UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-06243
Franklin Strategic Series
(Exact name of registrant as specified in charter)
One Franklin Parkway, San Mateo, CA 94403-1906
(Address of principal executive offices)(Zip code)
Craig S. Tyle, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
Date of fiscal year end: 8/31
Date of reporting period: 8/31/21
Explanatory Note:
The Registrant is filing this amendment to its Form N-CSR for the period ended August 31, 2021, originally filed with the Securities and Exchange Commission on October 28, 2021 (Accession Number 0001868420-21-000110), for the purpose of refiling certifications required by Item 13(a)(2) to clarify that they relate to the period covered by the report. Except as set forth above, no other changes have been made to the Form N-CSR, and this amended filing does not amend, update or change any other items or disclosure found in the Form N-CSR.
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,
2021
Sign
up
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at
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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
9
Franklin
Templeton
SMACS:
Series
H
15
Franklin
Templeton
SMACS:
Series
I
22
Financial
Highlights
and
Statements
of
Investments
29
Financial
Statements
42
Notes
to
Financial
Statements
46
Report
of
Independent
Registered
Public
Accounting
Firm
57
Tax
Information
58
Board
Members
and
Officers
59
Shareholder
Information
64
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,
202
1
.
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),
increased
from
$9.82
on
August
31,
2020,
to
$10.51
on
August
31,
2021.
The
Fund
paid
dividends
totaling
35.1148
cents
per
share
for
the
reporting
period.
2
The
Performance
Summary
beginning
on
page
5
shows
that
at
the
end
of
this
reporting
period
the
Fund’s
distribution
rate
was
3.29%
based
on
an
annualization
of
August’s
2.8841
cents
per
share
dividend
and
the
NAV
of
$10.51
on
August
31,
2021.
An
investor
in
the
2021
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
7.01%
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
The
U.S.
and
the
rest
of
the
world
continued
to
manage
the
recovery
from
the
novel
coronavirus
(COVID-19)
pandemic
that
has
caused
significant
economic
and
personal
strife
throughout
the
past
12
months
ended
August
31,
2021.
Through
the
summer
of
2020,
COVID-19
infection
rates
fell
across
the
U.S.,
allowing
some
states
to
begin
the
process
of
reopening
parts
of
their
economies.
However,
starting
in
the
fall
of
2020,
new
cases
and
hospitalizations
increased
to
all-time
highs.
The
virus
eventually
spread
to
areas
in
the
U.S.
that
had
not
seen
large
numbers
of
infections.
In
December
2020,
the
U.S.
Food
and
Drug
Administration
granted
emergency
approval
for
vaccines
from
a
number
of
pharmaceutical
companies
and
made
plans
for
large
scale
inoculation
programs.
By
the
end
of
August
2021,
53%
of
people
in
the
U.S.
had
been
fully
immunized,
but
the
remaining
population
were
either
hesitant
to
receive
the
vaccine
or
did
not
have
ready
access
to
it,
stalling
vaccination
growth.
After
falling
from
an
all-time
high
in
January
2021,
case
rates
and
hospitalizations
fell
through
the
spring
and
beginning
summer
months
of
2021.
However,
starting
in
August
2021,
a
new,
more
virulent
strain,
labeled
Delta,
began
to
drive
case
rates
higher
to
levels
last
seen
in
February
2021.
Although
most
infections
and
severe
illnesses
were
limited
to
unvaccinated
individuals,
there
were
breakthrough
cases
where
fully
vaccinated
individuals
contracted
the
disease.
Falling
consumer
sentiment
in
August
2021
called
into
question
whether
people
would
swiftly
return
to
normal
economic
activity.
Although
most
states
and
local
authorities
did
not
roll
back
business
and
school
reopenings,
there
were
some
areas
that
reimposed
face
mask
requirements.
U.S.
health
officials
started
to
explore
the
potential
need
for
booster
shots
to
ward
off
future
strains
of
the
virus.
Based
on
historic
fiscal
stimulus
payments,
the
U.S.
economy
continued
its
path
to
recovery
with
the
largest
single-quarter
expansion
of
33.8%
annualized
in
the
third
quarter
of
2020.
This
was
followed
by
increases
of
4.5%
in
the
fourth
quarter
of
2020
and
6.3%
in
2021’s
first
quarter.
Second
quarter
2021
growth
disappointed
many
economists
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.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
30
.
Franklin
Templeton
SMACS:
Series
CH
3
franklintempleton.com
Annual
Report
at
just
6.6%,
but
for
the
first
time,
overall
real
gross
domestic
product
growth
exceeded
pre-COVID-19
levels
from
the
fourth
quarter
of
2019.
Employment
improved,
driving
the
unemployment
rate
to
5.2%
in
August
2021,
down
from
a
peak
of
14.8%
seen
in
April
2020.
Inflation
picked
up
through
the
summer
months
of
2021
as
global
supply-chain
bottlenecks
and
rising
input
prices
limited
output
growth
that
was
met
with
pent-up
demand
for
goods.
The
U.S.
Federal
Reserve
(Fed)
continued
to
support
monetary
conditions
by
purchasing
a
large
number
of
U.S.
Treasury
(UST)
bonds
and
backstopping
many
other
fixed
income
markets.
However,
with
improving
U.S.
economic
fundamentals,
by
the
end
of
August
2021,
the
Fed
began
discussions
of
tapering
asset
purchases
as
the
first
step
toward
normalizing
monetary
policy.
The
Biden
administration
continued
its
talks
with
Congress
on
a
number
of
large
infrastructure
projects
that
would
partially
be
paid
for
with
increased
tax
rates
on
wealthy
individuals.
Although
the
final
size
of
the
programs
had
not
been
decided
as
of
period-
end,
there
could
be
significant
implications
for
the
municipal
(muni)
bond
market,
including
additional
bond
issuance
for
the
projects
and
the
potential
for
increased
demand
for
tax-
exempt
sources
of
income.
Strong
demand
for
muni
bonds
continued
throughout
the
period
under
review,
pushing
ratios
of
30-year
muni
bonds
versus
UST
yields
to
all-time
lows
in
June
2021.
Although
these
and
other
maturity
ratios
have
since
increased,
they
remain
at
historically
rich
valuations.
In
times
of
increased
UST
volatility
throughout
the
past
12
months,
muni
bond
valuations
suffered
declines
only
to
rally
once
stability
returned
to
the
market.
Muni
issuers
had
projected
severe
budget
deficits
in
2020
and
2021,
but
these
proved
unfounded
as
consumer
spending
recovered
more
quickly
than
anticipated,
leading
to
higher
sales
tax
collections.
Additionally,
the
U.S.
federal
government
provided
$350
billion
in
relief
to
muni
issuers
as
part
of
the
fiscal
stimulus
package
passed
in
March
2021.
A
strong
U.S.
housing
market
also
provided
support
to
local
and
state
governments
as
home
price
appreciation
rates
reached
historic
highs.
For
the
12-month
period,
U.S.
fixed
income
sectors
broadly
underperformed
relative
to
equities,
as
measured
by
the
Standard
&
Poor’s
500
®
Index,
which
posted
a
+31.17%
total
return
for
the
period.
3
Investment-grade
muni
bonds,
as
measured
by
the
Bloomberg
Municipal
Bond
Index,
posted
a
+3.40%
total
return,
while
USTs,
as
measured
by
the
Bloomberg
U.S.
Treasury
Index,
posted
a
-2.11%
total
return,
and
investment-grade
corporate
bonds,
as
measured
by
the
Bloomberg
U.S.
Corporate
Bond
Index,
posted
a
+2.53%
total
return.
3
State
Update
California’s
large,
diverse
economy,
which
was
strong
before
the
COVID-19
pandemic,
was
negatively
impacted
but
began
to
recover
during
the
12-month
period.
California’s
unemployment
rate
began
the
period
at
12.3%
and
ended
at
7.5%,
compared
with
the
5.2%
national
rate.
4
The
state’s
enacted
fiscal
year
(FY)
2020
budget
increased
spending
while
maintaining
strong
reserves,
but
revenues
declined
during
the
pandemic.
Further
revenue
declines
projected
for
FY
2021
were
offset
by
use
of
reserves,
education
spending
cuts,
suspension
of
certain
business
tax
breaks,
and
increased
federal
Medicaid
reimbursement
and
COVID-19
aid.
These
factors
and
overall
increased
tax
revenue
resulted
in
a
sizable
budget
surplus
by
period-end.
The
governor’s
2022
executive
budget
projected
increased
general
revenue
and
reversed
most
of
the
FY
2021
spending
cuts
and
tax
increases.
California’s
net
tax-supported
debt
was
$2,144
per
capita
and
3.0%
of
personal
income,
compared
with
the
$1,039
and
1.9%
national
medians,
respectively.
5
Independent
credit
rating
agency
Moody’s
Investors
Service
affirmed
California’s
general
obligations
bonds’
Aa2
rating
with
a
stable
outlook.
6
The
rating
reflected
Moody’s
view
of
the
state’s
large
and
diverse
economy,
strong
revenue
collection
throughout
the
pandemic,
and
use
of
surpluses
to
build
reserves.
Moody’s
noted
challenges,
including
high
revenue
volatility
given
the
state’s
disproportionate
dependence
on
income
taxes,
constrained
flexibility
to
adjust
spending
and
raise
revenue,
and
relatively
high
leverage
and
fixed
costs.
Portfolio
Composition
8/31/21
%
of
Total
Investments*
Special
Tax
48.83%
Housing
20.23%
Health
Care
12.96%
Industrial
Dev.
Revenue
and
Pollution
Control
7.73%
Transportation
6.00%
Education
4.25%
*
Does
not
include
cash
and
cash
equivalents.
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.
4.
Source:
Bureau
of
Labor
Statistics.
5.
Source:
Moody’s
Investors
Service,
State
government
–
US:
Medians
–
State
debt
rose
2.5%
in
2020,
spurred
by
pandemic-linked
borrowing
,
6/14/21.
6.
This
does
not
indicate
Moody’s
rating
of
the
Fund.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Franklin
Templeton
SMACS:
Series
CH
4
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
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,
2021,
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.
Performance
Summary
as
of
August
31,
2021
Franklin
Templeton
SMACS:
Series
CH
5
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
8/31/21
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
+10.75%
+10.75%
Since
Inception
(6/3/19)
+14.43%
+6.19%
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)
3.29%
7.01%
2.30%
-0.71%
4.90%
-1.51%
See
page
7
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
CH
Performance
Summary
6
franklintempleton.com
Annual
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See
page
7
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.
6/3/19-8/31/21
Franklin
Templeton
SMACS:
Series
CH
Performance
Summary
7
franklintempleton.com
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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.
1.
The
Fund
has
an
expense
reduction
(including
acquired
fund
fees
and
expenses)
contractually
guaranteed
through
12/31/21.
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
8/31/21.
5.
Taxable
equivalent
distribution
rate
and
yield
assume
the
published
rates
as
of
6/24/21
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
engineered
for
the
long-term
tax-exempt
bond
market.
To
be
included
in
the
index,
bonds
must
be
fixed
rate,
have
at
least
one
year
to
final
maturity
and
be
rated
investment
grade
(Baa3/BBB-
or
higher)
by
at
least
two
of
the
following
agencies:
Moody's,
S&P
and
Fitch.
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
(9/1/20–8/31/21)
Net
Investment
Income
$0.351148
Total
Annual
Operating
Expenses
8
With
Fee
Waiver
Without
Fee
Waiver
0.00%
4.23%
Your
Fund’s
Expenses
Franklin
Templeton
SMACS:
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CH
8
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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
3/1/21
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,051.10
$0.00
$1,025.21
$0.00
0.00%
9
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,
202
1
.
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
convertible
into
common
stock,
from
any
capitalization
range,
primarily
large-cap
securities.
The
Fund
may
also
invest
up
to
25%
of
its
assets
in
foreign
securities,
either
directly
or
through
depositary
receipts.
Performance
Overview
The
Fund
posted
a
+30.95%
cumulative
total
return
for
the
12
months
ended
August
31,
2021.
In
comparison,
the
Fund’s
benchmark,
the
MSCI
USA
High
Dividend
Yield
Index,
which
measures
performance
of
U.S.
stocks
(excluding
real
estate
investment
trusts)
with
higher
dividend
income
and
quality
characteristics
than
average
dividend
yields,
posted
a
+24.99%
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
11
.
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
(S&P
500
®
),
posted
a
+31.17%
total
return
for
the
12
months
ended
August
31,
2021.
1
Stocks
benefited
from
the
continued
economic
recovery,
monetary
and
fiscal
stimulus
measures,
development
of
highly
effective
novel
coronavirus
(COVID-19)
vaccines,
implementation
of
vaccination
programs
and
easing
pandemic
restrictions.
As
many
businesses
reopened,
stimulus
payments
and
generally
high
household
savings
contributed
to
increased
consumer
spending.
Senate
passage
of
a
bipartisan
infrastructure
bill
further
bolstered
investor
sentiment,
helping
equities
to
reach
new
all-time
price
highs
toward
period-end.
As
economic
conditions
improved,
gross
domestic
product
(GDP)
rebounded
at
a
record
annualized
pace
in
2020’s
third
quarter.
Although
GDP
growth
was
lower
in
the
subsequent
three
quarters,
the
lifting
of
many
COVID-19
restrictions
and
strong
consumer
spending
continued
to
support
the
economy.
The
continued
growth
of
the
economy
led
the
U.S.
to
surpass
its
pre-pandemic
output
in
2021’s
second
quarter.
*Categories
within
the
Other
category
are
listed
in
full
in
the
Fund's
Statement
of
Investments
(SOI),
which
can
be
found
later
in
this
report.
The
inflation
rate
surged
during
the
12-month
period
amid
increased
demand
and
supply-chain
bottlenecks,
with
the
price
pressures
coming
principally
from
the
areas
particularly
impacted
by
the
shutdown,
such
as
used
vehicles,
airfares,
semiconductors
and
building
materials.
Personal
consumption
expenditure,
a
measure
of
inflation,
also
rose
dramatically
during
the
period,
representing
the
highest
12-month
increase
in
decades.
The
unemployment
rate
declined
from
8.4%
in
August
2020
to
5.2%
in
August
2021
as
job
openings
increased,
but
a
relative
lack
of
available
workers
fueled
wage
growth,
adding
to
some
investors’
inflation
concerns.
2
Portfolio
Composition
8/31/21
%
of
Total
Net
Assets
Electric
Utilities
11.5%
Semiconductors
&
Semiconductor
Equipment
9.8%
Pharmaceuticals
7.8%
Banks
5.0%
Insurance
4.8%
Multiline
Retail
4.8%
Oil,
Gas
&
Consumable
Fuels
4.7%
Beverages
4.1%
Health
Care
Providers
&
Services
4.0%
Tobacco
4.0%
Specialty
Retail
3.8%
Energy
Equipment
&
Services
3.7%
Metals
&
Mining
3.1%
Multi-Utilities
2.9%
Other*
25.5%
Short-Term
Investments
&
Other
Net
Assets
0.5%
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.
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
32
.
Franklin
Templeton
SMACS:
Series
E
10
franklintempleton.com
Annual
Report
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
kept
the
federal
funds
target
rate
at
a
record-low
range
of
0.00%–0.25%.
The
Fed
also
maintained
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
open-ended
U.S.
Treasury
and
mortgage
bond
purchasing.
However,
in
an
August
2021
speech,
Fed
Chair
Jerome
Powell
stated
he
anticipated
the
Fed
would
begin
reducing
its
bond
purchases
later
in
2021.
He
also
indicated
that
although
recent
inflation
levels
were
concerning,
the
Fed
believed
these
levels
should
be
temporary,
and
that
further
progress
was
needed
on
increasing
employment
before
the
Fed
would
consider
raising
interest
rates.
Investment
Strategy
We
employ
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,
which
may
include
purchasing
or
selling
call
and
put
options
on
equity
securities
and
equity
security
indexes,
futures
on
equity
securities
and
equity
indexes,
options
on
equity
index
futures
and
equity-
linked
notes,
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.
The
use
of
such
derivative
transactions
may
allow
the
Fund
to
obtain
net
long
(that
is,
the
Fund
would
benefit
if
the
price
of
the
investment
increases)
or
net
short
exposures
(that
is,
the
Fund
would
benefit
if
the
price
of
the
investment
decreases)
to
selected
markets
or
countries.
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
12
months
under
review,
notable
sector
contributors
to
the
Fund’s
performance
relative
to
the
MSCI
USA
High
Dividend
Yield
Index
included
consumer
discretionary,
communication
services
and
utilities.
In
contrast,
key
sector
detractors
from
relative
performance
included
industrials
and
health
care.
Top
individual
contributors
to
the
Fund’s
absolute
performance
included
omnichannel
retail
operator
Target,
health
solutions
firm
CVS
Health
and
semiconductor
company
Texas
Instruments.
In
contrast,
individual
detractors
included
pharmaceutical
firms
AstraZeneca
(U.K.;
not
held
at
period-end)
and
Merck.
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.
The
Fund
is
not
intended
to
be
owned
as
a
stand-alone
investment
vehicle,
but
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
Brendan
Circle,
CFA
Todd
Brighton,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
August
31,
2021,
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
8/31/21
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Bristol-Myers
Squibb
Co.
4.8%
Pharmaceuticals
,
United
States
Target
Corp.
4.8%
Multiline
Retail
,
United
States
PepsiCo,
Inc.
4.1%
Beverages
,
United
States
Duke
Energy
Corp.
4.1%
Electric
Utilities
,
United
States
CVS
Health
Corp.
4.0%
Health
Care
Providers
&
Services
,
United
States
CFA
®
is
a
trademark
owned
by
CFA
Institute.
Performance
Summary
as
of
August
31,
2021
Franklin
Templeton
SMACS:
Series
E
11
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
8/31/21
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
+30.95%
+30.95%
Since
Inception
(6/3/19)
+43.01%
+17.28%
30-Day
Standardized
Yield
5
Distribution
Rate
4
(with
fee
waiver)
(without
fee
waiver)
3.61%
0.71%
2.41%
See
page
13
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
E
Performance
Summary
12
franklintempleton.com
Annual
Report
See
page
13
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.
6/3/19-8/31/21
Franklin
Templeton
SMACS:
Series
E
Performance
Summary
13
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
12/31/21.
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
8/31/21.
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
(9/1/20–8/31/21)
Net
Investment
Income
$0.451700
Total
Annual
Operating
Expenses
7
With
Fee
Waiver
Without
Fee
Waiver
0.00%
2.86%
Your
Fund’s
Expenses
Franklin
Templeton
SMACS:
Series
E
14
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
3/1/21
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,165.60
$0.00
$1,025.21
$0.00
0.00%
15
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,
202
1
.
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),
increased
from
$9.75
on
August
31,
2020,
to
$10.57
on
August
31,
2021.
The
Fund
paid
dividends
totaling
32.2719
cents
per
share
for
the
reporting
period.
2
The
Performance
Summary
beginning
on
page
18
shows
that
at
the
end
of
this
reporting
period
the
Fund’s
distribution
rate
was
3.14%
based
on
an
annualization
of
August’s
2.7661
cents
per
share
dividend
and
the
NAV
of
$10.57
on
August
31,
2021.
An
investor
in
the
2021
maximum
federal
income
tax
bracket
of
40.80%
(including
3.80%
Medicare
tax)
would
need
to
earn
a
distribution
rate
of
5.30%
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
The
U.S.
and
the
rest
of
the
world
continued
to
manage
the
recovery
from
the
novel
coronavirus
(COVID-19)
pandemic
that
has
caused
significant
economic
and
personal
strife
throughout
the
past
12
months
ended
August
31,
2021.
Through
the
summer
of
2020,
COVID-19
infection
rates
fell
across
the
U.S.,
allowing
some
states
to
begin
the
process
of
reopening
parts
of
their
economies.
However,
starting
in
the
fall
of
2020,
new
cases
and
hospitalizations
increased
to
all-time
highs.
The
virus
eventually
spread
to
areas
in
the
U.S.
that
had
not
seen
large
numbers
of
infections.
In
December
2020,
the
U.S.
Food
and
Drug
Administration
granted
emergency
approval
for
vaccines
from
a
number
of
pharmaceutical
companies
and
made
plans
for
large
scale
inoculation
programs.
By
the
end
of
August
2021,
53%
of
people
in
the
U.S.
had
been
fully
immunized,
but
the
remaining
population
were
either
hesitant
to
receive
the
vaccine
or
did
not
have
ready
access
to
it,
stalling
vaccination
growth.
After
falling
from
an
all-time
high
in
January
2021,
case
rates
and
hospitalizations
fell
through
the
spring
and
beginning
summer
months
of
2021.
However,
starting
in
August
2021,
a
new,
more
virulent
strain,
labeled
Delta,
began
to
drive
case
rates
higher
to
levels
last
seen
in
February
2021.
Although
most
infections
and
severe
illnesses
were
limited
to
unvaccinated
individuals,
there
were
breakthrough
cases
where
fully
vaccinated
individuals
contracted
the
disease.
Falling
consumer
sentiment
in
August
2021
called
into
question
whether
people
would
swiftly
return
to
normal
economic
activity.
Although
most
states
and
local
authorities
did
not
roll
back
business
and
school
reopenings,
there
were
some
areas
that
reimposed
face
mask
requirements.
U.S.
health
officials
started
to
explore
the
potential
need
for
booster
shots
to
ward
off
future
strains
of
the
virus.
Based
on
historic
fiscal
stimulus
payments,
the
U.S.
economy
continued
its
path
to
recovery
with
the
largest
single-quarter
expansion
of
33.8%
annualized
in
the
third
quarter
of
2020.
This
was
followed
by
increases
of
4.5%
in
the
fourth
quarter
of
2020
and
6.3%
in
2021’s
first
quarter.
Second
quarter
2021
growth
disappointed
many
economists
at
just
6.6%,
but
for
the
first
time,
overall
real
gross
domestic
product
growth
exceeded
pre-COVID-19
levels
from
the
fourth
quarter
of
2019.
Employment
improved,
driving
the
unemployment
rate
to
5.2%
in
August
2021,
down
from
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.
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
36
.
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a
peak
of
14.8%
seen
in
April
2020.
Inflation
picked
up
through
the
summer
months
of
2021
as
global
supply-chain
bottlenecks
and
rising
input
prices
limited
output
growth
that
was
met
with
pent-up
demand
for
goods.
The
U.S.
Federal
Reserve
(Fed)
continued
to
support
monetary
conditions
by
purchasing
a
large
number
of
U.S.
Treasury
(UST)
bonds
and
backstopping
many
other
fixed
income
markets.
However,
with
improving
U.S.
economic
fundamentals,
by
the
end
of
August
2021,
the
Fed
began
discussions
of
tapering
asset
purchases
as
the
first
step
toward
normalizing
monetary
policy.
The
Biden
administration
continued
its
talks
with
Congress
on
a
number
of
large
infrastructure
projects
that
would
partially
be
paid
for
with
increased
tax
rates
on
wealthy
individuals.
Although
the
final
size
of
the
programs
had
not
been
decided
as
of
period-
end,
there
could
be
significant
implications
for
the
municipal
(muni)
bond
market,
including
additional
bond
issuance
for
the
projects
and
the
potential
for
increased
demand
for
tax-
exempt
sources
of
income.
Strong
demand
for
muni
bonds
continued
throughout
the
period
under
review,
pushing
ratios
of
30-year
muni
bonds
versus
UST
yields
to
all-time
lows
in
June
2021.
Although
these
and
other
maturity
ratios
have
since
increased,
they
remain
at
historically
rich
valuations.
In
times
of
increased
UST
volatility
throughout
the
past
12
months,
muni
bond
valuations
suffered
declines
only
to
rally
once
stability
returned
to
the
market.
Muni
issuers
had
projected
severe
budget
deficits
in
2020
and
2021,
but
these
proved
unfounded
as
consumer
spending
recovered
more
quickly
than
anticipated,
leading
to
higher
sales
tax
collections.
Additionally,
the
U.S.
federal
government
provided
$350
billion
in
relief
to
muni
issuers
as
part
of
the
fiscal
stimulus
package
passed
in
March
2021.
A
strong
U.S.
housing
market
also
provided
support
to
local
and
state
governments
as
home
price
appreciation
rates
reached
historic
highs.
For
the
12-month
period,
U.S.
fixed
income
sectors
broadly
underperformed
relative
to
equities,
as
measured
by
the
Standard
&
Poor’s
500
®
Index,
which
posted
a
+31.17%
total
return
for
the
period.
3
Investment-grade
muni
bonds,
as
measured
by
the
Bloomberg
Municipal
Bond
Index,
posted
a
+3.40%
total
return,
while
USTs,
as
measured
by
the
Bloomberg
U.S.
Treasury
Index,
posted
a
-2.11%
total
return,
and
investment-grade
corporate
bonds,
as
measured
by
the
Bloomberg
U.S.
Corporate
Bond
Index,
posted
a
+2.53%
total
return.
3
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
15
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.
Portfolio
Composition
8/31/21
%
of
Total
Investments*
Health
Care
24.25%
Special
Tax
23.33%
Education
16.89%
Local
14.48%
Lease
9.82%
Industrial
Dev.
Revenue
and
Pollution
Control
6.67%
Transportation
1.71%
Utilities
0.99%
Housing
0.93%
State
General
Obligation
0.67%
Refunded
0.14%
Other
Revenue
Bonds
0.12%
*
Does
not
include
cash
and
cash
equivalents.
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.
Franklin
Templeton
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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,
2021,
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.
Performance
Summary
as
of
August
31,
2021
Franklin
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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
8/31/21
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
+11.88%
+11.88%
Since
Inception
(6/3/19)
+13.02%
+5.61%
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)
3.14%
5.30%
2.08%
-0.68%
3.51%
-1.15%
See
page
20
for
Performance
Summary
footnotes.
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Performance
Summary
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See
page
20
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.
6/3/19-8/31/21
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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
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
transportation.
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.
1.
The
Fund
has
an
expense
reduction
(including
acquired
fund
fees
and
expenses)
contractually
guaranteed
through
12/31/21.
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
8/31/21.
5.
Taxable
equivalent
distribution
rate
and
yield
assume
the
2021
maximum
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
Index
is
a
market
value-weighted
index
engineered
for
the
long-term
tax-exempt
bond
market.
To
be
included
in
the
index,
bonds
must
be
fixed
rate,
have
at
least
one
year
to
final
maturity
and
be
rated
investment
grade
(Baa3/BBB-
or
higher)
by
at
least
two
of
the
following
agencies:
Moody’s,
S&P
and
Fitch.
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
(9/1/20–8/31/21)
Net
Investment
Income
$0.322719
Total
Annual
Operating
Expenses
8
With
Fee
Waiver
Without
Fee
Waiver
0.00%
4.01%
Your
Fund’s
Expenses
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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
3/1/21
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,055.80
$0.00
$1,025.21
$0.00
0.00%
22
franklintempleton.com
Annual
Report
Franklin
Templeton
SMACS:
Series
I
This
annual
report
for
Franklin
Templeton
SMACS:
Series
I
(Fund)
covers
the
fiscal
year
ended
August
31,
2021.
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
debt
securities.
The
debt
securities
in
which
the
Fund
invests
include
all
varieties
of
fixed,
floating
and
variable
rate
instruments,
including
secured
and
unsecured
bonds,
bonds
convertible
into
common
stock,
senior
floating
rate
and
term
loans,
mortgage-backed
securities
and
other
asset-backed
securities,
debentures,
and
shorter-term
instruments.
The
Fund
seeks
income
by
selecting
investments
such
as
corporate,
agency,
securitized,
foreign
and
U.S.
Treasury
bonds
that
we
believe
are
attractive.
The
Fund
may
invest
up
to
100%
of
its
total
assets
in
debt
securities
rated
below
investment
grade
(also
known
as
“junk
bonds”),
including
a
portion
in
defaulted
securities.
Performance
Overview
The
Fund
posted
a
+16.48%
cumulative
total
return
for
the
12
months
ended
August
31,
2021.
In
comparison,
the
Fund’s
primary
benchmark,
the
Bloomberg
U.S.
High
Yield
Very
Liquid
Index,
which
is
designed
to
track
a
more
liquid
component
of
the
U.S.
dollar-denominated,
high-yield,
fixed-
rate
corporate
bond
market,
posted
a
+8.77%
cumulative
total
return,
1
while
its
secondary
benchmark,
the
Blended
50%
Bloomberg
U.S.
High
Yield
Very
Liquid
Index
and
50%
Bloomberg
U.S.
Corporate
Bond
Index,
posted
a
+5.62%
cumulative
total
return
for
the
same
period.
2
You
can
find
more
of
the
Fund’s
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.
Economic
and
Market
Overview
The
U.S.
bond
market,
as
measured
by
the
Bloomberg
U.S.
Aggregate
Bond
Index,
posted
a
-0.08%
total
return
for
the
12
months
ended
August
31,
2021.
1
As
the
U.S.
economy
continued
to
recover
from
the
novel
coronavirus
(COVID-19)
pandemic,
investor
appetite
for
risk
increased
and
inflation
concerns
rose.
Consequently,
lower-rated
bonds
posted
significantly
greater
returns
than
higher-rated
bonds,
while
shorter-term
bonds
generally
outperformed
longer-term
bonds,
which
tend
to
be
more
sensitive
to
inflation.
The
inflation
rate
surged
during
the
period
amid
increased
demand
and
supply-chain
bottlenecks,
with
the
price
pressures
coming
principally
from
the
areas
particularly
impacted
by
the
shutdown,
such
as
used
vehicles,
airfares,
semiconductors
and
building
materials.
In
an
effort
to
support
the
economy,
the
U.S.
Federal
Reserve
(Fed)
kept
the
federal
funds
target
rate
at
a
record-low
range
of
0.00%–0.25%.
The
Fed
also
maintained
quantitative
easing
measures
aimed
at
ensuring
credit
flows
to
borrowers
and
supporting
credit
markets
with
open-ended
U.S.
Treasury
and
mortgage
bond
purchasing.
However,
in
an
August
2021
speech,
Fed
Chair
Jerome
Powell
stated
that
he
anticipated
the
Fed
would
begin
reducing
its
bond
purchases
later
in
2021,
although
further
progress
was
needed
on
increasing
employment
before
the
Fed
would
consider
raising
interest
rates.
Portfolio
Composition
8/31/21
%
of
Total
Net
Assets
Health
Care
Providers
&
Services
26.6%
Media
12.1%
Oil,
Gas
&
Consumable
Fuels
8.9%
Pharmaceuticals
7.6%
Automobiles
6.5%
Airlines
5.5%
Hotels,
Restaurants
&
Leisure
5.1%
Energy
Equipment
&
Services
4.2%
Containers
&
Packaging
4.0%
Food
Products
3.1%
Chemicals
2.7%
Communications
Equipment
2.6%
Entertainment
2.4%
Metals
&
Mining
2.1%
Other
5.7%
Short-Term
Investments
&
Other
Net
Assets
0.9%
1.
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.
2.
FactSet.
The
Blended
50%
Bloomberg
U.S.
High
Yield
Very
Liquid
Index
and
50%
Bloomberg
U.S.
Corporate
Bond
Index
was
calculated
internally.
The
indexes
are
unmanaged
and
include
reinvestment
of
any
income
or
distributions.
They
do
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
Statement
of
Investments
(SOI).
The
SOI
begins
on
page
39
.
Franklin
Templeton
SMACS:
Series
I
23
franklintempleton.com
Annual
Report
U.S.
Treasury
bonds,
as
measured
by
the
Bloomberg
U.S.
Treasury
Index,
posted
a
-2.11%
total
return
for
the
12-month
period.
1
The
10-year
U.S.
Treasury
yield
(which
moves
inversely
to
price)
was
near
all-time
lows
as
the
period
began.
However,
yields
rose
thereafter
amid
many
investors’
increasing
inflation
expectations.
Mortgage-
backed
securities
(MBS),
as
measured
by
the
Bloomberg
MBS
Index,
posted
a
-0.18%
total
return
for
the
period,
as
low
interest
rates
accelerated
prepayments
from
mortgage
refinancing.
1
Fed
action
was
a
catalyst
for
the
recovery
in
the
corporate
bond
market,
which
advanced
overall
but
varied
significantly
based
on
credit
rating.
The
strengthening
economy
and
prospect
of
a
return
to
normal
conditions
tempered
concerns
about
credit
quality,
which
benefited
lower-rated
bonds.
In
this
environment,
high-yield
corporate
bonds,
as
represented
by
the
Bloomberg
U.S.
Corporate
High
Yield
Bond
Index,
posted
a
+10.14%
total
return,
outpacing
investment-grade
corporate
bonds,
as
represented
by
the
Bloomberg
U.S.
Corporate
Bond
Index,
which
nevertheless
posted
a
+2.53%
total
return.
1
Investment
Strategy
When
choosing
investments
for
the
Fund,
we
employ
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
generally
perform
independent
analysis
of
the
securities
being
considered
for
the
Fund’s
portfolio,
rather
than
relying
principally
on
the
ratings
assigned
by
the
ratings
organizations.
We
also
consider
a
company’s
price/earnings
ratio,
profit
margins
and
liquidation
value.
The
Fund
regularly
uses
interest-rate
derivatives,
including
interest-rate
swaps
and
interest-rate
and/or
bond
futures
contracts
(including
U.S.
Treasury
futures
contracts)
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
interest
rates.
The
Fund
also
regularly
uses
credit-related
derivatives,
such
as
credit
default
swaps
and
options
on
credit
default
swaps,
to
hedge
(protect)
against
credit
risks.
The
use
of
such
derivative
transactions
may
allow
the
Fund
to
obtain
net
long
(i.e.,
the
Fund
would
benefit
if
the
price
of
the
investment
increases)
or
net
short
exposures
(i.e.,
the
Fund
would
benefit
if
the
price
of
the
investment
decreases)
to
selected
markets,
interest
rates,
countries
or
durations.
Manager’s
Discussion
During
the
12
months
under
review,
notable
sector
contributors
to
the
Fund’s
performance
relative
to
the
Bloomberg
U.S.
High
Yield
Very
Liquid
Index
included
health
care,
energy
and
materials.
In
contrast,
key
sector
detractors
from
relative
performance
included
industrials,
consumer
staples
and
real
estate.
Top
individual
contributors
to
the
Fund’s
absolute
performance
included
hospital
manager
and
operator
Community
Health
Systems,
health
care
services
provider
Tenet
Healthcare,
energy
equipment
and
services
firm
Weatherford
International
and
oil,
gas
and
consumable
fuels
company
Calumet
Specialty
Products
Partners.
The
Fund
had
no
material
detractors
during
the
period,
although
Diamond
Sports
Group
detracted
slightly.
The
Fund
did
not
use
derivatives
during
the
period.
The
Fund
is
not
intended
to
be
owned
as
a
stand-alone
investment
vehicle,
but
as
part
of
the
broader
Franklin
Income
separately
managed
account
product.
Thank
you
for
your
participation
in
Franklin
Templeton
SMACS:
Series
I.
We
look
forward
to
serving
your
future
investment
needs.
Edward
Perks,
CFA
Brendan
Circle,
CFA
Todd
Brighton,
CFA
Portfolio
Management
Team
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
August
31,
2021,
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
Top
Five
Fixed
Income
Holdings
8/31/21
Company
Industry
%
of
Total
Net
Assets
a
a
CHS/Community
Health
Systems,
Inc.
22.3%
Health
Care
Providers
&
Services
Bausch
Health
Cos.,
Inc.
4.6%
Pharmaceuticals
Calumet
Specialty
Products
Partners
LP
/
Calumet
Finance
Corp.
4.3%
Oil,
Gas
&
Consumable
Fuels
Tenet
Healthcare
Corp.
4.3%
Health
Care
Providers
&
Services
Clear
Channel
Outdoor
Holdings,
Inc.
4.2%
Media
Franklin
Templeton
SMACS:
Series
I
24
franklintempleton.com
Annual
Report
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.
Performance
Summary
as
of
August
31,
2021
Franklin
Templeton
SMACS:
Series
I
25
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
8/31/21
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
+16.48%
+16.48%
Since
Inception
(6/3/19)
+13.72%
+5.90%
30-Day
Standardized
Yield
5
Distribution
Rate
4
(with
fee
waiver)
(without
fee
waiver)
7.19%
4.91%
2.31%
See
page
27
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
I
Performance
Summary
26
franklintempleton.com
Annual
Report
See
page
27
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
indexes
include
reinvestment
of
any
income
or
distributions.
They
differ
from
the
Fund
in
composition
and
do
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
6/3/19–8/31/21
Franklin
Templeton
SMACS:
Series
I
Performance
Summary
27
franklintempleton.com
Annual
Report
All
investments
involve
risks,
including
possible
loss
of
principal.
The
Fund’s
share
price
and
yield
will
be
affected
by
interest-rate
movements.
Bond
prices
gen-
erally
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.
The
risks
associated
with
higher-yielding,
lower-rated
securities
include
higher
risk
of
default
and
loss
of
principal.
Changes
in
the
financial
strength
of
a
bond
issuer
or
in
a
bond’s
credit
rating
may
affect
its
value.
The
Fund’s
distributions
to
shareholders
may
decline
when
prevailing
interest
rates
fall,
when
the
Fund
experiences
defaults
on
debt
securities
it
holds,
or
when
the
Fund
realizes
a
loss
upon
the
sale
of
a
debt
security.
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
12/31/21.
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
8/31/21.
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
Bloomberg
U.S.
High
Yield
Very
Liquid
Index
is
a
component
of
the
U.S.
Corporate
High
Yield
Index
that
is
designed
to
track
a
more
liquid
component
of
the
U.S.
dollar-denominated,
high-yield,
fixed-rate
corporate
bond
market.
7.
Source:
FactSet.
The
Blended
50%
Bloomberg
U.S.
High
Yield
Very
Liquid
Index
and
50%
Bloomberg
U.S.
Corporate
Index
was
calculated
internally.
The
Bloomberg
U.S.
Corporate
Bond
Index
measures
the
performance
of
the
investment-grade,
fixed-rate,
taxable
corporate
bond
market.
It
includes
U.S.
dollar-denominated
securities
publicly
issued
by
U.S.
and
non-U.S.
industrial,
utility
and
financial
issuers.
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
(9/1/20–8/31/21)
Net
Investment
Income
$0.660000
Total
Annual
Operating
Expenses
8
With
Fee
Waiver
Without
Fee
Waiver
0.00%
3.56%
Your
Fund’s
Expenses
Franklin
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28
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
3/1/21
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
Ending
Account
Value
8/31/21
Expenses
Paid
During
Period
3/1/21–8/31/21
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,043.20
$0.00
$1,025.21
$0.00
0.00%
Franklin
Strategic
Series
Financial
Highlights
Franklin
Templeton
SMACS:
Series
CH
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
29
a
Year
Ended
August
31,
Year
Ended
August
31,
2019
a
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
............................................
$9.82
$10.26
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
..................................................
0.35
0.33
0.05
Net
realized
and
unrealized
gains
(losses)
....................................
0.69
(0.31)
0.26
Total
from
investment
operations
.............................................
1.04
0.02
0.31
Less
distributions
from:
Net
investment
income
...................................................
(0.35)
(0.33)
(0.05)
Net
realized
gains
......................................................
—
(0.13)
—
Total
distributions
........................................................
(0.35)
(0.46)
(0.05)
Net
asset
value,
end
of
year
................................................
$10.51
$9.82
$10.26
Total
return
d
............................................................
10.75%
0.25%
3.06%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
...............................
3.11%
4.23%
3.74%
Expenses
net
of
waiver
and
payments
by
affiliates
................................
—%
f
—%
f
—%
Net
investment
income
....................................................
3.44%
3.38%
1.87%
Supplemental
data
Net
assets,
end
of
year
(000’s)
..............................................
$3,512
$2,986
$4,028
Portfolio
turnover
rate
.....................................................
2.74%
51.23%
18.11%
a
For
the
period
June
3,
2019
(commencement
of
operations)
to
August
31,
2019.
b
The
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.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Strategic
Series
Statement
of
Investments,
August
31,
2021
Franklin
Templeton
SMACS:
Series
CH
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
30
a
a
Principal
Amount
a
Value
a
a
a
a
a
Municipal
Bonds
98.7%
California
98.7%
a
California
Community
Housing
Agency
,
Annadel
Apartments
,
Revenue
,
144A,
2019
A
,
5
%
,
4/01/49
......................................................
$
200,000
$
227,461
California
County
Tobacco
Securitization
Agency
,
Gold
Country
Settlement
Funding
Corp.
,
Revenue
,
2020
B-1
,
Refunding
,
4
%
,
6/01/49
........................
100,000
114,732
California
Municipal
Finance
Authority
,
a
Claremont
Graduate
University,
Revenue,
144A,
2020
B,
Refunding,
5%,
10/01/49
.
125,000
146,770
Congregational
Home
Obligated
Group
(The),
Revenue,
2019,
Refunding,
5%,
11/15/39
.......................................................
130,000
154,122
California
Statewide
Communities
Development
Authority
,
Special
Assessment,
2019
C,
5%,
9/02/49
...............................
125,000
150,429
Special
Assessment,
2020
A,
4%,
9/02/50
...............................
100,000
113,294
Community
Facilities
District
No.
2016-02,
Special
Tax,
2019,
5%,
9/01/39
.......
100,000
122,106
a
Loma
Linda
University
Medical
Center
Obligated
Group,
Revenue,
144A,
2018
A,
5.5%,
12/01/58
..................................................
250,000
296,283
a
NCCD-Hooper
Street
LLC,
Revenue,
144A,
2019,
5.25%,
7/01/49
.............
100,000
108,818
a
NCCD-Hooper
Street
LLC,
Revenue,
144A,
2019,
5.25%,
7/01/52
.............
200,000
217,214
City
of
Dublin
,
Community
Facilities
District
No.
2015-1
,
Special
Tax
,
2019
,
5
%
,
9/01/49
130,000
150,825
City
of
Rancho
Cordova
,
Grantline
208
Community
Facilities
District
No.
2018-1
,
Special
Tax
,
2019
,
5
%
,
9/01/49
.......................................
100,000
116,176
City
of
Roseville
,
SVSP
Westpark
-Federico
Community
Facilities
District
No.
1,
Special
Tax,
2019,
5%,
9/01/49
........................................................
125,000
144,182
Villages
at
Sierra
Vista
Community
Facilities
District
No.
1,
Special
Tax,
2019,
5%,
9/01/49
........................................................
130,000
150,555
City
of
Santa
Paula
,
Harvest
Community
Facilities
District
No.
1
,
Special
Tax
,
2020
,
4
%
,
9/01/50
......................................................
125,000
139,821
City
of
Tracy
,
Community
Facilities
District
No.
2016-01
,
Special
Tax
,
2018
,
5
%
,
9/01/48
.........................................................
110,000
125,536
City
of
Upland
,
Community
Facilities
District
No.
2015-1
,
Special
Tax
,
2019
A
,
4
%
,
9/01/49
.........................................................
185,000
205,638
a
CSCDA
Community
Improvement
Authority
,
Dublin
,
Revenue
,
144A,
2021
B
,
4
%
,
2/01/57
.........................................................
140,000
150,879
Folsom
Ranch
Financing
Authority
,
City
of
Folsom
Community
Facilities
District
No.
19
,
Special
Tax
,
2019
,
5
%
,
9/01/49
.......................................
100,000
116,698
Foothill-Eastern
Transportation
Corridor
Agency
,
Revenue
,
2013
B-2
,
Refunding
,
3.5
%
,
1/15/53
.........................................................
190,000
210,210
River
Islands
Public
Financing
Authority
,
Community
Facilities
District
No.
2021-1
,
Special
Tax
,
2021
,
4
%
,
9/01/51
.......................................
140,000
150,418
Tobacco
Securitization
Authority
of
Southern
California
,
San
Diego
County
Tobacco
Asset
Securitization
Corp.
,
Revenue
,
2019
B-1
,
Refunding
,
5
%
,
6/01/48
.........
125,000
154,555
3,466,722
Total
Municipal
Bonds
(Cost
$3,253,165)
.......................................
3,466,722
a
a
a
a
a
Total
Investments
(Cost
$3,253,165)
98.7%
.....................................
$3,466,722
Other
Assets,
less
Liabilities
1.3%
.............................................
45,246
Net
Assets
100.0%
...........................................................
$3,511,968
See
Abbreviations
on
page
56
.
a
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
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.
At
August
31,
2021,
the
aggregate
value
of
these
securities
was
$1,147,425,
representing
32.7%
of
net
assets.
Franklin
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Series
Financial
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
31
a
Year
Ended
August
31,
Year
Ended
August
31,
2019
a
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
............................................
$10.15
$10.69
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
..................................................
0.35
0.36
0.10
Net
realized
and
unrealized
gains
(losses)
....................................
2.72
(0.19)
0.63
Total
from
investment
operations
.............................................
3.07
0.17
0.73
Less
distributions
from:
Net
investment
income
...................................................
(0.45)
(0.49)
(0.04)
Net
realized
gains
......................................................
—
(0.22)
—
Total
distributions
........................................................
(0.45)
(0.71)
(0.04)
Net
asset
value,
end
of
year
................................................
$12.77
$10.15
$10.69
Total
return
d
............................................................
30.95%
1.77%
7.31%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
...............................
2.19%
2.85%
4.76%
Expenses
net
of
waiver
and
payments
by
affiliates
................................
—%
f
—%
f
—%
Net
investment
income
....................................................
3.05%
3.48%
4.11%
Supplemental
data
Net
assets,
end
of
year
(000’s)
..............................................
$5,155
$3,847
$3,959
Portfolio
turnover
rate
.....................................................
49.90%
58.50%
16.33%
a
For
the
period
June
3,
2019
(commencement
of
operations)
to
August
31,
2019.
b
The
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.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Strategic
Series
Statement
of
Investments,
August
31,
2021
Franklin
Templeton
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E
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
32
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
63.2%
Beverages
4.1%
PepsiCo,
Inc.
........................................
United
States
1,350
$
211,126
Biotechnology
2.3%
a
AbbVie,
Inc.
.........................................
United
States
1,000
120,780
Chemicals
2.1%
Huntsman
Corp.
......................................
United
States
4,000
105,720
Communications
Equipment
2.3%
Cisco
Systems,
Inc.
...................................
United
States
2,000
118,040
Diversified
Telecommunication
Services
2.2%
BCE,
Inc.
...........................................
Canada
2,150
112,162
Electric
Utilities
9.2%
Duke
Energy
Corp.
....................................
United
States
2,000
209,320
Edison
International
...................................
United
States
1,500
86,760
Exelon
Corp.
.........................................
United
States
1,000
49,020
Southern
Co.
(The)
....................................
United
States
2,000
131,460
476,560
Energy
Equipment
&
Services
0.9%
Baker
Hughes
Co.
.....................................
United
States
2,000
45,560
Food
Products
0.6%
Nestle
SA
...........................................
Switzerland
250
31,570
Health
Care
Providers
&
Services
4.0%
CVS
Health
Corp.
.....................................
United
States
2,400
207,336
Insurance
2.4%
a
MetLife,
Inc.
.........................................
United
States
2,000
124,000
Metals
&
Mining
0.9%
Rio
Tinto
plc,
ADR
.....................................
Australia
600
45,042
Multiline
Retail
4.8%
Target
Corp.
.........................................
United
States
1,000
246,980
Multi-Utilities
2.9%
Dominion
Energy,
Inc.
..................................
United
States
1,400
108,976
DTE
Energy
Co.
......................................
United
States
350
42,119
151,095
Oil,
Gas
&
Consumable
Fuels
2.4%
TotalEnergies
SE,
ADR
.................................
France
2,800
124,012
Personal
Products
0.9%
Unilever
plc
..........................................
United
Kingdom
850
47,330
Pharmaceuticals
7.8%
Bristol-Myers
Squibb
Co.
................................
United
States
3,700
247,383
a
Merck
&
Co.,
Inc.
.....................................
United
States
2,000
152,580
399,963
Semiconductors
&
Semiconductor
Equipment
5.6%
a
Analog
Devices,
Inc.
...................................
United
States
600
97,770
a
Texas
Instruments,
Inc.
.................................
United
States
1,000
190,910
288,680
Specialty
Retail
3.8%
a
Home
Depot,
Inc.
(The)
.................................
United
States
600
195,708
Franklin
Strategic
Series
Statement
of
Investments
Franklin
Templeton
SMACS:
Series
E
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
33
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Tobacco
4.0%
Philip
Morris
International,
Inc.
...........................
United
States
2,000
$
206,000
Total
Common
Stocks
(Cost
$2,476,651)
.......................................
3,257,664
b
Equity-Linked
Securities
31.4%
Automobiles
2.3%
c
National
Bank
of
Canada
into
General
Motors
Co.,
144A,
10%,
1/26/22
...........................................
United
States
2,500
119,914
Banks
4.4%
c
Credit
Suisse
AG
into
Bank
of
America
Corp.,
144A,
7.5%,
7/19/22
United
States
3,000
122,957
c
Mizuho
Markets
Cayman
LP
into
JPMorgan
Chase
&
Co.,
144A,
8%,
6/30/22
...........................................
United
States
650
103,116
226,073
Capital
Markets
2.5%
c
UBS
AG
into
Morgan
Stanley,
144A,
8.5%,
2/11/22
............
United
States
1,500
127,228
Energy
Equipment
&
Services
2.8%
c
Royal
Bank
of
Canada
into
Schlumberger
NV,
144A,
10%,
3/01/22
United
States
5,000
143,034
Insurance
2.4%
c
BNP
Paribas
Issuance
BV
into
MetLife,
Inc.,
144A,
8.5%,
8/23/22
.
United
States
2,000
123,943
Internet
&
Direct
Marketing
Retail
2.7%
c
J.P.
Morgan
Structured
Products
BV
into
Amazon.com,
Inc.,
144A,
Reg
S,
9.5%,
12/07/21
................................
United
States
40
137,179
Media
2.8%
c
Morgan
Stanley
Finance
II
Ltd.
into
Comcast
Corp.,
144A,
6%,
7/19/22
...........................................
United
States
2,500
146,551
Metals
&
Mining
2.2%
c
National
Bank
of
Montreal
into
Rio
Tinto
plc,
144A,
12.5%,
7/28/22
Australia
1,400
114,211
Oil,
Gas
&
Consumable
Fuels
2.3%
c
UBS
AG
into
Chevron
Corp.,
144A,
10%,
8/16/22
.............
United
States
1,200
119,395
Road
&
Rail
2.1%
c
Goldman
Sachs
International
Bank
into
Union
Pacific
Corp.,
144A,
8%,
2/09/22
........................................
United
States
500
110,365
Semiconductors
&
Semiconductor
Equipment
2.2%
c
Credit
Suisse
AG
into
Intel
Corp.,
144A,
9%,
7/19/22
...........
United
States
2,000
111,029
Software
2.7%
c
Societe
Generale
SA
into
Workday,
Inc.,
144A,
8%,
9/02/22
......
United
States
550
139,063
Total
Equity-Linked
Securities
(Cost
$1,552,045)
................................
1,617,985
Convertible
Preferred
Stocks
4.3%
Electric
Utilities
2.3%
American
Electric
Power
Co.,
Inc.,
6.125%
..................
United
States
2,300
121,072
Semiconductors
&
Semiconductor
Equipment
2.0%
Broadcom,
Inc.,
8%,
A
..................................
United
States
65
102,586
Total
Convertible
Preferred
Stocks
(Cost
$177,594)
..............................
223,658
Franklin
Strategic
Series
Statement
of
Investments
Franklin
Templeton
SMACS:
Series
E
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
34
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Preferred
Stocks
0.6%
Banks
0.6%
Citigroup,
Inc.,
6.875%,
K
...............................
United
States
1,000
$
27,940
Total
Preferred
Stocks
(Cost
$27,343)
..........................................
27,940
Total
Long
Term
Investments
(Cost
$4,233,633)
.................................
5,127,247
a
a
Total
Investments
(Cost
$4,233,633)
99.5%
.....................................
$5,127,247
Options
Written
(0.0)%
†
......................................................
(1,312)
Other
Assets,
less
Liabilities
0.5%
.............................................
28,710
Net
Assets
100.0%
...........................................................
$5,154,645
Number
of
Contracts
Notional
Amount
#
d
Options
Written
(0.0)%
†
Calls
-
Exchange-Traded
Equity
Options
AbbVie,
Inc.,
September
Strike
Price
$125.00,
Expires
9/17/21
...
7
84,546
(259)
Analog
Devices,
Inc.,
October
Strike
Price
$180.00,
Expires
10/15/21
4
65,180
(432)
Home
Depot,
Inc.
(The),
September
Strike
Price
$345.00,
Expires
9/17/21
...........................................
6
195,708
(186)
Merck
&
Co.,
Inc.,
September
Strike
Price
$82.50,
Expires
9/17/21
11
83,919
(55)
MetLife,
Inc.,
September
Strike
Price
$65.00,
Expires
9/17/21
....
10
62,000
(210)
Texas
Instruments,
Inc.,
September
Strike
Price
$210.00,
Expires
9/17/21
...........................................
10
190,910
(170)
(1,312)
Total
Options
Written
(Premiums
received
$6,212)
...............................
$
(1,312)
See
Abbreviations
on
page
56
.
#
Notional
amount
is
the
number
of
units
specified
in
the
contract,
and
can
include
currency
units,
bushels,
shares,
pounds,
barrels
or
other
units.
Currency
units
are
stated
in
U.S.
dollars
unless
otherwise
indicated.
†
Rounds
to
less
than
0.1%
of
net
assets.
a
A
portion
or
all
of
the
security
is
held
in
connection
with
written
option
contracts
open
at
year
end.
b
See
Note
1(c)
regarding
equity-linked
securities.
c
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
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.
At
August
31,
2021,
the
aggregate
value
of
these
securities
was
$1,617,985,
representing
31.4%
of
net
assets.
d
See
Note
1(b)
regarding
written
options.
Franklin
Strategic
Series
Financial
Highlights
Franklin
Templeton
SMACS:
Series
H
franklintempleton.com
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accompanying
notes
are
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integral
part
of
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financial
statements.
Annual
Report
35
a
Year
Ended
August
31,
Year
Ended
August
31,
2019
a
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
............................................
$9.75
$10.09
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
..................................................
0.32
0.30
0.04
Net
realized
and
unrealized
gains
(losses)
....................................
0.82
(0.34)
0.09
Total
from
investment
operations
.............................................
1.14
(0.04)
0.13
Less
distributions
from:
Net
investment
income
...................................................
(0.32)
(0.30)
(0.04)
Net
asset
value,
end
of
year
................................................
$10.57
$9.75
$10.09
Total
return
d
............................................................
11.88%
e
(0.28)%
e
1.31%
Ratios
to
average
net
assets
f
Expenses
before
waiver
and
payments
by
affiliates
...............................
3.44%
3.91%
3.85%
Expenses
net
of
waiver
and
payments
by
affiliates
................................
—%
g
—%
g
—%
Net
investment
income
....................................................
3.16%
3.10%
1.69%
Supplemental
data
Net
assets,
end
of
year
(000’s)
..............................................
$3,187
$2,941
$3,042
Portfolio
turnover
rate
.....................................................
5.37%
4.93%
—%
a
For
the
period
June
3,
2019
(commencement
of
operations)
to
August
31,
2019.
b
The
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.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Total
return
excluding
payments
by
Advisers
for
acquired
fund
fees
and
expenses
is
11.78%
for
the
year
ended
August
31,
2021
and
(0.38)%
for
the
year
ended
August
31,
2020.
See
Note
3e.
f
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
g
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Strategic
Series
Statement
of
Investments,
August
31,
2021
Franklin
Templeton
SMACS:
Series
H
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
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part
of
these
financial
statements.
36
a
a
Shares
a
Value
a
Management
Investment
Companies
29.7%
Capital
Markets
29.7%
a
Franklin
Liberty
Federal
Intermediate
Tax-Free
Bond
Opportunities
ETF
..........
35,000
$
945,525
Total
Management
Investment
Companies
(Cost
$889,963)
.......................
945,525
Principal
Amount
a
a
a
a
Municipal
Bonds
65.7%
California
4.8%
Tobacco
Securitization
Authority
of
Southern
California
,
San
Diego
County
Tobacco
Asset
Securitization
Corp.
,
Revenue
,
2019
B-1
,
Refunding
,
5
%
,
6/01/48
.........
$
125,000
154,555
Colorado
19.0%
Colorado
Health
Facilities
Authority
,
Christian
Living
Neighborhoods
Obligated
Group
,
Revenue
,
2019
,
Refunding
,
4
%
,
1/01/38
.................................
100,000
110,481
Denver
Health
&
Hospital
Authority
,
Revenue
,
2019
A
,
Refunding
,
4
%
,
12/01/37
....
100,000
116,805
Hunters
Overlook
Metropolitan
District
No.
5
,
GO
,
2019
A
,
5
%
,
12/01/39
..........
150,000
166,659
Village
at
Dry
Creek
Metropolitan
District
No.
2
(The)
,
GO
,
2019
,
4.375
%
,
12/01/44
..
200,000
212,418
606,363
Florida
1.9%
Windward
Community
Development
District
,
Special
Assessment
,
2020
A-1
,
3
%
,
5/01/25
.........................................................
60,000
61,225
Indiana
3.8%
Indiana
Finance
Authority
,
Marian
University,
Inc.
,
Revenue
,
2019
A
,
5
%
,
9/15/39
...
100,000
121,377
Louisiana
8.5%
Calcasieu
Parish
Memorial
Hospital
Service
District
,
Southwest
Louisiana
Healthcare
System
Obligated
Group
,
Revenue
,
2019
,
Refunding
,
5
%
,
12/01/39
............
100,000
120,294
b
Louisiana
Local
Government
Environmental
Facilities
&
Community
Development
Authority
,
Parish
of
St.
Martin
,
Revenue
,
144A,
2019
,
4.4
%
,
11/01/44
...........
135,000
150,879
271,173
Maryland
3.3%
b
City
of
Baltimore
,
Harbor
Point
Special
Taxing
District
,
Tax
Allocation,
Senior
Lien
,
144A,
2019
A
,
Refunding
,
3.5
%
,
6/01/39
................................
100,000
105,166
Pennsylvania
3.7%
b
Allentown
Neighborhood
Improvement
Zone
Development
Authority
,
Revenue
,
144A,
2017
,
Refunding
,
5
%
,
5/01/32
........................................
100,000
117,804
Texas
7.3%
b
County
of
Hays
,
La
Cima
Public
Improvement
District
,
Special
Assessment
,
144A,
2020
,
3.25
%
,
9/15/30
...............................................
100,000
104,122
b
New
Hope
Cultural
Education
Facilities
Finance
Corp.
,
Cityscape
Schools,
Inc.
,
Revenue
,
144A,
2019
A
,
5
%
,
8/15/39
...................................
110,000
128,297
232,419
Washington
3.6%
b
Washington
State
Housing
Finance
Commission
,
Presbyterian
Retirement
Communities
Northwest
Obligated
Group
,
Revenue
,
144A,
2019
A
,
5
%
,
1/01/49
...
100,000
113,572
Wisconsin
4.5%
b
Public
Finance
Authority
,
Friends
Homes
Obligated
Group
,
Revenue
,
144A,
2019
,
Refunding
,
5
%
,
9/01/49
.............................................
125,000
144,063
Franklin
Strategic
Series
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of
Investments
Franklin
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37
a
a
Principal
Amount
a
Value
a
a
a
a
a
Municipal
Bonds
(continued)
U.S.
Territories
5.3%
District
of
Columbia
5.3%
District
of
Columbia
,
International
School
Obligated
Group
,
Revenue
,
2019
,
5
%
,
7/01/49
......................................................
$
140,000
$
168,258
Total
Municipal
Bonds
(Cost
$1,940,283)
.......................................
2,095,975
Total
Long
Term
Investments
(Cost
$2,830,246)
.................................
3,041,500
a
a
a
a
a
Short
Term
Investments
3.1%
Municipal
Bonds
3.1%
New
York
3.1%
c
Metropolitan
Transportation
Authority
,
Dedicated
Tax
Fund
,
Revenue
,
2008
A-1
,
Refunding
,
LOC
TD
Bank
NA
,
Daily
VRDN
and
Put
,
0.01
%
,
11/01/31
...........
100,000
100,000
Total
Municipal
Bonds
(Cost
$100,000)
.........................................
100,000
Total
Short
Term
Investments
(Cost
$100,000
)
..................................
100,000
a
Total
Investments
(Cost
$2,930,246)
98.5%
.....................................
$3,141,500
Other
Assets,
less
Liabilities
1.5%
.............................................
45,624
Net
Assets
100.0%
...........................................................
$3,187,124
See
Abbreviations
on
page
56
.
a
See
Note
3(d)
regarding
investments
in
affiliated
management
investment
companies.
b
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
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.
At
August
31,
2021,
the
aggregate
value
of
these
securities
was
$863,903,
representing
27.1%
of
net
assets.
c
Variable
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.
Franklin
Strategic
Series
Financial
Highlights
Franklin
Templeton
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I
franklintempleton.com
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The
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notes
are
an
integral
part
of
these
financial
statements.
38
a
Year
Ended
August
31,
Year
Ended
August
31,
2019
a
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
............................................
$8.95
$10.12
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
..................................................
0.66
0.64
0.19
Net
realized
and
unrealized
gains
(losses)
....................................
0.78
(1.10)
0.04
Total
from
investment
operations
.............................................
1.44
(0.46)
0.23
Less
distributions
from:
Net
investment
income
...................................................
(0.66)
(0.71)
(0.11)
Net
asset
value,
end
of
year
................................................
$9.73
$8.95
$10.12
Total
return
d
............................................................
16.48%
(4.51)%
2.25%
Ratios
to
average
net
assets
e
Expenses
befo
re
waiver
and
payments
by
affiliates
...............................
3.10%
3.55%
5.96%
Expenses
net
of
waiver
and
payments
by
affiliates
................................
—%
f
—%
f
—%
Net
investment
income
....................................................
7.01%
6.98%
7.61%
Supplemental
data
Net
assets,
end
of
year
(000’s)
..............................................
$3,699
$3,506
$3,774
Portfolio
turnover
rate
.....................................................
32.50%
43.24%
—%
a
For
the
period
June
3,
2019
(commencement
of
operations)
to
August
31,
2019.
b
The
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.
c
Based
on
average
daily
shares
outstanding.
d
Total
return
is
not
annualized
for
periods
less
than
one
year.
e
Ratios
are
annualized
for
periods
less
than
one
year,
except
for
non-recurring
expenses,
if
any.
f
Benefit
of
expense
reduction
rounds
to
less
than
0.01%.
Franklin
Strategic
Series
Statement
of
Investments,
August
31,
2021
Franklin
Templeton
SMACS:
Series
I
franklintempleton.com
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accompanying
notes
are
an
integral
part
of
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financial
statements.
Annual
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39
a
a
Principal
Amount
a
Value
a
a
a
a
a
Corporate
Bonds
93.4%
Airlines
2.7%
a
American
Airlines
Group,
Inc.
,
Senior
Note
,
144A,
5
%
,
6/01/22
.................
$
100,000
$
101,000
Automobiles
6.5%
Ford
Motor
Co.
,
Senior
Note
,
9
%
,
4/22/25
.................................
100,000
122,295
General
Motors
Co.
,
Senior
Note
,
6.125
%
,
10/01/25
.........................
100,000
118,004
240,299
Chemicals
2.7%
a
SCIH
Salt
Holdings,
Inc.
,
Senior
Note
,
144A,
6.625
%
,
5/01/29
..................
100,000
98,484
Communications
Equipment
2.6%
a
CommScope
Technologies
LLC
,
Senior
Bond,
144A,
5%,
3/15/27
.......................................
50,000
49,303
Senior
Note
,
144A,
6%,
6/15/25
.......................................
47,000
47,858
97,161
Containers
&
Packaging
4.0%
a
Mauser
Packaging
Solutions
Holding
Co.
,
Senior
Note
,
144A,
7.25
%
,
4/15/25
......
150,000
148,470
Diversified
Financial
Services
1.9%
a
MPH
Acquisition
Holdings
LLC
,
Senior
Note
,
144A,
5.75
%
,
11/01/28
.............
75,000
71,725
Energy
Equipment
&
Services
4.2%
a
Weatherford
International
Ltd.
,
144A,
8.75
%
,
9/01/24
........................
150,000
156,188
Entertainment
2.4%
Netflix,
Inc.
,
Senior
Bond
,
4.875
%
,
4/15/28
................................
75,000
87,752
Equity
Real
Estate
Investment
Trusts
(REITs)
0.9%
a
Iron
Mountain,
Inc.
,
Senior
Note
,
144A,
4.875
%
,
9/15/27
......................
30,000
31,275
Food
Products
3.1%
a
Post
Holdings,
Inc.
,
Senior
Bond
,
144A,
5.625
%
,
1/15/28
.....................
110,000
115,912
Health
Care
Providers
&
Services
26.6%
a
CHS/Community
Health
Systems,
Inc.
,
Secured
Note,
144A,
6.125%,
4/01/30
..................................
50,000
50,469
Senior
Note,
144A,
6.875%,
4/01/28
....................................
425,000
422,227
Senior
Secured
Note,
144A,
8%,
3/15/26
................................
150,000
160,755
Senior
Secured
Note,
144A,
8%,
12/15/27
...............................
174,000
191,835
a
Tenet
Healthcare
Corp.
,
Senior
Note
,
144A,
6.125
%
,
10/01/28
..................
150,000
158,625
983,911
Hotels,
Restaurants
&
Leisure
5.1%
a
Golden
Nugget,
Inc.
,
Senior
Note
,
144A,
6.75
%
,
10/15/24
.....................
55,000
55,195
a
Vail
Resorts,
Inc.
,
Senior
Note
,
144A,
6.25
%
,
5/15/25
........................
50,000
53,339
a
Wynn
Las
Vegas
LLC
/
Wynn
Las
Vegas
Capital
Corp.
,
Senior
Bond
,
144A,
5.5
%
,
3/01/25
.........................................................
75,000
79,594
188,128
Media
12.1%
a
Clear
Channel
Outdoor
Holdings,
Inc.
,
Senior
Note
,
144A,
7.75
%
,
4/15/28
.........
150,000
156,563
a
Diamond
Sports
Group
LLC
/
Diamond
Sports
Finance
Co.
,
Senior
Secured
Note
,
144A,
5.375
%
,
8/15/26
..............................................
100,000
66,555
DISH
DBS
Corp.
,
Senior
Note
,
5.875
%
,
7/15/22
............................
110,000
113,897
a
Univision
Communications,
Inc.
,
Senior
Secured
Note
,
144A,
5.125
%
,
2/15/25
.....
110,000
112,137
449,152
Metals
&
Mining
2.1%
a
Cleveland-Cliffs,
Inc.
,
Senior
Secured
Note
,
144A,
9.875
%
,
10/17/25
.............
66,000
76,643
Franklin
Strategic
Series
Statement
of
Investments
Franklin
Templeton
SMACS:
Series
I
(continued)
franklintempleton.com
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accompanying
notes
are
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part
of
these
financial
statements.
40
See
A
bbreviations
on
page
56.
a
a
Principal
Amount
a
Value
a
a
a
a
a
Corporate
Bonds
(continued)
Oil,
Gas
&
Consumable
Fuels
6.0%
Calumet
Specialty
Products
Partners
LP
/
Calumet
Finance
Corp.
,
Senior
Note,
7.75%,
4/15/23
.........................................
$
110,000
$
108,864
a
Senior
Note,
144A,
11%,
4/15/25
......................................
50,000
51,688
Occidental
Petroleum
Corp.
,
Senior
Note
,
8
%
,
7/15/25
.......................
50,000
60,312
220,864
Pharmaceuticals
7.6%
a
Bausch
Health
Cos.,
Inc.
,
Senior
Bond
,
144A,
6.125
%
,
4/15/25
.................
166,000
169,942
a
Par
Pharmaceutical,
Inc.
,
Senior
Secured
Note
,
144A,
7.5
%
,
4/01/27
.............
110,000
111,513
281,455
Trading
Companies
&
Distributors
1.5%
a
WESCO
Distribution,
Inc.
,
Senior
Note
,
144A,
7.125
%
,
6/15/25
.................
50,000
53,847
Wireless
Telecommunication
Services
1.4%
Sprint
Communications,
Inc.
,
Senior
Note
,
6
%
,
11/15/22
......................
50,000
52,875
Total
Corporate
Bonds
(Cost
$3,141,840)
.......................................
3,455,141
Asset-Backed
Securities
2.8%
Airlines
2.8%
United
Airlines
Pass-Through
Trust
,
2020-1
,
A
,
5.875
%
,
10/15/27
...............
92,748
103,660
Total
Asset-Backed
Securities
(Cost
$92,748)
...................................
103,660
Shares
Escrows
and
Litigation
Trusts
2.9%
a,b
Chesapeake
Energy
Corp.,
Escrow
Account
,
144A
..........................
100,000
106,880
Total
Escrows
and
Litigation
Trusts
(Cost
$100,000)
.............................
106,880
Total
Long
Term
Investments
(Cost
$3,334,588)
.................................
3,665,681
a
a
a
a
a
Short
Term
Investments
0.1%
a
Money
Market
Funds
0.1%
c,d
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
...................
1,888
1,888
Total
Money
Market
Funds
(Cost
$1,888)
.......................................
1,888
Total
Short
Term
Investments
(Cost
$1,888
)
....................................
1,888
a
Total
Investments
(Cost
$3,336,476)
99.2%
.....................................
$3,667,569
Other
Assets,
less
Liabilities
0.8%
.............................................
31,251
Net
Assets
100.0%
...........................................................
$3,698,820
a
Security
was
purchased
pursuant
to
Rule
144A
or
Regulation
S
under
the
Securities
Act
of
1933.
144A
securities
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.
Regulation
S
securities
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.
At
August
31,
2021,
the
aggregate
value
of
these
securities
was
$2,898,022,
representing
78.3%
of
net
assets.
b
Non-income
producing.
Franklin
Strategic
Series
Statement
of
Investments
Franklin
Templeton
SMACS:
Series
I
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
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financial
statements.
Annual
Report
41
c
See
Note
3
(
d
)
regarding
investments
in
affiliated
management
investment
companies.
d
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Franklin
Strategic
Series
Financial
Statements
Statements
of
Assets
and
Liabilities
August
31,
2021
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
42
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Assets:
Investments
in
securities:
Cost
-
Unaffiliated
issuers
................
$3,253,165
$4,233,633
$2,040,283
$3,334,588
Cost
-
Non-controlled
affiliates
(Note
3
d
)
.....
—
—
889,963
1,888
Value
-
Unaffiliated
issuers
...............
$3,466,722
$5,127,247
$2,195,975
$3,665,681
Value
-
Non-controlled
affiliates
(Note
3
d
)
....
—
—
945,525
1,888
Cash
.................................
57,945
—
77,113
—
Receivables:
Investment
securities
sold
................
—
55,240
—
—
Dividends
and
interest
..................
49,646
10,980
24,739
81,654
Affiliates
.............................
14,258
13,834
13,612
14,508
Deposits
with
brokers
for:
Exchange
traded
options
written
.........
—
452
—
—
Other
assets
...........................
—
2,575
—
2,358
Total
assets
.......................
3,588,571
5,210,328
3,256,964
3,766,089
Liabilities:
Payables:
Capital
shares
redeemed
................
702
—
—
—
Transfer
agent
fees
.....................
—
19
75
61
Reports
to
s
hareholders
.................
3,517
3,663
3,551
3,894
Professional
fees
......................
60,761
47,633
56,227
62,645
Distributions
to
shareholders
..............
8,767
—
8,342
—
Funds
advanced
by
custodian
..............
—
3,011
—
—
Options
written,
at
value
(premiums
received
$–,
$6,212,
$–
and
$–
respectively)
.............
—
1,312
—
—
Accrued
expenses
and
other
liabilities
........
2,856
45
1,645
669
Total
liabilities
......................
76,603
55,683
69,840
67,269
Net
assets,
at
value
..............
$3,511,968
$5,154,645
$3,187,124
$3,698,820
Net
assets
consist
of:
Paid-in
capital
..........................
$3,320,057
$4,102,784
$3,003,916
$3,834,925
Total
distributable
earnings
(losses)
..........
191,911
1,051,861
183,208
(136,105)
Net
assets,
at
value
..............
$3,511,968
$5,154,645
$3,187,124
$3,698,820
Shares
outstanding
......................
334,255
403,671
301,587
380,326
Net
asset
value
per
share
.................
$10.51
$12.77
$10.57
$9.73
Franklin
Strategic
Series
Financial
Statements
Statements
of
Operations
for
the
year
ended
August
31,
2021
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
43
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Investment
income:
Dividends:
(net
of
foreign
taxes
of
$–,
$1,452,
$–
and
$–,
respectively)
Unaffiliated
issuers
.....................
$—
$137,438
$—
$—
Non-controlled
affiliates
(Note
3d)
..........
—
1
21,813
2
Interest:
Unaffiliated
issuers
.....................
107,985
2,226
72,736
250,962
Other
income
a
..........................
—
199
2,831
853
Total
investment
income
................
107,985
139,864
97,380
251,817
Expenses:
Transfer
agent
fees
(Note
3
c
)
...............
627
896
492
693
Custodian
fees
(Note
4
)
...................
17
647
14
554
Reports
to
shareholders
...................
7,658
7,755
7,644
8,236
Registration
and
filing
fees
.................
22,736
22,714
22,674
22,863
Professional
fees
........................
59,526
63,791
68,096
74,674
Trustees'
fees
and
expenses
...............
1,189
1,198
1,189
1,191
Other
.................................
5,791
3,665
6,145
3,297
Total
expenses
......................
97,544
100,666
106,254
111,508
Expense
reductions
(Note
4
)
............
(15)
(1)
(17)
(1)
Expenses
waived/paid
by
affiliates
(Note
3d
and
3e)
...........................
(97,529)
(100,665)
(106,237)
(111,507)
Net
expenses
......................
—
—
—
—
Net
investment
income
.............
107,985
139,864
97,380
251,817
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
...................
1,402
422,799
(2,871)
30,621
Non-controlled
affiliates
(Note
3d)
........
—
—
522
—
Written
options
........................
—
4,176
—
—
Foreign
currency
transactions
.............
—
(123)
—
—
Net
realized
gain
(loss)
...............
1,402
426,852
(2,349)
30,621
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
...................
204,455
659,401
198,407
259,029
Non-controlled
affiliates
(Note
3d)
........
—
—
49,862
—
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
........
—
64
—
—
Written
options
........................
—
4,900
—
—
Net
change
in
unrealized
appreciation
(depreciation)
......................
204,455
664,365
248,269
259,029
Net
realized
and
unrealized
gain
(loss)
.........
205,857
1,091,217
245,920
289,650
Net
increase
(decrease)
in
net
assets
resulting
from
operations
...............................
$313,842
$1,231,081
$343,300
$541,467
a
Other
income
includes
payments
by
Advisers
for
acquired
fund
fees
and
expenses
(See
Note
3
e
).
Franklin
Strategic
Series
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Annual
Report
The
accompanying
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financial
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44
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Year
Ended
August
31,
2021
Year
Ended
August
31,
2020
Year
Ended
August
31,
2021
Year
Ended
August
31,
2020
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$107,985
$103,540
$139,864
$133,340
Net
realized
gain
(loss)
............
1,402
5,974
426,852
(149,085)
Net
change
in
unrealized
appreciation
(depreciation)
.................
204,455
(109,686)
664,365
82,177
Net
increase
(decr
ease)
in
net
assets
resulting
from
operations
.
313,842
(172)
1,231,081
66,432
Distributions
to
shareholders
.........
(107,444)
(141,823)
(179,313)
(266,656)
Capital
share
transactions
(Note
2
)
.....
320,057
(900,000)
255,674
88,257
Net
increase
(decrease)
in
net
assets
.....................
526,455
(1,041,995)
1,307,442
(111,967)
Net
assets:
Beginning
of
year
..................
2,985,513
4,027,508
3,847,203
3,959,170
End
of
year
......................
$3,511,968
$2,985,513
$5,154,645
$3,847,203
Franklin
Strategic
Series
Financial
Statements
Statements
of
Changes
in
Net
Assets
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
45
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Year
Ended
August
31,
2021
Year
Ended
August
31,
2020
Year
Ended
August
31,
2021
Year
Ended
August
31,
2020
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$97,380
$91,042
$251,817
$245,057
Net
realized
gain
(loss)
............
(2,349)
(21,887)
30,621
(501,515)
Net
change
in
unrealized
appreciation
(depreciation)
.................
248,269
(78,102)
259,029
88,770
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
343,300
(8,947)
541,467
(167,688)
Distributions
to
shareholders
.........
(97,329)
(92,173)
(249,849)
(268,376)
Capital
share
transactions
(Note
2
)
.....
—
—
(99,271)
168,706
Net
increase
(decrease)
in
net
assets
.....................
245,971
(101,120)
192,347
(267,358)
Net
assets:
Beginning
of
year
..................
2,941,153
3,042,273
3,506,473
3,773,831
End
of
year
......................
$3,187,124
$2,941,153
$3,698,820
$3,506,473
Franklin
Strategic
Series
Notes
to
Financial
Statements
46
franklintempleton.com
Annual
Report
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
ten
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
following
summarizes
the Funds'
significant
accounting
policies.
a.
Financial
Instrument
Valuation
The Funds'
investments
in
financial
instruments
are
carried
at
fair
value
daily.
Fair
value
is
the
price
that
would
be
received
to
sell
an
asset
or
paid
to
transfer
a
liability
in
an
orderly
transaction
between
market
participants
on
the
measurement
date.
The Funds calculate the
net
asset
value
(NAV)
per
share
each
business
day
as
of
4
p.m.
Eastern
time
or
the
regularly
scheduled
close
of
the
New
York
Stock
Exchange
(NYSE),
whichever
is
earlier.
Under
compliance
policies
and
procedures
approved
by
the
Trust's
Board
of
Trustees
(the
Board),
the
Funds' administrator
has
responsibility
for
oversight
of
valuation,
including
leading
the
cross-functional
Valuation
Committee
(VC).
The
Funds
may
utilize
independent
pricing
services,
quotations
from
securities
and
financial
instrument
dealers,
and
other
market
sources
to
determine
fair
value.
Equity
securities,
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.
Events
can 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
Funds.
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,
an
independent
pricing
service
may
be
used
to
adjust
the
value
of
the
Funds'
portfolio
securities
Franklin
Strategic
Series
Notes
to
Financial
Statements
47
franklintempleton.com
Annual
Report
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
August
31,
2021,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
inputs
within
the
fair
value
hierarchy
(referred
to
as
“market
level
fair
value”).
See
the
Fair
Value
Measurements
note
for
more
information.
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
security
valuation
changes
due
to
an
open
foreign
market
are
adjusted
and
reflected
by
the
Funds
for
financial
reporting
purposes.
b.
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
which
expose
the
Fund
to
gains
or
losses
in
excess
of
the
amounts
shown
in
the
Statements
of
Assets
and
Liabilities.
Realized
gain
and
loss
and
unrealized
appreciation
and
depreciation
on
these
contracts
for
the
period
are
included
in
the
Statements
of
Operations.
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.
See
Note
10
regarding
other
derivative
information.
c.
Equity-Linked
Securities
Certain
or
all
Funds
invest in
equity-linked
securities.
Equity-linked
securities
are
hybrid
financial
instruments
that
generally
combine
both
debt
and
equity
characteristics
into
a
single
note
form.
Income
received
from
equity-linked
securities
is
recorded
as
realized
gains
in
the
Statements
of
Operations
and
may
be
based
on
the
performance
of
an
underlying
equity
security,
an
equity
index,
or
an
option
position.
The
risks
of
investing
in
equity-linked
securities
include
unfavorable
price
movements
in
the
underlying
security
and
the
credit
risk
of
the
issuing
financial
institution.
There
may
be
no
guarantee
of
a
return
of
principal
with
equity-linked
securities
and
the
appreciation
potential
may
be
limited.
Equity-linked
securities
may
be
more
volatile
and
less
liquid
than
other
investments
held
by
the
Funds.
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
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
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
48
franklintempleton.com
Annual
Report
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
August
31,
2021, 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.
Amortization
of
premium
and
accretion
of
discount
on
debt
securities
are
included
in
interest
income.
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.
Dividends
from
net
investment
income
are
normally
declared
daily;
these
dividends
may
be
reinvested
or
paid
monthly
to
shareholders
for
Franklin
Templeton
SMACS:
Series
CH
and
Franklin
Templeton
SMACS:
Series
H,
and
recorded
on
ex-dividend
date
for
Franklin
Templeton
SMACS:
Series
E
and
Franklin
Templeton
SMACS:
Series
I.
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.
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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
d.
Income
and
Deferred
Taxes
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
49
franklintempleton.com
Annual
Report
2.
Shares
of
Beneficial
Interest
At
August
31,
2021,
there
were
an
unlimited
number
of
shares
authorized
(without
par
value).
Transactions
in
the
Funds’
shares
were
as
follows:
3.
Transactions
with
Affiliates
Franklin
Resources,
Inc.
is
the
holding
company
for
various
subsidiaries
that
together
are
referred
to
as
Franklin
Templeton.
Certain
officers
and
trustees
of
the
Trust
are
also
officers
and/or
directors
of
the
following
subsidiaries:
a.
Management
Fees
Advisers
provides
investment
management
services
to
the
Funds.
The
Funds
do
not
pay
a
fee
for
these
services.
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Shares
Amount
Shares
Amount
Class
A
Year
ended
August
31,
2021
Shares
sold
...................................
30,277
$320,057
18,685
$189,286
Shares
issued
in
reinvestment
of
distributions
..........
67
702
5,873
66,388
Shares
redeemed
...............................
(67)
(702)
—
—
Net
increase
(decrease)
..........................
30,277
$320,057
24,558
$255,674
Year
ended
August
31,
2020
Shares
issued
in
reinvestment
of
distributions
..........
—
$—
8,650
$88,257
Shares
redeemed
...............................
(88,495)
(900,000)
—
—
Net
increase
(decrease)
..........................
(88,495)
$(900,000)
8,650
$88,257
Franklin
Templeton
SMACS:
Series
H
a
Franklin
Templeton
SMACS:
Series
I
Shares
Amount
Shares
Amount
Class
A
Year
ended
August
31,
2021
Shares
issued
in
reinvestment
of
distributions
..........
—
$—
9,035
$84,848
Shares
redeemed
...............................
—
—
(20,526)
(184,119)
Net
increase
(decrease)
..........................
—
$—
(11,491)
$(99,271)
Year
ended
August
31,
2020
Shares
sold
...................................
—
$—
9,063
$77,130
Shares
issued
in
reinvestment
of
distributions
..........
—
—
9,998
91,576
Net
increase
(decrease)
..........................
—
$—
19,061
$168,706
a
During
the
years
ended
August
31,
2021
and
2020
there
were
no
transactions
of
the
Fund's
shares.
Subsidiary
Affiliation
Franklin
Advisers,
Inc.
(Advisers)
Investment
manager
Franklin
Templeton
Services,
LLC
(FT
Services)
Administrative
manager
Franklin
Distributors,
LLC
(Distributors)
Principal
underwriter
Franklin
Templeton
Investor
Services,
LLC
(Investor
Services)
Transfer
agent
Franklin
Strategic
Series
Notes
to
Financial
Statements
50
franklintempleton.com
Annual
Report
b.
Administrative
Fees
Under
an
agreement
with
Advisers,
FT
Services
provides
administrative
services
to
the
Funds.
The
Funds
do
not
pay
a
fee
for
these
services.
c.
Transfer
Agent
Fees
The
Funds
pay
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,
the
Funds
reimburse
Investor
Services
for
out
of
pocket
expenses
incurred
and
reimburses
shareholder
servicing
fees
paid
to
third
parties.
For
the
year
ended
August
31,
2021,
the
Funds
paid
transfer
agent
fees
as
noted
in
the
Statements
of
Operations
of
which
the
following
amounts
were
retained
by
Investor
Services:
d.
Investments
in
Affiliated
Management
Investment
Companies
Certain
or
all
Funds
invest
in
one
or
more
affiliated
management
investment
companies.
As
defined
in
the
1940
Act,
an
investment
is
deemed
to
be
a
“Controlled
Affiliate”
of
a
fund
when
a
fund
owns,
either
directly
or
indirectly,
25%
or
more
of
the
affiliated
fund’s
outstanding
shares
or
has
the
power
to
exercise
control
over
management
or
policies
of
such
fund.
The
Funds
do
not
invest
for
purposes
of
exercising
a
controlling
influence
over
the
management
or
policies.
Management
fees
paid
by
the
Funds
are
waived
on
assets
invested
in
the
affiliated
management
investment
companies,
as
noted
in
the
Statements
of
Operations,
in
an
amount
not
to
exceed
the
management
and
administrative
fees
paid
directly
or
indirectly
by
each
affiliate.
During
the
year
ended
August
31,
2021,
investments
in
affiliated
management
investment
companies
were
as
follows:
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Transfer
agent
fees
........................
$627
$896
$492
$693
aa
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares
Held
at
End
of
Year
Investment
Income
a
a
a
a
a
a
a
a
Franklin
Templeton
SMACS:
Series
E
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..
$165,509
$1,918,342
$(2,083,851)
$—
$—
$—
$1
Total
Affiliated
Securities
....
$165,509
$1,918,342
$(2,083,851)
$—
$—
$—
$1
Franklin
Templeton
SMACS:
Series
H
Non-Controlled
Affiliates
Dividends
Franklin
Liberty
Federal
Intermediate
Tax-Free
Bond
Opportunities
ETF
..........
$1,022,800
$—
$(127,659)
$522
$49,862
$945,525
35,000
$21,813
Total
Affiliated
Securities
....
$1,022,800
$—
$(127,659)
$522
$49,862
$945,525
$21,813
3.
Transactions
with
Affiliates
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
51
franklintempleton.com
Annual
Report
e.
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
Funds
so
that
the
operating expenses
(excluding
certain
non-routine
expenses
or
costs,
including
those
relating
to
litigation,
indemnification,
reorganizations,
and
liquidations)
and
acquired
fund
fees
and
expenses of
the
Funds
do not
exceed
0.00%
based
on
the
average
net
assets
until
December
31,
2021.
Total
expenses
waived
or
paid
are
not
subject
to
recapture
subsequent
to
the
Funds’
fiscal
year
end.
Acquired
fund
fees
and
expenses
are
indirect
expenses,
and
therefore
Advisers
may
make
payments,
if
necessary,
to
the
Funds
to
offset
these
estimated
indirect
expenses.
Payments
by
Advisers
for
the year
ended
August
31,
2021,
are
reflected
as
other
income
in
the
Statements
of
Operations.
f.
Other
Affiliated
Transactions
At
August
31,
2021,
Franklin
Advisers,
Inc.
and
Franklin
Resources,
Inc.
owned
a
percentage
of
the
Funds’
outstanding
shares
as
follows:
4.
Expense
Offset
Arrangement
The
Funds
have entered
into
an
arrangement
with
their
custodian
whereby
credits
realized
as
a
result
of
uninvested
cash
balances
are
used
to
reduce
a
portion
of
the
Funds'
custodian
expenses. During
the year
ended
August
31,
2021 the
custodian
fees
were
reduced
as
noted
in
the
Statements
of
Operations.
aa
Value
at
Beginning
of
Year
Purchases
Sales
Realized
Gain
(Loss)
Net
Change
in
Unrealized
Appreciation
(Depreciation)
Value
at
End
of
Year
Number
of
Shares
Held
at
End
of
Year
Investment
Income
Franklin
Templeton
SMACS:
Series
I
Non-Controlled
Affiliates
Dividends
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
0.01%
..
$159,307
$1,089,701
$(1,247,120)
$—
$—
$1,888
1,888
$2
Total
Affiliated
Securities
....
$159,307
$1,089,701
$(1,247,120)
$—
$—
$1,888
$2
Shares
Percentage
of
Outstanding
Shares
a
Franklin
Templeton
SMACS:
Series
CH
Franklin
Resources,
Inc.
303,978
90.9%
Franklin
Templeton
SMACS:
Series
E
Franklin
Advisers,
Inc.
153,671
38.1%
Franklin
Resources,
Inc.
250,000
61.9%
Franklin
Templeton
SMACS:
Series
H
Franklin
Resources,
Inc.
301,587
100.0%
Franklin
Templeton
SMACS:
Series
I
Franklin
Advisers,
Inc.
130,326
34.3%
Franklin
Resources,
Inc.
250,000
65.7%
a
Investment
activities
of
significant
shareholders
could
have
a
material
impact
on
the
Fund.
3.
Transactions
with
Affiliates
(continued)
d.
Investments
in
Affiliated
Management
Investment
Companies
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
52
franklintempleton.com
Annual
Report
5.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
August
31,
2021,
the
capital
loss
carryforwards
were
as
follows:
During
the
year
ended
August
31,
2021,
Franklin
Templeton
SMACS:
Series
I
Fund
utilized
$30,297
of
capital
loss
carryforwards.
The
tax
character
of
distributions
paid
during
the
years
ended
August
31,
2021,
and
2020,
was
as
follows:
At
August
31,
2021,
the
cost
of
investments,
net
unrealized
appreciation
(depreciation),undistributed
tax
exempt
income,
undistributed
ordinary
income
and
undistributed
long
term
capital
gains
for
income
tax
purposes
were
as
follows:
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
1
1
1
1
1
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
.............................
$
22,499
$
—
$
21,887
$
485,986
Long
term
.............................
—
—
2,349
—
Total
capital
loss
carryforwards
............
$22,499
$—
$24,236
$485,986
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
2021
2020
2021
2020
Distributions
paid
from:
Ordinary
income
........................
$—
$38,248
$179,313
$266,656
Tax
exempt
income
......................
107,444
103,575
—
—
$107,444
$141,823
$179,313
$266,656
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
2021
2020
2021
2020
Distributions
paid
from:
Ordinary
income
........................
$—
$—
$249,849
$268,376
Tax
exempt
income
......................
97,329
92,173
—
—
$97,329
$92,173
$249,849
$268,376
Franklin
Strategic
Series
Notes
to
Financial
Statements
53
franklintempleton.com
Annual
Report
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
bond
discounts
and
premiums
and
equity-linked
securities.
6.
Investment
Transactions
Purchases
and
sales
of
investments
and
ETFs
(excluding
short
term
securities)
for
the
year
ended
August
31,
2021,
were
as
follows:
7.
Credit
Risk
At
August
31,
2021,
the
Franklin
Templeton
SMACS:
Series
CH,
Franklin
Templeton
SMACS:
Series
H
and
Franklin
Templeton
SMACS:
Series
I
had
67.1%,
65.5%
and
93.9%,
respectively,
of
their
portfolio
invested
in
high
yield,
or
other
securities
rated
below
investment
grade
as
determined
by
Nationally
Recognized
Statistical
Credit
Ratings
Organizations
and/or
internally,
by
investment
management
and
unrated
securities.
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.
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
Fund
to
increased
market
volatility.
The
market
for
these
investments
may
be
limited,
which
may
make
them
difficult
to
buy
or
sell.
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
a
a
a
a
a
Cost
of
investments
.......................
$3,252,286
$4,246,285
$2,930,138
$3,339,802
Unrealized
appreciation
.....................
$219,866
$908,802
$211,362
$339,556
Unrealized
depreciation
.....................
(5,430)
(29,152)
—
(11,789)
Net
unrealized
appreciation
(depreciation)
.......
$214,436
$879,650
$211,362
$327,767
Distributable
earnings:
Undistributed
ordinary
income
................
$—
$25,209
$261
$22,114
Undistributed
tax
exempt
income
..............
8,742
—
4,463
—
Undistributed
long
term
capital
gains
...........
—
146,956
—
—
Total
distributable
earnings
..................
$8,742
$172,165
$4,724
$22,114
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Purchases
..............................
$408,995
$2,637,022
$160,000
$1,213,117
Sales
..................................
$85,187
$2,243,402
$238,665
$1,142,660
5.
Income
Taxes
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
54
franklintempleton.com
Annual
Report
9.
Novel
Coronavirus
Pandemic
The
global
outbreak
of
the
novel
coronavirus
disease,
known
as
COVID-19, has
caused
adverse
effects
on
many
companies,
sectors,
nations,
regions
and
the
markets
in
general, and
may
continue for
an unpredictable duration.
The
effects
of
this
pandemic
may
materially
impact
the
value
and
performance
of
the
Funds, their ability
to
buy
and
sell
fund
investments
at
appropriate
valuations
and their ability
to
achieve their investment
objectives.
10.
Other
Derivative
Information
At
August
31,
2021,
investments
in
derivative
contracts
are
reflected
in
the
Statements
of
Assets
and
Liabilities
as
follows:
For
the
year
ended
August
31,
2021,
the
effect
of
derivative
contracts
in
the
Statements
of
Operations
was
as
follows:
For
the
year
ended
August
31,
2021,
the
average
month
end
notional
amount
of
options
represented
1,169.
See
Note
1(b) regarding
derivative
financial
instruments.
11.
Credit
Facility
The
Funds,
together
with
other
U.S.
registered
and
foreign
investment
funds
(collectively,
Borrowers),
managed
by
Franklin
Templeton,
are
borrowers
in
a
joint
syndicated
senior
unsecured
credit
facility
totaling
$2.675
billion
(Global
Credit
Facility)
which
matures
on
February
4,
2022.
This
Global
Credit
Facility
provides
a
source
of
funds
to
the
Borrowers
for
temporary
and
emergency
purposes,
including
the
ability
to
meet
future
unanticipated
or
unusually
large
redemption
requests.
Under
the
terms
of
the
Global
Credit
Facility,
the
Funds
shall,
in
addition
to
interest
charged
on
any
borrowings
made
by
the
Funds
and
other
costs
incurred
by
the
Funds,
pay
their
share
of
fees
and
expenses
incurred
in
connection
with
the
implementation
and
maintenance
of
the
Global
Credit
Facility,
based
upon
their
relative
share
of
the
aggregate
net
assets
of
all
of
the
Borrowers,
including
an
annual
commitment
fee
of
0.15%
based
upon
the
unused
portion
of
the
Global
Credit
Facility.
These
fees
are
reflected
in
other
expenses
in
the
Statements
of
Operations.
During
the
year
ended
August
31,
2021,
the
Funds
did
not
use
the
Global
Credit
Facility.
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
Franklin
Templeton
SMACS:
Series
E
Equity
contracts
...........
Investments
in
securities,
at
value
$
—
Options
written,
at
value
$
1,312
Total
....................
$—
$1,312
Derivative
Contracts
Not
Accounted
for
as
Hedging
Instruments
Statement
of
Operations
Location
Net
Realized
Gain
(Loss)
for
the
Year
Statement
of
Operations
Location
Net
Change
in
Unrealized
Appreciation
(Depreciation)
for
the
Year
Franklin
Templeton
SMACS:
Series
E
Net
realized
gain
(loss)
from:
Net
change
in
unrealized
appreciation
(depreciation)
on:
Equity
Contracts
..............
Written
options
$4,176
Written
options
$4,900
Total
.......................
$4,176
$4,900
Franklin
Strategic
Series
Notes
to
Financial
Statements
55
franklintempleton.com
Annual
Report
12.
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
August
31,
2021,
in
valuing
the
Funds'
assets
and
liabilities
carried
at
fair
value,
is
as
follows:
Level
1
Level
2
Level
3
Total
Franklin
Templeton
SMACS:
Series
CH
Assets:
Municipal
Bonds
.........................
$
—
$
3,466,722
$
—
$
3,466,722
Total
Investments
in
Securities
...........
$—
$3,466,722
$—
$3,466,722
Franklin
Templeton
SMACS:
Series
E
Assets:
Investments
in
Securities:
Common
Stocks
:
Beverages
...........................
211,126
—
—
211,126
Biotechnology
.........................
120,780
—
—
120,780
Chemicals
...........................
105,720
—
—
105,720
Communications
Equipment
..............
118,040
—
—
118,040
Diversified
Telecommunication
Services
.....
112,162
—
—
112,162
Electric
Utilities
........................
476,560
—
—
476,560
Energy
Equipment
&
Services
.............
45,560
—
—
45,560
Food
Products
........................
—
31,570
—
31,570
Health
Care
Providers
&
Services
..........
207,336
—
—
207,336
Insurance
............................
124,000
—
—
124,000
Metals
&
Mining
.......................
45,042
—
—
45,042
Multiline
Retail
........................
246,980
—
—
246,980
Multi-Utilities
..........................
151,095
—
—
151,095
Oil,
Gas
&
Consumable
Fuels
.............
124,012
—
—
124,012
Personal
Products
.....................
—
47,330
—
47,330
Pharmaceuticals
.......................
399,963
—
—
399,963
Semiconductors
&
Semiconductor
Equipment
.
288,680
—
—
288,680
Specialty
Retail
........................
195,708
—
—
195,708
Tobacco
.............................
206,000
—
—
206,000
Equity-Linked
Securities
...................
—
1,617,985
—
1,617,985
Convertible
Preferred
Stocks
...............
223,658
—
—
223,658
Preferred
Stocks
........................
27,940
—
—
27,940
Total
Investments
in
Securities
...........
$3,430,362
$1,696,885
a
$—
$5,127,247
Liabilities:
Other
Financial
Instruments:
Options
written
..........................
$
1,312
$
—
$
—
$
1,312
Franklin
Strategic
Series
Notes
to
Financial
Statements
56
franklintempleton.com
Annual
Report
13.
New
Accounting
Pronouncements
In
March
2020,
the
Financial
Accounting
Standards
Board
(FASB)
issued
Accounting
Standards
Update
(ASU)
No.
2020-04,
Reference
Rate
Reform
(Topic
848)
–
Facilitation
of
the
Effects
of
Reference
Rate
Reform
on
Financial
Reporting.
In
January
2021,
the
FASB
issued
ASU
No.
2021-01,
with
further
amendments
to
Topic
848.
The
amendments
in
the
ASUs
provide
optional
temporary
accounting
recognition
and financial
reporting
relief
from
the
effect
of
certain
types
of
contract
modifications
due
to
the
planned
discontinuation
of
the
London
Interbank
Offered
Rate
(LIBOR)
and
other
interbank-offered
based
reference
rates
as
of
the
end
of
2021
and
2023. The
ASUs
are
effective
for
certain
reference
rate-related
contract
modifications
that
occur
during
the
period
March
12,
2020
through
December
31,
2022.
Management
has
reviewed
the
requirements
and
believes
the
adoption
of
these
ASUs
will
not
have
a
material
impact
on
the
financial
statements.
14.
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
Level
1
Level
2
Level
3
Total
Franklin
Templeton
SMACS:
Series
H
Assets:
Investments
in
Securities:
Management
Investment
Companies
.........
$
945,525
$
—
$
—
$
945,525
Municipal
Bonds
.........................
—
2,095,975
—
2,095,975
Short
Term
Investments
...................
—
100,000
—
100,000
Total
Investments
in
Securities
...........
$945,525
$2,195,975
$—
$3,141,500
Franklin
Templeton
SMACS:
Series
I
Assets:
Investments
in
Securities:
b
Corporate
Bonds
........................
—
3,455,141
—
3,455,141
Asset-Backed
Securities
..................
—
103,660
—
103,660
Escrows
and
Litigation
Trusts
...............
—
106,880
—
106,880
Short
Term
Investments
...................
1,888
—
—
1,888
Total
Investments
in
Securities
...........
$1,888
$3,665,681
$—
$3,667,569
a
Includes
foreign
securities
valued
at
$78,900,
which
were
categorized
as
Level
2
as
a
result
of
the
application
of
market
level
fair
value
procedures.
See
the
Financial
Instrument
Valuation
note
for
more
information.
b
For
detailed
categories,
see
the
accompanying
Statement
of
Investments.
Selected
Portfolio
ADR
American
Depositary
Receipt
ETF
Exchange-Traded
Fund
GO
General
Obligation
LOC
Letter
of
Credit
12.
Fair
Value
Measurements
(continued)
Franklin
Strategic
Series
Report
of
Independent
Registered
Public
Accounting
Firm
57
franklintempleton.com
Annual
Report
To
the
Board
of
Trustees
of
Franklin
Strategic
Series
and
Shareholders
of
Franklin
Templeton
SMACS:
Series
CH,
Franklin
Templeton
SMACS:
Series
E,
Franklin
Templeton
SMACS:
Series
H
and
Franklin
Templeton
SMACS:
Series
I
Opinions
on
the
Financial
Statements
We
have
audited
the
accompanying
statements
of
assets
and
liabilities,
including
the
statements
of
investments,
of
Franklin
Templeton
SMACS:
Series
CH,
Franklin
Templeton
SMACS:
Series
E,
Franklin
Templeton
SMACS:
Series
H
and
Franklin
Templeton
SMACS:
Series
I
(four
of
the
funds
constituting
Franklin
Strategic
Series,
hereafter
collectively
referred
to
as
the
"Funds")
as
of
August
31,
2021,
the
related
statements
of
operations
for
the
year
ended
August
31,
2021
and
the
statements
of
changes
in
net
assets
and
the
financial
highlights
for
each
of
the
periods
indicated
therein,
including
the
related
notes
(collectively
referred
to
as
the
“financial
statements”).
In
our
opinion,
the
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
each
of
the
Funds
as
of
August
31,
2021,
the
results
of
each
of
their
operations
for
the
year
ended
August
31,
2021,
and
the
changes
in
their
net
assets
and
each
of
the
financial
highlights
for
each
of
the
periods
indicated
therein
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America.
Basis
for
Opinions
These
financial
statements
are
the
responsibility
of
the
Funds’
management.
Our
responsibility
is
to
express
an
opinion
on
the
Funds’
financial
statements
based
on
our
audits.
We
are
a
public
accounting
firm
registered
with
the
Public
Company
Accounting
Oversight
Board
(United
States)
(PCAOB)
and
are
required
to
be
independent
with
respect
to
the
Funds
in
accordance
with
the
U.S.
federal
securities
laws
and
the
applicable
rules
and
regulations
of
the
Securities
and
Exchange
Commission
and
the
PCAOB.
We
conducted
our
audits
of
these
financial
statements
in
accordance
with
the
standards
of
the
PCAOB.
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement,
whether
due
to
error
or
fraud.
Our
audits
included
performing
procedures
to
assess
the
risks
of
material
misstatement
of
the
financial
statements,
whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
financial
statements.
Our
audits
also
included
evaluating
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
financial
statements.
Our
procedures
included
confirmation
of
securities
owned
as
of
August
31,
2021
by
correspondence
with
the
custodian,
transfer
agent
and
brokers;
when
replies
were
not
received
from
brokers,
we
performed
other
auditing
procedures.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinions.
PricewaterhouseCoopers
LLP
San
Francisco,
California
October
19,
2021
We
have
served
as
the
auditor
of
one
or
more
investment
companies
in
the
Franklin
Templeton
Group
of
Funds
since
1948.
Franklin
Strategic
Series
Tax
Information
(unaudited)
58
franklintempleton.com
Annual
Report
By
mid-February,
tax
information
related
to
a
shareholder's
proportionate
share
of
distributions
paid
during
the
preceding
calendar
year
will
be
received,
if
applicable.
Please
also
refer
to
www.franklintempleton.com
for
per
share
tax
information
related
to
any
distributions
paid
during
the
preceding
calendar
year.
Shareholders
are
advised
to
consult
with
their
tax
advisors
for
further
information
on
the
treatment
of
these
amounts
on
their
tax
returns.
The
following
tax
information
for
the
Funds
is
required
to
be
furnished
to
shareholders
with
respect
to
income
earned
and
distributions
paid
during
their
fiscal
year.
The
Funds
below
hereby
report
the
following
amounts,
or
if
subsequently
determined
to
be
different,
the
maximum
allowable
amounts,
for
the
fiscal
year
ended
August
31,
2021:
Pursuant
to:
Franklin
Templeton
SMACS
Series
CH
Exempt-Interest
Dividends
§852(b)(5)(A)
$107,444
Pursuant
to:
Franklin
Templeton
SMACS
Series
E
Dividends
Received
Deduction
(DRD)
§854(b)(1)(A)
$111,239
Qualified
Dividend
Income
(QDI)
§854(b)(1)(B)
$130,545
Pursuant
to:
Franklin
Templeton
SMACS
Series
H
Exempt-Interest
Dividends
§852(b)(5)(A)
$97,329
Franklin
Strategic
Series
Board
Members
and
Officers
59
franklintempleton.com
Annual
Report
The
name,
year
of
birth
and
address
of
the
officers
and
board
members,
as
well
as
their
affiliations,
positions
held
with
the
Fund,
principal
occupations
during
at
least
the
past
five
years
and
number
of
U.S.
registered
portfolios
overseen
in
the
Franklin
Templeton
fund
complex
are
shown
below.
Generally,
each
board
member
serves
a
three-year
term
that
continues
until
that
person’s
successor
is
elected
and
qualified.
Independent
Board
Members
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Harris
J.
Ashton
(1932)
Trustee
Since
1991
122
Bar-S
Foods
(meat
packing
company)
(1981-2010).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Director,
RBC
Holdings,
Inc.
(bank
holding
company)
(until
2002);
and
President,
Chief
Executive
Officer
and
Chairman
of
the
Board,
General
Host
Corporation
(nursery
and
craft
centers)
(until
1998).
Terrence
J.
Checki
(1945)
Trustee
Since
2017
104
Hess
Corporation
(exploration
of
oil
and
gas)
(2014-present).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Member
of
the
Council
on
Foreign
Relations
(1996-present);
Member
of
the
National
Committee
on
U.S.-China
Relations
(1999-present);
member
of
the
board
of
trustees
of
the
Economic
Club
of
New
York
(2013-present);
member
of
the
board
of
trustees
of
the
Foreign
Policy
Association
(2005-present);
member
of
the
board
of
directors
of
Council
of
the
Americas
(2007-present)
and
the
Tallberg
Foundation
(2018–
present);
and
formerly
,
Executive
Vice
President
of
the
Federal
Reserve
Bank
of
New
York
and
Head
of
its
Emerging
Markets
and
Internal
Affairs
Group
and
Member
of
Management
Committee
(1995-2014);
and
Visiting
Fellow
at
the
Council
on
Foreign
Relations
(2014).
Mary
C.
Choksi
(1950)
Trustee
Since
2014
123
Omnicom
Group
Inc.
(advertising
and
marketing
communications
services)
(2011-present)
and
White
Mountains
Insurance
Group,
Ltd.
(holding
company)
(2017-present);
and
formerly
,
Avis
Budget
Group
Inc.
(car
rental)
(2007-2020).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Founder
and
Senior
Advisor,
Strategic
Investment
Group
(investment
management
group)
(2015-2017);
Founding
Partner
and
Senior
Managing
Director,
Strategic
Investment
Group
(1987-2015);
Founding
Partner
and
Managing
Director,
Emerging
Markets
Management
LLC
(investment
management
firm)
(1987-2011);
and
Loan
Officer/Senior
Loan
Officer/Senior
Pension
Investment
Officer,
World
Bank
Group
(international
financial
institution)
(1977-1987).
Franklin
Strategic
Series
60
franklintempleton.com
Annual
Report
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Edith
E.
Holiday
(1952)
Lead
Independent
Trustee
Trustee
since
1998
and
Lead
Independent
Trustee
since
2019
123
Hess
Corporation
(exploration
of
oil
and
gas)
(1993-present),
Santander
Consumer
USA
Holdings,
Inc.
(consumer
finance)
(2016-present);
Santander
Holdings
USA
(holding
company)
(2019-present);
and
formerly
,
Canadian
National
Railway
(railroad)
(2001-April
2021),
White
Mountains
Insurance
Group,
Ltd.
(holding
company)
(2004-May
2021),
RTI
International
Metals,
Inc.
(manufacture
and
distribution
of
titanium)
(1999-2015)
and
H.J.
Heinz
Company
(processed
foods
and
allied
products)
(1994-2013).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
or
Trustee
of
various
companies
and
trusts;
and
formerly
,
Assistant
to
the
President
of
the
United
States
and
Secretary
of
the
Cabinet
(1990-1993);
General
Counsel
to
the
United
States
Treasury
Department
(1989-1990);
and
Counselor
to
the
Secretary
and
Assistant
Secretary
for
Public
Affairs
and
Public
Liaison-United
States
Treasury
Department
(1988-1989).
J.
Michael
Luttig
(1954)
Trustee
Since
2009
123
Boeing
Capital
Corporation
(aircraft
financing)
(2006-2010).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Private
investor;
and
formerly
,
Counselor
and
Senior
Advisor
to
the
Chairman,
CEO,
and
Board
of
Directors,
of
The
Boeing
Company
(aerospace
company),
and
member
of
the
Executive
Council
(May
2019-January
1,
2020);
Executive
Vice
President,
General
Counsel
and
member
of
the
Executive
Council,
The
Boeing
Company
(2006-2019);
and
Federal
Appeals
Court
Judge,
United
States
Court
of
Appeals
for
the
Fourth
Circuit
(1991-2006).
Larry
D.
Thompson
(1945)
Trustee
Since
2007
123
Formerly,
Graham
Holdings
Company
(education
and
media
organization)
(2011-May
2021);
The
Southern
Company
(energy
company)
(2014-2020;
previously
2010-2012)
and
Cbeyond,
Inc.
(business
communications
provider)
(2010-2012).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
Counsel,
Finch
McCranie,
LLP
(law
firm)
(2015-present);
John
A.
Sibley
Professor
of
Corporate
and
Business
Law,
University
of
Georgia
School
of
Law
(2015-present;
previously
2011-2012);
and
formerly
,
Independent
Compliance
Monitor
and
Auditor,
Volkswagen
AG
(manufacturer
of
automobiles
and
commercial
vehicles)
(2017-2020);
Executive
Vice
President
-
Government
Affairs,
General
Counsel
and
Corporate
Secretary,
PepsiCo,
Inc.
(consumer
products)
(2012-2014);
Senior
Vice
President
-
Government
Affairs,
General
Counsel
and
Secretary,
PepsiCo,
Inc.
(2004-2011);
Senior
Fellow
of
The
Brookings
Institution
(2003-2004);
Visiting
Professor,
University
of
Georgia
School
of
Law
(2004);
and
Deputy
Attorney
General,
U.S.
Department
of
Justice
(2001-2003).
Independent
Board
Members
(continued)
Franklin
Strategic
Series
61
franklintempleton.com
Annual
Report
Interested
Board
Members
and
Officers
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Valerie
M.
Williams
(1956)
Trustee
Since
May
2021
104
Omnicom
Group,
Inc.
(advertising
and
marketing
communications
services)
(2016-present),
DTE
Energy
Co.
(gas
and
electric
utility)
(2018-present),
Devon
Energy
Corporation
(exploration
and
production
of
oil
and
gas)
(January
2021-present);
and
formerly
,
WPX
Energy,
Inc.
(exploration
and
production
of
oil
and
gas)
(2018-January
2021).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
of
various
companies;
and
formerly
,
Regional
Assurance
Managing
Partner,
Ernst
&
Young
LLP
(public
accounting)
(2005-2016),
various
roles
of
increasing
responsibility
at
Ernst
&
Young
(1981-2005).
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
**Gregory
E.
Johnson
(1961)
Trustee
Since
2013
134
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Executive
Chairman,
Chairman
of
the
Board
and
Director,
Franklin
Resources,
Inc.;
officer
and/or
director
or
trustee,
as
the
case
may
be,
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
39
of
the
investment
companies
in
Franklin
Templeton;
Vice
Chairman,
Investment
Company
Institute;
and
formerly
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015),
Franklin
Resources,
Inc.
**Rupert
H.
Johnson,
Jr.
(1940)
Chairman
of
the
Board
and
Trustee
Chairman
of
the
Board
since
2013
and
Trustee
since
1991
123
None
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
(Vice
Chairman),
Franklin
Resources,
Inc.;
Director,
Franklin
Advisers,
Inc.;
and
officer
and/or
director
or
trustee,
as
the
case
may
be,
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
37
of
the
investment
companies
in
Franklin
Templeton.
Alison
E.
Baur
(1964)
Vice
President
Since
2012
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Deputy
General
Counsel,
Franklin
Templeton;
and
officer
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
44
of
the
investment
companies
in
Franklin
Templeton.
Breda
M.
Beckerle
(1958)
Chief
Compliance
Officer
Since
2020
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
Principal
Occupation
During
at
Least
the
Past
5
Years:
Chief
Compliance
Officer,
Fiduciary
Investment
Management
International,
Inc.,
Franklin
Advisers,
Inc.,
Franklin
Mutual
Advisers,
LLC,
Franklin
Templeton
Institutional,
LLC;
and
officer
of
39
of
the
investment
companies
in
Franklin
Templeton.
Independent
Board
Members
(continued)
Franklin
Strategic
Series
62
franklintempleton.com
Annual
Report
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Sonal
Desai,
Ph.D.
(1963)
Vice
President
Since
2018
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director
and
Executive
Vice
President,
Franklin
Advisers,
Inc.;
Executive
Vice
President,
Franklin
Templeton
Institutional,
LLC;
and
officer
of
17
of
the
investment
companies
in
Franklin
Templeton.
Steven
J.
Gray
(1955)
Vice
President
and
Co-
Secretary
Vice
President
since
2009
and
Co-Secretary
since
2019
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Associate
General
Counsel,
Franklin
Templeton;
Vice
President,
FASA,
LLC;
Assistant
Secretary,
Franklin
Distributors,
LLC;
and
officer
of
44
of
the
investment
companies
in
Franklin
Templeton.
Matthew
T.
Hinkle
(1971)
Chief
Executive
Officer
–
Finance
and
Administration
Since
2017
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Vice
President,
Franklin
Templeton
Services,
LLC;
officer
of
44
of
the
investment
companies
in
Franklin
Templeton;
and
formerly
,
Vice
President,
Global
Tax
(2012-April
2017)
and
Treasurer/Assistant
Treasurer,
Franklin
Templeton
(2009-2017).
Susan
Kerr
(1949)
Vice
President
–
AML
Compliance
Since
July
2021
Not
Applicable
Not
Applicable
620
Eighth
Avenue
New
York,
NY
10018
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Compliance
Analyst,
Global
Compliance,
Franklin
Templeton;
Chief
Anti-Money
Laundering
Compliance
Officer,
Legg
Mason
&
Co.
or
its
affiliates;
Anti
Money
Laundering
Compliance
Officer;
Senior
Compliance
Officer,
LMIS;
and
officer
of
41
of
the
investment
companies
in
Franklin
Templeton.
Edward
D.
Perks
(1970)
President
and
Chief
Executive
Officer
–
Investment
Management
Since
2018
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
President
and
Director,
Franklin
Advisers,
Inc.;
and
officer
of
eight
of
the
investment
companies
in
Franklin
Templeton
(since
December
2018).
Navid
J.
Tofigh
(1972)
Vice
President
Since
2015
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Associate
General
Counsel
and
officer
of
44
of
the
investment
companies
in
Franklin
Templeton.
Craig
S.
Tyle
(1960)
Vice
President
Since
2005
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
General
Counsel
and
Executive
Vice
President,
Franklin
Resources,
Inc.;
and
officer
of
some
of
the
other
subsidiaries
of
Franklin
Resources,
Inc.
and
of
44
of
the
investment
companies
in
Franklin
Templeton.
Interested
Board
Members
and
Officers
(continued)
Franklin
Strategic
Series
63
franklintempleton.com
Annual
Report
*
We
base
the
number
of
portfolios
on
each
separate
series
of
the
U.S.
registered
investment
companies
within
the
Franklin
Templeton
fund
complex.
These
portfolios
have
a
common
investment
manager
or
affiliated
investment
managers.
**
Gregory
E.
Johnson
is
considered
to
be
an
interested
person
of
the
Fund
under
the
federal
securities
laws
due
to
his
position
as
an
officer
and
director
of
Franklin
Resources,
Inc.
(Resources),
which
is
the
parent
company
of
the
Fund’s
investment
manager
and
distributor.
Rupert
H.
Johnson,
Jr.
is
considered
to
be
an
interested
person
of
the
Fund
under
the
federal
securities
laws
due
to
his
position
as
an
officer
and
director
and
major
shareholder
of
Resources.
Note
1:
Rupert
H.
Johnson,
Jr.
is
the
uncle
of
Gregory
E.
Johnson.
Note
2:
Officer
information
is
current
as
of
the
date
of
this
report.
It
is
possible
that
after
this
date,
information
about
officers
may
change.
The
Sarbanes-Oxley
Act
of
2002
and
Rules
adopted
by
the
Securities
and
Exchange
Commission
require
the
Fund
to
disclose
whether
the
Fund’s
Audit
Committee
includes
at
least
one
member
who
is
an
audit
committee
financial
expert
within
the
meaning
of
such
Act
and
Rules.
The
Fund’s
Board
has
determined
that
there
is
at
least
one
such
financial
expert
on
the
Audit
Committee
and
has
designated
Mary
C.
Choksi
as
its
audit
committee
financial
expert.
The
Board
believes
that
Ms.
Choksi
qualifies
as
such
an
expert
in
view
of
her
extensive
business
background
and
experience.
She
served
as
a
director
of
Avis
Budget
Group,
Inc.
(2007-2020)
and
formerly,
Founder
and
Senior
Advisor,
Strategic
Investment
Group
(1987
to
2017).
Ms.
Choksi
has
been
a
Member
of
the
Fund’s
Audit
Committee
since
2014.
As
a
result
of
such
background
and
experience,
the
Board
believes
that
Ms.
Choksi
has
acquired
an
understanding
of
generally
accepted
accounting
principles
and
financial
statements,
the
general
application
of
such
principles
in
connection
with
the
accounting
estimates,
accruals
and
reserves,
and
analyzing
and
evaluating
financial
statements
that
present
a
breadth
and
level
of
complexity
of
accounting
issues
generally
comparable
to
those
of
the
Fund,
as
well
as
an
understanding
of
internal
controls
and
procedures
for
financial
reporting
and
an
understanding
of
audit
committee
functions.
Ms.
Choksi
is
an
independent
Board
member
as
that
term
is
defined
under
the
relevant
Securities
and
Exchange
Commission
Rules
and
Releases.
The
Statement
of
Additional
Information
(SAI)
includes
additional
information
about
the
board
members
and
is
available,
without
charge,
upon
request.
Shareholders
may
call
(800)
DIAL
BEN/342-5236
to
request
the
SAI.
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member*
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Lori
A.
Weber
(1964)
Vice
President
and
Co-Secretary
Vice
President
since
2011
and
Co-Secretary
since
2019
Not
Applicable
Not
Applicable
300
S.E.
2nd
Street
Fort
Lauderdale,
FL
33301-
1923
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Associate
General
Counsel,
Franklin
Templeton;
Assistant
Secretary,
Franklin
Resources,
Inc.;
Vice
President
and
Secretary,
Templeton
Investment
Counsel,
LLC;
and
officer
of
44
of
the
investment
companies
in
Franklin
Templeton.
Jeffery
W.
White
(1971)
Interim
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
October
2021
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Director,
Fund
Administration
&
Reporting;
officer
of
24
of
the
investment
companies
in
Franklin
Templeton;
and
formerly
,
Manager,
Fund
Administration
&
Report
(2009-2017).
Interested
Board
Members
and
Officers
(continued)
Franklin
Strategic
Series
Shareholder
Information
64
franklintempleton.com
Annual
Report
Board
Approval
of
Investment
Management
Agreements
FRANKLIN
STRATEGIC
SERIES
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
(each
a
Fund)
At
a
meeting
held
on
April
20,
2021
(Meeting),
the
Board
of
Trustees
(Board)
of
Franklin
Strategic
Series
(Trust),
including
a
majority
of
the
trustees
who
are
not
“interested
persons”
as
defined
in
the
Investment
Company
Act
of
1940
(Independent
Trustees),
reviewed
and
approved
the
continuance
of
the
investment
management
agreement
between
Franklin
Advisers,
Inc.
(Manager)
and
the
Trust,
on
behalf
of
each
Fund
(each
a
Management
Agreement)
for
an
additional
one-year
period.
The
Independent
Trustees
received
advice
from
and
met
separately
with
Independent
Trustee
counsel
in
considering
whether
to
approve
the
continuation
of
each
Management
Agreement.
Although
the
Management
Agreements
for
the
Funds
were
considered
at
the
same
Board
meeting,
the
Board
considered
the
information
provided
to
it
about
the
Funds
together
and
with
respect
to
each
Fund
separately
as
the
Board
deemed
appropriate.
In
considering
the
continuation
of
each
Management
Agreement,
the
Board
reviewed
and
considered
information
provided
by
the
Manager
at
the
Meeting
and
throughout
the
year
at
meetings
of
the
Board
and
its
committees.
The
Board
also
reviewed
and
considered
information
provided
in
response
to
a
detailed
set
of
requests
for
information
submitted
to
the
Manager
by
Independent
Trustee
counsel
on
behalf
of
the
Independent
Trustees
in
connection
with
the
annual
contract
renewal
process.
In
addition,
prior
to
the
Meeting,
the
Independent
Trustees
held
a
telephonic
contract
renewal
meeting
at
which
the
Independent
Trustees
conferred
amongst
themselves
and
Independent
Trustee
counsel
about
contract
renewal
matters
and,
in
some
cases,
requested
additional
information
from
the
Manager
relating
to
the
contract.
The
Board
reviewed
and
considered
all
of
the
factors
it
deemed
relevant
in
approving
the
continuance
of
each
Management
Agreement,
including,
but
not
limited
to:
(i)
the
nature,
extent
and
quality
of
the
services
provided
by
the
Manager;
(ii)
the
investment
performance
of
each
Fund;
(iii)
the
costs
of
the
services
provided
and
profits
realized
by
the
Manager
and
its
affiliates
from
the
relationship
with
each
Fund;
(iv)
the
extent
to
which
economies
of
scale
are
realized
as
each
Fund
grows;
and
(v)
whether
fee
levels
reflect
these
economies
of
scale
for
the
benefit
of
Fund
investors.
In
approving
the
continuance
of
each
Management
Agreement,
the
Board,
including
a
majority
of
the
Independent
Trustees,
determined
that
the
terms
of
the
Management
Agreement
are
fair
and
reasonable
and
that
the
continuance
of
such
Management
Agreement
is
in
the
best
interests
of
the
applicable
Fund
and
its
shareholders.
While
attention
was
given
to
all
information
furnished,
the
following
discusses
some
primary
factors
relevant
to
the
Board’s
determination.
Nature,
Extent
and
Quality
of
Services
The
Board
reviewed
and
considered
information
regarding
the
nature,
extent
and
quality
of
investment
management
services
provided
by
the
Manager
and
its
affiliates
to
the
Funds
and
their
shareholders.
This
information
included,
among
other
things,
the
qualifications,
background
and
experience
of
the
senior
management
and
investment
personnel
of
the
Manager,
as
well
as
information
on
succession
planning
where
appropriate;
the
structure
of
investment
personnel
compensation;
oversight
of
third-
party
service
providers;
investment
performance
reports
and
related
financial
information
for
each
Fund;
reports
on
expenses
and
shareholder
services;
legal
and
compliance
matters;
risk
controls;
pricing
and
other
services
provided
by
the
Manager
and
its
affiliates;
and
management
fees
charged
by
the
Manager
and
its
affiliates
to
US
funds
and
other
accounts,
including
management’s
explanation
of
differences
among
accounts
where
relevant.
The
Board
also
reviewed
and
considered
an
annual
report
on
payments
made
by
Franklin
Templeton
(FT)
or
the
Funds
to
financial
intermediaries,
as
well
as
a
memorandum
relating
to
third-
party
servicing
arrangements,
which
included
discussion
of
the
changing
distribution
landscape
for
the
Funds.
The
Board
noted
management’s
continuing
efforts
and
expenditures
in
establishing
effective
business
continuity
plans
and
developing
strategies
to
address
areas
of
heightened
concern
in
the
mutual
fund
industry,
such
as
cybersecurity
in
the
current
work-from-home
environment
and
liquidity
risk
management.
The
Board
also
reviewed
and
considered
the
benefits
provided
to
Fund
shareholders
of
investing
in
a
fund
that
is
part
of
the
FT
family
of
funds.
The
Board
noted
the
financial
position
of
Franklin
Resources,
Inc.
(FRI),
the
Manager’s
parent,
and
its
commitment
to
the
mutual
fund
Franklin
Strategic
Series
Shareholder
Information
65
franklintempleton.com
Annual
Report
business
as
evidenced
by
its
reassessment
of
the
fund
offerings
in
response
to
the
market
environment
and
project
initiatives
and
capital
investments
relating
to
the
services
provided
to
the
Funds
by
the
FT
organization.
The
Board
specifically
noted
FT’s
commitment
to
enhancing
services
and
controlling
costs,
as
reflected
in
its
outsourcing
of
certain
administrative
functions,
and
growth
opportunities,
as
evidenced
by
its
recent
acquisition
of
the
Legg
Mason
companies.
The
Board
also
noted
FT’s
attention
focused
on
expanding
the
distribution
opportunities
for
all
funds
in
the
FT
family
of
funds.
Following
consideration
of
such
information,
the
Board
was
satisfied
with
the
nature,
extent
and
quality
of
services
provided
by
the
Manager
and
its
affiliates
to
the
Funds
and
their
shareholders.
Fund
Performance
The
Board
reviewed
and
considered
the
performance
results
of
each
Fund
for
the
one-year
period
ended
January
31,
2021.
The
Board
noted
that
each
Fund
commenced
operations
on
June
3,
2019.
The
Board
considered
the
performance
returns
for
each
Fund
in
comparison
to
the
performance
returns
of
mutual
funds
deemed
comparable
to
the
Fund
included
in
a
universe
(Performance
Universe)
selected
by
Broadridge
Financial
Solutions,
Inc.
(Broadridge),
an
independent
provider
of
investment
company
data.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
a
Performance
Universe.
The
Board
also
reviewed
and
considered
Fund
performance
reports
provided
and
discussions
that
occurred
with
portfolio
managers
at
Board
meetings
throughout
the
year.
A
summary
of
each
Fund’s
performance
results
is
below.
Franklin
Templeton
SMACS:
Series
CH,
Franklin
Templeton
SMACS:
Series
E
and
Franklin
Templeton
SMACS:
Series
I
–
The
Performance
Universe
for
the
Franklin
Templeton
SMACS:
Series
CH
included
the
Fund
and
all
retail
and
institutional
California
municipal
debt
funds.
The
Performance
Universe
for
the
Franklin
Templeton
SMACS:
Series
E
included
the
Fund
and
all
retail
and
institutional
equity
income
funds.
The
Performance
Universe
for
the
Franklin
Templeton
SMACS:
Series
I
included
the
Fund
and
all
retail
and
institutional
short
high
yield
funds.
The
Board
noted
that
each
Fund’s
annualized
income
return
and
annualized
total
return
for
the
one-year
period
was
above
the
medians
of
its
respective
Performance
Universe.
The
Board
concluded
that
each
Fund’s
performance
was
satisfactory.
Franklin
Templeton
SMACS:
Series
H
–
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
high
yield
funds.
The
Board
noted
that
the
Fund’s
annualized
income
return
and
annualized
total
return
for
the
one-year
period
was
below
the
medians
of
its
Performance
Universe.
The
Board
further
noted
that
the
Fund
commenced
operations
on
June
3,
2019
and
was
100%
owned
by
Franklin
Resources,
Inc.
or
an
affiliate.
The
Board
also
noted
that
the
Fund’s
annualized
income
return
and
annualized
total
return
for
the
one-year
period
was
3.30%
and
4.51%,
respectively.
Based
on
the
foregoing,
the
Board
concluded
that
the
Fund’s
performance
was
satisfactory.
Comparative
Fees
and
Expenses
The
Board
reviewed
and
considered
information
regarding
each
Fund’s
actual
total
expense
ratio
and
its
various
components,
including,
as
applicable,
management
fees;
transfer
agent
expenses;
underlying
fund
expenses;
Rule
12b-1
and
non-Rule
12b-1
service
fees;
and
other
non-
management
fees.
The
Board
considered
the
actual
total
expense
ratio
and,
separately,
the
actual
management
fee
rate
(Management
Rate),
of
each
Fund
in
comparison
to
the
median
expense
ratio
and
median
Management
Rate,
respectively,
of
other
mutual
funds
deemed
comparable
to
and
with
a
similar
expense
structure
to
the
Fund
selected
by
Broadridge
(Expense
Group).
Broadridge
fee
and
expense
data
is
based
upon
information
taken
from
each
fund’s
most
recent
annual
report,
which
reflects
historical
asset
levels
that
may
be
quite
different
from
those
currently
existing,
particularly
in
a
period
of
market
volatility.
While
recognizing
such
inherent
limitation
and
the
fact
that
expense
ratios
and
Management
Rates
generally
increase
as
assets
decline
and
decrease
as
assets
grow,
the
Board
believed
the
independent
analysis
conducted
by
Broadridge
to
be
an
appropriate
measure
of
comparative
fees
and
expenses.
The
Broadridge
Management
Rate
includes
administrative
charges,
and
the
actual
total
expense
ratio,
for
comparative
consistency,
was
shown
for
(i)
Class
A1,
Class
B,
Class
S,
Class
Y,
Class
Z,
Direct
Class
and
Investor
Class
shares
for
the
funds
in
the
Franklin
Templeton
SMACS:
Series
CH
Expense
Group;
(ii)
Class
N,
Investor
Class
and
Retail
Class
shares
for
the
funds
in
the
Franklin
Templeton
SMACS:
Series
E
Expense
Group;
(iii)
Class
I,
Class
Y,
Investor
Class,
Open
Class
and
Retail
Class
shares
for
the
funds
in
the
Franklin
Templeton
SMACS:
Series
H
Expense
Group;
and
(iv)
Class
I,
Class
Y,
Investor
Class,
Open
Class
and
Retail
Class
shares
for
the
funds
in
the
Franklin
Templeton
SMACS:
Series
I
Expense
Group.
The
Board
received
a
description
of
the
methodology
used
by
Broadridge
to
select
the
mutual
funds
included
in
an
Expense
Group.
Franklin
Strategic
Series
Shareholder
Information
66
franklintempleton.com
Annual
Report
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
CH
included
the
Fund
and
11
other
California
municipal
debt
funds.
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
E
included
the
Fund
and
15
other
equity
income
funds.
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
H
included
the
Fund
and
nine
other
high
yield
funds.
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
I
included
the
Fund,
two
other
short
high
yield
funds,
and
nine
high
yield
funds.
The
Board
noted
that
the
Management
Rates
and
the
actual
total
expense
ratios
for
the
Funds
were
below
the
medians
of
their
respective
Expense
Groups.
The
Board
also
noted
that
the
Manager
provides
general
investment
management
and
administrative
services
to
each
Fund
for
a
zero
management
fee.
The
Board
further
noted
that
the
Manager
assumes
certain
expenses
incurred
by
each
Fund
(including
acquired
fund
fees
and
expenses,
but
excluding
certain
non-routine
expenses,
such
as
those
relating
to
litigation,
indemnification,
reorganizations
and
liquidations)
so
that
total
annual
fund
operating
expenses
do
not
exceed
0.00%.
The
Board
concluded
that
each
Fund’s
zero
contractual
management
fee
is
reasonable.
Profitability
The
Board
reviewed
and
considered
information
regarding
the
profits
realized
by
the
Manager
and
its
affiliates
in
connection
with
the
operation
of
each
Fund.
In
this
respect,
the
Board
considered
the
Fund
profitability
analysis
provided
by
the
Manager
that
addresses
the
overall
profitability
of
FT’s
US
fund
business,
as
well
as
its
profits
in
providing
investment
management
and
other
services
to
each
of
the
individual
funds
during
the
12-month
period
ended
September
30,
2020,
being
the
most
recent
fiscal
year-
end
for
FRI.
The
Board
noted
that
although
management
continually
makes
refinements
to
its
methodologies
used
in
calculating
profitability
in
response
to
organizational
and
product-related
changes,
the
overall
methodology
has
remained
consistent
with
that
used
in
the
Funds’
profitability
report
presentations
from
prior
years.
The
Board
further
noted
management’s
representation
that
the
profitability
analysis
excluded
the
impact
of
the
recent
acquisition
of
the
Legg
Mason
companies
and
that
management
expects
to
incorporate
the
legacy
Legg
Mason
companies
into
the
profitability
analysis
beginning
next
year.
The
Board
also
noted
that
PricewaterhouseCoopers
LLP,
auditor
to
FRI
and
certain
FT
funds,
has
been
engaged
by
the
Manager
to
periodically
review
and
assess
the
allocation
methodologies
to
be
used
solely
by
the
Funds’
Board
with
respect
to
the
profitability
analysis.
The
Board
noted
management’s
belief
that
costs
incurred
in
establishing
the
infrastructure
necessary
for
the
type
of
mutual
fund
operations
conducted
by
the
Manager
and
its
affiliates
may
not
be
fully
reflected
in
the
expenses
allocated
to
each
Fund
in
determining
its
profitability,
as
well
as
the
fact
that
the
level
of
profits,
to
a
certain
extent,
reflected
operational
cost
savings
and
efficiencies
initiated
by
management.
As
part
of
this
evaluation,
the
Board
considered
management’s
outsourcing
of
certain
operations,
which
effort
has
required
considerable
up
front
expenditures
by
the
Manager
but,
over
the
long
run
is
expected
to
result
in
greater
efficiencies.
The
Board
also
noted
management’s
expenditures
in
improving
shareholder
services
provided
to
the
Funds,
as
well
as
the
need
to
implement
systems
and
meet
additional
regulatory
and
compliance
requirements
resulting
from
recent
US
Securities
and
Exchange
Commission
and
other
regulatory
requirements.
The
Board
also
considered
the
extent
to
which
the
Manager
and
its
affiliates
might
derive
ancillary
benefits
from
fund
operations,
including
revenues
generated
from
transfer
agent
services,
potential
benefits
resulting
from
personnel
and
systems
enhancements
necessitated
by
fund
growth,
as
well
as
increased
leverage
with
service
providers
and
counterparties.
Based
upon
its
consideration
of
all
these
factors,
the
Board
concluded
that
the
level
of
profits
realized
by
the
Manager
and
its
affiliates
from
providing
services
to
each
Fund
was
not
excessive
in
view
of
the
nature,
extent
and
quality
of
services
provided
to
each
Fund.
Economies
of
Scale
The
Board
reviewed
and
considered
the
extent
to
which
the
Manager
may
realize
economies
of
scale,
if
any,
as
each
Fund
grows
larger
and
whether
each
Fund’s
management
fee
structure
reflects
any
economies
of
scale
for
the
benefit
of
shareholders.
In
connection
with
this
review,
the
Board
noted
that
because
each
Fund
pays
a
zero
management
fee,
the
consideration
of
possible
economies
of
scale
in
the
future
was
not
relevant.
The
Board
further
noted
that
the
Manager
omitted
the
Funds
from
its
economies
of
scale
analysis
as
the
Funds
had
been
in
operation
for
less
than
three
years.
Conclusion
Based
on
its
review,
consideration
and
evaluation
of
all
factors
it
believed
relevant,
including
the
above-described
factors
and
conclusions,
the
Board
unanimously
approved
the
continuation
of
each
Management
Agreement
for
an
additional
one-year
period.
Franklin
Strategic
Series
Shareholder
Information
67
franklintempleton.com
Annual
Report
Liquidity
Risk
Management
Program-
Funds
no
HLIM
Each
Fund
has
adopted
and
implemented
a
written
Liquidity
Risk
Management
Program
(the
“LRMP”)
as
required
by
Rule
22e-4
under
the
Investment
Company
Act
of
1940
(the
“Liquidity
Rule”).
The
LRMP
is
designed
to
assess
and
manage
each
Fund’s
liquidity
risk,
which
is
defined
as
the
risk
that
the
Fund
could
not
meet
requests
to
redeem
shares
issued
by
the
Fund
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
In
accordance
with
the
Liquidity
Rule,
the
LRMP
includes
policies
and
procedures
that
provide
for:
(1)
assessment,
management,
and
review
(no
less
frequently
than
annually)
of
each
Fund’s
liquidity
risk;
(2)
classification
of
each
Fund’s
portfolio
holdings
into
one
of
four
liquidity
categories
(Highly
Liquid,
Moderately
Liquid,
Less
Liquid,
and
Illiquid);
(3)
for
Funds
that
do
not
primarily
hold
assets
that
are
Highly
Liquid,
establishing
and
maintaining
a
minimum
percentage
of
the
Fund’s
net
assets
in
Highly
Liquid
investments
(called
a
“Highly
Liquid
Investment
Minimum”
or
“HLIM”);
and
(4)
prohibiting
the
Fund’s
acquisition
of
Illiquid
investments
that
would
result
in
the
Fund
holding
more
than
15%
of
its
net
assets
in
Illiquid
assets.
The
LRMP
also
requires
reporting
to
the
Securities
and
Exchange
Commission
(“SEC”)
(on
a
non-public
basis)
and
to
the
Board
if
the
Fund’s
holdings
of
Illiquid
assets
exceed
15%
of
the
Fund’s
net
assets.
Funds
with
HLIMs
must
have
procedures
for
addressing
HLIM
shortfalls,
including
reporting
to
the
Board
and,
with
respect
to
HLIM
shortfalls
lasting
more
than
seven
consecutive
calendar
days,
reporting
to
the
SEC
(on
a
non-public
basis).
The
Director
of
Liquidity
Risk
within
the
Investment
Risk
Management
Group
(the
“IRMG”)
is
the
appointed
Administrator
of
the
LRMP.
The
IRMG
maintains
the
Investment
Liquidity
Committee
(the
“ILC”)
to
provide
oversight
and
administration
of
policies
and
procedures
governing
liquidity
risk
management
for
FT
products
and
portfolios.
The
ILC
includes
representatives
from
Franklin
Templeton’s
Risk,
Trading,
Global
Compliance,
Investment
Compliance,
Investment
Operations,
Valuation
Committee,
Product
Management
and
Global
Product
Strategy.
In
assessing
and
managing
each
Fund’s
liquidity
risk,
the
ILC
considers,
as
relevant,
a
variety
of
factors,
including
the
Fund’s
investment
strategy
and
the
liquidity
of
its
portfolio
investments
during
both
normal
and
reasonably
foreseeable
stressed
conditions;
its
short
and
long-term
cash
flow
projections;
and
its
cash
holdings
and
access
to
other
funding
sources
including
the
Funds’
interfund
lending
facility
and
line
of
credit.
Classification
of
the
Fund’s
portfolio
holdings
in
the
four
liquidity
categories
is
based
on
the
number
of
days
it
is
reasonably
expected
to
take
to
convert
the
investment
to
cash
(for
Highly
Liquid
and
Moderately
Liquid
holdings)
or
sell
or
dispose
of
the
investment
(for
Less
Liquid
and
Illiquid
investments),
in
current
market
conditions
without
significantly
changing
the
investment’s
market
value.
Each
Fund
primarily
holds
liquid
assets
that
are
defined
under
the
Liquidity
Rule
as
"Highly
Liquid
Investments,"
and
therefore
is
not
required
to
establish
an
HLIM.
Highly
Liquid
Investments
are
defined
as
cash
and
any
investment
reasonably
expected
to
be
convertible
to
cash
in
current
market
conditions
in
three
business
days
or
less
without
the
conversion
to
cash
significantly
changing
the
market
value
of
the
investment.
At
meetings
of
the
Funds’
Board
of
Trustees
held
in
May
2021,
the
Program
Administrator
provided
a
written
report
to
the
Board
addressing
the
adequacy
and
effectiveness
of
the
program
for
the
year
ended
December
31,
2020.
The
Program
Administrator
report
concluded
that
(i.)
the
LRMP,
as
adopted
and
implemented,
remains
reasonably
designed
to
assess
and
manage
each
Fund’s
liquidity
risk;
(ii.)
the
LRMP,
including
the
Highly
Liquid
Investment
Minimum
(“HLIM”)
where
applicable,
was
implemented
and
operated
effectively
to
achieve
the
goal
of
assessing
and
managing
each
Fund’s
liquidity
risk;
and
(iii.)
each
Fund
was
able
to
meet
requests
for
redemption
without
significant
dilution
of
remaining
investors’
interests
in
the
Fund.
Proxy
Voting
Policies
and
Procedures
The
Trust’s
investment
manager
has
established
Proxy
Voting
Policies
and
Procedures
(Policies)
that
the
Trust
uses
to
determine
how
to
vote
proxies
relating
to
portfolio
securities.
Shareholders
may
view
the
Trust’s
complete
Policies
online
at
franklintempleton.com.
Alternatively,
shareholders
may
request
copies
of
the
Policies
free
of
charge
by
calling
the
Proxy
Group
collect
at
(954)
527-
7678
or
by
sending
a
written
request
to:
Franklin
Templeton
Companies,
LLC,
300
S.E.
2nd
Street,
Fort
Lauderdale,
FL
33301,
Attention:
Proxy
Group.
Copies
of
the
Trust’s
proxy
voting
records
are
also
made
available
online
at
franklintempleton.com
and
posted
on
the
U.S.
Securities
and
Exchange
Commission’s
website
at
sec.gov
and
reflect
the
most
recent
12-month
period
ended
June
30.
Quarterly
Statement
of
Investments
The
Trust
files
a
complete
statement
of
investments
with
the
U.S.
Securities
and
Exchange
Commission
for
the
first
and
third
quarters
for
each
fiscal
year
as
an
exhibit
to
its
report
on
Form
N-PORT.
Shareholders
may
view
the
filed
Form
N-PORT
by
visiting
the
Commission’s
website
at
sec.
Franklin
Strategic
Series
Shareholder
Information
68
franklintempleton.com
Annual
Report
gov.
The
filed
form
may
also
be
viewed
and
copied
at
the
Commission’s
Public
Reference
Room
in
Washington,
DC.
Information
regarding
the
operations
of
the
Public
Reference
Room
may
be
obtained
by
calling
(800)
SEC-0330.
Householding
of
Reports
and
Prospectuses
You
will
receive,
or
receive
notice
of
the
availability
of,
each
Fund’s
financial
reports
every
six
months.
In
addition,
you
will
receive
an
annual
updated
summary
prospectus
(detail
prospectus
available
upon
request).
To
reduce
Fund
expenses,
we
try
to
identify
related
shareholders
in
a
household
and
send
only
one
copy
of
the
financial
reports
(to
the
extent
received
by
mail)
and
summary
prospectus.
This
process,
called
“householding,”
will
continue
indefinitely
unless
you
instruct
us
otherwise.
If
you
prefer
not
to
have
these
documents
householded,
please
call
us
at
(800)
632-2301.
At
any
time
you
may
view
current
prospectuses/
summary
prospectuses
and
financial
reports
on
our
website.
If
you
choose,
you
may
receive
these
documents
through
electronic
delivery.
FSS3
A
10/21
©
2021
Franklin
Templeton
Investments.
All
rights
reserved.
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.
Annual
Report
Franklin
Strategic
Series
Investment
Manager
Distributor
Shareholder
Services
Franklin
Advisers,
Inc.
Franklin
Distributors,
LLC
(800)
DIAL
BEN
®
/
342-5236
franklintempleton.com
(800)
632-2301
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 13(a)(1), the Registrant is attaching as an exhibit a copy of its code of ethics that applies to its principal executive officers and principal financial and accounting officer.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant has an audit committee financial expert serving on its audit committee.
(2) The audit committee financial expert is Mary C. Choksi and she is "independent" as defined under the relevant Securities and Exchange Commission Rules and Releases.
Item 4.
Principal Accountant Fees and Services.
((a) Audit Fees
The aggregate fees paid to the principal accountant for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements were $120,816 for the fiscal year ended August 31, 2021 and $161,177 for the fiscal year ended August 31, 2020.
(b) Audit-Related Fees
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of Item 4.
There were no fees paid to the principal accountant for assurance and related services rendered by the principal accountant to the registrant's investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that are reasonably related to the performance of the audit of their financial statements.
(c) Tax Fees
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant for tax compliance, tax advice and tax planning.
There were no fees paid to the principal accountant for professional services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant for tax compliance, tax advice and tax planning.
(d) All Other Fees
There were no fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant, other than the services reported in paragraphs (a)-(c) of Item 4.
The aggregate fees paid to the principal accountant for products and services rendered by the principal accountant to the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant not reported in paragraphs (a)-(c) of Item 4 were $37,812 for the fiscal year ended August 31, 2021 and $175,744 for the fiscal year ended August 31, 2020. The services for which these fees were paid included the issuance of an Auditors’ Certificate for South Korean regulatory shareholders disclosures, benchmarking services in connection with the ICI TA survey professional fees in connection with determining the feasibility of a U.S. direct lending structure, valuation services related to a fair value engagement, assets under management certification, and professional fees in connection with SOC 1 reports.
(e) (1) The registrant’s audit committee is directly responsible for approving the services to be provided by the auditors, including:
(i) pre-approval of all audit and audit related services;
(ii) pre-approval of all non-audit related services to be provided to the Fund by the auditors;
(iii) pre-approval of all non-audit related services to be provided to the registrant by the auditors to the registrant’s investment adviser or to any entity that controls, is controlled by or is under common control with the registrant’s investment adviser and that provides ongoing services to the registrant where the non-audit services relate directly to the operations or financial reporting of the registrant; and
(iv) establishment by the audit committee, if deemed necessary or appropriate, as an alternative to committee pre-approval of services to be provided by the auditors, as required by paragraphs (ii) and (iii) above, of policies and procedures to permit such services to be pre-approved by other means, such as through establishment of guidelines or by action of a designated member or members of the committee; provided the policies and procedures are detailed as to the particular service and the committee is informed of each service and such policies and procedures do not include delegation of audit committee responsibilities, as contemplated under the Securities Exchange Act of 1934, to management; subject, in the case of (ii) through (iv), to any waivers, exceptions or exemptions that may be available under applicable law or rules.
(e) (2) None of the services provided to the registrant described in paragraphs (b)-(d) of Item 4 were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of regulation S-X.
(f) No disclosures are required by this Item 4(f).
(g) The aggregate non-audit fees paid to the principal accountant for services rendered by the principal accountant to the registrant and the registrant’s investment adviser and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant were $37,812 for the fiscal year ended August 31, 2021 and $175,744 for the fiscal year ended August 31, 2020.
(h) The registrant’s audit committee of the board has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee
of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and
Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
.
The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures are effective.
(b)
Changes in Internal Controls. There have been no changes in the Registrant’s internal 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 Jeffrey W. White, Interim Chief Financial Officer, Chief Accounting Officer and Treasurer
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Jeffrey W. White, Interim Chief Financial Officer, Chief Accounting Officer and Treasurer
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 October 28, 2021
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 October 28, 2021
By S\Jeffrey W. White______________________
Jeffrey W. White
Interim Chief Financial Officer, Chief Accounting Officer and Treasurer
Date October 28, 2021