin

Templeton

SMACS:

Series

CH

7

franklintempleton.com

Annual

Report

Shareholders

of

mutual

funds

incur

ongoing

costs,

such

as

management

fees

(if

any),

custodian

fees

and

other

Fund

expenses,

which

are

sometimes

referred

to

as

operating

expenses.

The

table

below

shows

the

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.

Please

note

that

the

expenses

shown

in

the

table

are

meant

to

highlight

your

ongoing

Fund

costs

only

and

do

not

reflect

any

program

fees

that

you

may

pay.

Therefore,

the

table

is

useful

in

comparing

ongoing

costs

of

investing

in

the

Fund

only,

and

will

not

help

you

determine

the

relative

total

costs

of

participating

in

any

one

investment

program.

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.”

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

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

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.

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.

Actual

(actual

return

after

expenses)

Hypothetical

(5%

annual

return

before

expenses)

Beginning

Account

Value

3/1/22

Ending

Account

Value

8/31/22

Expenses

Paid

During

Period

3/1/22–8/31/22

1,2

Ending

Account

Value

8/31/22

Expenses

Paid

During

Period

3/1/22–8/31/22

1,2

a

Net

Annualized

Expense

Ratio

2

$1,000

$908.30

$0.00

$1,025.21

$0.00

0.00%

8

franklintempleton.com

Annual

Report

Franklin

Templeton

SMACS:

Series

E

This

annual

report

for

Franklin

Templeton

SMACS:

Series

E

(Fund)

covers

the

fiscal

year

ended

August

31,

2022

.

Your

Fund’s

Goal

and

Main

Investments

The

Fund

seeks

to

maximize

income,

while

maintaining

prospects

for

capital

appreciation.

Under

normal

market

conditions,

the

Fund

invests

predominantly

in

equity

securities,

which

consist

primarily

of

common

stocks,

and

may

invest

in

securities

from

any

capitalization

range,

primarily

large

cap

securities.

The

Fund

may

also

invest

in

securities

that

are

convertible

into

common

stock,

and

may

invest

up

to

25%

of

its

assets

in

foreign

securities,

either

directly

or

through

depositary

receipts.

Performance

Overview

The

Fund

posted

a

+0.38%

cumulative

total

return

for

the

12

months

ended

August

31,

2022.

In

comparison,

the

Fund’s

benchmark,

the

MSCI

USA

High

Dividend

Yield

Index,

which

measures

performance

of

U.S.

equities

(excluding

real

estate

investment

trusts)

with

higher

dividend

income

and

quality

characteristics

than

average

dividend

yields

that

are

both

sustainable

and

persistent,

posted

a

-4.30%

cumulative

total

return

for

the

same

period.

1

You

can

find

more

of

the

Fund’s

performance

data

in

the

Performance

Summary

beginning

on

page

10

.

Performance

data

represent

past

performance,

which

does

not

guarantee

future

results.

Investment

return

and

principal

value

will

fluctuate,

and

you

may

have

a

gain

or

loss

when

you

sell

your

shares.

Economic

and

Market

Overview

U.S.

equities,

as

measured

by

the

Standard

&

Poor’s

®

500

Index,

posted

a

-11.23%

total

return

for

the

12

months

ended

August

31,

2022.

1

High

inflation,

rising

interest

rates

and

geopolitical

instability

contributed

to

a

sharp

decline

in

equity

prices.

Although

consumer

spending

continued

to

rise,

deteriorating

financial

conditions

negatively

impacted

consumer

sentiment,

which

fell

to

its

lowest

recorded

level

late

in

the

period.

Elevated

inflation

was

a

major

concern

for

both

consumers

and

investors,

as

inflation

accelerated

to

the

highest

rate

since

1981.

Continued

supply-chain

disruptions,

strong

consumer

demand,

and

volatile

energy

prices

drove

inflation

higher.

Russia’s

invasion

of

Ukraine

also

disrupted

financial

markets

and

led

to

a

rise

in

oil

and

commodity

prices,

although

much

of

that

increase

abated

by

period-end.

The

U.S.

unemployment

rate

declined

from

5.2%

in

August

2021

to

3.7%

in

August

2022

as

job

openings

remained

elevated,

but

a

relative

lack

of

available

workers

fueled

wage

growth,

adding

to

some

investors’

inflation

concerns.

*Categories

within

the

Other

category

are

listed

in

full

in

the

Fund's

Schedule

of

Investments

(SOI),

which

can

be

found

later

in

this

report.

Following

a

robust

expansion

in

2021,

U.S.

gross

domestic

product

contracted

in

the

first

half

of

2022,

despite

continued

job

growth.

An

inventory

drawdown,

declining

residential

and

business

investment

and

lower

levels

of

government

spending

contributed

to

the

economic

slowdown.

Rising

interest

rates

translated

to

higher

borrowing

costs

for

individuals

and

businesses,

which

dampened

economic

activity.

Mortgage

rates

reached

the

highest

level

since

the

financial

crisis

of

2008,

and

new

home

construction

fell

notably

toward

period-end.

In

an

effort

to

control

inflation,

the

U.S.

Federal

Reserve

(Fed)

began

to

raise

the

federal

funds

target

rate

in

March

2022,

the

first

such

increase

since

2018.

The

Fed

raised

the

federal

funds

rate

again

at

each

of

its

three

subsequent

meetings

to

end

the

period

at

a

range

of

2.25%–2.50%.

The

Portfolio

Composition

8/31/22

%

of

Total

Net

Assets

Semiconductors

&

Semiconductor

Equipment

15.3%

Banks

14.0%

Metals

&

Mining

8.5%

Electric

Utilities

8.0%

Industrial

Conglomerates

6.1%

Communications

Equipment

5.5%

Multiline

Retail

4.5%

Chemicals

3.5%

Pharmaceuticals

3.4%

Specialty

Retail

3.1%

Automobiles

2.6%

Insurance

2.5%

Tobacco

2.5%

Entertainment

1.9%

Other*

15.4%

Short-Term

Investments

&

Other

Net

Assets

3.2%

1.

Source:

Morningstar.

The

index

is

unmanaged

and

includes

reinvestment

of

any

income

or

distributions.

It

does

not

reflect

any

fees,

expenses

or

sale

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

Schedule

of

Investments

(SOI).

The

SOI

begins

on

page

31

.

Franklin

Templeton

SMACS:

Series

E

9

franklintempleton.com

Annual

Report

Fed

noted

in

its

July

2022

meeting

that

inflation

remained

elevated

despite

some

indicators

that

spending

was

softening,

as

job

growth

was

robust

and

the

unemployment

rate

remained

low.

Furthermore,

the

Fed

said

it

would

continue

to

reduce

its

bond

holdings,

and

Fed

Chair

Jerome

Powell

indicated

that

reducing

inflation

was

likely

to

require

a

period

of

below-trend

growth.

Investment

Strategy

In

analyzing

securities,

we

consider

a

variety

of

factors,

including:

a

security’s

relative

value

based

on

such

factors

as

anticipated

cash

flow,

interest

or

dividend

coverage,

asset

coverage,

and

earnings

prospects;

the

experience

and

strength

of

the

company’s

management;

the

company’s

changing

financial

condition

and

market

recognition

of

the

change;

the

company’s

sensitivity

to

changes

in

interest

rates

and

business

conditions;

and

the

company’s

debt

maturity

schedules

and

borrowing

requirements.

When

choosing

investments

for

the

Fund,

we

apply

a

bottom-up,

value-oriented,

long-term

approach,

focusing

on

the

market

price

of

a

company’s

securities

relative

to

our

evaluation

of

the

company’s

long-term

earnings,

asset

value

and

cash

flow

potential.

We

also

consider

a

company’s

price/earnings

ratio,

profit

margins

and

liquidation

value.

We

regularly

use

a

variety

of

equity-related

derivatives

and

complex

equity

securities

for

various

purposes

including

enhancing

Fund

returns,

increasing

liquidity,

gaining

exposure

to

particular

instruments

in

more

efficient

or

less

expensive

ways

and/or

hedging

risks

relating

to

changes

in

certain

equity

markets.

We

seek

income

by

selecting

stocks

with

dividend

yields

we

believe

are

attractive.

We

search

for

undervalued

or

out-

of-favor

securities

we

believe

offer

opportunities

for

income

today

and

significant

growth

tomorrow.

Manager’s

Discussion

During

the

six

months

under

review,

notable

sector

contributors

to

the

Fund’s

performance

relative

to

the

MSCI

USA

High

Dividend

Yield

Index

included

energy,

utilities

and

health

care,

while

key

sector

detractors

from

relative

performance

included

materials

and

information

technology.

Top

individual

contributors

to

the

Fund’s

absolute

performance

included

global

chemicals

company

Huntsman,

oilfield

services

firm

Schlumberger

and

global

biopharmaceuticals

company

Bristol-Meyers

Squibb.

In

contrast,

individual

detractors

included

semiconductors

manufacturer

Intel

and

industrial

manufacturing

company

Siemens.

The

Fund

used

derivatives

such

as

equity

call

and

put

options

to

sell

and

reduce

positions

and/or

to

initiate

and

add

to

positions,

which

generated

gains

during

the

period

under

review.

Franklin

Templeton

SMACS:

Series

E

is

not

intended

to

be

owned

as

a

stand-alone

investment

vehicle

but

is

meant

to

be

owned

as

part

of

the

broader

Franklin

Income

separately

managed

account

product.

Thank

you

for

your

participation

in

Franklin

Templeton

SMACS:

Series

E.

We

look

forward

to

serving

your

future

investment

needs.

Edward

Perks,

CFA

Co-Lead

Portfolio

Manager

Brendan

Circle,

CFA

Co-Lead

Portfolio

Manager

Todd

Brighton,

CFA

Portfolio

Manager

The

foregoing

information

reflects

our

analysis,

opinions

and

portfolio

holdings

as

of

August

31,

2022,

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.

Top

Five

Equity

Holdings

8/31/22

Company

Industry

,

Country

%

of

Total

Net

Assets

a

a

Rio

Tinto

plc

4.9%

Metals

&

Mining

,

Australia

Cisco

Systems,

Inc.

4.9%

Communications

Equipment

,

United

States

Target

Corp.

4.5%

Multiline

Retail

,

United

States

Broadcom,

Inc.

4.1%

Semiconductors

&

Semiconductor

Equipment

,

United

States

American

Electric

Power

Co.,

Inc.

4.0%

Electric

Utilities

,

United

States

CFA

®

is

a

trademark

owned

by

CFA

Institute.

Performance

Summary

as

of

August

31,

2022

Franklin

Templeton

SMACS:

Series

E

10

franklintempleton.com

Annual

Report

The

performance

tables

and

graph

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.

Capital

gain

distributions

are

net

profits

realized

from

the

sale

of

portfolio

securities.

Performance

as

of

8/31/22

1

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.

Cumulative

Total

Return

2

Average

Annual

Total

Return

3

–

1-Year

+0.38%

+0.38%

Since

Inception

(6/3/19)

+43.55%

+11.79%

30-Day

Standardized

Yield

5

Distribution

Rate

4

(with

fee

waiver)

(without

fee

waiver)

8.16%

2.98%

1.89%

See

page

12

for

Performance

Summary

footnotes.

Franklin

Templeton

SMACS:

Series

E

Performance

Summary

11

franklintempleton.com

Annual

Report

See

page

12

for

Performance

Summary

footnotes

.

Total

Return

Index

Comparison

for

a

Hypothetical

$10,000

Investment

1

Total

return

represents

the

change

in

value

of

an

investment

over

the

periods

shown.

It

includes

any

applicable

maximum

sales

charge,

Fund

expenses,

account

fees

and

reinvested

distributions.

The

unmanaged

index

includes

reinvestment

of

any

income

or

distributions.

It

differs

from

the

Fund

in

composition

and

does

not

pay

management

fees

or

expenses.

One

cannot

invest

directly

in

an

index.

6/3/19-8/31/22

Franklin

Templeton

SMACS:

Series

E

Performance

Summary

12

franklintempleton.com

Annual

Report

All

investments

involve

risks,

including

possible

loss

of

principal.

Stock

prices

fluctuate,

sometimes

rapidly

and

dramatically,

due

to

factors

affecting

individual

companies,

particular

industries

or

sectors,

or

general

market

conditions.

The

Fund’s

distributions

to

shareholders

may

decline

when

prevailing

interest

rates

fall

or

when

dividend

income

from

investments

in

stocks

decline.

Foreign

investing

involves

additional

risks

such

as

currency

and

market

volatility,

as

well

as

political

and

social

instability.

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

promised.

Events

such

as

the

spread

of

deadly

diseases,

disasters,

and

financial,

political

or

social

disruptions,

may

heighten

risks

and

adversely

affect

performance.

The

Fund’s

prospectus

also

includes

a

description

of

the

main

investment

risks.

1.

The

Fund

has

an

expense

reduction

(including

acquired

fund

fees

and

expenses)

contractually

guaranteed

through

12/31/22.

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.

Distribution

rate

is

based

on

an

annualization

of

the

Fund’s

August

dividend

and

the

NAV

per

share

on

8/31/22.

5.

The

Fund’s

30-day

standardized

yield

is

calculated

over

a

trailing

30-day

period

using

the

yield

to

maturity

on

bonds

and/or

the

dividends

accrued

on

stocks.

It

may

not

equal

the

Fund’s

actual

income

distribution

rate,

which

reflects

the

Fund’s

past

dividends

paid

to

shareholders.

6.

Source:

Morningstar.

The

MSCI

USA

High

Dividend

Yield

Index

is

based

on

the

MSCI

USA

Index,

its

parent

index,

and

includes

large-

and

mid-capitalization

stocks.

The

index

is

designed

to

reflect

the

performance

of

equities

in

the

parent

index

(excluding

real

estate

investment

trusts)

with

higher

dividend

income

and

quality

characteristics

than

average

dividend

yields

that

are

both

sustainable

and

persistent.

7.

Figures

are

as

stated

in

the

Fund’s

current

prospectus,

including

the

effect

of

acquired

fund

fees

and

expenses,

and

may

differ

from

the

expense

ratios

disclosed

in

the

Your

Fund’s

Expenses

and

Financial

Highlights

sections

in

this

report.

In

periods

of

market

volatility,

assets

may

decline

significantly,

causing

total

annual

Fund

operating

expenses

to

become

higher

than

the

figures

shown.

See

www.franklintempletondatasources.com

for

additional

data

provider

information.

Distributions

(9/1/21–8/31/22)

Net

Investment

Income

Short-Term

Capital

Gain

Long-Term

Capital

Gain

Total

$0.8277

$0.0187

$0.6886

$1.5350

Total

Annual

Operating

Expenses

7

With

Fee

Waiver

Without

Fee

Waiver

0.00%

2.19%

Your

Fund’s

Expenses

Franklin

Templeton

SMACS:

Series

E

13

franklintempleton.com

Annual

Report

Shareholders

of

mutual

funds

incur

ongoing

costs,

such

as

management

fees

(if

any),

custodian

fees

and

other

Fund

expenses,

which

are

sometimes

referred

to

as

operating

expenses.

The

table

below

shows

the

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.

Please

note

that

the

expenses

shown

in

the

table

are

meant

to

highlight

your

ongoing

Fund

costs

only

and

do

not

reflect

any

program

fees

that

you

may

pay.

Therefore,

the

table

is

useful

in

comparing

ongoing

costs

of

investing

in

the

Fund

only,

and

will

not

help

you

determine

the

relative

total

costs

of

participating

in

any

one

investment

program.

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.”

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

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

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.

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.

Actual

(actual

return

after

expenses)

Hypothetical

(5%

annual

return

before

expenses)

Beginning

Account

Value

3/1/22

Ending

Account

Value

8/31/22

Expenses

Paid

During

Period

3/1/22–8/31/22

1,2

Ending

Account

Value

8/31/22

Expenses

Paid

During

Period

3/1/22–8/31/22

1,2

a

Net

Annualized

Expense

Ratio

2

$1,000

$948.80

$0.00

$1,025.21

$0.00

0.00%

14

franklintempleton.com

Annual

Report

Franklin

Templeton

SMACS:

Series

H

This

annual

report

for

Franklin

Templeton

SMACS:

Series

H

(Fund)

covers

the

fiscal

year

ended

August

31,

2022

.

Your

Fund’s

Goal

and

Main

Investments

The

Fund

seeks

to

provide

investors

with

a

high

level

of

income

exempt

from

federal

income

taxes.

1

Its

secondary

goal

is

capital

appreciation

to

the

extent

possible

and

consistent

with

the

Fund’s

principal

investment

goal.

Under

normal

market

conditions,

the

Fund

invests

substantially

all

of

its

net

assets

in

securities

whose

interest

is

free

from

federal

income

taxes,

including

the

federal

alternative

minimum

tax.

1

Although

the

Fund

attempts

to

invest

all

of

its

assets

in

tax-free

securities,

it

is

possible

that

a

portion

of

the

Fund’s

net

assets

may

be

invested

in

securities

that

pay

interest

that

may

be

subject

to

the

federal

alternative

minimum

tax

and,

although

not

anticipated,

in

securities

that

pay

interest

subject

to

other

federal

or

state

income

taxes.

1

The

Fund

may

invest

in

municipal

securities

rated

in

any

rating

category

(or

unrated

or

short-term

rated

securities

of

comparable

credit

quality),

including

municipal

securities

rated

A

or

lower

by

one

or

more

U.S.

nationally

recognized

rating

services

(or

unrated

or

short-term

rated

securities

of

comparable

credit

quality),

below

investment

grade

securities

(or

“junk

bonds”)

and

defaulted

securities.

The

Fund

may

invest

in

securities

of

any

maturity

or

duration.

Performance

Overview

The

Fund’s

share

price,

as

measured

by

net

asset

value

(NAV),

decreased

from

$10.57

on

August

31,

2021,

to

$9.03

on

August

31,

2022.

The

Fund

paid

dividends

totaling

30.8612

cents

per

share

for

the

reporting

period.

2

The

Performance

Summary

beginning

on

page

16

shows

that

at

the

end

of

this

reporting

period

the

Fund’s

distribution

rate

was

3.72%

based

on

an

annualization

of

August’s

2.7959

cents

per

share

dividend

and

the

NAV

of

$9.03

on

August

31,

2022.

An

investor

in

the

2022

maximum

federal

income

tax

bracket

of

40.80%

(including

3.80%

Medicare

tax)

would

need

to

earn

a

distribution

rate

of

6.28%

from

a

taxable

investment

to

match

the

Fund’s

tax-free

distribution

rate.

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.

Municipal

Bond

Market

Overview

During

the

12

months

ending

August

31,

2022,

multi-decade

high

inflation

continued

throughout

much

of

the

period

as

a

strong

U.S.

job

market

and

ample

consumer

savings

pushed

demand

beyond

the

ability

of

businesses

to

increase

supply.

In

response,

the

U.S.

Federal

Reserve

(Fed)

began

increasing

short-term

interest

rates

at

a

pace

not

seen

since

the

1980s,

leading

U.S.

Treasury

(UST)

yields

to

move

much

higher

over

the

period.

Recessionary

concerns

began

to

emerge

as

the

market

debated

whether

the

Fed

could

engineer

a

soft

landing

that

would

bring

inflation

down

without

causing

a

severe

economic

contraction.

Despite

strong

returns

in

the

second

half

of

2021,

the

municipal

bond

(muni)

market

subsequently

saw

one

of

its

worst

starts

to

a

new

year

in

2022.

High

levels

of

fixed

income

market

volatility

and

poor

performance

caused

significant

year-to-date

outflows

from

muni

retail

vehicles,

leading

market

technical

conditions

to

worsen.

Higher

all-in

issuance

costs

reduced

net

muni

issuance,

which

has

been

limited

as

of

period-end.

Fundamentals

remained

strong,

however,

with

many

issuers

reporting

surpluses

for

2022

as

federal

government

transfers

bolstered

revenues.

For

the

12-month

period,

U.S.

fixed

income

sectors

saw

mixed

performance

relative

to

equities,

as

measured

by

the

Standard

&

Poor’s

®

500

Index,

which

posted

a

-11.23%

total

return

for

the

period.

3

Investment-grade

munis,

as

measured

by

the

Bloomberg

Municipal

Bond

Index,

posted

a

-8.63%

total

return,

and

USTs,

as

measured

by

the

Bloomberg

U.S.

Treasury

Index,

posted

a

-10.80%

total

return.

3

In

contrast,

investment-grade

corporate

bonds,

as

measured

by

the

Bloomberg

U.S.

Corporate

Bond

Index,

posted

a

-14.91%

total

return.

3

1.

For

investors

subject

to

alternative

minimum

tax,

a

small

portion

of

Fund

dividends

may

be

taxable.

Distributions

of

capital

gains

are

generally

taxable.

To

avoid

imposition

of

28%

backup

withholding

on

all

Fund

distributions

and

redemption

proceeds,

U.S.

investors

must

be

properly

certified

on

Form

W-9

and

non-U.S.

investors

on

Form

W-8BEN.

2.

The

distribution

amount

is

the

sum

of

all

net

investment

income

distributions

for

the

period

shown.

Assumes

shares

were

purchased

and

held

for

the

entire

accrual

period.

Since

dividends

accrue

daily,

your

actual

distributions

will

vary

depending

on

the

date

you

purchased

your

shares

and

any

account

activity.

All

Fund

distributions

will

vary

depending

upon

current

market

conditions,

and

past

distributions

are

not

indicative

of

future

trends.

3.

Source:

Morningstar.

Treasuries,

if

held

to

maturity,

offer

a

fixed

rate

of

return

and

a

fixed

principal

value;

their

interest

payments

and

principal

are

guaranteed.

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

Schedule

of

Investments

(SOI).

The

SOI

begins

on

page

36

.

Franklin

Templeton

SMACS:

Series

H

15

franklintempleton.com

Annual

Report

Investment

Strategy

We

select

securities

we

believe

will

provide

the

best

balance

between

risk

and

return

within

the

Fund’s

range

of

allowable

investments

and

typically

use

a

buy-and-hold

strategy.

This

means

we

generally

hold

securities

in

the

Fund’s

portfolio

for

income

purposes,

rather

than

trading

securities

for

capital

gains,

although

we

may

sell

a

security

at

any

time

if

we

believe

it

could

help

the

Fund

meet

its

goal.

We

also

consider

existing

market

conditions,

the

availability

of

lower-rated

securities,

and

whether

the

difference

in

yields

between

higher-

and

lower-rated

securities

justifies

the

higher

risk

of

lower-rated

securities.

Thus,

there

may

be

times

when

the

Fund

has

a

majority

of

its

investments

in

securities

that

are

considered

investment

grade.

Manager’s

Discussion

We

manage

the

Fund

around

our

core

principles

of

credit

selection,

value

identification

and

risk

management,

consistent

with

the

primary

goal

of

providing

shareholders

with

a

high

level

of

tax-exempt

income

by

taking

advantage

of

credit-driven

opportunities

in

all

rating

categories.

We

rely

on

a

deep

and

experienced

investment

team,

featuring

a

group

of

12

research

analysts

that

covers

every

sector

of

the

municipal

bond

market.

The

breadth

and

depth

of

our

research

team

allow

us

to

evaluate

any

investment

opportunity.

The

Fund

does

not

use

leverage

or

credit

derivatives

to

boost

short-term

returns,

and

we

are

careful

to

not

overexpose

the

portfolio

to

any

one

credit

or

sector.

We

believe

our

conservative,

buy-and-hold

investment

strategy

can

help

us

achieve

high,

current,

tax-free

income

for

shareholders.

Thank

you

for

participation

in

Franklin

Templeton

SMACS:

Series

H.

We

look

forward

to

serving

your

future

investment

needs.

The

foregoing

information

reflects

our

analysis,

opinions

and

portfolio

holdings

as

of

August

31,

2022,

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,

state,

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.

Portfolio

Composition

8/31/22

%

of

Total

Investments*

Special

Tax

28.42%

Health

Care

23.22%

Education

14.42%

Lease

9.23%

Industrial

Dev.

Revenue

and

Pollution

Control

8.71%

Local

7.06%

State

General

Obligation

4.70%

Transportation

2.06%

Housing

0.94%

Other

Revenue

Bonds

0.66%

Utilities

0.47%

Refunded

0.11%

*

Does

not

include

cash

and

cash

equivalents.

Performance

Summary

as

of

August

31,

2022

Franklin

Templeton

SMACS:

Series

H

16

franklintempleton.com

Annual

Report

The

performance

tables

and

graph

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.

Capital

gain

distributions

are

net

profits

realized

from

the

sale

of

portfolio

securities.

Performance

as

of

8/31/22

1

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.

Cumulative

Total

Return

2

Average

Annual

Total

Return

3

–

1-Year

-11.82%

-11.82%

Since

Inception

(6/3/19)

-0.34%

-0.11%

30-Day

Standardized

Yield

6

Taxable

Equivalent

30-Day

Standardized

Yield

5

Distribution

Rate

4

Taxable

Equivalent

Distribution

Rate

5

(with

fee

waiver)

(without

fee

waiver)

(with

fee

waiver)

(without

fee

waiver)

3.72%

6.28%

4.13%

0.31%

6.98%

0.52%

See

page

18

for

Performance

Summary

footnotes.

Franklin

Templeton

SMACS:

Series

H

Performance

Summary

17

franklintempleton.com

Annual

Report

See

page

18

for

Performance

Summary

footnotes.

Total

Return

Index

Comparison

for

a

Hypothetical

$10,000

Investment

1

Total

return

represents

the

change

in

value

of

an

investment

over

the

periods

shown.

It

includes

any

applicable

maximum

sales

charge,

Fund

expenses,

account

fees

and

reinvested

distributions.

The

unmanaged

index

includes

reinvestment

of

any

income

or

distributions.

It

differs

from

the

Fund

in

composition

and

does

not

pay

management

fees

or

expenses.

One

cannot

invest

directly

in

an

index.

6/3/19-8/31/22

Franklin

Templeton

SMACS:

Series

H

Performance

Summary

18

franklintempleton.com

Annual

Report

All

investments

involve

risks,

including

possible

loss

of

principal.

Because

municipal

bonds

are

sensitive

to

interest-rate

movements,

the

Fund’s

yield

and

share

price

will

fluctuate

with

market

conditions.

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.

Investments

in

lower-rated

bonds

include

higher

risk

of