FRANKLIN STRATEGIC MORTGAGE PORTFOLIO
NSAR-B, 1994-11-29
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SIGNATURE   KENNETH V. DOMINGUES                         
TITLE       VP, TREAS, CFO & CAO
 


<TABLE> <S> <C>

<ARTICLE> 6
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FRANKLIN STRATEGIC MORTGAGE PORTFOLIO SEPTEMBER 30, 1994 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          SEP-30-1994
<PERIOD-END>                               SEP-30-1994
<INVESTMENTS-AT-COST>                        5,684,223
<INVESTMENTS-AT-VALUE>                       5,484,439
<RECEIVABLES>                                  301,189
<ASSETS-OTHER>                                  22,589
<OTHER-ITEMS-ASSETS>                                 0
<TOTAL-ASSETS>                               5,808,217
<PAYABLE-FOR-SECURITIES>                       562,318
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                       22,589
<TOTAL-LIABILITIES>                            584,907
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                     5,539,842
<SHARES-COMMON-STOCK>                          554,311
<SHARES-COMMON-PRIOR>                          518,254
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                      (116,748)
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                     (199,784)
<NET-ASSETS>                                 5,223,310
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                              297,090
<OTHER-INCOME>                                       0
<EXPENSES-NET>                                       0
<NET-INVESTMENT-INCOME>                        297,090
<REALIZED-GAINS-CURRENT>                     (116,748)
<APPREC-INCREASE-CURRENT>                    (263,282)
<NET-CHANGE-FROM-OPS>                         (82,940)
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                    (297,090)
<DISTRIBUTIONS-OF-GAINS>                      (56,643)
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                          1,960
<NUMBER-OF-SHARES-REDEEMED>                    (1,939)
<SHARES-REINVESTED>                             36,036
<NET-CHANGE-IN-ASSETS>                        (82,258)
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                       56,643
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                                0
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                               (46,347)
<AVERAGE-NET-ASSETS>                         5,259,328
<PER-SHARE-NAV-BEGIN>                           10.240
<PER-SHARE-NII>                                   .550
<PER-SHARE-GAIN-APPREC>                         (.708)
<PER-SHARE-DIVIDEND>                            (.553)
<PER-SHARE-DISTRIBUTIONS>                       (.109)
<RETURNS-OF-CAPITAL>                                 0
<PER-SHARE-NAV-END>                              9.420
<EXPENSE-RATIO>                                      0
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        

</TABLE>

      
      
                   REPORT OF INDEPENDENT ACCOUNTANTS      
      
To the Shareholders and Board of Trustees      
of Franklin Strategic Mortgage Portfolio:      
      
In planning and performing our audit of the financial statements       
and financial highlights of Franklin Strategic Mortgage       
Portfolio for the year ended September 30, 1994, we considered      
its internal control structure, including procedures for safeguarding      
securities, in order to determine our auditing procedures for the      
purpose of expressing our opinion on the financial statements and      
financial highlights and to comply with the requirements of Form      
N-SAR, not to provide assurance on the internal control structure.      
      
The management of Franklin Strategic Mortgage Portfolio is responsible      
for establishing and maintaining an internal control structure.      
In fulfilling this responsibility, estimates and judgements by      
management are required to assess the expected benefits and related      
costs of internal control structure policies and procedures.  Two      
of the objectives of an internal control structure are to provide      
management with reasonable, but not absolute, assurance that assets      
are safeguarded against loss from unauthorized use or disposition      
and that transactions are executed in accordance with management's      
authorization and recorded properly to permit preparation of       
financial statements in conformity with generally accepted accounting      
principles.      
      
Because of inherent limitations in any internal control structure,      
errors or irregularities may occur and not be detected.  Also,      
projection of any evaluation of the structure to future periods      
is subject to the risk that it may become inadequate because of      
changes in conditions or that the effectiveness of the design and      
operation may deteriorate.      
      
Our consideration of the internal control structure would not       
necessarily disclose all matters in the internal control structure      
that might be material weaknesses under standards established by      
the American Institute of Certified Public Accountants.  A material      
weakness is a condition in which the design or operation of the      
specific internal control structure elements does not reduce to a      
relatively low level the risk that errors or irregularities in       
amounts that would be material in relation to the financial statements      
and financial highlights being audited may occur and not be detected       
within a timely period by employees in the normal course of      
performing their assigned functions.  However, we noted no matters       
involving the internal control structure, including procedures for      
safeguarding securities, that we consider to be material weaknesses,      
as defined above, as of September 30, 1994.      
      
This report is intended solely for the information and use of       
management of Franklin Strategic Mortgage Portfolio and the Securities      
and Exchange Commission.      
      
S\COOPERS AND LYBRAND      
      
Coopers and Lybrand L.L.P.      
San Francisco, California      
October 28, 1994        
  

NAME OF REGISTRANT:
Franklin Strategic Mortgage Portfolio
File No. 811-7288

EXHIBIT ITEM No. 77Q1(a):
Copies of any material amendments to the registrant's charter or
by-laws.

At a meeting of the Board of Trustees of the registrant on April
19, 1994, the Board approved the following preamble and
resolution:

WHEREAS, the Board of Trustees has determined that it is
advisable and in the best interests of the shareholders of the
Trust to revise the Trust's By-Laws to specifically provide for
the use of proxies which are communicated by an electronic,
telephonic, computerized or telecommunications method;

NOW THEREFORE, BE IT RESOLVED, that Section 10 of Article II is
hereby resolved to read as follows:

"Section 10.  PROXIES.  Every person entitled to vote for
Trustees or on any other matter shall have the right to do so
either in person or by one or more agents.  Except as otherwise
provided in the Agreement and Declaration of Trust or these By-
Laws, matters relating to the giving, voting or validity of
proxies will be governed by the Delaware General Corporation Law
relating to proxies, and Delaware judicial interpretations
thereunder, as if the Trust were a Delaware corporation and
Shareholders of the Trust were shareholders of a Delaware
corporation."


















nsar\0157-77Q.DOC             October 28, 1994



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