o FSS1 SA-2
SHARE CLASS REDESIGNATION
Effective Date January 1, 1999
Class A - Formerly Class I
Class B - New Share Class
(California Fund Only)
Class C - Formerly Class II
SUPPLEMENT DATED MAY 17, 1999
TO THE STATEMENT OF ADDITIONAL INFORMATION OF
FRANKLIN STRATEGIC SERIES
(FSS1 - Franklin California Growth Fund, Franklin MidCap Growth Fund,
and Franklin Blue Chip Fund)
dated September 1, 1998
The Statement of Additional Information is amended as follows:
I. As of January 1, 1999, the California Fund offers three classes of shares:
Class A, Class B and Class C. The MidCap Fund and Blue Chip Fund each offer
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. In the section, "Investment Restrictions,"
(a) the first sentence of the first paragraph following the numbered
investment restrictions for the California Fund is replaced with the
following:
In addition to these fundamental policies, it is the present policy of the
California Fund (which may be changed without shareholder approval) not to
pledge, mortgage or hypothecate its 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 purchase or sell with orders from other persons to
obtain lower brokerage commissions.
(b) the fourth numbered paragraph in the section "Additional Restrictions" is
replaced with the following:
4. Buy securities of open-end or closed-end investment companies, except that
the fund may: (i) acquire securities of an open-end or closed-end investment
company in compliance with the 1940 Act; (ii) invest all or substantially all
of its assets in another registered investment company having the same
investment objective and policies as the fund; or (iii) 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.
III. 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
5,211 shares of the California Fund - Class A, 150 shares of the MidCap Fund
and 4,419 shares of the Blue Chip Fund, or less than 1% of the total
outstanding shares of each fund.
IV. 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.
V. 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.
VI. In the section "The Rule 12b-1 Plans," found under "The Funds'
Underwriter,"
(a) the first sentence is replaced with the following:
The MidCap Fund and the Blue Chip Fund and each class of the California 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 California Fund 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
California Fund 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."
VII. 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.
As of November 25, 1998, the principal shareholders of each fund, beneficial
or of record, were as follows:
Share
Name and Address Amount Percentage
MidCap Fund
Franklin Resources, Inc.
Corporate Accounting
Attn: Michael Corcoran
555 Airport Blvd., 4th Fl
Burlingame, CA 94010 625,630.520 27.24%
Blue Chip Fund
Franklin Resources, Inc.
Corporate Accounting
Attn: Michael Corcoran
555 Airport Blvd., 4th Fl
Burlingame, CA 94010 153,929.566 7.20%
VIII. In the "Useful Terms and Definitions" section, the definitions of
"Class I and Class II" and "Offering Price" are replaced with the following:
Class A, Class B and Class C - The California Fund offers three classes of
shares, designated "Class A," "Class B" and "Class C." The three classes have
proportionate interests in the fund's portfolio. They differ, however,
primarily in their sales charge structures and Rule 12b-1 plans. Shares of
the MidCap Fund and Blue Chip 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.
