Franklin Strategic Series

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1 Annual Report and Shareholder Letter April 30, 2017 Franklin Strategic Series Franklin Biotechnology Discovery Fund Franklin Natural Resources Fund Sign up for electronic delivery at franklintempleton.com/edelivery

2 Franklin Templeton Investments Gain From Our Perspective At Franklin Templeton Investments, we re dedicated to one goal: delivering exceptional asset management for our clients. By bringing together multiple, world-class investment teams in a single firm, we re able to offer specialized expertise across styles and asset classes, all supported by the strength and resources of one of the world s largest asset managers. This has helped us to become a trusted partner to individual and institutional investors across the globe. Dear Shareholder: During the 12 months ended April 30, 2017, mostly upbeat economic data, improved U.S. corporate earnings and supportive monetary policies were positives for the securities markets. After maintaining its target interest rate in the 0.25% 0.50% range for nearly a year, the U.S. Federal Reserve increased its target range for the federal funds rate twice, in December 2016 and March 2017, to 0.75% 1.00%, noting improved employment and hints of higher inflation. The 10-year U.S. Treasury yield began the period at 1.83% and ended the period at 2.29%. In this environment, U.S. stocks, as measured by the Standard & Poor s 500 Index, generated a % total return for the 12-month period. 1 In all economic environments, we are committed to our long-term perspective and disciplined investment approach as we conduct a diligent, fundamental analysis of securities with a regular emphasis on investment risk management. We believe active, professional investment management serves investors well. We also recognize the important role of financial advisors in today s markets and encourage investors to continue to seek their advice. Amid changing markets and economic conditions, we are confident investors with a well-diversified portfolio and a patient, long-term outlook should be well positioned for the years ahead. In addition, Franklin Strategic Series annual report includes more detail about prevailing conditions and a discussion about investment decisions during the period. Please remember all securities markets fluctuate, as do mutual fund share prices. We thank you for investing with Franklin Templeton, welcome your questions and comments, and look forward to serving your future investment needs. Sincerely, Edward B. Jamieson President and Chief Executive Officer Investment Management Franklin Strategic Series This letter reflects our analysis and opinions as of April 30, 2017, unless otherwise indicated. The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable. 1. Source: Morningstar See for additional data provider information. Not FDIC Insured May Lose Value No Bank Guarantee franklintempleton.com Not part of the annual report 1

3 Contents Annual Report Economic and Market Overview... 3 Franklin Biotechnology Discovery Fund... 4 Franklin Natural Resources Fund Financial Highlights and Statements of Investments Financial Statements Notes to Financial Statements Report of Independent Registered Public Accounting Firm Tax Information Board Members and Officers Shareholder Information Visit franklintempleton.com for fund updates, to access your account, or to find helpful financial planning tools. 2 Annual Report franklintempleton.com

4 Annual Report Economic and Market Overview The U.S. economy expanded during the 12 months under review. The economy strengthened in 2016 s second and third quarters, but moderated in the next two quarters, largely due to declines in private inventory investment and government spending. The manufacturing sector generally expanded and the services sector also continued to grow. The unemployment rate decreased from 5.0% in April 2016 to 4.4% at period-end. 1 Monthly retail sales were volatile, but grew during most of the period. Annual inflation, as measured by the Consumer Price Index, increased from 1.1% to 2.2% during the period. After maintaining its target interest rate in the 0.25% 0.50% range for nearly a year, the U.S. Federal Reserve (Fed), at its December meeting, increased its target range for the federal funds rate to 0.50% 0.75%, as policymakers noted improvement in the U.S. labor market and inflation. The Fed kept its interest rate unchanged at its February meeting, but incoming economic data, along with statements by Fed officials in late February and early March, heightened many investors expectations for a March interest-rate hike. The Fed, at its March meeting, made the widely anticipated increase in its federal funds target rate to 0.75% 1.00%. U.S. equity markets rose during the period, benefiting from mostly upbeat economic data, better U.S. corporate earnings and signs of improvement in the Chinese and European economies. Ongoing expansionary monetary policies from key central banks, investor optimism arising from pro-growth and pro-business policy plans in the U.S. and the results of the first round of presidential elections in France also helped U.S. equities. However, the U.K. s historic vote to leave the European Union (also known as Brexit ), global growth concerns and geopolitical tensions in the Middle East and Korean peninsula weighed on market sentiment. The broad U.S. stock market, as measured by the Standard & Poor s 500 Index, generated a % total return for the 12-month period. 2 The foregoing information reflects our analysis and opinions as of April 30, The information is not a complete analysis of every aspect of any market, country, industry, security or fund. Statements of fact are from sources considered reliable. 1. Source: Bureau of Labor Statistics. 2. Source: Morningstar. See for additional data provider information. franklintempleton.com Annual Report 3

5 Franklin Biotechnology Discovery Fund This annual report for Franklin Biotechnology Discovery Fund covers the fiscal year ended April 30, Effective July 8, 2014, with limited exceptions, the Fund closed to new investors. Effective May 16, 2016, the Fund reopened to new investors. Your Fund s Goal and Main Investments The Fund seeks capital appreciation by investing at least 80% of its net assets in securities of biotechnology companies and discovery research firms located in the U.S. and other countries. Portfolio Composition Based on Total Net Assets as of 4/30/17 Biotechnology Pharmaceuticals Life Sciences Tools & Services Short-Term Investments & Other Net Assets 9.7% 4.1% 2.2% 84.0% Performance Overview The Fund s Class A shares delivered a % cumulative total return for the 12 months under review. In comparison, the NASDAQ Biotechnology Index, which tracks U.S. and international-based biotechnology stocks, generated a % total return. 1 Also in comparison, the Standard & Poor s 500 Index (S&P 500 ), which is a broad measure of the U.S. stock market, produced a % total return. 1 Finally, domestic and international-based stocks, as measured by the NASDAQ Composite Index, posted a % total return. 1 You can find the Fund s long-term performance data in the Performance Summary beginning on page 6. Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) Investment Strategy We are research-driven, fundamental investors, pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between earnings growth, business and financial risk, and valuation. We rely on a team of analysts to help provide in-depth industry expertise and use both qualitative and quantitative analysis to evaluate companies for distinct and sustainable competitive advantages likely to lead to growth in earnings and/or share price. Competitive advantages, such as a particular product niche, proven technology, sound financial position and strong management, are all factors we believe may contribute to strong growth potential. Manager s Discussion During the 12 months under review, the biotechnology industry experienced significant volatility in response to increased scrutiny over drug pricing leading up to the U.S. presidential election in November Please keep in mind that volatility is not uncommon in the biotechnology industry, and we seek to take advantage of short-term volatility by initiating positions or adding to existing holdings in companies we believe are undervalued. Overall, the biotechnology industry had strong gains for the reporting period. Key contributors included TESARO, Incyte and Celgene. Oncology-focused biopharmaceutical company TESARO announced better-than-expected Phase 3 trial results in June 2016 for its PARP inhibitor, niraparib, in ovarian cancer. We believe niraparib may have a best-in-class profile and that the trial results demonstrated a broad market potential for the drug. Oncology therapeutics firm Incyte announced clinical collaborations for epacadostat, an IDO inhibitor to treat various cancers. In addition, the company s sales of Jakafi, which is used to treat intermediate- or high-risk myelofibrosis, a disorder that affects bone marrow, drove 2016 revenue growth. Biotechnology firm Celgene s strong performance during the review period was aided by subsiding concerns about government regulation on drug pricing. As an industry, biotechnology had underperformed the broader market leading 1. Source: Morningstar. The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund s portfolio. See for additional data provider information. The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund s Statement of Investments (SOI). The SOI begins on page Annual Report franklintempleton.com

6 FRANKLIN BIOTECHNOLOGY DISCOVERY FUND into the November 2016 election as consensus expectations were for a Hillary Clinton victory. With the election of Donald Trump, and more importantly, the Republican sweep in Congress, investors viewed the risk of government intervention on drug pricing as diminished. In contrast, key detractors from the Fund s absolute performance during the reporting period included Gilead Sciences, Heron Therapeutics and Ophthotech (no longer held by period-end). Biopharmaceutical company Gilead Sciences was impacted by slower sales trends in key products. Shares of clinical-stage biotechnology company Heron Therapeutics declined as approval of Sustol, the company s drug to treat nausea and vomiting associated with chemotherapy, was delayed until August 2016 from an initial expectation of early Sustol s early sales have been lower than expected. These negative factors were offset somewhat by positive data for HTX-011 to treat pain. Ophthotech is a biopharmaceutical company that develops treatments for eye diseases. The company s Phase 3 clinical trial studying Fovista to treat age-related macular degeneration failed and showed little effect, which was surprising to us given the positive effect that was seen in the Phase 2 trial. The stock declined significantly following the trial result. Thank you for your continued participation in Franklin Biotechnology Discovery Fund. We look forward to serving your future investment needs. Evan McCulloch, CFA Lead Portfolio Manager Top 10 Holdings 4/30/17 Company Sector/Industry % of Total Net Assets Celgene Corp. 9.5% Biotechnology Biogen Inc. 6.5% Biotechnology Alexion Pharmaceuticals Inc. 5.9% Biotechnology Incyte Corp. 5.8% Biotechnology Tesaro Inc. 5.6% Biotechnology Regeneron Pharmaceuticals Inc. 4.6% Biotechnology Gilead Sciences Inc. 4.2% Biotechnology Illumina Inc. 4.1% Life Sciences Tools & Services Neurocrine Biosciences Inc. 3.4% Biotechnology Vertex Pharmaceuticals Inc. 3.3% Biotechnology The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2017, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy. Christopher Lee, M.D. Steven Kornfeld, CFA Portfolio Management Team CFA is a trademark owned by CFA Institute. franklintempleton.com Annual Report 5

7 FRANKLIN BIOTECHNOLOGY DISCOVERY FUND Performance Summary as of April 30, 2017 The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. Performance as of 4/30/17 1 Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com. Share Class Cumulative Total Return 2 Average Annual Total Return 3 A 1-Year % % 5-Year % % 10-Year % % Advisor 4 1-Year % % 5-Year % % 10-Year % % Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) See page 8 for Performance Summary footnotes. 6 Annual Report franklintempleton.com

8 FRANKLIN BIOTECHNOLOGY DISCOVERY FUND PERFORMANCE SUMMARY Total Return Index Comparison for a Hypothetical $10,000 Investment 1 Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index. Class A (5/1/07 4/30/17) $50,000 $40,000 $30,000 $20,000 $37,006 $31,472 $19,955 $10,000 $0 5/07 4/09 4/11 4/13 4/15 4/17 Franklin Biotechnology Discovery Fund NASDAQ Biotechnology Index 5 S&P Advisor Class (5/1/07 4/30/17) 4 $50,000 $40,000 $30,000 $20,000 $37,006 $34,102 $19,955 $10,000 $0 5/07 4/09 4/11 4/13 4/15 4/17 Franklin Biotechnology Discovery Fund NASDAQ Biotechnology Index 5 S&P See page 8 for Performance Summary footnotes. franklintempleton.com Annual Report 7

9 FRANKLIN BIOTECHNOLOGY DISCOVERY FUND PERFORMANCE SUMMARY Distributions (5/1/16 4/30/17) Share Class Net Investment Income Long-Term Capital Gain Total A $ $ $ C $ $ $ R6 $ $ $ Advisor $ $ $ Total Annual Operating Expenses 6 Share Class With Waiver Without Waiver A 0.99% 1.00% Advisor 0.75% 0.76% Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus. All investments involve risks, including possible loss of principal. The Fund is a nondiversified fund that concentrates in a single sector, which involves risks such as patent considerations, product liability, government regulatory requirements, and regulatory approval for new drugs and medical products. Biotechnology companies often are small and/or relatively new. Smaller companies can be particularly sensitive to changes in economic conditions and have less certain growth prospects than larger, more established companies and can be volatile, especially over the short term. The Fund may also invest in foreign companies, which involve special risks, including currency fluctuations and political uncertainty. The Fund is actively managed but there is no guarantee that the manager s investment decisions will produce the desired results. The Fund s prospectus also includes a description of the main investment risks. 1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/17. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower. 2. Cumulative total return represents the change in value of an investment over the periods indicated. 3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year,ifany,hasnotbeen annualized. 4. Effective 9/1/09, the Fund began offering Advisor Class shares, which do not have sales charges or a Rule 12b-1 plan. Performance quotations for this class reflect the following methods of calculation: (a) For periods prior to 9/1/09, a restated figure is used based upon the Fund s Class A performance, excluding the effectofclassa s maximum initial sales charge, but reflecting the effect of the Class A Rule 12b-1 fees; and (b) for periods after 9/1/09, actual Advisor Class performance is used reflecting all charges and fees applicable to that class. Since 9/1/09 (commencement of sales), the cumulative and average annual total returns of Advisor Class shares were % and %. 5. Source: Morningstar. The NASDAQ Biotechnology Index is a modified capitalization-weighted index designed to measure performance of all NASDAQ stocks in the biotechnology sector. The S&P 500 is a market capitalization-weighted index of 500 stocks designed to measure total U.S. equity market performance. 6. Figures are as stated in the Fund s current prospectus and may differ from the expense ratios disclosed in the Your Fund s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown. See for additional data provider information. 8 Annual Report franklintempleton.com

10 FRANKLIN BIOTECHNOLOGY DISCOVERY FUND Your Fund s Expenses As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated. Actual Fund Expenses The table below provides information about actual account values and actual expenses in the columns under the heading Actual. In these columns the Fund s actual return, which includes the effect of Fund expenses, is used to calculate the Ending Account Value for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings Actual and Expenses Paid During Period (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $ Hypothetical Example for Comparison with Other Funds Under the heading Hypothetical in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading Hypothetical is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher. Share Class Beginning Account Value 11/1/16 Actual (actual return after expenses) Ending Account Value 4/30/17 Expenses Paid During Period 11/1/16 4/30/17 1,2 Hypothetical (5% annual return before expenses) Ending Account Value 4/30/17 Expenses Paid During Period 11/1/16 4/30/17 1,2 Net Annualized Expense Ratio 2 A $1,000 $1, $5.50 $1, $ % C $1,000 $1, $9.56 $1, $ % R6 $1,000 $1, $3.33 $1, $ % Advisor $1,000 $1, $4.14 $1, $ % 1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above in the far right column multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period. 2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses. franklintempleton.com Annual Report 9

11 Franklin Natural Resources Fund This annual report for Franklin Natural Resources Fund covers the fiscal year ended April 30, Your Fund s Goal and Main Investments The Fund seeks high total return (total return consists of capital appreciation and current dividend and interest income) by investing, under normal market conditions, at least 80% of its net assets in equity and debt securities of companies that own, produce, refine, process, transport or market natural resources, as well as those that provide related services. Performance Overview The Fund s Class A shares delivered a +1.37% cumulative total return for the 12 months under review. In comparison, the Standard & Poor s (S&P ) North American Natural Resources Sector Index, which tracks companies involved in industries such as mining, energy, timber and forestry services, and the production of pulp and paper, generated a +2.59% total return. 1 Also in comparison, the S&P 500, which is a broad measure of the U.S. stock market, generated a % total return. 1 Please note index performance information is provided for reference and we do not attempt to track any index but rather undertake investments on the basis of fundamental research. The Fund s strategy, which focuses on companies with higher long-term growth potential, differs from the natural resources index s large weighting in income-oriented companies that typically provide more limited opportunities for growth. This difference may occasionally lead to wide performance discrepancies, especially in periods when investors focus on short-term safety and yield or, conversely, when investors focus more heavily on companies with stronger growth prospects and greater commodity price leverage. You can find the Fund s long-term performance data in the Performance Summary beginning on page 14. Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) Geographic Composition Based on Total Net Assets as of 4/30/17 North America Europe Australia & New Zealand Latin America & Caribbean Short-Term Investments & Other Net Assets Investment Strategy We are research-driven, fundamental investors, pursuing a growth strategy. As bottom-up investors focusing primarily on individual securities, we choose companies that have identifiable drivers of future earnings growth and that present, in our opinion, the best trade-off between earnings growth, business and financial risk, and valuation. We rely on a team of analysts to help provide in-depth industry expertise and use both qualitative and quantitative analysis to evaluate companies for distinct and sustainable competitive advantages likely to lead to growth in earnings and/or share price. Competitive advantages, such as a particular product niche, proven technology, sound financial position and strong management, are all factors we believe may contribute to strong growth potential. Sector Overview 2.1% 0.9% 1.5% 16.3% 79.2% Global commodity prices were mixed during the 12 months under review. Despite heightened volatility during the period, energy commodities and industrial metals generally rose as oversupply concerns subsided. However, precious metals, with the exception of palladium, declined due to a strong U.S. dollar, the U.S. Federal Reserve s (Fed s) two interest-rate increases and expectations for higher interest rates in Crude oil prices ended the period higher despite periods of heightened volatility, especially during the summer and early fall of 2016, aided by an agreement between the Organization 1. Source: Morningstar. The indexes are unmanaged and include reinvestment of any income or distributions. They do not reflect any fees, expenses or sales charges. One cannot invest directly in an index, and an index is not representative of the Fund s portfolio. See for additional data provider information. The dollar value, number of shares or principal amount, and names of all portfolio holdings are listed in the Fund s Statement of Investments (SOI). The SOI begins on page Annual Report franklintempleton.com

12 FRANKLIN NATURAL RESOURCES FUND Portfolio Composition Based on Total Net Assets as of 4/30/17 Oil & Gas Exploration & Production Oil & Gas Equipment & Services Integrated Oil & Gas Gold Diversified Metals & Mining Oil & Gas Storage & Transportation Copper 6.2% 5.4% 4.4% 4.2% 20.4% 17.1% 34.7% Gold prices declined slightly for the 12-month period, as a rally in the first four months of 2017 failed to offset the price plunge in the latter part of 2016 amid the U.S. dollar s rapid appreciation, the Fed s December rate increase and lower demand for gold exchange-traded funds. Gold partially recovered amid increased physical demand and investor concerns about U.S. President Donald Trump s political and economic policies, a slower U.S. economic expansion in the first quarter, the outcome of the French election and geopolitical tensions. Among other precious metals, silver and platinum prices declined, while palladium prices rose, supported by emissions-catalyst demand from automobile manufacturers and tight supplies. Industrial metals performed well after the U.S. presidential election and as the global economy improved. Copper prices rose amid higher demand from China and supply disruptions at some of the world s major mines. Other industrial metals rose in price, including iron ore, aluminum and zinc. Oil & Gas Refining & Marketing Other Short-Term Investments & Other Net Assets 3.9% 2.2% 1.5% of the Petroleum Exporting Countries (OPEC) and major non-opec producers, including Russia, to curb production, which helped ease concerns about rising oil exports from several members and provided a path to inventory reductions. OPEC and non-opec producers compliance with production quotas and speculation that OPEC would extend the agreement to curb output at its meeting in May 2017 further supported oil prices. However, investor concerns that growing U.S. production and higher rig counts could offset the continuing effort to reduce global stockpiles restricted price gains. U.S. natural gas prices rose for the 12 months under review, despite periods of weakness resulting from smaller-thananticipated seasonal withdrawals from stockpiles due to a mild winter in North America. Despite the long stretch of warm winter conditions in North America, natural-gas supplies ended the first quarter tighter than the prior year due to waning production and rising exports. Although the surplus in early 2017 is smaller than last year, it has persisted, leading some investors to be concerned that production will eventually increase as stronger prices could lead producers to increase rig counts and drilling activity, associated gas produced from newly drilled oil wells in shale plays grows, and pipelines out of Appalachia provide more capacity to higher priced end markets. Manager s Discussion The Fund s fiscal year ended April 30, 2017, was somewhat volatile, including the peaking of a recovery in various commodities and commodity-linked equities followed by a retrenchment driven by growing economic concerns and deflation of the U.S. presidential election mini-bubble. In addition to the usual catalysts that included U.S. dollar strength, supply-and-demand imbalances and China economic worries, new factors also impacted commodities and commodity-linked equities, such as India s demonetization program to recall large-denominated currency notes to fight corruption. The Fund performed relatively well in this environment, though most of the benefits of the recovery had been realized near the beginning of the 12-month reporting period. The Fund s holdings in the diversified metals and mining industry contributed significantly to absolute results, despite a price pullback in industrial metals and related equities in March and April. Stock selection within the industry contributed to performance relative to the S&P North American Natural Resources Index, notably an overweighted position in Teck Resources (Canada) and several off-benchmark holdings that managed to generate robust returns despite the pullback, notably Glencore (Switzerland), BHP Billiton (U.K.), South32 (Australia) and Rio Tinto (U.K.). Overall, the Fund s overweighted industry holdings significantly outperformed the index s industry components. Stock selection and an underweighting in the integrated oil and gas industry contributed to relative performance, as the Fund s overall industry holdings outperformed the index s industry franklintempleton.com Annual Report 11

13 FRANKLIN NATURAL RESOURCES FUND Top 10 Holdings 4/30/17 Company Sector/Industry % of Total Net Assets Schlumberger Ltd. 5.0% Oil & Gas Equipment & Services Anadarko Petroleum Corp. 3.6% Oil & Gas Exploration & Production Royal Dutch Shell PLC 3.5% Integrated Oil & Gas Noble Energy Inc. 3.5% Oil & Gas Exploration & Production Halliburton Co. 3.4% Oil & Gas Equipment & Services Occidental Petroleum Corp. 3.3% Integrated Oil & Gas EOG Resources Inc. 2.9% Oil & Gas Exploration & Production Suncor Energy Inc. 2.5% Integrated Oil & Gas Kinder Morgan Inc. 2.5% Oil & Gas Storage & Transportation Cabot Oil & Gas Corp. 2.5% Oil & Gas Exploration & Production components. European integrated oil and gas companies Total (France), Royal Dutch Shell (U.K.) and BP (U.K.), which are not part of the index, outperformed the index holdings and U.S. company Exxon Mobil, which is a large index weighting and declined during the period. Conversely, an underweighted position in Chevron (U.S.), which posted a positive return, detracted from performance. Stock selection in gold and in oil and gas exploration and production (E&P) also contributed to the Fund s performance, as the Fund s holdings in these industries generally outperformed the index s industry components. In gold, a lack of ownership or underweighted positions in poor performers helped, as did an off-benchmark position in B2Gold (Canada), which posted robust returns. In E&P, off-benchmark investments in Aker BP (Norway) and SRC Energy (U.S.), as well as overweighted positions in Rice Energy (U.S.) and Anadarko Petroleum (U.S.), benefited absolute and relative performance. Avoidance of several index components that posted negative returns also helped Fund performance. In contrast, an underweighting in oil and gas storage and transportation was a major detractor from the Fund s relative performance as the industry performed well amid a recovery in oil and natural gas prices, increased drilling activity and expected production growth, which led to increased throughput in pipelines and expectations of more to come. Although the Fund s overall industry holdings outperformed the index s industry components, a lack of ownership in several index components that performed well hurt relative performance. Oilfield services also detracted from relative performance, due to the Fund s overweighted position and weak relative performance, with losses concentrated in offshore-focused companies, which suffered from continued fundamental weakness in offshore markets and the stalled-out recovery in oil prices. Investor concerns that increased drilling activity and related production would drive oil prices lower and hurt spending also weighed on the industry, including several companies with an onshore focus, though some of the largest detractors are hybrid companies with onshore and offshore exposure. Key detractors included overweighted holdings in hybrid company Superior Energy Services (U.S.) and offshore-focused company Oceaneering International (U.S.), as well as an off-benchmark position in offshore-focused company Hornbeck Offshore Services (U.S.; no longer held by period-end). A lack of exposure to the paper and packaging industry and an underweighting in the construction materials industry, which are both economically sensitive, also detracted from relative performance. Thank you for your continued participation in Franklin Natural Resources Fund. We look forward to serving your future investment needs. Frederick G. Fromm, CFA Matthew J. Adams, CFA Stephen M. Land, CFA Portfolio Management Team 12 Annual Report franklintempleton.com

14 FRANKLIN NATURAL RESOURCES FUND The foregoing information reflects our analysis, opinions and portfolio holdings as of April 30, 2017, the end of the reporting period. The way we implement our main investment strategies and the resulting portfolio holdings may change depending on factors such as market and economic conditions. These opinions may not be relied upon as investment advice or an offer for a particular security. The information is not a complete analysis of every aspect of any market, country, industry, security or the Fund. Statements of fact are from sources considered reliable, but the investment manager makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy. franklintempleton.com Annual Report 13

15 FRANKLIN NATURAL RESOURCES FUND Performance Summary as of April 30, 2017 The performance table and graphs do not reflect any taxes that a shareholder would pay on Fund dividends, capital gain distributions, if any, or any realized gains on the sale of Fund shares. Total return reflects reinvestment of the Fund s dividends and capital gain distributions, if any, and any unrealized gains or losses. Your dividend income will vary depending on dividends or interest paid by securities in the Fund s portfolio, adjusted for operating expenses of each class. Capital gain distributions are net profits realized from the sale of portfolio securities. Performance as of 4/30/17 1 Cumulative total return excludes sales charges. Average annual total return includes maximum sales charges. Sales charges will vary depending on the size of the investment and the class of share purchased. The maximum is 5.75% and the minimum is 0%. Class A: 5.75% maximum initial sales charge; Advisor Class: no sales charges. For other share classes, visit franklintempleton.com. Share Class Cumulative Total Return 2 Average Annual Total Return 3 A 1-Year +1.37% -4.47% 5-Year % -7.36% 10-Year % -2.45% Advisor 1-Year +1.64% +1.64% 5-Year % -6.00% 10-Year % -1.58% Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown. For most recent month-end performance, go to franklintempleton.com or call (800) See page 16 for Performance Summary footnotes. 14 Annual Report franklintempleton.com

16 FRANKLIN NATURAL RESOURCES FUND PERFORMANCE SUMMARY Total Return Index Comparison for a Hypothetical $10,000 Investment 1 Total return represents the change in value of an investment over the periods shown. It includes any applicable maximum sales charge, Fund expenses, account fees and reinvested distributions. The unmanaged indexes include reinvestment of any income or distributions. They differ from the Fund in composition and do not pay management fees or expenses. One cannot invest directly in an index. Class A (5/1/07 4/30/17) $20,000 $19,955 $15,000 $10,000 $11,018 $7,805 $5,000 5/07 4/09 4/11 4/13 4/15 4/17 Franklin Natural Resources Fund S&P North American Natural Resources Sector Index 4 S&P Advisor Class (5/1/07 4/30/17) $20,000 $19,955 $15,000 $10,000 $11,018 $8,524 $5,000 5/07 4/09 4/11 4/13 4/15 4/17 Franklin Natural Resources Fund S&P North American Natural Resources Sector Index 4 S&P See page 16 for Performance Summary footnotes. franklintempleton.com Annual Report 15

17 FRANKLIN NATURAL RESOURCES FUND PERFORMANCE SUMMARY Distributions (5/1/16 4/30/17) Share Class Net Investment Income A $ C $ R6 $ Advisor $ Total Annual Operating Expenses 5 Share Class With Waiver Without Waiver A 1.14% 1.15% Advisor 0.87% 0.88% Each class of shares is available to certain eligible investors and has different annual fees and expenses, as described in the prospectus. All investments involve risks, including possible loss of principal. Investing in a fund concentrating in the natural resources sector involves special risks, including increased susceptibility to adverse economic and regulatory developments affecting the sector. Smaller companies can be particularly sensitive to changes in economic conditions and have less certain growth prospects than larger, more established companies and can be volatile, especially over the short term. The Fund may also invest in foreign companies, which involve special risks, including currency fluctuations and political uncertainty. The Fund is actively managed but there is no guarantee that the manager s investment decisions will produce the desired results. The Fund s prospectus also includes a description of the main investment risks. 1. The Fund has a fee waiver associated with any investment it makes in a Franklin Templeton money fund and/or other Franklin Templeton fund, contractually guaranteed through 8/31/17. Fund investment results reflect the fee waiver; without this waiver, the results would have been lower. 2. Cumulative total return represents the change in value of an investment over the periods indicated. 3. Average annual total return represents the average annual change in value of an investment over the periods indicated. Return for less than one year,ifany,hasnotbeen annualized. 4. Source: Morningstar. The S&P North American Natural Resources Index is a modified capitalization-weighted index that includes companies involved in extractive industries (mining), energy and forestry services, producers of pulp and paper, and owners and operators of timber tracts or plantations. The S&P 500 Index is a market capitalizationweighted index of 500 stocks designed to measure total U.S. equity market performance. 5. Figures are as stated in the Fund s current prospectus and may differ from the expense ratios disclosed in the Your Fund s Expenses and Financial Highlights sections in this report. In periods of market volatility, assets may decline significantly, causing total annual Fund operating expenses to become higher than the figures shown. 16 Annual Report franklintempleton.com

18 FRANKLIN NATURAL RESOURCES FUND Your Fund s Expenses As a Fund shareholder, you can incur two types of costs: (1) transaction costs, including sales charges (loads) on Fund purchases and redemptions; and (2) ongoing Fund costs, including management fees, distribution and service (12b-1) fees, and other Fund expenses. All mutual funds have ongoing costs, sometimes referred to as operating expenses. The table below shows ongoing costs of investing in the Fund and can help you understand these costs and compare them with those of other mutual funds. The table assumes a $1,000 investment held for the six months indicated. Actual Fund Expenses The table below provides information about actual account values and actual expenses in the columns under the heading Actual. In these columns the Fund s actual return, which includes the effect of Fund expenses, is used to calculate the Ending Account Value for each class of shares. You can estimate the expenses you paid during the period by following these steps (of course, your account value and expenses will differ from those in this illustration): Divide your account value by $1,000 (if your account had an $8,600 value, then $8,600 $1,000 = 8.6). Then multiply the result by the number in the row for your class of shares under the headings Actual and Expenses Paid During Period (if Actual Expenses Paid During Period were $7.50, then 8.6 x $7.50 = $64.50). In this illustration, the actual expenses paid this period are $ Hypothetical Example for Comparison with Other Funds Under the heading Hypothetical in the table, information is provided about hypothetical account values and hypothetical expenses based on the Fund s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund s actual return. This information may not be used to estimate the actual ending account balance or expenses you paid for the period, but it can help you compare ongoing costs of investing in the Fund with those of other funds. To do so, compare this 5% hypothetical example for the class of shares you hold with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that expenses shown in the table are meant to highlight ongoing costs and do not reflect any transactional costs. Therefore, information under the heading Hypothetical is useful in comparing ongoing costs only, and will not help you compare total costs of owning different funds. In addition, if transactional costs were included, your total costs would have been higher. Share Class Beginning Account Value 11/1/16 Actual (actual return after expenses) Ending Account Value 4/30/17 Expenses Paid During Period 11/1/16 4/30/17 1,2 Hypothetical (5% annual return before expenses) Ending Account Value 4/30/17 Expenses Paid During Period 11/1/16 4/30/17 1,2 Net Annualized Expense Ratio 2 A $1,000 $1, $5.09 $1, $ % C $1,000 $1, $8.82 $1, $ % R6 $1,000 $1, $2.65 $1, $ % Advisor $1,000 $1, $3.84 $1, $ % 1. Expenses are equal to the annualized expense ratio for the six-month period as indicated above in the far right column multiplied by the simple average account value over the period indicated, and then multiplied by 181/365 to reflect the one-half year period. 2. Reflects expenses after fee waivers and expense reimbursements. Does not include acquired fund fees and expenses. franklintempleton.com Annual Report 17

19 Financial Highlights Franklin Biotechnology Discovery Fund Year Ended April 30, Class A Per share operating performance (for a share outstanding throughout the year) Net asset value, beginning of year... $ $ $ $ $ Income from investment operations a : Net investment income (loss) b... (0.79) (0.94) (1.09) (1.07) (0.76) Net realized and unrealized gains (losses) (39.39) Total from investment operations (40.33) Less distributions from: Net investment income... (1.73) (0.07) Netrealizedgains... (4.20) (13.78) (6.67) (8.79) Totaldistributions... (5.93) (13.78) (6.67) (8.79) (0.07) Net asset value, end of year.... $ $ $ $ $ Total return c % (23.55)% 46.81% 30.60% 39.12% Ratios to average net assets Expenses before waiver and payments by affiliates % 0.99% 1.00% 1.10% 1.20% Expenses net of waiver and payments by affiliates % d 0.98% d 1.00% d,e 1.10% d,e 1.20% Netinvestmentincome(loss)... (0.58)% (0.56)% (0.67)% (0.82)% (0.88)% Supplemental data Net assets, end of year (000 s).... $1,176,687 $1,074,903 $1,601,906 $1,141,890 $653,718 Portfolio turnover rate % 22.13% 41.43% 48.70% 33.64% a The amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund. b Based on average daily shares outstanding. ctotal return does not reflect sales commissions or contingent deferred sales charges, if applicable. dbenefit of expense reduction rounds to less than 0.01%. e Benefit of waiver and payments by affiliates rounds to less than 0.01%. 18 Annual Report The accompanying notes are an integral part of these financial statements. franklintempleton.com

20 FINANCIAL HIGHLIGHTS Franklin Biotechnology Discovery Fund (continued) Year Ended April 30, a Class C Per share operating performance (for a share outstanding throughout the year) Net asset value, beginning of year... $ $ $ $ Income from investment operations b : Net investment income (loss) c... (1.81) (2.11) (2.38) (0.34) Net realized and unrealized gains (losses) (38.79) (29.70) Total from investment operations (40.90) (30.04) Less distributions from: Net investment income.... (1.29) Netrealizedgains... (4.20) (13.78) (6.67) Totaldistributions... (5.49) (13.78) (6.67) Net asset value, end of year... $ $ $ $ Total return d % (24.09)% 45.76% (18.88)% Ratios to average net assets e Expenses before waiver and payments by affiliates % 1.71% 1.75% 1.82% Expenses net of waiver and payments by affiliates f % 1.70% 1.75% g 1.82% g Netinvestmentincome(loss)... (1.33)% (1.28)% (1.42)% (1.52)% Supplemental data Net assets, end of year (000 s)... $53,935 $17,562 $23,051 $5,486 Portfolio turnover rate % 22.13% 41.43% 48.70% afor the period March 4, 2014 (effective date) to April 30, bthe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund. cbased on average daily shares outstanding. d Total return does not reflect sales commissions or contingent deferred sales charges, if applicable, and is not annualized for periods less than one year. eratios are annualized for periods less than one year. fbenefit of expense reduction rounds to less than 0.01%. g Benefit of waiver and payments by affiliates rounds to less than 0.01%. franklintempleton.com The accompanying notes are an integral part of these financial statements. Annual Report 19

21 FINANCIAL HIGHLIGHTS Franklin Biotechnology Discovery Fund (continued) Year Ended April 30, a Class R6 Per share operating performance (for a share outstanding throughout the year) Net asset value, beginning of year... $ $ $ $ Income from investment operations b : Net investment income (loss) c... (0.25) (0.32) (0.45) (0.49) Net realized and unrealized gains (losses) (40.28) Total from investment operations (40.60) Less distributions from: Net investment income.... (2.30) Netrealizedgains... (4.20) (13.78) (6.67) (8.79) Totaldistributions... (6.50) (13.78) (6.67) (8.79) Net asset value, end of year... $ $ $ $ Total return d % (23.24)% 47.40% 34.10% Ratios to average net assets e Expenses before waiver and payments by affiliates % 0.60% 0.60% 0.63% Expenses net of waiver and payments by affiliates f % 0.59% 0.60% g 0.63% g Netinvestmentincome(loss)... (0.17)% (0.17)% (0.27)% (0.35)% Supplemental data Net assets, end of year (000 s)... $8,891 $5,568 $76,436 $50,846 Portfolio turnover rate % 22.13% 41.43% 48.70% afor the year May 1, 2013 (effective date) to April 30, bthe amount shown for a share outstanding throughout the period may not correlate with the Statement of Operations for the period due to the timing of sales and repurchases of the Fund s shares in relation to income earned and/or fluctuating fair value of the investments of the Fund. cbased on average daily shares outstanding. d Total return is not annualized for periods less than one year. eratios are annualized for periods less than one year. fbenefit of expense reduction rounds to less than 0.01%. g Benefit of waiver and payments by affiliates rounds to less than 0.01%. 20 Annual Report The accompanying notes are an integral part of these financial statements. franklintempleton.com