o FSS2 SA-2
SUPPLEMENT DATED MAY 17, 1999
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN STRATEGIC SERIES
(FSS2 - FRANKLIN BIOTECHNOLOGY DISCOVERY FUND, FRANKLIN GLOBAL HEALTH CARE
FUND, FRANKLIN GLOBAL UTILITIES FUND, AND FRANKLIN NATURAL RESOURCES FUND)
DATED SEPTEMBER 1, 1998
The Statement of Additional Information is amended as follows:
I. As of January 1, 1999, the Health Care Fund and Utilities Fund each
offer three classes of shares: Class A, Class B and Class C. The Natural
Resources Fund offers two classes of shares: Class A and Advisor Class.
The Biotechnology Fund offers one class of shares, which is considered
Class A. Before January 1, 1999, Class A shares were designated Class I
and Class C shares were designated Class II. All references in the
Statement of Additional Information to Class I shares are replaced with
Class A, and all references to Class II shares are replaced with Class C.
II. The second paragraph on the cover is replaced with the following:
This SAI describes each fund's Class A shares and the Class B and C
shares of the Health Care Fund and Utilities Fund. The Natural Resources
Fund currently offers another share class with a different sales charge
and expense structure, which affects performance. To receive more
information about the fund's other share class, contact your investment
representative or call 1-800/DIAL BEN.
III. In the section "Investment Restrictions,"
(a) the first paragraph following the numbered investment restrictions for
the Biotechnology Fund is replaced with the following:
In addition to these fundamental policies, it is the present policy of
the Biotechnology Fund (which may be changed without shareholder
approval) not to pledge, mortgage or hypothecate the fund's assets as
security for loans, nor to engage in joint or joint and several trading
accounts in securities, except that it may: (i) participate in joint
repurchase arrangements; (ii) invest in shares of one or more money
market funds managed by Advisers or its affiliates, to the extent
permitted by exemptions granted under the 1940 Act; or (iii) combine
orders to buy or sell with orders from other persons to obtain lower
brokerage commissions.
(b) the first sentence of the first paragraph following the numbered
investment restrictions for the Natural Resources Fund is replaced
with the following:
In addition to these fundamental policies, it is the present policy of
the Natural Resources Fund (which may be changed without shareholder
approval) not to engage in joint or joint and several trading accounts
in securities, except that it may: (i) participate in joint repurchase
arrangements; (ii) invest in shares of one or more money market funds
managed by Advisers or its affiliates, to the extent permitted by
exemptions granted under the 1940 Act; or (iii) combine orders to buy or
sell with orders from other persons to obtain lower brokerage
commissions.
(c) the first sentence of the first paragraph following the numbered
investment restrictions for the Utilities Fund is replaced with the
following:
In addition to these fundamental policies, it is the present policy of
the Utilities Fund (which may be changed without shareholder approval)
not to engage in joint or joint and several trading accounts in
securities, except that it may: (i) participate in joint repurchase
arrangements; (ii) invest in shares of one or more money market funds
managed by Advisers or its affiliates, to the extent permitted by
exemptions granted under the 1940 Act; or (iii) combine orders to buy or
sell with orders from other persons to obtain lower brokerage
commissions.
IV. The following is added to the "Officers and Trustees" section:
As of November 25, 1998, the officers and Board members, as a group,
owned of record and beneficially the following shares of the funds:
approximately 32 shares of the Biotechnology Fund, 20,927 shares of the
Health Care Fund - Class A, 1,429 shares of the Natural Resources Fund -
Class A and 1,861 shares of the Utilities Fund - Class A, or less than
1% of the total outstanding shares of each fund's Class A shares.
V. The first sentence in the section "Additional Information on Exchanging
Shares," found under "How Do I Buy, Sell and Exchange Shares?", is
replaced with the following:
If you request the exchange of the total value of your account, declared
but unpaid income dividends and capital gain distributions will be
reinvested in the fund and exchanged into the new fund at Net Asset
Value when paid.
VI. The following is added to the section "Additional Information on Selling
Shares," found under "How Do I Buy, Sell and Exchange Shares?":
The contingent deferred sales charge will generally be waived for
redemptions of Class A shares by investors who purchased $1 million or
more without an initial sales charge if the Securities Dealer of record
waived its commission in connection with the purchase.
VII. In the section "The Rule 12b-1 Plans," found under "The Fund's
Underwriter,"
(a) the first sentence is replaced with the following:
Class A of the Biotechnology Fund and Natural Resources Fund and each
class of the Health Care Fund and Utilities Fund have separate
distribution or "Rule 12b-1" plans that were adopted pursuant to Rule
12b-1 of the 1940 Act.
(b) the following paragraphs are added after the section "The Class I
Plan":
THE CLASS B PLAN. Under the Class B plan, the Health Care Fund and
Utilities Fund each pays Distributors up to 0.75% per year of the class'
average daily net assets, payable quarterly, to pay Distributors or
others for providing distribution and related services and bearing
certain expenses. All distribution expenses over this amount will be
borne by those who have incurred them. The Health Care Fund and
Utilities Fund each may also pay a servicing fee of up to 0.25% per year
of the class' average daily net assets, payable quarterly. This fee may
be used to pay Securities Dealers or others for, among other things,
helping to establish and maintain customer accounts and records, helping
with requests to buy and sell shares, receiving and answering
correspondence, monitoring dividend payments from the fund on behalf of
customers, and similar servicing and account maintenance activities.
The expenses relating to the Class B plan are also used to pay
Distributors for advancing the commission costs to Securities Dealers
with respect to the initial sale of Class B shares. Further, the
expenses relating to the Class B plan may be used by Distributors to pay
third party financing entities that have provided financing to
Distributors in connection with advancing commission costs to Securities
Dealers.
(c) and the section "The Class I and Class II Plans" is renamed "The
Class A, B and C Plans."
VIII. Under "Miscellaneous Information," the following is added:
The Information Services & Technology division of Resources established a
Year 2000 Project Team in 1996. This team has already begun making
necessary software changes to help the computer systems that service the
funds and their shareholders to be Year 2000 compliant. After completing
these modifications, comprehensive tests are conducted in one of
Resources' U.S. test labs to verify their effectiveness. Resources
continues to seek reasonable assurances from all major hardware, software
or data-services suppliers that they will be Year 2000 compliant on a
timely basis. Resources is also beginning to develop a contingency plan,
including identification of those mission critical systems for which it
is practical to develop a contingency plan. However, in an operation as
complex and geographically distributed as Resources' business, the
alternatives to use of normal systems, especially mission critical
systems, or supplies of electricity or long distance voice and data lines
are limited.
IX. In the "Useful Terms and Definitions" section, the definitions of "Class
I, Class II and Advisor Class" and "Offering Price" are replaced with
the following:
CLASS A, CLASS B, CLASS C AND ADVISOR - The Health Care Fund and
Utilities Fund each offers three classes of shares, designated "Class
A," "Class B" and "Class C." The Natural Resources Fund offers two
classes of shares, designated "Class A" and "Advisor Class." The classes
have proportionate interests in the fund's portfolio. They differ,
however, primarily in their sales charge and expense structures. Because
the Biotechnology Fund's sales charge structure and Rule 12b-1 plan are
similar to those of Class A shares, shares of the Biotechnology Fund are
considered Class A shares for redemption, exchange and other purposes.
OFFERING PRICE - The public offering price is based on the Net Asset
Value per share of the class and includes the front-end sales charge.
The maximum front-end sales charge is 5.75% for Class A and 1% for Class
C. There is no front-end sales charge for Class B. We calculate the
offering price to two decimal places using standard rounding criteria.
Please keep this supplement for future reference.
