FRANKLIN STRATEGIC SERIES, N-30D, 1996-01-03

FRANKLIN STRATEGIC SERIES
N-30D, 1996-01-03

Previous: GOVETT FUNDS INC, 497, 1996-01-03

Next: JUNDT GROWTH FUND INC, 497, 1996-01-03

Table of Contents Page

Franklin California Growth Fund 3

Franklin Global Utilities Fund 8

Franklin Small Cap Growth Fund 13

Franklin Global Health Care Fund 18

Franklin Strategic Income Fund 23

Franklin Institutional
Midcap Growth Fund 28

Franklin Natural Resources Fund 32

To reduce the volume of mail shareholders receive and to reduce expenses, only
one copy of most fund reports, such as the fund's annual and semi-annual
reports, may be mailed to a household. Additional copies can be ob- tained,
without charge, by calling Fund Informa- tion at 1-800/DIAL BEN
(1-800/342-5236).

December 15, 1995

Dear Shareholder:

We are pleased to bring you the fifth semi-annual report for the Franklin
Strategic Series, which covers the six months ended October 31, 1995.

During the period, U.S. economic growth slowed, inflation remained under
control, and the Federal Reserve Board (the Fed) seemed to have been successful
in achieving its much sought-after "soft landing."

In November 1994, long-term bond yields started to fall, and in July 1995, the
Fed lowered short-term interest rates for the first time in almost three years.
Stock and bond markets responded positively to this news, and on October 31,
1995, the Dow Jones Industrial Average(R) stood at 4755.48, up 10% from its
April 30, 1995 level. During the same period, the Standard & Poor's 500 Stock
Index(R) advanced almost 13%, and long-term bond prices, in response to
declining yields, rose 11.25%.*

*Source: Dow Jones Industrial Average; Standard & Poor's 500 Stock Index;
Merrill Lynch Long-Term Bond Index. Indices are unmanaged and do not include
reinvested dividends.

While the above mentioned performance statistics have pleased most investors, we
know from experience that investment results differ depending on one's
objectives and time horizon, and that past performance cannot predict future
results. However, history has shown that over the long term, stocks and bonds
have delivered impressive financial returns. That's why we encourage you to
focus on your long-term investment goals. If you remain invested over the long
term, you need not be unduly concerned with short-term market fluctuations.
What's really important is time in the market -- not timing the market.

We also believe it is important to seek the guidance of an investment
representative who can work with you in building and evaluating an investment
plan tailored to your financial objectives. He or she can help you stay focused
on your long-term goals when markets fluctuate and suggest ways to modify your
investment portfolio as your lifestyle changes.

On the following pages, you will find detailed discussions about the seven funds
in the Franklin Strategic Series. While each fund has a distinct investment
objective, all of our managers are dedicated to providing shareholders with
careful selection and constant professional supervision.

We welcome your questions, thank you for your support, and look forward to
serving you in the future.

Sincerely,

Rupert H. Johnson, Jr.
President
Franklin Strategic Series

FRANKLIN CALIFORNIA GROWTH FUND

Your Fund's Objective:

The Franklin California Growth Fund seeks capital appreciation through a policy
of investing at least 65% of its assets in the securities of companies either
headquartered or conducting a majority of their operations in the state of
California.

During the six months ended October 31, 1995, the Franklin California Growth
Fund provided a total return of +26.42%, as shown in the Performance Summary on
page 7. The fund posted a one-year total return of +45.31%, outperforming the
Standard & Poor's 500 Stock Index(R) (S&P 500(R)) and Franklin California 250
Growth Index(R), which posted total returns of +26.44% and +38.94%,
respectively, during the one-year period.1 We are also pleased to report that
Lipper Analytical Services, Inc., ranked the Franklin California Growth Fund #3
out of 558 growth stock funds for the one-year period ended October 31, 1995.2

1. The S&P 500 is a broad market index, whereas the Franklin California 250
Growth Index is an equally-weighted index representing 250 of the largest
corporations headquartered in California. An index does not contain cash (the
fund generally carries a certain percentage of cash at any given time), nor
include sales charges or management fees. The indices are unmanaged and include
reinvested dividends. One cannot invest directly in an index, and past
performance is not indicative of future results.

2. Lipper Analytical Services, Inc. is a nationally recognized mutual fund
research organization. Lipper rankings do not include sales charges; past and
present expense limitations increased the fund's total returns. Rankings may
have been different if such charges had been considered. Past performance is not
predictive of future results.

The fund was launched four years ago with the intention of taking advantage of
what management believed to be unusual investment opportunities created by
California's depressed economy. At that time, the state's unemployment figures
were rising, real estate values were plummeting, and California was in the midst
of its worst recession in 60 years. Fortunately, California's economy has
bounced back fairly well. In fact, the state's exports grew 18.7%, to $45.7
billion during the first half of 1995, and this growth supported 136,000
trade-related jobs. Though job reduction occurred in aerospace/defense
companies, it appears that the worst of the downsizing is over, and the state
unemployment rate has declined from double-digit figures to the 6%-7% range as
of October 31, 1995. Although about 300,000 people left the state between 1993
and 1994, its population remains over 32 million, and some estimate it will
increase to more than 38 million within the next decade. In fact, with over
800,000 companies and its 1995 Gross State Product estimated at more than $880
billion (approximately 13% of the total U.S. Gross Domestic Product), California
ranks as the 7th largest economy in the world.

New business development was one of the main factors behind California's
improving economy. On October 31, 1995, more than 1,250 publicly traded
companies were headquartered in California, with new firms going public almost
every week. Typically, 20% to 25% of the "best" or "fastest-growing" companies
in America, as determined by independent magazine studies conducted by Forbes,
Individual Investor, and Business Week, are California companies. In our
opinion, a host of successful high-tech companies are headquartered in Northern
California, particularly the San Francisco Bay Area, because it is home to many
venture capitalists, as well as Stanford and other Bay Area universities which
foster a plethora of innovative ideas.

Another factor behind the growth of California's economy was a dramatic increase
in international trade. For example, in 1994, the combined ports of Los Angeles
and Long Beach surpassed New York for the first time, and became the country's
leading ports of international trade.

On October 31, 1995, we were overweighted in technology stocks, relative to the
S&P 500.

GRAPHIC MATERIAL 1 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Today, as we move from an "industrial-based" to an "information-based" economy,
computers and communications products are revolutionizing the way we work and
play, and we believe that a long-term growth trend is in place in this sector.

As you can see in the chart to the right, we were also heavily weighted in
utilities and energy stocks. During the period, we increased our holdings in
Atlantic Richfield, Chevron, Unocal, San Diego Gas & Electric, and Southern
California Water because, in our estimation, they had high appreciation
potential and limited downside risk due to their high dividend yields. We also
participated selectively in the initial public offering market where we found
strong investment opportunities such as ArcSys, Inc., Netscape Communications
Corp., and Oakley, Inc., which were subsequently sold when we thought they
became overvalued.

Looking forward, we believe that California, one of the nation's most
economically diversified states, will continue to participate successfully in
world trade, particularly with Asian and Latin American countries. In our
opinion, a combination of creative spirit, first-rate research facilities, and
access to capital bodes well for new business development within the state, and
for the success of the fund. Of course, there are risks involved with investing
in a non-diversified fund concentrating in securities associated with a single
state, such as increased susceptibility to adverse economic or regulatory
developments. The fund also invests a portion of its assets in small or
relatively new or unseasoned companies, which involves the additional risks
related to relatively small revenues, limited product lines and small market
share. These and other risks are described in the prospectus.

We appreciate your participation in the Franklin California Growth Fund, welcome
any suggestions you may have, and look forward to serving you in the years to
come.

Franklin California Growth Fund
Top 10 Holdings on October 31, 1995
Based on Total Net Assets

Company, % of Total
Industry Net Assets

Silicon Graphics 3.62%
Electronic Technology

Bay Networks 2.52%
Electronic Technology

Intel Corp. 2.28%
Semiconductors/Equipment

PacifiCare Health 1.92%
Health Services

Avery Dennison Corp. 1.83%
Business Services

Adaptec 1.82%

Semiconductors/Equipment

Callaway Golf 1.78%
Leisure Time

Atlantic Richfield 1.74%
Energy/Minerals

Foundation Health 1.73%
Health Services

Vons Companies 1.73%
Retail Trade

For a complete list of portfolio holdings, please see page 36 of this report.

Performance Summary

The Franklin California Growth Fund provided a total return of +26.42% for the
six-month period ended October 31, 1995. Total return measures the change in
value of an investment, assuming reinvestment of dividends and capital gains,
and does not include the initial sales charge.

Of course, we maintain a long-term perspective when managing the fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table below, the fund delivered a cumulative total return of more
than 113.82% since inception on October 30, 1991.

The fund's share price, as measured by net asset value, increased from $14.03 on
April 30, 1995, to $17.12 on October 31, 1995. During the reporting period,
shareholders received distributions totaling 9.9 cents ($0.099) per share in
dividend income and 43 cents ($0.43) per share in capital gains, of which 13
cents ($0.13) represented long-term gains and 30 cents ($0.30) represented
short-term gains. Of course, past performance is not predictive of future
results, and distributions will vary depending on income earned by the fund and
any profits realized from the sale of portfolio securities.

Franklin California Growth Fund
Periods ended October 31, 1995

Since
One- Three- Inception
Year Year (10/30/91)

Cumulative
Total Return1 45.31% 118.60% 113.82%
Average Annual
Total Return2 38.79% 27.82% 19.50%

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.5% initial sales
charge.

2. Average annual total return represents the average annual change in
value of an investment over the specified periods and includes the maximum 4.5%
initial sales charge.

All total return calculations assume reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.

The fund's manager has agreed in advance to waive a portion of its management
fees, which reduces operating expenses and increases total return to
shareholders. Without this waiver the fund's total return would have been lower.
The waiver may be discontinued at any time, upon notice to the fund's Board of
Trustees.

FRANKLIN GLOBAL UTILITIES FUND

Your Fund's Objective:

The Franklin Global Utilities Fund seeks to provide total return by investing in
the equity and debt securities of utility companies located in the United States
and around the world.

During the six-month period ended October 31, 1995, both U.S. and foreign
interest rates eased substantially. For example, the yield on the benchmark
30-year U.S. Treasury fell from 7.34% on April 30, 1995, to 6.34% on October 31,
1995.* Generally, falling interest rates tend to boost the stock prices of
utility companies, and the latest drop in domestic and international interest
rates had a favorable effect on the fund's holdings. As illustrated in the
Performance Summary on page 12, the Franklin Global Utilities Fund Class I
shares produced an impressive total return of +11.09% for the six months ended
October 31, 1995.

*Source: Micropal, November 20, 1995.

United States

In late 1994 and at the start of 1995, prospects for slower domestic economic
growth and stable interest rates favored the traditionally defensive U.S.
utility sector, and we increased the fund's holdings in U.S. electric and
telephone utility stocks at that time. Subsequently, these sectors performed
strongly. In fact, the unmanaged S&P Electric Utility Index and the S&P
Telephone Utility Index were up more than 15% and 22%, respectively, for the six
months ending October 31, 1995.

During the reporting period, we sought to purchase companies with strong growth
prospects, good competitive positioning and entrepreneurial management. Recent
purchases include Southwestern Bell, Bellsouth, Ameritech and New England
Electric Co.

Continental Europe/United Kingdom

Although European stock markets produced mixed results during the reporting
period, several of the fund's holdings in Europe performed well over this time.
We took gains in Endesa, Spain's largest electric utility company, whose stock
recovered after political uncertainties eased and inflation subsided. We also
took gains in VEBA, a German electric utility, after strong performance of the
company's diversified businesses moved the stock price up significantly. Another
area of strength was Finland, where Espoon Sahko, an electric utility, was one
of the fund's strongest performers for the period. Even though utilities in the
United Kingdom posted flat returns due to regulatory and political
uncertainties, we believe this market's attractively priced stocks have
excellent potential.

Latin America

Latin American utility stocks remained volatile as aftershocks from the Mexican
currency crisis were felt throughout the region. We feel that some Latin
American stocks offer attractive valuations, and will continue to be highly
selective there, investing only in stocks that offer potential for above-average
growth and attractive risk/ reward characteristics.

Asia

While several Asian markets performed poorly over the six-month period, our
holdings in Hong Kong provided the fund with strong returns. Taking advantage of
this strength, we sold shares of Hong Kong & China Gas Co., Ltd, and initiated a
position in KEPCO, South Korea's national electric utility, as weakness in that
market created an attractive buying opportunity.

GRAPHIC MATERIAL 2 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Looking forward, we are optimistic about the growth prospects for global utility
stocks despite their impressive gains during the past six months. Although
competition is slowly entering the market, high-quality utilities with
aggressive, entrepreneurial management are continuing to expand
operations and post strong earnings growth, and we still believe that there are
attractive investment opportunities in the U.S. Outside the U.S., the ongoing
privatization of utilities in many countries should continue to present
additional investment opportunities with the potential for high growth and
excellent total returns.

In our opinion, global utilities provide services that are an essential part of
peoples' lives and we will continue to emphasize our long-term objective of
maximizing total return through investing in a portfolio of utility stocks from
around the globe. There are, of course, special risks involved with investing
globally in a non-diversified fund concentrating its investments in a single
industry. These risks, which include currency fluctuations and increased
susceptibility to adverse economic, political, social and regulatory
developments, are further discussed in the fund's prospectus.

Franklin Global Utilities Fund
Top 10 Holdings on October 31, 1995
Based on Total Net Assets

Company, % of Total
Industry, Country Net Assets

Southern Co. 4.05%
Utilities - Electrical & Gas, United States

Enron Corp. 3.56%
Utilities - Electrical & Gas, United States

TECO Energy, Inc. 3.54%
Utilities - Electrical & Gas, United States

CINergy Corp. 3.47%
Utilities - Electrical & Gas, United States

Hong Kong Electric Holdings, Ltd 3.27%

Utilities - Electrical & Gas, Hong Kong

AT&T Corp. 3.09%
Telecommunications, United States

Panhandle Eastern Corp. 2.75%
Utilities - Electrical & Gas, United States

PacifiCorp 2.72%
Utilities - Electrical & Gas, United States

AES Corp. 2.67%
Utilities - Electrical & Gas, United States

National Fuel Gas 2.64%
Utilities - Electrical & Gas, United States

For a complete list of portfolio holdings, please see page 40 of this report.

Performance Summary

Class I Shares
The Franklin Global Utilities Fund's Class I shares provided a total return of
+11.09% for the six-month period ended October 31, 1995. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains, and does not include the initial sales charge.

Of course, we maintain a long-term perspective when managing the fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table on page 12, the fund's Class I shares delivered a cumulative
total return of more than 50% since its inception on July 2, 1992.

As measured by net asset value, the price of the fund's Class I shares increased
from $12.23 on April 30, 1995 to $13.24 on October 31, 1995.

During the reporting period, Class I shareholders received distributions
totaling 32.6 cents ($0.326) per share, including 18.9 cents ($0.189) in
dividend income, 4.3 cents ($0.043) in short-term capital gains and 9.4 cents
($0.094) in long-term capital gains. Of course, past performance is not
predictive of future results, and distributions will vary depending on income
earned by the fund and any profits realized from the sale of securities in the
portfolio.

Class II Shares

The Franklin Global Utilities Fund's Class II shares provided a total return of
+11.16% for the six-month period ended October 31, 1995. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains, and does not include the initial sales charge.

The price of the fund's Class II shares, as measured by net asset value,
increased from $12.18 on May 1, 1995 (the date the fund began offering these
shares), to $13.20 on October 31, 1995.

Over the six-month period, Class II shareholders received distributions totaling
32 cents ($0.32) per share, including 18.3 cents ($0.183) in dividend income,
4.3 cents ($0.043) in short-term capital gains and 9.4 cents ($0.094) in
long-term capital gains. Of course, past performance is not predictive of future
results, and distributions will vary depending on income earned by the fund and
any profits realized from the sale of securities in the portfolio.

Franklin Global Utilities Fund
Periods ended October 31, 1995

Since Since
Inception Inception
One-Year Three-Year (07/02/92) (05/01/95)

Cumulative Total Return1
Class I Shares 12.29% 48.69% 50.33% --
Class II Shares -- -- -- 11.16%
Average Annual Total Return2
Class I Shares 7.24% 12.39% 11.46% --
Aggregate Total Return3
Class II Shares -- -- -- 9.09%

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.5% initial sales charge
for Class I shares, or the 1.0% initial sales charge and 1.0% contingent
deferred sales charge (CDSC) for Class II shares, applicable to shares redeemed
within the first 18 months of investment. See note below.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.5% initial
sales charge for Class I shares. See note below.

3. Aggregate total return represents the change in value of an investment over
the periods indicated and reflects the deduction of the 1.0% initial sales
charge and 1.0% CDSC for Class II Shares, applicable to shares redeemed within
the first 18 months of investment. Since Class II Shares have been in existence
for less than one year, average annual total returns are not provided. See note
below.

Note: All total return calculations assume reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate with market
conditions, and you may have a gain or loss when you sell your shares. Past
performance is not predictive of future results.

Past expense reductions by the fund's manager increased the fund's total
returns.

FRANKLIN SMALL CAP GROWTH FUND

Your Fund's Objective:

The Franklin Small Cap Growth Fund seeks long-term capital growth by investing
in equity securities of small-capitalization companies -- those with a market
capitalization of less than $1 billion at the time of investment.

Moderate U.S. economic growth coupled with stable interest rates and low
inflation proved to be favorable for the stock market during the six months
ended October 31, 1995. In fact, almost every major index reached record levels
during this time. Within this environment, the fund's Class I shares delivered
an impressive total return of +18.83%, as shown in the Performance Summary on
page 16. In the chart to the right, you can also see that the fund outperformed
the Standard & Poor's 500 Stock Index(R) (S&P 500(R)) and Russell 2500 Index(R).
These unmanaged indices posted total returns of +14.46% and +13.62%,
respectively, for the period. It is important to remember that an index does not
contain cash (the fund generally carries a certain percentage of cash at any
given time) or include sales charges or management fees, but does include
reinvested dividends. Of course, one cannot invest directly in an index, and
past performance is not indicative of future results.

GRAPHIC MATERIAL 3 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

In our search for small capitalization companies that were well-positioned for
rapid growth of revenues, earnings, or cash flow, we focused on those companies
with a competitive advantage, such as a proprietary product or unique marketing
niche. Because we found many of them in the technology sector, where new product
developments and increases in capital spending have generated tremendous revenue
and profit growth, our investment in this sector was a major factor in the
fund's success. However, as you can see in the chart to the right, the fund
remained diversified among a broad range of industries at the end of the
reporting period, and also had substantial holdings in financials,
transportation, health services, and energy.

Many technology stocks fell significantly from their highs during the last few
weeks of the period due to a very volatile stock market. Considering the selloff
to be a good time to buy shares of high-quality companies, we added to our
positions in Advanced Semiconductor Materials, a provider of production
solutions for semiconductor manufacturing, and Bay Networks, a supplier of
networking products and services. We also initiated positions in Risk Capital
Holdings, a reinsurance company that we feel has excellent growth opportunities
due to its dynamic approach to the business, and Callaway Golf, a rapidly
growing manufacturer of golf equipment that has a clearly identifiable market
niche and an innovative product. Of course, there are risks involved in
investing in a fund seeking long-term growth from small or relatively new or
unseasoned companies. These risks, which include relatively small revenues,
limited product lines and small market share, are further discussed in the
fund's prospectus.

GRAPHIC MATERIAL 4 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Looking forward, we believe that the economy should continue to grow, with
inflation remaining under control. In our opinion, such an economic climate is
conducive to the development and prosperity of smaller companies, and we remain
confident that our value-oriented approach to growth stock investing should
position the fund to perform well in the future.

We thank you for your participation in the Franklin Small Cap Growth Fund and
look forward to serving your investment needs in the years to come.

Franklin Small Cap Growth Fund
Top 10 Holdings on October 31, 1995
Based on Total Net Assets

Company, % of Total
Industry Net Assets

Bay Networks 2.53%
Electronic Technology

Advanced Semiconductor Materials 2.51%
Semiconductors

Sierra Health Services 2.19%
Health Services

Risk Capital Holdings 1.87%
Financials

ECI Telecom 1.74%
Electronic Technology

Lattice Semiconductor 1.60%
Semiconductors
Adaptec, Inc. 1.59%
Semiconductors

Tommy Hilfinger Corp. 1.57%
Textiles/Apparel

Landstar System, Inc. 1.55%
Transportation

Callaway Golf 1.54%
Consumer Durables

For a complete list of portfolio holdings, please see page 46 of this report.

Performance Summary

The Franklin Small Cap Growth Fund's Class I shares provided a total return of
+18.83% for the six-month period ended October 31, 1995. Total return measures
the change in value of an investment, assuming reinvestment of dividends and
capital gains, and does not include sales charges.

Of course, we maintain a long-term perspective when managing the fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table on page 17, the fund's Class I shares delivered a cumulative
total return of more than 101.27% since the fund's inception on February 14,
1992.

As measured by net asset value, the price of the fund's Class I shares increased
from $14.90 on April 30, 1995, to $17.24 on October 31, 1995.

During the reporting period, shareholders received distributions totaling 1.4
cents ($0.014) per share in dividend income and 41.2 cents ($0.412) per share in
short-term capital gains.

As measured by net asset value, the price of the fund's Class II shares
decreased from $17.69 on October 2, 1995 (the date the fund began offering these
shares), to $17.22 on October 31, 1995. Class II shareholders received no
distributions during the reporting period because Class II shares were not in
existence when fund distributions were paid.

Of course, past performance is not predictive of future results, and
distributions will vary depending on income earned by the fund and any profits
realized from the sale of portfolio securities.

Franklin Small Cap Growth Fund
Periods ended October 31, 1995

Since
Inception
One-Year Three-Year (2/14/92)

Cumulative Total Return1
Class I Shares 34.31% 104.96% 101.27%

Average Annual Total Return2
Class I Shares 28.29% 25.09% 19.23%

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.5% initial sales charge
for Class I shares.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.5% initial
sales charge for Class I shares.

Since Class II shares have been in existence for less than one month, total
returns are not provided. Class I and Class II shares have different fees,
expenses, and performances. Please see the prospectus for more details regarding
Class I and Class II shares.

FRANKLIN GLOBAL HEALTH CARE FUND

Your Fund's Objective:

The Franklin Global Health Care Fund seeks capital appreciation by investing
primarily in the equity securities of health care companies located throughout
the world.

The health care industry performed well during the six-month reporting period as
investors focused on the strong fundamentals and value these stocks offer,
rather than on the uncertainty caused by a failed attempt to reform the U.S.
health care system in 1994. The Franklin Global Health Care Fund thrived within
this environment and, as you can see in the Performance Summary on page 22,
delivered an impressive total return of +29.17% for the six-month period.

Rising from the ashes of the proposed National Health Care Reform Act of 1994,
managed care companies (HMOs) have emerged as leaders in market-driven health
care reform. We maintained a large weighting in HMOs, believing that employers
will continue to seek lower-cost options for providing their employees with
health care benefits. Privatization of government-sponsored health care programs
such as Medicare and Medicaid may also augment HMO enrollment growth.
Recognizing that this sector has been extremely volatile due to profit margin
concerns, we have focused our investments in companies with accelerating
enrollment growth and, in our opinion, excellent cost control. One such company
is PacifiCare Health Systems, Inc., an HMO provider in California, Texas, and
Florida.

GRAPHIC MATERIAL 5 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Large pharmaceutical companies, which represented the fund's most significant
exposure at the beginning of the reporting period, performed well as investors'
interest shifted to more defensive issues, which tend to be less susceptible to
changes in the business cycle. Dramatic price increases prompted us to sell
portions of our two largest positions, Swiss pharmaceutical manufacturers Roche
Holdings and Pfizer, Inc. This reduced our overall weighting in this sector from
18.9% of total net assets on April 30, 1995 to 14.6% on October 31, 1995. By the
end of the period, specialty pharmaceuticals (companies specializing in specific
products or treatments) represented the fund's largest sector, at 19.0%. We find
this area particularly attractive because many of these companies are
introducing innovative products and have the potential for strong earnings
growth. Specific examples include Noven Pharmaceuticals, Inc., a company
specializing in transdermal drug delivery products, and Penederm, Inc., a
manufacturer of topical agents used to treat skin disorders.

FRANKLIN GLOBAL HEALTH CARE FUND
Top 10 Holdings on October 31, 1995
Based on Total Net Assets

Company, % of Total
Industry, Country Net Assets

Penederm, Inc 4.18%
Specialty Pharmaceuticals
United States

Noven Pharmaceuticals, Inc. 3.75%
Specialty Pharmaceuticals
United States

PacifiCare Health Systems, Inc. 3.24%
Health Maintenance Organizations,
United States

Serologicals Corp. 2.94%
Biotechnology, United States

Merck KGAA 2.79%
Pharmaceuticals, Germany

Pediatrix Medical Group 2.41%
Physician Practice Management
United States

United Healthcare Group 2.36%
Health Maintenance Organizations,
United States

Ethical Holdings PLC 2.00%
Specialty Pharmaceuticals
United Kingdom

Ciba-Geigy Ltd. 1.93%
Pharmaceuticals, Switzerland

Medisense, Inc. 1.90%
Medical Technology & Supplies,
United States

For a complete listing of portfolio holdings, please see page 49 of this report.

Anticipating investor fears that Medicare reform would include drastic funding
cuts for oxygen equipment and rehabilitation therapy, we also reduced our
exposure to home-health and long-term care companies. This action helped the
fund's performance because these sectors did, in fact, perform poorly.

GRAPHIC MATERIAL 6 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

By the end of the reporting period, as you can see from the chart above, 68.3%
of the fund's total net assets were invested in the U.S. because superior
technological advancements have created a great deal of opportunity in the U.S.
health care industry. We held 19.7% of our net assets in cash because we
believed that the pharmaceutical and biotechnology sectors seemed to be
approaching fully valued levels. This cash position should enable us to
participate in future initial public offerings at attractive prices.

Looking forward, we are optimistic about the prospects for the health care
industry and will continue our efforts to provide shareholders with exposure to
today's fastest growing health care companies by discovering global health care
investment opportunities in a timely and disciplined fashion. Recent U.S.
Congressional budget proposals include provisions that could result in the
migration of Medicare and Medicaid beneficiaries into specially designed HMO
plans with broadened benefit packages and lower out-of-pocket expenses. Once
these proposals are resolved, we expect a relatively "quiet" 1996 in terms of
health care reimbursement changes from state and federal governments. This
should return investor focus to company fundamentals and could present
attractive investment opportu-nities in sectors such as nursing homes and home
health, which have suffered in 1995. In our opinion, managed-care companies will
continue to lead market-driven reform in the health care industry, and we will
attempt to focus our investments on those companies that should succeed under
such a framework.

There are, of course, special risks involved with investing globally in a
non-diversified fund concentrating its investments in a single industry. These
risks, which include currency fluctuations, market volatility, and increased
susceptibility to adverse economic, political, social and regulatory
developments, are further discussed in the fund's prospectus.

We welcome your comments and suggestions and look forward to serving your
investment needs in the years to come.

Performance Summary

The Franklin Global Health Care Fund provided a total return of +29.17% for the
six-month period ended October 31, 1995. Total return measures the change in
value of an investment, assuming reinvestment of dividends and capital gains at
net asset value, and does not include the fund's maximum initial sales charge.

Of course, we maintain a long-term perspective when managing the fund, and we
encourage shareholders to view their investments in a similar manner. As you can
see from the table to the right, the fund delivered a cumulative total return of
more than 64% since the fund's inception on February 14, 1992.

The fund's share price, as measured by net asset value, increased from $11.45 on
April 30, 1995 to $14.69 on October 31, 1995. During the reporting period,
shareholders received distributions totaling 8.2 cents ($0.082) per share in
dividend income. Of course, past performance is not predictive of future
results, and distributions will vary depending on income earned by the fund.

Franklin Global Health Care Fund
Periods ended October 31, 1995

Since
One- Three- Inception
Year Year (02/14/92)

Cumulative
Total Return1 30.17% 78.08% 64.25%
Average Annual
Total Return2 24.29% 19.37% 12.89%

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.5% initial sales
charge.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods and includes the maximum 4.5% initial
sales charge.

All total return calculations assume reinvestment of dividends and capital gains
at net asset value. Investment return and principal value will fluctuate with
market conditions, and you may have a gain or loss when you sell your shares.
Past performance is not predictive of future results.

FRANKLIN STRATEGIC INCOME FUND

Your Fund's Objective:

The Franklin Strategic Income Fund seeks a high level of current income, with
capital appreciation over the long term as a secondary objective. The fund uses
an active asset allocation process and invests in securities of foreign
governments, U.S. and foreign high yield fixed-income securities, asset-backed
securities, and preferred stocks, common stocks that pay dividends, and income
producing securities convertible into common stocks of such companies.*

*The fund may invest up to 100% of its assets in foreign securities, which may
involve political uncertainty and currency risks. Investing in developing
markets involves special considerations, which may include risks related to
market and currency volatility, adverse social and political developments, and
the relatively small size and lesser liquidity of these markets. High yields
reflect the higher credit risk associated with certain lower rated securities in
the fund's portfolio and, in some cases, the lower market prices for these
instruments.

During the six months under review, moderate economic growth, low inflation,
declining interest rates and good corporate earnings contributed to a favorable
climate for global fixed-income markets. We are pleased to report that within
this environment, the Franklin Strategic Income Fund provided a six-month
cumulative total return of +8.03 %.

As you can see in the chart on page 24, the fund's assets were diversified
across seven sectors on October 31, 1995. The portfolio was heavily weighted in
high-yield U.S. corporate bonds (26.0% of total net assets) and convertible
securities (12.2% of total net assets), which performed well due to falling
interest rates and strong equity markets.

During the reporting period we continued our search for values in foreign
fixed-income markets and increased our weightings in securities issued by
developed countries whose bond markets we expected to benefit from falling
interest rates. For example, the German economy was adversely affected by a
strong Deutsche mark and lower profit margins on foreign trade. At the same
time, the strength of the currency alleviated pressure on wholesale prices,
which helped keep inflation low. In response, the Bundesbank eased monetary
policy in August, and our German bond holdings appreciated significantly.

We also concentrated on the securities of "dollar bloc" countries such as
Canada, Australia and New Zealand, whose economies tend to move in the same
direction as the U.S. economy. Interest rates had risen appreciably in these
countries when economic growth had been strong. So when growth slowed, interest
rates had further to fall and the value of our Canadian, Australian and New
Zealand holdings rose correspondingly.

The devaluation of the Mexican peso in December 1994, and the resulting
volatility experienced by emerging markets throughout the world, allowed us to
discover bargains in these countries, and our emerging-market bond holdings
increased from 7.9% of total net assets on April 30, 1995 to 11.5% at the end of
the period. Some of the fund's largest emerging-market holdings are investments
in Thailand and Brazil. Thailand Bank Notes with investment grade ratings
offered relatively higher yields than other investment grade bonds, and our
emphasis on high-yielding Brazilian government bonds reflects our confidence in
the economic and political outlook for the country.

GRAPHIC MATERIALS 7 AND 8 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Shareholders should remember, of course, that investing in foreign markets
involves special considerations, which may include risks related to market and
currency volatility and adverse social, economic and political developments.
Emerging markets involve heightened exposure to the same risks, in addition to
the relatively small size and lesser liquidity of these markets. However, it
should be noted that while short-term volatility can be disconcerting, declines
of as much as 40% to 50% are not unusual in emerging markets. For example, the
Hong Kong stock market has increased 695% in the last 15 years, but has suffered
six declines of more than 20% during that time.**

**Source: Bloomberg. Based on quarterly percentage change over 15 years ended
September 30, 1995.

In our opinion, 1995's moderate growth and stable inflationary environment
should persist into 1996. Monthly indicators of U.S. inflation show that price
pressures appear to be well contained, and the Federal Reserve Board may
therefore have reason to lower short-term interest rates again. Although prices
are increasing moderately in other industrialized countries, this upward
movement has been subdued compared with past business cycles. We believe that
this bodes well for global fixed-income investors and are confident that the
fund will continue to deliver competitive returns, providing shareholders with a
high level of current income and long-term capital appreciation.

Performance Summary

The Franklin Strategic Income Fund's share price, as measured by net asset
value, rose to $10.58 on October 31, 1995, from $10.18 on April 30, 1995.

Your fund provided income distributions totaling 40.2 cents ($0.402) per share
during the six-month reporting period. Dividends will vary based on the earnings
of the fund's portfolio, and past distributions are not indicative of future
trends.

Your fund's distribution rate was 7.28% at the end of the six-month reporting
period, based on an annualization of the current monthly dividend of 6.7 cents
($0.067) per share and the maximum offering price of $11.05 on October 31, 1995.

Your fund produced a six-month total return of +8.03% and a one-year total
return of +14.74% for the periods ended October 31, 1995. Cumulative total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, if any, and does not include the initial sales
charge. Past performance is not predictive of future results.

As always, we emphasize a long-term investment approach and encourage our
shareholders to do the same. While the fund may experience volatility from time
to time, we believe its performance should be rewarding over the long term.

Franklin Strategic Income Fund
Periods ended October 31, 1995

Since
Inception
One-Year (06/01/94)

Cumulative Total Return1 14.74% 17.69%
Average Annual Total Return2 9.88% 8.81%
Distribution Rate3 7.28%
30-Day Standardized Yield4 7.47%

1. Cumulative total return measures the change in value of an investment over
the periods indicated and does not include the maximum 4.25% initial sales
charge.

2. Average annual total return represents the average annual change in value of
an investment over the specified periods, and reflects the maximum 4.25% initial
sales charge.

3. Based on an annualization of the fund's current 6.7 cent per share monthly
dividend and the maximum offering price of $11.05 on October 31, 1995.

4. Yield, calculated as required by the SEC, is based on the earnings of the
fund's portfolio for the 30 days ended October 31, 1995.

The fund's manager has agreed to waive a portion of management fees and assume
responsibility for certain other expenses, which reduces operating expenses and
increases distribution rate, yield and total return to shareholders. If the
manager had not taken this action, the fund's distribution rate and total return
would have been lower, and yield for the period would have been 6.51%. The fee
waiver may be discontinued at any time upon notice to the fund's Board of
Trustees.

FRANKLIN INSTITUTIONAL MIDCAP GROWTH FUND

Fund Objective:

The Franklin Institutional MidCap Growth Fund seeks total return (capital growth
plus income) exceeding the total return of the aggregate U.S.
medium-capitalization stocks, as measured by the Standard & Poor's MidCap 400
Index(R). The fund invests in the common stocks of companies selected by a
structured quantitative investment strategy. Shares of the fund are available
only to institutional accounts.

Over the six-month period, both stocks and bonds enjoyed a very favorable
interest rate environment, as the long-term government bond yield fell from
approximately 7.5% at the end of April, to roughly 6.3% at the end of October.
Inflationary fears have certainly not faded, but they have eased for the time
being. Not surprisingly, the utility and financial sectors were among the
beneficiaries of this environment, and technology stocks were also strong.

Overall, large cap stocks continued to outpace the small caps during the
reporting period. The Standard & Poor's 500 Stock Index (S&P 500(R)), a proxy
for large capitalization stocks, produced a strong return of +15.51%, and the
Russell 2000, a proxy for small capitalization stocks, produced a solid, but
lower return of +12.24%. As is typical, the S&P MidCap 400 Index(R),
representing medium capitalization issues, finished in the middle with a
six-month return of +13.83%. The Franklin Institutional MidCap Growth Fund,
through active management, fared better than the unmanaged S&P MidCap 400,
returning +15.79% over the same period.1 Past performance is not indicative of
future results.

1. Index total returns include reinvested dividends. One cannot invest directly
in an index.

The fund follows a disciplined approach to finding capital growth possibilities,
which may include favorably ranked companies that fit the medium capitalization
profile, but are not included in the S&P MidCap 400. At the end of October,
26.0% of the portfolio was invested in stocks that were not included in the S&P
MidCap 400, which was slightly lower than the 28.7% figure at the end of April.
While maintaining the fund's diversification, the number of positions held in
the portfolio fell slightly, from 187 stocks at the end of April, to 166 at the
end of October.

The fund's top ten holdings are illustrated in the table to the right. These
positions accounted for approximately 15% of the fund's total net assets. At the
close of the period, the fund's long-term earnings growth rate was 14.4%, while
the benchmark's was slightly higher, at about 14.8%.2 In contrast, the growth
rate for the S&P 500 Index(R), more representative of the growth and income
objective, is an estimated 12.2%.2

Franklin Institutional MidCap Growth Fund
Top 10 Holdings on October 31, 1995
Based on Total Net Assets

% of Total
Company Net Assets

Dell Computer 1.83%

IBP, Inc. 1.63%

Office Depot, Inc. 1.60%

AFLAC, Inc. 1.54%

Pinnacle Western Corp. 1.45%

McKesson Corp. 1.37%

Illinova 1.33%

Teradyne 1.31%

Mirage Resorts 1.29%

IMC Global 1.27%

For a complete list of holdings, please refer to page 58 of this report.

2. Source: Templeton Quantitative Advisors, Inc., using Institutional Brokers
Estimate System (I/B/E/S) data.

The short-term outlook for the U.S. equity market remains positive. Through risk
premium analysis based on consensus earnings and growth estimates, we believe
the market as a whole was undervalued by about 10% versus long-term bonds at the
close of this fiscal period. Favorable valuations may indicate that investors
are demanding a premium to hedge against the potential reversal of bond yields
to the 7% range.

We believe the long-term investor should continue to focus on earnings growth,
which has been quite strong for the stocks in the S&P MidCap 400. Since April
30, 1995, the 12-month trailing earnings for these securities rose 13.0%. The
Franklin Institutional MidCap Growth Fund should continue to present potential
for solid earnings growth and help shareholders who seek growth investments.

GRAPHIC MATERIAL 11 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Performance Summary

The Franklin Institutional MidCap Growth Fund posted a total return of +18.44%
for the six-month period ended October 31, 1995. Total return measures the
change in value of an investment, assuming reinvestment of dividends and capital
gains distributions.

The fund's share price, as measured by net asset value, increased $1.87 per
share, from $10.81 on April 30, 1995 to $12.68 on October 31, 1995. During the
reporting period, shareholders received distributions totaling 11.0 cents
($0.110) per share in income dividends. Distributions will vary depending on
income earned by the fund, as well as any capital gains realized from the sale
of individual holdings in the portfolio. Past performance is not indicative of
future results.

Franklin Institutional MidCap Growth Fund

Performance Results
Period ending October 31, 1995

Since
Inception
1-Year (8/17/93)

Cumulative
Total Return3 26.81% 32.47%
Average Annual
Total Return4 26.81% 13.52%

3. Cumulative total returns show the change in value of an investment over the
periods indicated. See note below.

4. Average annual total returns represent the average annual change in value of
an investment over the periods indicated. See note below.

Note: All total returns assume initial purchase and reinvestment of
dividends and capital gains at net asset value. Investment return and principal
value fluctuate so that your shares, when redeemed, may be worth more or less
than their original cost. Past performance cannot guarantee future results.

The fund's manager has agreed in advance to waive its management fees and made
payments for other expenses, which reduces operating expenses and increases
total return to shareholders. Without these reductions, the fund's total return
would have been lower. The fee waiver may be discontinued at any time, upon
notice to the fund's Board of Trustees.

FRANKLIN NATURAL RESOURCES FUND

Your Fund's Objective:
The Franklin Natural Resources Fund seeks long-term capital appreciation by
investing at least 65% of its total assets in securities of companies that own,
produce, refine, process or market natural resources, as well as those that
provide support services for natural resources companies.

We are pleased to bring you the first semi-annual report for the Franklin
Natural Resources Fund, which covers the period from the fund's inception on
June 5, 1995, through October 31, 1995. During this time, concerns over
increased supplies in oil, steel, and base metals, plus fears of a slowing world
economy, triggered erosion in the stock prices of companies in these sectors.
Within this environment, the fund produced a total return of -1.10%, as shown in
the Performance Summary on page 35.

As you know, the fund's strategy is designed to take advantage of the growing
worldwide demand for natural resources. With approximately half the world's
population on a path of rapid economic growth and industrialization, many
experts anticipate significantly increased demand over the long term.
Historically, economic expansion has led to growth in industries such as
construction and manufacturing, which are fueled by natural resources. Such
expansion could present tremendous opportunities for natural resources companies
and for investors who purchase their securities.

As you can see in the chart on page 33, on October 31, 1995, U.S. securities
represented 64.0% of the fund's total net assets, foreign securities accounted
for 29.4%, and the remaining 6.6% was in cash and cash equivalents. Our holdings
included eight industry sectors as we sought to maximize total returns while
minimizing the risks of investing in any particular sector.

Recognizing that commodities trade on economic cycles, we focused on companies
whose market dominance, lower-cost production and skilled management gave them
the ability to maximize profitability throughout such cycles. One of our most
promising positions is Nucor, a leading low-cost mini-mill operator in the
carbon steel industry. With the most diversified line of products and one of the
most innovative and talented management teams in its field, we believe that
Nucor is significantly undervalued at current levels.

GRAPHIC MATERIAL 9 AND 10 OMMITTED - SEE APPENDIX AT END OF DOCUMENT

Repsol is another top holding we feel offers strong upside potential. Based in
Spain, Repsol is a leading integrated oil company in that country's natural gas
distribution network, and in our opinion, should continue to benefit from its
regional and global exploration efforts.

Looking ahead, we are optimistic about the long-term opportunities in natural
resources, particularly the energy, chemical, and mining sectors. We believe
that the consumption of natural resources will grow, especially in
emerging-market economies, and we will continue to search for companies with a
discernible niche, strong management, and consistent earnings. As you know, the
rewards the fund may offer also involve the special risks of investing in a
non-diversified, sector fund, as well as the currency volatility and political,
economic or regulatory uncertainty associated with foreign investing. These and
other risk considerations are discussed in the prospectus.

Thank you for investing in the Franklin Natural Resources Fund. We appreciate
your support and will update you about our progress in the fund's April 30, 1996
annual report.

Franklin Natural Resources Fund
Top 10 Holdings on October 31, 1995
Based on Total Net Assets

Company, % of Total
Industry Net Assets

Repsol S.A., ADR 3.58%
Energy

Nucor Corporation 3.36%
Steel

Total, ADR 3.19%
Energy

Avery Dennison Corp. 3.00%
Chemical

Worthington Industries 2.65%
Steel

Phillips Petroleum 2.61%
Energy
Noble Affiliates 2.56%
Energy

Praxair, Inc. 2.34%
Chemical

Lubrizol Corporation 2.33%
Chemical

Newmont Mining 2.32%
Gold & Precious Metals

For a complete list of portfolio holdings, please see page 65 of this report.

Performance Summary

The Franklin Natural Resources Fund provided a total return of -1.10% for the
period from its inception on June 5, 1995, through October 31, 1995. Total
return measures the change in value of an investment, assuming reinvestment of
dividends and capital gains, and does not include the fund's initial sales
charge. Of course, we maintain a long-term perspective when managing the fund,
and we encourage shareholders to view their investments in a similar manner.

The fund's share price, as measured by net asset value, decreased from $10.00 on
June 5, 1995 to $9.89 on October 31, 1995. During the reporting period,
shareholders did not receive any dividend or capital gains distributions. Past
performance is not predictive of future results.

Franklin Natural Resources Fund
Period ended October 31, 1995

Since
Inception
(6/5/95)

Cumulative Total Return1 -1.10%
Aggregate Total Return2 -5.54%

1. Cumulative total return measures the change in value of an investment over
the period indicated and does not include the maximum 4.5% initial sales charge.

2. Aggregate total return represents the change in value of an investment over
the period indicated and reflects the deduction of the maximum 4.5% initial
sales charge. Since the fund has been in existence for less than one year,
average annual total returns are not provided.

<TABLE>
<CAPTION>
FRANKLIN STRATEGIC SERIES

Statement of Investments in Securities and Net Assets, October 31, 1995 (unaudited)

Value
Shares Franklin California Growth Fund (Note 1)
Common Stocks 85.7%

<S> <C> <C>
Business Services 3.5%
15,000 Avery-Dennison Corp. ............................................................ $ 671,250
16,500 aRobert Half International, Inc. ................................................. 602,250
-----------
1,273,500
-----------
Consumer Services 2.7%
3,700 Disney (Walt) Co. ............................................................... 213,212
17,000 McClatchy Newspapers, Inc., Series A ............................................ 335,750
5,000 United Television, Inc. ......................................................... 426,250
-----------
975,212
-----------
Electronic Technology 16.0%
3,600 a3Com Corp. ...................................................................... 169,200
14,000 aBay Networks, Inc. .............................................................. 927,500
8,000 aCisco Systems, Inc. ............................................................. 620,000
5,000 aComputer Sciences Corp. ......................................................... 334,375
25,000 aConner Peripherals, Inc. ........................................................ 450,000
20,000 Logicon, Inc. ................................................................... 457,500
15,000 aNovell, Inc. .................................................................... 247,500
13,000 aRead-Rite Corp. ................................................................. 453,375
11,800 aSeagate Technology, Inc. ........................................................ 528,050
40,000 aSilicon Graphics, Inc. .......................................................... 1,330,000
13,000 aVeriFone, Inc. .................................................................. 351,000
-----------
5,868,500
-----------
Energy/Minerals 7.0%
6,000 Atlantic Richfield Co. (ARCO) ................................................... 640,500
10,000 Chevron Corp. ................................................................... 467,500
25,000 Ultramar Corp. .................................................................. 609,375
20,000 Unocal Corp. .................................................................... 525,000
7,500 aWestern Atlas, Inc. ............................................................. 329,063
-----------
2,571,438
-----------
Finance 2.4%
20,600 aSilicon Valley Bancshares ....................................................... 396,550
10,000 The PMI Group, Inc. ............................................................. 480,000
-----------
876,550
-----------
Health Services 4.9%
15,000 aAccess Health, Inc. ............................................................. 466,875
15,000 aFoundation Health Corp. ......................................................... 635,625
10,000 aPacifiCare Health Systems, Class A .............................................. 705,000
-----------
1,807,500
-----------
Health Technology 3.2%
6,000 aAmgen, Inc. ..................................................................... $ 288,000
5,000 aGenentech, Inc. ................................................................. 250,625
25,000 Mentor Corp. .................................................................... 550,000
10,000 aPenederm, Inc. .................................................................. 98,750
-----------
1,187,375
-----------
Leisure Time 3.8%
60,000 aAldila, Inc. .................................................................... 266,250
25,000 Anthony Industries, Inc. ........................................................ 465,625
40,000 Callaway Golf Co. ............................................................... 655,000
-----------
1,386,875
-----------
Other
486 a,bLynx Therapeutics, Inc. ......................................................... -
-----------
Producer/Manufacturing 4.1%
7,000 Clorox Co. ...................................................................... 502,250
22,000 Mattel, Inc. .................................................................... 632,500
13,000 Superior Industries International, Inc. ......................................... 365,625
-----------
1,500,375
-----------
Real Estate 4.3%
30,000 Bay Apartment Communities, Inc. ................................................. 618,750
30,000 Irvine Apartment Communities, Inc. .............................................. 536,250
10,000 Nationwide Health Property, Inc. ................................................ 411,250
-----------
1,566,250
-----------
Retail Trade 2.9%
17,000 aPrice/Costco, Inc. .............................................................. 289,000
35,000 aStrouds, Inc. ................................................................... 161,875
25,000 aVons Companies, Inc. ............................................................ 634,375
-----------
1,085,250
-----------
Semiconductors/Equipment 11.3%
15,000 aAdaptec, Inc. ................................................................... 667,500
6,000 aApplied Materials, Inc. ......................................................... 300,750
7,000 aElectroglas, Inc. ............................................................... 491,750
12,000 Intel Corp. ..................................................................... 838,500
9,800 Linear Technology Corp. ......................................................... 428,750
25,000 aNational Semiconductor Corp. .................................................... 609,375
10,000 aXilinx, Inc. .................................................................... 460,000
10,000 aZilog, Inc. ..................................................................... 355,000
-----------
4,151,625
-----------
Technology Services 6.8%
8,000 aBusiness Objects SA, ADR ........................................................ $ 346,000
12,700 aDendrite International, Inc. .................................................... 220,662
10,000 aInformix Corp. .................................................................. 291,250
10,000 aIntegrated Systems, Inc. ........................................................ 350,000
4,000 aMicrosoft Corp. ................................................................. 400,000
12,000 aOracle Systems Corp. ............................................................ 523,500
27,000 aSystemsoft Corp. ................................................................ 388,125
-----------
2,519,537
-----------
Telecommunications 1.7%
18,000 aSpectrian Corp. ................................................................. 391,500
15,000 aTekelec ......................................................................... 217,500
-----------
609,000
-----------
Transportation 4.6%
14,750 Air Express International Corp. ................................................. 306,063
10,600 Expeditors International of Washington, Inc. .................................... 279,575
25,000 Harper Group, Inc. .............................................................. 450,000
40,000 aMesa Airlines, Inc. ............................................................. 380,000
12,459 aSouthern Pacific Rail Corp. ..................................................... 277,212
-----------
1,692,850
-----------
Utilities 6.5%
17,000 aAirTouch Communications, Inc. ................................................... 484,500
20,000 Pacific Enterprises ............................................................. 495,000
23,000 San Diego Gas & Electric Co. .................................................... 534,750
30,000 SCEcorp ......................................................................... 510,000
20,000 Southern California Water ....................................................... 377,500
-----------
2,401,750
-----------
Total Common Stocks (Cost $28,455,209) .................................... 31,473,587
-----------
Preferred Stocks .7%
Real Estate
6,800 cCatellus Development Corp., $3.625 cvt. pfd., Series B (Cost $256,700) .......... 259,250
-----------
Convertible Bonds .8%
Electronic Technology
$195,000 c3COM Corp., cvt. sub. notes, 10.25%, 11/01/01 (Cost $243,275) ................... $ 311,025
-----------
Total Investments before Repurchase Agreements (Cost $28,955,184) ......... 32,043,862
-----------
dReceivables from Repurchase Agreements 14.8%
3,000,000 Citicorp Securities, Inc., 5.85%, 11/01/95 (Maturity Value $3,000,488)
Collateral: U.S. Treasury Notes, 6.125%, 07/31/96 .............................. 3,000,000
425,000 Daiwa Government Securities, Inc., 5.90%, 11/01/95 (Maturity Value $425,070)
Collateral: U.S. Treasury Notes, 6.125%, 09/30/00 .............................. 425,000
1,976,693 eJoint Repurchase Agreement, 5.887%, 11/01/95
Daiwa Securities America, Inc., (Maturity Value $441,685)
Collateral: U.S. Treasury Bills, 04/25/96
U.S. Treasury Notes, 6.125%, 09/30/00
Donaldson, Lufkin & Jenrette, (Maturity Value $521,991)
Collateral: U.S. Treasury Notes, 5.125% - 8.25%, 07/31/96 - 03/31/00
Swiss Bank Corp., (Maturity Value $521,991)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
UBS Securities, Inc., (Maturity Value $521,991)
Collateral: U.S. Treasury Notes, 5.125% - 8.50%, 11/15/95 - 01/31/00 .......... 2,007,330
-----------
Total Receivables from Repurchase Agreements (Cost $5,432,330) ............ 5,432,330
-----------
Total Investments (Cost $34,387,514) 102.0% .......................... 37,476,192
Liabilities in Excess of Other Assets, Net (2.0)% .................... (733,610)
-----------
Net Assets 100.0% .................................................... $36,742,582
===========

At October 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $34,387,514 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ................................... $ 3,917,443
Aggregate gross unrealized depreciation for all investments in which
there was an excess of value over tax cost ................................... (828,765)
-----------
Net unrealized appreciation ................................................... $ 3,088,678
===========
</TABLE>

aNon-income producing.
bSee Note 7 regarding restricted securities.
cSee Note 8 regarding Rule 144A securities.
dFace amount for repurchase agreements is for the underlying collateral.
eSee Note 1(h) regarding Joint Repurchase Agreement.

<TABLE>
<CAPTION>
FRANKLIN STRATEGIC SERIES

Statement of Investments in Securities and Net Assets, October 31, 1995 (unaudited)

Value
Country Shares Franklin Strategic Income Fund (Note 1)
Preferred Stocks 2.5%
<S> <C> <C> <C>
Financial Services 1.3%
US 1,000 First Nationwide Bank, 11.50% pfd. ................................. $ 113,500
-----------
Media & Broadcasting 1.2%
US 103 PanAmSat Corp., L.P., 12.75% pfd., PIK ............................. 111,985
-----------
Total Preferred Stocks (Cost $203,094) ....................... 225,485
-----------
Convertible Preferred Stocks 2.5%
Financial Services 2.1%
US 1,500 Integon Corp., $3.875 cvt. pfd. .................................... 80,813
US 2,500 cParker & Parsley Capital, 6.25% cvt. pfd. .......................... 111,250
-----------
192,063
-----------
Real Estate Investment Trust .4%
US 1,400 Property Trust of America, $1.75 cvt. pfd., Series A ............... 33,250
-----------
Total Convertible Preferred Stocks (Cost $223,383) ........... 225,313
-----------
Face
Amount*
-------
Corporate Bonds 26.0%
Cable Television 2.3%
US 150,000 fBell Cablemedia, Plc., senior disc. notes, zero coupon to 07/15/99,
(original accretion rate 11.95%), 11.95% thereafter, 07/15/04 ...... 102,563
US 100,000 Rogers Cablesystems, Inc., guaranteed notes, 9.625%, 08/01/02 ...... 102,250
-----------
204,813
-----------
Consumer Goods 3.3%
US 100,000 cHerff Jones Inc., senior sub. notes, 11.00%, 08/15/05 .............. 103,500
US 100,000 Playtex Family Products Corp., senior sub. deb., 9.00%, 12/15/03 ... 90,500
US 100,000 Sealy Corp., senior sub. notes, 9.50%, 05/01/03 .................... 101,000
-----------
295,000
-----------
Containers & Packaging 1.2%
US 100,000 Owens Illinois, Inc., senior sub. deb., 10.50%, 06/15/02 ........... 105,500
-----------
Energy 1.2%
US 100,000 Gulf Canada Resources, Ltd., senior sub. deb., 9.25%, 01/15/04 ..... 103,063
-----------
Food/Beverages 1.2%
US 100,000 Curtice-Burns Foods, Inc., senior sub. notes, 12.25%, 02/01/05 ..... 104,500
-----------
Food Retailing 3.4%
US 100,000 Brunos, Inc., senior sub. notes, 10.50%, 08/01/05 .................. 98,500
US 100,000 Dominick's Finer Foods, senior sub. notes, 10.875%, 05/01/05 ....... 105,375
US 100,000 Grand Union Co., senior notes, 12.00%, 09/01/04 .................... 96,750
-----------
300,625
-----------
Forest & Paper Products 2.4%
US 100,000 Repap New Brunswick, senior notes, second priority, 10.625%, 04/15/05 $ 102,500
US 100,000 S.D. Warren Co., senior sub. notes, 12.00%, 12/15/04 ............... 111,500
-----------
214,000
-----------
Gaming & Hotels 3.5%
US 100,000 Aztar Corp., senior sub. notes, 13.75%, 10/01/04 ................... 108,500
US 100,000 cPlayers International, Inc., senior notes, 10.875%, 04/15/05 ....... 95,375
US 100,000 Showboat, Inc., senior sub. notes, 13.00%, 08/01/09 ................ 109,500
-----------
313,375
-----------
Health Care 2.4%
US 100,000 OrNda Healthcorp., guaranteed senior sub. notes, 11.375%, 08/15/04 . 112,000
US 100,000 Tenet Healthcare Corp., senior sub. notes, 10.125%, 03/01/05 ....... 107,500
-----------
219,500
-----------
Industrial 1.4%
US 150,000 fAmerican Standard, Inc., senior sub. deb., zero coupon to 06/01/98,
(original accretion rate 10.50%), 10.50% thereafter, 06/01/05 ...... 126,375
-----------
Media & Broadcasting 1.1%
US 100,000 American Media Operation, senior sub. notes, 11.625%, 11/15/04 ..... 102,500
-----------
Metals & Mining 1.5%
US 100,000 fAcme Metals, Inc., guaranteed senior secured disc. notes, zero coupon to
08/01/97, (original accretion rate 13.50%), 13.50% thereafter, 08/01/04 78,625
US 50,000 Ucar Global Enterprises, Inc., senior sub. notes, 12.00%, 01/15/05 . 56,375
-----------
135,000
-----------
Textile 1.1%
US 100,000 WestPoint Stevens, Inc., senior notes, 8.75%, 12/15/01 ............. 101,500
-----------
Total Corporate Bonds (Cost $2,210,203) ...................... 2,325,751
-----------
Convertible Bonds 9.7%
Electronics 3.6%
US 65,000 cAltera Corp., cvt. sub. notes, 5.75%, 10/15/02 ..................... 87,588
US 125,000 cDovatron International, Inc., cvt. sub. notes, 6.00%, 10/15/02 ..... 127,500
US 100,000 cSanmina Corp., sub. notes, 5.50%, 08/15/02 ......................... 111,500
-----------
326,588
-----------
Food/Beverages .7%
US 65,000 Chock Full O'Nuts Corp., cvt. deb., 7.00%, 10/15/02 ................ 59,475
-----------
Health Care 1.2%
US 40,000 Integrated Health Services, Inc., senior sub. deb., 5.75%, 01/01/01 $ 40,200
US 70,000 Maxxim Medical, Inc., cvt. sub. deb., 6.75%, 03/01/03 .............. 69,300
-----------
109,500
-----------
Industrial 1.0%
US 70,000 Raymond Corp., cvt. sub. deb., 6.50%, 12/15/03 ..................... 87,675
-----------
Information/Technology .8%
US 65,000 cBay Networks Inc., cvt. sub. deb., 5.25%, 05/15/03 ................. 73,369
-----------
Lodging 1.2%
US 100,000 Prime Hospitality Corp., cvt. sub. notes, 7.00%, 04/15/02 .......... 105,625
-----------
Telecommunications 1.2%
US 110,000 cAll American Communications, cvt. sub. deb., 6.50%, 10/01/03 ....... 107,800
-----------
Total Convertible Bonds (Cost $817,827) ...................... 870,032
-----------
Foreign Corporate Bonds 6.2%
US 100,000 Bridas Corp., senior notes, 12.50%, 11/15/99 ....................... 96,000
US 120,000 Centrais Eletricas Brasileiras SA, 10.00%, 10/30/98 ................ 119,400
US 100,000 cEssar Guajarat, Ltd., floating rate deb., 9.40%, 07/15/99 .......... 99,625
US 125,000 cSEI Holdings IX, Inc., senior notes, 11.00%, 11/30/00 .............. 127,031
US 100,000 Tjiwi Kimia International, 13.25%, 08/01/01 ........................ 109,500
-----------
Total Foreign Corporate Bonds (Cost $541,442) ................ 551,556
-----------
Foreign Government Agencies 24.6%
ES 9,480,000 hBonos y Obligacion del Estado, 12.25%, 03/25/00 .................... 82,208
DD 60,000 Bundesschatzanweisungen, 6.875%, 12/02/98 .......................... 45,012
IT 135,000,000 hBuoni Poliennali del Tesoro, 9.188%, 07/15/00 ...................... 82,718
DD 80,000 Deutsche Bundespost, 7.75%, 10/01/04 ............................... 60,818
DD 75,000 Deutschland Bundesrepublik, 8.375%, 05/21/01 ....................... 59,682
DD 70,000 Deutschland Bundesrepublik, 8.250%, 09/20/01 ....................... 55,440
DD 75,000 Deutschland Bundesrepublik, 7.125%, 12/20/02 ....................... 56,079
DD 80,000 Deutschland Bundesrepublik, 6.50%, 07/15/03 ........................ 57,446
DD 150,000 German Unity Fund, 8.00%, 01/21/02 ................................. 117,211
CA 100,000 Government of Canada, 10.25%, 12/01/98 ............................. 81,560
CA 100,000 Government of Canada, 5.75%, 03/01/99 .............................. 72,075
CA 53,000 Government of Canada, 6.50%, 06/01/04 .............................. 36,948
CA 100,000 Government of Canada, 10.50%, 10/01/04 ............................. 88,518
CA 20,000 Government of Canada, 9.00%, 12/01/04 .............................. 16,305
FR 470,000 Government of France, 8.50%, 03/28/00 .............................. 103,566
FR 442,000 Government of France, 9.50%, 01/25/01 .............................. 101,723

DD 20,000 International Bank of Reconstruction and Development, 7.125%, 04/12/05 $ 14,672
DK 108,000 Kingdom of Denmark, 9.00%, 11/15/98 ................................ 21,159
DK 501,000 Kingdom of Denmark, 8.00%, 11/15/01 ................................ 95,118
DK 167,000 Kingdom of Denmark, 8.00%, 05/15/03 ................................ 31,263
DK 327,000 Kingdom of Denmark, 7.00%, 12/15/04 ................................ 56,935
AU 100,000 New South Wales Treasury Corp., 7.00%, 04/01/04 .................... 67,594
NZ 100,000 New Zealand Government, 6.50%, 02/15/00 ............................ 64,323
NZ 80,000 New Zealand Government, 10.00%, 03/15/02 ........................... 60,247
NZ 80,000 New Zealand Government, 8.00%, 04/15/04............................. 55,411
AU 225,000 Queensland Treasury Corp., 8.875%, 11/08/96 ........................ 173,347
AU 25,000 Queensland Treasury Corp., 8.00%, 05/14/03 ......................... 18,152
US 170,000 Republic of Argentina, 6.813%, 03/31/05 ............................ 100,513
US 166,250 Republic of Brazil, 6.688%, 01/01/01 ............................... 142,040
US 408,594 Republic of Equador, 3.00%, 02/27/15 ............................... 135,858
AU 65,000 Treasury Corp. of Victoria, 8.25%, 10/15/03 ........................ 47,786
-----------
Total Foreign Government Agencies (Cost $2,134,830) .......... 2,201,727
-----------
U.S. Government 2.8%
US 250,000 U.S. Treasury Notes, 6.75%, 05/31/97 (Cost $248,974) ............... 254,297
-----------
U.S. Government Agencies/Mortgages 6.8%
US 28,262 FHLMC, 7.00%, 01/01/09 ............................................. 28,527
US 28,143 FHLMC, 6.00%, 04/01/09 ............................................. 27,493
US 50,097 FHLMC, 7.00%, 04/01/24 ............................................. 49,814
US 48,380 FHLMC, 7.50%, 04/01/24 ............................................. 49,014
US 43,055 FHLMC, 8.50%, 12/01/24 ............................................. 44,710
US 46,225 FNMA, 7.50%, 10/01/07 .............................................. 47,222
US 34,924 FNMA, 6.50%, 02/01/09 .............................................. 34,695
US 44,371 FNMA, 6.50%, 01/01/24 .............................................. 43,137
US 24,547 FNMA, 7.00%, 05/01/24 .............................................. 24,386
US 47,664 FNMA, 8.00%, 01/01/25 .............................................. 48,960
US 21,686 FNMA, 9.00%, 05/01/25 .............................................. 22,696
US 23,574 GNMA, SF, 7.50%, 09/15/23 .......................................... 23,934
US 49,711 GNMA, SF, 6.50%, 03/15/24 .......................................... 48,390
US 49,957 GNMA, SF, 8.00%, 06/15/24 .......................................... 51,517
US 9,568 GNMA, SF, 9.00%, 01/15/25 .......................................... 10,066
US 59,321 GNMA, SF, 7.00%, 09/20/25 .......................................... 58,690
-----------
Total U.S. Government Agencies/Mortgages (Cost $585,101) ..... 613,251
-----------
Total Long Term Investments (Cost $6,964,854) ................ 7,267,412
-----------

g Short Term Investments
Foreign Corporate Agencies 2.2%

TH 5,000,000 Thailand Military Bank Notes, 11.00%, 06/05/96 (Cost $203,128) ..... $ 198,690
-----------
Total Investments before Repurchase Agreements
(Cost $7,167,982)........................................... 7,466,102
-----------
d,eReceivables from Repurchase Agreements 11.7%
US 1,032,062 Joint Repurchase Agreement, 5.887 %, 11/01/95 (Cost $1,047,641)
Daiwa Securities America, Inc., (Maturity Value $230,519)
Collateral: U.S. Treasury Bills, 04/25/96
Collateral: U.S. Treasury Notes, 6.125%, 09/30/00
Donaldson, Lufkin & Jenrette, (Maturity Value $272,431)
Collateral: U.S. Treasury Notes, 5.125% - 8.25%, 07/31/96 - 03/31/00
Swiss Bank Corp., (Maturity Value $272,431)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
UBS Securities, Inc., (Maturity Value $272,431)
Collateral: U.S. Treasury Notes, 5.125% - 8.50%, 11/15/95 - 01/31/00 1,047,641
-----------
Total Investments (Cost $8,215,623) 95.0% ........... 8,513,743
Other Assets and Liabilities, Net 5.0% .............. 450,001
-----------
Net Assets 100.0% ................................... $8,963,744
===========

At October 31, 1995, the net unrealized appreciation based on the cost
of investments for income tax purposes of $8,215,623 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ...................... $ 321,316
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ...................... (23,196)
-----------
Net unrealized appreciation ...................................... $ 298,120
===========
</TABLE>

PORTFOLIO ABBREVIATIONS:
FHLMC - Federal Home Loan Mortgage Corp.
FNMA - Federal National Mortgage Association
GNMA - Government National Mortgage Association
LP - Limited Partnership
LYONs - Liquid Yield Option Notes
PIK - Payment-in-Kind
SF - Single Family

COUNTRY LEGEND:
AU - Australia
CA - Canada
DD - Germany
DK - Denmark
ES - Spain
FR - France
IT - Italy
NZ - New Zealand
TH - Thailand
US - United States of America

*Face amount is stated in the currency of country indicated and value is stated
in U.S. dollars.
cSee Note 8 regarding Rule 144A securities.
dFace amount for repurchase agreements is for the underlying collateral.
eSee Note 1(h) regarding Joint Repurchase Agreement.
fZero coupon/step-up bonds. The current effective yield may vary. The original
accretion rate will remain constant.
gCertain short-term securities are traded on a discount basis; the rates shown
are the discount rates at the time of purchase by the Fund. Other securities
bear interest at the rates shown, payable at fixed rates or upon maturity.
hSee Note 1(e) regarding securities purchased on a when-issued or delayed
delivery basis.

<TABLE>
<CAPTION>
FRANKLIN STRATEGIC SERIES

Statement of Investments in Securities and Net Assets, October 31, 1995
(unaudited)

Value
Country* Shares Franklin Global Utilities Fund (Note 1)
Common Stocks 92.6%
<S> <C> <C> <C>
Electric & Gas Utilities 66.7%
US 166,000 aAES Corp. .......................................................... $ 3,278,500
US 57,200 American Electric Power Co., Inc. .................................. 2,180,750
US 49,500 Central & South West Corp. ......................................... 1,324,125
HK 227,400 China Light & Power, Ltd. .......................................... 1,211,748
US 150,000 CINergy Corp. ...................................................... 4,256,250
US 49,700 Dominion Resources, Inc. ........................................... 1,975,575
US 22,300 DPL, Inc. .......................................................... 529,625
US 60,950 Duke Power Co. ..................................................... 2,727,513
US 62,900 Empresa Nacional de Electricidad, ADR .............................. 3,160,725
US 127,000 Enron Corp. ........................................................ 4,365,625
US 107,700 Enron Global Power & Pipelines ..................................... 2,598,263
US 110,000 Entergy Corp. ...................................................... 3,135,000
US 195,000 cEspoon Sahko Oy .................................................... 2,618,070
US 39,000 FPL Group, Inc. .................................................... 1,633,125
US 49,600 General Public Utilities Corp. ..................................... 1,550,000
HK 1,180,000 Hong Kong Electric Holdings, Ltd. .................................. 4,013,865
US 62,000 aHuaneng Power International, Inc., ADR ............................. 1,030,750
KR 33,700 Korea Electric Power Corp. ......................................... 1,526,113
US 109,000 National Fuel Gas Co. .............................................. 3,242,750
US 6,900 New England Electric System ........................................ 269,100
US 29,100 NIPSCO Industries, Inc. ............................................ 1,062,150
US 126,000 Pacific Enterprises ................................................ 3,118,500
US 20,200 Pacific Gas & Electric Co. ......................................... 593,375
US 176,700 PacifiCorp ......................................................... 3,335,213
US 133,500 Panhandle Eastern Corp. ............................................ 3,370,875
US 59,000 Pinnacle West Capital Corp. ........................................ 1,622,500
US 50,000 Public Service Co. of Colorado ..................................... 1,706,250
GB 360,000 Scottish Power, Plc. ............................................... 1,986,246
US 208,000 Southern Co. ....................................................... 4,966,000
US 41,200 Southern Indiana Gas & Electric Co. ................................ 1,390,500
US 183,900 TECO Energy, Inc. .................................................. 4,344,638
US 51,500 Texas Utilities Co. ................................................ 1,892,625
US 146,000 TransCanada Pipelines, Ltd. ........................................ 1,952,750
US 160,000 Transportadora Gas Sur, ADR ........................................ 1,640,000
US 4,600 Wicor, Inc. ........................................................ 136,275
US 53,400 Williams Cos., Inc. ................................................ 2,062,575
-----------
81,807,944
-----------

Telecommunications Services 25.9%
US 20,150 aAirTouch Communications, Inc. ...................................... $ 574,275
US 30,000 Ameritech Corp. .................................................... 1,620,000
US 59,300 AT&T Corp. ......................................................... 3,795,200
GB 300,000 Cable & Wireless, Plc. ............................................. 1,963,481
US 19,700 aComcast UK Cable Partners, Ltd. .................................... 253,638
MX 44,400 aGrupo Iusacell, SA, Series D ....................................... 39,826
US 100,560 aGrupo Iusacell, SA, Series L, ADR .................................. 1,194,150
US 55,300 GTE Corp. .......................................................... 2,281,125
US 124,000 aNynex Cablecomms Group, ADR ........................................ 2,526,500
US 130,000 Portugal Telecom SA, ADR ........................................... 2,437,500
US 40,000 SBC Communications, Inc. ........................................... 2,235,000
IT 550,000 STET-Societa Finanziaria Telefonica ................................ 1,556,040
US 120,000 Tele Danmark, A/S, ADS ............................................. 3,135,000
US 62,750 Telecom de Argentina, SA, ADR ...................................... 2,408,030
US 20,400 Telefonica de Argentina, ADS ....................................... 423,300
US 65,950 Telefonica de Espana, ADR .......................................... 2,481,369
US 45,700 Telefonos de Mexico, ADR ........................................... 1,256,750
US 57,500 aTelewest Communications, Plc., ADR ................................. 1,595,625
-----------
31,776,809
-----------
Total Common Stocks (Cost $109,638,643) ...................... 113,584,753
-----------
Face
Amount
------
d,eReceivables from Repurchase Agreements 4.7%
US $5,707,700 Joint Repurchase Agreement, 5.887%, 11/01/95 (Cost $5,798,095)
Daiwa Securities America, Inc., (Maturity Value $1,275,790)
Collateral: U.S. Treasury Bills, 04/25/96
U.S. Treasury Notes, 6.125%, 09/30/00
Donaldson, Lufkin & Jenrette, (Maturity Value $1,507,751)
Collateral: U.S. Treasury Notes, 5.125% - 8.25%, 07/31/96 - 03/31/00
Swiss Bank Corp., (Maturity Value $1,507,751)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
UBS Securities, Inc., (Maturity Value $1,507,751)
Collateral: U.S. Treasury Notes, 5.125% - 8.50%, 11/15/95 - 01/31/00 5,798,095
-----------
Total Investments (Cost $115,436,738) 97.3% .......... 119,382,848
Other Assets and Liabilities, Net 2.7% ............... 3,364,637
-----------
Net Assets 100.0% .................................... $122,747,485
===========

At October 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $115,438,556 was as follows:
Aggregate gross unrealized appreciation for all investments in which
there was an excess of value over tax cost ...................... $ 9,336,798
-----------
Aggregate gross unrealized depreciation for all investments in which
there was an excess of tax cost over value ...................... (5,392,506)
-----------
Net unrealized appreciation ...................................... $ 3,944,292
===========
</TABLE>

COUNTRY LEGEND:
GB - United Kingdom
HK - Hong Kong
IT - Italy
KR - South Korea
MX - Mexico
US - United States of America

*Securities traded in currency of country indicated.
aNon-income producing.
cSee Note 8 regarding Rule 144A securities.
dFace amount for repurchase agreements is for the underlying collateral.
eSee Note 1(h) regarding Joint Repurchase Agreement.

<TABLE>
<CAPTION>
FRANKLIN STRATEGIC SERIES

Statement of Investments in Securities and Net Assets, October 31, 1995
(unaudited)

Value
Shares Franklin Small Cap Growth Fund (Note 1)
Common Stocks 95.2%

<S> <C> <C>
Commercial Services 1.3%
71,000 aRobert Half International, Inc. ................................................ $ 2,591,500
-----------
Consumer Durables 5.4%
330,000 aAldila, Inc. ................................................................... 1,464,375
160,000 aBeazer Homes USA, Inc. ......................................................... 2,800,000
185,000 Callaway Golf Co. .............................................................. 3,029,375
65,000 Continental Homes Holding Corp. ................................................ 1,332,500
29,200 aNVR, Inc. ...................................................................... 292,000
114,000 aSouthern Energy Homes, Inc. .................................................... 1,681,500
-----------
10,599,750
-----------
Consumer Non-Durables 1.9%
25,000 aGucci Group .................................................................... 750,000
80,700 aTommy Hilfiger Corp. ........................................................... 3,076,688
-----------
3,826,688
-----------
Consumer Services 3.4%
319,600 aAztar Corp. .................................................................... 2,596,750
50,000 Gillett Holdings, Inc. ......................................................... 1,050,000
152,100 aRed Lion Hotels, Inc. .......................................................... 3,003,975
-----------
6,650,725
-----------
Electronic Technology 16.9%
60,000 a3Com Corp. ..................................................................... 2,820,000
40,000 aAspect Telecommunications Corp. ................................................ 1,375,000
275,000 Aviall, Inc. ................................................................... 2,303,125
75,000 aBay Networks, Inc. ............................................................. 4,968,750
88,000 aBell & Howell Holdings Co. ..................................................... 2,200,000
45,000 aDSC Communications Corp. ....................................................... 1,665,000
180,000 aECI Telecommunications, Ltd. ................................................... 3,420,000
60,000 aGeneral Instrument Corp. ....................................................... 1,140,000
15,000 aKomag, Inc. .................................................................... 855,000
100,000 Logicon, Inc. .................................................................. 2,287,500
80,000 aSilicon Graphics, Inc. ......................................................... 2,660,000
90,100 aSpectrian Corp. ................................................................ 1,959,675
120,000 aTekelec ........................................................................ 1,740,000
105,000 aTracor, Inc. ................................................................... 1,680,000
79,000 aVerifone, Inc. ................................................................. 2,133,000
-----------
33,207,050
-----------
Energy Minerals 4.8%
615,000 aAbacan Resource Corp. .......................................................... $ 1,515,118
65,000 aBarrett Resources Corp. ........................................................ 1,511,250
230,000 aForcenergy Gas Exploration, Inc. ............................................... 2,242,500
110,000 Parker & Parsley Petroleum Co. ................................................. 2,035,000
210,000 Total Petroleum (North America), Ltd. .......................................... 2,126,250
-----------
9,430,118
-----------
Financials 7.8%
200,000 ACMAT Corp., Class A ........................................................... 2,350,000
200,000 aAmeriCredit Corporation ........................................................ 2,450,000
18,200 Leucadia National Corp. ........................................................ 1,003,275
49,300 aPrudential Reinsurance Holdings, Inc. .......................................... 1,004,488
166,900 aRisk Capital Holdings, Inc. .................................................... 3,671,800
110,000 aSilicon Valley Bancshares ...................................................... 2,117,500
50,000 aThe PMI Group, Inc. ............................................................ 2,400,000
15,600 aWFS Financial, Inc. ............................................................ 259,350
-----------
15,256,413
-----------
Health Services 4.8%
50,000 aAccess Health, Inc. ............................................................ 1,556,250
185,000 aAdvocat, Inc. .................................................................. 1,988,750
10,500 Integrated Health Services, Inc. ............................................... 240,188
10,000 aMedic Computer Systems, Inc. ................................................... 532,500
150,000 aSierra Health Services, Inc. ................................................... 4,293,750
75,000 aSun Healthcare Group, Inc. ..................................................... 890,625
-----------
9,502,063
-----------
Health Technology 1.4%
60,000 aKV Pharmaceutical Co., Class B ................................................. 495,000
50,000 aMatrix Pharmaceutical, Inc. .................................................... 725,000
88,200 aNoven Pharmaceutical, Inc. ..................................................... 904,050
73,000 aPenederm, Inc. ................................................................. 720,875
-----------
2,844,925
-----------
Industrial Services 1.1%
112,000 AES Corp. ...................................................................... 2,212,000
-----------
Non-Energy Minerals 1.9%
80,000 Freeport-McMoRan Copper & Gold, Inc., Class B .................................. 1,820,000
110,000 aMagma Copper Co. ............................................................... 1,842,500
-----------
3,662,500
-----------
Process Industries 1.3%
92,600 aUcar International, Inc. ....................................................... $ 2,639,100
-----------
Producer Manufacturing 2.6%
61,300 aAtchison Casting Corp. ......................................................... 973,138
205,000 aEasco, Inc. .................................................................... 1,537,500
15,000 aRaymond Corp. .................................................................. 300,000
65,000 Roper Industries, Inc. ......................................................... 2,356,250
-----------
5,166,888
-----------
Real Estate 4.0%
175,000 Equity Inns, Inc. .............................................................. 2,056,250
55,000 FelCor Suite Hotels, Inc. ...................................................... 1,588,125
90,000 Omega Healthcare Investors, Inc. ............................................... 2,283,750
165,500 Winston Hotels, Inc. ........................................................... 1,841,188
-----------
7,769,313
-----------
Retail 2.4%
100,000 aBorders Group, Inc. ............................................................ 1,712,500
37,500 aErnst Home Center, Inc. ........................................................ 173,438
15,000 aGadzooks, Inc. ................................................................. 277,500
252,800 aStrouds, Inc. .................................................................. 1,169,200
75,000 aWilliams-Sonoma, Inc. .......................................................... 1,303,125
-----------
4,635,763
-----------
Semiconductors 17.6%
70,000 aAdaptec, Inc. .................................................................. 3,115,000
105,000 aAdvanced Semiconductor Materials International N.V. ............................ 4,921,875
40,000 aAltera Corp. ................................................................... 2,420,000
30,000 aElectroglas, Inc. .............................................................. 2,107,500
50,000 aElectro Scientific Industries, Inc. ............................................ 1,550,000
2,000 aESS Technology, Inc. ........................................................... 60,000
55,000 aExar Corp. ..................................................................... 1,306,250
80,000 aLattice Semiconductor Corp. .................................................... 3,140,000
60,000 Linear Technology Corp. ........................................................ 2,625,000
150,000 aMicro Linear Corp. ............................................................. 2,306,250
55,000 aSGS-Thomson Microelectronics, Inc., ADR ........................................ 2,488,750
60,000 aSilicon Valley Group, Inc. ..................................................... 1,935,000
70,000 aUniphase Corp. ................................................................. 2,047,500
40,000 aXilinx, Inc. ................................................................... 1,840,000
75,000 aZilog, Inc. .................................................................... 2,662,500
-----------
34,525,625
-----------
Technology Services 8.4%
70,000 aBusiness Objects SA, ADR ....................................................... $ 3,027,500
54,000 aIntegrated Systems, Inc. ....................................................... 1,890,000
45,000 aIntersolv, Inc. ................................................................ 708,750
110,000 aMapInfo Corp. .................................................................. 2,213,750
160,000 aMicrotec Research, Inc. ........................................................ 2,230,000
55,000 aSterling Software, Inc. ........................................................ 2,536,875
142,000 aSystemsoft Corp. ............................................................... 2,041,250
41,200 Wyle Electronics ............................................................... 1,756,150
-----------
16,404,275
-----------
Transportation 6.0%
74,000 Air Express International Corp. ................................................ 1,535,500
348,200 aAtlantic Coast Airlines, Inc. .................................................. 2,850,887
110,000 Harper Group, Inc. ............................................................. 1,980,000
116,000 aLandstar System, Inc. .......................................................... 3,045,000
250,000 aMesa Airlines, Inc. ............................................................ 2,375,000
-----------
11,786,387
-----------
Utilities/Communication 2.2%
140,000 aBell Cablemedia, Plc. .......................................................... 2,082,500
25,000 aCellular Communications, Inc. .................................................. 1,340,624
25,000 aComnet Cellular, Inc. .......................................................... 628,124
8,000 aSilver King Communications, Inc. ............................................... 234,000
-----------
4,285,248
-----------
Total Common Stocks (Cost $179,523,630) .................................. 186,996,331
-----------
Preferred Stocks 1.0%
Electronic Technology
35,000 Nokia Corp., pfd., ADR (Cost $1,341,320) ....................................... 1,951,250
-----------
Total Common Stocks and Preferred Stocks (Cost $180,864,950) ............. 188,947,581
-----------
dReceivables from Repurchase Agreements 8.2%....................................
$ 3,140,000 Daiwa Securities America, Inc., 5.90%, 11/01/95 (Maturity Value $3,128,513)
Collateral: U.S. Treasury Notes, 6.125%, 09/30/00 ............................. $ 3,128,000
12,776,277 eJoint Repurchase Agreement, 5.887%, 11/01/95
Daiwa Securities America, Inc., (Maturity Value $2,855,941)
Collateral: U.S. Treasury Bills, 04/25/96
U.S. Treasury Notes, 6.125%, 09/30/00
Donaldson, Lufkin & Jenrette, (Maturity Value $3,375,203)
Collateral: U.S. Treasury Notes, 5.125% - 8.25%, 07/31/96 - 03/31/00
Swiss Bank Corp., (Maturity Value $3,375,203)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
UBS Securities, Inc., (Maturity Value $3,375,203)
Collateral: U.S. Treasury Notes, 5.125% - 8.50%, 11/15/95 - 01/31/00 .......... 12,979,426
-----------
Total Receivables from Repurchase Agreements (Cost $16,107,426) .......... 16,107,426
-----------
Total Investments (Cost $196,972,376) 104.4% ....................... 205,055,007
Liabilities in Excess of Other Assets, Net (4.4)% .................. (8,671,722)
-----------
Net Assets 100.0% .................................................. $196,383,285
===========

At October 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $197,154,626 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost ............................................ $ 20,322,597
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ............................................ (12,422,216)
-----------
Net unrealized appreciation .................................................. $ 7,900,381
===========
</TABLE>

aNon-income producing.
dFace amount for repurchase agreements is for the underlying collateral.
eSee Note 1(h) regarding Joint Repurchase Agreement.

<TABLE>
<CAPTION>
FRANKLIN STRATEGIC SERIES

Statement of Investments in Securities and Net Assets, October 31, 1995
(unaudited)

Shares/ Value
Country* Warrants Franklin Global Health Care Fund (Note 1)
Common Stocks & Warrants 80.3%

<S> <C> <C> <C>
Biotechnology 9.2%
US 4,000 aBiogen, Inc. ......................................................... $ 245,000
GB 20,000 aBritish Bio-Technology Group ......................................... 281,084
GB 3,750 aBritish Bio-Technology Group, warrants ............................... 21,816
US 20,000 aCytoTherapeutics, Inc. ............................................... 205,000
US 10,000 aMyriad Genetics, Inc. ................................................ 270,000
US 10,000 aNeurogen Corp. ....................................................... 222,500
US 42,000 aSerologicals, Corp. .................................................. 661,500
US 25,000 aUnivax Biologics, Inc. ............................................... 157,813
-----------
2,064,713
-----------
Homecare/Alternate Site 1.1%
US 17,000 aProfessional Sports Care Management, Inc. ............................ 93,500
US 15,000 aQuantum Health Resources, Inc. ....................................... 159,375
-----------
252,875
-----------
Hospitals 2.2%
US 6,300 Columbia/HCA Healthcare Corp. ........................................ 309,488
US 10,000 aTenet Healthcare Corp. ............................................... 178,750
-----------
488,238
-----------
Managed Care/HMOs 14.1%
US 12,000 aCompdent Corp. ....................................................... 373,500
US 5,000 aFoundation Health Corp. .............................................. 211,875
US 17,100 aOrNda HealthCorp. .................................................... 301,388
US 5,000 aOxford Health Plans, Inc. ............................................ 391,250
US 10,000 aPacifiCare Health Systems, Inc., Class B ............................. 727,500
US 14,000 aSierra Health Services, Inc. ......................................... 400,750
US 10,000 United Healthcare Corp. .............................................. 531,250
US 10,000 aValue Health, Inc. ................................................... 228,750
-----------
3,166,263
-----------
Medical Technology & Supplies 8.5%
US 40,000 aAbaxis, Inc. ......................................................... 275,000
US 10,000 Bard (C.R.), Inc. .................................................... 282,500
US 10,000 aCygnus, Inc. ......................................................... 163,750
US 19,666 aHealthdyne Technologies, Inc. ........................................ 211,410
US 20,000 aMediSense, Inc. ...................................................... 427,500
US 16,000 Mentor Corp. ......................................................... 352,000
US 10,000 aVentritex, Inc. ...................................................... 196,250
-----------
1,908,410
-----------
Nursing Homes/Subacute 1.2%
US 25,000 aAdvocat, Inc. ........................................................ $ 268,750
-----------
Pharmaceutical Distributors .8%
US 14,000 Grupo Casa Autrey, SA de C.V., ADR ................................... 178,500
-----------
Pharmaceuticals 14.6%
SE 7,500 aAstra AB, Series B ................................................... 271,144
CH 500 Ciba-Geigy, AG ....................................................... 432,697
US 20,000 Medeva, Plc., ADR .................................................... 342,500
DD 15,000 aMerck KGaA ........................................................... 626,888
US 2,000 Pfizer, Inc. ......................................................... 114,750
CH 50 Roche Holding ........................................................ 363,148
CH 500 Sandoz, AG-R ......................................................... 412,448
FR 3,300 Sanofi, SA ........................................................... 210,765
US 4,400 Schering-Plough Corp. ................................................ 235,950
US 6,000 aWatson Pharmaceuticals, Inc. ......................................... 268,500
-----------
3,278,790
-----------
Physician Practice Management 3.6%
US 19,500 aAHI Healthcare Systems, Inc. ......................................... 273,000
US 25,000 aPediatrix Medical Group, Inc. ........................................ 540,625
-----------
813,625
-----------
Software/Information Systems 4.8%
US 8,300 aDendrite International, Inc. ......................................... 144,212
US 16,000 aImnet Systems, Inc. .................................................. 406,000
US 15,000 aOwen Healthcare, Inc. ................................................ 273,750
US 20,000 aPyxis Corp. .......................................................... 252,500
-----------
1,076,462
-----------
Specialty Pharmaceuticals 19%
US 7,000 aAllergan, Inc. ....................................................... 205,625
US 15,000 aAlza Corp. ........................................................... 330,000
US 40,000 aAnesta Corp. ......................................................... 425,000
CH 100 aAres Serono, Inc., Series B .......................................... 65,587
US 50,000 aEthical Holdings, Plc., ADR .......................................... 450,000
US 25,000 aGensia, Inc. ......................................................... 106,250
US 36,000 aKV Pharmaceutical Co., Class B ....................................... 297,000
US 25,000 aMatrix Pharmaceutical, Inc. .......................................... 362,500
US 82,100 aNoven Pharmaceuticals, Inc. .......................................... 841,525
US 95,000 aPenederm, Inc. ....................................................... 938,124
US 12,500 aRoberts Pharmaceutical Corp. ......................................... 242,187
-----------
4,263,798
-----------
Temporary Staffing 1.2%
US 15,000 aRomac International, Inc. ............................................ $ 277,500
-----------
Total Common Stocks & Warrants (Cost $ 14,935,862) ............. 18,037,924
-----------
Face
Amount
------
dReceivables from Repurchase Agreements 20.9%
US $2,040,000 Citicorp Securities Inc., 5.85%, 11/01/95 (Maturity Value $2,000,325)
Collateral: U.S. Treasury Notes, 4.625%, 02/29/96.................... 2,000,000
US 2,653,330 eJoint Repurchase Agreement, 5.887%, 11/01/95
Daiwa Securities America, Inc., (Maturity Value $592,944)
Collateral: U.S. Treasury Bills, 04/25/96
U.S. Treasury Notes, 6.125%, 09/30/00
Donaldson, Lufkin & Jenrette, (Maturity Value $700,751)
Collateral: U.S. Treasury Notes, 5.125% - 8.25%, 07/31/96 - 03/31/00

Swiss Bank Corp., (Maturity Value $700,751)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
UBS Securities, Inc., (Maturity Value $700,751)
Collateral: U.S. Treasury Notes, 5.125% - 8.50%, 11/15/95 - 01/31/00 2,694,757
-----------
Total Receivables from Repurchase Agreement (Cost $4,694,757) .. 4,694,757
-----------
Total Investments (Cost $19,630,619) 101.2% .............. 22,732,681
Liabilities in Excess of Other Assets, Net (1.2)% ........ (266,349)
-----------
$22,466,332
===========

At October 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $19,633,800 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there was an excess of value over tax cost ............... $ 3,798,504
Aggregate gross unrealized depreciation for all investments
in which there was an excess of tax cost over value ............... (699,623)
-----------
Net unrealized appreciation ........................................ $ 3,098,881
===========
</TABLE>

COUNTRY LEGEND:
CH - Switzerland
DD - Germany
FR - France
GB - United Kingdom
SE - Sweden
US - United States of America

*Securities traded in currency of country indicated.
aNon-income producing.
dFace amount for repurchase agreements is for the underlying collateral.
eSee Note 1(h) regarding Joint Repurchase Agreement.

<TABLE>
<CAPTION>
FRANKLIN STRATEGIC SERIES

Statement of Investments in Securities and Net Assets, October 31, 1995
(unaudited)

Value
Shares Franklin Institutional MidCap Growth Fund (Note 1)
Common Stocks 99.1%

Advertising .2%
<S> <C> <C>
200 Omnicom Group, Inc. ................................................................ $ 12,775
-----------
Aerospace/Defense .5%
1,200 GenCorp, Inc. ...................................................................... 12,600
200 General Motors, Class H ............................................................ 8,400
400 Thiokol Corp. ...................................................................... 13,850
-----------
34,850
-----------
Chemical & Materials 5.6%
300 Albemarle Corp. .................................................................... 5,588
800 ARCO Chemical Co. .................................................................. 39,200
1,300 Cabot Corp. ........................................................................ 61,750
2,300 Granite Construction, Inc. ......................................................... 65,263
400 Hanna (M.A.) Co. ................................................................... 10,250
1,200 IMC Global, Inc. ................................................................... 84,000
200 Olin Corp. ......................................................................... 12,800
800 aSouthdown, Inc. .................................................................... 13,000
800 aSterling Chemicals, Inc. ........................................................... 6,400
1,000 The Geon Co. ....................................................................... 24,875
600 TriMas Corp. ....................................................................... 12,450
1,500 Wellman, Inc. ...................................................................... 35,250
-----------
370,826
-----------
Commercial Services 1.5%
1,700 CPI Corp. .......................................................................... 31,025
700 Kelly Services, Inc., Class A ...................................................... 17,588
1,200 Manpower, Inc. ..................................................................... 32,550
400 PHH Corp. .......................................................................... 17,500
-----------
98,663
-----------
Communications Equipment 1.1%
1,100 aBay Networks, Inc. ................................................................. 72,875
-----------
Computer Hardware 4.5%
1,200 aCirrus Logic, Inc. ................................................................. 50,550
2,600 aDell Computer Corp. ................................................................ 121,225
800 aLSI Logic Corp. .................................................................... 37,700
700 aQuantum Corp. ...................................................................... 12,163
1,100 aSeagate Technology, Inc. ........................................................... 49,225
900 aSilicon Graphics, Inc. ............................................................. 29,925
-----------
300,788
-----------
Computer Software 3.2%
800 Adobe Systems, Inc. ................................................................ $ 45,600
400 aBMC Software, Inc. ................................................................. 14,250
1,650 aCadence Design Systems, Inc. ....................................................... 53,212
1,400 aInformix Corp. ..................................................................... 40,775
600 aParametric Technology Corp. ........................................................ 40,125
800 aSymantec Corp. ..................................................................... 19,450
-----------
213,412
-----------
Containers & Packaging 1.1%
1,600 Chesapeake Corp. ................................................................... 49,000
900 Sonoco Products Co. ................................................................ 22,275
-----------
71,275
-----------
Electronic Components/Technology 12.1%
1,200 aAltera Corp. ....................................................................... 72,600
1,400 aAmphenol Corp., Class A ............................................................ 30,275
1,000 aAnalog Devices, Inc. ............................................................... 36,125
1,000 Arrow Electronics, Inc. ............................................................ 50,750
2,300 Comdisco, Inc. ..................................................................... 70,150
1,300 Cypress Semiconductor Corp. ........................................................ 45,825
200 Diebold, Inc. ...................................................................... 10,600
1,000 aKLA Instruments Corp. .............................................................. 42,750
800 aLam Research Corp. ................................................................. 48,700
800 Linear Technology Corp. ............................................................ 35,000
600 aLitton Industries, Inc. ............................................................ 23,775
1,000 aSolectron Corp. .................................................................... 40,250
400 Sundstrand Corp. ................................................................... 24,500
1,500 aSymbol Technologies, Inc. .......................................................... 52,312
2,600 aTeradyne, Inc. ..................................................................... 86,775
900 Varian Associates, Inc. ............................................................ 46,238
800 aVishay Intertechnology, Inc. ....................................................... 28,200
1,200 aXilinx, Inc. ....................................................................... 55,200
-----------
800,025
-----------
Environmental Control 1.2%
1,200 aAir & Water Technologies Corp., Class A ............................................ 6,000
14,600 aAmerican Waste Services, Inc., Class A ............................................. 38,325
12,600 aInternational Technology Corp. ..................................................... 34,650
-----------
78,975
-----------
Finance 7.8%
1,800 AT&T Capital Corp. ................................................................. $ 72,000
1,300 Bank of New York Co., Inc. ......................................................... 54,600
600 BanPonce Corp. ..................................................................... 23,175
800 BayBanks, Inc. ..................................................................... 64,800
200 Bear Stearns Cos., Inc. ............................................................ 3,975
700 Comerica, Inc. ..................................................................... 23,537
700 First Bank System, Inc. ............................................................ 34,825
2,000 Green Tree Financial Corp. ......................................................... 53,250
1,400 Hibernia Corp., Class A............................................................. 13,825
700 Midlantic Corp., Inc. .............................................................. 37,100
400 Old National Bancorp ............................................................... 13,500
1,200 Signet Banking Corp. ............................................................... 28,500
300 SunAmerica, Inc. ................................................................... 18,675
700 Union Bank of San Francisco ........................................................ 35,088
1,000 West One Bancorp ................................................................... 42,500
-----------
519,350
-----------
Food/Beverages 2.7%
2,100 Coca-Cola Enterprises, Inc. ........................................................ 55,912
800 Hormel Foods Corp. ................................................................. 18,400
1,800 IBP, Inc. .......................................................................... 107,775
-----------
182,087
-----------
Healthcare Products 5.9%
800 Beckman Instruments, Inc. .......................................................... 26,500
1,600 Cardinal Health, Inc. .............................................................. 82,200
600 aCordis Corp. ....................................................................... 66,300
1,900 McKesson Corp. ..................................................................... 90,725
3,750 Mylan Laboratories Corp. ........................................................... 71,250
900 aNellcor, Inc. ...................................................................... 51,750
-----------
388,725
-----------
Healthcare Services 3.1%
1,300 aCoram Healthcare Corp. ............................................................. 5,200
500 aHealth Care and Retirement Corp. ................................................... 14,688
3,200 aHEALTHSOUTH Rehabilitation Corp. ................................................... 83,600
700 aHealth Systems International, Inc., Class A ........................................ 21,262
1,441 aHorizon/CMS Healthcare Corp. ....................................................... 29,180

Healthcare Services (cont.)
1,100 aOrNda Healthcorp ................................................................... $ 19,388
400 aPacifiCare Health Systems, Inc., Class B ........................................... 29,100
-----------
202,418
-----------
Insurance 10.1%
2,500 AFLAC, Inc. ........................................................................ 101,875
2,500 Allmerica Property & Casualty Cos., Inc. ........................................... 56,875
700 American Re Corp. .................................................................. 26,775
1,800 Aon Corp. .......................................................................... 74,025
600 Bankers Life Holdings Corp. ........................................................ 10,875
300 aCNA Financial Corp. ................................................................ 34,200
600 Equitable of Iowa Cos. ............................................................. 21,000
200 GEICO Corp. ........................................................................ 13,800
2,600 Horace Mann Educators Corp. ........................................................ 69,225
1,400 aHumana, Inc. ....................................................................... 29,575
200 MBIA, Inc. ......................................................................... 13,925
1,100 MGIC Investment Corp. .............................................................. 62,562
700 Progressive Corp. .................................................................. 29,050
1,500 Reliastar Financial Corp. .......................................................... 62,625
900 Transatlantic Holdings, Inc. ....................................................... 60,638
-----------
667,025
-----------
Leisure 2.6%
900 aBoyd Gaming Corp. .................................................................. 12,263
4,400 Callaway Golf Co. .................................................................. 72,050
2,600 aMirage Resorts, Inc. ............................................................... 85,150
-----------
169,463
-----------
Manufacturing - Diversified .5%
600 Pentair, Inc. ...................................................................... 30,300
-----------
Manufacturing - Specialized Industrial 2.2%
1,400 Breed Technologies, Inc. ........................................................... 26,075
1,600 Lancaster Colony Corp. ............................................................. 53,200
500 aLear Seating Corp. ................................................................. 13,875
400 Leggett & Platt, Inc. .............................................................. 9,600
1,500 Modine Manufacturing Co. ........................................................... 41,250
-----------
144,000
-----------
Metals & Mining 1.4%
1,000 aAlumax, Inc. ....................................................................... 29,500
500 Lukens, Inc. ....................................................................... 15,375

Metals & Mining (cont.)
1,400 aMagma Copper Co. ................................................................... $ 23,450
600 Newmont Gold Co. ................................................................... 21,600
-----------
89,925
-----------
Office Supplies 1.6%
3,700 aOffice Depot ....................................................................... 105,912
-----------
Oil & Gas 3.7%
1,600 Apache Corp. ....................................................................... 40,800
1,500 El Paso Natural Gas Co. ............................................................ 40,500
700 Equitable Resources, Inc. .......................................................... 20,475
1,600 Murphy Oil Corp. ................................................................... 60,600
900 Parker & Parsley Petroleum Co. ..................................................... 16,650
6,000 Ranger Oil, Ltd. ................................................................... 34,500
1,400 Valero Energy Corp. ................................................................ 33,075
-----------
246,600
-----------
Paper & Forest Products 2.5%
1,700 Bowater, Inc. ...................................................................... 75,225
800 Consolidated Papers, Inc. .......................................................... 45,800
1,400 Longview Fibre Co. ................................................................. 20,300
500 aManville Corp. ..................................................................... 5,813
300 Willamette Industries, Inc. ........................................................ 17,400
-----------
164,538
-----------
Publishing .4%
100 Washington Post Co. ................................................................ 29,000
-----------
Restaurants .6%
1,700 aBuffets, Inc. ...................................................................... 21,250
3,000 aNPC International, Inc., Class A ................................................... 19,500
-----------
40,750
-----------
Retail 4.6%
100 aBest Buy Co., Inc. ................................................................. 2,075
2,500 Dollar General Corp. ............................................................... 61,250
2,800 Fingerhut Cos., Inc. ............................................................... 38,150
2,600 Ruddick Corp. ...................................................................... 33,150
1,400 aSafeway, Inc. ...................................................................... 66,150
4,000 aSouthland Corp. .................................................................... 15,250
600 aStop & Shop Cos., Inc. ............................................................. 12,450

Retail (cont.)
1,000 aVons Cos., Inc. .................................................................... $ 25,375
3,100 aWaban, Inc. ........................................................................ 48,437
-----------
302,287
-----------
Telecommunications 2.2%
2,200 Cincinnati Bell, Inc. .............................................................. 64,625
500 aGlenayre Technologies, Inc. ........................................................ 32,125
1,500 aWorldCom, Inc. ..................................................................... 48,937
-----------
145,687
-----------
Textiles 2.2%
5,400 aBurlington Industries, Inc. ........................................................ 60,075
1,900 aJones Apparel Group, Inc. .......................................................... 65,075
2,200 Phillips-Van Heusen Corp. .......................................................... 22,275
-----------
147,425
-----------
Transportation 1.6%
400 American President Cos., Ltd. ...................................................... 9,700
300 GATX Corp. ......................................................................... 14,250
700 Illinois Central Corp. ............................................................. 26,775
1,400 aNorthwest Airlines Corp., Class A .................................................. 56,175
-----------
106,900
-----------
Utilities 12.4%
4,400 Central Maine Power Co. ............................................................ 61,050
2,200 Delmarva Power & Lighting Co. ...................................................... 48,400
200 Florida Progress Corp. ............................................................. 6,625
1,000 General Public Utilities Corp. ..................................................... 31,250
3,100 Illinova Corp. ..................................................................... 87,961
3,100 Long Island Light Co. .............................................................. 52,700
200 New England Electric System ........................................................ 7,800
1,600 New York State Electric & Gas Corp. ................................................ 40,400
2,200 NIPSCO Industries, Inc. ............................................................ 80,300
1,500 Northeast Utilities ................................................................ 37,125
3,500 Pinnacle West Capital Corp. ........................................................ 96,250
3,000 Portland General Corp. ............................................................. 81,375
1,000 Public Service Co. of Colorado ..................................................... 34,125
4,100 aPublic Service Co. of New Mexico ................................................... 68,675

Utilities (cont.)
1,500 Rochester Gas & Electric Corp. ..................................................... $ 35,250
2,200 Scana Corp. ........................................................................ 55,825
-----------
825,111
-----------
Total Common Stocks (Cost $5,263,725) ........................................ 6,561,967
-----------
Face
Amount
------
d,eReceivables from Repurchase Agreements .8%
$ 51,318 Joint Repurchase Agreement, 5.887%, 11/01/95 (Cost $51,630)
Daiwa Securities America, Inc., (Maturity Value $11,360)
Collateral: U.S. Treasury Bills, 04/25/96
U.S. Treasury Notes, 6.125%, 09/30/00
Donaldson, Lufkin & Jenrette, (Maturity Value $13,426)
Collateral: U.S. Treasury Notes, 5.125% - 8.25%, 07/31/96 - 03/31/00
Swiss Bank Corp., (Maturity Value $13,426)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
USB Securities, Inc., (Maturity Value $13,426)
Collateral: U.S. Treasury Notes, 5.125% - 8.50%, 11/15/95 - 01/31/00 .............. $ 51,630
-----------
Total Investments (Cost $5,315,355) 99.9% ............................ 6,613,597
Other Assets & Liabilities, Net .1% .................................. 9,204
-----------
Net Assets 100.0% .................................................... $6,622,801
===========

At October 31, 1995, the net unrealized appreciation based on the cost of
investments for income tax purposes of $5,319,459 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost ................................................ $1,433,546
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ................................................ (139,408)
-----------
Net unrealized appreciation ...................................................... $1,294,138
===========
</TABLE>

aNon-income producing.
dFace amount for repurchase agreements is for the underlying collateral.
eSee Note 1(h) regarding Joint Repurchase Agreement.

FRANKLIN STRATEGIC SERIES

Statement of Investments in Securities and Net Assets, October 31, 1995
(unaudited)

Value
Shares Franklin Natural Resources Fund (Note 1)
Common Stocks 92.9%

Chemicals 12.1%
<S> <C> <C>
2,000 Arcadian Corp. ..................................................................... $ 41,250
2,400 Avery-Dennison Corp. ............................................................... 107,400
1,000 Loctite Corp. ...................................................................... 47,250
2,900 Lubrizol Corp. ..................................................................... 83,375
1,000 Potash Corp. of Saskatchewan, Inc. ................................................. 69,625
3,100 Praxair, Inc. ...................................................................... 83,700
-----------
432,600
-----------
Environmental Control/Construction 5.2%
10,400 aAllwaste, Inc. ..................................................................... 50,700
2,300 Browning-Ferris Industries, Inc. ................................................... 66,988
4,400 Hanson, Plc. ....................................................................... 68,200
-----------
185,888
-----------
Forest Products and Paper 1.0%
5,500 a,cPortucel Industrial, SA ............................................................ 38,520
-----------
Iron/Steel 10.2%
5,400 aGibraltar Steel Corp. .............................................................. 63,450
200 Huntco, Inc., Class A .............................................................. 2,600
1,700 J&L Specialty Steel, Inc. .......................................................... 27,838
2,500 Nucor Corp. ........................................................................ 120,313
700 Pohang Iron & Steel Co., Ltd., ADR ................................................. 17,669
1,300 aUCAR International, Inc. ........................................................... 37,050
5,700 Worthington Industries, Inc. ....................................................... 94,763
-----------
363,683
-----------
Machine - Diversified/Construction and Mining 2.9%
1,000 Caterpillar, Inc. .................................................................. 56,125
1,500 Harnischfeger Industries, Inc. ..................................................... 47,250
-----------
103,375
-----------
Metal - Diversified 6.5%
800 Alcan Aluminum, Ltd. ............................................................... 25,300
300 Aluminum Co. of America (ALCOA) .................................................... 15,300
2,100 aCastech Aluminum Group, Inc. ....................................................... 29,400
1,800 Commonwealth Aluminum Corp. ........................................................ 29,025
2,700 Freeport-McMoran Copper & Gold, Inc. ............................................... 61,763
400 Phelps Dodge Corp. ................................................................. 25,350
4,000 a,cPT Tambang Timah, .................................................................. 48,100
-----------
234,238
-----------
Mining - Precious Metals 14.0%
23,000 aAcacia Resources, Ltd. ............................................................. $ 37,668
4,400 cAshanti Goldfields Co. Ltd., ADR ................................................... 78,100
5,900 Compania de Minas Buenaventure, SA ................................................. 32,388
500 De Beers Consolidated Mines, Ltd., ADR ............................................. 13,750
4,500 Driefontein Consolidated, Ltd., ADR ................................................ 49,500
13,350 aGoldfields, Ltd. ................................................................... 33,050
2,200 Newmont Mining Corp. ............................................................... 83,050
2,600 Rustenburg Platinum Holdings, Ltd., ADR ............................................ 45,623
8,100 Santa Fe Pacific Gold Corp. ........................................................ 79,988
6,700 Sons of Gwalia, Ltd. ............................................................... 33,174
1,000 a,cStillwater Mining Co. .............................................................. 15,188
-----------
501,479
-----------
Oil/Gas - Domestic 7.0%
2,900 Phillips Petroleum Co. ............................................................. 93,525
1,600 Tosco Corp. ........................................................................ 55,200
5,100 Total Petroleum (North America), Ltd. .............................................. 51,638
2,100 Ultramar Corp. ..................................................................... 51,188
-----------
251,551
-----------
Oil/Gas - Equipment & Services 5.7%
1,411 Coflexip, Sponsored ADR ............................................................ 19,754
3,000 aENSCO International, Inc. .......................................................... 50,625
4,500 aSmith International, Inc. .......................................................... 72,000
2,600 aWeatherford Enterra, Inc. .......................................................... 62,725
-----------
205,104
-----------
Oil/Gas - Exploration 11.0%
19,000 aAbacan Resource Corp. .............................................................. 46,809
2,400 aBarrett Resources Corp. ............................................................ 55,800
3,700 Enron Oil & Gas Co. ................................................................ 74,000
6,400 aForcenergy Gas Exploration, Inc .................................................... 62,400
3,700 Noble Affiliates, Inc. ............................................................. 91,575
2,700 aUnion Pacific Resources Group, Inc.................................................. 61,425
-----------
392,009
-----------
Oil/Gas - International 10.5%
4,300 Repsol, SA ......................................................................... 127,925
500 Royal Dutch Petroleum Co. .......................................................... 61,437
3,700 Total, SA, ADR ..................................................................... 114,237
4,300 YPF, SA, ADR ....................................................................... 73,637
-----------
377,236
-----------
Real Estate Investment Trusts 3.8%
500 Equity Residential Properties Trust ................................................ $ 14,000
300 Felcor Suite Hotels, Inc. .......................................................... 8,662
800 Oasis Residential, Inc. ............................................................ 17,400
900 OMEGA Healthcare Investors, Inc. ................................................... 22,837
1,100 Storage Trust Realty ............................................................... 21,587
700 The Macerich Company ............................................................... 14,087
3,200 Winston Hotels, Inc. ............................................................... 35,600
-----------
134,173
-----------
Utilities 3.0%
1,800 aAES Corp. .......................................................................... 35,550
900 Enron Global Power & Pipelines ..................................................... 21,713
1,000 Pacific Enterprises ................................................................ 24,750
800 Wicor, Inc. ........................................................................ 23,700
-----------
105,713
-----------
Total Common Stocks (Cost $3,501,184) ........................................ 3,325,569
-----------
Face
Amount
------
Convertible Bonds .5%
Mining - Precious Metals
$ 15,000 Bema Gold Corp., cvt. sub. notes, 7.50%, 02/28/00 (Cost $16,600) ................... 16,050
-----------
Total Investments before Repurchase Agreements (Cost $3,517,784) ............. 3,341,619
-----------
d,eReceivables from Repurchase Agreements 8.4%
296,504 Joint Repurchase Agreement, 5.887%, 11/01/95 (Cost $301,232)
Daiwa Securities America, Inc., (Maturity Value $66,282)
Collateral: U.S. Treasury Bills, 04/25/96
U.S. Treasury Notes, 6.125%, 09/30/00
Donaldson, Lufkin & Jenrette, (Maturity Value $78,333)
Collateral: U.S. Treasury Notes, 5.125% - 8.25%, 07/31/96 - 03/31/00
Swiss Bank Corp., (Maturity Value $78,333)
Collateral: U.S. Treasury Notes, 6.875%, 03/31/00
UBS Securities, Inc., (Maturity Value $78,333)
Collateral: U.S. Treasury Notes, 5.125% - 8.50%, 11/15/95 - 01/31/00 ............. 301,232
-----------
Total Investments (Cost $3,819,016) 101.8% .............................. 3,642,851
Liabilities in Excess of Other Assets, Net (1.8)% ....................... (64,861)
-----------
Net Assets 100.0% ....................................................... $3,577,990
===========

At October 31, 1995, the net unrealized depreciation based on the cost of investments
for income tax purposes of $3,825,001 was as follows:
Aggregate gross unrealized appreciation for all investments in which there was
an excess of value over tax cost ................................................ $ 72,272
Aggregate gross unrealized depreciation for all investments in which there was
an excess of tax cost over value ................................................ (254,422)
-----------
Net unrealized depreciation ...................................................... $(182,150)
===========
</TABLE>

aNon-income producing.
cSee Note 8 regarding Rule 144A securities.
dFace amount for repurchase agreements is for the underlying collateral.
eSee Note 1(h) regarding Joint Repurchase Agreement.

FRANKLIN STRATEGIC SERIES

Financial Statements

Statements of Assets and Liabilities
October 31, 1995 (unaudited)
<TABLE>
<CAPTION>

Franklin Franklin Franklin
California Strategic Global
Growth Fund Income FundUtilities Fund
-------- -------- --------
Assets:
Investments in securities:
<S> <C> <C> <C>
At identified cost........................................................ $28,955,184 $7,167,982$109,638,643
======== ======== ========
At value.................................................................. 32,043,862 7,466,102 113,584,753
Receivables from repurchase agreements, at value and cost.................. 5,432,330 1,047,641 5,798,095
Cash....................................................................... 259,761 28,207 --
Foreign currencies (Cost $48,155).......................................... -- 48,270 --
Receivables:
Dividends and interest.................................................... 40,122 174,094 321,769
Investment securities sold................................................ -- 474,131 3,391,238
Capital shares sold....................................................... 96,175 87,501 104,190
Unamortized organization costs (Note 2).................................... 5,547 -- 5,284
Prepaid Expenses........................................................... 36,690 15,689 --
-------- -------- --------
Total assets.......................................................... 37,914,487 9,341,635 123,205,329
-------- -------- --------
Liabilities:
Payables:
Investment securities purchased:
Regular delivery......................................................... 722,750 202,050 189,750
When-issued basis (Note 1)............................................... -- 164,913 --
Payable upon return of securities loaned (Note 9)......................... 425,920 -- --
Capital shares repurchased................................................ -- -- 90,865
Management fees........................................................... 2,691 -- 61,851
Distribution fees......................................................... 14,726 7,686 75,825
Shareholder servicing costs............................................... 271 -- --
Payables to Manager for organization costs (Note 2) ...................... 5,547 -- 5,284
Accrued expenses and other liabilities..................................... -- -- 34,269
Unrealized loss on forward foreign currency contracts (Note 1)............. -- 3,242 --
-------- -------- --------
Total liabilities..................................................... 1,171,905 377,891 457,844
-------- -------- --------
Net assets, at value........................................................ $36,742,582 $8,963,744$122,747,485
======== ======== ========
Net assets consist of:
Undistributed net investment income........................................ 197,286 25,361 1,423,871
Unrealized appreciation on investments and
translation of assets and liabilities denominated in
foreign currencies......................................................... 3,088,678 295,692 3,941,683
Net realized gain from investments and foreign currency transactions....... 3,371,526 94,972 1,737,539
Class I Capital shares..................................................... 21,461 8,473 91,949
Class II Capital shares.................................................... -- -- 737
Additional paid-in capital................................................. 30,063,631 8,539,246 115,551,706
-------- -------- --------
Net assets, at value........................................................ $36,742,582 $8,963,744$122,747,485
======== ======== ========
Class I shares:
Net assets, at value....................................................... $36,742,582 $8,963,744$121,774,956
======== ======== ========
Shares outstanding......................................................... 2,146,147 847,268 9,194,912
======== ======== ========
Net asset value per share*................................................. $17.12 $10.58 $13.24
======== ======== ========
Class II shares:
Net assets, at value....................................................... $ 972,529
========
Shares outstanding......................................................... 73,657
========
Net asset value per share*................................................. $13.20
========
*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

The accompanying notes are an integral part of these financial statements.

FRANKLIN STRATEGIC SERIES Financial Statements (cont.)

Statements of Assets and Liabilities (cont.)
October 31, 1995 (unaudited)

Franklin Franklin
Franklin Franklin Institutional Natural
Small Cap Global Health MidCap Resources
Growth Fund Care Fund Growth Fund Fund
-------- -------- -------- -------
Assets:
Investments in securities:
<S> <C> <C> <C> <C>
At identified cost.............................................$180,864,950 $14,935,862 $5,263,725$3,517,784
======== ======== ======== =======
At value....................................................... 188,947,581 18,037,924 6,561,967 3,341,619
Receivables from repurchase agreements, at value and cost....... 16,107,426 4,694,757 51,630 301,232
Cash............................................................ 699,600 23,942 -- --
Foreign currencies (Cost $3,660 and $4,920, respectively)....... -- 3,686 -- 4,928
Receivables:
Dividends and interest......................................... 127,850 1,789 9,204 2,522
Investment securities sold..................................... 273,904 174,327 -- --
Capital shares sold............................................ 1,204,807 278,357 -- 301
Unamortized organization costs (Note 2)......................... 4,848 4,775 -- 23,585
Prepaid Expenses................................................ 29,277 20,702 -- 948
-------- -------- -------- -------
Total assets............................................... 207,395,293 23,240,259 6,622,801 3,675,135
-------- -------- -------- -------
Liabilities:
Payables:
Investment securities purchased................................ 7,668,824 759,513 -- 28,258
Payable upon return of securities loaned (Note 9).............. 3,132,452 -- -- --
Capital shares repurchased..................................... 14,255 -- -- 4,945
Management fees................................................ 89,953 -- -- --
Distribution fees.............................................. 101,676 9,639 -- 1,776
Bank Overdraft................................................. -- -- -- 38,581
Payables to Manager for organization costs (Note 2) ........... 4,848 4,775 -- 23,585
-------- -------- -------- -------
Total liabilities.......................................... 11,012,008 773,927 -- 97,145
-------- -------- -------- -------
Net assets, at value.............................................$196,383,285 $22,466,332 $6,622,801$3,577,990
======== ======== ======== =======
Net assets consist of:
Undistributed net investment income............................. 52,530 12,108 35,372 12,731
Unrealized appreciation (depreciation)
on investments and translation of assets and
liabilities denominated in foreign currencies................... 8,082,631 3,102,088 1,298,242 (176,085)
Net realized gain from investments
and foreign currency transactions ............................. 12,520,779 1,846,308 63,889 28,163
Class I Capital shares.......................................... 113,248 15,287 5,224 3,619
Class II Capital shares......................................... 638 -- -- --
Additional paid-in capital...................................... 175,613,459 17,490,541 5,220,074 3,709,562
-------- -------- -------- -------
Net assets, at value.............................................$196,383,285 $22,466,332 $6,622,801$3,577,990
======== ======== ======== =======
Class I shares:
Net assets, at value............................................$195,283,821 $22,466,332 $6,622,801$3,577,990
======== ======== ======== =======
Shares outstanding.............................................. 11,324,756 1,528,711 522,378 361,934
======== ======== ======== =======
Net asset value per share*...................................... $17.24 $14.70 $12.68 $9.89
======== ======== ======== =======
Class II shares:
Net assets, at value............................................ $ 1,099,464
========
Shares outstanding.............................................. 63,836
========
Net asset value per share*...................................... $17.22
========

*Redemption price per share is equal to net asset value less any applicable contingent deferred sales charge.

The accompanying notes are an integral part of these financial statements.

FRANKLIN STRATEGIC SERIES Financial Statements (cont.)

Statements of Operations
for the six months ended October 31, 1995 (unaudited)

Franklin Franklin Franklin
California Strategic Global
Growth Fund Income FundUtilities Fund
-------- -------- ---------
Investment income:
<S> <C> <C> <C>
Dividends................................................................ $ 126,814 $ 16,921 $ 2,183,113
Interest................................................................. 152,441 321,067 260,700
-------- -------- ---------
Total Income........................................................ 279,255 337,988 2,443,813
-------- -------- ---------
Expenses:
Management fees, (Note 6)................................................ 80,606 24,543 368,765
Distribution fees Class I (Note 6)....................................... 19,960 8,856 148,281
Distribution fees Class II (Note 6)...................................... -- -- 2,664
Shareholder servicing costs (Note 6)..................................... 15,282 1,071 63,186
Reports to shareholders.................................................. 5,916 8,676 31,239
Registration and filing fees............................................. 5,445 2,628 31,235
Custodian fees........................................................... 627 1,095 17,168
Professional fees........................................................ 1,635 969 10,619
Amortization of organization costs (Note 2).............................. 4,434 -- 1,584
Other.................................................................... 1,272 906 2,487
Payments from Manager (Note 6)........................................... (104,603) (38,953) --
-------- -------- ---------
Total expenses...................................................... 30,574 9,791 677,228
-------- -------- ---------
Net investment income.............................................. 248,681 328,197 1,766,585
-------- -------- ---------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) on:
Investments............................................................. 3,374,800 88,283 1,773,797
Foreign currency transactions........................................... -- (2,053) (34,971)
Net unrealized appreciation (depreciation) on:
Investments............................................................. 1,471,292 173,109 9,358,369
Translation of assets and liabilities denominated in foreign currency... -- 718 (5,698)
-------- -------- ---------
Net realized and unrealized gain on investments and foreign currency...... 4,846,092 260,057 11,091,497
-------- -------- ---------
Net increase in net assets resulting from operations...................... $5,094,773 $588,254 $12,858,082
======== ======== =========

The accompanying notes are an integral part of these financial statements.

FRANKLIN STRATEGIC SERIES Financial Statements (cont.)

Statements of Operations (cont.)
for the six months ended October 31, 1995 (unaudited)

Franklin Franklin
Franklin Franklin Institutional Natural
Small Cap Global Health MidCap Resources
Growth Fund Care Fund Growth Fund Fund*
--------- -------- -------- --------
Investment income:
<S> <C> <C> <C> <C>
Dividends.................................................... $ 312,850 $ 26,240 $ 48,469 $ 11,208
Interest..................................................... 382,597 66,560 2,021 9,430
--------- -------- -------- --------
Total Income............................................ 695,447 92,800 50,490 20,638
--------- -------- -------- --------
Expenses:
Management fees (Note 6)..................................... 393,791 50,218 20,539 5,075
Distribution fees Class I (Note 6)........................... 153,245 16,851 -- 1,776
Distribution fees Class II (Note 6).......................... 413 -- -- --
Shareholder servicing costs (Note 6)......................... 78,895 17,897 -- 567
Reports to shareholders...................................... 44,289 8,124 660 810
Registration and filing fees................................. 25,972 6,174 5,583 810
Custodian fees............................................... 6,655 1,209 189 324
Professional fees............................................ 10,205 1,530 1,047 876
Amortization of organization costs (Note 2).................. 1,878 1,620 -- 2,145
Other........................................................ 4,479 877 1,209 648
Payments from Manager (Note 6)............................... (103,368) (83,692) (29,227) (5,124)
--------- -------- -------- --------
Total expenses.......................................... 616,454 20,808 -- 7,907
--------- -------- -------- --------
Net investment income.................................. 78,993 71,992 50,490 12,731
--------- -------- -------- --------
Realized and unrealized gain (loss) from investments and foreign currency:
Net realized gain (loss) on:
Investments................................................ 12,532,694 1,291,147 139,178 28,587
Foreign currency transactions.............................. 4,680 (842) -- (424)
Net unrealized appreciation (depreciation) on:
Investments................................................ 1,310,816 2,510,080 841,991 (176,165)
Translation of assets and liabilities denominated in foreign
currency..................................................... -- 26 -- 80
--------- -------- -------- --------
Net realized and unrealized gain (loss) on investments and
foreign currency............................................. 13,848,190 3,800,411 981,169 (147,922)
--------- -------- -------- --------
Net increase (decrease) in net assets resulting from operations $13,927,183 $ 3,872,403 $1,031,659 $(135,191)
========= ======== ======== ========

*For the period June 5, 1995 (effective date) to October 31, 1995.

The accompanying notes are an integral part of these financial statements.

FRANKLIN STRATEGIC SERIES Financial Statements (cont.)

Statements of Changes in Net Assets for the six months ended October 31, 1995
(unaudited) and the year ended April 30, 1995
Franklin California Franklin Strategic Franklin Global
Growth Fund Income Fund Utilities Fund
------------------- ------------------ ---------------------
Six months Year ended Six months Year ended Six months Year ended
ended 10/31/95 4/30/85 ended 10/31/95 4/30/95* ended 10/31/95 4/30/85
--------- --------- --------- -------- ---------- ----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C> <C> <C>
Net investment income......... $ 248,681 $ 123,528 $ 328,197 $ 406,443 $ 1,766,585 $ 4,243,241
Net realized gain (loss) from
investments and foreign
currency transactions.......... 3,374,800 836,699 86,230 (15,782) 1,738,826 1,602,848
Net unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities denominated in
foreign currencies.............. 1,471,292 1,235,649 173,827 121,865 9,352,671 (2,364,729)
--------- --------- --------- -------- ---------- ----------
Net increase in net
assets resulting from
operations..................... 5,094,773 2,195,876 588,254 512,526 12,858,082 3,481,360
Distributions to shareholders from:
Undistributed net investment
income:
Class I...................... (122,907) (64,537) (294,856) (389,899) (1,813,634) (3,707,193)
Class II..................... -- -- -- -- (4,181) --
Net realized capital gains:
Class I....................... (533,836) (549,224) -- -- (1,314,584) (3,611,890)
Class II...................... -- -- -- -- (3,131) --
Increase (decrease) in net assets
from capital share transactions
(Note 4)....................... 18,460,285 7,616,445 1,934,640 6,613,079 (6,225,549) (1,099,874)
--------- --------- --------- -------- ---------- ----------
Net increase (decrease)
in net assets.................. 22,898,315 9,198,560 2,228,038 6,735,706 3,497,003 (4,937,597)
Net assets:
Beginning of Period............ 13,844,267 4,645,707 6,735,706 -- 119,250,482 124,188,079
--------- --------- --------- -------- ---------- ----------
End of Period.................. $36,742,582 $13,844,267 $8,963,744 $6,735,706 $122,747,485 $119,250,482
========= ========= ========= ======== ========== ==========
Undistributed net investment
income included in net assets:
Beginning of Period........... $ 71,512 $ 12,521 $ 16,544 $ -- $ 1,475,101 $ 939,053
========= ========= ========= ======== ========== ==========
End of Period................. $ 197,286 $ 71,512 $ 25,361 $ 16,544 $ 1,423,871 $ 1,475,101
========= ========= ========= ======== ========== ==========
*For the period May 24, 1994 (effective date) to April 30, 1995.

The accompanying notes are an integral part of these financial statements.

FRANKLIN STRATEGIC SERIES Financial Statements (cont.)

Statements of Changes in Net Assets (cont.)
for the six months ended October 31, 1995 (unaudited)
and the year ended April 30, 1995

Franklin Small Cap Franklin Global
Growth Fund Health Care Fund
-------------------- -------------------
Six months Year ended Six months Year ended
ended 10/31/95 4/30/95 ended 10/31/95 4/30/95
------------ ----------- ----------- -----------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C> <C>
Net investment income................................... $ 78,993 $ 91,732 $ 71,992 $ 74,674
Net realized gain from investments and foreign currency
transactions............................................. 12,537,374 3,405,075 1,290,305 943,505
Net unrealized appreciation on investments and translation
of assets and liabilities denominated in foreign currencies 1,310,816 6,619,781 2,510,106 189,307
------------ ----------- ----------- -----------
Net increase in net assets resulting from
operations............................................... 13,927,183 10,116,588 3,872,403 1,207,486
Distributions to shareholders from:
Undistributed net investment income:
Class I................................................. (75,705) (50,170) (91,767) (49,631)
Net realized capital gains:
Class I................................................. (2,227,891) (2,378,735) -- (469,438)
Increase in net assets from
capital share transactions (Note 4)...................... 121,750,063 31,406,861 5,779,767 6,422,416
------------ ----------- ----------- -----------
Net increase in net assets.......................... 133,373,650 39,094,544 9,560,403 7,110,833
Net assets:
Beginning of Period...................................... 63,009,635 23,915,091 12,905,929 5,795,096
------------ ----------- ----------- -----------
End of Period............................................ $196,383,285 $63,009,635 $22,466,332 $12,905,929
============ =========== =========== ===========
Undistributed net investment income included in net assets:
Beginning of Period..................................... $ 49,242 $ 7,680 $ 31,883 $ 6,840
============ =========== =========== ===========
End of Period........................................... $ 52,530 $ 49,242 $ 12,108 $ 31,883
============ =========== =========== ===========

The accompanying notes are an integral part of these financial statements.

FRANKLIN STRATEGIC SERIES Financial Statements (cont.)

Statements of Changes in Net Assets (cont.)
for the six months ended October 31, 1995 (unaudited)
and the year ended April 30, 1995

Franklin Institutional Franklin Natural
MidCap Growth Fund Resources Fund
------------------ ------------
Six months Year ended For the period
ended 10/31/95 4/30/95 ended 10/31/95**
----------- ---------- ------------
Increase (decrease) in net assets:
Operations:
<S> <C> <C> <C>
Net investment income................................................. $ 50,490 $ 109,010 $ 12,731
Net realized gain (loss) from investments and foreign currency
transactions........................................................... 139,178 (75,022) 28,163
Net unrealized appreciation (depreciation) on investments and translation
of assets and liabilities denominated in foreign currencies............ 841,991 478,214 (176,085)
----------- ---------- ------------
Net increase (decrease) in net assets resulting from operations... 1,031,659 512,202 (135,191)
Distributions to shareholders from:
Undistributed net investment income:
Class I............................................................... (56,910) (103,704) --
Net realized capital gains:
Class I............................................................... -- (7,584) --
Increase in net assets from capital share transactions (Note 4)......... 56,910 111,288 3,713,181
----------- ---------- ------------
Net increase in net assets........................................ 1,031,659 512,202 3,577,990
Net assets:
Beginning of Period.................................................... 5,591,142 5,078,940 --
----------- ---------- ------------
End of Period.......................................................... $6,622,801 $5,591,142 $3,577,990
=========== ========== ============
Undistributed net investment income included in net assets:
Beginning of Period.................................................... $ 41,792 $ 36,486 $--
=========== ========== ============
End of Period.......................................................... $ 35,372 $ 41,792 $ 12,731
=========== ========== ============

**For the period June 5, 1995 (effective date) to October 31, 1995.

The accompanying notes are an integral part of these financial statements.

</TABLE>

FRANKLIN STRATEGIC SERIES

Notes to Financial Statements (unaudited)

1. SIGNIFICANT ACCOUNTING POLICIES

Franklin Strategic Series (the Trust) is an open-end, management investment
company (mutual fund), registered under the Investment Company Act of 1940, as
amended. The Trust currently consists of eight separate series (the Funds).
There are three separate diversified funds Franklin Small Cap Growth Fund (the
Small Cap Growth Fund), Franklin Institutional MidCap Growth Fund (the
Institutional MidCap Growth Fund) and Franklin MidCap Growth Fund (the MidCap
Growth Fund); and five separate non-diversified funds: Franklin California
Growth Fund (the California Growth Fund), Franklin Strategic Income Fund (the
Strategic Income Fund), Franklin Global Health Care Fund (the Global Health
Fund), Franklin Global Utilities Fund (the Global Utilities Fund), and Franklin
Natural Resources Fund (the Natural Resources Fund). Each of the Funds issues a
separate series of shares and maintains a totally separate investment portfolio.

The Natural Resources Fund became effective on June 5, 1995. The MidCap Growth
Fund has been effective since June 15, 1993, but has not commenced operations.

The Global Utilities Fund and the Small Cap Growth Fund offer two classes of
shares, Class I and Class II. Class I shares are sold with a higher front-end
sales charge than Class II shares. Each class of shares may be subject to a
contingent deferred charge and has the same rights, except with respect to the
effect of the respective sales charges, the distribution fees borne by each
class, voting rights on matters affecting a single class and the exchange
privilege of each class.

The offering of Class II shares for the Global Utilities Fund began May 1, 1995
and for the Small Cap Growth Fund began October 1, 1995. At the time of the
offering, all previously outstanding shares became Class I shares. Realized and
unrealized gains or losses and net investment income, other than class specific
expenses, are allocated daily to each class of shares based upon the relative
proportion of net assets of each class.

The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies.

a. Security Valuations:

Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and asked prices. Other
securities for which market quotations are readily available are valued at
current market values, obtained from pricing services, which are based on a
variety of factors, including recent trades, institutional size trading in
similar types of securities (considering yield, risk and maturity) and/or
developments related to specific securities. Portfolio securities which are
traded both in the over-the-counter market and on a securities exchange are
valued according to the broadest and most representative market as determined by
the investment manager. Securities for which market quotations are not
available, if any, are valued in accordance with procedures established by the
Board of Trustees.

The value of a foreign security is determined as of the close of trading on the
foreign exchange on which it is traded or as of the close of trading on the New
York Stock Exchange, if that is earlier, and that value is then converted into
its U.S. dollar equivalent at the foreign exchange rate in effect at noon, New
York time, on the day the value of the foreign security is determined. If no
sale is reported at that time, the mean between the current bid and asked price
is used. Occasionally, events which affect the values of foreign securities and
foreign exchange rates may occur between the times at which they are determined
and the close of the exchange and will, therefore, not be reflected in the
computation of the Fund's net asset value, unless material. If events which
materially affect the value of these foreign securities occur during such
period, then these securities will be valued in accordance with procedures
established by the Board of Trustees.

The fair values of securities restricted as to resale, if any, are determined
following procedures established by the Board of Trustees.

1. SIGNIFICANT ACCOUNTING POLICIES (cont.)

b. Income Taxes:

The Funds intend to continue to qualify for the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and to make the
requisite distributions to its shareholders which will be sufficient to relieve
it from income and excise taxes. Therefore, no income tax provision is required.
Each Fund is treated as a separate entity in the determination of compliance
with the Internal Revenue Code.

c. Security Transactions:

Security transactions are accounted for on the date the securities are purchased
or sold (trade date). Realized gains and losses on security transactions are
determined on the basis of specific identification for both financial statement
and income tax purposes.

d. Investment Income, Expenses and Distributions:

Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income and estimated expenses are accrued daily. Bond
discount is amortized as required by the Internal Revenue Code.

A portion of the distributions received by the Fund from investments in Real
Estate Investment Trust (REIT) securities may be characterized as tax basis
return of capital (ROC) distributions, which are not recorded as dividend
income, but reduce the cost basis of the REIT securities. ROC distributions
exceeding the cost basis for the REIT security are recognized by the Fund as
capital gain.

Net realized capital gains and losses differ for financial statement and tax
purposes primarily due to differing treatments of wash sales and foreign
currency transactions.

e. Securities Purchased on a When-Issued or Delayed Delivery Basis:

The Funds may trade 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 acquiring such
securities, they may sell such securities before the settlement date. These
securities are identified on the accompanying Statement of Investments in
Securities and Net Assets. The Funds have set aside sufficient investment
securities as collateral for these purchase commitments.

f. Expense Allocation:

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. In all other
respects, expenses are charged to each Fund as incurred on a specific
identification basis.

g. Foreign Currency Translation:

The accounting records of the Trust are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies are translated into U.S.
dollars at the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are recognized when reported by the custodian
bank.

The Trust does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.

1. SIGNIFICANT ACCOUNTING POLICIES (cont.)

g. Foreign Currency Translation (cont.):

Reported net realized foreign exchange gains or losses arise from sales and
maturities of short-term securities, sales of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions and the difference between the amounts of dividends, interest and
foreign withholding taxes recorded on the Trust's books and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized appreciation
(depreciation) on translation of assets and liabilities denominated in foreign
currencies arise from changes in the value of assets and liabilities other than
investments in securities at semi-fiscal year end, resulting from changes in
exchange rates.

h. Repurchase Agreements:

The Funds may enter into Joint Repurchase Agreements whereby their uninvested
cash balances are deposited into a joint cash account to be used to invest in
one or more repurchase agreements with government securities dealers recognized
by the Federal Reserve Board and/or member banks of the Federal Reserve System.
The value and face amount of the Joint Repurchase Agreement are allocated to the
Funds based on their pro-rata interest.

In a repurchase agreement, the Fund purchases a U.S. government security from a
dealer or bank subject to an agreement to resell it at a mutually agreed upon
price and date. Such a transaction is accounted for as a loan by the Fund to the
seller, collateralized by the underlying security. The transaction requires the
initial collateralization of the seller's obligation by U.S. government
securities with market value, including accrued interest, of at least 102% of
the dollar amount invested by the Fund, with the value of the underlying
security marked-to-market daily to maintain coverage of at least 100%. The
collateral is delivered to the fund's custodian bank and held until resold to
the dealer or bank. At October 31, 1995, all outstanding repurchase agreements
held by the Funds had been entered into on that date.

i. Forward Foreign Currency Contracts:

A forward currency contract, which is individually negotiated and privately
traded by currency traders and their customers, is a commitment to purchase or
sell a specific currency for an agreed-upon price at a future date.

The Strategic Income Fund may enter into forward contracts with the objective of
minimizing the risk to the Fund from adverse changes in the relationship between
currencies or to enhance fund value. The Fund may also enter into a forward
contract in relation to a security denominated in a foreign currency or when it
anticipates receipt in a foreign currency of dividends or interest payments in
order to "lock in" the U.S. dollar price of a security or the U.S. dollar
equivalent of such dividend or interest payments.

Any gain or loss realized from a forward currency contract is recorded as a
realized gain or loss from investments. See the accompanying Statement of
Operations for the Fund's total realized gains or losses from investments during
the period.

The Fund segregates in its custodian bank sufficient cash, cash equivalents or
readily marketable debt securities as collateral for commitments created by open
forward contracts. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value of the
foreign currency changes unfavorably.

1. SIGNIFICANT ACCOUNTING POLICIES (cont.)

i. Forward Foreign Currency Contracts: (cont.)

As of October 31, 1995, the Strategic Income Fund had the following forward
foreign currency contracts outstanding:

Unrealized
Contracts to Sell In Exchange for U.S. Settlement DateGain (Loss) U.S.
--------------------------------------------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
275,000 Canadian Dollars ................................. $201,653 11/07/95 $(3,639)
105,000 Canadian Dollars ................................. $ 76,819 11/08/95 (1,565)
------------- ----------
$278,472 (5,204)
------------- ----------
Contracts to Buy
- ---------------------------------------------
105,000Canadian Dollars ..................................... $ 76,422 11/08/95 1,962
------------- ----------
Net unrealized depreciation ....................................................................... $(3,242)
==========
</TABLE>

2. ORGANIZATION COSTS

The organization costs of the Trust are amortized on a straight-line basis over
a period of five years from the effective date of registration under the
Securities Act of 1933. In the event that Franklin Resources, Inc. ("Resources")
(which was the sole shareholder prior to the effective date of registration)
redeems its shares within the five-year period, the pro rata share of the
then-unamortized deferred organization costs will be deducted from the
redemption price paid to Resources. New investors purchasing shares of the Trust
subsequent to that date bear such costs during the amortization period only as
such charges are accrued daily against investment income. The Trust's investment
manager advanced all of the organization costs of the Funds (except for the
Global Utilities Fund) which amounted to $33,267, $18,775, $16,816 and $25,730
for the California Growth Fund, the Small Cap Fund, the Global Health Fund and
the Natural Resources Fund, respectively. In an effort to reduce the Funds'
expenses, the manager has agreed in advance to waive repayment of the current
period's amortization of $4,434, $1,878, $1,620 and $2,145, for the California
Growth Fund, the Small Cap Growth Fund, the Global Health Fund and the Natural
Resources Fund, respectively.

3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS

At April 30, 1995, for tax purposes, the Funds had accumulated net realized
gains or capital loss carryovers as follows:
<TABLE>
<CAPTION>

Franklin Franklin Franklin Franklin
California Global Small Cap Global Health
Growth FundUtilities FundGrowth Fund Care Fund
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Accumulated net realized gains ................................ $532,804 $1,315,465 $2,220,904 $528,260
======== ======== ======== ========
Franklin
Institutional
Midcap
Growth Fund
--------
Capital loss carryovers
<S> <C> <C>
Expiring in: 2003............................................. $67,804
========
</TABLE>

The Strategic Income Fund has a deferred foreign currency loss of $15,782 deemed
to be incurred on the first day of the following fiscal year for federal income
tax purposes.

3. DISTRIBUTIONS AND CAPITAL LOSS CARRYOVERS (cont.)

For tax purposes, the aggregate cost of securities is higher (and unrealized
appreciation is lower or unrealized depreciation is higher) than for financial
reporting purposes at October 31, 1995 by $1,818 in the Global Utilities Fund,
$182,250 in the Small Cap Growth Fund, $3,181 in the Global Health Fund, $4,104
in the Institutional MidCap Growth Fund, and $5,985 in the Natural Resources
Fund.

4. TRUST SHARES

At October 31, 1995, there was an unlimited number of $.01 par value of
beneficial interest authorized. Transactions in each of the Funds' shares for
the six months ended October 31, 1995 and for the year ended April 30, 1995 were
as follows:
<TABLE>
<CAPTION>

Franklin California Franklin Strategic Franklin Global
Growth Fund Income Fund* Utilities Fund
------------------ ---------------- -------------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- --------- ------ -------- -------- ----------
Six months ended October 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold ......................... 514,779 $ 8,286,105 114,710 $1,196,390 260,234 $ 3,326,163
Shares issued in reinvestment of
distributions ....................... 38,862 570,497 26,727 277,274 215,040 2,677,243
Shares redeemed ..................... (49,571) (810,523) (9,793) (102,473) (822,451) (10,521,922)
Changes from exercise of exchange
privilege:
Shares sold ....................... 1,053,263 16,955,173 57,118 597,149 1,559,854 20,050,460
Shares redeemed ................... (397,698) (6,540,967) (3,238) (33,700) (1,770,537) (22,696,993)
-------- --------- ------ -------- -------- ----------
Net increase (decrease) .............. 1,159,635 $18,460,285 185,524 $1,934,640 (557,860) $ (7,165,049)
======== ========= ====== ======== ======== ==========
Year ended April 30, 1995
Shares sold.......................... 177,789 $ 2,286,030 591,961 $5,923,336 1,300,280 $15,677,001
Shares issued in reinvestment of
distributions........................ 49,674 577,174 37,975 374,342 525,655 6,120,700
Shares redeemed...................... (51,488) (652,107) (4,853) (49,419) (1,571,981) (18,781,605)
Changes from exercise of exchange
privilege:
Shares sold........................ 517,956 6,624,501 51,246 509,787 1,108,116 13,411,365
Shares redeemed.................... (92,961) (1,219,153) (14,585) (144,967) (1,468,342) (17,527,335)
-------- --------- ------ -------- -------- ----------
Net increase (decrease) .............. 600,970 $ 7,616,445 661,744 $6,613,079 (106,272) $ (1,099,874)
======== ========= ====== ======== ======== ==========
Class II Shares:

Six months ended October 31, 1995
Shares sold ......................... 74,073 $ 945,198
Shares issued in reinvestment of
distributions ....................... 416 5,182
Changes from exercise of exchange
privilege:
Shares sold ....................... 3,389 44,047
Shares redeemed ................... (4,229) (54,927)
-------- ----------
Net increase.......................... 73,649 $ 939,500
======== ==========
*For the six months ended October 31, 1995 and the period May 24, 1994
(effective date) to April 30, 1995.

4. TRUST SHARES (cont.)

Franklin
Franklin Small Cap Franklin Global Institutional MidCap
Growth Fund Health Care Fund Growth Fund
-------------------- ----------------- -------------
Class I Shares: Shares Amount Shares Amount Shares Amount
-------- ---------- ------- --------- ----- -------
Six months ended October 31, 1995
<S> <C> <C> <C> <C> <C> <C>
Shares sold ............................... 4,504,214 $ 76,872,271 292,308 $4,072,412 -- $ --
Shares issued in reinvestment of
distributions ............................. 123,747 1,949,021 6,734 81,346 5,019 56,910
Shares redeemed............................ (329,636) (5,617,678) (49,518) (646,492) -- --
Changes from exercise of exchange privilege:
Shares sold .............................. 5,124,993 87,332,240 509,577 7,171,316 -- --
Shares redeemed .......................... (2,326,852) (39,887,692) (357,545) (4,898,815) -- --
-------- ---------- ------- --------- ----- -------
Net increase ............................... 7,096,466 $120,648,162 401,556 $5,779,767 5,019 $ 56,910
======== ========== ======= ========= ===== =======
Year ended April 30, 1995
Shares sold................................ 1,050,774 $ 14,073,399 295,333 $ 3,331,812 -- $ --
Shares issued in reinvestment of
distributions............................. 165,206 1,980,868 43,569 460,121 11,755 111,288
Shares redeemed............................ (377,504) (4,925,437) (99,454) (1,111,831) -- --
Changes from exercise of exchange privilege:
Shares sold............................... 3,300,526 43,456,084 737,966 8,349,736 -- --
Shares redeemed........................... (1,785,818) (23,178,053) (405,973) (4,607,422) -- --
-------- ---------- ------- --------- ----- -------
Net increase................................ 2,353,184 $ 31,406,861 571,441 $ 6,422,416 11,755 $111,288
======== ========== ======= ========= ===== =======
Class II Shares:
Six months ended October 31, 1995**
Shares sold ............................... 53,790 $ 927,904
Shares redeemed ........................... (60) (1,035)
Changes from exercise of exchange privilege:
Shares sold .............................. 10,106 175,032
-------- ----------
Net increase................................ 63,836 $ 1,101,901
======== ==========
**For the period October 1, 1995 (effective date for Class II shares) to October
31, 1995.

Franklin Natural
Resources Fund
----------------
Class I Shares: Shares Amount
------ ---------
Six months ended October 31, 1995***
<S> <C> <C>
Shares sold ............................................................................ 300,397 $3,075,939
Shares redeemed ........................................................................ (517) (5,116)
Changes from exercise of exchange privilege:
Shares sold ........................................................................... 83,652 867,624
Shares redeemed ....................................................................... (21,598) (225,266)
------ ---------
Net increase ............................................................................ 361,934 $3,713,181
====== =========
***For the period June 5, 1995 (effective date) to October 31, 1995.

5. PURCHASES AND SALES OF SECURITIES

Purchases and sales of securities (excluding purchases and sales of short-term
securities) for the six months ended October 31, 1995, were as follows:

Franklin Franklin
Franklin Franklin Franklin Franklin Franklin Institutional Natural
California Strategic Global Small Cap Global Health MidCap Resources
Growth Fund Income FundUtilities Fund Growth Fund Care Fund Growth Fund Fund*
--------- -------- --------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Purchases ............ $26,466,454 $4,351,645 $21,183,866 $188,155,267 $9,249,030 $1,527,691 $3,794,802
========= ======== ========= ========== ======== ======== ========
Sales ................ $10,788,643 $3,071,491 $33,876,342 $ 70,173,862 $6,429,021 $1,445,293 $ 305,605
========= ======== ========= ========== ======== ======== ========
*For the period June 5, 1995 (effective date) to October 31, 1995
</TABLE>

6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

Franklin Advisers, Inc., ("Advisers") under the terms of a management agreement,
provides investment advice, administrative services, office space and facilities
to each Fund, except for the Institutional MidCap Growth Fund and Strategic
Income Fund, and receives fees computed monthly based on the net assets of each
Fund, at an annualized rate of .625 of 1% of the average daily net assets up to
and including $100 million; .50 of 1% of the average daily net assets over $100
million, up to and including $250 million; .45 of 1% of the average daily net
assets over $250 million, up to and including $10 billion; .44 of 1% of the
average daily net assets over $10 billion, up to and including $12.5 billion;
.42 of 1% of the average daily net assets over $12.5 billion, up to and
including $15 billion; and .40 of 1% of the average net assets over $15 billion.
For the Strategic Income Fund, Advisers receives fees computed monthly based on
the net assets of the Fund, at an annual rate of .625 of 1% of the average daily
net assets up to and including $100 million; .50 of 1% of the daily average net
assets over $100 million, up to and including $250 million; .45 of 1% of the
average daily net assets over $250 million. Franklin Institutional Services
Corporation (FISCO) serves as the investment advisor for the Institutional
MidCap Growth Fund, and receives fees computed monthly at the annual rate of .65
of 1% the Fund's average daily net assets.

Under a subadvisory agreement with Advisers, Templeton Investment Council, Inc.
(TICI or the "Subadviser") provides services to the Strategic Income Fund, and
receives from Advisers fees computed monthly on the net assets at an annual rate
of 0.3125 of 1% of the Fund's average daily net assets up to and including $100
million; 0.25 of 1% of the value of the Fund's average daily net assets over
$100 million up to and including $250 million, and 0.225 of 1% of the value of
the Fund's average daily net assets over $250 million.

The terms of the management agreement provide that aggregate annual expenses of
the Trust be limited to the extent necessary to comply with the limitations set
forth in the laws, regulations and administrative interpretations of the states
in which the Trust's shares are registered. The Trust's expenses did not exceed
these limitations; however, for the period ended October 31, 1995, Advisers and
FISCO agreed in advance to waive the management fees, as indicated below, in an
effort to minimize the Funds' expenses. Additionally, Advisers made payments,
including waiver of repayment of organization costs advances, of $23,997,
$14,410, $47,239, $33,474, $8,688 and $49, for other expenses as shown in the
Statement of Operations for the California Growth Fund, the Strategic Income
Fund, the Small Cap Growth Fund, the Global Health Fund, the Institutional
MidCap Growth Fund, and the Natural Resources Fund, respectively.
<TABLE>
<CAPTION>

Franklin Advisers, Inc.
Franklin Franklin Franklin Franklin Franklin
California Strategic Global Small Cap Global HealthFranklin Natural
Growth Fund Income FundUtilities FundGrowth Fund Care Fund Resources Fund
-------- --------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Management fees before waiver ...... $ 80,606 $ 24,543 $368,765 $393,791 $ 50,218 $ 5,075
Fee waiver ......................... (80,606) (24,543) -- (56,129) (50,218) (5,075)
-------- --------- -------- -------- -------- ----------
Management fees paid .............. $-- $-- $368,765 $337,662 $-- $--
======== ========= ======== ======== ======== ==========

6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)

FISCO
--------
Franklin
Institutional
MidCap
Growth Fund
--------
<S> <C>
Management fees before waiver ........................................ $ 20,539
Fee waiver............................................................ (20,539)
--------
Management fees paid ................................................. $--
========
</TABLE>

Pursuant to a shareholder service agreement with Franklin/Templeton Investor
Services, Inc., ("Investor Services") the Trust pays costs on a per shareholder
account basis. Shareholder servicing costs of $176,898 were incurred for the
period ended October 31, 1995, of which $165,809 was for services provided by
Investor Services.

Under the terms of separate Distribution Plans pursuant to Rule 12b-1 of the
Investment Company Act of 1940, the California Growth Fund, the Strategic Income
Fund, and the Global Health Fund will reimburse Franklin/Templeton Distributors,
Inc. ("Distributors") in an amount up to .25% per annum of the average daily net
assets, while the Natural Resources Fund will reimburse up to .35% per annum of
the Fund's average daily net assets, for costs incurred in the promotion,
offering and marketing of the Funds' shares. The Global Utilities Fund and the
Small Cap Growth Fund will reimburse Distributors in an amount up to .25% per
annum for Class I, and 1% per annum for Class II's average daily net assets for
costs incurred in the promotion, offering and marketing of the Fund's shares.
Costs incurred by the Funds under the agreement aggregated $352,046 for the six
months ended October 31, 1995.

In its capacity as underwriter for the shares of the Funds, except for the
Institutional MidCap Growth Fund, Distributors receives commissions on sales of
the Funds' shares of beneficial interest. Commissions are deducted from the
gross proceeds received from the sale of the shares of the Funds, and as such
are not expenses of the Funds. Distributors may also make payments, out of its
own resources, to the dealers for certain sales of Class I and Class IIshares.
Commissions received by Distributors, and the amounts paid to other dealers for
the six months ended October 31, 1995, were as follows:
<TABLE>
<CAPTION>

Franklin
Franklin Franklin Franklin Franklin Franklin Natural
California Strategic Global Small Cap Global Health Resources
Class I Growth Fund Income Fund Utilities Fund Growth Fund Care Fund Fund
- ----------------------- -------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total commissions received .... $341,922 $32,195 $135,857 $2,444,307 $99,612 $35,390
======== ========= ======== ======== ======== ========
Paid to other dealers ......... $304,271 $30,101 $120,918 $2,182,717 $90,063 $36,294
======== ========= ======== ======== ======== ========
Class II
- -----------------------
<S> <C> <C>
Total commissions received .... $ 9,630 $ 8,285
======== ========
Paid to other dealers ......... $ 11,522 $ 16,602
======== ========
</TABLE>

Distributors also received contingent deferred sales charges relating to
transactions in the Small Cap Growth Fund of $9,607 and $10 for Class I and
Class II shares, respectively.

6. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (cont.)

Certain officers and trustees of the Trust are also officers and/or directors of
Distributors, Advisers, FISCO, and Investors Services, all wholly-owned
subsidiaries of Resources.

At October 31, 1995, Resources owned 12% of the California Growth Fund, 66% of
the Strategic Income Fund, 7% of the Global Health Fund, 28% of the Natural
Resources Fund, and 100% of the Institutional MidCap Growth Fund.

7. RESTRICTED SECURITIES

A restricted security is a security which has not been registered with the
Securities Exchange Commission pursuant to the Securities Act of 1933. The Trust
may purchase restricted securities through a private offering and they cannot be
sold without prior registration under the Securities Act of 1933 unless such
sale is pursuant to an exemption therefrom. Subsequent costs of registration of
such securities are borne by the issuer. A secondary market exists for certain
privately placed securities. The Trust values these restricted securities as
disclosed in Note 1. At October 31, 1995, the California Growth Fund held the
following restricted security:
<TABLE>
<CAPTION>

Shares Security Acquisition Date Cost Value
- ----- ----------------------------------------------------- ----------- ---- ----
<S> <C> <C> <C> <C>
486 Lynx Therapeutics, Inc. ............................................... 10/19/92 $328 $--

8. RULE 144A SECURITIES

Rule 144A provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act of 1933 for specified resales of restricted
securities to qualified institutional investors. The Trust values these
securities as disclosed in Note 1(a). At October 31, 1995, 144A securities were
as follows:
Franklin
Franklin Franklin Franklin Natural
California Strategic Global Resources
Growth Fund Income Fund Utilities Fund Fund
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Value...................................................... $570,275 $1,044,538 $2,618,070 $179,908
======== ======== ======== =======
Ratio of value to net assets............................... 1.55% 11.65% 2.13% 5.03%
======== ======== ======== =======
See the accompanying Statement of Investments in Securities and Net Assets for
specific information of such securities.

</TABLE>

9. LOANS OF PORTFOLIO SECURITIES

During the period ended October 31, 1995, the California Growth Fund and the
Small Cap Growth Fund loaned securities to certain brokers for which it received
cash collateral against the loaned securities in an amount equal to at least
102% of the market value of the loaned securities The cash collateral received
is invested by the Funds in short-term instruments and any interest income in
excess of a predetermined rebate to the brokers is kept by the Funds as interest
income. Interest income from this source amounted to $920 for the California
Growth Fund and $19,198 for the Small Cap Growth Fund for the six months ended
October 31, 1995.

At October 31, 1995, the value of the loaned securities amounted to $409,375 in
the California Growth Fund and $3,013,000 in the Small Cap Growth Fund. The
Funds have received sufficient cash collateral to meet these commitments.

10. FINANCIAL HIGHLIGHTS

Selected data for each share of beneficial interest outstanding throughout the
period by Fund are as follows:
<TABLE>
<CAPTION>

Per Share Operating Performance Ratios/Supplemental Data
------------------------------------------------ ------------------------
Net Distri- Ratio of Net
Realized & Distri- butions Net Net Ratio of Investment
Net Asset Net Unrealized butions From Asset Assets Expenses Income to
Value at Invest-Gain(Loss) Total From From Net Realized Total Value at End to Average Average Portfolio
Year Beginning ment on Investment Investment Capital Distri- at End Total of Year Net Net Assets Turnover
Ended of Year Income Securities Operations Income Gains butions of Year Return*(in 000's)Assets*** (See Note 6) Rate

Franklin California Growth Fund:
Class I Shares:
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
19921 $10.04 $0.07 $ (.168) $ (.098) $(.072) $ -- $ (.072) $ 9.87 (1.77)%**$ 3,091 --% 1.27%** 13.73%
1993 9.87 .12 .340 .460 (.120) -- (.120) 10.21 4.72 3,412 -- 1.23 38.28
1994 10.21 .14 2.425 2.565 (.145) (.580) (.725) 12.052 5.55 4,646 .09 1.16 135.12
1995 12.05 .16 3.043 3.203 (.124) (1.099) (1.223) 14.032 9.09 13,844 .25 1.63 79.52
19957 14.03 .12 3.499 3.619 (.099) (.430) (.529) 17.122 6.42 36,743 .24** 1.93** 50.64
Franklin Strategic Income Fund:
Class I Shares:
19955 10.00 .70 .154 .854 (.674) -- (.674) 10.18 8.94 6,736 .25** 7.93** 68.43
19957 10.18 .41 .392 .802 (.402) -- (.402) 10.58 8.03 8,964 .25** 8.36** 46.75
Franklin Global Utilities Fund:
Class I Shares:
19932 10.00 .22 1.270 1.490 (.130) -- (.130) 11.36 18.08** 14,227 -- 3.89** --
1994 11.36 .30 1.280 1.580 (.299) (.042) (.341) 12.60 14.04 124,188 .84 2.95 16.28
1995 12.60 .42 (.067) .353 (.365) (.358) (.723) 12.23 3.17 119,250 1.12 3.47 16.65
19957 12.23 .19 1.146 1.336 (.189) (.137) (.326) 13.24 11.09 121,775 1.10** 2.89** 18.66
Class II Shares:
19957 12.23 .08 1.21 1.290 (.183) (.137) (.320) 13.20 10.71 972 1.87** 2.18** 18.66
Franklin Small Cap Growth Fund:
Class I Shares:
19923 10.00 .04 (.460) (.420) -- -- -- 9.58 (19.96)** 1,268 -- 2.45** 2.41
1993 9.58 .07 .657 .727 (.087) -- (.087) 10.22 7.66 6,026 -- 0.84 63.15
1994 10.22 .03 2.944 2.974 (.043) (.401) (.444) 12.75 29.26 23,915 .30 0.24 89.60
1995 12.75 .03 3.138 3.168 (.021) (.997) (1.018) 14.90 27.05 63,010 .69 0.25 104.84
19957 14.90 .01 2.756 2.766 (.014) (.412) (.426) 17.24 18.83 195,284 .92** 0.12** 57.10
Class II Shares:
1995+ 17.94 -- (.720) (.720) -- -- -- 17.22(4.01) 1,099 1.70** (.36)** 57.10
Franklin Global Health Care Fund:
Class I Shares:
19923 10.00 .02 (1.180) (1.160) -- -- -- 8.84(55.14)** 1,368 -- 1.68** 41.01
1993 8.84 .09 .037 .127 (.087) -- (.087) 8.88 1.41 3,422 -- 1.13 62.74
1994 8.88 .07 1.856 1.926 (.078) (.298) (.376) 10.4321.93 5,795 .10 .68 110.82
1995 10.43 .08 1.560 1.640 (.061) (.559) (.620) 11.4516.33 12,906 .25 .80 93.79
19957 11.45 .06 3.272 3.332 (.082) -- (.082) 14.7029.26 22,466 .25** .90** 46.09
Franklin Institutional MidCap Growth Fund:
Class I Shares:
19944 10.00 .15 .014 .164 (.079) (.035) (.114) 10.05 1.62 5,079 -- 2.21** 70.53
1995 10.05 .21 .769 .979 (.204) (.015) (.219) 10.8110.06 5,591 -- 2.12 163.54
19957 10.81 .10 1.880 1.980 (.110) -- (.110) 12.6818.44 6,623 -- 1.61** 23.46

10. FINANCIAL HIGHLIGHTS (cont.)

Franklin Natural Resources Fund:
Class I Shares:
19956 $10.00 $.04$ (.150) $ (.110) $ -- $ -- $ -- $ 9.89(1.10)% $ 3,578 .98%** 1.58%** 16.54%
</TABLE>

1For the period October 18, 1991 (effective date) to April 30, 1992.
2For the period July 2, 1992 (effective date) to April 30, 1993.
3For the period February 14, 1992 (effective date) to April 30, 1992.
4For the period August 17, 1993 (effective date) to April 30, 1994.
5For the period May 24, 1994 (effective date) to April 30, 1995.
6For the period June 5, 1995 (effective date) to October 31, 1995.
7For the six months ended October 31, 1995.
+For the period October 1, 1995 to October 31, 1995.
*Total return measures the change in value of an investment over the periods
indicated. It is not annualized. It does not include the maximum front-end sales
charge or the deferred contingent sales charge, if applicable. The total return
for the Funds also assumes reinvestment of dividends and capital gains, if any,
at net asset value.
**Annualized.
***During the periods indicated, Advisers and FISCO agreed to waive in advance a
portion or all of their management fees and made payments of other expenses
incurred by a Fund. Had such action not been taken, the ratios of operating
expenses to average net assets would have been as follows:

Ratio of expenses
to average net assets
Franklin California Growth Fund
19921............................. 1.61%**
1993.............................. 1.99
1994.............................. 1.89
1995.............................. 1.27
19957............................. .98**
Franklin Strategic Income Fund
1995.............................. 1.38**
19957............................. 1.23
Franklin Global Utilities Fund
19932............................. 1.51%**
1994.............................. 1.28
Franklin Natural Resources Fund
19956............................. 1.62%**

Ratio of expenses
to average net assets
Franklin Small Cap Growth Fund
19923............................. 1.74%**
1993.............................. 1.95
1994.............................. 1.58
1995.............................. 1.16
19957............................. 1.00**
Franklin Global Health Care Fund
19923............................. 1.62%**
1993.............................. 2.16
1994.............................. 1.74
1995.............................. 1.37
19957............................. 1.14**
Franklin Institutional MidCap Growth Fund
19944............................. 0.91%**
1995.............................. 0.98
19957............................. 0.93**

Franklin Strategic Series

APPENDIX
DESCRIPTION OF GRAPHIC MATERIAL OMITTED FROM EDGAR FILING
(PURSUANT TO ITEM 304 (a) OF REGULATION S-T)

GRAPHIC MATERIAL (1)

This chart shows in pie chart format the fund's securities breakdown by sector
as a percentage of the fund's total net assets.

Franklin California Growth Fund
Portfolio Breakdown on 10/31/95

Electronic Technology 16.8%
Semiconductors/Equipment 11.3%
Energy/Minerals 7.0%
Technology Services 6.8%
Utilities 6.5%
Real Estate 5.0%
Health Services 4.9%
Transportation 4.6%
Producer/Manufacturing 4.1%
Leisure 3.8%
Business Services 3.5%
Health Technology 3.2%
Retail Trade 2.9%
Consumer Services 2.7%
Financials 2.4%
Other 1.7%
Cash & Equivalents 12.8%

GRAPHIC MATERIAL (2)

This chart shows in pie chart format the fund's securities breakdown by region
as a percentage of the fund's total net assets.

Franklin Global Utilities Fund
Geographic Distribution Breakdown on 10/31/95

United States 57.3%
Continental Europe 14.4%
Latin America 7.8%
United Kingdom 6.8%
Asia 6.3%
Other 1.7%
Cash & Equivalents 5.7%

GRAPHIC MATERIAL (3)

Franklin Small Cap Growth Fund This bar chart shows the comparison between the
fund's 1-year total return rate of 34.31%, the S&P 500 Index 1-year total return
rate of 26.44% and the Russell 2500 Index 1-year total return rate of 21.37%.
This bar chart also shows the comparison between the fund's 6-month total return
rate of 18.83%, the S&P 500 Index 6-month total return rate of 14.46% and the
Russell 2500 Index 6-month total return rate of 13.62%.

GRAPHIC MATERIAL (4)

This chart shows in pie chart format the fund's securities breakdown by sector
as a percentage of the fund's total net assets.

Franklin Small Cap Growth Fund
Portfolio Breakdown on 10/31/95

Electronic Technology 18.0%
Semiconductors 17.6%
Technology Services 8.4%
Financials 7.8%
Transportation 6.0%
Consumer Durables 5.4%
Health Services 4.8%
Energy Minerals 4.8%
Real Estate 4.0%
Consumer Services 3.4%
Producer Manufacturing 2.6%
Retail 2.4%
Utilities/Communication 2.2%
Consumer Non-Durables 1.9%
Other 6.9%
Cash & Equivalents 3.8%

GRAPHIC MATERIAL (5)

This chart shows in pie chart format the fund's securities breakdown by sector
as a percentage of the fund's total net assets.

Franklin Global Health Care Fund
Portfolio Breakdown on 10/31/95

Specialty Pharmaceuticals 19.0%
Pharmaceuticals 14.6%
Health Maintenance Organizations 14.1%
Biotechnology 9.2%
Medical Technology & Supplies 8.5%
Software/Information Systems 4.8%
Physician Practice Management 3.6%
Hospitals 2.2%
Temporary Staffing 1.2%
Other Medical Services 3.1%
Cash & Equivalents 19.7%

GRAPHIC MATERIAL (6)

This chart shows in pie chart format the fund's securities breakdown by region
as a percentage of the fund's total net assets.

Franklin Global Health Care Fund
Regional Breakdown on 10/31/95

United States 68.3%
Switzerland 5.7%
Germany 2.8%
United Kingdom 1.4%
Sweden 1.2%
France 0.9%
Cash & Equivalents 19.7%

GRAPHIC MATERIAL (7)

This chart shows in pie chart format the fund's securities breakdown by asset
allocation as a percentage of the fund's total net assets.

Franklin Strategic Income Fund
Asset-Type Breakdown on 10/31/95

High Yield Corporate Bonds 26.0%
International Bonds 21.4%
Emerging Markets Bonds 11.5%
Convertible Securities 12.2%
U.S. Government Bonds 2.8%
Mortgage Securities 6.8%
Preferred Stock (Non-Convertible) 2.5%
Cash & Equivalents 16.8%

GRAPHIC MATERIAL (8)

This chart shows in pie chart format the fund's securities breakdown by asset
allocation as a percentage of the fund's total net assets.

Franklin Strategic Income Fund
Asset-Type Breakdown on 4/30/95

High Yield Corporate Bonds 33.4%
International Bonds 15.4%
Emerging Markets Bonds 7.9%
Convertible Securities 14.8%
Mortgage Securities 6.4%
U.S. Government Bonds 3.7%
Preferred Stock (Non-Convertible) 3.1%
Cash & Equivalents 15.3%

GRAPHIC MATERIAL (9)

This chart shows in pie chart format the fund's securities breakdown by region
as a percentage of the fund's total net assets.

Franklin Natural Resources Fund
Regional Breakdown on 10/31/95

United States 64.0%
Europe 14.2%
Canada 4.4%
Africa 3.1%
South America 3.0%
Australia 2.9%
Asia 1.8%
Cash & Equivalents 6.6%

GRAPHIC MATERIAL (10)

This chart shows in pie chart format the fund's securities breakdown by sector
as a percentage of the fund's total net assets.

Franklin Natural Resources Fund
Portfolio Breakdown on 10/31/95

Energy 37.2%
Gold & Precious Metals 14.5%
Chemicals 12.1%
Steel 10.2%
Service/Related Industries 8.1%
Base Metals 6.5%
REITs 3.8%
Paper & Forest Products 1.0%
Cash & Equivalents 6.6%

GRAPHIC MATERIAL (11)

This chart shows in pie chart format the fund's securities breakdown by Industry
as a percentage of the fund's total net assets.

Industry Breakdown on 10/31/95

Capital Equipment & Technology 24.7%
Consumer Non-Durables 17.9%
Financial 17.5%
Utilities 12.5%
Basic Materials & Processes 9.1%
Consumer Services 8.9%
Energy & Resources 3.7%
Consumer Durables 3.2%
Transportation 1.6%
Cash & Equivalents 0.9%