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)
Alison Baur, One Franklin Parkway, San Mateo, CA 94403-1906
(Name and address of agent for service)
Registrant's telephone number, including area code: 650 312-2000
Date of fiscal year end: 8/31
Date of reporting period: 8/31/23
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,
2023
Not
FDIC
Insured
May
Lose
Value
No
Bank
Guarantee
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
I
The
Securities
and
Exchange
Commission
has
adopted
new
regulations
that
will
result
in
changes
to
the
design
and
delivery
of
annual
and
semiannual
shareholder
reports
beginning
in
July
2024.
If
you
have
previously
elected
to
receive
shareholder
reports
electronically,
you
will
continue
to
do
so
and
need
not
take
any
action.
Otherwise,
paper
copies
of
the
Fund’s
shareholder
reports
will
be
mailed
to
you
beginning
in
July
2024.
If
you
would
like
to
receive
shareholder
reports
and
other
communications
from
the
Fund
electronically
instead
of
by
mail,
you
may
make
that
request
at
any
time
by
contacting
your
financial
intermediary
(such
as
a
broker-dealer
or
bank).
franklintempleton.com
Annual
Report
1
Contents
Franklin
Templeton
SMACS:
Series
CH
2
Franklin
Templeton
SMACS:
Series
E
8
Franklin
Templeton
SMACS:
Series
H
14
Franklin
Templeton
SMACS:
Series
I
20
Financial
Highlights
and
Schedules
of
Investments
26
Financial
Statements
48
Notes
to
Financial
Statements
52
Report
of
Independent
Registered
Public
Accounting
Firm
65
Tax
Information
66
Board
Members
and
Officers
67
Shareholder
Information
72
Visit
franklintempleton.com
for
fund
updates,
to
access
your
account,
or
to
find
helpful
financial
planning
tools.
2
franklintempleton.com
Annual
Report
Franklin
Templeton
SMACS:
Series
CH
This
annual
report
for
Franklin
Templeton
SMACS:
Series
CH
(Fund)
covers
the
fiscal
year
ended
August
31,
2023.
This
Fund
is
not
intended
to
be
owned
as
a
stand-alone
vehicle
but
may
only
be
owned
as
part
of
the
applicable
Franklin
Templeton
SMA
strategy.
Fund
Overview
Q.
What
is
the
Fund’s
investment
strategy?
A.
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.
Q.
What
were
the
overall
market
conditions
during
the
Fund’s
reporting
period?
A.
During
the
12
months
ending
August
31,
2023,
the
U.S.
Federal
Reserve
(Fed)
continued
to
tighten
monetary
policy
as
it
tried
to
get
inflation
under
control
without
tipping
the
economy
into
recession.
After
several
outsized
interest
rate
hikes
of
75
basis
points
(bps),
the
Fed
slowed
the
pace
of
tightening
to
50
bps
in
December
2022,
followed
by
25-bp
increases
in
February,
March
and
May
2023.
The
Fed
then
opted
for
a
pause
in
June
to
allow
policymakers
some
time
to
assess
the
effects
of
the
campaign.
July
saw
another
25-bp
hike,
taking
the
fed
funds
rate
to
its
highest
level
in
more
than
22
years.
The
post-meeting
statement
reiterated
the
central
bank’s
data
dependence,
and,
in
light
of
inflation
that
appeared
“stickier”
than
many
had
hoped,
it
remained
unclear
whether
this
would
be
the
last
move
in
the
Fed’s
tightening
cycle.
Meanwhile,
the
U.S.
economy
remained
resilient,
with
real
gross
domestic
product
(GDP)
increasing
at
an
annual
rate
of
2.0%
in
the
first
quarter
and
2.1%
in
the
second
quarter
of
2023,
underpinned
by
rising
consumer
spending
and
business
investment.
The
municipal
(muni)
bond
market
witnessed
a
challenging
year
in
2022,
primarily
driven
by
the
aforementioned
monetary
policy
tightening.
High
levels
of
uncertainty
led
to
significant
outflows
from
muni
bond
retail
vehicles.
However,
2023
has
seen
investor
interest
return
as
flows
into
the
asset
class
so
far
this
year
have
been
underwhelming
but
positive.
Limited
new
issuance
also
meant
that
technical
conditions
have
been
constructive
for
the
sector:
year-to-date
in
2023
new
supply
in
the
market
remained
around
9%
below
what
it
was
for
the
same
period
in
2022.
Q.
How
did
we
respond
to
these
changing
market
conditions?
A.
The
past
12
months
witnessed
high
levels
of
uncertainty.
However,
market
volatility
was
largely
interest-rate
driven.
Credit
fundamentals
have
remained
solid,
in
our
view,
with
robust
balance
sheets
that
were
supported
by
significant
“rainy-day”
funds
which,
in
turn,
were
bolstered
by
federal
COVID-19
aid,
increased
during
the
post-pandemic
recovery,
and
maintained
with
conservative
budgeting
and
fiscal
discipline.
Considering
our
view
of
the
fundamental
strength
in
the
muni
market,
the
Fund
looked
for
opportunities
among
lower-rated
issuers
and
those
with
no
external
credit
rating.
Over
the
period,
we
sought
opportunities
that
had
the
potential
to
improve
the
overall
yield
of
the
portfolio
and
used
our
rigorous
bottom-up
research
process
to
help
us
identify
credits
that
we
believed
could
weather
a
more
challenging
macroeconomic
environment.
Performance
Overview
The
Fund’s
share
price,
as
measured
by
net
asset
value
(NAV),
decreased
from
$8.85
on
August
31,
2022,
to
$8.52
on
August
31,
2023.
The
Fund
paid
dividends
totaling
39.9526
cents
per
share
for
the
reporting
period.
1
The
Performance
Summary
beginning
on
page
4
shows
that
at
the
end
of
this
reporting
period
the
Fund’s
distribution
rate
was
4.92%
based
on
an
annualization
of
August’s
3.4935
cents
per
share
dividend
and
the
NAV
of
$8.52
on
August
31,
2023.
An
investor
in
the
2023
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
10.49%
from
a
taxable
investment
to
match
the
Fund’s
tax-free
distribution
rate.
1.
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.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Schedule
of
Investments
(SOI).
The
SOI
begins
on
page
27
.
Franklin
Templeton
SMACS:
Series
CH
3
franklintempleton.com
Annual
Report
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.
*
Does
not
include
cash
and
cash
equivalents.
Q.
What
were
the
leading
contributors
to
performance?
A.
In
contrast,
an
off-benchmark
allocation
to
B
and
BB
rated
securities
contributed
to
performance,
as
did
an
overweight
to
bonds
with
more
than
10
years
to
maturity.
In
terms
of
sector
allocations,
overweights
to
the
housing
and
special
tax
segments
contributed
to
relative
results.
Q.
What
were
the
leading
detractors
from
performance?
A.
The
Fund
underperformed
its
benchmark
over
the
past
12
months.
Its
lack
of
exposure
to
AA
and
A
rated
bonds
weighed
on
relative
returns,
as
did
a
significant
underweight
to
bonds
with
less
than
10
years
to
maturity.
In
terms
of
sector
allocations,
a
lack
of
exposure
to
both
local
and
state
general
obligation
bonds,
as
well
as
an
underweight
to
utilities-related
issues
hindered
performance
over
the
period.
It
is
important
to
note
that
the
Fund
is
paired
with
Separately
Managed
Accounts
(SMAs)
that
are
tilted
towards
higher-
quality,
AAA
and
AA
rated
securities
as
well
as
essential
services
sectors,
such
as
utilities,
water
and
sewer,
and
similar.
Q.
Were
there
any
significant
changes
to
the
Fund
during
the
reporting
period?
A.
There
were
no
significant
changes
to
the
Fund’s
overall
strategy.
However,
as
we
gained
more
clarity
on
the
Fed’s
monetary
tightening
path
and
became
more
comfortable
that
muni
fundamentals
were
generally
robust
in
the
face
of
tighter
financing
conditions
and
slowing
economic
activity,
the
Fund
put
aside
some
cash
as
dry
powder
to
be
able
to
put
it
to
work
if
and
when
interesting
opportunities
were
to
arise.
The
Franklin
Templeton
Fixed
Income
research
team
conducts
an
in-depth
analysis
of
potential
investment
opportunities
and
is
therefore
able
to
find
what
it
deems
to
be
attractively
priced
securities
from
muni
issuers
with
solid
underlying
credit
fundamentals
that
could
weather
a
period
of
below-trend
growth.
Additionally,
in
light
of
the
Fed’s
aggressive
hiking
cycle,
the
Fund
shortened
its
duration
over
the
review
period.
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,
2023,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
state,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
Portfolio
Composition
8/31/23
%
of
Total
Investments
*
Special
Tax
44.44%
Housing
21.81%
Health
Care
10.85%
Education
10.48%
Industrial
Dev.
Revenue
and
Pollution
Control
9.09%
Transportation
3.33%
Performance
Summary
as
of
August
31,
2023
Franklin
Templeton
SMACS:
Series
CH
4
franklintempleton.com
Annual
Report
The
performance
tables
and
graph
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
8/31/23
1
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Current
performance
may
differ
from
figures
shown.
Cumulative
Total
Return
2
Average
Annual
Total
Return
3
–
1-Year
+0.85%
+0.85%
3-Year
-2.39%
-0.80%
Since
Inception
(6/3/19)
+0.85%
+0.20%
30-Day
Standardized
Yield
6
Taxable
Equivalent
30-Day
Standardized
Yield
5
Distribution
Rate
4
Taxable
Equivalent
Distribution
Rate
5
(with
fee
waiver)
(without
fee
waiver)
(with
fee
waiver)
(without
fee
waiver)
4.92%
10.49%
5.34%
3.04%
11.39%
6.48%
See
page
6
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
CH
Performance
Summary
5
franklintempleton.com
Annual
Report
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.
6/3/19-8/31/23
See
page
6
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
CH
Performance
Summary
6
franklintempleton.com
Annual
Report
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
All
investments
involve
risks,
including
possible
loss
of
principal.
Fixed
income
securities
involve
interest
rate,
credit,
inflation
and
reinvestment
risks,
and
possible
loss
of
principal.
As
interest
rates
rise,
the
value
of
fixed
income
securities
falls.
Portfolios
focused
on
a
single
state
are
subject
to
greater
risk
of
adverse
economic
and
regulatory
changes
in
that
state
than
a
geographically
diversified
fund.
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.
Low-rated,
high-yield
bonds
are
subject
to
greater
price
volatility,
illiquidity
and
possibility
of
default.
These
and
other
risks
are
discussed
in
the
Fund’s
prospectus.
1.
Gross
expenses
are
the
Fund’s
total
annual
operating
expenses
as
of
the
Fund's
prospectus
available
at
the
time
of
publication.
Actual
expenses
may
be
higher
and
may
impact
portfolio
returns.
Net
expenses
reflect
contractual
fee
waivers,
expense
caps
and/or
reimbursements,
which
cannot
be
terminated
prior
to
12/31/23
without
Board
consent.
Additional
amounts
may
be
voluntarily
waived
and/or
reimbursed
and
may
be
modified
or
discontinued
at
any
time
without
notice.
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
8/31/23.
5.
Taxable
equivalent
distribution
rate
and
yield
assume
the
published
rates
as
of
6/22/23
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:
FactSet.
The
Bloomberg
Municipal
Bond
California
Exempt
Index
is
the
California
component
of
the
Bloomberg
Municipal
Bond
Index,
a
market
value-weighted
index
of
tax-exempt,
investment-grade
municipal
bonds
with
maturities
of
one
year
or
more.
8.
Figures
are
as
stated
in
the
Fund’s
current
prospectus,
including
the
effect
of
acquired
fund
fees
and
expenses,
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(9/1/22–8/31/23)
Net
Investment
Income
$0.399526
Total
Annual
Operating
Expenses
8
With
Fee
Waiver
Without
Fee
Waiver
0.00%
2.37%
Your
Fund’s
Expenses
Franklin
Templeton
SMACS:
Series
CH
7
franklintempleton.com
Annual
Report
Shareholders
of
mutual
funds
incur
ongoing
costs,
such
as
management
fees
(if
any),
custodian
fees
and
other
Fund
expenses,
which
are
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
the
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Please
note
that
the
expenses
shown
in
the
table
are
meant
to
highlight
your
ongoing
Fund
costs
only
and
do
not
reflect
any
program
fees
that
you
may
pay.
Therefore,
the
table
is
useful
in
comparing
ongoing
costs
of
investing
in
the
Fund
only,
and
will
not
help
you
determine
the
relative
total
costs
of
participating
in
any
one
investment
program.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value.”
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=
$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
184/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Beginning
Account
Value
3/1/23
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,017.70
$0.00
$1,025.21
$0.00
0.00%
8
franklintempleton.com
Annual
Report
Franklin
Templeton
SMACS:
Series
E
This
annual
report
for
Franklin
Templeton
SMACS:
Series
E
(Fund)
covers
the
fiscal
year
ended
August
31,
2023.
This
Fund
is
not
intended
to
be
owned
as
a
stand-alone
vehicle
but
may
only
be
owned
as
part
of
the
applicable
Franklin
Templeton
SMA
strategy.
Fund
Overview
Q.
What
is
the
Fund’s
investment
strategy?
A.
In
analyzing
securities,
we
consider
a
variety
of
factors,
including:
a
security’s
relative
value
based
on
such
factors
as
anticipated
cash
flow,
interest
or
dividend
coverage,
asset
coverage,
and
earnings
prospects;
the
experience
and
strength
of
the
company’s
management;
the
company’s
changing
financial
condition
and
market
recognition
of
the
change;
the
company’s
sensitivity
to
changes
in
interest
rates
and
business
conditions;
and
the
company’s
debt
maturity
schedules
and
borrowing
requirements.
When
choosing
investments
for
the
Fund,
we
apply
a
bottom-up,
value-oriented,
long-term
approach,
focusing
on
the
market
price
of
a
company’s
securities
relative
to
our
evaluation
of
the
company’s
long-term
earnings,
asset
value
and
cash
flow
potential.
We
also
consider
a
company’s
price/earnings
ratio,
profit
margins
and
liquidation
value.
We
regularly
use
a
variety
of
equity-related
derivatives
and
complex
equity
securities
for
various
purposes
including
enhancing
Fund
returns,
increasing
liquidity,
gaining
exposure
to
particular
instruments
in
more
efficient
or
less
expensive
ways
and/or
hedging
risks
relating
to
changes
in
certain
equity
markets.
We
seek
income
by
selecting
stocks
with
dividend
yields
we
believe
are
attractive.
We
search
for
undervalued
or
out-
of-favor
securities
we
believe
offer
opportunities
for
income
today
and
significant
growth
tomorrow.
Q.
What
were
the
overall
market
conditions
during
the
Fund’s
reporting
period?
A.
Throughout
the
period,
the
U.S.
Federal
Reserve
(Fed)
continued
to
increase
interest
rates
from
2022
levels
to
counteract
stubborn
inflation.
Despite
the
Fed’s
hawkish
stance,
the
labor
market
remains
tight,
and
the
economy
continues
to
grow
with
gross
domestic
product
in
excess
of
2%.
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.
Q.
How
did
we
respond
to
these
changing
market
conditions?
A.
As
interest
rates
increased
during
the
period
and
higher
yield
investment
opportunities
arose
for
fixed
income
holdings,
the
Fund
increased
its
fixed
income
allocation.
In
response
to
the
changing
market
conditions,
the
Fund
also
used
derivatives
to
sell
and
reduce
positions.
Performance
Overview
The
Fund
posted
a
+10.81%
cumulative
total
return
for
the
12
months
ended
August
31,
2023.
In
comparison,
the
Fund’s
benchmark,
the
MSCI
USA
High
Dividend
Yield
Index,
which
measures
performance
of
U.S.
equities
(excluding
real
estate
investment
trusts)
with
higher
dividend
income
and
quality
characteristics
than
average
dividend
yields
that
are
both
sustainable
and
persistent,
posted
a
+7.76%
cumulative
total
return
for
the
same
period.
1
You
can
find
more
of
the
Fund’s
performance
data
in
the
Performance
Summary
beginning
on
page
10
.
Performance
data
represent
past
performance,
which
does
not
guarantee
future
results.
Investment
return
and
principal
value
will
fluctuate,
and
you
may
have
a
gain
or
loss
when
you
sell
your
shares.
Q.
What
were
the
leading
contributors
to
performance?
A.
Equity
holdings
contributed
the
highest
return
to
the
Fund,
particularly
among
the
information
technology
(IT),
materials,
and
industrials
sectors.
Broadcom
and
Cisco
Systems
performed
best
within
the
IT
sector,
while
Freeport-
McMoRan
and
Siemens
contributed
the
highest
absolute
performance
within
the
materials
and
industrials
sectors,
respectively.
As
of
the
period-end
on
August
31,
2023,
the
Fund
no
longer
holds
Siemens.
The
Fund’s
fixed
income
allocation
also
exhibited
positive
results
for
the
year,
with
the
financials,
industrials,
and
consumer
discretionary
sectors
contributing
the
highest
absolute
performance.
Within
the
fixed
income
holdings,
PNC
Financial
Services,
United
Rentals,
and
Expedia
contributed
the
greatest
absolute
returns
for
the
Fund
and
reflect
the
strong
results
from
the
financials,
industrials,
and
consumer
discretionary
sectors.
1.
Source:
Morningstar.
The
index
is
unmanaged
and
includes
reinvestment
of
any
income
or
distributions.
It
does
not
reflect
any
fees,
expenses
or
sale
charges.
One
cannot
invest
directly
in
an
index,
and
an
index
is
not
representative
of
the
Fund’s
portfolio.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Schedule
of
Investments
(SOI).
The
SOI
begins
on
page
30
.
Franklin
Templeton
SMACS:
Series
E
9
franklintempleton.com
Annual
Report
Q.
What
were
the
leading
detractors
from
performance?
A.
Utilities,
consumer
staples,
and
communication
services
are
among
the
leading
equity
detractors
for
the
year.
On
a
stock
basis,
Truist
Financial
and
U.S.
Bancorp
fall
within
the
financials
sector
and
were
the
lowest
performers.
Within
utilities,
NextEra
Energy
was
a
leading
detractor.
As
for
consumer
staples
and
communication
services,
Target
and
Walt
Disney
Company
detracted
from
Fund
performance.
The
Fund
no
longer
holds
a
position
in
Walt
Disney,
as
of
the
period-end
on
August
31,
2023.
Q.
Were
there
any
significant
changes
to
the
Fund
during
the
reporting
period?
A.
There
were
no
significant
changes
to
the
fund
during
the
reporting
period,
but
assets
under
management
increased.
Thank
you
for
your
participation
in
Franklin
Templeton
SMACS:
Series
E.
We
look
forward
to
serving
your
future
investment
needs.
Edward
Perks,
CFA
Co-Lead
Portfolio
Manager
Brendan
Circle,
CFA
Co-Lead
Portfolio
Manager
Todd
Brighton,
CFA
Portfolio
Manager
The
foregoing
information
reflects
our
analysis,
opinions
and
portfolio
holdings
as
of
August
31,
2023,
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.
Portfolio
Composition
8/31/23
%
of
Total
Net
Assets
Pharmaceuticals
10.0%
Banks
8.8%
Metals
&
Mining
8.0%
Oil,
Gas
&
Consumable
Fuels
7.3%
Semiconductors
&
Semiconductor
Equipment
6.7%
Communications
Equipment
5.8%
Capital
Markets
5.0%
Electric
Utilities
4.8%
Biotechnology
4.3%
Machinery
4.1%
Aerospace
&
Defense
3.6%
Specialty
Retail
3.1%
Chemicals
3.0%
Broadline
Retail
2.5%
Other
*
21.4%
Short-Term
Investments
&
Other
Net
Assets
1.6%
*
Categories
within
the
Other
category
are
listed
in
full
in
the
Fund's
Schedule
of
Investments
(SOI),
which
can
be
found
later
in
this
report.
Top
Five
Equity
Holdings
8/31/23
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
Cisco
Systems,
Inc.
5.9%
Communications
Equipment
,
United
States
Bristol-Myers
Squibb
Co.
4.2%
Pharmaceuticals
,
United
States
AstraZeneca
plc
3.8%
Pharmaceuticals
,
United
Kingdom
NextEra
Energy,
Inc.
3.6%
Electric
Utilities
,
United
States
AbbVie,
Inc.
3.4%
Biotechnology
,
United
States
CFA
®
is
a
trademark
owned
by
CFA
Institute.
Performance
Summary
as
of
August
31,
2023
Franklin
Templeton
SMACS:
Series
E
10
franklintempleton.com
Annual
Report
The
performance
tables
and
graph
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
8/31/23
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
+10.81%
+10.81%
3-Year
+45.66%
+13.36%
Since
Inception
(6/3/19)
+59.07%
+11.56%
30-Day
Standardized
Yield
5
Distribution
Rate
4
(with
fee
waiver)
(without
fee
waiver)
6.64%
2.56%
2.29%
See
page
12
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
E
Performance
Summary
11
franklintempleton.com
Annual
Report
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.
6/3/19-8/31/23
See
page
12
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
E
Performance
Summary
12
franklintempleton.com
Annual
Report
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
All
investments
involve
risks,
including
possible
loss
of
principal.
Low-rated,
high-yield
bonds
are
subject
to
greater
price
volatility,
illiquidity
and
possibility
of
default.
Equity
securities
are
subject
to
price
fluctuation
and
possible
loss
of
principal.
International
investments
are
subject
to
special
risks,
including
currency
fluctuations
and
social,
economic
and
political
uncertainties,
which
could
increase
volatility.
These
risks
are
magnified
in
emerging
markets.
The
manager
may
consider
environmental,
social
and
governance
(ESG)
criteria
in
the
research
or
investment
process;
however,
ESG
considerations
may
not
be
a
determinative
factor
in
security
selection.
In
addition,
the
manager
may
not
assess
every
investment
for
ESG
criteria,
and
not
every
ESG
factor
may
be
identified
or
evaluated.
These
and
other
risks
are
discussed
in
the
Fund’s
prospectus.
1.
Gross
expenses
are
the
Fund’s
total
annual
operating
expenses
as
of
the
Fund's
prospectus
available
at
the
time
of
publication.
Actual
expenses
may
be
higher
and
may
impact
portfolio
returns.
Net
expenses
reflect
contractual
fee
waivers,
expense
caps
and/or
reimbursements,
which
cannot
be
terminated
prior
to
12/31/23
without
Board
consent.
Additional
amounts
may
be
voluntarily
waived
and/or
reimbursed
and
may
be
modified
or
discontinued
at
any
time
without
notice.
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
8/31/23.
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:
FactSet.
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
(9/1/22–8/31/23)
Net
Investment
Income
Short-Term
Capital
Gain
Long-Term
Capital
Gain
Tax
Return
of
Capital
Total
$0.7151
$0.0101
$0.1739
$0.0025
$0.9016
Total
Annual
Operating
Expenses
7
With
Fee
Waiver
Without
Fee
Waiver
0.00%
1.36%
Your
Fund’s
Expenses
Franklin
Templeton
SMACS:
Series
E
13
franklintempleton.com
Annual
Report
Shareholders
of
mutual
funds
incur
ongoing
costs,
such
as
management
fees
(if
any),
custodian
fees
and
other
Fund
expenses,
which
are
sometimes
referred
to
as
operating
expenses.
The
table
below
shows
the
ongoing
costs
of
investing
in
the
Fund
and
can
help
you
understand
these
costs
and
compare
them
with
those
of
other
mutual
funds.
The
table
assumes
a
$1,000
investment
held
for
the
six
months
indicated.
Please
note
that
the
expenses
shown
in
the
table
are
meant
to
highlight
your
ongoing
Fund
costs
only
and
do
not
reflect
any
program
fees
that
you
may
pay.
Therefore,
the
table
is
useful
in
comparing
ongoing
costs
of
investing
in
the
Fund
only,
and
will
not
help
you
determine
the
relative
total
costs
of
participating
in
any
one
investment
program.
Actual
Fund
Expenses
The
table
below
provides
information
about
actual
account
values
and
actual
expenses
in
the
columns
under
the
heading
“Actual.”
In
these
columns
the
Fund’s
actual
return,
which
includes
the
effect
of
Fund
expenses,
is
used
to
calculate
the
“Ending
Account
Value.”
You
can
estimate
the
expenses
you
paid
during
the
period
by
following
these
steps
(
of
course,
your
account
value
and
expenses
will
differ
from
those
in
this
illustration
):
Divide
your
account
value
by
$1,000
(
if
your
account
had
an
$8,600
value,
then
$8,600
÷
$1,000
=
8.6
).
Then
multiply
the
result
by
the
number
in
the
row
under
the
headings
“Actual”
and
“Expenses
Paid
During
Period”
(
if
Actual
Expenses
Paid
During
Period
were
$7.50,
then
8.6
x
$7.50
=
$64.50
).
In
this
illustration,
the
actual
expenses
paid
this
period
are
$64.50.
Hypothetical
Example
for
Comparison
with
Other
Funds
Under
the
heading
“Hypothetical”
in
the
table,
information
is
provided
about
hypothetical
account
values
and
hypothetical
expenses
based
on
the
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
the
Fund’s
actual
return.
This
information
may
not
be
used
to
estimate
the
actual
ending
account
balance
or
expenses
you
paid
for
the
period,
but
it
can
help
you
compare
ongoing
costs
of
investing
in
the
Fund
with
those
of
other
funds.
To
do
so,
compare
this
5%
hypothetical
example
with
the
5%
hypothetical
examples
that
appear
in
the
shareholder
reports
of
other
funds.
Please
note
that
expenses
shown
in
the
table
are
meant
to
highlight
ongoing
costs
and
do
not
reflect
any
transactional
costs.
Therefore,
information
under
the
heading
“Hypothetical”
is
useful
in
comparing
ongoing
costs
only,
and
will
not
help
you
compare
total
costs
of
owning
different
funds.
In
addition,
if
transactional
costs
were
included,
your
total
costs
would
have
been
higher.
1.
Expenses
are
equal
to
the
annualized
expense
ratio
for
the
six-month
period
as
indicated
above—in
the
far
right
column—multiplied
by
the
simple
average
account
value
over
the
period
indicated,
and
then
multiplied
by
184/365
to
reflect
the
one-half
year
period.
2.
Reflects
expenses
after
fee
waivers
and
expense
reimbursements.
Does
not
include
acquired
fund
fees
and
expenses.
Actual
(actual
return
after
expenses)
Hypothetical
(5%
annual
return
before
expenses)
Beginning
Account
Value
3/1/23
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,028.70
$0.00
$1,025.21
$0.00
0.00%
14
franklintempleton.com
Annual
Report
Franklin
Templeton
SMACS:
Series
H
This
annual
report
for
Franklin
Templeton
SMACS:
Series
H
(Fund)
covers
the
fiscal
year
ended
August
31,
2023.
This
Fund
is
not
intended
to
be
owned
as
a
stand-alone
vehicle
but
may
only
be
owned
as
part
of
the
applicable
Franklin
Templeton
SMA
strategy.
Fund
Overview
Q.
What
is
the
Fund's
investment
strategy?
A.
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.
Q.
What
were
the
overall
market
conditions
during
the
Fund's
reporting
period?
A.
During
the
12
months
ending
August
31,
2023,
the
U.S.
Federal
Reserve
(Fed)
continued
to
tighten
monetary
policy
as
it
tried
to
get
inflation
under
control
without
tipping
the
economy
into
recession.
After
several
outsized
hikes
of
75
basis
points
(bps),
the
Fed
slowed
the
pace
of
tightening
to
50
bps
in
December
2022,
followed
by
25-bp
increases
in
February,
March
and
May
2023.
The
Fed
then
opted
for
a
pause
in
June
to
allow
policymakers
some
time
to
assess
the
effects
of
the
campaign.
July
saw
another
25-bp
hike,
taking
the
fed
funds
rate
to
its
highest
level
in
more
than
22
years.
The
post-meeting
statement
reiterated
the
central
bank’s
data
dependence,
and,
in
light
of
inflation
that
appeared
“stickier”
than
many
had
hoped,
it
remained
unclear
whether
this
would
be
the
last
move
in
the
Fed’s
tightening
cycle.
Meanwhile,
the
U.S.
economy
remained
resilient,
with
real
gross
domestic
product
(GDP)
increasing
at
an
annual
rate
of
2.0%
in
the
first,
and
2.1%
in
the
second
quarter
of
2023
underpinned
by
rising
consumer
spending
and
business
investment.
The
municipal
(muni)
bond
market
witnessed
a
challenging
year
in
2022,
primarily
driven
by
the
aforementioned
monetary
policy
tightening.
High
levels
of
uncertainty
led
to
significant
outflows
from
muni
bond
retail
vehicles.
However,
2023
has
seen
investor
interest
return
as
flows
into
the
asset
class
so
far
this
year
have
been
underwhelming
but
positive.
Limited
new
issuance
also
meant
that
technical
conditions
have
been
constructive
for
the
sector:
year-to-date
in
2023
new
supply
in
the
market
remained
around
9%
below
what
it
was
for
the
same
period
in
2022.
Q.
How
did
we
respond
to
these
changing
market
conditions?
A.
The
past
12
months
witnessed
high
levels
of
uncertainty.
However,
market
volatility
was
largely
interest-rate
driven.
Credit
fundamentals
have
remained
solid,
with
robust
balance
sheets
that
were
supported
by
significant
“rainy-day”
funds
which,
in
turn,
were
bolstered
by
federal
COVID-19
aid,
increased
during
the
post-pandemic
recovery,
and
maintained
with
conservative
budgeting
and
fiscal
discipline.
Considering
our
view
of
the
fundamental
strength
in
the
muni
market,
the
Fund
increased
its
exposure
towards
lower-rated
issuers
and
those
with
no
external
credit
rating.
Over
the
period,
we
looked
for
opportunities
that
had
the
potential
to
improve
the
overall
yield
of
the
portfolio
and
used
our
rigorous
bottom-up
research
process
to
help
us
identify
credits
that
we
believed
could
weather
a
more
challenging
macroeconomic
environment.
Performance
Overview
The
Fund’s
share
price,
as
measured
by
net
asset
value
(NAV),
decreased
from
$9.03
on
August
31,
2022,
to
$8.86
on
August
31,
2023.
The
Fund
paid
dividends
totaling
37.1870
cents
per
share
for
the
reporting
period.
1
The
Performance
Summary
beginning
on
page
16
shows
that
at
the
end
of
this
reporting
period
the
Fund’s
distribution
rate
was
4.72%
based
on
an
annualization
of
August’s
3.4864
cents
per
share
dividend
and
the
NAV
of
$8.86
on
August
31,
2023.
An
investor
in
the
2023
maximum
federal
income
tax
bracket
of
40.80%
(including
3.80%
Medicare
tax)
would
need
to
earn
a
distribution
rate
of
7.97%
from
a
taxable
investment
to
match
the
Fund’s
tax-free
distribution
rate.
1.
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.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
The
dollar
value,
number
of
shares
or
principal
amount,
and
names
of
all
portfolio
holdings
are
listed
in
the
Fund’s
Schedule
of
Investments
(SOI).
The
SOI
begins
on
page
36
.
Franklin
Templeton
SMACS:
Series
H
15
franklintempleton.com
Annual
Report
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.
Q.
What
were
the
leading
contributors
to
performance?
A.
In
contrast,
overweights
to
bonds
with
no
external
credit
rating
and
BBB
rated
bonds
supported
results,
as
did
holdings
of
muni
bonds
with
seven
to
nine
years
to
maturity.
In
terms
of
sector
allocations,
overweights
to
industrial
revenue
and
education
bonds,
as
well
as
an
underweight
to
leasing-related
issues
contributed
to
relative
returns.
Q.
What
were
the
leading
detractors
from
performance?
A.
The
Fund
underperformed
its
benchmark
over
the
past
12
months.
The
main
detractors
from
performance
were
allocations
to
muni
bonds
with
more
than
10
years
to
maturity,
as
well
as
a
lack
of
exposure
to
AA
rated
bonds.
The
Fund’s
underweight
allocation
to
A
and
AAA
rated
securities
also
weighed
on
relative
results.
In
terms
of
sector
allocations,
an
overweight
to
health
care
bonds,
as
well
as
underweights
to
transportation
and
utilities-related
issues
were
a
drag
on
returns.
It
is
important
to
note
that
the
Fund
is
paired
with
Separately
Managed
Accounts
(SMAs)
that
are
tilted
towards
higher-quality,
AAA
and
AA
rated
securities
as
well
as
essential
services
sectors,
such
as
utilities,
water
and
sewer,
and
similar.
Q.
Were
there
any
significant
changes
to
the
Fund
during
the
reporting
period?
A.
There
were
no
significant
changes
to
the
Fund’s
overall
strategy.
However,
as
we
gained
more
clarity
around
the
Fed’s
monetary
tightening
path
and
became
more
comfortable
that
muni
fundamentals
were
generally
robust
in
the
face
of
tighter
financing
conditions
and
slowing
economic
activity,
the
Fund
added
to
its
holdings
of
bonds
rated
below
investment-grade,
and
in
particular
those
that
do
not
have
an
external
credit
rating.
The
Franklin
Templeton
Fixed
Income
research
team
conducts
an
in-depth
analysis
of
potential
investment
opportunities
and
is
therefore
able
to
find
what
they
deem
to
be
attractively
priced
securities
from
muni
issuers
with
solid
underlying
credit
fundamentals
that
could
weather
a
period
of
below-trend
growth.
Additionally,
as
the
Fed
moved
closer
to
the
end
of
its
hiking
cycle
and
therefore
its
terminal
policy
rate,
the
Fund
lengthened
its
duration
over
the
review
period.
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,
2023,
the
end
of
the
reporting
period.
The
way
we
implement
our
main
investment
strategies
and
the
resulting
portfolio
holdings
may
change
depending
on
factors
such
as
market
and
economic
conditions.
These
opinions
may
not
be
relied
upon
as
investment
advice
or
an
offer
for
a
particular
security.
The
information
is
not
a
complete
analysis
of
every
aspect
of
any
market,
state,
industry,
security
or
the
Fund.
Statements
of
fact
are
from
sources
considered
reliable,
but
the
investment
manager
makes
no
representation
or
warranty
as
to
their
completeness
or
accuracy.
Although
historical
performance
is
no
guarantee
of
future
results,
these
insights
may
help
you
understand
our
investment
management
philosophy.
Portfolio
Composition
8/31/23
%
of
Total
Investments
*
Special
Tax
29.74%
Industrial
Dev.
Revenue
and
Pollution
Control
24.14%
Health
Care
14.82%
Housing
10.88%
Lease
6.99%
Education
5.07%
State
General
Obligation
3.54%
Local
2.91%
Transportation
1.57%
Utilities
0.17%
Other
Revenue
Bonds
0.16%
Refunded
0.01%
*
Does
not
include
cash
and
cash
equivalents.
Performance
Summary
as
of
August
31,
2023
Franklin
Templeton
SMACS:
Series
H
16
franklintempleton.com
Annual
Report
The
performance
tables
and
graph
do
not
reflect
any
taxes
that
a
shareholder
would
pay
on
Fund
dividends,
capital
gain
distributions,
if
any,
or
any
realized
gains
on
the
sale
of
Fund
shares.
Total
return
reflects
reinvestment
of
the
Fund’s
dividends
and
capital
gain
distributions,
if
any,
and
any
unrealized
gains
or
losses.
Your
dividend
income
will
vary
depending
on
dividends
or
interest
paid
by
securities
in
the
Fund’s
portfolio,
adjusted
for
operating
expenses.
Capital
gain
distributions
are
net
profits
realized
from
the
sale
of
portfolio
securities.
Performance
as
of
8/31/23
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
+2.36%
+2.36%
3-Year
+0.98%
+0.33%
Since
Inception
(6/3/19)
+2.01%
+0.47%
30-Day
Standardized
Yield
6
Taxable
Equivalent
30-Day
Standardized
Yield
5
Distribution
Rate
4
Taxable
Equivalent
Distribution
Rate
5
(with
fee
waiver)
(without
fee
waiver)
(with
fee
waiver)
(without
fee
waiver)
4.72%
7.97%
4.81%
3.91%
8.13%
6.60%
See
page
18
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
H
Performance
Summary
17
franklintempleton.com
Annual
Report
See
page
18
for
Performance
Summary
footnotes.
Total
Return
Index
Comparison
for
a
Hypothetical
$10,000
Investment
1
Total
return
represents
the
change
in
value
of
an
investment
over
the
periods
shown.
It
includes
any
applicable
maximum
sales
charge,
Fund
expenses,
account
fees
and
reinvested
distributions.
The
unmanaged
index
includes
reinvestment
of
any
income
or
distributions.
It
differs
from
the
Fund
in
composition
and
does
not
pay
management
fees
or
expenses.
One
cannot
invest
directly
in
an
index.
6/3/19-8/31/23
Franklin
Templeton
SMACS:
Series
H
Performance
Summary
18
franklintempleton.com
Annual
Report
Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
All
investments
involve
risks,
including
possible
loss
of
principal.
Fixed
income
securities
involve
interest
rate,
credit,
inflation
and
reinvestment
risks,
and
possible
loss
of
principal.
As
interest
rates
rise,
the
value
of
fixed
income
securities
falls.
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.
Low-rated,
high-yield
bonds
are
subject
to
greater
price
volatility,
illiquidity
and
possibility
of
default.
These
and
other
risks
are
discussed
in
the
Fund’s
prospectus.
1.
Gross
expenses
are
the
Fund’s
total
annual
operating
expenses
as
of
the
Fund's
prospectus
available
at
the
time
of
publication.
Actual
expenses
may
be
higher
and
may
impact
portfolio
returns.
Net
expenses
reflect
contractual
fee
waivers,
expense
caps
and/or
reimbursements,
which
cannot
be
terminated
prior
to
12/31/23
without
Board
consent.
Additional
amounts
may
be
voluntarily
waived
and/or
reimbursed
and
may
be
modified
or
discontinued
at
any
time
without
notice.
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
8/31/23.
5.
Taxable
equivalent
distribution
rate
and
yield
assume
the
2023
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:
FactSet.
The
Bloomberg
Municipal
Bond
Index
is
a
market
value-weighted
index
of
tax-exempt,
investment-grade
municipal
bonds
with
maturities
of
one
year
or
more.
8.
Figures
are
as
stated
in
the
Fund’s
current
prospectus,
including
the
effect
of
acquired
fund
fees
and
expenses,
and
may
differ
from
the
expense
ratios
disclosed
in
the
Your
Fund’s
Expenses
and
Financial
Highlights
sections
in
this
report.
In
periods
of
market
volatility,
assets
may
decline
significantly,
causing
total
annual
Fund
operating
expenses
to
become
higher
than
the
figures
shown.
See
www.franklintempletondatasources.com
for
additional
data
provider
information.
Distributions
(9/1/22–8/31/23)
Net
Investment
Income
$0.371870
Total
Annual
Operating
Expenses
8
With
Fee
Waiver
Without
Fee
Waiver
0.00%
2.58%
Your
Fund’s
Expenses
Franklin
Templeton
SMACS:
Series
H
19
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
3/1/23
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,036.70
$0.00
$1,025.21
$0.00
0.00%
20
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,
2023.
This
Fund
is
not
intended
to
be
owned
as
a
stand-alone
vehicle
but
may
only
be
owned
as
part
of
the
applicable
Franklin
Templeton
SMA
strategy.
Fund
Overview
Q.
What
is
the
Fund's
investment
strategy?
A.
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.
Q.
What
were
the
overall
market
conditions
during
the
Fund's
reporting
period?
A.
Throughout
the
period,
the
U.S.
Federal
Reserve
(Fed)
continued
to
increase
interest
rates
from
2022
levels
to
counteract
stubborn
inflation.
Despite
the
Fed’s
hawkish
stance,
the
labor
market
remains
tight,
and
the
economy
continues
to
grow
with
gross
domestic
product
in
excess
of
2%.
The
Fund
used
interest
rate
futures
to
hedge
duration
in
the
period.
However,
this
did
not
cause
the
change
to
Net
Assets
from
Operations
for
the
fiscal
year
to
exceed
5%.
Q.
How
did
we
respond
to
these
changing
market
conditions?
A.
As
a
result
of
increasing
interest
rates,
higher
yield
investment
opportunities
arose
for
fixed
income
holdings.
The
Fund
took
advantage
of
the
price
decline
to
generate
more
income
by
investing
in
increased
corporate
credit
opportunities.
Performance
Overview
The
Fund
posted
a
+7.57%
cumulative
total
return
for
the
12
months
ended
August
31,
2023.
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
+7.12%
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
+4.04%
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
22
.
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.
Q.
What
were
the
leading
contributors
to
performance?
A.
Health
care,
consumer
discretionary,
and
materials
were
the
highest
performing
sectors
for
the
year.
Community
Health
Systems
and
Tenet
Healthcare
were
the
highest
performing
holdings,
both
within
the
health
care
sector.
Carnival
and
Wynn
Resorts
exhibited
the
greatest
absolute
returns
from
the
consumer
discretionary
sector.
As
for
materials,
BWAY
Holding
was
a
leading
contributor
to
performance.
Q.
What
were
the
leading
detractors
from
performance?
A.
Carvana,
Endo
International
and
BWAY
Corporation
were
the
leading
detractors
from
performance.
These
companies
fall
within
the
consumer
discretionary,
health
care,
and
materials
sectors,
respectively.
As
of
the
period-end
on
August
31,
2023,
the
Fund
no
longer
holds
Carvana.
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.
Source:
FactSet.
The
Blended
50%
Bloomberg
U.S.
High
Yield
Very
Liquid
Index
and
50%
Bloomberg
Barclays
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
Schedule
of
Investments
(SOI).
The
SOI
begins
on
page
42
.
Franklin
Templeton
SMACS:
Series
I
21
franklintempleton.com
Annual
Report
*Categories
within
the
Other
category
are
listed
in
full
in
the
Fund's
Schedule
of
Investments
(SOI),
which
can
be
found
later
in
this
report.
Q.
Were
there
any
significant
changes
to
the
Fund
during
the
reporting
period?
A.
There
were
no
significant
changes
to
the
Fund
during
the
reporting
period,
but
assets
under
management
increased.
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,
2023,
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.
Portfolio
Composition
8/31/23
%
of
Total
Net
Assets
Health
Care
Providers
&
Services
19.5%
Hotels,
Restaurants
&
Leisure
8.2%
Pharmaceuticals
7.0%
Oil,
Gas
&
Consumable
Fuels
6.2%
Passenger
Airlines
4.9%
Containers
&
Packaging
4.6%
Media
4.1%
Communications
Equipment
3.8%
Automobiles
3.5%
Chemicals
3.3%
Metals
&
Mining
3.3%
Software
2.2%
Aerospace
&
Defense
2.1%
Health
Care
Equipment
&
Supplies
2.0%
Other
*
21.7%
Short-Term
Investments
&
Other
Net
Assets
3.6%
Top
Five
Fixed
Income
Holdings
8/31/23
Company
Industry
,
Country
%
of
Total
Net
Assets
a
a
CHS/Community
Health
Systems,
Inc.
10.9%
Health
Care
Providers
&
Services
,
United
States
Tenet
Healthcare
Corp.
5.0%
Health
Care
Providers
&
Services
,
United
States
1375209
BC
Ltd.
4.8%
Pharmaceuticals
,
Canada
Mauser
Packaging
Solutions
Holding
Co.
3.1%
Containers
&
Packaging
,
United
States
Ford
Motor
Co.
3.1%
Automobiles
,
United
States
Performance
Summary
as
of
August
31,
2023
Franklin
Templeton
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Series
I
22
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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
8/31/23
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
+7.57%
+7.57%
3-Year
+9.17%
+2.97%
Since
Inception
(6/3/19)
+6.59%
+1.51%
30-Day
Standardized
Yield
5
Distribution
Rate
4
(with
fee
waiver)
(without
fee
waiver)
7.70%
8.44%
8.27%
See
page
24
for
Performance
Summary
footnotes.
Franklin
Templeton
SMACS:
Series
I
Performance
Summary
23
franklintempleton.com
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See
page
24
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.
6/3/19-8/31/23
Franklin
Templeton
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Series
I
Performance
Summary
24
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Events
such
as
the
spread
of
deadly
diseases,
disasters,
and
financial,
political
or
social
disruptions,
may
heighten
risks
and
adversely
affect
performance.
All
investments
involve
risks,
including
possible
loss
of
principal.
Low-rated,
high-yield
bonds
are
subject
to
greater
price
volatility,
illiquidity
and
possibility
of
default.
Fixed
income
securities
involve
interest
rate,
credit,
inflation
and
reinvestment
risks,
and
possible
loss
of
principal.
As
interest
rates
rise,
the
value
of
fixed
income
securities
falls.
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.
International
investments
are
subject
to
special
risks,
including
currency
fluctuations
and
social,
economic
and
political
uncertainties,
which
could
increase
volatility.
These
risks
are
magnified
in
emerging
markets
.
The
manager
may
consider
environmental,
social
and
governance
(ESG)
criteria
in
the
research
or
investment
process;
however,
ESG
considerations
may
not
be
a
determinative
factor
in
security
selection.
In
addition,
the
manager
may
not
assess
every
investment
for
ESG
criteria,
and
not
every
ESG
factor
may
be
identified
or
evaluated.
These
and
other
risks
are
discussed
in
the
Fund’s
prospectus.
1.
Gross
expenses
are
the
Fund’s
total
annual
operating
expenses
as
of
the
Fund's
prospectus
available
at
the
time
of
publication.
Actual
expenses
may
be
higher
and
may
impact
portfolio
returns.
Net
expenses
reflect
contractual
fee
waivers,
expense
caps
and/or
reimbursements,
which
cannot
be
terminated
prior
to
12/31/23
without
Board
consent.
Additional
amounts
may
be
voluntarily
waived
and/or
reimbursed
and
may
be
modified
or
discontinued
at
any
time
without
notice.
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
8/31/23.
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:
FactSet.
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
compo-
nent
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
Bond
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
(9/1/22–8/31/23)
Net
Investment
Income
Tax
Return
of
Capital
Total
$0.6148
$0.0007
$0.6155
Total
Annual
Operating
Expenses
8
With
Fee
Waiver
Without
Fee
Waiver
0.00%
1.27%
Your
Fund’s
Expenses
Franklin
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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
3/1/23
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
Ending
Account
Value
8/31/23
Expenses
Paid
During
Period
3/1/23–8/31/23
1,2
a
Net
Annualized
Expense
Ratio
2
$1,000
$1,034.80
$0.00
$1,025.21
$0.00
0.00%
Franklin
Strategic
Series
Financial
Highlights
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Templeton
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CH
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
26
a
Year
Ended
August
31,
Year
Ended
August
31,
2019
a
2023
2022
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$8.85
$10.51
$9.82
$10.26
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
.........................
0.39
0.36
0.35
0.33
0.05
Net
realized
and
unrealized
gains
(losses)
...........
(0.32)
(1.66)
0.69
(0.31)
0.26
Total
from
investment
operations
....................
0.07
(1.30)
1.04
0.02
0.31
Less
distributions
from:
Net
investment
income
..........................
(0.40)
(0.36)
(0.35)
(0.33)
(0.05)
Net
realized
gains
.............................
—
—
—
(0.13)
—
Total
distributions
...............................
(0.40)
(0.36)
(0.35)
(0.46)
(0.05)
Net
asset
value,
end
of
year
.......................
$8.52
$8.85
$10.51
$9.82
$10.26
Total
return
d
...................................
0.85%
(12.61)%
10.75%
0.25%
3.06%
Ratios
to
average
net
assets
e
Expenses
before
waiver
and
payments
by
affiliates
......
2.48%
2.37%
3.11%
4.23%
3.74%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
—%
f
—%
f
—%
f
—%
f
—%
Net
investment
income
...........................
4.56%
3.71%
3.44%
3.38%
1.87%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$3,898
$2,957
$3,512
$2,986
$4,028
Portfolio
turnover
rate
............................
45.25%
5.65%
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
Schedule
of
Investments,
August
31,
2023
Franklin
Templeton
SMACS:
Series
CH
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
27
a
a
Principal
Amount
a
Value
a
a
a
a
a
Municipal
Bonds
86.6%
California
86.6%
Alameda
Community
Facilities
District
,
City
of
Alameda
Community
Facilities
District
No.
22-1
,
Special
Tax
,
2023
,
5
%
,
9/01/53
................................
$
125,000
$
113,958
Beaumont
Unified
School
District
,
Community
Facilities
District
No.
2020-1
Improvement
Area
No.
2
,
Special
Tax
,
2023
,
5
%
,
9/01/53
....................
150,000
146,125
a
California
Community
Choice
Financing
Authority
,
Revenue
,
2023
C
,
Mandatory
Put
,
5.25
%
,
10/01/31
...................................................
150,000
155,582
b
California
Community
Housing
Agency
,
Annadel
Apartments,
Revenue,
144A,
2019
A,
5%,
4/01/49
..................
200,000
165,161
Mira
Vista
Hills
Apartments,
Revenue,
144A,
2021
A,
4%,
2/01/56
.............
150,000
102,258
California
Municipal
Finance
Authority
,
Special
Tax,
2022
B,
Refunding,
6%,
9/01/52
.............................
150,000
150,644
Special
Tax,
2022
C,
6.25%,
9/01/52
...................................
150,000
147,679
Special
Tax,
2022
D,
6.125%,
9/01/52
..................................
150,000
151,935
Caritas
Corp.
(The),
Revenue,
2021
B,
Refunding,
4%,
8/15/56
...............
115,000
94,592
b
Claremont
Graduate
University,
Revenue,
144A,
2020
B,
Refunding,
5%,
10/01/49
.
125,000
110,871
Community
Facilities
District
No.
2021-6
Improvement
Area
No.
2,
Special
Tax,
2022,
6%,
9/01/52
....................................................
150,000
152,417
Congregational
Homes,
Inc.
Obligated
Group,
Revenue,
2019,
Refunding,
5%,
11/15/39
.......................................................
130,000
122,680
b,c
California
Pollution
Control
Financing
Authority
,
Rialto
Bioenergy
Facility
LLC
,
Revenue
,
144A,
2018
,
7.5
%
,
12/01/40
..................................
75,000
44,999
b
California
School
Finance
Authority
,
Orange
County
Educational
Arts
Academy
,
Revenue
,
144A,
2023
A
,
Refunding
,
5.875
%
,
6/01/53
.......................
100,000
98,334
California
Statewide
Communities
Development
Authority
,
Special
Assessment,
2019
C,
5%,
9/02/49
...............................
125,000
125,341
Special
Tax,
2023
A,
5.25%,
9/01/51
...................................
100,000
97,067
Community
Facilities
District
No.
2016-02,
Special
Tax,
2019,
5%,
9/01/39
.......
100,000
102,230
Community
Facilities
District
No.
2022-03,
Special
Tax,
2023,
5%,
9/01/53
.......
150,000
138,210
Community
Facilities
District
No.
2022-07
Improvement
Area
No.
1,
Special
Tax,
2023,
5%,
9/01/53
................................................
150,000
137,350
b
Loma
Linda
University
Medical
Center
Obligated
Group,
Revenue,
144A,
2016
A,
5.25%,
12/01/56
.................................................
250,000
244,579
b
NCCD-Hooper
Street
LLC,
Revenue,
144A,
2019,
5.25%,
7/01/49
.............
100,000
94,075
b
NCCD-Hooper
Street
LLC,
Revenue,
144A,
2019,
5.25%,
7/01/52
.............
200,000
186,251
d
City
of
Lake
Elsinore
,
Community
Facilities
District
No.
2006-8
,
Special
Tax
,
2023
,
5
%
,
9/01/53
.........................................................
150,000
147,471
b
CSCDA
Community
Improvement
Authority
,
Dublin
,
Revenue
,
144A,
2021
B
,
4
%
,
2/01/57
.........................................................
140,000
98,121
Foothill-Eastern
Transportation
Corridor
Agency
,
Revenue
,
2013
B-2
,
Refunding
,
3.5
%
,
1/15/53
.........................................................
140,000
113,763
Tobacco
Securitization
Authority
of
Southern
California
,
San
Diego
County
Tobacco
Asset
Securitization
Corp.
,
Revenue
,
2019
B-1
,
2
,
Refunding
,
5
%
,
6/01/48
.......
105,000
106,770
Upland
Community
Facilities
District
,
City
of
Upland
Community
Facilities
District
No.
2015-1
,
Special
Tax
,
2019
A
,
4
%
,
9/01/49
................................
30,000
25,328
3,373,791
Total
Municipal
Bonds
(Cost
$3,657,893)
.......................................
3,373,791
a
a
a
a
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
CH
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
28
Short
Term
Investments
15.4%
a
a
Principal
Amount
a
Value
Municipal
Bonds
15.4%
California
15.4%
e
California
Statewide
Communities
Development
Authority
,
Rady
Children's
Hospital
Obligated
Group
,
Revenue
,
2008
B
,
LOC
Wells
Fargo
Bank
NA
,
Daily
VRDN
and
Put
,
2.65
%
,
8/15/47
................................................
$
300,000
$
300,000
e
Irvine
Ranch
Water
District
,
Water
Service
Corp.
,
Special
Assessment
,
2009
B
,
LOC
Bank
of
America
NA
,
Daily
VRDN
and
Put
,
2.17
%
,
10/01/41
..................
100,000
100,000
e
University
of
California
,
Revenue
,
2013
AL-4
,
Refunding
,
Daily
VRDN
and
Put
,
2.85
%
,
5/15/48
.........................................................
200,000
200,000
600,000
Total
Municipal
Bonds
(Cost
$600,000)
.........................................
600,000
Total
Short
Term
Investments
(Cost
$600,000
)
..................................
600,000
a
Total
Investments
(Cost
$4,257,893)
102.0%
....................................
$3,973,791
Other
Assets,
less
Liabilities
(2.0)%
...........................................
(76,171)
Net
Assets
100.0%
...........................................................
$3,897,620
See
A
bbreviations
on
page
64
.
a
The
maturity
date
shown
represents
the
mandatory
put
date.
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,
2023,
the
aggregate
value
of
these
securities
was
$1,144,649,
representing
29.4%
of
net
assets.
c
See
Note
7
regarding
credit
risk
and
defaulted
securities.
d
Security
purchased
on
a
when-issued
basis.
See
Note
1(c).
e
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
SMACS:
Series
E
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
2023
2022
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$11.29
$12.77
$10.15
$10.69
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
.........................
0.42
0.37
0.35
0.36
0.10
Net
realized
and
unrealized
gains
(losses)
...........
0.75
(0.31)
2.72
(0.19)
0.63
Total
from
investment
operations
....................
1.17
0.06
3.07
0.17
0.73
Less
distributions
from:
Net
investment
income
..........................
(0.72)
(0.83)
(0.45)
(0.49)
(0.04)
Net
realized
gains
.............................
(0.18)
(0.71)
—
(0.22)
—
Tax
return
of
capital
............................
(—)
d
—
—
—
—
Total
distributions
...............................
(0.90)
(1.54)
(0.45)
(0.71)
(0.04)
Net
asset
value,
end
of
year
.......................
$11.56
$11.29
$12.77
$10.15
$10.69
Total
return
e
...................................
10.81%
0.38%
30.95%
1.77%
7.31%
Ratios
to
average
net
assets
f
Expenses
before
waiver
and
payments
by
affiliates
......
0.27%
1.36%
2.19%
2.85%
4.76%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
—%
g
—%
—%
g
—%
g
—%
Net
investment
income
...........................
3.70%
3.11%
3.05%
3.48%
4.11%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$61,992
$12,863
$5,155
$3,847
$3,959
Portfolio
turnover
rate
............................
123.80%
117.70%
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
Amount
rounds
to
less
than
$0.01
per
share.
e
Total
return
is
not
annualized
for
periods
less
than
one
year.
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
Schedule
of
Investments,
August
31,
2023
Franklin
Templeton
SMACS:
Series
E
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
30
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
53.1%
Aerospace
&
Defense
1.4%
Northrop
Grumman
Corp.
...............................
United
States
2,000
$
866,180
Banks
6.1%
Citigroup,
Inc.
........................................
United
States
15,000
619,350
Fifth
Third
Bancorp
....................................
United
States
27,000
716,850
PNC
Financial
Services
Group,
Inc.
(The)
...................
United
States
3,600
434,628
Truist
Financial
Corp.
..................................
United
States
65,000
1,985,750
3,756,578
Biotechnology
2.4%
AbbVie,
Inc.
.........................................
United
States
10,000
1,469,600
Capital
Markets
2.1%
Charles
Schwab
Corp.
(The)
.............................
United
States
22,000
1,301,300
Chemicals
1.9%
Air
Products
and
Chemicals,
Inc.
..........................
United
States
4,000
1,181,960
Communications
Equipment
2.4%
Cisco
Systems,
Inc.
...................................
United
States
26,400
1,514,040
Electric
Utilities
1.1%
American
Electric
Power
Co.,
Inc.
.........................
United
States
8,452
662,637
Health
Care
Providers
&
Services
1.4%
CVS
Health
Corp.
.....................................
United
States
13,000
847,210
Industrial
Conglomerates
1.5%
Honeywell
International,
Inc.
.............................
United
States
5,100
958,494
Insurance
1.7%
a
MetLife,
Inc.
.........................................
United
States
17,000
1,076,780
IT
Services
1.7%
International
Business
Machines
Corp.
.....................
United
States
7,000
1,027,810
Machinery
3.2%
Caterpillar,
Inc.
.......................................
United
States
7,000
1,967,910
Metals
&
Mining
5.3%
Fortescue
Metals
Group
Ltd.,
ADR
........................
Australia
30,000
827,100
Freeport-McMoRan,
Inc.
................................
United
States
20,000
798,200
Rio
Tinto
plc,
ADR
.....................................
Australia
27,000
1,687,500
3,312,800
Multi-Utilities
1.3%
DTE
Energy
Co.
......................................
United
States
7,500
775,350
Oil,
Gas
&
Consumable
Fuels
5.7%
a
BP
plc,
ADR
.........................................
United
Kingdom
18,000
669,240
Shell
plc,
ADR
........................................
Netherlands
15,500
962,395
TotalEnergies
SE,
ADR
.................................
France
30,000
1,887,300
3,518,935
Pharmaceuticals
6.0%
AstraZeneca
plc,
ADR
..................................
United
Kingdom
35,000
2,373,700
Bristol-Myers
Squibb
Co.
................................
United
States
22,000
1,356,300
3,730,000
Semiconductors
&
Semiconductor
Equipment
3.4%
Analog
Devices,
Inc.
...................................
United
States
6,000
1,090,680
Intel
Corp.
...........................................
United
States
7,441
261,476
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
E
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
31
a
a
Country
Shares
a
Value
a
a
a
a
a
a
Common
Stocks
(continued)
Semiconductors
&
Semiconductor
Equipment
(continued)
QUALCOMM,
Inc.
.....................................
United
States
6,500
$
744,445
2,096,601
Software
0.4%
b
Workday,
Inc.,
A
......................................
United
States
1,062
259,659
Specialty
Retail
2.6%
Home
Depot,
Inc.
(The)
.................................
United
States
4,900
1,618,470
Tobacco
1.5%
Philip
Morris
International,
Inc.
...........................
United
States
10,000
960,600
Total
Common
Stocks
(Cost
$31,841,940)
......................................
32,902,914
c
Equity-Linked
Securities
38.4%
Aerospace
&
Defense
2.2%
d
BNP
Paribas
Issuance
BV
into
Northrop
Grumman
Corp.,
144A,
7.5%,
9/10/24
......................................
United
States
2,000
884,066
d
Merrill
Lynch
International
&
Co.
CV
into
Raytheon
Technologies
Corp.,
144A,
7.5%,
5/08/24
............................
United
States
4,000
361,014
d
Mizuho
Markets
Cayman
LP
into
Lockheed
Martin
Corp.,
144A,
9%,
11/07/23
..........................................
United
States
300
138,066
1,383,146
Automobiles
1.5%
d
Barclays
Bank
plc
into
Ford
Motor
Co.,
144A,
12%,
2/09/24
......
United
States
44,500
549,639
d
Barclays
Bank
plc
into
General
Motors
Co.,
144A,
10%,
7/17/24
..
United
States
11,000
385,288
934,927
Banks
2.7%
d
Barclays
Bank
plc
into
Citigroup,
Inc.,
144A,
9%,
7/03/24
........
United
States
5,000
218,330
d
Barclays
Bank
plc
into
JPMorgan
Chase
&
Co.,
144A,
8%,
9/08/23
United
States
2,500
358,636
d
Barclays
Bank
plc
into
US
Bancorp.,
144A,
10%,
8/23/24
.......
United
States
16,500
611,018
d
Citigroup
Global
Markets
Holdings,
Inc.
into
Bank
of
America
Corp.,
144A,
8%,
8/16/24
...................................
United
States
8,400
249,258
d
JPMorgan
Chase
Bank
NA
into
Bank
of
America
Corp.,
144A,
9%,
2/02/24
...........................................
United
States
7,100
211,342
1,648,584
Biotechnology
1.9%
d,e
Barclays
Bank
plc
into
Amgen,
Inc.,
144A,
8%,
9/20/24
.........
United
States
2,100
538,705
d
Goldman
Sachs
International
Bank
into
AbbVie,
Inc.,
144A,
8.5%,
2/06/24
...........................................
United
States
4,300
640,831
1,179,536
Broadline
Retail
2.5%
d
Goldman
Sachs
International
Bank
into
Amazon.com,
Inc.,
144A,
9%,
11/20/24
.......................................
United
States
10,000
1,227,733
d
Royal
Bank
of
Canada
into
Amazon.com,
Inc.,
144A,
10%,
4/05/24
United
States
2,800
319,471
1,547,204
Building
Products
1.4%
d
J.P.
Morgan
Structured
Products
BV
into
Johnson
Controls
International
plc,
144A,
8%,
9/09/24
......................
United
States
15,000
886,042
Capital
Markets
2.9%
d
BNP
Paribas
Issuance
BV
into
Goldman
Sachs
Group,
Inc.
(The),
144A,
7.5%,
8/19/24
.................................
United
States
1,700
575,000
d
Goldman
Sachs
International
Bank
into
Morgan
Stanley,
144A,
9%,
12/24/24
..........................................
United
States
2,300
202,325
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
E
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
32
a
a
Country
Shares
a
Value
a
a
a
a
a
a
c
Equity-Linked
Securities
(continued)
Capital
Markets
(continued)
d
Merrill
Lynch
International
&
Co.
CV
into
Morgan
Stanley,
144A,
10%,
6/04/24
.......................................
United
States
1,000
$
85,154
d
Societe
Generale
SA
into
Goldman
Sachs
Group,
Inc.
(The),
144A,
8.5%,
7/12/24
......................................
United
States
1,500
488,707
d
UBS
AG
into
Charles
Schwab
Corp.
(The),
144A,
10%,
7/17/24
...
United
States
8,100
471,319
1,822,505
Chemicals
1.1%
d
JPMorgan
Chase
Bank
NA
into
LyondellBasell
Industries
NV,
144A,
11%,
1/22/24
.......................................
United
States
7,000
693,234
Communications
Equipment
3.4%
d
Mizuho
Markets
Cayman
LP
into
Cisco
Systems,
Inc.,
144A,
7.5%,
7/23/24
...........................................
United
States
12,000
655,847
d
Royal
Bank
of
Canada
into
Cisco
Systems,
Inc.,
144A,
8%,
9/03/24
United
States
15,000
848,243
d
UBS
AG
into
Cisco
Systems,
Inc.,
144A,
8.5%,
6/20/24
.........
United
States
11,000
590,779
2,094,869
Consumer
Staples
Distribution
&
Retail
1.2%
d
UBS
AG
into
Target
Corp.,
144A,
9%,
9/05/24
................
United
States
5,900
767,077
Electric
Utilities
1.7%
d
Mizuho
Markets
Cayman
LP
into
NextEra
Energy,
Inc.,
144A,
8%,
3/19/24
...........................................
United
States
4,600
319,401
d
National
Bank
of
Canada
into
NextEra
Energy,
Inc.,
144A,
8.5%,
12/05/23
..........................................
United
States
3,000
208,386
d
Wells
Fargo
Bank
NA
into
NextEra
Energy,
Inc.,
144A,
8%,
5/08/24
United
States
7,500
523,728
1,051,515
Ground
Transportation
1.3%
d
UBS
AG
into
Union
Pacific
Corp.,
144A,
8%,
3/13/24
...........
United
States
3,600
782,725
Insurance
0.4%
d
Citigroup
Global
Markets
Holdings,
Inc.
into
MetLife,
Inc.,
144A,
9.5%,
7/17/24
......................................
United
States
4,500
266,703
Machinery
0.9%
d
National
Bank
of
Canada
into
Cummins,
Inc.,
144A,
8.5%,
2/13/24
United
States
2,300
545,093
Media
2.3%
d
J.P.
Morgan
Structured
Products
BV
into
Comcast
Corp.,
144A,
8%,
8/13/24
...........................................
United
States
10,000
447,607
d,e
J.P.
Morgan
Structured
Products
BV
into
Comcast
Corp.,
144A,
8%,
9/12/24
...........................................
United
States
3,000
139,705
d
Royal
Bank
of
Canada
into
Comcast
Corp.,
144A,
8%,
7/12/24
...
United
States
18,000
812,894
1,400,206
Metals
&
Mining
1.6%
d
Mizuho
Markets
Cayman
LP
into
Freeport-McMoRan,
Inc.,
144A,
11%,
12/10/24
......................................
United
States
9,600
380,728
d
Royal
Bank
of
Canada
into
Barrick
Gold
Corp.,
144A,
11%,
3/07/24
Canada
35,000
600,922
981,650
Oil,
Gas
&
Consumable
Fuels
1.6%
d
Citigroup
Global
Markets
Holdings,
Inc.
into
Exxon
Mobil
Corp.,
144A,
9.5%,
2/22/24
.................................
United
States
3,200
362,154
d
J.P.
Morgan
Structured
Products
BV
into
Exxon
Mobil
Corp.,
144A,
9%,
9/24/24
........................................
United
States
2,300
259,303
Franklin
Strategic
Series
Schedule
of
Investments
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Templeton
SMACS:
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a
a
Country
Shares
a
Value
a
a
a
a
a
a
c
Equity-Linked
Securities
(continued)
Oil,
Gas
&
Consumable
Fuels
(continued)
d
Merrill
Lynch
International
&
Co.
CV
into
Chevron
Corp.,
144A,
10%,
12/04/23
..........................................
United
States
2,400
$
399,768
1,021,225
Pharmaceuticals
4.0%
d
BNP
Paribas
Issuance
BV
into
Pfizer,
Inc.,
144A,
8.5%,
6/10/24
..
United
States
19,000
704,153
d
National
Bank
of
Canada
into
Bristol-Myers
Squibb
Co.,
144A,
8%,
9/05/24
...........................................
United
States
20,000
1,230,356
d
Societe
Generale
SA
into
Pfizer,
Inc.,
144A,
8.5%,
8/02/24
......
United
States
15,000
542,646
2,477,155
Semiconductors
&
Semiconductor
Equipment
3.3%
d
Barclays
Bank
plc
into
Texas
Instruments,
Inc.,
144A,
9%,
10/10/23
United
States
1,900
325,365
d
Merrill
Lynch
International
&
Co.
CV
into
Broadcom,
Inc.,
144A,
10%,
12/05/23
..........................................
United
States
365
211,157
d
Mizuho
Markets
Cayman
LP
into
Microchip
Technology,
Inc.,
144A,
10%,
11/03/23
......................................
United
States
5,600
436,174
d
Morgan
Stanley
Finance
II
Ltd.
into
Microchip
Technology,
Inc.,
144A,
10%,
3/03/25
..................................
United
States
11,500
936,952
d
UBS
AG
into
Texas
Instruments,
Inc.,
144A,
8.5%,
8/07/24
......
United
States
700
119,678
2,029,326
Specialty
Retail
0.5%
d
Citigroup
Global
Markets
Holdings,
Inc.
into
Home
Depot,
Inc.
(The),
144A,
8.5%,
6/12/24
.................................
United
States
900
303,489
Total
Equity-Linked
Securities
(Cost
$23,489,968)
...............................
23,816,211
Convertible
Preferred
Stocks
2.0%
Electric
Utilities
2.0%
NextEra
Energy,
Inc.,
6.926%
............................
United
States
30,000
1,269,000
Total
Convertible
Preferred
Stocks
(Cost
$1,339,527)
............................
1,269,000
Principal
Amount
*
Corporate
Bonds
4.9%
Diversified
REITs
1.4%
d
VICI
Properties
LP
/
VICI
Note
Co.,
Inc.
,
Senior
Bond
,
144A,
4.625
%
,
12/01/29
..........................................
United
States
950,000
859,038
Hotels,
Restaurants
&
Leisure
1.1%
Expedia
Group,
Inc.
,
Senior
Note
,
3.25
%
,
2/15/30
.............
United
States
750,000
654,261
Metals
&
Mining
1.1%
d
Alcoa
Nederland
Holding
BV
,
Senior
Note
,
144A,
4.125
%
,
3/31/29
.
United
States
750,000
675,677
Trading
Companies
&
Distributors
1.3%
d
United
Rentals
North
America,
Inc.
,
Senior
Secured
Note
,
144A,
6
%
,
12/15/29
..........................................
United
States
825,000
820,688
Total
Corporate
Bonds
(Cost
$3,019,013)
.......................................
3,009,664
Total
Long
Term
Investments
(Cost
$59,690,448)
................................
60,997,789
a
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
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SMACS:
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The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
34
See
A
bbreviations
on
page
64
.
Short
Term
Investments
2.0%
a
a
Country
Shares
a
Value
a
a
a
Money
Market
Funds
2.0%
f,g
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
5.066%
....
United
States
1,232,610
$
1,232,610
Total
Money
Market
Funds
(Cost
$1,232,610)
...................................
1,232,610
Total
Short
Term
Investments
(Cost
$1,232,610
)
.................................
1,232,610
a
Total
Investments
(Cost
$60,923,058)
100.4%
...................................
$62,230,399
Options
Written
(0.0)%
†
......................................................
(27,450)
Other
Assets,
less
Liabilities
(0.4)%
...........................................
(211,174)
Net
Assets
100.0%
...........................................................
$61,991,775
Number
of
Contracts
Notional
Amount
#
a
a
a
h
Options
Written
(0.0)%
†
Calls
-
Exchange-Traded
Equity
Options
BP
plc,
October
Strike
Price
$39.00,
Expires
10/20/23
..........
110
408,980
(4,950)
MetLife,
Inc.,
December
Strike
Price
$67.50,
Expires
12/15/23
....
150
950,100
(22,500)
(27,450)
Total
Options
Written
(Premiums
received
$23,417)
.............................
$
(27,450)
#
Notional
amount
is
the
number
of
contracts
multiplied
by
contract
size,
and
may
be
multiplied
by
the
underlying
price.
May
include
currency
units,
bushels,
shares,
pounds,
barrels
or
other
units.
Currency
units
are
stated
in
U.S.
dollars
unless
otherwise
indicated.
*
The
principal
amount
is
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
Non-income
producing.
c
See
Note
1(e)
regarding
equity-linked
securities.
d
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,
2023,
the
aggregate
value
of
these
securities
was
$26,171,614,
representing
42.2%
of
net
assets.
e
A
portion
or
all
of
the
security
purchased
on
a
delayed
delivery
basis.
See
Note
1(c).
f
See
Note
3(d)
regarding
investments
in
affiliated
management
investment
companies.
g
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
h
See
Note
1(d)
regarding
written
options.
Franklin
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Series
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Templeton
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35
a
Year
Ended
August
31,
Year
Ended
August
31,
2019
a
2023
2022
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$9.03
$10.57
$9.75
$10.09
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
.........................
0.38
0.31
0.32
0.30
0.04
Net
realized
and
unrealized
gains
(losses)
...........
(0.18)
(1.54)
0.82
(0.34)
0.09
Total
from
investment
operations
....................
0.20
(1.23)
1.14
(0.04)
0.13
Less
distributions
from:
Net
investment
income
..........................
(0.37)
(0.31)
(0.32)
(0.30)
(0.04)
Net
asset
value,
end
of
year
.......................
$8.86
$9.03
$10.57
$9.75
$10.09
Total
return
d
...................................
2.36%
e
(11.82)%
e
11.88%
e
(0.28)%
e
1.31%
Ratios
to
average
net
assets
f
Expenses
before
waiver
and
payments
by
affiliates
......
1.88%
2.51%
3.44%
3.91%
3.85%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
—%
—%
g
—%
g
—%
g
—%
Net
investment
income
...........................
4.34%
3.14%
3.16%
3.10%
1.69%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$10,059
$3,019
$3,187
$2,941
$3,042
Portfolio
turnover
rate
............................
11.82%
6.89%
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
2.25
%
for
the
year
ended
August
31,
2023,
(11.90)%
for
the
year
ended
August
31,
2022,
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
Schedule
of
Investments,
August
31,
2023
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Templeton
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The
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36
a
a
Shares
a
Value
a
Management
Investment
Companies
8.2%
Capital
Markets
8.2%
a
Franklin
Dynamic
Municipal
Bond
ETF
...................................
34,900
$
823,989
Total
Management
Investment
Companies
(Cost
$887,420)
.......................
823,989
Principal
Amount
a
a
a
a
Municipal
Bonds
79.6%
Alabama
0.8%
MidCity
Improvement
District
,
Assessment
Area
,
Special
Assessment
,
2022
,
4.75
%
,
11/01/49
........................................................
$
100,000
79,600
Arizona
1.4%
b
Sierra
Vista
Industrial
Development
Authority
,
American
Leadership
Academy,
Inc.
,
Revenue
,
144A,
2023
,
5.75
%
,
6/15/58
..................................
150,000
144,534
Arkansas
1.5%
Arkansas
Development
Finance
Authority
,
United
States
Steel
Corp.
,
Revenue
,
2023
,
5.7
%
,
5/01/53
....................................................
150,000
150,633
California
8.9%
c
California
Community
Choice
Financing
Authority
,
Revenue
,
2023
C
,
Mandatory
Put
,
5.25
%
,
10/01/31
...................................................
130,000
134,837
b
California
Community
Housing
Agency
,
Arbors
Apartments,
Revenue,
144A,
2020
A,
5%,
8/01/50
....................
125,000
113,361
Fountains
at
Emerald
Park,
Revenue,
Junior
Lien,
144A,
2021
A-2,
4%,
8/01/46
...
110,000
88,079
Verdant
at
Green
Valley
Apartments,
Revenue,
144A,
2019
A,
5%,
8/01/49
.......
105,000
96,325
b
CMFA
Special
Finance
Agency
,
Solana
at
Grand
,
Revenue,
Junior
Lien
,
144A,
2021
A-2
,
4
%
,
8/01/45
..................................................
100,000
79,197
b
CMFA
Special
Finance
Agency
XII
,
Allure
Apartments
,
Revenue
,
144A,
2022
A-2
,
4.375
%
,
8/01/49
...................................................
100,000
75,773
b
CSCDA
Community
Improvement
Authority
,
Renaissance
at
City
Center,
Revenue,
144A,
2020
A,
5%,
7/01/51
.............
110,000
100,230
Waterscape
Apartments,
Revenue,
144A,
2021
B,
4%,
9/01/46
................
135,000
108,836
Tobacco
Securitization
Authority
of
Southern
California
,
San
Diego
County
Tobacco
Asset
Securitization
Corp.
,
Revenue
,
2019
B-1
,
2
,
Refunding
,
5
%
,
6/01/48
.......
100,000
101,686
898,324
Colorado
2.5%
Colorado
Health
Facilities
Authority
,
Christian
Living
Neighborhoods
Obligated
Group
,
Revenue
,
2019
,
Refunding
,
4
%
,
1/01/38
.................................
100,000
80,209
Denver
Health
&
Hospital
Authority
,
Revenue
,
2019
A
,
Refunding
,
4
%
,
12/01/37
....
100,000
90,307
Hunters
Overlook
Metropolitan
District
No.
5
,
GO
,
2019
A
,
5
%
,
12/01/39
..........
81,000
76,579
247,095
Franklin
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37
a
a
Principal
Amount
a
Value
a
a
a
a
a
Municipal
Bonds
(continued)
Florida
13.8%
City
of
Jacksonville
,
Genesis
Health,
Inc.
Obligated
Group
,
Revenue
,
2020
,
Refunding
,
5
%
,
11/01/50
.....................................................
$
100,000
$
100,025
Cross
Creek
North
Community
Development
District
,
Special
Assessments
,
Special
Assessment
,
2022
,
4.5
%
,
5/01/52
.....................................
125,000
109,176
b
Florida
Development
Finance
Corp.
,
Brightline
Trains
Florida
LLC
,
Revenue
,
144A,
2019
B
,
7.375
%
,
1/01/49
............................................
100,000
100,203
Kindred
Community
Development
District
II
,
Special
Assessment
,
2021
,
3.125
%
,
5/01/41
.........................................................
100,000
74,310
North
AR-1
Pasco
Community
Development
District
,
Assessment
Area
3
,
Special
Assessment
,
2023
,
6
%
,
5/01/54
.......................................
100,000
99,177
Palermo
Community
Development
District
,
Special
Assessment
,
2023
,
5
%
,
6/15/43
..
100,000
96,939
Palm
Coast
Park
Community
Development
District
,
Special
Assessment
,
2023
,
5.6
%
,
5/01/53
.........................................................
100,000
98,165
Quail
Roost
Community
Development
District
,
Expansion
Area
,
Special
Assessment
,
2021
,
4
%
,
12/15/51
................................................
70,000
58,076
Ridge
at
Apopka
Community
Development
District
,
Parcel
2
,
Special
Assessment
,
2023
,
5.75
%
,
5/01/53
...............................................
100,000
98,869
Sawgrass
Village
Community
Development
District
,
Special
Assessment
,
2023
,
5.75
%
,
5/01/53
.........................................................
100,000
97,356
b
Seaton
Creek
Reserve
Community
Development
District
,
Assessment
Area
One
,
Special
Assessment
,
144A,
2023
,
5.5
%
,
6/15/53
..........................
100,000
98,978
Seminole
Palms
Community
Development
District
,
Special
Assessment
,
2023
,
5.5
%
,
5/01/43
.........................................................
100,000
99,280
Twisted
Oaks
Pointe
Community
Development
District
,
Assessment
Area
1
,
Special
Assessment
,
2023
,
5.375
%
,
5/01/43
...................................
100,000
98,738
Westwood
of
Pasco
Community
Development
District
,
Assessments
,
Special
Assessment
,
2023
,
5.625
%
,
5/01/53
...................................
100,000
98,222
Windward
Community
Development
District
,
Special
Assessment
,
2020
A-1
,
3
%
,
5/01/25
.........................................................
60,000
58,534
1,386,048
Illinois
2.5%
Metropolitan
Pier
&
Exposition
Authority
,
Revenue
,
2020
A
,
Refunding
,
5
%
,
6/15/50
..
250,000
250,761
Indiana
1.0%
Indiana
Finance
Authority
,
Marian
University,
Inc.
,
Revenue
,
2019
A
,
5
%
,
9/15/39
...
100,000
99,345
Iowa
3.2%
Iowa
Finance
Authority
,
Iowa
Fertilizer
Co.
LLC,
Revenue,
2022,
Refunding,
5%,
12/01/50
.............
130,000
128,654
c
Iowa
Fertilizer
Co.
LLC,
Revenue,
2022,
Refunding,
Mandatory
Put,
5%,
12/01/42
.
100,000
100,579
Lifespace
Communities,
Inc.
Obligated
Group,
Revenue,
2016
A,
5%,
5/15/36
....
100,000
87,789
317,022
Louisiana
2.1%
Calcasieu
Parish
Memorial
Hospital
Service
District
,
Southwest
Louisiana
Healthcare
System
Obligated
Group
,
Revenue
,
2019
,
Refunding
,
5
%
,
12/01/39
............
100,000
86,161
b
Louisiana
Local
Government
Environmental
Facilities
&
Community
Development
Authority
,
Parish
of
St.
Martin
,
Revenue
,
144A,
2019
,
4.4
%
,
11/01/44
...........
135,000
126,333
212,494
Maryland
1.7%
b
City
of
Baltimore
,
Harbor
Point
Special
Taxing
District
,
Tax
Allocation,
Senior
Lien
,
144A,
2019
A
,
Refunding
,
3.5
%
,
6/01/39
................................
100,000
82,749
Maryland
Economic
Development
Corp.
,
Morgan
View
&
Thurgood
Marshall
Student
Housing
,
Revenue
,
2020
,
4.25
%
,
7/01/50
................................
100,000
91,747
174,496
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
H
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
38
a
a
Principal
Amount
a
Value
a
a
a
a
a
Municipal
Bonds
(continued)
Michigan
1.1%
City
of
Detroit
,
GO
,
2023
C
,
6
%
,
5/01/43
..................................
$
100,000
$
110,028
Minnesota
0.9%
City
of
Apple
Valley
,
PHS
Apple
Valley
Senior
Housing,
Inc.
,
Revenue
,
2021
,
4
%
,
9/01/36
.........................................................
105,000
91,224
Nevada
0.9%
Henderson
Local
Improvement
Districts
,
Local
Improvement
District
No.
T-22
,
Special
Assessment
,
2023
,
5.25
%
,
3/01/53
....................................
100,000
95,670
New
Hampshire
2.4%
New
Hampshire
Business
Finance
Authority
,
Presbyterian
Homes
Obligated
Group
,
Revenue
,
2023
A
,
5.25
%
,
7/01/48
.....................................
250,000
246,567
New
Jersey
1.7%
Tobacco
Settlement
Financing
Corp.
,
Revenue
,
2018
B
,
Refunding
,
5
%
,
6/01/46
....
175,000
172,184
New
York
2.6%
New
York
Transportation
Development
Corp.
,
Delta
Air
Lines,
Inc.,
Revenue,
2020,
4%,
10/01/30
.........................
100,000
98,663
Delta
Air
Lines,
Inc.,
Revenue,
2020,
4.375%,
10/01/45
.....................
175,000
165,039
263,702
Ohio
8.3%
Buckeye
Tobacco
Settlement
Financing
Authority
,
Revenue,
Senior
Lien
,
2020
B-2
,
2
,
Refunding
,
5
%
,
6/01/55
.............................................
800,000
732,381
Ohio
Housing
Finance
Agency
,
Revenue
,
2023
C
,
8
%
,
8/01/34
.................
100,000
99,272
831,653
Tennessee
1.4%
c
Tennergy
Corp.
,
Revenue
,
2022
A
,
Mandatory
Put
,
5.5
%
,
12/01/30
..............
135,000
140,718
Texas
7.5%
b
City
of
Celina
,
Chalk
Hill
Public
Improvement
District
No.
2,
Special
Assessment,
144A,
2023,
6%,
9/01/53
........................................................
100,000
98,766
Pravin
Public
Improvement
District,
Special
Assessment,
144A,
2023,
6.75%,
9/01/53
100,000
98,990
b
City
of
Fate
,
Williamsburg
Public
Improvement
District
No.
1
,
Special
Assessment
,
144A,
2023
,
5.375
%
,
8/15/53
.........................................
100,000
97,598
b
City
of
Hutto
,
Emory
Crossing
Public
Improvement
District
Impt
Area
No.
2
,
Special
Assessment
,
144A,
2023
,
5.625
%
,
9/01/58
...............................
115,000
113,355
b,d
City
of
Tomball
,
Raburn
Reserve
Public
Improvement
District
Area
No.
2
,
Special
Assessment
,
144A,
2023
,
5.75
%
,
9/15/52
...............................
112,000
111,216
b
County
of
Hays
,
La
Cima
Public
Improvement
District
,
Special
Assessment
,
144A,
2020
,
3.25
%
,
9/15/30
...............................................
100,000
86,972
New
Hope
Cultural
Education
Facilities
Finance
Corp.
,
NCCD-College
Station
Properties
LLC,
Revenue,
A,
5%,
7/01/47
..............
50,000
45,375
Quality
Senior
Housing
Foundation
of
East
Texas,
Inc.,
Revenue,
2019
A-1,
5%,
12/01/39
.......................................................
85,000
79,600
Quality
Senior
Housing
Foundation
of
East
Texas,
Inc.,
Revenue,
Second
Tier,
2019
B,
5.5%,
12/01/54
................................................
20,000
18,358
750,230
Washington
1.9%
Washington
State
Housing
Finance
Commission
,
Eastside
Retirement
Association
Obligated
Group,
Revenue,
2023
A,
Refunding,
5%,
7/01/48
........................................................
120,000
119,316
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
H
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
39
See
Abbreviations
on
page
64
.
a
a
Principal
Amount
a
Value
a
a
a
a
a
Municipal
Bonds
(continued)
Washington
(continued)
Washington
State
Housing
Finance
Commission,
(continued)
b
Presbyterian
Retirement
Communities
Northwest
Obligated
Group,
Revenue,
144A,
2019
A,
5%,
1/01/55
..............................................
$
100,000
$
74,034
193,350
Wisconsin
1.1%
b
Public
Finance
Authority
,
Friends
Homes
Obligated
Group
,
Revenue
,
144A,
2019
,
Refunding
,
5
%
,
9/01/49
.............................................
125,000
106,754
U.S.
Territories
10.4%
District
of
Columbia
2.5%
District
of
Columbia
,
International
School
Obligated
Group,
Revenue,
2019,
5%,
7/01/49
............
140,000
137,072
Plenary
Infrastructure
DC
LLC,
Revenue,
2022
A,
5.5%,
8/31/33
..............
100,000
112,967
250,039
Puerto
Rico
7.9%
Commonwealth
of
Puerto
Rico
,
GO,
2022
A-1,
4%,
7/01/41
..........................................
100,000
86,475
GO,
2022
A-1,
4%,
7/01/46
..........................................
250,000
208,119
Puerto
Rico
Sales
Tax
Financing
Corp.
,
Sales
Tax
,
Revenue
,
A-1
,
5
%
,
7/01/58
.....
517,000
501,700
796,294
Total
U.S.
Territories
....................................................................
1,046,333
Total
Municipal
Bonds
(Cost
$8,270,013)
.......................................
8,008,765
Total
Long
Term
Investments
(Cost
$9,157,433)
.................................
8,832,754
a
a
a
a
a
Short
Term
Investments
7.0%
Municipal
Bonds
7.0%
New
York
6.0%
e
City
of
New
York
,
GO
,
2006
I-4
,
LOC
TD
Bank
NA
,
Daily
VRDN
and
Put
,
3.9
%
,
4/01/36
600,000
600,000
Oregon
1.0%
e
Oregon
State
Facilities
Authority
,
PeaceHealth
Obligated
Group
,
Revenue
,
2018
A
,
Refunding
,
LOC
US
Bank
NA
,
Daily
VRDN
and
Put
,
4.2
%
,
8/01/34
.............
100,000
100,000
Total
Municipal
Bonds
(Cost
$700,000)
.........................................
700,000
Total
Short
Term
Investments
(Cost
$700,000
)
..................................
700,000
a
Total
Investments
(Cost
$9,857,433)
94.8%
.....................................
$9,532,754
Other
Assets,
less
Liabilities
5.2%
.............................................
526,243
Net
Assets
100.0%
...........................................................
$10,058,997
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,
2023,
the
aggregate
value
of
these
securities
was
$2,002,283,
representing
19.9%
of
net
assets.
Franklin
Strategic
Series
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Franklin
Templeton
SMACS:
Series
H
(continued)
franklintempleton.com
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The
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are
an
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part
of
these
financial
statements.
40
c
The
maturity
date
shown
represents
the
mandatory
put
date.
d
Security
purchased
on
a
when-issued
basis.
See
Note
1(c).
e
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
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Financial
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Templeton
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accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
41
a
Year
Ended
August
31,
Year
Ended
August
31,
2019
a
2023
2022
2021
2020
Per
share
operating
performance
(for
a
share
outstanding
throughout
the
year)
Net
asset
value,
beginning
of
year
...................
$7.83
$9.73
$8.95
$10.12
$10.00
Income
from
investment
operations
b
:
Net
investment
income
c
.........................
0.64
0.65
0.66
0.64
0.19
Net
realized
and
unrealized
gains
(losses)
...........
(0.07)
(1.85)
0.78
(1.10)
0.04
Total
from
investment
operations
....................
0.57
(1.20)
1.44
(0.46)
0.23
Less
distributions
from:
Net
investment
income
..........................
(0.62)
(0.70)
(0.66)
(0.71)
(0.11)
Tax
return
of
capital
............................
(—)
d
(—)
d
—
—
—
Total
distributions
...............................
(0.62)
(0.70)
(0.66)
(0.71)
(0.11)
Net
asset
value,
end
of
year
.......................
$7.78
$7.83
$9.73
$8.95
$10.12
Total
return
e
...................................
7.57%
(12.87)%
16.48%
(4.51)%
2.25%
Ratios
to
average
net
assets
f
Expenses
before
waiver
and
payments
by
affiliates
......
0.20%
1.27%
3.10%
3.55%
5.96%
Expenses
net
of
waiver
and
payments
by
affiliates
.......
—%
g
—%
—%
g
—%
g
—%
Net
investment
income
...........................
8.24%
7.72%
7.01%
6.98%
7.61%
Supplemental
data
Net
assets,
end
of
year
(000’s)
.....................
$109,051
$19,910
$3,699
$3,506
$3,774
Portfolio
turnover
rate
............................
27.73%
30.22%
32.50%
43.24%
—%
a
For
the
period
June
3,
2019
(commencement
of
operations)
to
August
31,
2
019.
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
Amount
rounds
to
less
than
$0.01
per
share.
e
Total
return
is
not
annualized
for
periods
less
than
one
year.
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
Schedule
of
Investments,
August
31,
2023
Franklin
Templeton
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The
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of
these
financial
statements.
42
a
a
Shares
a
Value
a
a
Equity-Linked
Securities
0.9%
Automobiles
0.4%
b
Royal
Bank
of
Canada
into
General
Motors
Co.,
144A,
12%,
6/18/24
.............
14,000
$
479,928
Metals
&
Mining
0.5%
b
Royal
Bank
of
Canada
into
Freeport-McMoRan,
Inc.,
144A,
10%,
5/03/24
.........
13,000
534,598
Total
Equity-Linked
Securities
(Cost
$1,007,607)
................................
1,014,526
Principal
Amount
a
a
a
a
Corporate
Bonds
95.5%
Aerospace
&
Defense
2.1%
b
Bombardier,
Inc.
,
Senior
Bond
,
144A,
7.5
%
,
3/15/25
.........................
$
64,000
64,110
b
TransDigm,
Inc.
,
Senior
Secured
Note,
144A,
6.25%,
3/15/26
..............................
500,000
495,722
Senior
Secured
Note,
144A,
6.75%,
8/15/28
..............................
1,250,000
1,255,944
Senior
Secured
Note,
144A,
6.875%,
12/15/30
............................
500,000
503,845
2,319,621
Automobile
Components
1.5%
b
Dornoch
Debt
Merger
Sub,
Inc.
,
Senior
Note
,
144A,
6.625
%
,
10/15/29
...........
550,000
474,839
Goodyear
Tire
&
Rubber
Co.
(The)
,
Senior
Note
,
5.25
%
,
7/15/31
................
1,350,000
1,163,903
1,638,742
Automobiles
3.1%
Ford
Motor
Co.
,
Senior
Bond
,
6.1
%
,
8/19/32
...............................
3,500,000
3,347,504
Banks
1.8%
Barclays
plc
,
Senior
Bond,
5.746%
to
8/08/32,
FRN
thereafter,
8/09/33
....................
1,400,000
1,342,454
Sub.
Bond,
7.119%
to
6/26/33,
FRN
thereafter,
6/27/34
.....................
400,000
399,658
Fifth
Third
Bank
NA
,
Senior
Note
,
5.852%
to
10/26/24,
FRN
thereafter
,
10/27/25
....
250,000
246,500
1,988,612
Building
Products
1.0%
b
Camelot
Return
Merger
Sub,
Inc.
,
Senior
Secured
Note
,
144A,
8.75
%
,
8/01/28
.....
600,000
599,109
b
Emerald
Debt
Merger
Sub
LLC
,
Senior
Secured
Note
,
144A,
6.625
%
,
12/15/30
.....
500,000
492,835
1,091,944
Capital
Markets
0.5%
Charles
Schwab
Corp.
(The)
,
Senior
Note
,
5.643%
to
5/18/28,
FRN
thereafter
,
5/19/29
500,000
499,334
Chemicals
3.3%
Celanese
US
Holdings
LLC
,
Senior
Note
,
6.55
%
,
11/15/30
....................
1,000,000
1,000,997
b
Consolidated
Energy
Finance
SA
,
Senior
Note
,
144A,
5.625
%
,
10/15/28
..........
450,000
376,256
Olin
Corp.
,
Senior
Bond
,
5
%
,
2/01/30
....................................
100,000
91,657
b
Rain
Carbon,
Inc.
,
Senior
Secured
Note
,
144A,
12.25
%
,
9/01/29
................
700,000
722,911
b
Rain
CII
Carbon
LLC
/
CII
Carbon
Corp.
,
Secured
Note
,
144A,
7.25
%
,
4/01/25
.....
5,000
4,922
b
SCIH
Salt
Holdings,
Inc.
,
Senior
Note,
144A,
6.625%,
5/01/29
....................................
900,000
795,001
Senior
Secured
Note,
144A,
4.875%,
5/01/28
.............................
700,000
630,647
3,622,391
Commercial
Services
&
Supplies
1.4%
b
ADT
Security
Corp.
(The)
,
Senior
Secured
Note
,
144A,
4.125
%
,
8/01/29
..........
100,000
87,379
b
APX
Group,
Inc.
,
Senior
Secured
Note
,
144A,
6.75
%
,
2/15/27
..................
1,500,000
1,459,470
1,546,849
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
I
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
43
a
a
Principal
Amount
a
Value
a
a
a
a
a
Corporate
Bonds
(continued)
Communications
Equipment
3.8%
b
CommScope
Technologies
LLC
,
Senior
Note
,
144A,
6
%
,
6/15/25
................
$
2,000,000
$
1,832,506
b
CommScope,
Inc.
,
Senior
Note,
144A,
8.25%,
3/01/27
.....................................
2,500,000
1,658,850
Senior
Secured
Note,
144A,
6%,
3/01/26
................................
700,000
636,801
4,128,157
Consumer
Finance
1.9%
Ford
Motor
Credit
Co.
LLC
,
Senior
Bond,
5.113%,
5/03/29
........................................
800,000
736,661
Senior
Note,
7.35%,
3/06/30
.........................................
1,300,000
1,324,535
2,061,196
Containers
&
Packaging
4.6%
b
Ardagh
Packaging
Finance
plc
/
Ardagh
Holdings
USA,
Inc.
,
Senior
Note
,
144A,
5.25
%
,
8/15/27
.........................................................
1,700,000
1,458,235
b
Mauser
Packaging
Solutions
Holding
Co.
,
Secured
Note,
144A,
9.25%,
4/15/27
...................................
1,600,000
1,451,188
Senior
Secured
Note,
144A,
7.875%,
8/15/26
.............................
2,000,000
1,971,290
b
Pactiv
Evergreen
Group
Issuer,
Inc.
/
Pactiv
Evergreen
Group
Issuer
LLC
,
Senior
Secured
Note
,
144A,
4
%
,
10/15/27
.....................................
100,000
90,032
4,970,745
Diversified
Telecommunication
Services
0.2%
b
CCO
Holdings
LLC
/
CCO
Holdings
Capital
Corp.
,
Senior
Bond
,
144A,
5.125
%
,
5/01/27
200,000
188,199
Electric
Utilities
1.7%
b
NRG
Energy,
Inc.
,
Senior
Note
,
144A,
3.375
%
,
2/15/29
.......................
500,000
412,583
Pacific
Gas
and
Electric
Co.
,
Senior
Bond,
4.55%,
7/01/30
.........................................
200,000
179,985
Senior
Bond,
6.4%,
6/15/33
..........................................
500,000
493,666
PG&E
Corp.
,
Senior
Secured
Note
,
5
%
,
7/01/28
............................
200,000
184,167
b
Vistra
Operations
Co.
LLC
,
Senior
Note
,
144A,
5
%
,
7/31/27
....................
600,000
564,845
1,835,246
Electrical
Equipment
0.2%
b
Regal
Rexnord
Corp.
,
Senior
Note
,
144A,
6.05
%
,
4/15/28
.....................
250,000
247,545
Energy
Equipment
&
Services
1.7%
b
Weatherford
International
Ltd.
,
Senior
Note,
144A,
8.625%,
4/30/30
....................................
1,600,000
1,640,268
Senior
Secured
Note,
144A,
6.5%,
9/15/28
...............................
200,000
200,676
1,840,944
Entertainment
0.8%
b
Netflix,
Inc.
,
Senior
Bond
,
144A,
5.375
%
,
11/15/29
..........................
900,000
895,832
Food
Products
0.9%
JBS
USA
LUX
SA
/
JBS
USA
Food
Co.
/
JBS
USA
Finance,
Inc.
,
Senior
Note
,
5.75
%
,
4/01/33
.........................................................
800,000
762,388
b
Post
Holdings,
Inc.
,
Senior
Bond
,
144A,
5.5
%
,
12/15/29
......................
300,000
277,786
1,040,174
Ground
Transportation
0.4%
b
Ashtead
Capital,
Inc.
,
Senior
Bond
,
144A,
5.95
%
,
10/15/33
....................
500,000
491,181
Health
Care
Equipment
&
Supplies
2.0%
b
Medline
Borrower
LP
,
Senior
Note,
144A,
5.25%,
10/01/29
....................................
1,250,000
1,111,270
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
I
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
44
a
a
Principal
Amount
a
Value
a
a
a
a
a
Corporate
Bonds
(continued)
Health
Care
Equipment
&
Supplies
(continued)
b
Medline
Borrower
LP,
(continued)
Senior
Secured
Note,
144A,
3.875%,
4/01/29
.............................
$
1,250,000
$
1,092,407
2,203,677
Health
Care
Providers
&
Services
19.5%
b
CHS/Community
Health
Systems,
Inc.
,
Secured
Note,
144A,
6.125%,
4/01/30
..................................
1,250,000
720,475
Senior
Note,
144A,
6.875%,
4/01/28
....................................
500,000
300,721
Senior
Secured
Note,
144A,
8%,
3/15/26
................................
5,000,000
4,886,458
Senior
Secured
Note,
144A,
5.625%,
3/15/27
.............................
1,900,000
1,673,993
Senior
Secured
Note,
144A,
8%,
12/15/27
...............................
4,500,000
4,330,598
CVS
Health
Corp.
,
Senior
Bond
,
5.25
%
,
2/21/33
............................
50,000
48,921
b
DaVita,
Inc.
,
Senior
Bond
,
144A,
3.75
%
,
2/15/31
............................
2,450,000
1,953,245
b
Kedrion
SpA
,
Senior
Secured
Note
,
144A,
6.5
%
,
9/01/29
......................
500,000
427,500
b
MPH
Acquisition
Holdings
LLC
,
Senior
Secured
Note
,
144A,
5.5
%
,
9/01/28
........
1,750,000
1,487,735
Tenet
Healthcare
Corp.
,
Senior
Note,
6.125%,
10/01/28
........................................
5,000,000
4,820,475
Senior
Secured
Note,
6.125%,
6/15/30
..................................
650,000
630,670
21,280,791
Health
Care
REITs
0.6%
MPT
Operating
Partnership
LP
/
MPT
Finance
Corp.
,
Senior
Bond
,
5
%
,
10/15/27
...
800,000
632,927
Hotel
&
Resort
REITs
0.3%
Service
Properties
Trust
,
Senior
Note
,
4.35
%
,
10/01/24
.......................
300,000
288,993
Hotels,
Restaurants
&
Leisure
8.2%
b
Caesars
Entertainment,
Inc.
,
Senior
Note,
144A,
8.125%,
7/01/27
....................................
850,000
863,797
Senior
Note,
144A,
4.625%,
10/15/29
...................................
1,000,000
876,233
Senior
Secured
Note,
144A,
7%,
2/15/30
................................
500,000
502,403
b
Carnival
Corp.
,
Senior
Note
,
144A,
10.5
%
,
6/01/30
..........................
2,250,000
2,398,568
b
Fertitta
Entertainment
LLC
/
Fertitta
Entertainment
Finance
Co.,
Inc.
,
Senior
Note,
144A,
6.75%,
1/15/30
.....................................
600,000
496,005
Senior
Secured
Note,
144A,
4.625%,
1/15/29
.............................
600,000
519,582
b
Penn
Entertainment,
Inc.
,
Senior
Note
,
144A,
4.125
%
,
7/01/29
.................
200,000
163,746
b
Wynn
Las
Vegas
LLC
/
Wynn
Las
Vegas
Capital
Corp.
,
Senior
Bond
,
144A,
5.25
%
,
5/15/27
.........................................................
3,250,000
3,079,116
8,899,450
Household
Durables
0.6%
Shea
Homes
LP
/
Shea
Homes
Funding
Corp.
,
Senior
Note
,
4.75
%
,
4/01/29
.......
750,000
665,812
Household
Products
0.2%
b
Energizer
Holdings,
Inc.
,
Senior
Note
,
144A,
6.5
%
,
12/31/27
...................
200,000
193,422
Independent
Power
and
Renewable
Electricity
Producers
2.0%
b
Calpine
Corp.
,
Senior
Note
,
144A,
4.625
%
,
2/01/29
..........................
1,350,000
1,174,627
b,c
Vistra
Corp.
,
Junior
Sub.
Bond
,
144A,
8%
to
10/14/26,
FRN
thereafter
,
Perpetual
....
1,000,000
957,206
2,131,833
Machinery
0.2%
b
TK
Elevator
US
Newco,
Inc.
,
Senior
Secured
Note
,
144A,
5.25
%
,
7/15/27
.........
200,000
187,660
Media
4.1%
b
Clear
Channel
Outdoor
Holdings,
Inc.
,
Senior
Note,
144A,
7.5%,
6/01/29
.....................................
300,000
223,857
Senior
Secured
Note,
144A,
5.125%,
8/15/27
.............................
900,000
806,938
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
I
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
45
a
a
Principal
Amount
a
Value
a
a
a
a
a
Corporate
Bonds
(continued)
Media
(continued)
CSC
Holdings
LLC
,
Senior
Bond,
5.25%,
6/01/24
.........................................
$
400,000
$
379,811
b
Senior
Bond,
144A,
5.5%,
4/15/27
.....................................
200,000
172,866
DISH
DBS
Corp.
,
Senior
Note,
5.875%,
11/15/24
........................................
700,000
651,748
Senior
Note,
7.75%,
7/01/26
.........................................
200,000
149,770
b
Stagwell
Global
LLC
,
Senior
Note
,
144A,
5.625
%
,
8/15/29
.....................
200,000
167,207
b
Univision
Communications,
Inc.
,
Senior
Secured
Note
,
144A,
6.625
%
,
6/01/27
.....
2,000,000
1,938,265
4,490,462
Metals
&
Mining
2.8%
ArcelorMittal
SA
,
Senior
Bond
,
6.8
%
,
11/29/32
..............................
500,000
514,202
b
Cleveland-Cliffs,
Inc.
,
Senior
Bond
,
144A,
4.875
%
,
3/01/31
....................
150,000
131,011
b
First
Quantum
Minerals
Ltd.
,
Senior
Note,
144A,
6.875%,
3/01/26
....................................
400,000
394,598
Senior
Note,
144A,
8.625%,
6/01/31
....................................
500,000
509,436
b
FMG
Resources
August
2006
Pty.
Ltd.
,
Senior
Bond,
144A,
4.375%,
4/01/31
...................................
800,000
671,072
Senior
Bond,
144A,
6.125%,
4/15/32
...................................
300,000
279,500
b
Mineral
Resources
Ltd.
,
Senior
Note
,
144A,
8.5
%
,
5/01/30
....................
550,000
552,655
3,052,474
Oil,
Gas
&
Consumable
Fuels
6.2%
b
Calumet
Specialty
Products
Partners
LP
/
Calumet
Finance
Corp.
,
Senior
Note,
144A,
11%,
4/15/25
......................................
600,000
615,725
Senior
Note,
144A,
8.125%,
1/15/27
....................................
1,250,000
1,195,832
Senior
Note,
144A,
9.75%,
7/15/28
.....................................
1,000,000
994,935
Cheniere
Corpus
Christi
Holdings
LLC
,
Senior
Secured
Note
,
3.7
%
,
11/15/29
......
500,000
454,997
b
CITGO
Petroleum
Corp.
,
Senior
Secured
Note
,
144A,
7
%
,
6/15/25
..............
300,000
297,345
b
Civitas
Resources,
Inc.
,
Senior
Note
,
144A,
8.75
%
,
7/01/31
....................
500,000
518,125
b
Hilcorp
Energy
I
LP
/
Hilcorp
Finance
Co.
,
Senior
Note
,
144A,
6
%
,
4/15/30
........
350,000
325,910
b
Kinetik
Holdings
LP
,
Senior
Note
,
144A,
5.875
%
,
6/15/30
......................
200,000
193,925
Occidental
Petroleum
Corp.
,
Senior
Note
,
8.875
%
,
7/15/30
....................
1,000,000
1,147,495
b
Venture
Global
LNG,
Inc.
,
Senior
Secured
Note
,
144A,
8.125
%
,
6/01/28
..........
750,000
757,233
Williams
Cos.,
Inc.
(The)
,
Senior
Bond
,
5.65
%
,
3/15/33
.......................
300,000
301,825
6,803,347
Passenger
Airlines
4.9%
American
Airlines
Inc/AAdvantage
Loyalty
IP
Ltd.
,
b
Senior
Secured
Note,
144A,
5.5%,
4/20/26
...............................
1,512,500
1,485,772
b
American
Airlines,
Inc.
,
Senior
Secured
Note
,
144A,
11.75
%
,
7/15/25
............
1,100,000
1,205,004
b
Delta
Air
Lines,
Inc.
/
SkyMiles
IP
Ltd.
,
Senior
Secured
Note
,
144A,
4.75
%
,
10/20/28
.
1,300,000
1,249,095
b
Mileage
Plus
Holdings
LLC
/
Mileage
Plus
Intellectual
Property
Assets
Ltd.
,
Senior
Secured
Note
,
144A,
6.5
%
,
6/20/27
....................................
800,000
798,017
b
United
Airlines,
Inc.
,
Senior
Secured
Note
,
144A,
4.625
%
,
4/15/29
...............
700,000
623,333
5,361,221
Personal
Care
Products
0.3%
b
BellRing
Brands,
Inc.
,
Senior
Note
,
144A,
7
%
,
3/15/30
.......................
100,000
100,135
Haleon
US
Capital
LLC
,
Senior
Note
,
3.625
%
,
3/24/32
.......................
250,000
222,186
322,321
Pharmaceuticals
7.0%
1375209
BC
Ltd.
,
b
Senior
Secured
Note,
144A,
9%,
1/30/28
................................
5,250,000
5,261,400
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
I
(continued)
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
46
a
a
Principal
Amount
a
Value
a
a
a
a
a
Corporate
Bonds
(continued)
Pharmaceuticals
(continued)
b
Bausch
Health
Cos.,
Inc.
,
Senior
Secured
Note
,
144A,
5.5
%
,
11/01/25
............
$
1,500,000
$
1,352,505
b,d
Par
Pharmaceutical,
Inc.
,
Senior
Secured
Note
,
144A,
7.5
%
,
4/01/27
.............
300,000
213,860
Teva
Pharmaceutical
Finance
Netherlands
III
BV
,
Senior
Note
,
8.125
%
,
9/15/31
....
800,000
848,579
7,676,344
Semiconductors
&
Semiconductor
Equipment
0.2%
Micron
Technology,
Inc.
,
Senior
Bond
,
5.875
%
,
2/09/33
.......................
200,000
197,921
Software
2.2%
b
Cloud
Software
Group,
Inc.
,
Senior
Secured
Note
,
144A,
6.5
%
,
3/31/29
...........
1,450,000
1,298,264
b
McAfee
Corp.
,
Senior
Note
,
144A,
7.375
%
,
2/15/30
..........................
1,100,000
963,394
Inc.
,
Senior
Bond
,
3.8
%
,
4/01/32
................................
150,000
133,215
2,394,873
Specialized
REITs
0.3%
American
Tower
Corp.
,
Senior
Note
,
4.05
%
,
3/15/32
.........................
250,000
223,143
b
Iron
Mountain,
Inc.
,
Senior
Bond
,
144A,
5.25
%
,
7/15/30
.......................
100,000
90,329
313,472
Specialty
Retail
0.5%
Lowe's
Cos.,
Inc.
,
Senior
Bond
,
5
%
,
4/15/33
...............................
60,000
58,646
b
Michaels
Cos.,
Inc.
(The)
,
Senior
Note,
144A,
7.875%,
5/01/29
....................................
350,000
242,935
Senior
Secured
Note,
144A,
5.25%,
5/01/28
..............................
300,000
250,395
551,976
Textiles,
Apparel
&
Luxury
Goods
0.2%
b
Hanesbrands,
Inc.
,
Senior
Note
,
144A,
9
%
,
2/15/31
..........................
250,000
251,210
Tobacco
1.9%
BAT
Capital
Corp.
,
Senior
Bond,
4.742%,
3/16/32
........................................
250,000
226,205
Senior
Bond,
7.75%,
10/19/32
........................................
250,000
271,497
Senior
Bond,
6.421%,
8/02/33
........................................
650,000
649,257
Senior
Note,
3.557%,
8/15/27
.........................................
950,000
881,710
2,028,669
Trading
Companies
&
Distributors
0.4%
United
Rentals
North
America,
Inc.
,
Senior
Bond
,
5.25
%
,
1/15/30
...............
500,000
475,630
Total
Corporate
Bonds
(Cost
$104,295,001)
.....................................
104,158,701
Total
Long
Term
Investments
(Cost
$105,302,608)
...............................
105,173,227
a
a
a
a
a
Franklin
Strategic
Series
Schedule
of
Investments
Franklin
Templeton
SMACS:
Series
I
(continued)
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
47
At
August
31,
2023,
the
Fund
had
the
following futures
contracts
outstanding.
See
Note
1(d).
*
As
of
period
end.
See
abbreviations
on
pag
e
64
.
Short
Term
Investments
2.0%
a
a
Shares
a
Value
a
Money
Market
Funds
2.0%
e,f
Institutional
Fiduciary
Trust
-
Money
Market
Portfolio,
5.066%
..................
2,191,463
$
2,191,463
Total
Money
Market
Funds
(Cost
$2,191,463)
...................................
2,191,463
Total
Short
Term
Investments
(Cost
$2,191,463
)
.................................
2,191,463
a
Total
Investments
(Cost
$107,494,071)
98.4%
...................................
$107,364,690
Other
Assets,
less
Liabilities
1.6%
.............................................
1,686,436
Net
Assets
100.0%
...........................................................
$109,051,126
a
See
Note
1(e)
regarding
equity-linked
securities.
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,
2023,
the
aggregate
value
of
these
securities
was
$78,524,183,
representing
72.0%
of
net
assets.
c
Perpetual
security
with
no
stated
maturity
date.
d
See
Note
7
regarding
credit
risk
and
defaulted
securities.
e
See
Note
3(d)
regarding
investments
in
affiliated
management
investment
companies.
f
The
rate
shown
is
the
annualized
seven-day
effective
yield
at
period
end.
Futures
Contracts
Description
Type
Number
of
Contracts
Notional
Amount
*
Expiration
Date
Value/
Unrealized
Appreciation
(Depreciation)
Interest
rate
contracts
U.S.
Treasury
10
Year
Notes
....................
Long
95
$
10,547,969
12/19/23
$
146,818
U.S.
Treasury
Ultra
Bonds
......................
Long
42
5,437,688
12/19/23
167,183
Total
Futures
Contracts
......................................................................
$314,001
Franklin
Strategic
Series
Financial
Statements
Statements
of
Assets
and
Liabilities
August
31,
2023
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
48
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
................
$4,257,893
$59,690,448
$8,970,013
$105,302,608
Cost
-
Non-controlled
affiliates
(Note
3
d
)
.....
—
1,232,610
887,420
2,191,463
Value
-
Unaffiliated
issuers
...............
$3,973,791
$60,997,789
$8,708,765
$105,173,227
Value
-
Non-controlled
affiliates
(Note
3
d
)
....
—
1,232,610
823,989
2,191,463
Cash
.................................
82,047
2,863
72,308
4,187
Receivables:
Investment
securities
sold
................
—
754,454
—
—
Capital
shares
sold
.....................
—
845,746
663,996
1,488,512
Dividends
and
interest
..................
59,996
230,805
87,101
1,878,295
Affiliates
.............................
—
11,313
1,464
14,282
Deposits
with
brokers
for:
Futures
contracts
.....................
—
—
—
442,000
Variation
margin
on
futures
contracts
........
—
—
—
41,437
Total
assets
.......................
4,115,834
64,075,580
10,357,623
111,233,403
Liabilities:
Payables:
Investment
securities
purchased
...........
146,355
1,798,555
218,723
1,721,875
Capital
shares
redeemed
................
—
219,254
—
384,167
Transfer
agent
fees
.....................
—
697
116
1,353
Professional
fees
......................
41,057
35,961
41,525
48,731
Trustees'
fees
and
expenses
..............
2
2
3
4
Affiliates
.............................
12,883
—
—
—
Distributions
to
shareholders
..............
14,043
—
33,686
—
Options
written,
at
value
(premiums
received
$–,
$23,417,
$–
and
$–,
respectively)
............
—
27,450
—
—
Accrued
expenses
and
other
liabilities
........
3,874
1,886
4,573
26,147
Total
liabilities
......................
218,214
2,083,805
298,626
2,182,277
Net
assets,
at
value
..............
$3,897,620
$61,991,775
$10,058,997
$109,051,126
Net
assets
consist
of:
Paid-in
capital
..........................
$4,390,614
$61,185,376
$10,470,145
$111,215,162
Total
distributable
earnings
(losses)
..........
(492,994)
806,399
(411,148)
(2,164,036)
Net
assets,
at
value
..............
$3,897,620
$61,991,775
$10,058,997
$109,051,126
Shares
outstanding
......................
457,381
5,363,431
1,135,442
14,025,308
Net
asset
value
per
share
.................
$8.52
$11.56
$8.86
$7.78
Franklin
Strategic
Series
Financial
Statements
Statements
of
Operations
for
the
year
ended
August
31,
2023
franklintempleton.com
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
Annual
Report
49
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
$–,
$40,309,
$–
and
$–,
respectively)
Unaffiliated
issuers
.....................
$—
$1,003,317
$—
$—
Non-controlled
affiliates
(Note
3
d
)
..........
—
38,609
29,305
49,409
Interest:
Unaffiliated
issuers
.....................
140,568
75,079
142,201
4,232,645
Other
income
a
..........................
—
2,438
2,470
3,235
Total
investment
income
................
140,568
1,119,443
173,976
4,285,289
Expenses:
Transfer
agent
fees
(Note
3
c
)
...............
609
8,399
776
12,076
Custodian
fees
(Note
4
)
...................
14
(762)
15
(695)
Reports
to
shareholders
fees
...............
(2,567)
(5,333)
(2,545)
(5,796)
Registration
and
filing
fees
.................
20,534
27,924
20,041
29,847
Professional
fees
........................
45,862
51,722
45,834
61,009
Trustees'
fees
and
expenses
...............
603
882
609
1,082
Pricing
fees
............................
6,143
—
5,315
2,217
Other
.................................
5,061
197
5,459
5,206
Total
expenses
......................
76,259
83,029
75,504
104,946
Expense
reductions
(Note
4
)
............
(6)
(185)
—
(112)
Expenses
waived/paid
by
affiliates
(Note
3
d
and
3
e
)
...........................
(76,253)
(82,844)
(75,504)
(104,834)
Net
expenses
......................
—
—
—
—
Net
investment
income
.............
140,568
1,119,443
173,976
4,285,289
Realized
and
unrealized
gains
(losses):
Net
realized
gain
(loss)
from:
Investments:
Unaffiliated
issuers
...................
(188,037)
768,696
(54,795)
(1,105,669)
Non-controlled
affiliates
(Note
3
d
)
........
—
—
(151)
—
Written
options
........................
—
(238,712)
—
—
Foreign
currency
transactions
.............
—
(2,395)
—
—
Futures
contracts
......................
—
—
—
(747,267)
Net
realized
gain
(loss)
...............
(188,037)
527,589
(54,946)
(1,852,936)
Net
change
in
unrealized
appreciation
(depreciation)
on:
Investments:
Unaffiliated
issuers
...................
60,122
1,455,553
(17,402)
1,283,839
Non-controlled
affiliates
(Note
3
d
)
........
—
—
(6,468)
—
Translation
of
other
assets
and
liabilities
denominated
in
foreign
currencies
........
—
366
—
—
Written
options
........................
—
(26,502)
—
—
Futures
contracts
......................
—
—
—
314,001
Net
change
in
unrealized
appreciation
(depreciation)
......................
60,122
1,429,417
(23,870)
1,597,840
Net
realized
and
unrealized
gain
(loss)
.........
(127,915)
1,957,006
(78,816)
(255,096)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
...............................
$12,653
$3,076,449
$95,160
$4,030,193
a
Other
income
includes
payments
by
Advisers
for
acquired
fund
fees
and
expenses
(See
Note
3e).
Franklin
Strategic
Series
Financial
Statements
Statements
of
Changes
in
Net
Assets
franklintempleton.com
Annual
Report
The
accompanying
notes
are
an
integral
part
of
these
financial
statements.
50
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Year
Ended
August
31,
2023
Year
Ended
August
31,
2022
Year
Ended
August
31,
2023
Year
Ended
August
31,
2022
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$140,568
$120,134
$1,119,443
$198,328
Net
realized
gain
(loss)
............
(188,037)
2,385
527,589
628,328
Net
change
in
unrealized
appreciation
(depreciation)
.................
60,122
(557,781)
1,429,417
(1,024,475)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
12,653
(435,262)
3,076,449
(197,819)
Distributions
to
shareholders
.........
(143,020)
(119,277)
(2,405,013)
(719,084)
Distributions
to
shareholders
from
tax
return
of
capital
..................
—
—
(13,510)
—
Total
distributions
to
shareholders
.....
(143,020)
(119,277)
(2,418,523)
(719,084)
Capital
share
transactions
(Note
2
)
.....
1,070,558
—
48,470,400
8,625,707
Net
increase
(decrease)
in
net
assets
.....................
940,191
(554,539)
49,128,326
7,708,804
Net
assets:
Beginning
of
year
..................
2,957,429
3,511,968
12,863,449
5,154,645
End
of
year
......................
$3,897,620
$2,957,429
$61,991,775
$12,863,449
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
51
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Year
Ended
August
31,
2023
Year
Ended
August
31,
2022
Year
Ended
August
31,
2023
Year
Ended
August
31,
2022
Increase
(decrease)
in
net
assets:
Operations:
Net
investment
income
............
$173,976
$102,838
$4,285,289
$544,969
Net
realized
gain
(loss)
............
(54,946)
(1,603)
(1,852,936)
20,526
Net
change
in
unrealized
appreciation
(depreciation)
.................
(23,870)
(512,063)
1,597,840
(1,744,313)
Net
increase
(decrease)
in
net
assets
resulting
from
operations
.
95,160
(410,828)
4,030,193
(1,178,818)
Distributions
to
shareholders
.........
(173,185)
(102,739)
(4,306,631)
(568,499)
Distributions
to
shareholders
from
tax
return
of
capital
..................
—
—
(9,367)
(4,176)
Total
distributions
to
shareholders
.....
(173,185)
(102,739)
(4,315,998)
(572,675)
Capital
share
transactions
(Note
2
)
.....
7,118,274
345,191
89,426,896
17,962,708
Net
increase
(decrease)
in
net
assets
.....................
7,040,249
(168,376)
89,141,091
16,211,215
Net
assets:
Beginning
of
year
..................
3,018,748
3,187,124
19,910,035
3,698,820
End
of
year
......................
$10,058,997
$3,018,748
$109,051,126
$19,910,035
Franklin
Strategic
Series
Notes
to
Financial
Statements
52
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).
The
Funds
follow
the
accounting
and
reporting
guidance
in
Financial
Accounting
Standards
Board
(FASB)
Accounting
Standards
Codification
Topic
946,
Financial
Services
–
Investment
Companies
(ASC
946)
and
apply
the
specialized
accounting
and
reporting
guidance
in
U.S.
Generally
Accepted
Accounting
Principles
(U.S.
GAAP),
including,
but
not
limited
to,
ASC
946.
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
Board
has
designated
the
Funds’
investment
manager
as
the
valuation
designee
and
has
responsibility
for
oversight
of
valuation.
The
investment
manager
is
assisted
by
the
Funds'
administrator
in
performing
this
responsibility,
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.
Certain
derivative
financial
instruments
trade
in
the
OTC
market.
The
Funds' pricing
services
use
various
techniques
including
industry
standard
option
pricing
models
and
proprietary
discounted
cash
flow
models
to
determine
the
fair
value
of
those
instruments.
The
Funds' net
benefit
or
obligation
under
the
derivative
contract,
as
measured
by
the
fair
value
of
the
contract,
is
included
in
net
assets.
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,
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.
Franklin
Strategic
Series
Notes
to
Financial
Statements
53
franklintempleton.com
Annual
Report
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
to
the
latest
indications
of
fair
value
at
4
p.m.
Eastern
time.
At
August
31,
2023,
certain
securities
may
have
been
fair
valued
using
these
procedures,
in
which
case
the
securities
were
categorized
as
Level
2
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.
Foreign
Currency
Translation
Portfolio
securities
and
other
assets
and
liabilities
denominated
in
foreign
currencies
are
translated
into
U.S.
dollars
based
on
the
exchange
rate
of
such
currencies
against
U.S.
dollars
on
the
date
of
valuation.
The
Funds
may
enter
into
foreign
currency
exchange
contracts
to
facilitate
transactions
denominated
in
a
foreign
currency.
Purchases
and
sales
of
securities,
income
and
expense
items
denominated
in
foreign
currencies
are
translated
into
U.S.
dollars
at
the
exchange
rate
in
effect
on
the
transaction
date.
Portfolio
securities
and
assets
and
liabilities
denominated
in
foreign
currencies
contain
risks
that
those
currencies
will
decline
in
value
relative
to
the
U.S.
dollar.
Occasionally,
events
may
impact
the
availability
or
reliability
of
foreign
exchange
rates
used
to
convert
the
U.S.
dollar
equivalent
value.
If
such
an
event
occurs,
the
foreign
exchange
rate
will
be
valued
at
fair
value
using
procedures
established
and
approved
by
the
Board.
The
Funds
do
not
separately
report
the
effect
of
changes
in
foreign
exchange
rates
from
changes
in
market
prices
on
securities
held.
Such
changes
are
included
in
net
realized
and
unrealized
gain
or
loss
from
investments
in
the
Statements
of
Operations.
Realized
foreign
exchange
gains
or
losses
arise
from
sales
of
foreign
currencies,
currency
gains
or
losses
realized
between
the
trade
and
settlement
dates
on
securities
transactions
and
the
difference
between
the
recorded
amounts
of
dividends,
interest,
and
foreign
withholding
taxes
and
the
U.S.
dollar
equivalent
of
the
amounts
actually
received
or
paid.
Net
unrealized
foreign
exchange
gains
and
losses
arise
from
changes
in
foreign
exchange
rates
on
foreign
denominated
assets
and
liabilities
other
than
investments
in
securities
held
at
the
end
of
the
reporting
period.
c.
Securities
Purchased
on
a
When-Issued
or
Delayed
Delivery
Basis
Certain
or
all
Funds
purchase
securities
on
a
when-issued
or
delayed
delivery
basis,
with
payment
and
delivery
scheduled
for
a
future
date.
These
transactions
are
subject
to
market
fluctuations
and
are
subject
to
the
risk
that
the
value
at
delivery
may
be
more
or
less
than
the
trade
date
purchase
price.
Although
the
Funds
will
generally
purchase
these
securities
with
the
intention
of
holding
the
securities, they
may
sell
the
securities
before
the
settlement
date.
d.
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
1.
Organization
and
Significant
Accounting
Policies
(continued)
a.
Financial
Instrument
Valuation
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
54
franklintempleton.com
Annual
Report
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
entered
into
exchange
traded
futures
contracts
primarily
to
manage
and/or
gain
exposure
to
interest
rate
risk.
A
futures
contract
is
an
agreement
between
the
Fund
and
a
counterparty
to
buy
or
sell
an
asset
at
a
specified
price
on
a
future
date.
Required
initial
margins
are
pledged
by
the
Fund,
and
the
daily
change
in
fair
value
is
accounted
for
as
a
variation
margin
payable
or
receivable
in
the
Statements
of
Assets
and
Liabilities.
At
August
31,
2023,
Franklin
Templeton
SMACS:
Series
CH,
Franklin
Templeton
SMACS:
Series
E
and
Franklin
Templeton
SMACS:
Series
H
had
no
futures
contracts.
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.
At
August
31,
2023,
Franklin
Templeton
SMACS:
Series
CH,
Franklin
Templeton
SMACS:
Series
H
and
Franklin
Templeton
SMACS:
Series
I
had
no
options.
See
Note
9
regarding
other
derivative
information.
e.
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.
f.
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
a
capital
gain
tax
is
determined
to
apply,
certain
or
all
Funds
record
an
estimated
deferred
tax
liability
in
an
amount
that
would
be
payable
if
the
securities
were
disposed
of
on
the
valuation
date.
Each
Fund
may
recognize
an
income
tax
liability
related
to
its
uncertain
tax
positions
under
U.S.
GAAP
when
the
uncertain
tax
position
has
a
less
than
50%
probability
that
it
will
be
sustained
upon
examination
by
the
tax
authorities
based
on
its
technical
merits.
As
of
August
31,
2023, 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.
1.
Organization
and
Significant
Accounting
Policies
(continued)
d.
Derivative
Financial
Instruments
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
55
franklintempleton.com
Annual
Report
g.
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.
h.
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.
i.
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)
Franklin
Strategic
Series
Notes
to
Financial
Statements
56
franklintempleton.com
Annual
Report
2.
Shares
of
Beneficial
Interest
At
August
31,
2023,
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,
2023
Shares
sold
...................................
233,719
$2,028,783
4,860,019
$55,681,889
Shares
issued
in
reinvestment
of
distributions
..........
343
2,864
15,103
174,229
Shares
redeemed
...............................
(110,936)
(961,089)
(650,882)
(7,385,718)
Net
increase
(decrease)
..........................
123,126
$1,070,558
4,224,240
$48,470,400
Year
ended
August
31,
2022
Shares
sold
...................................
—
$—
877,040
$10,332,454
Shares
issued
in
reinvestment
of
distributions
..........
1,126
10,804
16,452
195,270
Shares
redeemed
...............................
(1,126)
(10,804)
(157,973)
(1,902,017)
Net
increase
(decrease)
..........................
—
$—
735,519
$8,625,707
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Shares
Amount
Shares
Amount
Class
A
Year
ended
August
31,
2023
Shares
sold
...................................
800,313
$7,112,553
12,772,496
$99,507,840
Shares
issued
in
reinvestment
of
distributions
..........
662
5,721
35,418
274,618
Shares
redeemed
...............................
—
—
(1,324,698)
(10,355,562)
Net
increase
(decrease)
..........................
800,975
$7,118,274
11,483,216
$89,426,896
Year
ended
August
31,
2022
Shares
sold
...................................
31,885
$335,526
2,283,528
$18,935,129
Shares
issued
in
reinvestment
of
distributions
..........
995
9,665
14,268
126,042
Shares
redeemed
...............................
—
—
(136,030)
(1,098,463)
Net
increase
(decrease)
..........................
32,880
$345,191
2,161,766
$17,962,708
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
57
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.
Effective
October
1,
2022,
the
fees
are
based
on
an
annualized
asset
based
fee
of
0.016%
plus
a
reduced
transaction
based
fee.
Prior
to
October
1,
2022,
the
fees
were
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,
2023,
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,
2023,
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
........................
$609
$8,399
$776
$12,076
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,
5.066%
$321,782
$39,365,254
$(38,454,426)
$—
$—
$1,232,610
1,232,610
$38,609
Total
Affiliated
Securities
...
$321,782
$39,365,254
$(38,454,426)
$—
$—
$1,232,610
$38,609
Franklin
Templeton
SMACS:
Series
H
Non-Controlled
Affiliates
Dividends
Franklin
Dynamic
Municipal
Bond
ETF
...................
$833,000
$—
$(2,392)
$(151)
$(6,468)
$823,989
34,900
$29,305
Total
Affiliated
Securities
...
$833,000
$—
$(2,392)
$(151)
$(6,468)
$823,989
$29,305
3.
Transactions
with
Affiliates
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
58
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,
2023.
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,
2023,
are
reflected
as
other
income
in
the
Statements
of
Operations.
f.
Other
Affiliated
Transactions
At
August
31,
2023,
Franklin
Advisers,
Inc.
and
Franklin
Resources,
Inc.
owned
a
percentage
of
the
Funds’
outstanding
shares
as
follows:
g.
Interfund
Transactions
Certain
or
all
Funds
engaged
in
purchases
and
sales
of
investments
with
funds
or
other
accounts
that
have
common
investment
managers
(or
affiliated
investment
managers),
directors,
trustees
or
officers.
These
purchases,
sales
and
the
related
net
realized
gains
(losses),
if
any,
for
the
period
ended
August
31,
2023,
were
as
follows:
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,
5.066%
$686,333
$51,517,302
$(50,012,172)
$—
$—
$2,191,463
2,191,463
$49,409
Total
Affiliated
Securities
...
$686,333
$51,517,302
$(50,012,172)
$—
$—
$2,191,463
$49,409
Shares
Percentage
of
Outstanding
Shares
a
Franklin
Templeton
SMACS:
Series
CH
Franklin
Resources,
Inc.
303,978
66.5%
Franklin
Templeton
SMACS:
Series
H
Franklin
Resources,
Inc.
301,587
26.6%
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
59
franklintempleton.com
Annual
Report
4.
Expense
Offset
Arrangement
The
Funds
have previously
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,
2023,
the
custodian
fees
were
reduced
as
noted
in
the
Statements
of
Operations.
For
Franklin
Templeton
SMACS:
Series
E
and
Franklin
Templeton
SMACS:
Series
I,
effective
June
12,
2023,
earned
credits,
if
any,
will
be
recognized
as
income.
5.
Income
Taxes
For
tax
purposes,
capital
losses
may
be
carried
over
to
offset
future
capital
gains.
At
August
31,
2023,
the
capital
loss
carryforwards
were
as
follows:
For
tax
purposes,
the
Funds
may
elect
to
defer
any
portion
of
a
post-October
capital
loss
or
late-year
ordinary
loss
to
the
first
day
of
the
following
fiscal
year.
At
August
31,
2023,
Franklin
Templeton
SMACS:
Series
E
deferred
post-October
capital
losses
of
$269,838.
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
H
Purchases
..............................
$243,431
$2,750,000
Sales
..................................
$250,351
$700,000
Net
Realized
Gains
(Losses)
.................
$(25,879)
$—
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
1
1
1
1
Capital
loss
carryforwards
not
subject
to
expiration:
Short
term
.............................
$
20,114
$
21,877
$
1,587,297
Long
term
.............................
187,126
58,696
367,795
Total
capital
loss
carryforwards
............
$207,240
$80,573
a
$1,955,092
b
a
Includes
$65,341
which
may
be
carried
over
to
offset
future
capital
gains,
subject
to
certain
limitations
.
b
Includes
$331,722
which
may
be
carried
over
to
offset
future
capital
gains,
subject
to
certain
limitations
.
3.
Transactions
with
Affiliates
(continued)
g.
Interfund
Transactions
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
60
franklintempleton.com
Annual
Report
The
tax
character
of
distributions
paid
during
the
years
ended
August
31,
2023
and
2022,
was
as
follows:
At
August
31
,
2023,
the
cost
of
investments,
net
unreali
zed
appreciation
(depreciation)
and
undistributed
tax
exempt
income
for
income
tax
purposes
were
as
follows:
Differences
between
income
and/or
capital
gains
as
determined
on
a
book
basis
and
a
tax
basis
are
primarily
due
to
differing
treatments
of
defaulted
securities,
wash
sales,
derivative
financial
instruments,
equity-linked
securities,
contingent
securities
and
convertible
securities.
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
2023
2022
2023
2022
Distributions
paid
from:
Ordinary
income
........................
$147
$—
$2,057,469
$449,044
Tax
exempt
income
......................
142,873
119,277
—
—
Long
term
capital
gain
....................
—
—
347,544
270,040
Return
of
capital
.........................
—
—
13,510
—
$143,020
$119,277
$2,418,523
$719,084
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
2023
2022
2023
2022
Distributions
paid
from:
Ordinary
income
........................
$1,660
$—
$4,306,631
$568,499
Tax
exempt
income
......................
171,525
102,739
—
—
Return
of
capital
.........................
—
—
9,367
4,176
$173,185
$102,739
$4,315,998
$572,675
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
.......................
$4,260,342
$61,126,907
$9,855,711
$107,887,635
Unrealized
appreciation
.....................
$20,575
$2,400,872
$48,181
$1,553,584
Unrealized
depreciation
.....................
(307,126)
(1,324,830)
(371,138)
(1,762,528)
Net
unrealized
appreciation
(depreciation)
.......
$(286,551)
$1,076,042
$(322,957)
$(208,944)
Distributable
earnings:
Undistributed
tax
exempt
income
..............
$14,840
$—
$26,364
$—
5.
Income
Taxes
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
61
franklintempleton.com
Annual
Report
6.
Investment
Transactions
Purchases
and
sales
of
investments
and
ETFs
(excluding
short
term
securities)
for
the
year
ended
August
31,
2023,
were
as
follows:
7.
Credit Risk
and
Defaulted
Securities
At August
31,
2023,
certain
or all
Funds
had
a
portion
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.
Certain
or
all
Funds
held
defaulted
securities
and/or
other
securities
for
which
the
income
has
been
deemed
uncollectible.
At
August
31,
2023,
the
aggregate
value
of
these
securities
for
Franklin
Templeton
SMACS:
Series
CH
and
Franklin
Templeton
SMACS:
Series
I
was
$44,999
and
$213,860,
representing
1.2%
and
0.2%,
respectively,
of
each
Fund's
net
assets.
The
Funds
discontinue
accruing
income
on
securities
for
which
income
has
been
deemed
uncollectible
and
provide
an
estimate
for
losses
on
interest
receivable.
The
securities
have
been
identified
in
the
accompanying
Schedules
of
Investments.
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.
9.
Other
Derivative
Information
At
August
31,
2023,
investments
in
derivative
contracts
are
reflected
in
the
Statements
of
Assets
and
Liabilities
as
follows:
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Purchases
..............................
$2,005,490
$84,848,900
$6,465,982
$99,885,336
Sales
..................................
$1,355,214
$37,747,853
$469,124
$14,192,357
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
H
Franklin
Templeton
SMACS:
Series
I
Credit
risk
.....................................
53.6%
39.9%
83.9%
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
$
27,450
Total
....................
$—
$27,450
Franklin
Strategic
Series
Notes
to
Financial
Statements
62
franklintempleton.com
Annual
Report
a
This
amount
reflects
the
cumulative
appreciation
(depreciation)
of
futures
contracts
as
reported
in
the
Schedule
of
Investments.
Only
the
variation
m
argin
receivable/payable
at
period
end
is
separately
reported
within
the
Statements
of
Assets
and
Liabilities.
Prior
variation
margin
movements
were
recorded
to
cash
upon
receipt
or
payment.
For
the
year
ended
August
31,
2023,
the
effect
of
derivative
contracts
in
the
Statements
of
Operations
was
as
follows:
For
the year
ended
August
31,
2023,
the
average
month
end
notional
amount
of
futures
contracts
and
options
were
as
follows:
See
Note
1(d) regarding
derivative
financial
instruments.
10.
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
2,
2024.
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.
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
I
Interest
rate
contracts
.......
Variation
margin
on
futures
contracts
$
314,001
a
Variation
margin
on
futures
contracts
$
—
Total
....................
$314,001
$—
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
$(238,712)
Written
options
$(26,502)
Total
.......................
$(238,712)
$(26,502)
Franklin
Templeton
SMACS:
Series
I
Interest
rate
contracts
..........
Futures
contracts
(747,267)
Futures
contracts
314,001
Total
.......................
$(747,267)
$314,001
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
I
Futures
contracts
.........................
$—
$5,876,431
Options
.................................
38,415
—
9.
Other
Derivative
Information
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
63
franklintempleton.com
Annual
Report
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,
2023,
the
Funds
did
not
use
the
Global
Credit
Facility.
11.
Fair
Value
Measurements
The Funds
follow
a
fair
value
hierarchy
that
distinguishes
between
market
data
obtained
from
independent
sources
(observable
inputs)
and
the Funds'
own
market
assumptions
(unobservable
inputs).
These
inputs
are
used
in
determining
the
value
of
the Funds' financial
instruments
and
are
summarized
in
the
following
fair
value
hierarchy:
Level
1
–
quoted
prices
in
active
markets
for
identical
financial
instruments
Level
2
–
other
significant
observable
inputs
(including
quoted
prices
for
similar
financial
instruments,
interest
rates,
prepayment
speed,
credit
risk,
etc.)
Level
3
–
significant
unobservable
inputs
(including
the Funds'
own
assumptions
in
determining
the
fair
value
of
financial
instruments)
The
input
levels
are
not
necessarily
an
indication
of
the
risk
or
liquidity
associated
with
financial
instruments
at
that
level.
A
summary
of
inputs
used
as
of
August
31,
2023,
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:
Investments
in
Securities:
a
Municipal
Bonds
.........................
$
—
$
3,373,791
$
—
$
3,373,791
Short
Term
Investments
...................
—
600,000
—
600,000
Total
Investments
in
Securities
...........
$—
$3,973,791
$—
$3,973,791
Franklin
Templeton
SMACS:
Series
E
Assets:
Investments
in
Securities:
a
Common
Stocks
.........................
32,902,914
—
—
32,902,914
Equity-Linked
Securities
...................
—
23,816,211
—
23,816,211
Convertible
Preferred
Stocks
................
1,269,000
—
—
1,269,000
Corporate
Bonds
........................
—
3,009,664
—
3,009,664
Short
Term
Investments
...................
1,232,610
—
—
1,232,610
Total
Investments
in
Securities
...........
$35,404,524
$26,825,875
$—
$62,230,399
Liabilities:
Other
Financial
Instruments:
Options
written
..........................
$
27,450
$
—
$
—
$
27,450
Total
Other
Financial
Instruments
.........
$27,450
$—
$—
$27,450
Franklin
Templeton
SMACS:
Series
H
Assets:
Investments
in
Securities:
a
Management
Investment
Companies
.........
823,989
—
—
823,989
Municipal
Bonds
.........................
—
8,008,765
—
8,008,765
Short
Term
Investments
...................
—
700,000
—
700,000
Total
Investments
in
Securities
...........
$823,989
$8,708,765
$—
$9,532,754
10.
Credit
Facility
(continued)
Franklin
Strategic
Series
Notes
to
Financial
Statements
64
franklintempleton.com
Annual
Report
12.
Subsequent
Events
The
Funds
have
evaluated
subsequent
events
through
the
issuance
of
the
financial
statements
and
determined
that
no
events
have
occurred
that
require
disclosure.
Abbreviations
Level
1
Level
2
Level
3
Total
Franklin
Templeton
SMACS:
Series
I
Assets:
Investments
in
Securities:
a
Equity-Linked
Securities
...................
$
—
$
1,014,526
$
—
$
1,014,526
Corporate
Bonds
........................
—
104,158,701
—
104,158,701
Short
Term
Investments
...................
2,191,463
—
—
2,191,463
Total
Investments
in
Securities
...........
$2,191,463
$105,173,227
$—
$107,364,690
Other
Financial
Instruments:
Futures
contracts
........................
$314,001
$—
$—
$314,001
Total
Other
Financial
Instruments
.........
$314,001
$—
$—
$314,001
a
For
detailed
categories,
see
the
accompanying
Schedule
of
Investments.
Selected
Portfolio
ADR
American
Depositary
Receipt
ETF
Exchange-Traded
Fund
FRN
Floating
Rate
Note
GO
General
Obligation
LOC
Letter
of
Credit
11.
Fair
Value
Measurements
(continued)
Franklin
Strategic
Series
Report
of
Independent
Registered
Public
Accounting
Firm
65
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
schedules
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,
2023,
the
related
statements
of
operations
for
the
year
ended
August
31,
2023,
the
statements
of
changes
in
net
assets
for
each
of
the
two
years
in
the
period
ended
August
31,
2023,
including
the
related
notes,
and
the
financial
highlights
for
each
of
the
four
years
ended
August
31,
2023
and
the
period
June
3,
2019
(commencement
of
operations)
to
August
31,
2019
(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,
2023,
the
results
of
each
of
their
operations
for
the
year
then
ended,
the
changes
in
each
of
their
net
assets
for
each
of
the
two
years
in
the
period
ended
August
31,
2023
and
each
of
the
financial
highlights
for
each
of
the
four
years
ended
August
31,
2023
and
the
period
June
3,
2019
(commencement
of
operations)
to
August
31,
2019
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,
2023
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
23,
2023
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)
66
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,
2023:
Pursuant
to:
Franklin
Templeton
SMACS:
Series
CH
Franklin
Templeton
SMACS:
Series
E
Franklin
Templeton
SMACS:
Series
H
Long-Term
Capital
Gain
Dividends
Distributed
§852(b)(3)(C)
—
$347,595
—
Income
Eligible
for
Dividends
Received
Deduction
(DRD)
§854(b)(1)(A)
—
$522,814
—
Qualified
Dividend
Income
Earned
(QDI)
§854(b)(1)(B)
—
$747,821
—
Exempt-Interest
Dividends
Distributed
§852(b)(5)(A)
$142,873
—
$171,525
Short-Term
Capital
Gain
Dividends
Distributed
§871(k)(2)(C)
—
$20,188
—
Section
163(j)
Interest
Dividends
Earned
§163(j)
—
$888,404
—
Pursuant
to:
Franklin
Templeton
SMACS:
Series
I
Section
163(j)
Interest
Dividends
Earned
§163(j)
$4,266,635
Franklin
Strategic
Series
Board
Members
and
Officers
67
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
Trust,
principal
occupations
during
at
least
the
past
five
years
and
number
of
U.S.
registered
portfolios
overseen
in
the
Franklin
Templeton/Legg
Mason
fund
complex,
are
shown
below.
Generally,
each
board
member
serves
until
that
person’s
successor
is
elected
and
qualified.
Independent
Board
Members
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member
1
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Harris
J.
Ashton
(1932)
Trustee
Since
1991
119
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
119
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
119
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
68
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
1
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
119
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)
(2001-2021),
White
Mountains
Insurance
Group,
Ltd.
(holding
company)
(2004-
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
119
Boeing
Capital
Corporation
(aircraft
financing)
(2006-2010).
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Counselor
and
Special
Advisor
to
the
CEO
and
Board
of
Directors
of
the
Coca-Cola
Company
(beverage
company)
(2021-present);
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
(2019-2020);
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
119
Graham
Holdings
Company
(education
and
media
organization)
(2011-2021);
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
69
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
1
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Valerie
M.
Williams
(1956)
Trustee
Since
2021
110
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)
(2021-present);
and
formerly
,
WPX
Energy,
Inc.
(exploration
and
production
of
oil
and
gas)
(2018-
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
1
Other
Directorships
Held
During
at
Least
the
Past
5
Years
Gregory
E.
Johnson
2
(1961)
Chairman
of
the
Board
and
Trustee
Chairman
of
the
Board
since
January
2023
and
Trustee
since
2013
129
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
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex;
Vice
Chairman,
Investment
Company
Institute;
and
formerly
,
Chief
Executive
Officer
(2013-2020)
and
President
(1994-2015)
Franklin
Resources,
Inc.
Rupert
H.
Johnson,
Jr.
3
(1940)
Trustee
Since
1991
119
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
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Ted
P.
Becker
(1951)
Chief
Compliance
Officer
Since
June
2023
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
Principal
Occupation
During
at
Least
the
Past
5
Years:
Vice
President,
Global
Compliance
of
Franklin
Templeton
(since
2020);
Chief
Compliance
Officer
of
Legg
Mason
Partners
Fund
Advisor,
LLC
(since
2006);
Chief
Compliance
Officer
of
certain
funds
associated
with
Legg
Mason
&
Co.
or
its
affiliates
(since
2006);
formerly
,
Director
of
Global
Compliance
at
Legg
Mason
(2006
to
2020);
Managing
Director
of
Compliance
of
Legg
Mason
&
Co.
(2005
to
2020).
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
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Independent
Board
Members
(continued)
Franklin
Strategic
Series
70
franklintempleton.com
Annual
Report
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.
1.
We
base
the
number
of
portfolios
on
each
separate
series
of
the
U.S.
registered
investment
companies
within
the
Franklin
Templeton/Legg
Mason
fund
complex.
These
portfolios
have
a
common
investment
manager
or
affiliated
investment
managers.
2.
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.
3.
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
a
major
shareholder
of
Resources,
which
is
the
parent
company
of
the
Fund's
investment
manager
and
distributor.
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
to
2020)
and
formerly,
Founder
and
Senior
Advisor,
Strategic
Investment
Group
(1987
to
2017).
Ms.
Choksi
has
been
a
Member
of
the
Fund’s
Name,
Year
of
Birth
and
Address
Position
Length
of
Time
Served
Number
of
Portfolios
in
Fund
Complex
Overseen
by
Board
Member
1
Other
Directorships
Held
During
at
Least
the
Past
5
Years
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
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex;
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
2021
Not
Applicable
Not
Applicable
280
Park
Avenue
New
York,
NY
10017
Principal
Occupation
During
at
Least
the
Past
5
Years:
Senior
Compliance
Analyst,
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
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Christopher
Kings
(1974)
Chief
Financial
Officer,
Chief
Accounting
Officer
and
Treasurer
Since
2022
Not
Applicable
Not
Applicable
One
Franklin
Parkway
San
Mateo,
CA
94403-1906
Principal
Occupation
During
at
Least
the
Past
5
Years:
Treasurer,
U.S.
Fund
Administration
&
Reporting;
and
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
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
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Navid
J.
Tofigh
(1972)
Vice
President
and
Secretary
Vice
President
since
2015
and
Secretary
since
June
2023
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;
and
officer
of
certain
funds
in
the
Franklin
Templeton/Legg
Mason
fund
complex.
Interested
Board
Members
and
Officers
(continued)
Franklin
Strategic
Series
71
franklintempleton.com
Annual
Report
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.
Interested
Board
Members
and
Officers
(continued)
Franklin
Strategic
Series
Shareholder
Information
72
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
an
in-person
meeting
held
on
April
18,
2023
(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
virtual
contract
renewal
meeting
at
which
the
Independent
Trustees
first
conferred
amongst
themselves
and
Independent
Trustee
counsel
about
contract
renewal
matters;
and
then
met
with
management
to
request
additional
information
that
the
Independent
Trustees
reviewed
and
considered
prior
to
and
at
the
Meeting.
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
the
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.
The
Board
acknowledged
management’s
continued
development
of
strategies
to
address
areas
of
heightened
concern
in
the
mutual
fund
industry,
including
various
regulatory
initiatives
and
continuing
geopolitical
concerns.
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
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
Franklin
Strategic
Series
Shareholder
Information
73
franklintempleton.com
Annual
Report
the
Funds
by
the
FT
organization.
The
Board
specifically
noted
FT’s
commitment
to
technological
innovation
and
advancement
and
investments
to
promote
alternative
investing.
Following
consideration
of
such
information,
the
Board
was
satisfied
with
the
nature,
extent
and
quality
of
services
provided
by
the
Manager
and
its
affiliates
to
the
Funds
and
their
shareholders.
Fund
Performance
The
Board
reviewed
and
considered
the
performance
results
of
each
Fund
over
various
time
periods
ended
December
31,
2022.
The
Board
noted
that
each
Fund
commenced
operations
on
June
3,
2019,
and
thus
has
been
in
operation
for
less
than
five
years.
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
–
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
California
municipal
debt
funds.
The
Board
noted
that
the
Fund’s
annualized
income
return
for
the
one-
and
three-year
periods
was
above
the
median
and
in
the
first
quintile
(best)
of
its
Performance
Universe.
The
Board
also
noted
that
the
Fund’s
annualized
total
return
for
the
one-
and
three-year
periods
was
below
the
median
of
its
Performance
Universe.
The
Board
further
noted
management’s
view
regarding
the
income-related
attributes
of
the
Fund
(e.g.,
a
fund’s
investment
objective)
as
set
forth
in
the
Fund’s
registration
statement
and
that
the
evaluation
of
the
Fund’s
performance
relative
to
its
peers
on
an
income
return
basis
was
appropriate
given
these
attributes.
The
Board
concluded
that
the
Fund’s
performance
was
satisfactory.
Franklin
Templeton
SMACS:
Series
E
–
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
equity
income
funds.
The
Board
noted
that
the
Fund’s
annualized
income
return
and
annualized
total
return
for
the
one-
and
three-year
periods
were
above
the
medians
and
in
the
first
quintile
(best)
of
its
Performance
Universe.
The
Board
further
noted
management’s
view
regarding
the
income-related
attributes
of
the
Fund
(e.g.,
a
fund’s
investment
objective)
as
set
forth
in
the
Fund’s
registration
statement
and
that
the
evaluation
of
the
Fund’s
performance
relative
to
its
peers
on
an
income
return
basis
was
appropriate
given
these
attributes.
The
Board
concluded
that
the
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-
and
three-year
periods
were
below
the
medians
of
its
Performance
Universe.
The
Board
further
noted
that
the
Fund
commenced
operations
on
June
3,
2019
and,
as
of
August
31,
2022,
was
90.2%
owned
by
FRI
or
an
affiliate.
The
Board
also
noted
that
the
Fund’s
one-
and
three-year
annualized
income
return
was
3.72%
and
3.36%,
respectively.
The
Board
further
noted
management’s
view
regarding
the
income-related
attributes
of
the
Fund
(e.g.,
a
fund’s
investment
objective)
as
set
forth
in
the
Fund’s
registration
statement
and
that
the
evaluation
of
the
Fund’s
performance
relative
to
its
peers
on
an
income
return
basis
was
appropriate
given
these
attributes.
Based
on
the
foregoing,
the
Board
concluded
that
the
Fund’s
Management
Agreement
should
be
continued
for
an
additional
one-year
period,
while
management’s
efforts
continue
to
be
closely
monitored.
Franklin
Templeton
SMACS:
Series
I
–
The
Performance
Universe
for
the
Fund
included
the
Fund
and
all
retail
and
institutional
short
high
yield
funds.
The
Board
noted
that
the
Fund’s
annualized
income
return
for
the
one-
and
three-year
periods
was
above
the
median
and
in
the
first
quintile
(best)
of
its
Performance
Universe.
The
Board
also
noted
that
the
Fund’s
annualized
total
return
for
the
one-
and
three-year
periods
was
below
the
median
and
in
the
fifth
quintile
(worst)
of
its
Performance
Universe.
The
Board
further
noted
that
the
Fund’s
one-
and
three-year
annualized
income
return
was
7.76%
and
7.59%,
respectively.
The
Board
also
noted
management’s
view
regarding
the
income-related
attributes
of
the
Fund
(e.g.,
a
fund’s
investment
objective)
as
set
forth
in
the
Fund’s
registration
statement
and
that
the
evaluation
of
the
Fund’s
performance
relative
to
its
peers
on
an
income
return
basis
was
appropriate
given
these
attributes.
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
Franklin
Strategic
Series
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74
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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
or
semi-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
S,
Class
Z,
Investor
Class
and
Fund
Class
shares
for
the
funds
in
the
Franklin
Templeton
SMACS:
Series
CH
Expense
Group;
(ii)
Class
A,
Investor
Class
and
Retail
Class
shares
for
the
funds
in
the
Franklin
Templeton
SMACS:
Series
E
Expense
Group;
(iii)
Class
P,
Class
I,
Investor
Class
and
Retail
Class
shares
for
the
funds
in
the
Franklin
Templeton
SMACS:
Series
H
Expense
Group;
and
(iv)
Class
I,
Class
P,
Investor
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.
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
CH
included
the
Fund
and
10
other
California
municipal
debt
funds.
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
E
included
the
Fund
and
12
other
equity
income
funds.
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
H
included
the
Fund
and
11
other
high
yield
funds.
The
Expense
Group
for
the
Franklin
Templeton
SMACS:
Series
I
included
the
Fund,
two
other
short
high
yield
funds,
and
11
high
yield
funds.
The
Board
noted
that
the
actual
total
expense
ratios
for
the
Funds
were
below
the
medians
and
in
the
first
quintile
(least
expensive)
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,
2022,
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
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
Franklin
Strategic
Series
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75
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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.
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.
Liquidity
Risk
Management
Program
Each
of
the
Franklin
Templeton
and
Legg
Mason
Funds
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
Franklin
Templeton
and
Legg
Mason
products
and
portfolios.
The
ILC
includes
representatives
from
Franklin
Templeton’s
Risk,
Trading,
Global
Compliance,
Legal,
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
2023,
the
Program
Administrator
provided
a
written
report
to
the
Board
addressing
the
adequacy
and
effectiveness
of
the
program
for
the
year
ended
December
31,
2022.
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.
Franklin
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76
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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
Schedule
of
Investments
The
Trust
files
a
complete
schedule
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.
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
10/23
©
2023
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 $121,332 for the fiscal year ended August 31, 2023 and $121,897 for the fiscal year ended August 31, 2022.
(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.
The aggregate 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 were $70,000 for the fiscal year ended August 31, 2023, and $0 for the fiscal year ended August 31, 2022. The services for which these fees were paid included global access to tax platform International Tax View.
(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, not 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 $44,715 for the fiscal year ended August 31, 2023 and $286,126 for the fiscal year ended August 31, 2022. The services for which these fees were paid included professional fees in connection with determining the feasibility of a U.S. direct lending structure, professional fees in connection with SOC 1 reports, professional services relating to the readiness assessment over Greenhouse Gas Emissions and Energy, fees in connection with license for accounting and business knowledge platform Viewpoint, professional fees relating to security counts and fees in connection with license for employee development tool ProEdge.
(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 $114,715 for the fiscal year ended August 31, 2023 and $286,126 for the fiscal year ended August 31, 2022.
(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.
(i) N/A
(j) N/A
Item 5. Audit Committee
of Listed Registrants. N/A
Item 6. Schedule of Investments. N/A
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. N/A
Item 8. Portfolio Managers of Closed-End Management Investment Companies. N/A
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and
Affiliated Purchasers. N/A
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant's Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures
.
The Registrant maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Registrant’s filings under the Securities Exchange Act of 1934, as amended, and the Investment Company Act of 1940 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the Securities and Exchange Commission. Such information is accumulated and communicated to the Registrant’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. The Registrant’s management, including the principal executive officer and the principal financial officer, recognizes that any set of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Within 90 days prior to the filing date of this Shareholder Report on Form N-CSR, the Registrant had carried out an evaluation, under the supervision and with the participation of the Registrant’s management, including the Registrant’s principal executive officer and the Registrant’s principal financial officer, of the effectiveness of the design and operation of the Registrant’s disclosure controls and procedures. Based on such evaluation, the Registrant’s principal executive officer and principal financial officer concluded that the Registrant’s disclosure controls and procedures 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 Christopher Kings, Chief Financial Officer, Chief Accounting Officer and Treasurer
(a)(2)(1) There were no written solicitations to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the Registrant to 10 or more persons.
(a)(2)(2) There was no change in the Registrant’s independent public accountant during the period covered by the report.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Matthew T. Hinkle, Chief Executive Officer - Finance and Administration, and Christopher Kings, 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 30, 2023
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 30, 2023
By S\CHRISTOPHER KINGS______________________
Christopher Kings
Chief Financial Officer, Chief Accounting Officer and Treasurer
Date October 30, 2023