<PAGE> PAGE 1
000 B000000 09/30/1999
000 C000000 0000893226
000 D000000 N
000 E000000 NF
000 F000000 Y
000 G000000 N
000 H000000 N
000 I000000 6.1
000 J000000 U
001 A000000 FRANKLIN STRATEGIC MORTGAGE PORTFOLIO
001 B000000 811-7288
001 C000000 6503122000
002 A000000 777 MARINERS ISLAND BOULEVARD
002 B000000 SAN MATEO
002 C000000 CA
002 D010000 94404
002 D020000 1585
003 000000 N
004 000000 N
005 000000 N
006 000000 N
007 A000000 Y
007 B000000 1
007 C010100 1
007 C020100 FRANKLIN STRATEGIC MORTGAGE PORTFOLIO
007 C030100 N
007 C010200 2
007 C010300 3
007 C010400 4
007 C010500 5
007 C010600 6
007 C010700 7
007 C010800 8
007 C010900 9
007 C011000 10
008 A00AA01 FRANKLIN ADVISERS, INC.
008 B00AA01 A
008 C00AA01 801-26292
008 D01AA01 SAN MATEO
008 D02AA01 CA
008 D03AA01 94404
008 D04AA01 1585
010 A00AA01 FRANKLIN TEMPLETON SERVICES, INC.
010 C01AA01 SAN MATEO
010 C02AA01 CA
010 C03AA01 94404
010 C04AA01 1585
011 A00AA01 FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
011 B00AA01 8-5889
011 C01AA01 SAN MATEO
011 C02AA01 CA
<PAGE> PAGE 2
011 C03AA01 94404
011 C04AA01 1585
012 A00AA01 FRANKLIN/TEMPLETON INVESTOR SERVICES, INC.
012 B00AA01 84-1036
012 C01AA01 SAN MATEO
012 C02AA01 CA
012 C03AA01 94404
012 C04AA01 1585
013 A00AA01 PRICEWATERHOUSECOOPERS LLP
013 B01AA01 SAN FRANCISCO
013 B02AA01 CA
013 B03AA01 94105
013 B04AA01 2119
014 A00AA01 FRANKLIN/TEMPLETON DISTRIBUTORS, INC.
014 B00AA01 8-5889
015 A00AA01 THE BANK OF NEW YORK
015 B00AA01 C
015 C01AA01 NEW YORK
015 C02AA01 NY
015 C03AA01 10286
015 E01AA01 X
015 A00AA02 BANKBOSTON
015 B00AA02 S
015 C01AA02 BUENOS AIRES
015 D01AA02 ARGENTINA
015 E04AA02 X
015 A00AA03 NATIONAL AUSTRALIA BANK
015 B00AA03 S
015 C01AA03 MELBOURNE
015 D01AA03 AUSTRALIA
015 E04AA03 X
015 A00AA04 BANK AUSTRIA AG
015 B00AA04 S
015 C01AA04 VIENNA
015 D01AA04 AUSTRIA
015 E04AA04 X
015 A00AA05 BANQUE BRUXELLES LAMBERT
015 B00AA05 S
015 C01AA05 BRUSSELS
015 D01AA05 BELGIUM
015 E04AA05 X
015 A00AA06 ROYAL BANK OF CANADA
015 B00AA06 S
015 C01AA06 MONTREAL
015 D01AA06 CANADA
015 E04AA06 X
015 A00AA07 DEN DANSKE BANK
015 B00AA07 S
015 C01AA07 COPENHAGEN
015 D01AA07 DENMARK
015 E04AA07 X
<PAGE> PAGE 3
015 A00AA08 CEDEL
015 B00AA08 S
015 C01AA08 LUXEMBOURG CITY
015 D01AA08 EUROMARKET
015 E04AA08 X
015 A00AA09 EUROCLEAR
015 B00AA09 S
015 C01AA09 BRUSSELS
015 D01AA09 EASDAQ
015 E04AA09 X
015 A00AA10 MERITA BANK PLC
015 B00AA10 S
015 C01AA10 HELSINKI
015 D01AA10 FINLAND
015 E04AA10 X
015 A00AA11 BANQUE PARIBAS
015 B00AA11 S
015 C01AA11 PARIS
015 D01AA11 FRANCE
015 E04AA11 X
015 A00AA12 DRESDNER BANK AG
015 B00AA12 S
015 C01AA12 FRANKFURT
015 D01AA12 GERMANY
015 E04AA12 X
015 A00AA13 HONGKONG & SHANGHAI BANKING CORP. LTD.
015 B00AA13 S
015 C01AA13 HONG KONG
015 D01AA13 HONG KONG
015 E04AA13 X
015 A00AA14 HONGKONG & SHANGHAI BANKING CORP. LTD.
015 B00AA14 S
015 C01AA14 JAKARTA
015 D01AA14 INDONESIA
015 E04AA14 X
015 A00AA15 ALLIED IRISH BANKS, PLC
015 B00AA15 S
015 C01AA15 DUBLIN
015 D01AA15 IRELAND
015 E04AA15 X
015 A00AA16 BANK OF TOKYO - MITSUBISHI
015 B00AA16 S
015 C01AA16 TOKYO
015 D01AA16 JAPAN
015 E04AA16 X
015 A00AA17 BANQUE ET CAISSE D'EPARGNE DE L'ETAT LUXEMBOU
015 B00AA17 S
015 C01AA17 LUXEMBOURG CITY
015 D01AA17 LUXEMBOURG
015 E04AA17 X
015 A00AA18 HSBC BANK MALAYSIA BERHAD
<PAGE> PAGE 4
015 B00AA18 S
015 C01AA18 KUALA LUMPUR
015 D01AA18 MALAYSIA
015 E04AA18 X
015 A00AA19 BANCO NACIONAL DE MEXICO
015 B00AA19 S
015 C01AA19 MEXICO CITY
015 D01AA19 MEXICO
015 E04AA19 X
015 A00AA20 MEES PIERSON N.V.
015 B00AA20 S
015 C01AA20 AMSTERDAM
015 D01AA20 NETHERLANDS
015 E04AA20 X
015 A00AA21 AUSTRALIA & NEW ZEALAND BANKING GROUP LTD.
015 B00AA21 S
015 C01AA21 WELLINGTON
015 D01AA21 NEW ZEALAND
015 E04AA21 X
015 A00AA22 STANDARD CHARTERED BANK
015 B00AA22 S
015 C01AA22 KARACHI
015 D01AA22 PAKISTAN
015 E04AA22 X
015 A00AA23 HONGKONG & SHANGHAI BANKING CORP. LTD.
015 B00AA23 S
015 C01AA23 MANILA
015 D01AA23 PHILIPPINES
015 E04AA23 X
015 A00AA24 BANCO COMERCIAL PORTUGUES S.A.
015 B00AA24 S
015 C01AA24 LISBON
015 D01AA24 PORTUGAL
015 E04AA24 X
015 A00AA25 UNITED OVERSEAS BANK LTD.
015 B00AA25 S
015 C01AA25 SINGAPORE
015 D01AA25 SINGAPORE
015 E04AA25 X
015 A00AA26 STANDARD BANK OF SOUTH AFRICA LTD.
015 B00AA26 S
015 C01AA26 JOHANNESBURG
015 D01AA26 SOUTH AFRICA
015 E04AA26 X
015 A00AA27 BANCO BILBAO VIZCAYA
015 B00AA27 S
015 C01AA27 MADRID
015 D01AA27 SPAIN
015 E04AA27 X
015 A00AA28 STANDARD CHARTERED BANK
015 B00AA28 S
<PAGE> PAGE 5
015 C01AA28 COLOMBO
015 D01AA28 SRI LANKA
015 E04AA28 X
015 A00AA29 SKANDINAVISKA ENSKILDA BANKEN
015 B00AA29 S
015 C01AA29 STOCKHOLM
015 D01AA29 SWEDEN
015 E04AA29 X
015 A00AA30 UBS AG
015 B00AA30 S
015 C01AA30 ZURICH
015 D01AA30 SWITZERLAND
015 E04AA30 X
015 A00AA31 STANDARD CHARTERED BANK
015 B00AA31 S
015 C01AA31 BANGKOK
015 D01AA31 THAILAND
015 E04AA31 X
015 A00AA32 OSMANLI BANKASI A.S.
015 B00AA32 S
015 C01AA32 ISTANBUL
015 D01AA32 TURKEY
015 E04AA32 X
015 A00AA33 THE BANK OF NEW YORK
015 B00AA33 S
015 C01AA33 LONDON
015 D01AA33 UNITED KINGDOM
015 E04AA33 X
015 A00AA34 DEPOSITORY AND CLEARING CENTER
015 B00AA34 S
015 C01AA34 LONDON
015 D01AA34 UNITED KINGDOM
015 E04AA34 X
015 A00AA35 STANBIC BANK ZAMBIA LTD.
015 B00AA35 S
015 C01AA35 LUSAKA
015 D01AA35 ZAMBIA
015 E04AA35 X
015 A00AA36 STANBIC BANK OF ZIMBABWE LTD.
015 B00AA36 S
015 C01AA36 HARARE
015 D01AA36 ZIMBABWE
015 E04AA36 X
015 A00AA37 FIRST CHICAGO CLEARING CENTRE
015 B00AA37 S
015 C01AA37 LONDON
015 D01AA37 EUROMARKET
015 E04AA37 X
018 00AA00 Y
019 A00AA00 Y
019 B00AA00 234
<PAGE> PAGE 6
019 C00AA00 FRNKTEMGRP
022 A000001 DONALDSON LUFKIN & JENRETTE SECURITIES CORP
022 B000001 13-2741729
022 C000001 90576
022 D000001 0
022 A000002 BARCLAYS CAPITAL INC.
022 B000002 13-3551367
022 C000002 89825
022 D000002 0
022 A000003 WARBURG DILLON READ LLC
022 B000003 13-2932996
022 C000003 89658
022 D000003 0
022 A000004 PARIBAS CORP.
022 B000004 13-3235334
022 C000004 89364
022 D000004 0
022 A000005 CIBC WORLD MARKETS CORP
022 B000005 13-3639028
022 C000005 87329
022 D000005 0
022 A000006 PAINE WEBBER INC.
022 B000006 13-2638166
022 C000006 73887
022 D000006 1161
022 A000007 DRESDNER KLEINWORT BENSON,NORTH AMERICA LLC
022 B000007 04-2442748
022 C000007 73151
022 D000007 0
022 A000008 BANC OF AMERICA SECURITIES LLC
022 B000008 94-1687665
022 C000008 55119
022 D000008 0
022 A000009 LEHMAN BROTHERS INC.
022 B000009 13-2518466
022 C000009 50883
022 D000009 175
022 A000010 BEAR STEARNS & CO. INC.
022 B000010 13-3299429
022 C000010 43823
022 D000010 0
023 C000000 913286
023 D000000 5184
024 00AA00 N
026 A000000 Y
026 B000000 Y
026 C000000 Y
026 D000000 Y
026 E000000 N
026 F000000 N
026 G010000 N
<PAGE> PAGE 7
026 G020000 N
026 H000000 N
029 00AA00 Y
030 A00AA00 296
030 B00AA00 4.25
030 C00AA00 0.00
031 A00AA00 19
031 B00AA00 0
032 00AA00 277
033 00AA00 0
062 A00AA00 Y
062 B00AA00 0.0
062 C00AA00 0.0
062 D00AA00 6.9
062 E00AA00 0.0
062 F00AA00 0.0
062 G00AA00 0.0
062 H00AA00 0.0
062 I00AA00 0.0
062 J00AA00 0.0
062 K00AA00 0.0
062 L00AA00 0.0
062 M00AA00 0.0
062 N00AA00 98.0
062 O00AA00 0.0
062 P00AA00 0.0
062 Q00AA00 0.0
062 R00AA00 0.0
063 A00AA00 0
063 B00AA00 23.8
064 A00AA00 N
064 B00AA00 N
066 A00AA00 N
067 00AA00 N
068 A00AA00 N
068 B00AA00 N
069 00AA00 N
070 A01AA00 Y
070 A02AA00 Y
070 B01AA00 N
070 B02AA00 N
070 C01AA00 N
070 C02AA00 N
070 D01AA00 N
070 D02AA00 N
070 E01AA00 Y
070 E02AA00 N
070 F01AA00 Y
070 F02AA00 N
070 G01AA00 Y
070 G02AA00 N
<PAGE> PAGE 8
070 H01AA00 Y
070 H02AA00 N
070 I01AA00 Y
070 I02AA00 N
070 J01AA00 Y
070 J02AA00 N
070 K01AA00 Y
070 K02AA00 N
070 L01AA00 N
070 L02AA00 N
070 M01AA00 N
070 M02AA00 N
070 N01AA00 Y
070 N02AA00 N
070 O01AA00 Y
070 O02AA00 N
070 P01AA00 Y
070 P02AA00 N
070 Q01AA00 N
070 Q02AA00 N
070 R01AA00 N
070 R02AA00 N
071 A00AA00 30917
071 B00AA00 8499
071 C00AA00 20375
071 D00AA00 42
072 A00AA00 12
072 B00AA00 1396
072 C00AA00 0
072 D00AA00 0
072 E00AA00 0
072 F00AA00 88
072 G00AA00 0
072 H00AA00 0
074 N00AA00 35038
074 T00AA00 32876
075 A00AA00 0
075 B00AA00 22106
077 A000000 Y
077 B000000 Y
077 Q010000 Y
078 000000 N
080 A00AA00 ICI MUTUAL INSURANCE COMPANY
080 B00AA00 NONE
080 C00AA00 175000
081 A00AA00 Y
081 B00AA00 233
082 A00AA00 Y
082 B00AA00 100
083 A00AA00 N
083 B00AA00 0
<PAGE> PAGE 9
084 A00AA00 N
084 B00AA00 0
085 A00AA00 Y
085 B00AA00 N
SIGNATURE KIMBERLEY MONASTERIO
TITLE ASSISTANT TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FRANKLIN
STRATEGIC MORTGAGE PORFOLIO SEPTEMBER 30, 1999 ANNUAL REPORT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 571
<NAME> FRANKLIN STRATEGIC MORTGAGE PORFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 32,689,187
<INVESTMENTS-AT-VALUE> 32,224,401
<RECEIVABLES> 2,813,748
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,038,149
<PAYABLE-FOR-SECURITIES> 1,973,181
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 188,645
<TOTAL-LIABILITIES> 2,161,876
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33,512,458
<SHARES-COMMON-STOCK> 3,376,195
<SHARES-COMMON-PRIOR> 1,435,175
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (171,349)
<ACCUM-APPREC-OR-DEPREC> (464,786)
<NET-ASSETS> 32,876,323
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,396,273
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 1,396,273
<REALIZED-GAINS-CURRENT> (20,112)
<APPREC-INCREASE-CURRENT> (889,175)
<NET-CHANGE-FROM-OPS> 486,986
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,391,928)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,311,776
<NUMBER-OF-SHARES-REDEEMED> (444,661)
<SHARES-REINVESTED> 73,905
<NET-CHANGE-IN-ASSETS> 18,325,506
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (155,583)
<GROSS-ADVISORY-FEES> (88,415)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (144,065)
<AVERAGE-NET-ASSETS> 22,105,907
<PER-SHARE-NAV-BEGIN> 10.140
<PER-SHARE-NII> 0.627
<PER-SHARE-GAIN-APPREC> (0.400)
<PER-SHARE-DIVIDEND> (0.627)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.740
<EXPENSE-RATIO> 0.000<F1>
<FN>
<F1>EXPENSE RATIO EXCLUDING WAIVER .650%
</FN>
</TABLE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees of Franklin Strategic Mortgage
Portfolio:
In planning and performing our audit of the financial
statements of the Franklin Strategic Mortgage Portfolio for
the year ended September 30, 1999, we considered its internal
control, including controls over safeguarding securities, in
order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide
assurance on internal control.
The management of the Franklin Strategic Mortgage Portfolio
is responsible for establishing and maintaining internal
control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected
benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's
objective of preparing financial statements for external
purposes that are fairly presented in conformity with
generally accepted accounting principles. Those controls
include the safeguarding of assets against unauthorized
acquisition, use, or disposition.
Because of inherent limitations in internal control, errors
or irregularities may occur and may not be detected. Also,
projection of any evaluation of internal control 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 internal control would not necessarily
disclose all matters in internal control 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 any specific internal control component 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 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 internal control,
including controls over safeguarding securities, that we
consider to be material weaknesses as defined above, as of
September 30, 1999.
This report is intended solely for the information and use
of management and the Securities and Exchange Commission.
PricewaterhouseCoopers LLP
San Francisco, California
November 11, 1999
