497(K)(1)(i)
GROWTH
FRANKLIN SMALL CAP GROWTH FUND
Franklin Strategic Series
PROFILE
September 1, 1998
This Profile summarizes key information about the Fund that is included in the
Fund's prospectus. The Fund's prospectus includes additional information about
the Fund, including a more detailed description of the risks associated with
investing in the Fund that you may want to consider before you invest. You may
obtain the prospectus and other information about the Fund, at no cost by
calling 1-800/DIAL BEN (1-800/342-5236), or from your investment representative
from whom shares of the Fund may be purchased. This Profile describes the Fund's
Class I and Class II shares.
FRANKLIN SMALL CAP GROWTH FUND
FRANKLIN STRATEGIC SERIES
1. WHAT IS THE FUND'S GOAL?
Franklin Small Cap Growth Fund seeks long-term capital growth.
2. WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
PRINCIPAL INVESTMENTS. The Fund invests primarily in equity securities
of small capitalization ("small cap") growth companies. Under normal
market conditions, the Fund will invest at least 65% of its total
assets in equity securities of smaller companies which have market
capitalization values (share price times the number of common stock
shares outstanding) of less than $1 billion. The Fund will try to
invest at least one-third of its total assets in companies with market
capitalization values of $550 million or less. The Fund's manager may
not always be able to find companies to include in this one-third
portion that it believes are suitable. Equity securities include
common stocks, preferred stocks, securities convertible into common
stocks, and warrants for the purchase of common stocks.
OTHER INVESTMENTS. The Fund may also invest up to 35% of its total
assets in equity securities of larger growth companies. Although the
Fund may invest up to 25% of its total assets in foreign securities,
including those of developing markets issuers, it currently has no
intention of investing more than 10% of its assets in such securities.
The Fund may also invest, to a limited extent, in real estate
investments trusts, in illiquid securities, and engage in other
investment strategies. The Fund may invest in cash or short-term
investments for liquidity or, without limit, for temporary defensive
purposes.
PORTFOLIO SELECTION. The manager will choose small cap companies which
it believes are positioned for rapid growth in revenues, earnings or
assets, that it can acquire at a price it believes to be reasonable.
The manager looks for companies it believes exhibit leadership in
growing markets or have distinct and sustainable competitive
advantages, such as a particular marketing or product niche. The
manager strives to avoid overly speculative issues, such as those
based on unproven technology. The manager uses a disciplined "bottom
up" approach to stock selection, blending fundamental and quantitative
analysis. The manager diversifies the Fund's assets across many
industries, and from time to time may invest significantly in certain
sectors, including technology and biotechnology.
FOR MORE INFORMATION ABOUT THE FUND'S INVESTMENTS, PLEASE REVIEW THE
FUND'S MOST RECENT ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. IN
THE FUND'S ANNUAL REPORT YOU WILL FIND A DISCUSSION OF MARKET
CONDITIONS AND INVESTMENT STRATEGIES THAT SIGNIFICANTLY AFFECTED THE
FUND'S PERFORMANCE DURING THE LAST FISCAL YEAR. YOU MAY OBTAIN THESE
FREE REPORTS BY CALLING 1-800/342-5236.
3. WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
The main risks, affecting the value of the Fund's shares, are those
common to all managed smaller company stock investments.
STOCKS. Common stocks and other equities represent ownership interests
in individual companies. Stocks tend to rise and fall more
dramatically than other asset classes over the shorter term. These
price movements may result from factors affecting individual
companies, or factors affecting the securities market as a whole.
Growth stock prices reflect projections of future earnings or revenues
and can, therefore, fall dramatically if the company fails to meet
those projections.
SMALLER COMPANIES. Historically, smaller company stocks have generally
experienced greater price swings than, and have fluctuated
independently from, larger company stocks. Smaller or relatively new
companies can be particularly sensitive to changing economic
conditions, and their growth prospects are less certain than those of
larger, more established companies. For example, smaller companies may
have limited financial resources, product lines or market share; they
may lack depth of management; they may be in new industries; or they
may not find an established market for their products or services, or
their products or services may become quickly obsolete. Small cap
companies may suffer significant losses and investments in these
companies may be speculative. In particular, smaller companies in the
technology or biotechnology industries can be subject to abrupt or
erratic price movements.
MANAGEMENT. Individual and worldwide stock markets, interest rates,
and currency valuations have both increased and decreased, sometimes
very dramatically, in the past. These changes are likely to occur
again in the future at unpredictable times, and the manager may not
correctly anticipate or respond to these changes.
In addition to the main risks, the Fund's investments in foreign
securities, particularly those of developing markets issuers, involve
special risks including changing currency values which increase or
decrease the Fund's returns from its foreign portfolio holdings, and
social, political, and economic uncertainty.
YOU MAY LOSE MONEY BY INVESTING IN THE FUND; YOUR INVESTMENT IS NOT
GUARANTEED.
PAST RESULTS The bar chart and table show the historical variability (or
volatility) of the Small Cap Fund's returns on a year by year basis, and its
average annual total returns compared to a broad-based securities index. They
may provide some indication of the risks of investing in the Fund. Of course,
past performance cannot predict or guarantee future results. Moreover, this has
been a period of generally rising securities prices, which may not be sustained
in the future.
GRAPHIC MATERIAL OMITTED.
THE FOLLOWING IS A NARRATIVE DESCRIPTION OF THE GRAPHIC MATERIAL PURSUANT TO
ITEM 304(A) OF REGULATION S-T:
This chart shows on bar format the annual total returns for the Franklin Small
Cap Growth Fund - Class I for the years 1993 through 1997/
Calendar Year Total Returns*
1993 21.77%
1994 9.22%
1995 42.20%
1996 27.07%
1997 15.78%
Best Quarter Q2 '97 +18.69%
Worst Quarter Q1 '97 -9.12%
<TABLE>
<CAPTION> SINCE INCEPTION
AVERAGE ANNUAL TOTAL RETURNS (2/14/92)
(FOR THE PERIODS ENDED JUNE 30, 1998) PAST ONE YEAR PAST 5 YEARS
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<S> <C> <C> <C>
FRANKLIN SMALL CAP GROWTH FUND - CLASS I** 7.32% 22.42% 19.37%
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S&P 500*** 30.16% 23.08% 20.18%
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RUSSELL 2500*** 18.10% 17.30% 16.15%
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</TABLE>
<TABLE>
<CAPTION>
SINCE INCEPTION
AVERAGE ANNUAL TOTAL RETURNS (10/2/95)
(FOR THE PERIODS ENDED JUNE 30, 1998) PAST ONE YEAR PAST 5 YEARS
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<S> <C> <C>
FRANKLIN SMALL CAP GROWTH FUND - CLASS II**** 10.92% N/A 17.01%
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</TABLE>
All figures assume reinvestment of dividends and capital gains. Past expense
reductions by the manager increased returns.
* Sales loads are not reflected in the bar chart returns; if they had been
reflected, returns would be lower. The year-to-date return as of June 30, 1998
was 6.06% for Class I.
**These figures have been restated to reflect the current, maximum 5.75% initial
sales charge; thus actual returns may differ. Prior to August 3, 1998, fund
shares were offered at a lower initial sales charge.
*** The Standard & Poor's 500 Stock Index (S&P 500) is an index of widely held
common stocks, whereas the Russell 2500 is an index of 2,500 companies with
small market capitalizations. Please remember one cannot invest directly in an
index, nor is an index representative of the Fund's portfolio.
****These figures include the 1% initial sales charge and 1% deferred sales
charge to the extent applicable. Class II shares have higher annual fees and
expenses than Class I shares.
4. WHAT ARE THE FUND'S FEES AND EXPENSES?
This table is designed to help you understand the costs of investing
in the Fund. It is based on the historical expenses of each class for
the fiscal year ended April 30, 1998. The Fund's future expenses may
vary.
<TABLE>
<CAPTION>
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT) CLASS I CLASS II
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<S> <C> <C>
Maximum Sales Charge (Load) (as a percentage of Offering Price) 5.75% 1.99%
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Paid at time of purchase 5.75% 1.00%
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Paid at redemption None* 0.99%**
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</TABLE>
See "How do I Buy Fund Shares?" and "How do I Sell Fund Shares?" below for an
explanation of how and when these sales charges apply.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
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<S> <C> <C>
Management Fees 0.46% 0.46%
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Distribution and Service (12b-1) Fees+ 0.25% 1.00%
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Other Expenses 0.18% 0.18%
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TOTAL ANNUAL FUND OPERATING EXPENSES 0.89% 1.64%
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</TABLE>
EXAMPLE This Example can help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. Your actual costs may be higher or
lower. This is not a representation of past or future expenses. You would pay
the following expenses on a $10,000 investment, assuming a 5% return and sale of
your shares at the end of each period.
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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- ------------------------- ---------------------- --------------------- ---------------------- ----------------------
CLASS I $661++ $843 $1,040 $1,608
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CLASS II $363 $612 $983 $2,024
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</TABLE>
For the same Class II investment, you would pay projected expenses of $265 if
you did not sell your shares at the end of the first year. Your projected
expenses for the remaining periods would be the same.
*Except for (1) purchases of $1 million or more that you sell within one year,
and (2) purchases by certain retirement plans made without a front-end sales
charge.
**The charge is 1% of the value of shares sold or the net asset value at the
time of purchase, whichever is less. The number in the table shows the charge as
a percentage of offering price. While the percentage is different depending on
whether the charge is shown based on the net asset value or the offering price,
the dollar amount you would pay is the same.
+Because of the Rule 12b-1 fees, over the long term you may indirectly pay more
than the equivalent of the maximum permitted front-end sales charge.
++Assumes a contingent deferred sales charge will not apply.
5. WHO ARE THE FUND'S INVESTMENT ADVISER AND PORTFOLIO MANAGERS?
The Fund is managed by Franklin Advisers, Inc. ("Advisers"). Together,
Advisers and its Franklin and Templeton affiliates manage over $243
billion in assets. Franklin Templeton is one of the largest mutual
fund organizations in the United States. Edward Jamieson, Senior Vice
President of Advisers since 1987, and Michael McCarthy, Portfolio
Manager of Advisers, since 1992, have been responsible for the
day-to-day management of the Fund's portfolio since inception and
since 1993, respectively.
6. HOW DO I BUY FUND SHARES?
To open your account, contact your investment representative or
complete and sign the enclosed shareholder application and return it
to the Fund with your check. The minimum initial investment is $1000.
The minimum additional investment is $50. Lower minimum investment
amounts may be applicable to certain retirement accounts. WE RESERVE
THE RIGHT TO REFUSE ANY ORDER TO BUY SHARES.
Currently, the Fund does not allow investments by Market Timers,
including market timing or asset allocation services, or any person or
group whose transactions include frequent or large exchanges.
Each share class has its own sales charge and expense structure.
Determining which class of shares is better suited to your needs
depends on a number of factors which you should discuss with your
investment representative. Generally, Class I shares may be more
attractive for long-term investors, for example if you plan to hold
most of your shares for 7 years or more, or investors who qualify for
a reduced sales charge.
A sales charge may apply when you purchase shares, and as indicated
below, the charge may be reduced for larger purchases.
<TABLE>
<CAPTION>
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AMOUNT OF PURCHASE AT OFFERING PRICE TOTAL SALES CHARGE AS A PERCENTAGE OF OFFERING PRICE
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<S> <C>
CLASS I
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Under $50,000 5.75%
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$50,000 but less than $100,000 4.50%
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$100,000 but less than $250,000 3.50%
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$250,000 but less than $500,000 2.50%
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$500,000 but less than $1,000,000 2.00%
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$1,000,000 or more None
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CLASS II
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Under $1,000,000 1.00%
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</TABLE>
REDUCTIONS OF CLASS I SALES CHARGES
The following programs may help you qualify for a reduced Class I sales charge:
AGGREGATION (WITH OTHER INVESTMENTS IN FRANKLIN TEMPLETON FUNDS*)
You may aggregate your current purchase with existing investments in
Franklin Templeton Funds made by you, your spouse, your children and
grandchildren under 21, and if you are the sole owner of a company,
you may add the company accounts and retirement plan accounts.
Companies may aggregate the plan assets of retirement plans.
LETTER OF INTENT
You may commit to investing a specified dollar amount during a 13
month period.
GROUP PURCHASES
Qualified group members may aggregate the dollar value of existing
investments with the amount of the current purchase.
WAIVERS OF CLASS I SALES CHARGES
If your purchase falls within one of the categories listed below, you
may qualify for a waiver of Class I sales charges.
DISTRIBUTIONS, PAYMENTS AND REDEMPTION PROCEEDS FROM FRANKLIN
TEMPLETON FUNDS THAT MAY BE REINVESTED WITHOUT A SALES CHARGE WITHIN
365 DAYS OF THEIR PAYMENT DATE:
Distributions and redemption proceeds (if you paid a sales charge at
the time of purchase) reinvested in the same share class (also applies
to Class II shares); distributions from a REIT investment sponsored or
advised by Franklin Properties, Inc.; annuity payments; retirement
plan distributions; redemption proceeds from a repurchase of shares of
Franklin Floating Rate Trust, if the shares were continuously held for
at least 12 months; and redemption proceeds from the Templeton Global
Strategy Funds - Class A shares (for qualified investors).
ELIGIBLE INSTITUTIONS AND INDIVIDUALS
Trust companies and bank trust departments agreeing to invest at least
$1 million of client assets over a 13 month period; eligible
governmental authorities; broker-dealers, registered investment
advisors or certified financial planners engaged in comprehensive fee
programs; Registered Securities Dealers and affiliates for their
investment accounts only; employees and family members of Securities
Dealers and affiliates; officers, directors, trustees, and full time
employees of Franklin Templeton Group** and their family members;
accounts managed by Franklin Templeton Group; unit investment trusts
and their holders reinvesting distributions; group annuity separate
accounts offered to retirement plans; and Chilean retirement plans.
*Franklin Templeton Funds include all U.S. registered mutual funds in the
Franklin Templeton Group of Funds except for dedicated insurance funds.
**Franklin Resources, Inc., a publicly owned holding company and its various
subsidiaries.
7. HOW DO I SELL FUND SHARES?
You may sell your shares by written request, or by phone
(1-800/632-2301) if you have completed and returned to us the
telephone redemption agreement. Once we receive your request in good
order, we will redeem your shares at net asset value as next
determined by the Fund, less any applicable redemption charges.
A contingent deferred sales charge of 1% of the lesser of (i) the
value of shares sold, or (ii) net asset value at the time of purchase,
may apply to Class I purchases of $1 million or more if you sell the
shares within one year, and may apply to any Class II purchase if you
sell the shares within 18 months. We may waive the deferred sales
charge under certain circumstances.
8. HOW ARE THE FUND'S DISTRIBUTIONS MADE AND TAXED?
Dividends are generally distributed to shareholders semiannually in
June and December. Any capital gains are generally distributed
annually, usually in December. Your distributions will be
automatically reinvested in the Fund unless you select another
distribution option (see Item 9, below). For federal income tax
purposes, income dividends and capital gain distributions received by
you (whether received as cash or additional shares) are taxed as
ordinary income, or as capital gains, which are taxed at different
rates depending on the length of time that the Fund holds its assets.
9. WHAT OTHER SERVICES ARE AVAILABLE FROM THE FUND?
DISTRIBUTION OPTION:
You can choose to have your distributions mailed to you in cash, or
automatically reinvested into your account or into another Franklin or
Templeton fund account within the same class (generally without any
additional sales charges). Your distributions will automatically be
reinvested in your account unless you select another option.
EXCHANGE PROGRAM: You can exchange shares between most
Franklin and Templeton funds within the same class, usually without
any additional sales fees. Some funds do not allow Market Timers.
We reserve the right to modify or withdraw the exchange privilege.
AUTOMATIC INVESTMENT PLAN: The Automatic Investment Plan lets
you automatically transfer monthly investments of $50 or more from
your checking account to your Fund account.
SYSTEMATIC WITHDRAWAL PLAN: The Systematic Withdrawal Plan
lets you receive checks for a fixed amount from your account on a
regular basis.
RETIREMENT PLANS AND OTHER PROGRAMS: We offer retirement
plans, including IRAs and Business Retirement Plans, such as 401(k)
plans.
TELEFACTS(R): For information or transactions call
1-800/247-1753.
